ATEN - Earnings call transcript Q4 2019

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Operator

Good afternoon and welcome to the A10 Networks’ Fourth Quarter and Year 2019 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Mammone, Investor Relations for A10 Networks. Please go ahead.

Chris Mammone

you joining thank today. and Chad all us for Thanks, live recorded accessed AXX This being webcast Networks and aXXnetworks.com. the call is via and maybe year for website, X Trivedi, team CFO. today AXX’s Tom joining of CEO and management are Members Dhrupad President and Constantino, me

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

and supplemental trended statements. published AXX a presentation Additionally, financial

the on Relations presentation and You the trended website. section may access press company’s statements of the release, financial Investor

could actual as rely should some our priorities based number During statements, and materially our beliefs involve our the new XX, and results the product performance of upon These and future current our profitability, business vertical. our the to course position can on respect our customer in of unique future future predictions projections our regarding and make in competitive of growth, products; XXXX. today’s to not on call, and our uncertainties, are we our and benefits to overall base, development that to results, cause growth as that our our investment the differ of expectations advantages; events. These XG including for expectations partnerships continue a February our strength roadmap and commitment beyond from them to help and today, future momentum are management products; general control innovation and with will current to those which going forward; on beliefs our our of growth expectations statements focus operating statements belief our to business; the organic expectations and forward-looking and our customer on bringing capabilities of anticipating our and driving statements strategies; customers, relating for future our solutions execute opportunities; to risks of regarding optimization market; channel market use talent of our enterprise ability our you opportunities of build and our forward-looking

to otherwise. future AXX statements result forward-looking disclaims a or information, events of update in any these new whether information contained obligation as

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

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

basis guidance of measures. to due charges to corresponding on with respect to excluded of two measures unable we However, forward-looking available variability non-GAAP are GAAP these visibility reconciliation a are non-GAAP make low from high and a which measures the

Networks. call of President turn CEO I the Now, and over to Dhrupad like to would AXX Trivedi,

Dhrupad Trivedi

help same cloud IoT, complexity the outcomes business complexities ever faced delivering attractive for cybersecurity environments also to the and security world Service increasingly proliferation companies you, occupies AXX Networks of increasing Thank on and from hybrid Chris you an an to am at and operational landscape. AXX today. shift area join the the thank focus business. networking thrilled within for strong our XG ready challenges time to legacy, joining providers and all transformations. managing base the while of customers who of loyal our I trends. exciting as these on around enviable them services we our AXX these are customer base address industry applications of the understand We their to positioned Based support and customers. have these to talent deeply many are for consumption difficult through teams. emerging success well committed to technology getting support AXX while enabling a is leaders and

report revenue to pleased are We represents of fourth growth. which $XX.X million, sequential quarter XX%

total driven quarter-over-quarter in For increased $XX the $XX XXXX. reported growth revenue million in revenue. In million was AXX $XXX.X year, QX, XXXX million by full revenue solid from to in the Recurring strength are in and of who our geographic our strength rollouts. provider We regions. Middle furthest Japan, the main all from the XG Korea along supporting saw most in in South the East, service clients

driving growth, drive the management is grow to profitability business. as addition operational organic focused to we on team the In excellence

also We our guidance This give resulted in end finished non-GAAP on an high financial highest and of $XX range. above our our adjusted million range of share per fourth quarter quarter. of the ever his the EBITDA guidance improvement the our over the with detail meeting fourth of Tom prior quarter during performance further XXX% remarks. representing year will during $X.XX earnings

reliability in in security our related The integrated an their ready version scale, customers solution lower is XG or physical marked which our with opportunities. our of the suite, and analytics. get larger lower This the AXX solution cost market security, deploy announced existing directly surrounding agility performance results helping brings continued XG momentum scalability, customers highest networks We QX efficiently. for Orion of network and ownership. higher XG latency, total XG it or virtual

provider Japan with XXXX are customer XG our this in leadership Middle XG We around deployments South and world. more the begin our with up service high-performing building for Korea, secure interest East. of level deploying in on active than XX We pleased offering clients the networks in

remember materialize. massive this encouraged XG are rollouts to by takes supporting and we providers While execute for time, of those is service considerable it to activity, important and CapEx to is budgets level undertaking effort it what a deployments technical their fully

order largest from our America. sizable web a giant North from in benefited we QX, customer In

all market levels. dependent While we also giant a can customers, position with existing last and result web in our are years cycles we their investment multiple continue demand to variable which have on of strong

enhancing to with improve commercial focus on continues vertical enterprise Our execution.

install base XXXX technology. enter with XX,XXX XXX,XXX over AXX installations, apps is We Our supporting running strong. on over

top and our multi-cloud ADC see growth base We as moves supplier a to are X install meaningful infrastructures. opportunities

to XXX continue the improving on strong momentum invest and XXXX forward believe can that focus also product We roadmap build we execution We going to customers in that enhance a space. up channel that continue with all areas. execution of partnerships and in this in in total on further will added new

proud to able am be I some wins. signature end, that highlight recent to To

cloud for in approximately secure supporting selected network and core repeat LAN AXX and in services solution of South X its covering First, network Korea its a the subscribers by Gi large mobile mobile customer XXXX. network operator XG and million center end translation AXX operation edge address

workloads a environment and Second, migration performance help for of technology management certification rigorous support major the of ADC selected was in software its to communications. and cloud airline Latin selected partner AXX the Oracle cloud as AXX’s to achieve platform multi-cloud to infrastructure its its America ability air and Oracle towards requirements. because to virtual network infrastructure a manage an

our expertise we XXXX, to solutions over install on Service continue Tom, enterprise focus strong we will have customers begin upon them execution we addressing and build providers to customers. to commercial business As to new as adapt and product help goals are and our add different base with. roadmap as you? well and a

Tom Constantino

or $XX.X Dhrupad. QX. quarter high-end representing you, in from XX% revenue quarter million XX% in million, million, product of product year-over-year. Fourth the and driven $XX.X was $XX.X Thank revenue reported sequentially revenue. $XX.X our guidance revenue QX XX% revenue Fourth range was million total total comprised above total Service Security XX% X% revenue of product of revenue. of down was

million. revenue year was approximately For XXXX, the $XX full recurring

EMEA million, million, in APAC, of revenue basis. was where XX% standpoint, increase third revenue a was X% Japan, year-over-year. revenue were the to $X.X a with sequentially double-digit Japan, Americas million year-over-year year-over-year. down in compared and $X.X achieved strong was fourth excluding with revenue for was modestly and these million XX% when regions compared X% Moving which the million, an increased in from million growth $XX.X in XX% our geographic third quarter. quarter and to We $XX.X up In seasonally flat $XX.X with from from down revenue the $X.X sequentially the on $X.X quarter, QX compared up of Both million

quarter XX% total in was enterprise XX%. revenue of the provider was revenue and revenue Service

In have largest the contributed are We fourth included revised customers reflect customers. our of typical other within purchasing revenue. patterns our the reporting provider giant our quarter, to customer provider million similar service $X.X service in now giant web to web largest which

otherwise. non-GAAP discussed all we on this call beyond unless revenue, As are basis metrics stated move on a further

points level and reflecting upon of in to headcount XXX total expect We other at points basis end XX.X% and guidance believe headcount last QX gross the compared quarter XXXX of quarter the gross margin the savings or margins also approximately better total XX.X%, measures cost highest product a the quarter maintain AXX, We XXX QX in of end taken margin fourth in of of above going the Full XX.X% Service will last quarter fourth to ended a rationalization at Fourth gross and actions better the annualized Our of as year savings of XX improve the reduction QX XX.X%, quarter XXXX year that we QX was in on with for and XX.X% was and OpEx we the this call. XXXX. margin our the XXX last million. this enable from quarter to is to basis range. XX.X% reduce at than gross quarter $XX compared high compared to communicated came in was from up XXXX. XX.X% quarter’s in than forward.

operating decline. this costs. headcount quarter. XX% were roughly prior a the OpEx all quarter than basis, variable of rationalized was million Non-GAAP absolute $XX.X restructuring contributed line million million, QX on Further and $XX.X to year in last disciplined reductions fourth with in expenses spending excluding in compensation, year-over-year lower an G&A in dollar $X.X

reported non-GAAP million operating income. We in $X.X

the to continued quarterly than for EBITDA ever adjusted high beating our million EBITDA doubling came significantly, the both of EBITDA also our highest our the improve adjusted quarter ago We and more and results. represents at period which QX the $XX adjusted in for range guidance year fourth end

was for a approximately Diluted mentioned reflects $X.XX of million shares were Dhrupad million non-GAAP Non-GAAP intense EPS our As our share for $X.X end or the profitability. the weighted approximately above on computing high for quarter shares. focus basis quarter guidance per net this used the and improving income on range. earlier, XX.X

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

like would the echo I Before quarter, for AXX. Dhrupad’s excitement chapter to about I for provide guidance the coming next

continue our success way Moving prepare growth focus XXXX, operational profitable to plan we in into to excellence. our customers will for build XG. helping on We by early of upon driving

for outlook in our growth revenue to $XX expect the end first of million, on the million range. at high XXXX, quarter be year-over-year Moving $XX range of of X% to the that we of representing to revenue currently

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

million our first a approximately count to quarter between on XX $X.XX income expect basis and diluted using non-GAAP share a per We be share $X.XX net of shares.

to million million. adjusted expect quarter $X be our first EBITDA and we between $X.X Finally,

the you now questions. for Operator, up call can open

Operator

BWS Instructions] Thank ahead. The first Financial. from you. Khorsand with will Please go [Operator come Hamed question

Hamed Khorsand

questions. the is me in taking the for thanks if Hi, background. Excuse noise there

having mix you gross margin impact see web could line? volatility about forward on you off, giant given how on gross with mix margins the product the going the and can the much the and the product First talk order,

Tom Constantino

down comes Well, typically we margin typically a seasonally, where normally is bit typically just with seasonality, a in the the mix geographic a coming – result where do that but of comes QX revenue of it’s from. revenue normal from. The factor gross is little in see

that well have Some to QX. demand regard. and web web our do we from giants others in into regions factored Large for expect for are obviously more guidance – than us some as giant that we that have in profitable that’s XXXX

Hamed Khorsand

of Okay. of And some are you with kind still customers far and are the then in you that XG as is early seeing what XG pipeline concerned deployment? as the where stand

Tom Constantino

that what XG of the out a terms of early is it’s providers still base very still their them. we stages service for very stages and in architecture figuring for generally XG are lot they have, need and install Yes, early

who We have really see early success some from South world. had what ahead strong in in the is Korea we furthest

Japan accounts. to long but we process. there established they will so from as of obviously things preparing business So this going for continued Olympics, see terms in this will the is that, be long well be but in well are those tail of race, ahead is of a

Dhrupad Trivedi

that comments Yes. of a I helpful. Maybe Tom be more add couple to can that might

So either I think for or is they are today going XG that globally building to start we service their to solutions, way providers going and with XG the XG approach LTE ready get right. XG out other are

Greenfield is that So just are service not XG replace to our success do providers without today we enabling migration but build-outs, a having to everything. also

that’s element of So it. one

and new it a to comes design like regions, starts for priorities, then as our they I of of countries and out, with then service on they that build and sequence choice, out the structure purchase the rest whether today adopters. As and small other by software are towards a government we selected of that focus think boost the upgrades cell certain think XG wins, design already spending early been it’s the start it building then goal build-out in spectrum, right. to we ones has deploying I XG and specific the radio services or XG when is are the the mentioned selling do providers that usually including wins XG infrastructure, is and In

come, focus that you ability wins selected time, think will years revenue, XG technology the you positioned come. carriers’ we example or to is very that some invest to for the dependent well upgrades, but could in etcetera. on for see design to I those have right XG So be are CapEx at translate for say will we are our and years for we that But into if

Hamed Khorsand

your that front you Are you competition when you up own feed seeing seeing for any of comes pressures? kind competitive it Are to security XG?

Dhrupad Trivedi

Yes.

of right. pressure exactly are terms we do So, not we in seeing competitive what

head think to we people competitive like with to pure-play do head tend things security that. So pure-play I and not or be who radios

in integrated our and solution them secure us, allows scalable, is more For to more in provider do things uniquely the service a way.

to going lower be that’s replacement, their to And what So ownership, what alternatives it a not cost do of actually is even the as right, degree of anything to that one-for-one that competition it’s so doing with are it’s the more is. we course demonstrate competitive as total if of much a to technology. can advantage

Hamed Khorsand

savings implies annualized immediately savings the guidance your cost are is could then or you there pretty it on line, pretty And Okay. is much implement you more that that OpEx seeing much in QX this XXXX? for

Tom Constantino

until of effect seen announced will get we full the what Well, last quarter QX. be into we

year, of to we little So we to specifics in more are we’ll we be terms just in more for in impact full imagine, go mode mindset of how seen a a of as at S, constant you actions can be got then the become that in looking QX. that efficient. And all will but bit to the took, QX. the

Hamed Khorsand

when all is he he what Chen X-K there a to last that? immediately is his like was resigning Lee anything my that or the going reasons – behind was that and sell was And Okay. stock question and

Dhrupad Trivedi

Yes. This is Dhrupad.

helping supportive tremendously I helping on say of the would he choice has team all I him. prior notified resign meeting right. Directors of the And immediately, filing, would I with customer the X personal per made So joined with Board February company as and from in quarterly the this our And been he was the Lee transition, effective board of would that. of Board to that say by since insights Directors terms insights,

to has I is he sure the more that up done in running. some speed and make So company even think help ways to

legal there questions. are on more remaining are Beyond there that, discussions – think and other the I am I complications sure obviously

say now, than Lee he that built I on I see So, right that going but who right as I successful we think wants today. somebody I speculate cannot them would other anything no, founded see company be very and to certainly, certainly forward don’t and the

Hamed Khorsand

for you thank Okay, time. your

Tom Constantino

Thanks Hamed.

Operator

will And next Group. go Maxim ahead. Please question Chokshi Nehal come with the from

Nehal Chokshi

long-term all strong been been This you congrats year-over-year, can has ‘XX revenue the Yes, that short-term has deferred sorts but explain out on while of not through been, all calendar dynamic? for has over results up guidance. happening

Tom Constantino

effect in they decline The trends, deferred a trailing products do of revenue revenue reflect unfortunately. a

if it down So right. was products at it down in XXXX, – revenue double-digit, you look was

And of is – a so up build support revenue mainly revenue the deferred that are deferred contracts nature. in

So right, as – gets an a it sold and to attach as revenue, sales. product product

service terms of look there deferred you revenue revenue impacted our that get So right not really it’s you in but revenue. what the direction up, a seeing line the decline is in to at the does in the by still if are as so that’s trending revenue, products it’s tail the that

Dhrupad Trivedi

And have declined of decline drop, subscription maybe come not in relevant that’s point down is not but either. revenue, the we only that professional seen the revenue has I maintenance product think would and services is associated the component is other rate data attach of support attach that bound because all which our other that with

Nehal Chokshi

Right.

Dhrupad Trivedi

to product showing But it’s deferred attachment up just the the is revenue. that which rate down in revenue

Nehal Chokshi

this I with not is just whatever to base being X Okay, is be because it’s that current play amount throughout years an you December ago install product much correct? – not X, as down that’s that decline, not revenue mean what X, driving December as is renewal off coming might quarter sold year-over-year, until ‘XX

Dhrupad Trivedi

so I a of correct. describing you yes. you like mean like waterfall that’s think have exactly to it Yes, are

Nehal Chokshi

then driver out alright. and is so mechanic? long-term of the going what’s Okay, revenue the But deferred that

Tom Constantino

– they the is your factor so right. things. year, contracts are are of be X One that for the of typically nature they X be more be of to couple going going the to That’s purchased, can a

it of to for majority the directly going term you selling a it’s that’s in long-term are and longer are rev/rec see more most tied of it. duration of they contract, the then upon to we are. long-term also more those in the part but nature of is if depending carve-out It does the move sitting So impacts, kind contracts,

Nehal Chokshi

of to have you guys that the do been Increase contracts, that something in has duration about with so ramp subscription support right? talking

Dhrupad Trivedi

also is Subscription in there.

So would the supporting and rather are as products line meaningful wanting not a industry that customers purchase that to I subscription coming. it’s is we revenue subscription-based than where upfront, that consume CapEx we keep move as in while with towards our a today certainly like a to of driver think recurring

Nehal Chokshi

can on ramp? specific And metrics the you any Okay. subscription share

Tom Constantino

break separately out it don’t We today.

Nehal Chokshi

b) alright. Trivedi, strong roadmap that roadmap for you a) then the And a specifically improving an you and that XXXX consist can you you that product Okay, it that related you then mentioned can your performance is why have you I product enterprise improve expected, and more give as to think performance? little if what on bit would verify this and case indeed details a of enterprise

Dhrupad Trivedi

probably by provider product would service I the saying focus sure. and enterprise. Yes, and And start improvement, both are roadmap

I provider on think more, the design are which feel we do we customer on will. on based and traction, wins track we service and to need we the side right the obviously

the could it customers partners to multiple easier customers example, like make enterprise and very obviously, private our to been right. the is include address customers consume on-prem cloud, public side, need and on-prem cloud, hybrid. lot for will And historically our on to environments those two we base to more operate legacy which think and actively I of products channel our things roadmap install enable our an that are relevant, oriented stored we that in

the as is into to think and that, will within and and invest application thing and the but a which looking scalability adapting maintain already customer And that thing we and as like is from to pattern forth buying So aligning know enterprise would by you alongside of things continue so we the well. second be real different our a performance you further prospective consumed obviously have focus sort customers leading that customer be on channel is the roadmap agility partners and to at that. I see will biggest little

Nehal Chokshi

Thank you.

Dhrupad Trivedi

bet. You

Operator

any turn conference and I session. to closing would our the Ladies to back gentlemen, over remarks. Dhrupad concludes like Trivedi this for question-and-answer

Dhrupad Trivedi

Thank and believe more of look our that have business move the our our together. model and your you all day. of spending shareholders good leverage profitable thank a we forward to today you growth will and joining you improving shareholders. to meeting commitment to reward as time us and support. operating forward I We and for Thank our for with and you focus

Operator

Thank you, for sir. conference attending has concluded. Thank now you The today’s presentation.

disconnect. may You now

A10 Networks (ATEN) 11 Feb 202019 Q4 Earnings call transcript