ATEN - Earnings call transcript Q1 2019

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Operator

Good day and welcome to the A10 Networks First Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would like to now turn the conference over to Maria Riley with Investor Relations. Please go ahead.

Maria Riley

thank for and us Alyssa you, you joining all today. Thank www.aXXnetworks.com. webcast is via may website, being call live the recorded Networks' year This X and and for be AXX accessed today Members are Chris of EVP Sales; CFO. Worldwide Tom of team AXX's joining White, Lee Founder and management Chen, CEO; Constantino; and me

today, like first a issued press announcing its Before would you shortly Networks to we begin, after AXX that XXXX financial results. quarter remind I the market close release

for along presentation and with a this published comments call trended prepared AXX statements. financial Additionally, supplemental its

may presentation, You the and comments. And the access section company's Relations on statements prepared the press www.aXXnetworks.com. website, release, trended Investor of financial

These of current key call, to and opportunities, partnerships, opportunities, products, statements the penetrate benefits projections new expectations engine, relating our markets, beliefs bringing operating our control performance our growth the our our timeline in margin These are beliefs to and of grow recent to adoption based today, current to for ability as our and of providers releases, today's our expected XG business product are of margins. these use forward-looking capabilities our new as priorities of software partnerships obligation from actual whether development and solutions and to make on our uncertainties, as future strategies, otherwise. ability predictions expectations those market future to statements our statements, anticipated XX, risks advantages, regarding events, should marketing growth, and new to improvements respect sales our regarding expectations target with security result our that management differ operating and our some future future results of of market, During refining of you our and threats, disclaims execute involve in of future responses of our general competitive information, April team, security to future materially, them XG our to or products our beyond ability a and AXX of to commitment solutions, the technology sales including statements, number on revenue operating on statements our XXXX. with contained and and customer forward-looking any relating our and and our could information events. certain forward-looking our products, or new which expectations our innovation cause achieve annually rely for of course the growth market, the a to update to will results, and not incrementally launches productivity,

a a on non-GAAP different risks that non-GAAP be company's measures website. more posted financial note measures release measures uncertainties, prepared or on are to description our today a other results companies. on non-GAAP financial with most please in measures and non-GAAP exclude XX-K. not charges. have been revenue, discussed are considered detailed basis and these adjusted to today recent the of Please intended of to exception certain refer found For and between press reconciliation presented the trended results isolation substitute A by in can financial quarterly issued from GAAP for with and be the may financial GAAP the accordance be in as and The

on for non-GAAP a We XXXX will second of expectations provide our current quarter basis. the

Chen, GAAP these Lee? due AXX Founder, of measures. excluded a with basis charges, respect from a CEO available of to reconciliation measures to forward-looking to to guidance low However, and are are we unable corresponding to which high non-GAAP over visibility variability and Networks. on would call non-GAAP like turn I the measures to the make Lee

Lee Chen

thank for today. you Thank all you, us Maria and joining

few the of change our to our Chris worldwide Chris and new on discuss will comments include quarter, EVP and markets, for approach go-to-market provide to will Tom innovations. the transformation, and of find major on initiatives hope provide our White, then informative. financial wins, a of the call QX. decided our performance our progress our We will details the format have customer sales. We you product I and outlook

Moving in to revenue there margin QX non-GAAP like delivered to a several is our XG, multi-cloud. results. of seasonal on points and first we are share while I growing multi-cloud. and In a continued XX.X% to progress that We growth and momentum traditionally per year-over-year for in $XX.X make highlight the we and modest, loss of million, quarter our $X.XX. revenue XG, us quarter, non-GAAP security, initiatives demonstrate gross security, delivered our our would was of believe

visibility, and First, center capabilities. firewall, secure traffic in application web new existing XX% Security security firewall, revenue, to customers. led strength our we solution carrier see Thunder XX% grew steering revenue continue that and protection, IPSec CFW data DDoS SSL of both product VPN, by visibility, product integrates integrated with site-to-site year-over-year to gateway,

solutions. investing been the have our for automated building momentum included security our security solutions. XG recognition Magazine in in we software-based DDOS We this with QX, X awards intelligent Infosec winning protection believe and and In security defense and and market scalable highly are Cyber

research by IT largest in Additionally, AXX was for advisory ITR share of Japanese-based Corporation, SSL top-ranked the visibility market which and Japan firm. terms in is

security which is XG, for opportunity an market our believe we solutions. Second, exciting is

security high-performance Our us the needs of customers. in scalability the XG to evolving provider the solutions our well segment extremely service and our and and of performance meet position stronghold

the I top selected win packet to our and which providers Korea, XXXX. to flagship Thunder XG that the wins of goals is am This proof customer concept, zero leading passed appliance with for a only AXX's our Harmony and cases, from invited the XXXX XG with with vendors is XG another with mobile in AXX X three One CFW pioneer QX, was on X commercial has the wins largest Korea one wins country. participate XG design the and that deployments design Of new thrilled in with builds In of design provider use completely in AXX's successfully carriers loss. new globally. our secured solution mobile a Controller. grow in design secured we

launch ready a and at year and XXXX, new their secure this In level we provider believe for world for for leaders We several the helped wins well in operators to network. pioneers undeniable XG unveiled Korea future XG as look these was plans announced their first number use The handsets. energy World will fact, our this networks wireless bode the XG. commercial largest providers cases, Mobile the XG announced AXX industry the as month, with in launch the around manufacturers other Congress of earlier

at about top-of-mind as show, keynotes service operators' this presentations. security Another of year was discussions MWC, and partners and we noteworthy productive emerging security providers challenges their many development had with in the At to With to hyperscale, automation and them our be of with their Gi/SGi-firewall, AXX posture. portfolio customers integrated driven XG GTP XG protection at XG. firewall security plans firewall, strengthen high-performance DNS DDoS help and

with and financial products service customers our basis subscription Third, government, we Controller services quarter. subscription Harmony software the on growing number driving new and wins with made in of during Multi-Cloud, a progress is is revenue. our offered provider, good one of

to small, see is which our were wins of quarter. it growing we While this marquee our rapidly, remains included increase, subscription pleased wins Harmony the some Controller revenue number of and

pioneer solutions, this roadmap a robust On new Thunder year. and we the TPS have product innovate front, to and we continue

released while of announced to our March, enhancement that In product performing Over a gaming their the providers defending and and the highest online now capacity the past enhancements capacity subscribers. Thunder number new enable service will market. to quarter, expand The our added we to DDoS cloud profitable providers, portfolio. on a appliance TPS defense provides service and mitigation offerings we services DDoS their build networks

back be half in for make product Thunder by over revenue networks, second, revenue DDoS connected its also shipping I with application East to major and a and throughput attacks We the of scalable, the of size against which ahead services Thunder helping will the this our total environment. rollout agile, in been the new We our devices, security XG include the transition Overall, and XG, will in With on total deliver adopted fastest and already year. for commercial and driving solution delivers has commercial progress XXXX, an be continue virtual quarter, our CFW industry-leading to TPS protection telco Chris. Middle and the attack by efforts for infrastructure the critical to effective increase of provider customers XXX growth security, we XG product the believe drive track This driven to the function call that automation solution forged supports With further top solution the proliferation innovation in will required per rollout XG gigabit We landscape. we to remain virtualization market. of networks this XG grow and networks. revenue new in began to our the network priorities growth available the AXX bandwidth, believe on the innovation turn to a with and evolving of product to available XX% In performance exponentially. XX% and XXXX new that, of expanding intensity multi-cloud. our software-defined

Christopher White

Lee. you, more remained was environment looking dynamics oriented demand In however quarter, than the Thank consistent, the expected. Great. at it the back-end within

customers. remained and we high and enterprise had ongoing within win rate strength Our service provider

cloud with for our it also Latin We we year-over-year XXXX. our compare our and the where where Korea in be on geographic security, pleased of a with of expect standpoint, Giant of excludes customers from Web success the Japan, our be XX% quarter. based and Pacific a dynamic growth America, play that in to tend continued Business triple-digit year-over-year saw we theatre with downside headwind out XG, and for in large Our delivered delivered these in were quarter. the strong can performance growth. continue customers revenue solutions. tough we contribute during to where customer the consecutive quarter we and demand quarter, Asia was to QX double-digit fourth to that given fluctuate multi-cloud QX a is growing From QX had

our momentum we stations and believe our we in and early XG stronghold mentioned, region provider XG is the alone, the been evolving of to needs X is deployments. of the As believe on in have an and providers the high-performance this service market We the largest of and South commercial segment deployed gaining cases XG Approximately meet us with with fast performance the Lee and extremely have the quickly positions XX,XXX customers. our design foothold Korea in solutions pioneer security XG scalability well base country. Korea becoming wins in and use in

on our progress. continued quarter, In Moving we our to to go-to-market. transformation execute the and make plan

both with several new and of sales the team previously, we start incentivize drive to product year, we the the at discussed As implemented sales accounts. to existing changes new designed

changes these expect second impact We the of XXXX. half to positively

of on to launched and we structure. enablement, new Arrow sales QX, which new recruiting and planning a progress, In We enables North quarter. we focus opportunities. Arrow VARs with focused with two activities together new move our Electronics, adding security included technical still a security X-tier than early, through channel working partnership by and focused in announced ramping important the while Arrow In VARs X in go-to-market marketing find and a business channel community also are joint encouraged centric on initial more and were is changes it America. this January, to will we X,XXX partners we partnership, on a

This lead-generation see new we throughout efforts of these new with help expand in the our also of also went we impact program formed a year. into expect progress the and We America. to Televerde engagement in effect both as North to QX relationships us

pipeline America conversion. progress close XX% and and quarters. and can sales are and full we with completed less metrics. revenue already to Latin our team furthest to in continue in a productivity teams region transformation, new our America board growth two of Approximately board of by journey of team see XX% global heavy full been a X transformation has their our on the the Europe in early we on year innings half-way the less are Whereas, revenue than ramp, relationships, sales you the still than three have lot sales sales drive their along quarters. customer The leaders we and combined build North believe lifting While is new the through sales their in and

grew evolution, through are are we As we measure customers, key progress which using our this to in to metrics QX. success continue XXX the new to

of are grew logos, seasonality, we deals, to but it also decreased this And addition closely we within to quarter hires over upward In the of new and on the year. of future expansion through year-over-year. productivity, we new XX% the to customers. opportunities, slightly sales concentration in quality large which in were progress QX. In sales pleased quarter trend the also from number security overall which opportunities and monitoring Two, expect with pipeline these represented the percentage depending of quarter, fluctuate aggregate, can we metric the new as our

strong platform building our a customers. is our opportunities multi-cloud XG, differentiated solutions are funnel We and for and and technology vision with security, resonating of

a incumbent the replacing few I'd recent to footprint to Lee with an U.S., large a shared, provider install a ThunderSSLi their of expanded XG win addition secured win ThunderADC and portion where In engagements. like We in with solution. highlight by we refreshed our a mobile base the vendor our

was A engagement large key the Ericsson a component. put with sales integration a time, cementing gained foothold We India carrier-grade with Ericsson. there CGN new opportunity solution providing partner options our also our packet a to tight over their this forth our core mobile with customer is NAT in differentiator consider solution. carrier We they complete expand this for especially the customer as AXX XG. believe to with Thunder

in provides large-scale grow This for to to services selected Overall, seeing continue leading hard lengthy also against work enable RFP to results with team in a up a work solution. their would including pipeline that agencies. collaboration thank customer we and transformation decryption deal we we to footprint of IT of on ahead I and of And like X large have this bring and to help a our SSLi with incumbent our our Canada new Phase partner this our we to deals, areas and close. were and but secured order we fast ramp secured to the from provider win as partners This teams where for a DDoS growing growing vendor harden capitalize competitors. process lastly, ThunderTPS a new solution number also replace perimeter. our of a important customer our recognize Japan, go-to-market to large their We government are security high-performance involved win with our AXX's customer we in market.

are our win committed and strong, innovating remains engine. go-to-market is portfolio product Our we to refining rate high, and our

We energized to year, clear like solutions. Tom the the a and With market have second and the can of to accomplish opportunity this line a turn our our team sight is to our I'd guidance. very to vision, what over details review about Tom? we first for performance call that, of quarter financial quarter

Tom Constantino

Chris. you Thank

revenue million, with was period revenue quarter X% $XX.X First the year-over-year reach year-over-year, increased $XX.X million X% up to compared in last year. million. $XX.X Deferred to same

XX% of Security was million year revenue First grew revenue QX. product in of of revenue. reach $XX.X product revenue $XX.X XX% was or product million, Service revenue representing quarter total revenue. total over XX% XX% last to total

was $XX.X million In million, in the revenue year-over-year to revenue up States year-over-year. period a year. United our from XX% million, million, $X.X $X.X increase APAC, year. year-over-year Japan, more year-over-year. was of million, up excluding with last In revenue $X.X compared when year. million Revenue million, LATAM XX% with $X.X doubled million from compared an at Revenue to with Japan, revenue Moving $XX.X compared was last X% modestly first in for same XX% $X standpoint, quarter from from to decreased than quarter geographic the last the $XX.X EMEA,

in X% the revenue reach Enterprise to revenue. increased quarter increased primarily our by revenue, year-over-year year-over-year accounted provide in reminder, we last quarter provider a revenue we to Giant previously Cloud in transparency quarter into million. $XX.X our revenue in which $XX.X the changed Web Service was order million. Enterprise and to way the disclose XX% vertical more for to exposure As customer customer

XX% Our Web quarter. year-over-year million in to Giant revenue the $X.X decreased

XXX stated As we QX quarter first this all margin from XX.X%, basis year. and are move last from of call XXX We beyond points gross discussed on revenue, of further a unless a points on metrics basis, quarter delivered basis of non-GAAP total last otherwise. decrease

XX.X%, and XX.X% XXXX. gross last product XX.X% was with QX margin quarter compared of quarter First in

diluted strategic Our inventory a in Services of to in primarily year-over-year and came margin the non-GAAP quarter compared in by quarter loss quarter. per operating at driven with QX $X.X share, compared QX XX.X% used and first gross select was compared write-downs. decrease few shares. XX.X%, was opportunities in product or income approximately per $X.XX in quarter shares gross million margin XXXX. compared at million, quarter with a or was million loss for expenses Non-GAAP XXX million, in $X.X million the weighted basic in EPS QX for headcount with XXX of for dollars, year. operating at XX.X $X ended the Diluted prior last compared We quarter. operating net in $XX.X million Non-GAAP of the a last of computing $XX.X Non-GAAP of with loss with prior quarter. of share the in the came were the end basic $X.XX $X loss million,

the we sales of the to at with balance total average and days, million had At with prior Moving cash March outstanding consistent the XXXX, $XXX.X securities, December. million quarter. were XX, XX sheet, $XXX.X days compared end in marketable

Moving our be for quarter range to to second $XX $XX currently second million in on revenue outlook expect the million. We the of to quarter.

margin gross $XX between be to and $XX expenses million be the range operating million. expect and to to XX% XX% in We

loss We now million bottom XX open of line expect our using up questions. $X.XX results a can and be call for on of the non-GAAP to Operator, approximately count a share per basis shares. a breakeven between you share

Operator

Instructions]. [Operator

Mark Kelleher first question of today comes Our from Davidson. D.A.

Mark Kelleher

Giants, Web cloud and cloud the start with Web Just the wanted Giants. to the

visibility much do You've indicated Web drives you and there, demand lumpy. have the some you're weakness What it's how there? seeing Giants the that from

Lee Chen

address Chris, this? you to want

Christopher White

predictability certainly of Web our base have look very Giant basis, we're it weakness an their annual mean on Giants with on based Yes, lot them some predictable well a members, on as is utilization we Giants. we in at But standpoint, that of QX. aren't Sure. Web out, at look as available. closely This accounts. install for believe do Web you Hi, you some we, as always of we it, which And I did or But we XXXX the work called Mark. readily positioned from rates, a Chris. is with

Mark Kelleher

roll really ramp, on Does there this does What you've there. part some XG XG? year? begin of that bigger then start just the to great and be to that back we a of the When next And half should meaningful year wins revenue? got from out expect

Lee Chen

of Our half expectation the meaningful is second in XXXX. A revenue.

Mark Kelleher

meaningful A revenue.

much how the VAR help ramp How Okay. about little ramp a to you? and that revenue more and the going is bit should impact you Can margins? talk VAR

Christopher White

Yes, absolutely.

as script it So in in certainly we brought on in an the a -- was obviously, we quarter, quarter I quarter them. enablement Arrow that called the first for and out America, North ramp right,

in with XXXX. handful will QX us of through and we saw really we're the on year, XXXX half growth we area And resources in increase resources focused expect So you the our because through see other in on them would then to that the half. see look which help expect had should it of to we those it, to strategy And Arrow a some some have right. focused with second we see and of level dedicated have is impact XXXX through within the partners, I really additional around on the second XXXX security bringing the scale new would but of or recruitment the security we that

Mark Kelleher

And me. Okay. question last from

Just environment. the competitive

that you Genex recently, competitors Source an that? of dynamic? do the of made Has What acquisition your and changed think One [ph]. competitive Open

Christopher White

know, a it I landscape from Mark, that is customers that speaking, differentiate competitive acquisition we I perspective, perspective we would take, bring not really there. many my in this we're interesting experience specific come continue around an number that with And generically to think at you my conversations speaking, quarters And together. table from is already area, tools and perspective, look Open a story as because doesn't the generically we the that acquisitions, that AXX ourselves competitor, Chris to having with is of change to say again. From Source. those the can to but you that think

So impact, it's think if it's than short-term. going to longer-term I have an

Operator

Instructions]. [Operator

question Trebnick next comes Catharine Dougherty. with from Our

Catharine Trebnick

you So your pretty could X looked your growth the without what largest segments from much customer quarter? peel like the during

Tom Constantino

Catharine. Sure. Hi,

Catharine Trebnick

Hi, Tom. you? How are

Tom Constantino

Good. How for are you? Thanks the question.

account, it's top X% our out about year-over-year. take you growth If

buy buy the seems that to Okay. Giants. And order count larger you that don't still for couple also a you then I went mean the of off is to you as me, is covering and Web I then a another you order. Giants order guys recall back have they many public and then case? -- see to how since And as customers? quarters Web then do large It that almost they tend

Christopher White

Catherine, this is Chris.

year, are working I a -- would for with Mark's sales buying see of remainder with them in And we then cyclical that question, And from our XXXX new particular our we number we there's and would to follow-on said, I'll transformation, the pipeline, still working But predictability as as your as tend Web you are that will, have well. our the the beyond tighter you with the that. we call through as a some the of of ebb get to accurate see, do to to opportunities we that more we we're do your kind history, look say, a Web to With enhance of Giants. portfolio to pattern them, said, of So Web and QX with flow of Giant. in at it part and in that Giants in with and that. add play I uptick expect overall know, them closely

Catharine Trebnick

a I've questions. sorry, I'm -- got lot then of And

question really other follow-on XG, Chris. around is The

have So XG wins? of a total X you now,

Lee Chen

Tier six Yes, operators. mobile is-- X are One

Catharine Trebnick

like a Korea, Europe in Tier East. maybe in couple or Japan, one It Middle Six okay. and several X. Yes, sounds in

Lee Chen

Yes.

Catharine Trebnick

Okay.

Europe that is Lee? So Middle or East,

Lee Chen

Middle East. Yes, X it's two They in all in one Tier Korea, Japan, mobile in operators. three are

Catharine Trebnick

and AT&T quite guys and talking seem -- -- supplanted you XG different you the out this then be cities. have bit other think are Can a XG Verizon then lately why infrastructure XG Okay. really of a are to just question or Verizon or about is explain is have working rolling and I to AT&T, you mean -- briefly how about through they what be I And North explain to you offer they then out part rolling the me Tier service. America? part to to Xs of the the do Ericsson in and what

Lee Chen

Okay.

So phase spectrum. first to the -- at XG globally, XG is roll early infrastructures. This today with look you it's address on the different if XG out XG band of the different than

So today's well XG we infrastructure, play that's where in market.

consolidate can XG the upgrade. articles later software infrastructure XG more be solution, You to [indiscernible] can upgraded through

Catharine Trebnick

Got it.

Lee Chen

XG current the evolving deployment infrastructure. It's on it the on really not spectrum years. roadmap deployment. is the those XG something purified long they will the XG G several that's LSA. and a standard That's today call what a today, So are for be next

Catharine Trebnick

Okay. you. Thank

Lee Chen

with we of but I of working we comment, trials very partners. really seven specific terms ones. big you closely have addition had, today, give some including some XX and can't in AT&T we the globally, we wins and Ericsson, are engaging Ericsson and the are And POC - to In other

Catharine Trebnick

Okay.

like partnership. as then you the would you you and have you a say ICQ had RSA, Ericsson as a also NEC it Nokia So then partnership sounds announced

Ericsson wins the and a that these has you very So new of that's would going say helped forward? important partnership some drive for partnership

Lee Chen

did In mobile already. have have access to we mobile world the before. us allows It which Ericsson. especially across important, operator the [indiscernible] we operators, hold access of are strong key some with partnerships the not the all think I

Operator

like concludes This closing question our any Chen back answer for I remarks. session. the turn over to would and to conference Lee

Lee Chen

you today Thank for joining day. you for and good our and support. Thank shareholders of us all your and

Operator

Thank now The today's concluded. you for attending conference is presentation.

You may disconnect. now

A10 Networks (ATEN) 26 Apr 192019 Q1 Earnings call transcript