Product revenue growth of 13% and security-led solutions continue to drive growth; Company re-affirms full-year outlook, raises dividend and announces new $50 million buyback

A10 Networks (NYSE: ATEN), a leading provider of cybersecurity and infrastructure solutions, today announced financial results for its third quarter and nine-month period ended September 30, 2022.

Third Quarter 2022 Financial Summary

• Revenue of $72.1 million, up 10.2% year-over-year.
• Revenue growth was broad-based, with increases in North America, APJ, EMEA and Latin America, and from both Enterprise and Service Provider customers. Enterprise sales grew 17%, and Service Provider sales grew 6%, demonstrating strong revenue diversification.
• GAAP gross margin of 79.5%; non-GAAP gross margin of 80.2% as a result of better product mix and continued successful navigation of short-term input cost pressures.
• GAAP net income of $12.1 million, or $0.16 per diluted share, compared with GAAP net income (inclusive of a non-recurring $65.4 million income tax benefit related to sustained profitability) of $74.9 million, or $0.94 per diluted share in the third quarter of 2021.
• Non-GAAP net income of $15.9 million, or $0.20 per diluted share, compared with non-GAAP net income of $13.7 million, or $0.17 per diluted share in the third quarter of 2021.
• Adjusted EBITDA of $21.3 million, representing 29.5% of revenue, in line with stated business model goals.
• A10 repurchased approximately 3.7 million shares during the quarter at an average price of $12.77 for a total of $47.5 million and issued $3.8 million in cash dividends.
• The Board of Directors approved a 20% increase in its quarterly cash dividend to $0.06 per share, payable on December 1, 2022 to stockholders of record at the close of business on November 15, 2022.

A reconciliation between GAAP and non-GAAP information is contained in the financial statements below.

“A10 is consistently achieving revenue and EPS targets despite a variety of macro headwinds in all regions,” said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. “This demonstrates robust demand for our proprietary security-led solutions, disciplined execution, and a focus on diversification that drives sustainability. We have positioned our business to avoid concentration in any single geography, any specific customer type, or any isolated product offering, and this diversification enables consistent execution despite economic, supply chain, and geopolitical challenges. Customer-centric technical innovation, global commercial execution and focus on driving the business model are bolstering our sustainability and driving continued success.”

“From a profitability standpoint, we maintained gross margins of approximately 80%, and we delivered record non-GAAP operating income and EBITDA margin, reflecting strong execution and an ability to navigate supply chain challenges and input cost pressures,” added Mr. Trivedi. “This performance enabled us to repurchase more than $47.5 million of our stock, in both negotiated and open-market transactions, materially reducing our capitalization. Additionally, ongoing strength in our business positioned us to increase the quarterly dividend by 20% and authorize a new $50 million stock repurchase plan. Simultaneously, we are strategically investing in technology, furthering our ability to capture market share and reinforcing our differentiators and driving durability for our business model despite macroeconomic conditions. We again reiterate our full year targets of top line growth of 10 – 12% and Adjusted EBITDA margins in the range of 26 – 28% of revenue.”

Conference Call

Management will host a call at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, November 1, 2022, to discuss these results. Interested parties may access the conference call by dialing (833) 927-1758 (toll-free) or (929) 526-1599 and referencing access code: 059416.

A live audio webcast of the conference call will be accessible from the “Investor Relations” section of A10 Network’s website at investors.a10networks.com. The webcast will be archived for at least 90 days. A telephonic replay of the conference call will be available two hours after the conclusion of the live call and will run for seven days and may be accessed by dialing (866) 813-9403 (toll-free) or (929) 458-6194 and entering the passcode 030371.

Forward-Looking Statements

This press release contains “forward-looking statements,” including statements regarding our anticipated future financial results, quarterly dividend payments, drivers of growth, demand, supply chain challenges, positioning, growth and EBITDA expectations. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on assumptions that may prove to be incorrect, which could cause actual results to differ materially from those expected or implied by the forward-looking statements. Factors that may cause actual results to differ include the impact of the COVID-19 pandemic on our business and the business of our customers; a significant decline in global macroeconomic or political conditions that have an adverse impact on our business and financial results; business interruptions related to our supply chain; our ability to manage our business and expenses if customers cancel or delay orders; execution risks related to closing key deals and improving our execution; the continued market adoption of our products; our ability to successfully anticipate market needs and opportunities; our timely development of new products and features; our ability to achieve or maintain profitability; any loss or delay of expected purchases by our largest end-customers; our ability to maintain or improve our competitive position; competitive and execution risks related to cloud-based computing trends; our ability to attract and retain new end-customers and our largest end-consumers; our ability to maintain and enhance our brand and reputation, changes demanded by our customers in the deployment and payment model for our products; continued growth in markets relating to network security; the success of any future acquisitions or investments in complementary companies, products, services or technologies; the ability of our sales team to execute well; our ability to shorten our close cycles; the ability of our channel partners to sell our products; variations in product mix or geographic locations of our sales; risks associated with our presence in international markets; weaknesses or deficiencies in our internal control over financial reporting; our ability to timely file periodic reports required to be filed under the Securities Exchange Act of 1934; and other risks that are described in “Risk Factors” in our periodic filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Commission on March 8, 2022. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables and Exhibit 99.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this release contain certain non-GAAP financial measures, including non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP gross profit and gross margin, non-GAAP operating income and operating margin, non-GAAP operating expenses, and Adjusted EBITDA. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies.

A10 Networks considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the company, exclusive of unusual events or factors that do not directly affect what we consider to be our core operating performance and are used by the company's management for that purpose.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

We define non-GAAP net income as our GAAP net income excluding: (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition, (iii) global distribution center transition expense and (iv) release of deferred tax asset valuation allowance. We define non-GAAP net income per basic and diluted share as our non-GAAP net income divided by our basic and diluted weighted-average shares outstanding. We define non-GAAP gross profit as our GAAP gross profit excluding (i) stock-based compensation and related payroll tax, and (ii) global distribution center transition expense. We define non-GAAP gross margin as our non-GAAP gross profit divided by our GAAP revenue. We define non-GAAP operating income as our GAAP income from operations excluding (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition and (iii) global distribution center transition expense. We define non-GAAP operating margin as our non-GAAP operating income divided by our GAAP revenue. We define non-GAAP operating expenses as our GAAP operating expenses excluding (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition and (iii) global distribution center transition expense. We define Adjusted EBITDA as our GAAP net income excluding (i) interest expense (if any), (ii) interest income and other (income) expense, net, (iii) depreciation and amortization expense, (iv) benefit from (provision for) income taxes, (v) stock-based compensation and related payroll tax and (vi) global distribution center transition expense.

We have included our non-GAAP net income, non-GAAP gross profit and gross margin, non-GAAP operating income and operating margin, non-GAAP operating expenses and Adjusted EBITDA in this press release. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company's operating results.

About A10 Networks

A10 Networks (NYSE: ATEN) provides secure application services and solutions for on-premises, multi-cloud and edge-cloud environments at hyperscale. Our mission is to enable service providers and enterprises to deliver business-critical applications that are secure, available and efficient for multi-cloud transformation and 5G readiness. We deliver better business outcomes that support investment protection, new business models and help future-proof infrastructures, empowering our customers to provide the most secure and available digital experience. Founded in 2004, A10 Networks is based in San Jose, Calif. and serves customers globally. For more information, visit https://www.a10networks.com/ and follow us @A10Networks.

The A10 logo and A10 Networks are trademarks or registered trademarks of A10 Networks, Inc. in the United States and other countries. All other trademarks are the property of their respective owners.

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