A10 Networks Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 7, 2023

There are 9 speakers on the call.

Operator

Hello and welcome to the A10 Networks Third Quarter 2023 Earnings Conference Call. My name is Elliot and I'll be coordinating your call today. I would now like to hand over to Rob Fink with FNK IR. Floor is yours. Please go ahead.

Speaker 1

Thank you, operator, and thank you all for joining us today. This call is being recorded and webcasted live and may be accessed for at least 90 days via the A10 Networks website at aytennetworks.com. Hosting the call today are Drew Petrivetti, A10's President and CEO and Brian Becker, CFO. Before we begin, I would like to remind you that shortly The market closed today, A10 Networks issued a press release announcing its Q3 2023 financial results. Additionally, ATN published a presentation and supplemental trended financial statements.

Speaker 1

You may access the press release, presentation and trended financials on the Investor Relations section of the company's website. During the course of today's call, management will make forward looking statements, including statements regarding projections or future operating results, including their potential revenue share, revenue growth, Industry and customer trends and capital allocation strategy, supply chain constraints and expectations, positioning, The repurchase and dividend programs and market share. These statements are based on current expectations and beliefs as of today, November 7, 2023. These forward looking statements involve a number of risks and uncertainties, so much are beyond management's control, such as the potential impact ATN does not intend to update information contained in these forward looking statements, whether as a result of new information, future events or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to the company's most recent 10 ks.

Speaker 1

Please note that with the exception of revenue, financial measures discussed today are on a non GAAP basis and have been adjusted to exclude certain charges. The non GAAP financial measures are not intended to be or considered in isolation or substitute for results prepared in accordance with GAAP, And they may be different from non GAAP financial measures presented by other companies. A reconciliation between GAAP and non GAAP measures can be found in the press release that was issued today And on the trended quarterly financial statements posted on the company's website. With all that said, I'd now like to turn the call over to Drew Ped. Drew Ped, the call is yours.

Speaker 2

Thank you, Rob, and thank you all for joining us today. The industry headwinds we discussed on our Previous earnings calls impacted our results in the 3rd quarter, resulting in revenue of 57,800,000 which is in line with our preliminary results. Despite these headwinds, year to date, we have achieved our stated EBITDA goal Of 26% to 28%, and we continue to generate cash. For the past 3 years, we have been speaking about the importance of our diversified business model and ATN's structural profitability. This diversification has enabled us to outperform the market, Transition to consistent profitability and support a buyback program and then a cash dividend.

Speaker 2

But the real value of our business model, both in terms of diversification and resource allocation relates to how we adapt In February 2021, we had guided to a business model 80% to 82% gross margin, 26% to 28% EBITDA and expanding EPS. In spite of a challenging top line environment, we are on track year to date to deliver on these as a result of our focus on execution and being customer centric. To put it in perspective, Our non GAAP EPS for Q3 2023 of $0.16 was higher than our full year non GAAP EPS in 2018 and 2019. This demonstrates the progress we have made in establishing durable earnings power, Building upon a strong technical foundation. We monitor growth opportunities and our sales cycles closely using multiple points of view.

Speaker 2

During the quarter and the 1st few weeks of Q3, We saw improving market conditions. But as the quarter progressed, decisions were delayed and our visibility decreased. Even so, we expected higher revenue levels based on several late stage opportunities that we expected to close In the last few weeks of Q3, as conditions worsen, these orders shifted from the Q3 into future periods During the last 2 weeks of the quarter, as a result, we made the decision to preannounce our revenue Just after the quarter ended. As has been widely reported subsequent to our announcement, the North American market, Especially with service providers, has been difficult for all of our peers. Buying decisions are being delayed, projects are being pushed And inventory gloves are being worked through in response to rising interest rates and inflation concerns.

Speaker 2

A10 has not been completely immune to these headwinds despite enterprise segment growth, both year to date and in the quarter. Visibility is reduced, customer cycles are elongated and quarter to quarter volatility has increased. However, our global reach, customer diversification and effective supply chain management Has enabled us to navigate these challenges as evidenced by performance viewed over longer time periods. And we are confident that as the market normalizes, our solid foundation and commitment to execution Will help us to drive sustainable financial results. Our business model enables profitability Even when we experience revenue challenges, few years ago, such challenges would have resulted in significant losses and cash burn.

Speaker 2

Today, that is clearly not the case as we reported GAAP profitability and generated cash even as we continue to return capital to shareholders while driving innovation. In the last 12 months, we have Returned 95,200,000 to shareholders in the form of dividends and repurchases. In part, we have adjusted our business priorities To aggressively reallocate and reduce spending amidst a challenging revenue environment, We remain focused on preserving growth oriented investments, while being cognizant of our overall spending. Subsequent to the end of the quarter, we launched a new component of our already strong security product portfolio, Our new ATN defense detector available as part of ATN solution portfolio provides early warning capabilities to facilitate even more effective and advanced threat mitigation. This product targets the growing threat of DDoS attacks.

Speaker 2

A10 Defense Detector helps customer build DDoS defenses before attacks occur. We believe that our portfolio, including ATN Detector, Orchestrator and Mitigator provides The highest levels of scalability and efficacy available in the market today, delivering automated DDoS defenses For the most demanding service provider and enterprise environments, we are also in early trials with enterprise customers For our new DDoS threat intelligence service, and we plan to integrate this into our solution portfolio in early 2024. Our security research team already tracked more than 15,400,000 DDoS weapons globally. Our threat intelligence service leverages this expertise. Our global pipeline of opportunities remains strong In both Service Provider and Enterprise segments, projects have been delayed, but revenue has not been lost.

Speaker 2

In reality, security and network expansion remain business critical investments and while higher interest rates And broad economic uncertainty is impacting the sales cycle. These projects cannot be permanently deferred. Our visibility has been reduced, but we continue to believe that we are well positioned to navigate these challenges And poised to rebound as the market normalizes. This is based on a customer centric approach combined with innovation. With that, I'd like to turn the call over to Brian for a detailed review of the quarter and the 1st 9 months of the year.

Speaker 2

Brian?

Speaker 3

Thank you, Dhruvad. The results we are announcing today are in line with preliminary results reported on October 3rd. 3rd quarter revenue was $57,800,000 a decrease of 20% year over year reflecting the headwinds Dhruv had described earlier. Product revenue for the quarter was $30,300,000 representing 52.4 percent of total revenue. After modest improvements in the 2nd quarter, Market conditions deteriorated with several projects we expected to close at the end of the quarter being pushed into future periods during the last month.

Speaker 3

Services revenue, which includes maintenance and support revenue, was $27,500,000 or 47.6 percent of total revenue. Moving to our revenue from a geographic standpoint, revenue from the Americas including Latin America was 25,800,000 Down 28% year over year. This reflects slowing purchasing from large customers, primarily service providers due to economic concerns. Revenue from the Americas was down 36%, primarily related to reduced spending from Tier 1 service providers. As you can see on our balance sheet, our deferred revenue was $135,700,000 as of September 30, 2023, up 8% year over year.

Speaker 3

With the exception of revenue, all the metrics discussed on this call are on a non GAAP basis unless otherwise stated. A full reconciliation of GAAP to non GAAP results are provided in our press release and on our website. Gross margin in the 3rd quarter was 81.8% in line with our expectations. Adjusted EBITDA was $14,400,000 for the quarter, reflecting 24.9 percent of revenue. I'd like to note that we were able to maintain EBITDA margins in excess of 20% even as revenues declined by 20% in the quarter.

Speaker 3

Non GAAP net income for the quarter was $12,000,000 or $0.16 per diluted share, down from $15,900,000 or $0.20 per diluted share in a year ago quarter. Maintaining our non GAAP net income on lower revenue is a significant accomplishment, demonstrating the earnings power we have built into ATN. Diluted weighted shares used for computing non GAAP EPS for the Q3 were approximately 75,800,000 shares compared to 77,700,000 shares in the year ago quarter. On a GAAP basis, net income for the quarter was $6,500,000 or $0.09 per diluted share, compared with net income of $12,100,000 or $0.16 per diluted share in the year ago quarter. Turning to the year to date results.

Speaker 3

Revenue was $181,200,000 Down 10.6% year over year. Product revenue was down 18.7%, representing approximately 55.5% of total revenue And services revenue was up 2%, representing about 44.5% of total revenue. Year to date non GAAP gross margin was 81.6%. Adjusted EBITDA was $47,200,000 reflecting 26 point 1% of total revenue in line with our profitability targets. Non GAAP net income for the 1st 9 months was $36,500,000 or $0.48 per diluted share compared to $39,300,000 or $0.50 per diluted share in the year ago period.

Speaker 3

On a GAAP basis, Net income for the 1st 9 months was $22,100,000 or $0.29 per diluted share compared with net income of $28,900,000 or 0.37 cents per diluted share in 2022. Year to date, we have generated $41,800,000 in cash from operations. Turning to the balance sheet, as of September 30, 2023, we had $169,000,000 in total cash, cash equivalents and marketable securities Compared to $150,900,000 at the end of 2022, an increase of 12% compared to the end of 2022. In the quarter, we paid $4,500,000 in cash dividends and repurchased 168,000 shares at an average price of $14.52 For a total of $2,400,000 we continue to carry no debt. The Board has approved a quarterly cash dividend of $0.06 per share to be paid on December 1, 2023 to shareholders of record on November 17, 2023.

Speaker 3

The Board also approved a new $50,000,000 share repurchase plan. As discussed in our preliminary results, we expect Q4 2023 revenue to be between CAD70 1,000,000 CAD80 1,000,000 And year over year growth in full year 2023 non GAAP EPS. Based on current market conditions and in line with our broader peer group, we 2020 4 revenue and EPS growth. I'll now turn the call back over to Dhupit for closing comments.

Speaker 2

Thank you, Brian. A10 remains well positioned to generate improved results as market conditions improve, And we expect our performance to benefit from our diversification and global presence. Our security led solutions remain in high demand, aligned with durable secular catalyst. Additionally, our investments in Supporting hybrid solutions that work on prem and in the cloud are well aligned with customers' business outcomes. Operator, you can now open the call up for questions.

Operator

Thank you. When preparing to ask your question, please ensure your device is unmuted locally. First question today comes from Gray Powell with BTIG. Your line is open.

Speaker 4

Okay, great. Thanks for taking the question. So I had a couple here. So I just look at some of my companies on the network security side of the world. Some companies like Fortinet are talking about how a portion of growth the last couple of years It was driven by temporary factors like COVID and supply chain.

Speaker 4

And now we're in sort of this digestion phase. I know you all are a little bit different, but how long do you think this digestion phase lasts? And then admittedly a tough question, but what do you think growth looks like when we do come out of it?

Speaker 2

So no, no, thank you, Gray. So maybe I'll address those separately. So first, as it relates to supply chain, You are correct, right? I think if you look at some of the networking infrastructure as well as security companies, in the last 12 to 18 months, Lot of them went through this kind of inventory correction cycle, if

Operator

you will,

Speaker 2

where they Could not supply for a while, had a lot of backlog, built up a lot of it and then are now kind of working through it and normalizing it. For ATN, I think because of our footprint and the way we manage some of these operational items, We were never in a situation of having excessive backlog either direction, right? So in some ways, For us, it's more reflective of the actual market opportunity because most of our business is book and turn, And so it gets affected quickly. So we don't expect or we are not the Q3 challenges for us Had very little or nothing to do with supply chain or inventory levels, but certainly that's a phenomenon we are mindful of. And indirectly, right, we, of course, always look at the equipment customers have purchased, what is the utilization.

Speaker 2

And because our customer base is predominantly service provider or large enterprise rather than, say, small enterprise, We are very well integrated technically to track those things. So I do think that in itself is not a major factor. Certainly, where customers will be slower to use inventory they've already purchased in the past, it's harder to predict. But I think we see deferral of new CapEx projects like building new data centers more so than kind of Cancellation of that, right? So that's sort of the supply chain perspective.

Speaker 2

And if you see some of the peer companies, you see their growth Over the last 3 years, year over year, you can see that bubble, right, and then it normalizes out. So that's something we are mindful of, but Unknown products would be more customers taking longer to consume what they have, not that they have so much that they don't plan to buy anything. As it relates to COVID, I think we had mentioned this earlier, right, but because our business is Predominantly in the core of the network, when things moved to more remote or more distributed working models, It had a much more profound impact on companies that supported sort of work from home or remote applications and things like that. For us, ultimately, what mattered was that, that data gets aggregated into a core network. And so for us, we didn't see a Dramatic demand change, again, because of the customers that we are exposed to, right, who We would see more data whether it was from home or the office, for example.

Speaker 2

So, but those are factors we certainly think And it's hard for me, Greg, to differentiate that from normal CapEx cyclic behavior that you see from those customers, right? So how it is due to these factors versus their normal cycles? Hard to know. But hopefully that gives you a flavor for at least what ATN is facing. And Your next question around how do we think growth resumes.

Speaker 2

So if you think about business, 2 thirds service provider, 1 third enterprise. Enterprise is predominantly large enterprise and I would say that is certainly becoming more stable And not on a negative trajectory. And if you see our segment results, right, you'll see that as well. We expect that to be driven More for us in 2 ways. 1 is they are supporting more complex configurations where More and more of the larger customers want a mixed operating environment on prem and cloud and we have invested a lot in those products And commercial activities, right?

Speaker 2

So that we expect to be stable. And I think year to date, our enterprise segment is growing like 5%, 6% and in quarter slightly better than that, so even though overall it's so negative. On the service provider side, I think We made some progress with Tier 2, Tier 3 a little bit, which is more or less volatile. And with Tier 1 service provider, our assumption and the signed VCR, it will resume towards the growth period, but it's Not going to suddenly snap back to where they were. So we are projecting kind of a slow recovery in the beginning of the year.

Speaker 2

And then as they see a bigger supply demand imbalance, right, they will spend more.

Speaker 4

Understood. Okay, great. And I guess just one follow-up question. I mean you guys have you've always done a good job controlling costs. How much more room do you have to squeeze on the OpEx side and grow EBITDA and EPS In excess of revenue growth?

Speaker 2

Yes. Great question, Gray. And of course, EPS growth is always more fun with revenue growth. The so for us, I think this year because of the revenue impact What is last year? Obviously, there are temporary cost changes that will resume when we are back in growth mode, Such as right variable, selling cost, commission, channel, all of that.

Speaker 2

So, we expect that obviously to float up again with revenue growth. On G and A side, I think we continue to look for efficiency. So nothing dramatically different, but it will always be better as a And all OpEx will grow slower than revenue growth, right? The part that I think obviously comes back fastest would be variable comp on sales side with revenue growth. On R and D, I would say the biggest focus for us is reallocating resources to where we see the most Growth opportunities, right.

Speaker 2

So a lot of our new announcements around capabilities and products will be Not more engineers per se, but the ones who are there are working on the most important things, right? So that's the The way we balance it and when growth resumes, we grow OpEx, but not as fast.

Speaker 4

Understood. All right. Thank you very much.

Speaker 2

Thank you, Greg.

Operator

We now turn to Hammad Khorsandi with BWS Financial. Your line is open.

Speaker 5

Hi. I was just want to understand the conversations you're having with your service provider customers, Yes. How does that relate to your guidance commentary about 2024 when it sounded like early in your Comments that you still don't have enough visibility even for Q4?

Speaker 2

Yes. No, good question. So I think we are obviously I think we are not giving guidance for 2024, right? I think what I was explaining before is, so specific, Amit, to the service provider customers, I would say difference between North America and rest, so speaking about North America maybe the most. Our conversations Are around projects that are planned, but are getting postponed As opposed to them not meeting the product anymore or scaling back their plans.

Speaker 2

2nd element is Some of those customers specifically cite the cost of capital and concerns about Their ability to get a rate of return when they are borrowing at those levels. And I think as Those things not necessarily decline, but normalize out. They will have to fulfill demand, right? So they can postpone it, but they are Planning to add capacity to support new services and new data. So that's the second element of it.

Speaker 2

And, 3rd, I think, obviously, North America, some of the service providers have structural CapEx and capital Complexity and challenges, so we are not assuming those go away, right? This is more around customers that We're planning something in Q3. We know they are still planning it because we are working with them on testing and deployment. It's more from that perspective than assuming that some large customer that completely shut off suddenly turns on.

Speaker 5

Okay. And my other question was, you've always been a service Provider centric company, what are you doing to expand your presence and market share in enterprise and how fast could that segment grow for you?

Speaker 2

Yes. So good question and I think if you look at our trended financials, right, Ken, as I said before, Enterprise segment actually even in this year is growing 5% to 7% for us. Globally, obviously, you're right, it's revenue wise, it's Still not as big or close to the SP segment, but I would say Q3, our Enterprise revenue was roughly $29,000,000 out of that. So that's a pretty good mix, if you will. Now We don't want it to grow because SE is declining, right?

Speaker 2

But that is a pretty high mark for us so far in the last 7, 8 quarters, right? So And the connection for us really there is lot of the large enterprise customers Have concluded that it is more efficient and risk management wise better for them to operate On prem and cloud and our ability to provide that right is what is helping us regain Growth in that market and be credible for those customers.

Speaker 5

Okay, great. Thank you.

Speaker 2

Okay. Thank you, Alan.

Operator

We now turn to Christian Schwab with Craig Hallum Capital. Your line is open.

Speaker 6

Hey, great. And thanks for taking my question.

Speaker 7

I guess just looking at

Speaker 6

your generic guidance If we assume enterprise remains stable at 5% and service provider, not sure when it's You're going to come back, but should come back eventually. I'm just does that kind of mean That's a flat year over year or it kind of sounds like it should be up modestly maybe like 5%. Was that kind of given the visibility in hand, I know you're not giving guidance, but it kind of seems what you're implying. Did I hear that right or did I not hear that right

Speaker 2

Good question, Christian. So obviously, yes, we've talked about Q4, so put that aside. One of the principles we talk about, right, is we plan to always over perform versus our peer group by a couple of 100 basis points with execution and strategy. And I think if you look at all the earnings that have already come out And you look at our peer group right now, you are correct, right? It would put the zip code for that group next year, year over year to be 3% to 4%.

Speaker 2

And we obviously expect to do better. So we are not giving guidance, but we certainly are mindful of where the market is And working on things that help us do a little bit better than that.

Speaker 6

Okay. And then how long would at these type of growth rates versus kind of Our hope is to be a double digit growth company not all that many quarters ago. How long would it take Before you would maybe have to readjust the cost structure of the company permanently, if you would, If the business is reverting back to kind of call it a mid to high single digit growth company?

Speaker 2

Yes. So good question. So I think right now, obviously, we are taking actions where we can deliver results even without that high Double digit growth number. My expectation is our new products And security led offerings obviously can grow in that zip code. Our ability to drive enterprise, although it's a smaller number, is also in that zip code.

Speaker 2

Service provider, we are continuing to derisk. That spending is not going to snap back, but we are trying to derisk by going more Also regional providers around the world, and I would say a lot of the other people In our sector, we have talked about it. They expect service provider spending to resume in the first half, but be at a more normal clip by Second half of twenty twenty four, right. So I think we obviously will continue to monitor it, but our goal is obviously to get back to the double digit growth Without necessarily calling a date, right, which I can't do.

Speaker 6

Yes. That's extremely fair. Great. I don't have any other questions. Thank you.

Speaker 2

Thanks. Thank you, Chris.

Operator

Our next question comes from Anja Soderstrom with Sidoti. Your line is open.

Speaker 8

Hi, and thank you for taking my questions. Most of them have been addressed already. But Are you starting to see any loss deals? Or is it just a matter of them being pushed out, you think?

Speaker 2

So I think what we see, Anya, predominantly is push out. And the reason I say that is With the nature of customers we have, right, the design cycle is 6 to 9 months and we would have a pretty good idea if they were planning to switch, Right. And we support those products for multi years on a highly frequent basis. So we do see push outs and it's not In the category of like a modernization project that they canceled, right, it's more to Support some subscriber growth, they were planning to invest X dollars and now they are going to wait another quarter or 2 quarters to see where that is. So we do continue to see that.

Speaker 2

We obviously closely look for win loss analysis and of course Around the world, there are deals we do lose once in a while. But majority of what impacts our results It's not it's in the deferment or CapEx slowdown category than anything.

Speaker 8

Okay. Thank you. And then just maybe touch on capital allocation and returning cash to shareholders. Have you changed anything in your strategy on buybacks?

Speaker 2

No, I think we talked about it right. So the Board has Approved another new buyback for $50,000,000 and we continue to be active in the market. Of course, right, there are some Constraints for us around volumes and kind of results and dates and all that, but we expect to be Given buyback and as I noted earlier, right, we have invested a lot in buyback and dividend activities even in the last 12 months.

Speaker 8

Okay. Thank you. That was all for me.

Speaker 2

Thanks, Annie.

Operator

We now turn to Henry Susanto with Gabelli Funds. Your line is open.

Speaker 7

Good evening, and thank you for taking my question, Dhrupat and Ryan. Dhruvat, I have a question. So in terms of when the telco service provider demand will recover, I have several questions. The first one is, do you think they will recover at around the same time across different geography or one Who may see softness first, may I recover earlier? And then the Yes, I understand.

Speaker 7

Yes, so let me ask that first.

Speaker 2

Yes. So I think good question. And I would say From what we see around the world, right, we saw the most Impact in North America service providers, right? And that is where obviously there is the most kind of Mix of things around CapEx as well as inflation and interest rates and everything else. We did see some slowdown in Parts of Europe, but in couple of like large territories, right, with large providers.

Speaker 2

Beyond that, I think, We saw sort of a general slowdown, but nothing dramatic. So I think outside of North America, we will see that being stable or In line with expectations, and in North America, I think is where we continue to monitor sort of a bigger macro market Environment impact on when that returns, right? But certainly, I think the deepest issue for us is North America, and that's where We have the least visibility. I think the other regions are not as far off

Speaker 7

on plan. Okay. And then as far as the market recovery in telco service providers, what can trigger That's like the resumption of the demand. I think one maybe the capacity you can only hold on, on like existing capacity Until a certain point, but I'm wondering like what else, let's say, if interest rate remain high, the concern on inflation is growing. I'm wondering what can trigger the demand resumption?

Speaker 2

Yes. So I think there's 2 elements to that answer, Right. So one is, as you said, right, which is a pure business case around the products that they used to buy from us. And I think one is obviously customer demand and network traffic growth, which requires them to invest more to support that traffic. And that I think is harder to predict because it comes down to their priorities.

Speaker 2

And Even if their budget is cut, they still have to choose like what is not cut or funded. So that's harder. The second part of it, right, that we have We are also with those existing customers, continuously trying to expand The number of categories we send to them as well as the different parts of those businesses where we sell, right. So in that case, We are not dependent on a single business unit who does certain things in a big company, but it's more distributed around Their mobile network, their wireline network, their security infrastructure, all of those. So For us, from what we can control and execute, our ability to sell them more categories, even if there is depressed spending, is an important driver.

Speaker 2

And in terms of when they resume reinvestment, I think it's a function of where the network traffic growth Is it to a point where they cannot sustain the service level to their customers?

Speaker 7

I see. And then a question for Brian. So Brian, product gross margin is outstanding despite of the revenue decline. I'm wondering what contributed to the strong gross margin primarily. I'm wondering whether that also reflect the I'd like a more favorable mix of enterprise versus service providers.

Speaker 7

And then I'm wondering like how much Cost discipline, cost cutting, supply chain improvement play into generating that strong gross margin?

Speaker 3

Yes. Thanks for the question, Andy. Yes, I think you're exactly right. First of all, the gross margin improvement is not A function of mix of service provider enterprise, it's more of a function of our execution and demand planning. We've done a lot of work to Build different avenues to gain product and to maintain our cost structure, even despite the growing input costs that we see.

Speaker 3

But Yes. Again, it's being able to execute on plan, it's a mix of certain products and services, not services but subscription And really managing and monitoring our supply chain and executing on our plans.

Speaker 2

And I think in a different way, Andy, think of it as, right, we said we We'll have gross margins of 80% to 82%, and that is in the category of things we can control, right? So Interest rates, we cannot control so much, but what we can control, we'll do our best to do what we said.

Speaker 7

And then, Brian, If I'm not mistaken, I think you mentioned earnings growth remains intact for 2023, Which means that full year earnings will be above $0.73 of last year. May I verify that?

Speaker 3

That's correct. Yes, we continue to drive business. We have a

Speaker 2

That's fully a non GAAP Full

Speaker 3

non GAAP EPS, as I mentioned, we expect to do CAD70 1,000,000 to CAD80 1,000,000 in revenue in Q4 and we'll continue to maintain our Margins of 80% to 82%, which will fall through and expand EPS year over year for the full year.

Speaker 7

Okay. Thank you.

Speaker 2

Thank you.

Operator

This concludes our Q and A. I'll now hand back to Dhruvad Trivedi, President and CEO for closing remarks.

Speaker 2

Thank you. Thanks to all of you and to all of our shareholders for joining us today And your continued support of A10. Thanks.

Operator

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

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Key Takeaways

  • Q3 revenue of $57.8 million was down 20% year-over-year, reflecting delayed purchases from North American service providers.
  • The company delivered an 81.8% gross margin and 24.9% adjusted EBITDA margin, with non-GAAP EPS of $0.16, exceeding its full-year 2018 and 2019 levels.
  • A10’s diversified model generated cash and profitability despite top-line headwinds, resulting in a $169 million cash balance, no debt, and $95.2 million returned to shareholders via buybacks and dividends.
  • Management launched the ATN Defense Detector for proactive DDoS threat detection and plans to roll out a new DDoS threat intelligence service in early 2024.
  • For Q4, A10 expects revenue of $70 million to $80 million and anticipates full-year non-GAAP EPS growth, positioning the company to outperform peers as market conditions normalize.
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Earnings Conference Call
A10 Networks Q3 2023
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