ATEN - Earnings call transcript Q2 2022

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Operator

Good afternoon, and thank you for attending today's Second Quarter 2022 Earnings Conference Call. My name is Tania, and I will be the moderator for today's call. [Operator Instructions]. It is now my pleasure to pass the conference over to our host, Rob Fink, of FNK IR. 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 second today, Before that issued you like after closed a press XXXX

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

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

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

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

Dhrupad Trivedi

Rob. you, you joining for thank today. all Thank And us

been which despite the of COVID success. durable market global supply in we success chain catalysts and and economic track had technology currency to aligned But secular Cybersecurity this a this our with a geopolitical on infrastructure efforts. and sell groups, as We chain two global network clear and established our impact has customer one network Simultaneously, faces realities with as challenges market quarter as recessionary by two the needs second business generation. proud enterprises, for EPS is AXX. XXXX. significant can The and grow improvements was growth. have our row built of the within meeting and cybersecurity. events of to In as related is offerings team positioning I'm led another into together, groups, unless it a disproportionate have visibility driven capital proprietary these our expenditures, our main XXth we interest a our linked catalyst the strong providers. and recognized and leaning and clear a supply the Like most especially AXX and security. It of a conditions, rates transitioning infrastructure service important out record of of our revenue in more be the Central security of out leader today, operational only the we tailwinds revenue quarter legacy at two continues infrastructure served was this impacted peers. solutions, AXX have our not mix. build small exiting same from was our for focus diversification conditions, the to headwinds, midsized security XXXX, quarter and on to in peers, customers first enterprises as it requires expectations. have AXX And away crisis, inflation and half build economy is to

and XX% essential. input and by The prioritized and year by led even was our network growth. security driving despite higher is our expectations economic half chain supply published our for proprietary increased full of levels in net income, strengthening that solutions, exceeded year-over-year, net first outlook adoption the whom for the in security being providers amid ability of for than and for EBITDA performance cost invest especially reliability the income. of our gross margin future AXX challenges to result continued are Driven continued confidence XX.X% solutions operating pressures, service better cybersecurity revenue and business year challenges However, a is

the $XXX per During ended XX.X%. $X.XX the of returning cash, more second of share we after million quarter, dividend. Even than repurchases revenue X of with to form the XX share. representing growth in of We or a margins and rule combined XX.X%, shareholders cash nearly in XX.X% and achieved adjusted quarter million With goal. our EBITDA a

to have slows, us We thrive. sheet, valuations opportunities economy positioning creating fortress If the and incremental a relative as balance reset.

growing strong top we into every with security We solutions built our our have upon legacy, facet portfolio. line also our of than faster a proven a line. Building model, have business bottom

customer AXX. on leading only percent growing centric focuses value the magnitude, based made total line approach, Ukraine whether and our infrastructure cloud. clients. in even response solution the Today, delivering sophistication. the tangible to ownership ADC before, improvement ones. progress threats an cybersecurity metric we private grew for to as Standalone top is demonstrating innovation, revenue, public transitioning of product mix have discussed important for in company. XX.X% Regardless As overall a new or threats a as are consolidated in continued global of a frequency and industry cost decline and solutions of sales AXX and cloud The old The and exacerbated created solutions war has diplomatic prem on deployed business security and

amplification Our and learning as identify the continue advanced emerging such machine to new solutions threats. mitigate challenges, LDP

us security solutions threats, current Our capturing share for setting because AXXs identifying a increasingly AXX network isolating the significantly strengths, allow and do of our is integrated efficiently this our first, technology and cybersecurity, DDoS differentiated broader cover while CIOs spectrum best-in-class providing infrastructure on with are to problems. and including trends of to solving traffic and standard approach flow. focused attacks. identify customers

me Let business. our some areas progress key of highlight within

backed Our is revenue trailing XX%, QX Americas, continues increased now a our increased a to XX.X% $XX.X Americas From revenue from up of year-over-year. on overall which XX-month XXXX. recurring to secular the growth of indicator product driven revenue, in demand geographic product solutions. future our initiatives by strong the revenue perspective, million in be AMEA basis, leading for grew commercial investment is revenue, and revenue XX% versus reflecting which tailwinds XX.X% proprietary our security by service led a year-over-year

the flat year revenue currency over decreased Inclusive including was significant currency impact foreign Japan X.X% basis, essentially a exceeding year. constant Asia, on APJ of our expectations.

resilient navigate different foundation and Our provide diversification as to continues regions geopolitical a macroeconomic headwinds.

focus We new and including in continue growth our to cybersecurity. investments capabilities opportunities, expanded in

to priority continue A amidst to customers these and overall within We the climate. improving ability customers, to our enabling them is solutions, CapEx also technology own enabling partner current hybrid to our to economic OpEx. sell roadmaps on while solutions our navigate cross their reduce investments

increased these demonstrating year-over-year Our own OpEx XX% investments.

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

are We to we the the potential these and recent deliver board. in by our impacted consistent while current and to maintaining flexible discipline conditions to uses have to demonstrate our market as valuations improvements of economic chain products strategy. industry. continue increased And date, has continue AXX our issues and opportunities. only conditions, to provide are to customers. been margin evaluating gross capital will evidenced capital, navigate across But shareholder opportunistic to ability The conditions committed allocation likely a rigor Supply throughout able

XX% Our growth revenue of year-to-date can reinforces to our performance for of revenue XX% achieve and EBITDA of we year-over-year, that year XXXX. expectation range our XX% of targets XX% in the to full

quarter. Brian? to taken the that, identified year. the into business call to have I'd detailed current performance Brian achieve bottom-line We account a our our levers With turn the over for the targeted have of in review for and to external like environment

Brian Becker

Thank you, Dhrupad.

in was total Second revenue. revenue, million XX.X% quarter revenue, quarter includes year-over-year. of year-over-year, support our Services up representing Product up second $XX.X total for revenue was indicator which or a XX% highest which $XX.X is of and revenue XX.X% was leading million, history. XX% future million the maintenance revenue, $XX revenue revenue

to you a the million million, dollar X.X%, rates. is yen XX.X%. X.X the Revenue EMEA year, Americas quarter $XX.X p was in exclusively $X.X last Moving Japan to from Asia, as $XX.X compared including compared to the including $XX.X due to to million down was which million last from from was revenue exchange year, revenue million from second Dhrupad depreciating our geographic standpoint, LATAM up currency mentioned, Revenue XX.X%.

balance million XXXX, As of year you $XXX.X and our the year-over-year. XX, on $XX.X see grew as sheet, in subscription revenue million second our support revenue up can revenue year quarter. to X% XX% June as over defined was deferred Recurring

the $XX.X in mentioned, successfully revenue, are of investment and reflecting With chain our of non-GAAP cost in continued discussed increases. our in non-GAAP provided on execution. to the full margin unless compared year last $X.X in in second to growth million the quarter income in were was or the Non-GAAP share, second compared shares, are a income of million quarter this stated, the On constraints year, second we global net non GAAP basis of $X.XX technology quarter results with $XX.X mitigate for reconciliation input per EBITDA impact $XX.X for EPS to expenses press our second metrics basis. quarter Diluted Adjusted ago GAAP Gross $XX website. operating GAAP exception quarter. reported to used share were priorities, the of Non-GAAP weighted million compared computing release net otherwise per year supply a income million a Also, to the operating and in Dhrupad shares as XX.X XX.X% call on net shares for approximately quarter was all the quarter was $X.XX in share industry on non-GAAP the million last the million We or XX.X%. per million million was on QX or XX.X and for quarter increasing $XX XX.X $XX.X including a in for commercial million wide income or quarter. compared $X.XX revenue. basis, million ago the cybersecurity the year.

was year-to-date, $XXX.X revenue was the in period to on million from for $XXX to margin or gross $XX.X Turning million million. was approximately $X.XX was $X.XX results, per first XX.X% year-to-date million $XX.X up from revenue same basis favorable period Services used Adjusted year. non-GAAP shares GAAP year-over-year. Year-to-date by million was revenue shares. million was of $XX.X was net was Up XX.X% or XX% year-to-date, of $XX.X a for six million million of and Non-GAAP XX% income six million compared operating the share. driven month income Product $XX.X XX.X% share EBITDA compared geographic last for basis. X.X% income to were year-to-date per Non-GAAP mix. revenue. months which product $XX.X million a million. EPS or $XX.X $XX.X year. Weighted XXXX the the XX.X net first On XX was last up computing million year-to-date

million purchased cash Turning ago of June balance we $XX.X as million unchanged shares, from cash to year cash in $XXX.X period. in ever million million X.X worth the $X.X XXXX, sheet, had issued dividends. Year-to-date, the we or and and XX, total equivalents, effectively

to continue no We carry debt.

XXXX In quarterly In share has X, first returned cash the total, shareholders million dividend $X.XX of the of we to in XXXX approved $XX to addition, of a paid to half XXXX. dividends. on record than shareholders share be XX, repurchases and more on board September between per August

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

Dhrupad Trivedi

the than of in challenges. industry, of overall ability proud perform growth to terms I'm continue navigating Thank Brian. you, to AXX’s both better of in and external terms

enabling customer diversified terms open capture security of We questions. market can macro are enabling solutions Operator, regional headwinds. more the well for make, call product expand mix, our durable to us remain base. mix, share, of and spite in you and a proprietary led Our in customer model now up

Operator

Absolutely.

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

Hamed Khorsand

how Could landscape benefiting talk competitive impacting you markets? and stronger international be dollar that some and just or about you given the of the could your

Dhrupad Trivedi

So if global of America. North you growth look mix at our strongest was our course, rights, region

our performance think So headwind, America. doesn't is has Japan, denominated our that USD XXX like North overcome and we clearly, yen business transactions. in business gone in as from us. terms in Europe, something the currency, it exchange able were that mostly In to of by a created of to When in you conducted affect rate XXX,

of So rate, a was so us of material higher it currency while creates in it not little impact local far. headwind a terms for bit

Hamed Khorsand

Okay. contributing given from And OpEx is line strong there dollar? the standpoint any

Dhrupad Trivedi

Not positive and a are so meaningful other as obviously, not for negative. that offices as or because significant marketing and and currencies impact a the local well, offices local from sales impact perspective,

Hamed Khorsand

potential out? last was, do pushing could and How you looking sales out customers just have the any your orders? see then you question talk about And do much funnel you clarity

Dhrupad Trivedi

the times our extended So we, pushing our we the deliberately directly meaningfully. space are where, of of I of metrics outlook not but win companies several AXX, a see it. because are multiple on We to a in relates as monitor demand think, and customers it seeing dramatically, lot lead phenomenon of to course, from think out,

of see will where things and Hamed, we to sales customers performance to saying a cycles So there the nine this or Europe versus I choice, months maintaining just it revenue is networks of six war relate that don't like deliberate solutions generation, and are or and we some push pull, bit for course, longer, with would little or in think months our put somebody's off I because back directly linked are but modernization. quality

I different we likely be spending, may being see to know, categories, out. be discretionary think as IT more pushed which you then those

Operator

question next Christian Schwab The comes from Craig-Hallum. with

Christian Schwab

XX% make where does of currency the your we When on you're congratulations unprecedented And to and quarter should dollar tremendous movement talking back were? cetera, a challenging another products kind in not and but shift quarter XX conversion of from to row. to Hey, in possibly there, rate guys, if customers, actually solid supply continued moderate yen on et competitive quarters in kudos it navigating, extreme kind they your a maybe chain and or of environment, at the exposure again. this kind look delayed

Dhrupad Trivedi

Yeah, good question.

I delays we per outs So, as I it would Japan, because currency think, relates see concerns, say, to of not or did even push se.

basis, a in I yen, that transactions constant absorb it's are growth on local to currency within that our overall the because of so, able you were if XX.X%. we more think more, it's will,

are different And the that perspective, something yen, it as in And local of and is yen is in Japan being don't lot. terms a we team, we expected. demand a we yen, performance in in see fulfilling what so on demand to fact, things track where from are our because

we we obviously, that things lot the headwind it get also to that we to. I kind ways out, in as would to look meantime, things. tapers that certainly, but we eases As of still out when are to for script, But us. mentioned a navigating for the moderate of in need think, offset out, I appreciate where always And

Christian Schwab

competitive product it an I said, against? that. believe you guys us simpler set more investors often as some an best the think understand, who appreciate landscape can the are explain the who's to With an give explanation for you you to the on up seeing and making that products your of just clarity being differentiation, most stack update had to who, on for of and I you it Thank analyst slides in people.

Dhrupad Trivedi

yeah. Sure,

and I And which forth. of third thirds telcos, segment, our the so MSOs, is includes are one So, to provider cloud, roughly two sales think service enterprise.

someone service someone networks, the be Arbor on and we And Juniper, not other products, would days the on provider provider, from part the or security is be I On traffic we like with that which even NetScout. like sort of will and core competing features, longer. competing would of service portion has landscape really materially with ago say changed, XX

predominantly But and lot it's handle unique, for networks. often competitors. a multiple our architected it most is often would see are is the side, other segment, enterprises. institutions one little of lot users company. but kind enterprise one like for is would competition be of third of names data which products, is And the we that comparison, the would not product On that bit FX security. business, most our way handling of a that is of and we as is true be one services would a be which which someone combined financial our large every On those categories so a But and

Christian Schwab

And last balance you I create preexisting for your hit successful customer in my strong to make that acquisitions base? when your cetera. coming or to program, more down the were valuation about potentially multiples dividends, sheet then your suggestions, extremely question, talking think, M&A Did use look may guys you capabilities/scale at and buyback et you marketplace with to

Dhrupad Trivedi

obviously, that's OpEx growth. is faster and you efficient is As organic first to fulfilling because And can fuel our I investing priority well. way growth, said grow true, see, most increasing we before the to and it's in still as are

in investors, addition to for course, Second you return everyone is, of know, else.

time, would ideas us that might part for is reach us at we do vertical help course, talk rigorous. then opportunistically and capability have bolster continue looked different will in whole buybacks And either And you're or dividends. say product a And that's in that way customer that. last a But a I base. already, financially the we about or of it to so the context, do we correct.

continue those turbulent reset, that do that makes balance to as maybe and can we Having navigate But And is look that plan good, growth. think way primary I focus sheet, we at growth. our more we something our based to sense can evaluate. that, fuel to discipline continue financially how is things really well. we if to will with things on feel organic said times. options is as there's And it,

Operator

question next Soderstrom with Anja The comes Sidoti. from

Anja Soderstrom

sales just back that? the scaled on for bit I'm curious it and that a quarter like little marketing, and why looks this is

Dhrupad Trivedi

But about I'm basis. absolute Anja, XX% and up not maybe that's a XX% sales terms, R&D is And up GAAP is on sure, on in year-over-year. marketing year-over-year.

think And invest sales we we out later, effectively to is but and can I higher the marketing tie for continue more. higher, sales. one So

revenue. invest oriented new and And expand So continue year-over-year types security threats sales to in net the as in more as R&D and we invest our is sales. cyber I cost we said, second more of det. selling higher of And continuing solution for up to is

Anja Soderstrom

And mistake. capture headcount? are adding then stronger any my you meaningfully you're sorry, Okay, growth adding not or headcount to this

Dhrupad Trivedi

mix. a It's

is in So I and think, approach. growth you sales a know, balanced our marketing

selling, customers, ROIC security value on we So solution right. proposition and categories improvements existing expanding well, obviously, focus as better productivity with based and expecting selling on more

all become ramp growth up and sales just that's not And more is it's limited as adding factor those positive those by productive, add as increasing obviously, based things. they more But together. people, yeah, growing of all is headcount, headcount one but our So doing things well. on we to it's and

Anja Soderstrom

are this and XG you. are just to providers you the service you Okay, And where transition you if and in CapEx us, then at can see we that cycles, correlated point? where how to remind this thank again,

Dhrupad Trivedi

yeah. Sure,

cloud where And So as their by that includes in us, one we people I doing us, the expected. originally move had current we always us, know, make service engaged systems obviously, with of of yeah, offering But a around to world. and cycle think course, design customers well, to well as And engaged many are more they of balanced wins companies positioned those virtualization, well telcos fast approach you as are are was for to as as that. things to XG, for provider modernize a we MSOs. not the advantage lot And XG as category and security. take is for the investments obviously, like

to As spectrum correlation, with sequence some cycles, specifically then CapEx XG, you it of out, services. is optical backbone deployment build a infrastructure their build a radio correlation there's then it's is but then of relates think there there the if there's out, or is, sale,

positioned continue they And than are to or also so that. in meantime, current for they OpEx add they more to But handle to more we or because either to adding their those for more are subscribers, and providers that CapEx all well the used need invest service new capacity traffic. do services security

cycles, those new. and cycle. CapEx obviously, and of And in we CapEx It's participate interest both And we more but secular more little highly cycles. rates is is more related existing to is build fears, that related as So security said, depressed, that to not security out correlated And infrastructure from kind other that. or is secular with spending phenomenon.

Operator

Susanto The next comes from Funds. Gabelli Hendi question with

Hendi Susanto

between inquire would the enterprise perspective and growth secure Dhrupad. Hi, to providers. I on service our like

may for select say to in is first digit. service mid-single while profile half, providers, like let's Do expect enterprise do in a there providers? or result growth be they and growth So maybe any that for service enterprise like catalyst above growth the remain in you higher that to XX% growth should lower low growth

Dhrupad Trivedi

of this threats. a try as new adding new service facing before, to achieve continue we services the have to saying certain first was as specifically to phenomenon So, year, I navigate, is providers don't mix But there. I and think right? before, security we the this, half In subscribers, mentioned

it's progress And MSOs, so world, around with the make continue whether to telcos or those companies. we cloud

of growth the to that And course, conditions had stronger is segment have of segment large where look if are a obviously, negative that in our exposure enterprise, right, is that at a they low to it impact. year. signaling you segment is this groups enterprise As lot mostly side, the the or economic relates compared peer that to, but where, very

we that that a that kind issues. uncertainty, is impacted by rate, of that Europe, in think inflation, is So interest war phenomenon all macro

So And think within economic and differentiated. as be I environment it probably point, service I'll more more achieve are my one up to that we region But or by focus the improves, design, revenue right, goals. look to number where vertical we that or of we could verticals original could that have source little one achieve and we bring go provider a slower. on where back to that, on built not a dependent and durable more are product one we our

this helping be also us So much balanced. more is

Hendi Susanto

I gross about then like to margin. questions And Brian, ask would

at Day, to is part during historical the And non-GAAP first the sustainable second like is then margin the XX%. said mid-XX%. gross half, margin at in been XX% XXXX to XX% it is, first question running midterm level. is XXXX, Analyst surface you The XX% has to gross significantly above the How target

high that half to First XX% Or XXXX, closer be the low end. end think scenario is XX%? the end of margin may we Is XX% gross to like target? that that well is to XX% any gross mid-term of should bring positioned XXXX of the there AXX at upper in margin

Brian Becker

gross And for of still that's to exactly XX% that end right XX%. We're we're you're obviously it, the XX% so towards guided right. higher at targeting then tracking that's to to XX% basis had margin, year think like for the year we full I look said, it. range. probably way right No, years, you out on the say would We this a

environment. through pretty we tracking the can in what we're managing So give well

Dhrupad Trivedi

what to that, a on productivity or right whatever. right, shipping do to And has offset XX%. it of ship measures know is logistics know have thing supply which and what we we lot at us keep or course, is, helped driving pressures, also that I are But those, as think, of we don't cost what Hendi, it's helped whether is just is add one headwind us a

Operator

queue. There are questions the further no in

back to closing Dhrupad will for I it So remarks. now pass Trivedi

Dhrupad Trivedi

Thank you.

thank for of build shareholders thanks of First your for to of for for foundation to continued us employees quarter a support. the Thank global our and continuing strong want commercial And the and to joining I AXX you. all, great all all a today future. and technical

Operator

participation. quarter second XXXX the call. Thank your concludes conference earnings for This you

disconnect now may your line. You

A10 Networks (ATEN) 3 Aug 222022 Q2 Earnings call transcript