ATEN - Earnings call transcript Q1 2022

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Operator

Good afternoon, and thank you for attending today's A10 Networks Q1 2022 Earnings Call. My name is Sam, and I will be the moderator for today's call. [Operator Instructions]. At this time, I'd now like to turn the call over to our host, Rob Fink, of FNK IR. Rob, please proceed.

Rob Fink

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

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

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

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

and M&A rely results operations and of could a pandemic of the by unless beyond on are intend the a as uncertainties, business them impact control, result and you such its today's the and course future management During otherwise, revenue trends, involve in statements, forward-looking new which results. infrastructure, company's including including strategy focus to results, should regarding of growth, beliefs of and the these for are our capital call, projections or actual future May COVID-XX materially, its some not will and of repurchases customer investment cause market statements, potential risks and to number not opportunities, on required make as its positioning, industry and and potential constraints whether differ and statements dividend and as statements X, of future update that operating share. These These go-to-market statements supply expectations and does in as chain and AXX current of predictions forward-looking information expectations programs its contained forward-looking law. today, information, XXXX. on allocation based strategy, events

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

Dhrupad Trivedi

you you, than today. solutions, of year-over-year, full guidance increased at Rob, all the security-led more Driven adoption XX% by Thank thank range. and of to deliver revenue revenue us year growth us for high end positioning our our joining continued

in see leverage generated continue improvement We with we -- As a our in to dividend margin, $X.X the cash after expected, business million cash cash to of quarter. million the $XX.X in in operating earnings operations, in ending and quarter gross and shareholders income from and equivalents million model in share. per stock during $XXX.X in cash repurchasing million $XX.X returning form million the with $XX.X

XX, our with sustainable our achieve XX% a companies. highly combined we growth and developed goal or EBITDA As discussed meaning model, of Rule is Analyst greater, margin at valued recent business the line cybersecurity have to revenue of Day, and a in

durable serve as demonstrate build spite Foundation our a the to our continue in and headwinds. for Security-led is solutions catalyst that continue Hyundai results growth. quarter working to multiple first secular macro The of model

the attacks for large that focus well our see incidents, ransomware States, recent business We impacting have here continue as high-profile value into facet on all our delivers built We technology cybersecurity customer-centric business, in with security the situations innovation clients. our to including not differentiate individuals as companies every helping government cybersecurity about of groups with several weekly, technology solutions scale, targeting daily intrusion organization cyber agencies key to seem sophisticated sponsored attacks around alike. and occurrence the infrastructure, be through if taking state large a small Headlines incident state-sponsored a or involving and Ukraine. including moving world, place beyond isolated utility

result, are a CIOs As leaders focused and on first. IT security increasingly

architecture ability security-led our differentiated networking and leader performance capability with sets encryption best-in-class cybersecurity infrastructure to Zero AXX Our protection. of solution, a solutions apart. has integrate including all in as security into and itself networking the us Trust superior

result, in target our and we winning a are As markets applications.

handle increase IT traffic to security. our Our more global throughput networks capacity traffic global customers their AXXs expand an data. suite in without and continue and effort allows product to also to customers sacrificing

capabilities In build while into mitigation our privacy and as DDoS safeguards we to enabling as and protection improve networking recognition nearly offerings, resiliency, well expanding networks. all malware customers our their their fact,

key North reflecting America highlight areas in growth. investment increased of XX.X% million, this commercial initiatives leading some million progress million. from grew Security-led our quarter geographical $XX increased to to revenue of the with year-over-year perspective, me the From the being $X.X in revenue from Let business. Americas EMEA XX.X% on year-over-year a product year-over-year within the driver our revenue $XX.X Americas.

continued $XX.X Within $XX Asia, those from countries million Japan in impact including and lingering $XX.X APJ the expectations. QX to in XXXX, headwind Japan, of exchange foreign million. million COVID-XX. This [ph] depressed went of with to is economic declined a our outlook significant from line a $XX.X inclusive and of million consequence in

diversification foundation. Our a resilient to continues provide

is capex of investment and cross-sell to reduce opex. continuing key our and overall that balanced this focus XX. our growth to a profitability strategy with to focus opportunities to customers, stated ability while our solutions continue on our achieving A We of improving in part Rule

growth rate in growth. existing past and to growth ability bolster strong with our target our year, installed consistently has demonstrating product XX% leverage confidence revenue the our successfully our to Over exceeded XX% customers delivering our rate, base consolidated

and shareholders, balance our return proven to We invest for fortress have our bolster capital sheet. to grow, ability growth, future

all disciplined, evaluating in demonstrating rigor strategy, of maintain potential capital flexible while shareholder options, will uses a We and capital. exploring allocation opportunistic

As these navigate issues able you chain AXX issues continue date. I'm our are has industry. aware, to to sure successfully all supply throughout been

looking are for financial and AXX Cybersecurity growing strong a requirements we in able so for to have customers market, positioned proven meet been this is and those the by primary Our our well remains far. performance. growth. assurance, is supply our catalyst

XX% now review EBITDA achieve of Brian? full the call high-end expanding XX% turn We positioned the top are With the to to Brian to over around a well quarter. range target the XX%. to of line for of to that, and year I'd detailed XX% growth like in of our

Brian Becker

Thank you, Dhrupad.

revenue, first up includes revenue, which the was XX.X% of lead is million, representing year-over-year. future XX.X% million maintenance As which XX.X% Dhrupad XX.X% total indicator mentioned, was support $XX.X revenue was revenue Product year-over-year. a of or revenue. in for revenues and up $XX.X million, quarter total revenue, Services $XX

geographic including currency Americas, $X.X $XX Dhrupad million, million last our year. including down Japan, to was in foreign $XX the Latin mentioned $XX.X standpoint. earlier. up revenue which a million was Revenue Revenue inclusive headwind America, rates to last was EMEA from from XX.X% This from by from XX.X%. the was strong compared of million, from exchange million year. to Revenue the compared Moving Asia, $XX.X is first quarter

seasonality. grew quarter, year-over-year in range our XX% the with as Please note $XX.X revenue in our our typical balance X.X% Recurring XX, which defined see of this revenue. sheet, within million As you and that subscription is on $XXX.X was revenue, X.X% line of year-over-year. deferred March revenue of XXXX. can is and to target support between million as up XX% That's first

otherwise of exception all Gross our press the in basis of the unless metrics quarter on revenue, XX.X%. GAAP on With are this reconciliation our discussed margin first of A release was on results to provided non-GAAP stated. call full a and are non-GAAP the website. in

the were Non-GAAP of for first EBITDA $X.XX the million we non-GAAP million basis. approximately As income first or last $X.X per XX.X in was cost compared used income the able execution. computing operating the of reported priorities, quarter quarter Dhrupad for growth global per to million impact QX shares. chain share investment compared quarter On operating and $XX.X net industry-wide or with the or for successfully a million in $XX far, GAAP reflecting We compared quarter have $XX.X $XX.X was mitigate our supply shares the $X.XX was net million non-GAAP in expenses first income in in cybersecurity input last constraints mentioned, were basis, a weighted or the Diluted for million of to share year, thus million year $XX.X been for XX.X% $X.XX EPS million per million year. $XX.X quarter commercial ago on quarter the to increasing share revenue. $X.X income quarter. Non-GAAP Adjusted and including in increases.

QX. million million $XX.X from free generated generated of we flow For cash the quarter, activities. We cash for operating $XX.X of

a Capital expenditures cash we purchase flow expenditures. as provided is operations, free capital define and the reminder, of equipment. As property cash net less by

of which of the quarterly As and compares cash includes million had XXXX, dividend equivalents, quarter. in total Growth $XXX in XX, which $XX.X $XXX.X share and quarter. to March cash year of million the repurchases ago we million during

continue We no to carry debt.

$XX.XX During the totaling quarter, $XX.X shares per at X.X average share, price an million million. of we repurchased

remaining of million million. XXXX, of million have program. $X.XX, in at price we $XX.X our share $XX.X an totaling have X.X million January average Since $XXX We repurchased shares repurchase

record be the per paid cash XXth. May in Xst share on In In $XX approved we returned on a the and shareholders dividend share between addition, dividend. June have quarterly the more quarter to shareholders Board to of million has than repurchases $X.XX to total, of

achieve revenue year Dhrupad to to XX% the closing of well of the year Dhrupad we our XX% As target XX%. end and back to mentioned, to remarks. now turn call over XX% of positioned adjusted full EBITDA growth for are high I'll full

Dhrupad Trivedi

Brian. Thank you,

a to represented quarter year first the The start for strong AXX.

deliver with a helping market. and as position us to security-led trusted outpace results partner consistent is solutions the Our

to continued spite can for well macro enabling mix, for terms sales AXX durable would I and like are model support. regional you up customers headwinds. employees, customer Operator, and in more open now business shareholders product in a of thank We all their the of questions. also of diversified mix, call

Operator

Instructions]. [Operator

the line first Schwab open. is Christian, Our question your of Christian line of Capital. Craig-Hallum from comes

Christian Schwab

Thank or and and challenges chain I once you. every Can in able results wonderful here. the what some way consistent a a follow Great. issues. such supply job and facing guys expectations? handling to what you've report understand -- us help the then another done to almost chain you perform Congratulations is company one you solid for you other, raise done saw the supply of in again or -- we help consistent just level to you have better continue at Can be

Dhrupad Trivedi

to Yes, bit. let you, thank a that little talk Yes, Christian. me no,

think I especially course, right? mitigate suppliers, that picture, same So that things of walk like those have hear you some of this, us you hopefully of our on silicon, helped about, if through So I'll the the the look examples some broader at suppliers things help.

operational So around about longer-term started X.X stringent, processes mix much can commercial we and one so etc., a with putting years supply but customer deliver. that we demand, are while really we line needs, in initiatives ago, capabilities, driving X, in that more planning

a so us good to And from. that was foundation start for

Second U.S. and as simplifying it got we delivery from thing, U.K., right, to it Japan, was our with do cost around where in we things Taiwan took as harder obviously input and well it and footprint perspective as initiatives regionalizing makes had sense footprint, an our

sources we'll monitor if then at for far, beginning have us on relevant focusing developing I been the early anticipating components, to. non-silicon is skis be new say obviously least sort not And some what signs, have has we ability try the of and more it need position customers, would closely much what to some saw XXXX, as deliberate in levers very deliver, simplifying but we best putting last, to impacted components could we deliver most on our And scenario and worst to thing right, so more to to our we case world. second to, of as portfolio on right? of ourselves find it started those our around continue Third we for is, of

Christian Schwab

Japan, most clarity. that Americas, example. outperforming, are you guys is is, I often? current update where Yes. different in And versus my you in last you're who Congratulations question security on, general, geographies environment on say it the in give us guess in for Thanks against that. the competing different for an just can

Dhrupad Trivedi

Yes. No, question. good

directly So you certainty well. I question the [ph] your and answer think then so -- as give I'll

installed have we So DDoS people are the first, typically, competing marketplace. who with footprint in

as Arbor it oftentimes, Networks, competing well. So includes like Netscout someone times, we a will broader different now. things which part is be many would Other solution, of which with be

of would those a nations driven. by on right? solution a So sense you the and could in competitors target, may versus we for performance, high our segment, So are reliability resilience in most we level which that customers, be of example, where are varies set local of we as will virtue tremendously the our be provider It some a are are little customers Networks, not high-end and looking typically into. companies by mid-enterprise of customer some see well. run competing kind for performers. weigh geography. It generally and product it high with But positioning Juniper does that at service those like cost, with price the small, lowest true we expertise high are we like the right often working And that competing the when on bit look purely who developing -- for

also does it SSL products selling we for the say we Now are when landscape encryption. change

also those apples-to-apples, there's you right? when are gives it hope other to So I for compete our an integrating with with. not you products platforms, all mix that compare the product a but We we flavor that,

Christian Schwab

great. it. Thank That's that's you. and Congratulations quarter raise a in on solid this guidance. Yes, environment

Dhrupad Trivedi

Christian. you, Thank

Operator

Thank Soderstrom is line from is your you, of Anja, Christian. open. Sidoti. next question Anja The

Anja Soderstrom

great Hey, question. results. for thank Congratulations continued taking you my the on

So what product that contracted sort can I'm gross just at And least margin, curious that? from going What sequentially. expect for forward? drove we it's the of

Dhrupad Trivedi

comment think let Yes. I'll No, it and more. I Brian to

So to that. note Anja, nothing unusual, on

cost low a right? impact obviously, line. accommodating we trend, that we product add. FedEx QX, see, to of up. those chip in if look right you course, or you the some So as or it's margin, mix will of And very all inflation where quarter-to-quarter. but there also well see as whether absorbing that is trend with think kind not think, to it's we move input at you is look see bit and obviously, volume of right, And net anything inclusive right? year-over-year I suppliers, that right, can And QX, obviously Brian, from lot, a -- QX now, within slightly we right, sequential like if little market it's variation end at QX are mix you the as impacts of So we product of

Brian Becker

Yes, exactly. that's

of a Our relatively while product margins services the of are products we're it's and just gross matter consistent that fluctuating slightly, very selling. mix really

Anja Soderstrom

and assume including labor terms I also labor, to are in how some of then and Okay, able extent, input cost mitigate you cost, inflation would to that?

Dhrupad Trivedi

yes. Sure,

think have I doing So, that there we are right. been several things

to So those relevant obviously us. are to -- continue be

So place. operations offset helped the little Day, we obviously a or labor On company of But inflationary of noted I initiatives us in last we have it's those were in cost as that structural people things PPV had to the get cost helped do XXX%, continue continued around we those, better inflation, same has we structure and the I And we right? to simplify business, obviously things whether improve put and productivity on us a So address on cost also goal operations portfolio And in our being and as that, could delivering have that like a quarters on face the place that have several things required lot kind phenomenon. offset to that -- logistics several ended and been lot offset So just continuing up think but us focus as bit we materials, cost, costs, offset things input margin. right? some ultimately not to Analyst a ago towards the of helps into have side. those quarters a those inflation. to place

Anja Soderstrom

gone like mean, you increased What it strong looks you. then Okay, And very of are in that environment in Americas was for terms the of, the was that's geopolitical here given there? seeing cyber sort I Europe the helpful. and on work

Dhrupad Trivedi

I so we think right. talked it, Yes, about

as far year-over-year. grew So EMEA,

conflict impact there. are things, we think from I is, So the one any X direct have don't seeing we right?

expect plus people to importance bit we seeing be increased X right doing that activity causing So We more little uncertain, do happen. is is see become a right? there are it's are see as interest now. X and in cybersecurity and to X we So prioritizing that's sales what is is of cybersecurity, themselves. in economy or result to to outlook because typical cybersecurity we not think that or budget. in more we us But things. beginning see not, is are But customers importance people them the the One, of more I months, uncertainty topic to And relevant protect budgeted that of as can worried cycle their of hesitation higher more a conscious than right, and to either what minus. what whether and

Anja Soderstrom

sensitive solution, do a how it inflation. a and think And seems mean, right? like economy I flat you you are to sort have of you critical pretty

Dhrupad Trivedi

Yes. No, that's right, that's right.

Anja. that's well, think I exactly So

So with inflation down, use raises management throughput right, to for around Internet it as strong as us, incidents, all awareness and cybersecurity build-out want that. going very And public is So we network as more be slightly by slightly secure. also the data right? see to well. the they people or are still whether it more products are trends, our up secular the and And leading and way see

and the things on urgent more more of right, mid-enterprise all ambitious doing would or transformation cybersecurity more a where think you the critical about rates digital were I economy those and see initiatives need. that projects, like side is with cautioned IT slowdown interest about

a So phenomenon now. we more certainly right secular see as that

Anja Soderstrom

for That Okay, you. all was thank me.

Dhrupad Trivedi

you. Thank

Operator

you. is Hamed, Hamed line of your next question from BWS. Khorsand Thank open. The is

Hamed Khorsand

X the for security-related are what you service promotions? to a that now? I X-month was, the is question it providers? security doing that starts first how even about Is all conversation lead is mean, So given time,

Dhrupad Trivedi

typically I on yes, attacked I mean, are public, obviously, of is -- a data. that not the right? more there's the think they see things company so one every to trying themselves are in be obviously are cybersecurity, compromised things ways, seeing public, that right, different for It's and also they -- incident lot So

so So many more, services. you for you the is carrier would to you want about [indiscernible] new want have us mobile more infrastructure more now it subscribers, having a so that have and so be, for is more revenue integrated to secure these offer many

that are with trusted our a a the to product, what help with and cyber publish could you them Trust as you right? Here we deploy to do intelligence, we threat more things which is Or more which and seeing is like what framework, how we they with people attacks, make lot outside of and right, say, talks can Zero we of threats about can your the kinds infrastructure But more be monitor as it and you develop them secure. only adviser, That and of work not remediate. includes work we do. here's how mitigate should something see

a as infrastructure network same trusted deliver it right, lot relates that a it to first management. So at that the security, in seen the gives data expert as build-out is with being able opex, time capex to them lower being but of and around also

clear choose if I how new X versus they might of Hamed, cyberattacks and we is got build, new initiatives types seeing, do we commercial is focus commercial right. happening, most typically, right? benefit those without occasionally have time when that have solve So there are in they very infrastructure X initiatives product spend problem most us, to money, our advise we a point getting we we with it's are customers our on from customers at how it to -- So we and specific what and can obviously, specific, very would how there's there any If it. customers, is prefer around what would relevant spend do -- that

Hamed Khorsand

going Okay, to where Are more markets, and and given marketing? could expense restrictions proper on you looking so forward? conferences more forth you and and sales then sales attend in for that a no there's marketing this you spend COVID is

Dhrupad Trivedi

basis, it year trended we if Yes, is it and think compared the resumption I to last marketing, and I of travel a way a look at to certainly look at on Hamed, activities. sales think you see

I it back to think to few of what but a ago, it's was not years maybe XX%. XXX% XX%, go going

that our towards obviously, so sales sales only So variable amount per other incur had is relates hopefully right? I discretionary marketing can as reflected right, lead will think generation, And but The that revenue, okay. we then its some think and to way in it's grow and about spending sales see on quarter stopped, you that. marketing reflects that right expense we incremental now the that to

we goes on while basis, event also obviously get a variable So a year-over-year up some increasing spending roughly revenue and $X year. we goes as compensation entertainment million on sales basis, with productivity well, a and up year-over-year expect travel and

Hamed Khorsand

Okay, D&A, quarter? [ph] customers XX% this

Dhrupad Trivedi

We had one.

Hamed Khorsand

you pretty then sales question last they And my are in the much the smaller winning large deals was, side? or are range in

Dhrupad Trivedi

a that they and will It's you and both, deal it, deals there So are so there one then progress, typically, our a they look get one then lot at So it are more. maybe, I and may think are right? deploy add be million, that many are right? out these XXX,XXX that's try if deal of they XX,XXX, deals size, average first site several right? deals mean,so a location, we it but I

and it's customer. existing even a an progression So within

So first the not will continue deal year, typically revenue our delivering will but biggest they deal, right? be every

Hamed Khorsand

you. Thank Okay.

Dhrupad Trivedi

you. thank Yes,

Operator

Thank you, Hamed.

Hendi, is from is line your open. Hendi question Gabelli. of Susanto Next

Hendi Susanto

and Good QX. afternoon, Dhrupad Congrats strong on Brian.

Dhrupad Trivedi

on pipeline you, longer times Thank that the pipeline? lead and the higher stronger no, Can on strength the visibility about XXXX. throughout order continued sure. you gives your talk companies a and talk order conviction Yes, Hendi. some Dhrupad, then about visibility convictions and

quarter think different revenue at funnel, of forecast, our for own obviously look at our look one got view, is how necessarily several to happened market it's X indicators, We those we last from understanding have refine spending what at not I which XX-month continued net etc., X-month and So as of think processes. etc. indicators, on the would whether funnel, our outlook rates lead us, those sales our which delta, cybersecurity, translate? capex, IT on Second lead we points etc., I be and months, of typically

that's other of you at and outlook So look demonstrated at. And we suppliers. second multiple on some we when we from are a front. factors, what see I So couple And thing right, can say hopefully there's of commit. look that we right? lead we would factors a think have our times extending consistency

customers our concerned the engagement, think roughly and that. about But that. like to have our specific have, year should X perspective that of to go. course, full deal our right? are or when we talk outlook customer orders So I X visibility on generally, we is month we or X you on It's think QX any of based not time be based good a months, cycle with versus obviously on surprised about, pretty is things

And so those we factors. multitude look at of

right? talked about tailwinds, us, think little we for I giving and is say headwinds would is cybersecurity. bit a things that the visibility visibility and of importance relevance so -- And So us better increased I are

Headwinds uncertainty and towards Second use assets at us, right, could things extend we some tracking wanting where would budget are is years may we basis, see and basis, one people So and were is to try number X connectivity to a for to and economy about, macro generally, all around or that. is project looking and talked them the not cause But them radical their which a are, by ago continue customer rates right? project-by-project maybe we approvals like defer on are that keep large and more obviously interest spending they to on visibility versus we quarter of data be and on there transformation. something.

I ago, gaining say, definitely better. service ago, in versus I'm to X I main that's is as the assume you the would what Dhrupad, the Thank minus line break somewhat wondering compared compared you're drivers is say what in in you, delivery visibility and to stated then if and market reasonable controllers. controller. Analyst application from Day, delivery growth say insightful. delivery then CFW talked that then or our observation growth, the not security year about is is so And better. -- outlook? think, your close Dhrupad, security. think at look down, X And state enterprise? growth I providers X it's I ADC, stand-alone And I'm application wondering this that lets then say still in to help you firewall correct. think, SSLi. Yes, would controller -- year I comes And to remainder top I that, your XX% application is very slightly and years its the so far of shares So in compared we let's Can Hendi, And right, that to CGN, also categories, growth worse, plus DDoS, security

SSLi, less fleet is not is the with than more innovate average. reason by stand-alone invest features, So to ADC declining, growing this not security would because we I security DDoS, is average. service are is embedded right? are And declining certainly we and those quarter and provider and And it then the and say products, of And the way, growth saw if you but for CFW, non-security. the it in it both look security-oriented enterprise north us, in in the at continuing all

focus drag for about enterprise to big data not availability, it's large us, and critical security. difference which for like worried are our customers enterprise, that So be who us. But uptime remember is or tends a

other to as are well. delivering are companies services that closer So they

Hendi Susanto

you, Thank Dhrupad. you, Thank Brian.

Dhrupad Trivedi

Hendi. Thanks,

Operator

waiting are further There questions this Hendi. you, time. Thank no at

to like back the to Dhrupad I'd over turn So remarks. call for any closing

Dhrupad Trivedi

today for and all of for Thank your joining of us Thank AXX. our you. ongoing you, continued shareholders and thanks to support

Operator

QX Networks all AXX the concludes That you for Call. your XXXX Earnings participation. Thank

disconnect lines. your You may now

A10 Networks (ATEN) 4 May 222022 Q1 Earnings call transcript