ATEN - Earnings call transcript Q1 2021

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Operator

Good day and welcome to the A10 Networks’ First Quarter 2021 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Rob Fink of FNK IR. Please go ahead.

Rob Fink

Thank you, operator. And thank you all for joining us today. recorded, at live AXX least Relation at being be it Networks’ is website for access XX aXXnetworks.com. call and and webcasted may Investor This days on CEO; Dhrupad AXX’s are today call Becker. the President Hosting and CFO, Brian Trivedi,

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

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

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

in whether result to information, pandemic update events statements control, on as differ does such make intend These forward; will results. number business; opportunities reductions and management customer statements, as performance as information call, the XXXX. development company's or XG. the future and on execute continued build to and impact and and for and today's our based new on business ability to uncertainties, its our COVID-XX of contained future beliefs products, our predictions our business course overall AXX our those could risks of operations you future respect should and growth with continued the regarding optimization of priorities statements future results, results forward-looking from efforts efficiency profitability; products; that statements them market to expectations for of anticipated upon expectations growth, belief expectations these not in forward-looking projections on are for as operational rely our which the regarding actual During of on including expenses, the growth customer and beyond current XX, materially, future April driving cause opportunities; benefits a that statements, today, to focus not and expectations and contribute use otherwise. are and to they of our These operating involve some general momentum improve of a forward-looking operating the the going can of of potential

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

Dhrupad Trivedi

today. particularly, Thank Rob. solid to revenue And joining for AXX, another all strategic quarter for grow thank and security recurring initiatives This us in you, was our you solutions.

good This Despite proxy, line X% solid year-over-year creating for greater with grew $XX.X into revenue revenues giving XX.X% in $XXX.X grew us visibility our revenue, timing to year-over-year in results. base growing a and expectations. and impacts is overall spot is which over periods, us future expected a million. Japan, to the be revenue, million will deferred Our future in which recurring recognized contracted by

revenue grow overall strategic for year positive. continues full our with Aligned our recurring than and goals revenue. Our faster unchanged to remains Japan our

model. supporting our This of long-term In large consecutive organic business our overall revenue fifth fact, year-over-year recurring our increased growth. increasingly it becoming X% is was and quarter of an mix revenue portion

to solutions best-in-class our globe several progress integrator streamlining have of to growth resellers, establishing our to rollout are security enabling are solutions opportunity. well-positioned revenue areas of ending refined around solutions. best-in-class strategy, these for most strategic a revenue of XX-month a contract Security solutions transition selling percent network is XX-month Each security In focus successfully XXXX. and and and DDoS our XX, broad is revenue as on from mix, differentiated. promising basis, strategic our trailing XG our us the relationships been in offerings with in On deferred and and and XX% have including availability, trailing partners about sales of steadily seen solution We in growth-oriented This the we go-to-market to profitable organization December a compared revenue we in evidence a made of technological commoditized enjoy the provider having providing of particular, cybersecurity, our prevention. tailwinds increasing. areas. XX% this the security The strategy represented

catalysts federal plan new investments Additionally, U.S. the in infrastructure support further these

Northern able comprehensive we was AXX this point quarter, from a under the education them versus students Europe that our solution During provide in with strategic cyberattack, protection had goals. aligned to with higher multiple products heavy important network our protection A more challenging much of navigate time includes was competitors. large also remote wins and help elements

this a The available in gaming Our is a subscribers online was leverage as able secure, Americas their their COVID-related Also, cyberattack. smaller traffic performance networks saw The was same now competitive model in is more customer and footprint, of ability because EPS of of by XXX% strained by sites Due grew won us very with the in part solutions provided solution the to revenue. and the e-learning both ahead AXX lower after of in for compared profitability large faster price increased a per year, and last new the them growth security. our capacity, other large well provide the a AXX the risk in subscriber, disciplined leverage shutdowns. our and more expectations. better platform first future. giant. EBITDA and CapEx to OpEx grew networking better to win plans platform. technical business our as ultimately terms robust our global an to deploy against This inherent further The rapidly our This to our that global we enabling continued customer. deploy to our business footprint enablers. XX.X% have grow of support quarter execution, result were solution XXX,XXX we adjusted than

detailed first was the to we call growth Brian? support full areas Our goal. representing million, solid financial and in while to over a quarter time, the accelerated quarter a maintaining of investments the fourth Brian to same New our Year. year. adjusted that I'd turn increased EBITDA At our $XX like the have current that, With review start for

Brian Becker

Thanks, Dhrupad.

As X% Dhrupad was year-over-year. in $XX.X the shared, quarter revenue first million, up

$XX.X million, First quarter million was revenue. product $XX.X or revenue XX.X% XX.X% revenue. Services total of revenue of was total representing

revenue to XX.X% Moving a geographic our $XX.X down standpoint, from revenue year-over-year. Japan from was million or $X million,

revenue last we was million These support in year in $X.X growth revenue execution. year-over-year XX.X%. first in with $X.X decline year. with commercial revenue million X% Japan $XX.X $XX.X stronger million, of EMEA quarter. Americas to quarter year. X.X Japan in $X.X And Americas throughout defined expect one up At excluding with million, the the Revenues XX% first revenue Recurring as in and from to quarter was to due to Japan the that million offset in expectations. revenue Japan. the APAC compared grew the EMEA quarter X.X% full last XX.X%. subscription expected regions the Book-to-bill grew compared in first grew XXXX. excluding $XX.X continue revenue Asia-Pacific XX.X% line was from the was increased in from

last As a revenue XXXX recurring million, $XXX reminder, million $XX was to our year. approximately for growing

XXXX, we transition During be to this margins. neutral to our anticipate operating

As XX, see you XXXX. XX.X% million to was our March can deferred up as compared of sheet, $XXX balance on $XXX.X revenue our million,

our in results exception press QX Non-GAAP all call this due operating favorable million in XX.X%, the on quarter was and a $XX points are stated. from million, more down product GAAP basis, the to website. expenses on $XX.X to XX full of were Gross the mix. non-GAAP a revenue, With of up year-over-year provided year-over-year. A our margin in basis XX.X% a reconciliation on first release unless discussed otherwise metrics non-GAAP

all on Our overall decline. continued and areas efficiency to focus to profitability in contributed year-over-year execution this maximize

most optimize global to allocate long-term our footprint further execution. resources to the and important continue We growth opportunities improve to

due events million and marketing operating by benefited $X.X QX also non-GAAP addition, deferred restrictions We've approximately year reduced with quarter. XXX,XXX COVID-related income $X.X year-over-year continued ago of from from expenses to million approximately travel. operating In $X.X in the million million compared approximately in $XX.X which reported

computing per improve EPS income non-GAAP to quarter million quarter over compared was for GAAP adjusted of This On in zero net $X.XX net quarter for cents Non-GAAP the with on in approximately million XXX,XXX for for share loss shares. was weighted continue our came the share per last a shares We million improvement Diluted used first XX.X share year. million quarter, a first of or at last $X.X the XX.X were or net shares for income a a quarter basis, $X.X the per year. significantly. or the basis. EBITDA million the $X.X also $XX $X.XX –

with XX, total at of March in XXXX. equivalents March of the $XXX.X of XXXX $XXX.X As end we XXXX, cash and XX, million as million and million cash had compared $XXX

cash We financial flow $X.X For business the operating leverage our generated expense the to cash million generated changes in we million QX. for activities our the in due and $X.X of model. free from quarter, structure of

As Capital common for XX,XXX we $X.XX property is repurchased plan cash the as $XX,XXX our an next shares period. XX announced less a net of expenditures September On reminder, repurchase share the shares expenditures. XX, the at million define flow cash worth operations, provided equipment. a the a of We free price purchase average capital total during of by to of and over for up $XX months. approximately company

time subject During compliance XXbX-X. purchases. rule instituted to a manage time, we plan with to the our plan from We to review XXbX-X quarter, our intend to

expect outlook provided quarter conference today to X%. an We the our annual organic of growth in call fourth are X% generate and our full we year as reiterating full On basis, results. accompanying to year

the market is quantity XXXX. one and and momentum sequential the each quarter. book-to-bill in sales We expect based in growth it first quality our quarter of funnel, This remaining exceeds of expectation on

to expect anticipate line at over back line. I'll become to business to portion And We security for larger XX%. expect grow now part we comments. approximately solutions a And of mix. to than Dhrupad will continue turn grow our revenue of our our call the closing bottom faster we this top

Dhrupad Trivedi

am XXXX. summary, for In I really Brian. prospects excited growth and our you, of outlook Thank

We are with tailwind. in market increasingly leader as and value viewed best-in-class added offering a security solutions

our grow are clearly profitability. helping revenue this our initiators Our working increase recurring is to us and

you strong well open can questions. for for now are up a We XXXX. call positioned Operator, the

Operator

question-and-answer begin Hamed now Instructions] ahead. Our question [Operator first with go will BWS session. from Please Khorsand the We Financial. comes

Hamed Khorsand

Hi.

the about your business? existing new talk you're customers? just So customers, first you off, momentum coming seeing from could Is that in

Dhrupad Trivedi

Sure. Yes.

So I Hamed sides say two would that it, right. of

XX% positive So XX% customers, whether existing existing With recall, customers. or definitely or it's if as their it of about business readiness relates networks. momentum our from to infrastructure, XG XG from you new growing for we customers, enterprise see comes

to to customers, relates as customers well. we it new continue As new add continuously

robust customers grow who will And as well seeing a so relevant, America, we Asia, more to from pretty it continue EMEA, to as become as new growth relates and right. are Japan, adding

of So of it. infrastructure, and or is addition we customers. are existing Greenfield new both dimensions seeing investment One investment, protection,

Hamed Khorsand

customers a ago, from now. that's It you clarity last have And where the you changed? clarity didn't into sounds couple that compared What going QX? to have better call what's as giving of you are months like seeing it you Dhrupad,

Dhrupad Trivedi

Yes.

two that to Hamed. sides think I there's

either at had et investments is paused what but The vaccines large to impact can't growing opening we last customers quite are beginning elsewhere. cetera uncertainties a newer control, where who that we are bit are COVID it's things or or doing obviously, look But optimism there's as seeing everybody investments. in India is up, different appreciate with they how first year, and catch-up whether

do infrastructure, So keep the do right. mode purely from moving with up with deal how reactive home we we from how of to people working

we would So I say one see. area, that, definitely

selling to mean as is is trying we I a customers, by where what broader second evolved product. economic what a goals proposition to And the that to of our we place commodity have value see momentum security on compete The connecting is solutions. positive kind

relates engaging more categories to with products. good of as working and We more broadly it continue customers traction see us, very us buying with to

Hamed Khorsand

Okay. there any quarter? was customer this XX% My is, last question

Dhrupad Trivedi

No.

Brian Becker

customer Hamed, and we this balance is No, XX% XXXX. Brian. for sheet up a or QX have don’t revenue either items

Hamed Khorsand

Thank you.

Dhrupad Trivedi

Thank you.

Operator

go question Soderstrom Sidoti. next from Our comes Anja from ahead. Please

Anja Soderstrom

to see this what Hi. anything in quantify there you you Thank a my question. you or and you are for Can able talk little about taking about funnel that?

Dhrupad Trivedi

Yes, is Dhrupad. Anja, this

good So question.

lead to look look full year, we for tend for think, next at try we I and as outlook quarter as we when many typically at least our to the can. indicators

we then So when say evolving X%, in on when market, that in enterprise how that in we X% feel rates growth different is and at we to our provider context, at service our look the funnel right. look year and historical up full regions and to very confident conversion

indicators saw based phenomenon multiple on year. with the to impact will we it's that that. basis, would some be we on our year high what there be confidence line Japan full we expect. for And based So a we connecting that the the where you lead and the really But think with funnel had on funnel, timing also positive in understood on outlook

we lead we as can. retreading full the and analytics more it's year indicators growth well confident to feel based Anja So project as numbers. those, And getting on more better

Anja Soderstrom

Okay. Thank you.

for Japan that was just quarter to what's you're shifted. you America a strong in regions? driving you mentioned shift different you bit when little Can in the slower has seeing and last notice very what You talk that for was that about

Dhrupad Trivedi

Sure.

phenomenon Japan, service was had of customers the originally, So, our spoken we there. I large some provider think

are investment that the were as make downsized and and and spread ultimately advance be network by same customers the place more still to to Olympics and What rescheduled. which demand, going don't all increases, Olympics ups saw the and capacity visiting upfront in externally that our concluded and And is the we it's be to all with experience one through we planning of no in went We’re but and downs right it the needs driven Japan. planning where feel they is anticipated timing are with prepared the year. out capacity

always not one QX case, performing So comes in this regions, and just say relative in from America, back to needs of to processes, year. and of lot in about leadership the I have Japan And would et say of commercial to change continues execution would go QX the a regions, how most organized really we used When one we our it and saw year improve be that where a a commercial addressing improve to territories, last execution best what you if balanced America including North QX, improvement cetera. reflection is in will that impact. spoke to to to we our there, of seen Japan. you've We our that I continues QX timing

to So we a did large think you on as there. it single a that right, gives we in affecting earlier, us balanced an without opportunity and growth right. this heard a customer way build foundation And from very

America. a commercial it's in execution improving of So result

Anja Soderstrom

bit Okay. are see little can you Thank positive when those impacts talk And with Ericsson, and have about you. from? Dell when to the see a you and developing we – partnerships also from

Dhrupad Trivedi

course. of and Yes,

I'll about think, I So separately. two talk the

to joint about, of take to marketing So, and to that And with as we includes, market. in talked sales work and all Dell and calls continue it we announced the that. with September, we partnership jointly them

continuing in of line As we are the and looking for by sight be which funnel second will multiple to expectations. at, with deals, is And our we expected, meaningful to grow us line the half. absolutely

as meaningful So and start before, customer say would progressing trying a to with track of relates next will have what trials on as work to Ericsson, software to impact and that along the We and regards on they well. to become Dell is said similar. I doing and it been generation pipeline. it's partnership we platform lines them build that With

other call. extremely about maybe optimistic come and on would with continue future move COVID, that little know, but work XG as slowed And from providers growth right, are was bit Ericsson you the XG from as them networks that existing meantime, with heard their they the down As in it. Ericsson you to we readiness. towards service well

said have results the exactly, and second half. meaningful on both by to those as are them our expect So in track we of we be before,

Anja Soderstrom

general? Okay. the talk just just in a what in enterprise bit And about see channel can also little you you

Dhrupad Trivedi

Sure.

in kind up. of if think verticals make look at you of I different it what that enterprise terms

Our and and financial most so proposition targeted throughput, includes terms in value large mostly and there at is is And enterprise, security. by design our companies latency business forth. the reason for is which of differentiated that gaming

So, focus large these the is within enterprise, see continue gaming we these They addressing small-to-mid certainly volume do it market, course worried after more the for of forward our it more more and But enterprises enterprise media our meantime, and like we they broader to and see breaches as about. with look are the partnership. knows continued, that that public in security relates positive to, to stuff. some tailwind on people everyone more that and of about platform demand Dell

as for enterprise. enterprise, So, I of doing. we what a large continue to And we are pretty think, see there course, talked general tailwind sentiment stable beyond major year. that, that us that it's in is obviously out And And outlook improving about we But look can the drive. enterprise not today and certainly help driver we forward of in to market only us. for a that small-to-mid

Anja Soderstrom

we year-over-year, then And any you. your terms seasonality confected about we it think there dynamics or think recurring of there, at of well, sequentially. it, Thank is it grew should How sort revenue about how in that? should

Brian Becker

small is much revenue faster rate overall Right, an service run it's we've our I software our the half and talked this, revenue of it's mean, normal but stat. at of know other it a I recurring and growing about perspective, and half From support today, revenues. there’s portion so XX% subscription. than overall is

that with point in prominently in the in XXXX this see the us the balance growing impact subscription to as significantly our and more on we year-over-year QX the benefit deferred marketplace I as can and the next outlook. year. into revenues was begin traction see good on the to said, Obviously seeing We sheet are revenue, at continue expect in pretty you we

Dhrupad Trivedi

right, or Brian. see why with just it as XX-month add initiative focus basis And not in ramp phase. as that's to trailing that's strategic up, and faster you it you or the where to look it's to shrinking? fluctuation, also tend growing of on we But startup as variation quarterly And that bit a we this a trend clearly. Anja because a it's ramping Yes, to some more But right. Yes, but more will the it are variation, is that, is grow up see you progress little see at we will that there is a phenomenon, look to if continuous And should year. right. trended, you at reduce

Anja Soderstrom

you you. have your Thank lastly balance allocation cash you bit to sheet, have little you And see have strong buyback priorities? then capital pretty generation, that a more surprised flow expect around Okay. strong this Do quarter. a any and didn't your comments what's to shares balance sheet was And that?

Dhrupad Trivedi

question. good no sure, Sure,

and So, I capital organic us priorities think, allocation is right. growth driving funding first for

to continue profitability. and to best business look the drive that model we at our as way So,

buyback that a buyback. right you more it good certainly that, on believe we use more. of we are And moved we the in and is authorization we business significant Anja, course, we plan, we to especially and continue through correct, Second, XXbX-X Brian and as doing as the do review of are capital, we where will have a see I periodically a mentioned, to and think, as

that, And build does that faster product foundation But we'll us then a want first, our with think, that. carefully accelerate. we will we said it, that revisit continue accelerate at, as on, I tailwind. those on of grow time. bolt-on the market the us we but can our the acquisition, and small allow then this based yes, because revisit be beyond But all growth to help course, are to upon focus look we type and very to to continue there before the if evaluate we in we'll have opportunities will So, create

Anja Soderstrom

Okay, great. That’s me. Thank you from so much. all

Dhrupad Trivedi

Thank you.

Operator

Hendi from ahead. comes go question Susanto Please Gabelli next Our of Instructions] Fund. [Operator

Hendi Susanto

Good Dhrupad evening and Brian.

Dhrupad Trivedi

evening. Good

Brian Becker

Hendi. Hi,

Hendi Susanto

Hi.

enterprise and the question discussion improvement. First potential revisit I prior on market may

reopening enterprise the in Would or share XXXX. hopefully Our the normal expectation colors you you for half like of second have the into IT that throughout whether And the will like that? enterprise economy XXXX? less on of feasibility feasibility outlook more benefit remainder

Dhrupad Trivedi

Sure. Yes, question. good

for performance the in we goals So, we America, to in the vertical, improved north we expect don't right. that but enterprise year-over-year of publish segment, back each continue will specific see absolutely in especially half XXXX

demand enterprise, and So, see to to and people large that needs invest we small beginning both a again of broader in mid right. network of phenomenon it and security enterprise, also and relates definitely hopefully but improving for reopening sort

definitely of are counting we our when that look we are the optimistic. growth year-over-year and So, And one working things is at we in key improvement on towards.

Hendi Susanto

then any QX QX? do insight Tokyo qualitative to contribution it And reasonable assume Olympics sales to Olympics the be benefit further and it. on have Got of related in second Tokyo will question, you

Dhrupad Trivedi

think No, Yes. I that's a good question.

the see about not So, that. think really we as be Olympics, in out networks now region, it growth the will right. the it only absolutely But will to more to way tied spread is

is subscribers, needs see there still is growth security you And correct. there in we in are growth so So, that. will still

QX, we deals to QX our know, in mentioned expect for positive you and and happen outlook based year very that on QX. Japan is still we full optimistic As earlier,

Hendi Susanto

That's AXX offers, of can like what share the you okay. it. type flavors And subscription helpful. Got Okay. question, and Even QX, what then Dhrupad, model? business of last then currently types

Dhrupad Trivedi

Sure.

I So, think right. it's ideas, multiple

through a So, specific I'll one. go

products view enterprise. because than differently risk can So, providers the

value customers, But monthly enterprise subscription, or term period. to get a providing model are be security throughout should for of add or be paying could it something update. that it that it's updates with where could be they and them yearly, their So, aligning it consumption monthly us a they

of are subscription. is back-to-back our based working with subscription we dimension on second where are who customers selling it The also

well. that based or proportional subscription volume So number users data as a of of on is

a base typical customer enterprise. So than service little those because company are it. just targeting bit two a small two or is ideas thirds our it’s different still providers, flavors And of

Hendi Susanto

Thank Dhrupad. Brian. you, you, Thank

Brian Becker

Thank you.

Dhrupad Trivedi

Hendi. you, Thank

Operator

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

Dhrupad Trivedi

of and you. Thank investors, you Thank to all employees customers. our

said the XXXX QX strong a As to year. call and really full positioning our from the us year, strategic forward for solid you. in for us growth start Thank we initiatives to was look well we a

Operator

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

disconnect. now may You

A10 Networks (ATEN) 28 Apr 212021 Q1 Earnings call transcript