ATEN - Earnings call 4 2023 | A10 Networks, Inc.

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Operator

Good afternoon, and thank you all for joining. I would like to welcome you all to the A10 Networks Fourth Quarter and Full Year 2023 Financial Results. My name is Brika, and I will be your moderator coordinating today's call. [Operator Instructions]. I would now like to pass the conference over to your host, Tom Baumann at FNK IR to begin.

ahead. go please Tom, So

Tom Baumann

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

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

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

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

During our the timing, and of call, allocation market constraints chain capital including industry expenses our projections regarding forward-looking our share. management will growth, course strategy, including investments, repurchase supply statements statements, our results, expectations, our today's positioning, future and dividend potential trends, operating and and customer for programs revenue make and

and you of intend events. in otherwise, or predictions law. update them should on forward-looking by on statements a current could These control cause not XXXX. expectations result contained based whether as does these information, rely that risks financial actual information statements, as future events as February to are X, forward-looking beliefs and AXX and beyond of a uncertainties, statements to future materially, our These which are some differ new of involve results of not number of unless today, required

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

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

Dhrupad Trivedi

revenue joining steps resources and Thank headwinds. demonstrates The necessary customer but and and you single related you, in today. especially region efficiently to type. the in that all amidst The find broadly quarter a realign others by have ensure largely headwinds we us areas North as of taken allocate Tom, fourth profitability Service to providers, persist, solid to growth continue a to thank the are America CapEx industry. and for investments announced delay single

taking economic has Simultaneously longer and their enterprise to customers are internal to headwinds. the due layers same process make decisions incremental approval

pushed into during discussed size orders As into were fourth third and third of in out our the our parts project call, slipped from XXXX. the quarter quarter as reduced

macro environment. and sales choppy diversification We We remain to in revenue are both the to and uncertainty, in In quarter. customer that improvement customers, by fourth time business. I third cycles on the longer and related interim, particular, from some focus into navigating the am sequential quarter provider for revenue could encouraged benefit these service our agree our the the profitability continues

in industry. which strategy to again, XX% our in validating AXX the challenging strength addition Enterprise provider in in the will our cycle poised others future. and quarter, mitigating fourth to customers service to this enterprise than the up provider decrease revenue in Once return on to better revenue the was partially focus our service XX% is customers, navigate increase

independent grew us revenue full XX% and a of to service of enterprise an CapEx on increasing for results. This from provider We prioritized. have reallocated customers. to solutions our be is resources, opportunity service customers increasingly X% continue provider peers positive represents Cybersecurity cycles. that customers and a from decline offsetting deliver our year begun growth this globally, enterprise focus already many generating concentration ahead has basis, of On

investments stated Economic to interrupting we We to These by malware, to XX% existential opportunities expand headwinds recent our trust, attacks gross millions evidenced to to XX% delayed, maintained capabilities margin focusing they the and regulatory XX% these service, growing that platform be our are canceled. may threat ensuring we as ransomware some support risks, The and margins. are and mean causing we approach. but DDoS matching damaging business of operational headwinds, our affected issues. to In and sales are growing. are customer model increasingly this our long-term and announcements. customer-centric costing EBITDA resources business from This is profitability in our business reallocated rigor hackers, a and continue unlikely as response product despite near-term testament and goals revenue our XX% of are achievement on opportunity,

of On macro full defer a the expenses We certain level year-over-year due push achieve significant spite align investments a decision expect constant deterioration this deferrals into proactive EPS profitability These still We achieved basis, currency in deteriorating those conditions. in them to with to we flat profitability targets our and basis. light to an of environment. of in year XXXX business $X.XX, market ongoing on will of condition improvements. delivered

of model EPS. XX% in XX% our growth margins XX% our to expect including year business XX% to gross of deliver to single-digit and adjusted EBITDA to continue margins full We objectives on non-GAAP

to growth-oriented new R&D We being and spending. while on preserving buy solutions We investments, of related our focused continue remain cognizant to overall stock. including security enhanced back

integrates designed strategy and made our customers. commercial from In portfolio our align our annual December XXXX, expand stage solutions event. XXXX, intensive the gathering Defend we experience sales we detector, further to security discuss for In to our on our This learnings capabilities strengthen of product, January AXX we sales kickoff have our multi-day this is and completed further our year, execution. Based further our team, and economic released sets strategic and enterprise new a remain current on security with teams growing enable their The With new a like solutions over excited Brian? strength review the one customers dynamic the an about key and deeper year. solutions. turn capitalize drive to aligns maintain even while which priorities service detailed very for I'd to faster us customer-centric quarter that call provider that environment. and adjustments Brian of the to with the approach with that, that to

Brian Becker

X.X% revenue Thank the reflects million revenue were Fourth quarter. described Sequentially, some $XX.X was of XX% quarter fourth recognized third decrease up normal delayed to that particularly million, to right at you, Dhrupad. $XX.X in a the This headwinds during earlier. reflecting fourth the compared during that orders quarter, the increased we continue to quarter due constraints, cycles end service third provider quarter the longer customers. and than with CapEx though the sales of year-over-year, see

of Services maintenance expected to slipped XXXX. revenue $XX.X revenue, orders the Product number includes a As total XX.X% into was result, of close for which or the revenue total representing quarter million, we during and $XX.X revenue. revenue. quarter a million was of support XX.X%

throughout validating demand revenue recurring solutions year X% the deferred for to revenue opportunities competitors. in that product But continues the recurring XX%, not increased fourth impact and losing our revenue. we our are year-over-year demonstrating confidence continued quarter, Lower the also revenue to increased and

revenue full the provider for Dhrupad was was Service down X%, As enterprise year, up XX%. while mentioned, revenue

balance our to sheet. Turning

year-over-year. revenue up you see, as can of deferred $XXX.X December million As was XX.X% XX, XXXX,

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

total million and compared our at built shares for XX% goals fourth Diluted especially quarter since the XX% million the XX% net unchanged Gross line third year in EBITDA XXXX, of year the basis, our XX% non-GAAP we growth was for revenue. the revenue revenue. On for million XX% $X.XX And computing the Maintaining non-GAAP AXX. on fourth or in year per to ago shares ago was $XX.X XXXX. reflecting diluted the with weighted XX%. net adjusted a were in to in XX.X $XX.X margin EBITDA shares with of or margin the we stated have significant quarter. delivered quarter quarter quarter, of full line was quarter goals stated EBITDA diluted of earnings of XX.X%, Non-GAAP in our million from $XX.X a accomplishment, income Adjusted to our of income share to was used per demonstrating is quarter. power compared the the XX.X approximately share have EPS million $X.XX lower for adjusted

with On income net $XX.X ago $X.XX the million quarter. the compared or diluted a share of GAAP quarter for diluted in basis, net $XX $X.XX million share per per year was income or

was with revenue, income revenue $XXX.X margin gross was XX.X% Turning non-GAAP total Non-GAAP revenue our Revenue to million, full stated year GAAP of was Full per net Product year-over-year. the year or service goals. diluted XX% was about million, million, total total million million, or period. Adjusted of $XXX.X representing line a year per net flat $XX On a On constant $XX.X was to diluted non-GAAP share basis, year-over-year. income million or per EPS $XX.X net $XX.X basis, million $X.XX for diluted with in $X.XX share currency down revenue reflecting representing XX.X% was year XXXX. of ago was income approximately $XXX.X the $X.XX share per was compared compared XX% $XX.X of million year in the results. revenue. diluted XX.X%. EBITDA our share in for or and $X.XX

cash in operations. During the $XX.X we million from year, generated

XXXX expect cash historical flow levels normalizes. the as from We to return to operations market

Turning balance to back the sheet.

cash XXXX, XX, XXXX. $XXX.X in million securities $XXX.X compared end we at cash, December equivalents million the had total of to marketable of As and

During the million dividends. cash quarter, paid we $X.X in

Board March carry XXXX. of February to The on to no XXXX, has $X.XX record shareholders to be continue cash also We per on paid approved quarterly of debt. share XX, a X, dividend

the call, plan As in Board our November. repurchase discussed a approved during share $XX had million last new

we revenue EPS on our and current conditions XXXX single XXXX to with outlook. Turning peer in the group, in expect growth Based our market digits. broader line and

XX% XX% margins gross XX%. to EBITDA and of target to continue to adjusted margins XX% of We

normalize. We call expect back over turn to see the weighted to the for now comments. to as revenue XXXX markets I'll half second of closing Dhrupad the growth

Dhrupad Trivedi

with a well solution Thank you, positioned, Brian. business-critical remains approach. AXX customer-centric a offering

business can for the over solutions revenue of revenue customers, key And profitability navigating be achieve despite terms you questions. and they in environment. the our up Our our as other continue call prioritized goals model Operator, challenging we generating open investments now will headwinds. are to to economic

Operator

[Operator Instructions].

The have Schwab comes first Christian from of Craig-Hallum. question we

You may with proceed your question.

Christian Schwab

few just quick questions. a Guys,

I future provider and enterprise? to going driven the the the be in Would to revenue waited. the second the Or the said by I On improve service provider the expect is you of growth half service you single-digit second year? prepared think level, half comments, then think majority of in

Dhrupad Trivedi

question. Christian, Yes. good

we And belief service in be is to year. market the second normalizes So the expect sharply I that half. in half our returning to up expectation Certainly, think I XX% I But XX%, beyond seasonality an out that would spending of say and of our second the popular second provider SP half, of growth that, half. picks think in based spending the is normal not first assumption seasonality the expectation on

expect a seasonality we look and in we spending more think way as to at it up I solutions. help saying, the continue that of And half, SP progress balanced second picks with maybe and it beyond. as security should in us enterprise

maybe So on second in of way is based half. it's think the SP not spending that's that comes hoping best it back purely to the

Christian Schwab

to or further snapback Or provider return a expect out you a would after look then, into you we as period? business plus then revenue would like 'XX anticipate long service to minus? that difficult flattish, and And

Dhrupad Trivedi

Yes. No, question. it's good a

difficult and affected in security then as you we and It's mid-teens, us at So that there's high if some it us, that that. how a could project. movements been obviously, to see long-term given the much be influences to if mean terms year digits interest I least But particularly of the election the and you in by look it we difficult positive which a is normalize market and single given growing would for XXXX, expect in will. that thing say has cycle levels, rate in that actions The it that depressed of political it fact historical in in at for be all cycle. would would to

because certainly, new dramatic and reinvention our so network. And base, a customer need experience, the see a on core to go to we as positive SP what a spending into they cycle deliver from the of opposed come maintain and particularly services depressed products of should back

a see do in ramps we as expect more in could So beyond. it up that we XXXX cycle positive XXXX, and

Operator

question comes from Your from Anja Soderstrom next Sidoti.

Anja Soderstrom

of First geographically there is to revenue? out all, of in anything call terms

Dhrupad Trivedi

Yes. Anja. Good question,

certainly in the in weakness where we So in side. North year. released have new resources products as very I we also enterprise in service for think and growth We nothing provider saw saw some positive us of last North expected. invested on we America, unusual America Certainly, momentum

negative. So in at to pockets in a in little I and continue find Europe, that change would we pressure America When positive we Japan expecting I North to strength I look FX perspective, enterprise year. not and A versus provider bit the say were EMEA deliver service And from significant think Japan. what theaters on continue our that. for of of

say that's would to have I before. So unusual what mentioned nothing relative we

Anja Soderstrom

was quarterly this can how quarter? this to in or for quarter some fourth the just we lot little the stronger. I quarter. you pulled in the the bit about year year next product it And If XXXX, lumpy fourth And a know a happening second second in was remind revenue year? had from cadence think me past quarter we same to year the of and in should the was third

Dhrupad Trivedi

say Yes. that we some certainly, quarter, publish. in segment that, sequential you see that, from product growth third information to I from movement would particularly in saw it our provider we service fourth and revenue can quarter really

own for think, us environment, macro own position bit our the little in unusual because cybersecurity our I quarter, that. on focusing on also we a to addition and were posture First was strengthening

return that, half. and our to XX%, 'XX We expect half, to of the would we onetime to to best expect, second beyond, obviously, normal of ability, into much. seasonality Going don't XX% affect say events that I our first

Anja Soderstrom

been standing Are that's now? citing, longer the improving? Or even becoming touch how you've on longer? they they like cycles that sales are And

Dhrupad Trivedi

are they longer. think not do becoming I

I and I think process typically quarters adding we seen Enterprise In customers better, focus in before uncertain done X-step really in the takes generally was what that approval. any segment, saw or even a complex navigate on they don't of CapEx we have And to of we X it signature have just were XXXX, adding getting see couple layers that process, customers sales needed is our right, but sure, they whether we But it getting related. X steps, more say, or company cash it doing we environment, worse than was see XXXX. approvals of to a ourselves. what macro can incremental finance-related something and are see X like make many and would And in it management getting don't steps probably would or in they we that worse.

Operator

[Operator Instructions].

Khorsand have the BWS from Hamed We question next Financial. from

Hamed Khorsand

million First question it like I it's revenue like never just just XX%, look just being basis, is, it year-over-year. seems if at down on that gets million $XX a simple You're saying some $XX you recouped. pushed were Is lost? but down

Dhrupad Trivedi

Yes.

that would I and enterprise separate probably in say, provider So would Hamed, that segment. service I

and at cycles revenue look that historical you is enterprise every grown has our for if provider cyclic service year. As spending CapEx

on to reduce longer not have from over time service projected was subsequently to periods that's who add recut those what So And customers factor of large capacity SP the plants had of pullbacks a plans be we services or them. new saw on a here. provider side, and handful

all or customers time. reports And this our very data peers, now or that, investments of projected consistent over incremental general, the see partners longer you the with from will many is are in XG slower and deferred a period of

the a not So the there reality think made to as looking go loss. now we are customer a call provider someone the don't which we we chosen lost, decision project is was we what at were we competitive would when with is we else, say a where and

our next million a this we'll Or a year. aligned of was spending for thing planning make me we that to And think half do ended more leave XXX% ability, is ultimately we in to say hard think bit year do it's difficult that I saying I can sure and spend the our and customers. that year, it's that I'll customer of little and next to little is x half dollars to to So bit reappears that. XXXX. up And figure the those out. economists are the But with what analysts

confidence we losing that. that as not invest, And to good are to we gain in feel a get are they to position competitors. We

Hamed Khorsand

talk Okay. very timing the the you happen quarter? could the all just end about sales towards within of the And it quarter? Did

Dhrupad Trivedi

And risk the in balanced we we obviously, phenomenon. the cost. is What it and as volatility just QX hope generally, us more saw as reduces execution on quarter because for well

ship what so the month say, X. in terms able second And of and quarter, and to we fourth month book definitely I and would X quarter improved third X, from in were month

Hamed Khorsand

customer? diversified? accounts still you receivable large that more is Or a with one Do have

Dhrupad Trivedi

that. you know, It's fairly to but Brian, can add I diversified,

Brian Becker

AR, we cycle. No, in did have normal Yes. customers a it's X large but

as in quarter-to-quarter. in the I think we And the customers quarter, mentioned appear the did change as Dhrupad had same does past, quarters. not that previous this I it think, X

Operator

We now from Hendi Funds. have Gabelli [Operator Instructions]. Susanto

Hendi Susanto

My we service has have providers another, still any whether sequential some is segment I insight quarter that like to Do it down the from may you improvement first saw seen questions see any surface are Or if QX. in from for Dhrupad, QX risk sequentially? to there button? one continue the sales slide to its providers

Dhrupad Trivedi

about were than in would say, QX year going and making that step results you can So Board that few what about their in leave in originally remember designing But Federal political seen perspective, talked quarters. And and hard they the as related fairly said, it's that quarter, closely purely as more as part month timing than to confidence had as economists to our the In strategy we resumes the we move spending it's I in by are that economic with you of that difficult think the to before, general, key forward. thinking significant fact up, between in certainly, a we a into really the QX. could we it's as that calling but X QX. QX. a and materialize entered And what analysts even you our I factors, cases, the some slightly I smaller more show were we thought quarter, influenced had a in know very particularly see far even again, was of we that projected even the third to And And Hendi, that for be significant just third we deals had QX that bottom, that be factors. aligned out. From that for as us I a sure customers. said will figure in are if products

Hendi Susanto

since And solutions? security you can share the percentage year we what the have full of revenue,

Brian Becker

Yes. XX%, that. was believe just I below it around

So achieving in goal line with announced of XXXX. we our which in XX%,

steadily and growing, So to it's plan. we're tracking

Hendi Susanto

then me. question for And last

So to $XX of for OpEx? OpEx, Brian, look run $XX is I million million good if a at rate baseline quarterly the

Brian Becker

obviously, factors Hendi. little both But comp question, OpEx, not that's we overall know, result we variable QX in a say missing of few saw the Good were from variable QX. better bit QX. changes as at comp or projecting lower in then there's a I'd year the that And is expected, the full you There's only in as least than results. that because misses well

like of back 'XX, that that to we cost we'll be As to add a turn result. X/X comp, back as variable expecting maybe

Operator

further Instructions]. registered. have [Operator We questions currently no

to remarks. to Trivedi I'd final any Dhrupad hand it back So for like

Dhrupad Trivedi

I to thank for thank for shareholders all also all this employees market very our your around continued want performance environment. and you our you, a you. challenging Thank the for today world us support. joining driving Thank in of and

Operator

of lines, conference and your may today's the with you Today's for Thank concluded, call now joining has please AXX call your day. you and enjoy rest Networks. disconnect now all

A10 Networks (ATEN) 6 Feb 242023 Q4 Earnings call transcript