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Core Insights - A10 Networks reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.21 per share, and showing an increase from $0.21 per share a year ago, resulting in an earnings surprise of +9.52% [1] - The company achieved revenues of $74.68 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 6.29%, compared to $66.72 million in the same quarter last year [2] - A10 Networks has consistently surpassed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.26 on revenues of $76.72 million, and for the current fiscal year, it is $0.88 on revenues of $282.51 million [7] - The estimate revisions trend for A10 Networks was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Communication - Network Software industry, to which A10 Networks belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

A10 Networks (NYSE:ATEN) Q3 2025 Earnings Call November 04, 2025 04:30 PM ET Speaker3Good day, everyone, and welcome to the A10 Networks Third Quarter 2025 Financial Results Conference Call. At this time, all participants are on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Tom Baumann. Sir, the floor is yours.Speaker8Thank you all for joining us today. This call is being recorded and webcast ...

Q3 2025 Financial Results & Commentary November 4, 2025 Cautionary Statements & Disclosures This presentation and the accompanying oral presentation contain "forward-looking" statements that are based on our management's beliefs and assumptions, including statements regarding our strategy, market, operations, profitability and positioning. Q3'25: Broad-Based Improvements Revenue Overview Consistent Profitability Forward-looking statements are subject to known and unknown risks and uncertainties and are base ...

Revenue Performance - Total net revenue for the three months ended September 30, 2025, was $74.7 million, an increase of 11.9% compared to $66.7 million in the same period of 2024[137]. - Products revenue for the nine months ended September 30, 2025, was $118.3 million, representing a 22.6% increase from $96.5 million in the same period of 2024[138]. - Services revenue for the three months ended September 30, 2025, was $31.6 million, a 5.7% increase from $29.9 million in the same period of 2024[137]. - For the nine months ended September 30, 2025, total net revenue increased by $22.7 million, or 12%, to $210.2 million compared to the same period in 2024[149]. - Products revenue for the nine months ended September 30, 2025, increased by $21.8 million, or 23%, to $118.3 million, primarily due to demand from service provider customers in the Americas and EMEA regions[150]. - Services revenue for the nine months ended September 30, 2025, increased by $0.9 million, or 1%, to $91.9 million, driven by demand from enterprise customers in the Americas and EMEA regions[150]. Profitability and Margins - Gross profit for the three months ended September 30, 2025, was $59.9 million, with a gross margin of 80.1%, compared to $53.7 million and 80.5% in the same period of 2024[137]. - For the three months ended September 30, 2025, total gross profit was $59.9 million with a gross margin of 80.1%, compared to $53.7 million and 80.5% in the same period of 2024, reflecting a decrease of 0.4% in gross margin[162]. - Products gross profit increased by $5.7 million, or 19.4%, to $35.0 million, while services gross profit increased by $0.5 million, or 2.0%, to $24.8 million for the same period[162]. Operating Expenses - Operating expenses for the three months ended September 30, 2025, were $46.9 million, representing 62.7% of total revenue, compared to $43.2 million and 64.8% in the same period of 2024[137]. - Operating expenses for the three months ended September 30, 2025, totaled $46.9 million, an increase of $3.6 million, or 8.4%, compared to $43.2 million in 2024[166]. - Research and development expenses rose by $2.6 million, or 16.8%, to $18.4 million for the three months ended September 30, 2025, driven by increased personnel costs[171]. Cash Flow and Liquidity - Cash provided by operating activities was $62.2 million during the nine months ended September 30, 2025, compared to $64.8 million in the same period of 2024[134]. - Cash provided by operating activities was $62.2 million for the nine months ended September 30, 2025, consisting of net income of $32.3 million and non-cash charges of $28.3 million[190]. - As of September 30, 2025, the company had $86.6 million in cash and cash equivalents and $284.3 million in marketable securities[134]. - The company repurchased 3.3 million shares for a total cost of $62.0 million under the 2024 and 2025 stock repurchase programs during the nine months ended September 30, 2025[185]. - The company anticipates continuing to pay quarterly cash dividends of $0.06 per share, totaling $4.3 million for the three months ended September 30, 2025[186]. Regional Performance - The Americas region accounted for 65% of total revenue for the three months ended September 30, 2025, up from 51% in the same period of 2024[132]. - The Americas region generated $48.8 million, or 65% of total revenue, for the three months ended September 30, 2025, representing a 43% increase compared to the same period in 2024[146]. - The APJ region contributed $16.7 million, or 22% of total revenue, for the three months ended September 30, 2025, reflecting a 27% decrease compared to the same period in 2024[147]. Investments and Acquisitions - The company acquired ThreatX Protect in February 2025, enhancing its cybersecurity portfolio with WAAP protection[128]. - The company plans to continue investing in growth priorities, including cybersecurity and artificial intelligence technologies, with an expected increase in research and development expenses[172]. Marketable Securities and Investments - As of September 30, 2025, the investment portfolio included marketable securities with an aggregate amortized cost basis of $283.7 million and a fair value of $284.3 million[205]. - The fair value of marketable securities as of September 30, 2025, was $284.3 million, with hypothetical fair values varying based on interest rate shifts[206].

Revenue and Income - Revenue for Q3 2025 was $74.7 million, an increase of 11.9% year-over-year from $66.7 million in Q3 2024[7] - GAAP net income was $12.2 million, or $0.17 per diluted share, compared to $12.6 million, or $0.17 per diluted share, in Q3 2024[7] - Non-GAAP net income rose to $16.7 million, or $0.23 per diluted share, from $15.9 million, or $0.21 per diluted share, in Q3 2024[7] - Total net revenue for the nine months ended September 30, 2025, was $210.2 million, up from $187.5 million in the same period of 2024[18] - GAAP net income for Q3 2025 was $12,191, a slight decrease from $12,637 in Q3 2024, while non-GAAP net income increased to $16,701 from $15,926[19] Margins and Profitability - GAAP gross margin was 80.1%, while non-GAAP gross margin was 80.7%[7] - GAAP operating margin improved to 17.4% from 15.7% in Q3 2024; non-GAAP operating margin increased to 24.7% from 22.6%[7] - The company reported a gross profit of $59.9 million for Q3 2025, compared to $53.7 million in Q3 2024[18] - GAAP gross profit for Q3 2025 was $59,852, up from $53,682 in Q3 2024, resulting in a GAAP gross margin of 80.1% compared to 80.5%[24] - Non-GAAP gross profit for Q3 2025 was $60,269, compared to $54,216 in Q3 2024, with a non-GAAP gross margin of 80.7%[24] - Adjusted EBITDA for Q3 2025 was $21,877 million, an increase from $17,800 million in Q3 2024, indicating a 22.8% rise[30] - Adjusted EBITDA margin for the nine months ended September 30, 2025, was 29.1%, up from 25.2% in the same period of 2024[30] Cash Flow and Dividends - The company returned $15.3 million to investors, including $11.0 million in share repurchases and $4.3 million in cash dividends[7] - A quarterly cash dividend of $0.06 per share was approved, payable on December 1, 2025[7] - Cash flows from operating activities for the nine months ended September 30, 2025, totaled $62,187, slightly down from $64,782 in 2024[23] - Cash and cash equivalents at the end of Q3 2025 were $86,555, down from $95,129 at the beginning of the period[23] Assets and Liabilities - Total current assets rose significantly to $468,679 in Q3 2025 from $307,288 in Q4 2024, driven by an increase in marketable securities[21] - The company’s long-term debt increased to $218,450 in Q3 2025, compared to no long-term debt reported in Q4 2024[21] - The accumulated deficit decreased to $(8,072) in Q3 2025 from $(40,344) in Q4 2024, indicating improved financial health[21] Operating Performance - GAAP income from operations for Q3 2025 was $12,994 million, up from $10,443 million in Q3 2024, representing a 24.4% increase[28] - Non-GAAP operating income for Q3 2025 reached $18,458 million, compared to $15,059 million in Q3 2024, reflecting a 22.4% growth[28] - For the nine months ended September 30, 2025, GAAP income from operations was $32,083 million, a 25.4% increase from $25,572 million in the same period of 2024[28] Expenses - Non-GAAP total operating expenses for the nine months ended September 30, 2025, were $118,295, an increase from $113,582 in the same period of 2024[26] - Stock-based compensation and related payroll tax for Q3 2025 amounted to $4,961 million, compared to $4,516 million in Q3 2024[28] - Acquisition-related expenses for the nine months ended September 30, 2025, totaled $655 million, with no expenses reported in the same period of 2024[28] Customer Base - A10 Networks serves over 7,000 global customers, focusing on secure application services and solutions[14]

Core Viewpoint - A10 Networks (NYSE: ATEN) provides products that enhance the security and efficiency of online systems for companies and internet service providers, with a previous rating of "Hold" due to perceived high stock price [1] Company Summary - A10 Networks specializes in solutions that protect online systems and improve operational efficiency for businesses and internet service providers [1] Market Context - The analysis primarily focuses on small- to mid-cap companies, which are often overlooked by investors, while also considering large-cap companies for a broader market perspective [1]

A10 Networks Inc. (NYSE:ATEN) is one of the worst-performing data center stocks in 2025. Its stock is largely flat since the start of the year, which contrasts with the broader strong performance of larger data center-exposed stocks. On September 24, the company’s new CFO, Michelle Caron, took charge from Brian Becker, who has stepped down and is expected to leave the company at the end of September 2025. Michelle joins from Beckman Coulter Life Sciences, a division of Danaher Corporation, where she serve ...

Company Performance - A10 Networks reported quarterly earnings of $0.21 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and up from $0.18 per share a year ago, representing an earnings surprise of +5.00% [1] - The company achieved revenues of $69.38 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.30%, compared to $60.1 million in the same quarter last year [2] - Over the last four quarters, A10 Networks has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Market Outlook - A10 Networks shares have underperformed the market, losing about 1.3% since the beginning of the year, while the S&P 500 has gained 7.6% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The current consensus EPS estimate for the coming quarter is $0.22 on revenues of $70.2 million, and for the current fiscal year, it is $0.87 on revenues of $279.71 million [7] Industry Context - The Communication - Network Software industry, to which A10 Networks belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors or through tools like the Zacks Rank [5][6]

Financial Data and Key Metrics Changes - Total revenue for the second quarter was $69.4 million, an increase of 15% year over year [12] - Non-GAAP net income for the quarter was $15.5 million or $0.21 per diluted share, compared to $13.2 million or $0.18 per diluted share in the same quarter last year [14] - EBITDA as a percentage of revenue grew year over year, reflecting a strong operational performance despite aggressive investments [10] Business Line Data and Key Metrics Changes - Product revenue for the quarter was $39.2 million, representing 56% of total revenue, while services revenue was $30.2 million or 44% of total revenue [12] - Enterprise revenue grew by 8% year over year, while service provider revenue increased by 14% [8] Market Data and Key Metrics Changes - The company experienced improved demand from data center expansions and AI infrastructure investments, particularly in the service provider segment [9] - Total deferred revenue increased to $144.4 million, indicating strong uptake of the company's portfolio [13] Company Strategy and Development Direction - The company is strategically aligned with the evolving cybersecurity landscape and emphasizes high performance and advanced security [6] - A focus on diversification across verticals and geographies enhances resilience and allows the company to capitalize on secular tailwinds in AI and cybersecurity [8] - The company aims to dynamically allocate resources to address changing market conditions while preserving profitability and shareholder returns [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic positioning, particularly in light of increased demand for cybersecurity solutions and AI-related spending [18] - The company remains comfortable in its ability to deliver annual revenue growth in the high single-digit range [9] Other Important Information - The company ended the quarter with $367.4 million in cash, cash equivalents, and marketable securities, compared to $195.6 million in the previous year [16] - The Board approved a quarterly cash dividend of $0.06 per share to be paid on September 2, 2025 [17] Q&A Session Summary Question: How should we think about the potential to sustain recent momentum and the sustainability of the service provider segment? - Management indicated that product revenue growth is a strong indicator of customer preference and future growth, with positive signs in service provider performance outside North America [23][26] Question: Can you provide insights on how linearity played out this quarter and any insights on July? - Management noted that there was no unexpected burst of activity in the third month of the quarter and that customer activity is on track for the third quarter [28][29] Question: How should we think about the potential contributions from the recent Microsoft award? - Management emphasized the importance of the long-term partnership with Microsoft and the relevance of their solutions to a global leader in cloud networking [34] Question: Does ATN see tailwinds from telcos raising CapEx following recent legislation? - Management acknowledged that increased CapEx could provide a tailwind, particularly in North America, while also focusing on selling more security solutions [39] Question: Can you elaborate on the AI global leaders mentioned in the press release? - Management confirmed that there are multiple customers involved, including both North American and international players, who are building new AI infrastructure [42][43] Question: What percentage of revenue is AI-driven? - Management indicated that current growth is primarily from customers building new data centers for AI traffic, with significant revenue expected in 2026 and beyond [48] Question: Can you provide insights on enterprise revenue growth by customer vertical and geography? - Management highlighted strong growth in enterprise revenue in North America, particularly among large enterprise customers in sectors like finance and technology [54][56] Question: How are conversations going with existing and prospective customers regarding ThreatX? - Management noted that ThreatX has been well integrated into the portfolio and is seen as a relevant solution for customers, although it is still early to quantify its impact [59][60]