ATEN - Earnings call transcript Q3 2024

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Operator

Hello, everyone, and welcome to the A10 Networks Third Quarter 2024 Financial Results Call. My name is Lydia, and I'll be your operator today. [Operator Instructions] I'll now hand you over to Tom Baumann to begin. Please go ahead.

Tom Baumann

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

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

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

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

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

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

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

Dhrupad Trivedi

and overall balanced today. customers. Growth for and all joining AXX trailing us you, X% with quarter a X% with for through Tom, year-to-date is half first the focus broader sectors. from validating increased the road core a over up strategic driving and Indeed, on both ongoing diversification. enterprise to map than consistently on service remains growth that was improved part our of X% This you revenue our term, new driving the down being after long thank to on focus performance year-to-date conditions Thank Enterprise in was revenue is diversification these XX-month AXX basis, and performance market provider increased customers up navigate and predictable XXXX. of peers our strategy, enterprise challenging more provider outpaces segment. Service enabling

trend encouraging. While remains segment North of the business the is this volatile, overall American

service provider communicated our were uncertainties macro For pipeline even will AXX of customers long-term for opportunities impacting optional have not a customers spend and force solutions short-term less security-led delayed. more to challenge several QX the when lost, the our we pose that quarters, the likely are communicated past in that cautiously. We less headwinds less as in just

us. is visibility American that we that North are those yet have sufficient the service expectations. stabilized, state worst do validated behind to provider the cautiously but market has quarter We optimistic This not

Our due strong on to focus our competitive is security solutions. position

and AI critical enterprises is cannot who threats providers and both existing Our networks security-led every more of new true be we and must canceled. ones. XX% be that customers revenue more laid the of day safeguard who We may our expansion, record and security-led recently delayed, security blueprint out add our announced they of increased latency for low experience of bolster cybersecurity to high integration throughput, including expanding cost further service all to X-decade-long to and low year-to-date. Customer and offerings on This enabling portfolio. These service decisions longer-term throughout ownership. best-in-class but cybersecurity, existing while new levels track of presence capabilities focusing a our total are solutions leverage industry-leading

AXX Over introduce positive the capabilities to outcomes our enable solutions customers. next continue better few to and will additional tools, for months, business

create capabilities, an AI-based to simplifies IT improves identify risk, to user Our anticipate learning cybersecurity goal better adding build-outs. Overall, reduces infrastructure and we the the experience that including harnessing our AI integrated machine and threats. is of new solution customers, mitigate

solutions creating launching these that targeting address and new threats. approaches also deployments are threats create, to AI vulnerabilities We specifically can

mission-critical Defend, Our will enable centralized infrastructure management to developing customers performance integrate applications, from and future and infrastructure applications. From standpoint, an their the resiliency solutions cyber intelligence an will their attacks web including protection are of products, With protecting customers DDoS we will With threat applications and proactively number and includes to help products. threats. our of we AI-enabled predict potential performance. solutions threats. This improve that infrastructure help protect all we AXX AXX ever-growing network AI Control, bots partner AXX providing from identify for

returning mix and a growth. accelerate investments Our shareholders strategic internal of continue to to to evaluating innovation, priorities capital to opportunities be support

reflected our You return are consistently we in results internal investment to seeing and blueprint, continue shareholders. this of to capital the

upside targets demonstrates slightly maintained business in We Our strong and profitability third quarter line our the quarter. our model. that of robust performance built ahead in is into the

the full increased our us operations, XX% disproportionately During year we note generated We year-over-year. net bottom fell operating $XX incremental that for line. At R&D in investment we same million quarter, than and on the important more margins the third it have targets. from margins, track to expanded EBITDA is margins time, more than cash to as revenue keeping

built and our from Our EPS currency our the nonrecurring into profitability operating benefited model. demonstrate even But these Systemic benefits, and in net factors. foreign expansion excluding the quarter operating margin income leverage

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

Brian Becker

you, Dhrupad. Thank

$XX.X Third million, an quarter was of XX.X% increase year-over-year. revenue

quarter-to-quarter described, Dhrupad in but revenue quarter customers. Product American the growth total service the $XX.X $XX.X of to sales representing volatility XX% was and provider revenue North both As for million, persists, we total million Services was enterprise delivered meaningful provider service revenue. XX% sector or revenue. of in

stronger to our third Third quarter increased demand in quarter revenue cyber-led compared year. last the third recurring X% demonstrating quarter sales X%, and increased for revenue continued Deferred solutions. product the

mentioned, indicated remarks. in sheet, and year-over-year September up Dhrupad his of million As $XXX.X deferred was you XX, as on can opening our as revenue balance as see I XXXX, X%

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

exchange mentioned, nonrecurring and rates Dhrupad related share. As income. to was resulted earnings foreign nonoperational benefits and in interest This largely several higher-than-normal per currency

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

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

to balance the sheet. Turning

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

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

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

million September million $XX authorization $XX.X in have XX. remaining our repurchase We of share as

XX% and back basis. I'll a the XX% target full on to now We to continue year XX% turn comments. EBITDA to gross over margins closing Dhrupad call for XX% to of adjusted of margins

Dhrupad Trivedi

enterprise to amidst from demand The Increasingly, outperforming execute is is improving set service Brian. cadence is volatility. AXX providers you, market simultaneously. driving ability buying our improving peer Thank from our ongoing and in

result to additional am solutions, customers the durable questions. incremental Operator, further Additionally, a our right ability profile. And open the our our proven I enhancing confident translate are outcomes business to in you levels. and into important we expected position the for delivering up strategy, call leveraging the cybersecurity, in now business growth in have can profitability for have most model. we significantly investments higher R&D growing our revenue

Operator

first Trevor Our with from Rambo question BTIG. comes

Trevor Rambo

It's Powell. in Congrats some results quarter. the nice Trevor on Gray on for

was How into rest we it in to would SP more to see there strength great. good be continue the that on some throughout come segment the what seeing and year that next segment. maybe demand start, year? and in to color expect see of So back spending any to you're Just should

Dhrupad Trivedi

Sure, yes.

noted overall volatility would to is trend So level improving space, earlier, I say some of more. expect the as but in and that we we stabilizing see

resume growth, down, Given I get they investments seeing are say where bit AI perspective, and up so the that plans certainly outcomes things it's from signs beginning interest on to infrastructure demand a we to can like whether and sort would post-election cloud of or just right? But positive support are for forth. rate a modulated more or overall, that feel customer we little

expect to is line before. trend a So is be it's every where perfect. from quarter that next whether we than overall, in in it's I that say we with what term to long the going segment. certainly, would Hard direction turning say line feel But trending different towards

Trevor Rambo

I revenue, expectations, enterprise Awesome. you it up That's with line which know good and color. other maybe X% with on the quarter. in but previous your year from more guys was And down only last year-over-year, said segment was the about

Just puts just that of there you're out great. seeing Anything in would segment? overall, for takes you and or want seeing what be you're onetime what to that's demand any call

Dhrupad Trivedi

question. Yes. Great

you think to this a a line not couple is, the necessarily and on look focus we enterprise we as So last be and for front correct, companies. improve from is I numbers and this say in what enterprise remember, is had or a larger at opportunities we our total to I right? So points year-to-date at what basis, trailing perspective, are see enterprise to right, you those year. of just large in So us, look would small overall certainly, funnel of of a continuing of seeing XX-month industry in I compare the us, right? is favorably if good dollar revenue. note, of reflective predominantly enterprise a when percent one think But might segment mid-enterprise, And quarter some not and you from

how say So industry it. continue we that we our growth to make to average a segment. grow basis, is That's that's on that right? about the trailing that to is XX-month is continue our to that think basis progress view and above for sign probably in of And the dollar us X-month or

Operator

Our with Hamed next question BWS comes Financial. from Khorsand

Hamed Khorsand

are your had went any a And I as paid? plan to receivable was seeing quarter this far there you the accounts quite getting question that? as bit to compared QX. delays first What's So up manage

Brian Becker

exactly question. No, right. Yes. And you're good

What period, is still concerned the during with the the of we're We trend. some a impact seeing result. linearity but good it's are not

of But an statement what think seeing I really on however, improvement period-over-period, we you're what it's this is reflective -- we're the year. seeing cash I of timing time the think at of the are of flows, year.

return to orders bit in QX, hope improve see terms as we ] things a in little talked of drag a small, got see then But the usually at placing is start into about we health before, QX. revenue, percent have looking to extremely and normal. the income of of closer we aging against in as think the I see a linearity of But [ general. we reserve it to as reflecting

Dhrupad Trivedi

the better Yes, receivables exactly. see. way than Hamed, aging think or easiest of And is I it about think, our line is in normally the we to

concern no regard. in that there's So

Hamed Khorsand

it could And you Okay. bridge volatility behind. the it, -- service bring could, if comment together. comments the is that about then here, for two What's just me provider optimistic bridge you the being continuing the worst your the then in that and to one you're other as just

Dhrupad Trivedi

No, no good problem. observation. Yes,

caution QX, we in see movements providers, bit a So said we is we from because spending million meant as a by still can dollars do by trend call you see of few after had you quarters. But remember Hamed, the between that little concern. that that not look when what longer on service it see a at a we I that, if perspective,

So service business our America is provider would say doing still fine fine. bridge was and is way North doing of already it I to the outside

Our bit America is business volatile. North a little

XX is months use trend funnel, customer that say, see So are QX, can movement so more the between do them. But their factors that's QX that. as rates bridge close or months of forth we look you there's line opportunities As to capital, slight seeing around right? if X a at you the if well ago and in we combination plans as what and of and ago, than, favorable conversations that the to a

Hamed Khorsand

it's can don't grow Okay. you have And here? just from do Or you that clarity think that yet? you

Dhrupad Trivedi

would quarterly right? I it's think a percentage, grow that positive. But hard what that on from to trend That's but here, -- say correct. be exactly we think we basis the

Operator

next Our Christian from question Group. with Schwab comes Craig-Hallum Capital

Christian Schwab

it. I said the I in kind I I -- security-led missed that of sorry, Great. Did correct? was XX%. business grew I'm your that thought you quarter hear

Brian Becker

Security-led complete correct. to is of revenue. revenue basis that total No, on from Yes. a XX% grew XX%

Dhrupad Trivedi

basis, not year-to-date a quarter. Christian, in On

Brian Becker

on a basis, year-to-date yes. And XX%,

Christian Schwab

then business? Or portion Is think expectation normal? for your And the your future is be that you of XX% it what than do that? higher Okay. could new

Brian Becker

Yes.

that's reasonable appropriate. think that in I think near we're our yes, future, baked and to into is the But we plan, XX% think we -- a expectation. XX% that's

Christian Schwab

for then Okay. to Or businesses? strategic potential Great. there other or to Is question now? alternatives my regarding layer effort regarding last really M&A. just anything is is initiatives And there not new you report much on there in right opportunities

Dhrupad Trivedi

do consolidation-oriented would would in to is I that effort and assets portfolio. right well even we that there mean, be as that. at we'll scalable that year-to-date, have are now. I that security say, continue say there our would as period I more ideas Yes. accelerate looked And assets

model accelerating long growth. We the business relative very capital defending are while how pretty term deploy active, but we cautious also to on also

pretty is partnerships. We have it active, right? So

I it doing -- how discussions. to secondary say we a We so priority, not something. choose mindful to and but very it's comes are we on would have other capital use exploration when But

Operator

And Anja our question Sidoti. next with Soderstrom comes from

Anja Soderstrom

going how the capabilities on I'm upsell? should And and curious the in nice about those about solutions be -- capabilities the profile to will think increase about Congratulations forward? you're here. margin to release new you an progress the R&D, with or are we

Dhrupad Trivedi

Good question, Anja.

a a productivity XX% to as of have continue we you right? do will So new of we So lot and obviously mix and is in of and we drive our a line that SaaS or continuing I hardware, consumption mix products customers. goal with we product number existing of our to that and a other mix the -- margin, perspective, sell if about think a or software already place. I feel think the from right, profile XX% we initiatives we products margin And even a well target, to solutions, through is as drive margin obviously good with other new company, to would categories we profile, the good gross in customer support model. say expand which to can are

XX% out, But continue margin. that we to - as gross we deliver So plan to can we XX% believe

Anja Soderstrom

position, how increase Okay. a become cash was your Or And Could on do terms you more nice in buybacks? you about it of buybacks? the there. aggressive think

Brian Becker

Yes. I around mean we priorities cash continue to be consistent about and our capital.

first is business the priority growth. drive Our to reinvest in to

a through the R&D increase the an dividend. non-GAAP repurchase on yes, the mentioned, value over Dhrupad of see shareholders program protection we filed to continue not good basis. But program that we we accelerated perspective and against. Obviously, to share program at from a is to As ways repurchase a look an return XX%

So around it's mindful be to an volume guardrails and opportunistic endeavor, which of requires pricing. us

those So we our when we around deployment. can cash main priorities But do yes, we can. what are

Dhrupad Trivedi

versus continue, the investment, between do volume think balance. And is period. we'll capacity a cannot in we that's organic strategic to great use our capital same by do on find said, balance as buybacks, like determined investment right time, And to and Yes. So limits want the that we what at But of buyback I the can versus right? that's well. think, as sometimes Brian Ana, and we and

think of -- part our strategy. is an But something it's capital So important we

Operator

questions. further no have We

So you Dhrupad I'll to pass Trivedi back any comments. for closing

Dhrupad Trivedi

your to you. forward you our the all quarter all all to continued to the for and great support, a look joining us around thanks thank AXX employees today for Thank the And you. Thank -- we for of shareholders and world ahead.

Operator

call. joining. for This Thank you concludes our

disconnect now may lines. your You

A10 Networks (ATEN) 7 Nov 242024 Q3 Earnings call transcript