ATEN - Earnings call transcript Q2 2024

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Operator

Thank you for joining. I would like to welcome you all to the A10 Networks Second Quarter 2024 Financial Results Conference Call. My name is Brika, and I'll be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Tom Baumann with FNK IR.

You may proceed, Tom.

Tom Baumann

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

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

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

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

During make industry, a for demand, and the whether predictions information, should statements not a cause them as number events. and differ you not our statements, does actual course to and are result information future XXXX. These our of statements, share. today, projections by capital could forward-looking allocation growth, strategy, today's materially, revenue of on profitability, results that based of statements uncertainties, which rely beyond control July and risks involve to our call, future contained otherwise, forward-looking expenses, customer and beliefs are programs these repurchase including XX, management some of regarding timing, These potential AXX forward-looking update market dividend will as statements new unless or future investments, in trends, events intend required operating of our including as results, expectations our on current law. and our of and including positioning,

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

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

Dhrupad Trivedi

the today. XXXX, across Thank and American the service us market you, in moving even but all quarters. market to of Year-to-date, an market our spending in excluding The second service versus CapEx. improved is Encouragingly, direction. joining largely timing a provider still in American of related remains The segment. half North Tom, strength by were offset the in for XX%, saw quarter we trending America, is sentiment these improving you second up thank as this positive projects that enterprise choppy overall quarter the the carrier North provider much of revenue, is first North headwinds demonstrating issue

offsetting muscle segment. service much opportunities. XX% resources, devoting in target are bearing XX%, Enterprise-related revenue These investments both additional fruit. investments been of to marketing the have and sales We enterprise provider increased and R&D the decline

investments and now, enterprise the improve. position Additional are to continue market in we expect process AXX's to in

employees hybrid infrastructure one communications company their for largest quarter, their the technology with AXX, XXX,XXX the of world's displacing During vendor digital nearly chose previous solution. worldwide,

with the to space win reenergized and AXX to showcased in goals, a portfolio, enterprise customers' and led secure demanding technical the to and commitment Our technical alignment our compete this enterprise quarter win in business the global most infrastructure. with ability support performance with

own core this provider remains in strategic is business grow focus continued this segment but these part diversification navigate us is been the our service AXX performance. segment. provides and over far in a to for has our they AXX faster maintain challenging growth a have is conditions enabling business As providers our year businesses. enterprise for model ongoing not and than challenging of enabled we targets this our in of better long driving outpaces strategy, half look peers despite service to the for market navigate alone at so American the overall than vertical. Growing Diversification on for the North term, driving that broader to XXXX our as second their the Clearly, market to and predictable with year, profitability robust headwinds. exposure, segment line pipeline basis growth expected challenges the

to in with double-digit XXXX, pace delivered term, accomplish be expansion time to helping we market continue some at initiatives faster this next Simultaneously, solutions, expect growth our and we full-year For capitalize fully EPS generation, on grow low a faster commercialized. the Longer the top to and of our than products, line are including profitability to cash built we grow and growth scope the of with in expectations in a before continue growth half than to year-over-year line. wave have first tied to basis. AI investing which they're new on

have security solutions, used past, those in I address AI discussed in especially our that As the AXX long DDoS has attacks.

and address must-have add increasingly continue of we We solutions of solutions to to percentage arsenal long-term are Security in security utilizing These for our coming tools a the in a and our are solutions threats. are identify, to new actors trend of we of the these goals. customers, line and our security our sales agile as evolving quarters. remediate AI-backed our AI, to with and technology growth enable expect use a are growing customers increasing to threats. Bad to AI-focused address, better wave

latency AI-based hardware historic traffic capabilities AI emerged to to and secure we data insights, kinds in developing to time better traffic. well networks. our investments real includes This to new as better Our for manage network and with their In are models. network network as solutions to evolve centers needs our working AI customers next-generation of real-time, in related for performance that on support to threats all strength keeping with with needed engineering predict also have in address to understanding new new traffic performance support are customers

We with partners to matures as road commercialization the in are map customers channel engaged phase and the the enable into moves future. market and their

we While solidly sales these non-GAAP resources, new AXX reallocate solutions, we our and challenges. technologies and with even invest again, market near-term that proud remains new even Once I'm as profitable have investments in headwinds. achieved navigate EPS targets revenue we

have Just profitable. a significant would resulted Today, losses. systematically we these ago, few in are years factors

our were and margin line EBITDA our in goals. quarter Our to gross XX%, in of was margins profitability XX% line the adjusted XX%, the in with goal second stated with nearly

we even As goals profitability our to improve our while revenue to underscores the We further. AXX's committed profitability targets to conditions expect growth. normalize, achieving meet challenges amidst ability revenue driving consistent remain as long-term our and The for model. margin adjusted targets of EBITDA in including non-GAAP gross position as resilience our year-to-date us results to business objectives, full-year EPS. margin model growth our achieve business well full-year stated

back cash have detailed Brian? stock our I'd and funded of programs. With our We than has quarter. buyback the a the to that, review dividend buy more continued Brian like and flow call turn for to over to

Brian Becker

you, Thank Dhrupad.

$XX.X was decrease quarter Second million, year-over-year. revenue of X.X% a

total the or continued XX% sector improvements quarter-to-quarter $XX.X for quarter the revenue described, Services $XX.X in revenue total million Enterprise the million, American Dhrupad be segment. revenue. was provider volatility service offset of was high, XX% Product to in As revenue. North of by representing

pipeline losing the XX% revenue strong solutions. product compared coupled second several revenue a recurring sales continued metrics, with and increased further our year, that last X%, for opportunities are enterprise demand increased past not Second-quarter quarter for validate demonstrating These of confidence competitors. deferred to we and the stronger quarters to our opportunities,

you of see XX, our deferred As balance million XXXX, $XXX on June X.X% was up can year-over-year. sheet, our revenue as

or used to Diluted in release this quarter are otherwise all in year-ago XX.X%, million or $XX.X on stated. second million of or in shares $X.X of $X.XX margin net Non-GAAP EPS of revenue. the a the for income $XX.X quarter. On XX.X for exception $X.XX the quarter, line reflecting discussed metrics was XX%. Adjusted net per per XX% $X.XX the was year-ago our results to and a on to income in net website. income share compared XX.X% the $X.XX GAAP full per quarter per quarter the our shares are second for the GAAP total on provided approximately the diluted in diluted to With million year-ago was XX.X A to non-GAAP with quarter. non-GAAP million million unless million stated call compared shares million $XX.X computing goals compared diluted the our revenue, or $XX.X were quarter. Gross in for share non-GAAP EBITDA was weighted reconciliation of of the share basis, for basis, of quarter press diluted share

per share. was $XX.X first total million $X.XX XX% approximately up year-ago was Revenue down results. million, year-to-date Product diluted or in revenue $X.XX and revenue, margin was down X year-over-year. was of services diluted for diluted revenue. Year-to-date or in $XX.X net compared a months share, year. or first per quarter Adjusted gross of representing target operating $X.XX the million total income basis, was We the from range. per net Non-GAAP revenue. with the with million, to of months XX%, about diluted up representing per period. On with million million reflecting X reported was non-GAAP XX.X% XX.X% $XX.X income was $X.XX the X.X% Turning million in months in our or $XX.X $XXX.X net revenue share GAAP XX% last $XX.X XX% $XX.X first income down non-GAAP EBITDA million of income, compared $XX.X X the line for total share XX%,

During line full-year generated in the million was by in with quarter, from $XX.X we Year-to-date, operations targets. generated our operations. $XX.X cash cash million,

Turning sheet. the balance to

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

million we $X.X dividends quarter, shares. worth the cash in repurchased of $XX.X During paid and million

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

repurchase June million remaining in as million We XXXX. $XX authorization have our XX, $XX.X of share

with we XX% to margins for on back digits, and the comments. now growth full-year target We expect in XXXX margins call EPS to XX% of Dhrupad adjusted basis. I'll expectations, to turn closing continue of in EBITDA a XX% full-year gross XX% single and line to

Dhrupad Trivedi

Short-term market. provider the progress volatility long-term American we enhance Brian. the the catalysts. durable enterprise Thank a are does position in and North competitive market, long-term to our service in strategy, by in AXX not making market growth you, our alter supported position maintains steady strong

Our strategic periods profitability diversification consistent a headwinds. advantage, remains of enabling revenue key even during

through you continue shareholder can of return now also capital questions. create the for value call open meaningful the to up to We shareholders. Operator,

Operator

Sidoti. first from have the [Operator Instructions] You question Soderstrom Anja with

Stephan Guillaume

And half? Soderstrom. with how are on first still providers is, guess Anja I back This the Guillaume for service my you question seeing is second conversations come your Stephan them? in are

Dhrupad Trivedi

Yes. Good question.

I outside have service much that. the first, body as because in I think, call, healthy of So North of is America-specific, growth the very mentioned conversation we our provider right,

are And So America, things differently within election can are move and period I right continue their and our is a get capital, there of capital well assumption, North investments periods. to of of sort they significant uncertainty, course, X are level, B, seeing. the now. of cost across scoped making around spending an decisions is think market A, manage lot to projects we related One including

conversations things either are little bit a our revenue of to that a becoming show they of with So generation the in path the lot or spend them secure. continue generally do more we because

bit. pushed be assumptions When steady out continue footprint. half, However, in delivering time that enterprise to the the we results we little are think around second a our progress of make to newer on really tend our projects

At at providers And see ways America. in service balance of of the we to confident we which get that America, saw they is from we to then North the point our outside that I to deliver reinvesting growth. find first think execution customers Second start within continue CapEx. continue and North between half the

as on Of But from benefit course, a that sharp is on predicated plan spending right? snapback will in half our from not we well, them. second the

Stephan Guillaume

share? taking competitive that? Can talk past, about still you Are said that you've also In the doing the you you're environment?

Dhrupad Trivedi

Yes.

growth at of first right? So So if the right? and our market they're So all one. ways you're you industry, X% from are look you rates sector I in would broader to say of that, seeing range, kind kind look that that's at there look plus/minus or of X a at companies is the lot

would the can able solutions. we feel way to is are share at look say market growth in kind I that to of think market, half some the Second trace about -- our competitive basic when of Enterprise gaining about I we basis, you on a is we displacement say above half, about And we solution. grew slightly I gaining to that's replace is we And at least of we And way year-to-date a are segment would an point think share. which and say most that the the we would actual average. X%, the enterprise certainly if

Stephan Guillaume

right. All

And do this so power you environment? what pricing have kind of in

Dhrupad Trivedi

would I a is pricing So say thing. balanced

we to we pass that find we right? overcoming maybe we to think have us, in do I on So a input and on. with down it then are way a offset try selective obviously, input increases choice through have to want think to versus and where because inflation, methodical offset a So I to we prices, costs selectively productivity it but we going very price up which productivity. of cost mix the and don't rest for it's with But increases customers very selective and ways price

Stephan Guillaume

one results And of of sales the where you changing the is, beginning are team? your last me the for in from seeing

Dhrupad Trivedi

would of I say So service provider, bit X/X Enterprise if is X/X little a you now. our bigger business, enterprise. think

course, a capability we good base, our mature focus that dimension, to have team, to cross-sell very more making on we experienced progress. On where think products I provider side, improving service customer on the the sales existing So right? are is of

Some obviously ahead regions farther than others. are

through is for still there to So that. room continue us growing

And terms inning would in, we characterize third well journey. somewhere -- our products as we and On as I sales the the go market enterprise to as side, portfolio fourth well. that we between probably obviously, in talent that are how new have as and third in brought of on

Operator

Your Gray next with question Powell comes from BTIG.

Gray Powell

Okay. Great.

by you've prepared may negatively? just side. have that Just high off or at yes, surprise. say of And you start environment it provider it what can in caught any would the of terms sounds American headwinds? service macro anything saw I outside Did So remarks, provide talk some you spending positively stable? you you a Maybe were like a a that, North could on But and things color about overall on my there? talked more the know questions you few to in change about level,

Dhrupad Trivedi

question, good Gray. Yes. No,

provider on would North And So what so if provider it X think offsets some enterprise, EMEA I APJ on that push are within the and service stable is I side, weakness. not complete some rescoping service I versus is provider, of market regions, my we and would were absolutely would say then stable And necessarily maybe say, out. surprised, America or I progress was of enterprise of enterprise good service North I think say, side. on making right, cancellations I think we involved but projects, America,

we goal right, million better we good plus/minus -- year. QX we but still was feel that slightly to America, that's obviously And the volatility you is ] So $X $X the right, than comes or only we that remaining or the so got where offset slightly only from [ use remember, the it of that's worse, there. our to So if see. thing And we when about movement pieces as did is and helps million, why back, it's North sort that right? full us QX, spending

Gray Powell

revenue should like now? the expecting full then or maybe low year, single-digit in of context within And we flat to growth still be the closer

Dhrupad Trivedi

digit results, out how bridge feels below loaded, our right, to think our non-GAAP always if I would back it's probably obviously, is, single it's that But say more way. to still we do to EPS either low so it's risky. so we back-end plan that getting although right, slightly

Gray Powell

in half that? What flow actually strong. the first margins the flow was EBITDA drove just then can Free the year free really last of about pointers you And relative pointers like there. any talk margins, directional maybe And any to give or question. cash cash us

Dhrupad Trivedi

Yes, Brian. question. Good Yes. ahead, go

Brian Becker

had last pretty Yes. I number year, No, mean, of we A free cash factors that. led into poor linearity. flow.

seeing the benefits market, to our spending return releasing and cash cash free think the of some cash I that we're into flow. of benefiting

really quarter As we've nearly cash last free talked $XX pointed at being out, flow strong about you million.

our got flow we've this cash million continues as flow to cash of perspective another if a should free from So everything flow full-year But target cash in the planned. be go quarter. approximately free XXs $XX

Dhrupad Trivedi

for there's our a because flow EBITDA And Brian, not is good much cash free CapEx variability. proxy too

Operator

We Instructions] Financial. [Operator now have Khorsand BWS with Hamed

Hamed Khorsand

talking a So provider. North about a year about for this service American been now. This has topic

to QX, obviously the that decline given in -- saw on points this revenue is part. it So growth actual you

So these losing spending much are cutting so just hare you service share? you losing without back providers share? Or are

Dhrupad Trivedi

Yes.

Hamed. good think I question, So

couple if CapEx. X XXXX, of of a you American in in providers, So the maybe slightly that that, days, service last CapEx projecting just I published at than companies to right? see they've X% X can look level between the set that. all projecting And on AT&T, North data right? declines they're think I right, And cable all of year-over-year, So X% less are Verizon, points, you think right? And or it's

So negative. that and XX%, not we that's data one market It's plus is are point.

is way these products are the designed our Second at customers.

We in the network workflow operational results and and things SLA to are that. publish on their achievement like run

knows they are what of So all track a is good is is deployed. traffic looking our active is and it going have pretty it. much We competitors, but every devices, those understanding how device we support at team through that maybe, likely

is in get when a the we gives mix, CapEx we spending approved, and we So last So it's versus reasonably have get are more that point that center, us the data project the of a do view. And good to the they right? approve when is data PO, that cycle confidence competitive. linked the we correlation do

these companies you I it think for -- but So CapEx can those see public, the is right? are I mean, here. plans -- So

Hamed Khorsand

you then on side. you're And if more Okay. the I enterprise sales heard investing right,

X, So acceleration line? see the does enterprise that X we quarters should in eventually, maybe down an mean revenue

Dhrupad Trivedi

think if can grew compare should. is see way, I to X%, the is Juniper, example, losing you even now, on And basis, And thing or business which is which right? right, to side, enterprise on half-to-half, our are to, for year-over-year compare even by relatively a I you the you early, that Hamed, to very can Yes, peers, would point SP gaining. the we the

we of as volatility. teams said, And grow. kind to the So certainly, on we of as that better that expect as proposition get don't enterprise continue sales, do I and that we market do want side, to to we want a the mature instead the if that to impact fit, to reduce way of value a SP

Hamed Khorsand

my forward? on impact any, you have digital QX, does it revenue and much revenue is question And going that on an of How Okay. if -- for talking when it company. in significant will about last is were tech that how be

Dhrupad Trivedi

Yes.

So XX% it be I a to has think would between X% potential it not I customer, over say the was time. somewhere XX% but and

Operator

registered. [Operator some for like Instructions] back hand to AXX to I We CEO no President Trivedi, Dhrupad final further and remarks. at would Networks, questions have

Dhrupad Trivedi

you. and thank the all thanks to all Thank support, you to around and us Thank continued for the you, world. for today AXX of your employees our and shareholders joining also

Operator

call Thank you for joining today's [indiscernible].

of disconnect, and now enjoy the day. may You your please rest

A10 Networks (ATEN) 30 Jul 242024 Q2 Earnings call transcript