A10 Networks(ATEN) - 2025 Q2 - Quarterly Results

Executive Summary Q2 2025 Performance Overview A10 Networks reported strong Q2 2025 financial results, driven by normalized end markets, data center expansions, and AI infrastructure investments, achieving year-over-year revenue growth, improved GAAP and non-GAAP net margins, increased EPS, and robust cash flow from operations - Demand for security and infrastructure solutions grew due to normalized end markets, data center expansions, and AI infrastructure investments, including selection by global AI data center leaders[3] - A10 Networks demonstrated strong operational discipline, translating revenue growth into improved profitability and cash flow, with expansion in both GAAP and non-GAAP net margins and increased earnings per share[3] Key Financial Highlights A10 Networks reported significant year-over-year growth in Q2 2025, with revenue up 15% to $69.4 million and diluted EPS increasing for both GAAP ($0.14) and non-GAAP ($0.21), while returning $8.3 million to investors and approving a quarterly cash dividend of $0.06 per share Q2 2025 Key Financial Highlights | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Revenue | $69,400 | $60,100 | +15% | | GAAP Gross Margin | 78.9% | - | - | | Non-GAAP Gross Margin | 80.0% | - | - | | GAAP Net Income | $10,500 | $9,500 | +10.5% | | GAAP Net Income (% of revenue) | 15.2% | 15.8% | -0.6 pp | | GAAP Diluted EPS | $0.14 | $0.13 | +$0.01 | | Non-GAAP Net Income | $15,500 | $13,200 | +17.4% | | Non-GAAP Net Income (% of revenue) | 22.3% | 22.0% | +0.3 pp | | Non-GAAP Diluted EPS | $0.21 | $0.18 | +$0.03 | - The company returned $8.3 million to investors in Q2 2025, comprising $3.9 million for repurchasing 229 thousand shares at an average price of $17.22, and $4.3 million in cash dividends, with $71.1 million remaining on the $75.0 million share repurchase authorization[7] - The Board of Directors approved a quarterly cash dividend of $0.06 per share, payable September 2, 2025, to stockholders of record on August 15, 2025[7] Conference Call Information Conference Call Details Management will host a conference call on August 5, 2025, at 1:30 p.m. Pacific time to discuss the Q2 2025 results, with details for accessing the call via phone or live audio webcast provided, along with replay information - A conference call to discuss Q2 2025 results will be held on August 5, 2025, at 1:30 p.m. Pacific time (4:30 p.m. Eastern time)[4] - Participants can access the call by dialing (888) 506-0062 (toll-free) or (973) 528-0011 (international) using access code: 117352; a live audio webcast will be available on investors.a10networks.com and archived for one year[4][5] Forward-Looking Statements & Risk Factors Forward-Looking Statements Disclosure This section outlines that the press release contains forward-looking statements regarding future performance, strategy, and capital returns, which are subject to known and unknown risks and uncertainties, including macroeconomic conditions, trade dynamics, supply chain issues, and other risks detailed in SEC filings - The report contains forward-looking statements about quarterly dividends, strategy, positioning, demand, growth, margins, operating leverage, profitability, and capital return, which are subject to known and unknown risks and uncertainties[8] - Actual results may differ due to factors such as unforeseen capital needs, global macroeconomic or political conditions, trade dynamics, supply chain disruptions, customer order changes, execution risks, market adoption, product development, profitability, competitive position, and risks detailed in SEC filings (e.g., Form 10-K filed February 25, 2025)[8] - The company does not intend to update or alter forward-looking statements unless required by applicable law[8] Non-GAAP Financial Measures Explanation Non-GAAP Financial Measures Definition and Use A10 Networks uses non-GAAP financial measures, such as non-GAAP net income, EPS, gross profit, operating expenses, operating income, Adjusted EBITDA, and their respective margins, to provide additional insight into its core operating performance, excluding specific items like stock-based compensation and acquisition-related expenses - A10 Networks uses non-GAAP financial measures (e.g., non-GAAP net income, EPS, gross profit, operating expenses, operating income, Adjusted EBITDA) to provide useful insights into core operating performance, excluding unusual events or factors[9][10] - Non-GAAP net income excludes stock-based compensation and related payroll tax, acquisition-related expense, amortization of purchased intangible assets, one-time legal expense, tax planning expense, and the income tax effect of these items; similar adjustments apply to other non-GAAP metrics[11] - Non-GAAP measures are for supplemental informational purposes only and should not be considered in isolation from or as a substitute for GAAP financial information[10][12] About A10 Networks Company Overview A10 Networks, founded in 2004 and based in San Jose, California, is a leading provider of security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments, serving over 7,000 global customers to ensure their business-critical applications and networks are secure, available, and efficient - A10 Networks provides security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments[13] - The company serves over 7,000 customers, including global large enterprises and communications, cloud, and web service providers, helping them ensure business-critical applications and networks are secure, available, and efficient[13] - Founded in 2004, A10 Networks is headquartered in San Jose, California, and operates globally[13] Financial Statements (GAAP) Condensed Consolidated Statements of Operations For Q2 2025, A10 Networks reported GAAP total net revenue of $69.383 million, a 15.45% increase year-over-year, primarily driven by product revenue growth, with GAAP net income increasing to $10.538 million, resulting in diluted EPS of $0.14 Condensed Consolidated Statements of Operations (GAAP, Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Products Revenue | $39,173 | $29,533 | +32.64% | | Services Revenue | $30,210 | $30,563 | -1.15% | | Total Net Revenue | $69,383 | $60,096 | +15.45% | | Gross Profit | $54,711 | $48,058 | +13.84% | | Income from Operations | $10,311 | $7,916 | +30.26% | | Net Income | $10,538 | $9,476 | +11.21% | | Diluted EPS | $0.14 | $0.13 | +$0.01 | Condensed Consolidated Balance Sheets As of June 30, 2025, A10 Networks' total assets significantly increased to $607.915 million from $432.815 million at December 31, 2024, primarily due to a substantial rise in cash and cash equivalents and the addition of long-term debt, with total liabilities also increasing considerably Condensed Consolidated Balance Sheets (GAAP, as of June 30, 2025 vs Dec 31, 2024) | Metric (in thousands) | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------- | :------------ | :----------- | :----- | | Cash and Cash Equivalents | $252,924 | $95,129 | +$157,795 | | Total Current Assets | $457,062 | $307,288 | +$149,774 | | Goodwill | $15,070 | $1,307 | +$13,763 | | Intangible Assets, net | $7,018 | $0 | +$7,018 | | Total Assets | $607,915 | $432,815 | +$175,100 | | Total Current Liabilities | $108,159 | $123,573 | -$15,414 | | Long-term Debt | $218,086 | $0 | +$218,086 | | Total Liabilities | $403,927 | $200,986 | +$202,941 | | Total Stockholders' Equity | $203,988 | $231,829 | -$27,841 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities decreased to $39.384 million from $44.650 million year-over-year, while financing activities generated a significant net cash inflow of $159.652 million, primarily due to proceeds from convertible notes, leading to a substantial increase in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (GAAP, Six Months Ended June 30, 2025 vs 2024) | Metric (in thousands) | 6 Months 2025 | 6 Months 2024 | Change | | :-------------------------------- | :------------ | :------------ | :----- | | Net Cash Provided by Operating Activities | $39,384 | $44,650 | -$5,266 | | Net Cash Used in Investing Activities | $(41,241) | $(42,472) | +$1,231 | | Net Cash Provided by (Used in) Financing Activities | $159,652 | $(21,965) | +$181,617 | | Proceeds from Issuance of Convertible Notes | $225,000 | $0 | +$225,000 | | Repurchase of Common Stock | $(50,973) | $(14,876) | -$36,097 | | Net Increase (Decrease) in Cash and Cash Equivalents | $157,795 | $(19,787) | +$177,582 | | Cash and Cash Equivalents - End of Period | $252,924 | $77,457 | +$175,467 | Non-GAAP Reconciliations Reconciliation of GAAP Net Income to Non-GAAP Net Income For Q2 2025, non-GAAP net income was $15.453 million, an increase from $13.210 million in Q2 2024, primarily due to adjustments for stock-based compensation, acquisition-related expenses, amortization of purchased intangibles, and one-time legal expenses, with non-GAAP diluted EPS increasing to $0.21 from $0.18 year-over-year Reconciliation of GAAP Net Income to Non-GAAP Net Income (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Net Income | $10,538 | $9,476 | +11.21% | | Total Non-GAAP Adjustments | $4,915 | $3,734 | +31.64% | | Non-GAAP Net Income | $15,453 | $13,210 | +17.00% | | GAAP Diluted EPS | $0.14 | $0.13 | +$0.01 | | Non-GAAP Diluted EPS | $0.21 | $0.18 | +$0.03 | Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit In Q2 2025, non-GAAP gross profit was $55.494 million, up from $48.621 million in Q2 2024, with a non-GAAP gross margin of 80.0%, reflecting adjustments primarily for stock-based compensation and amortization of purchased intangible assets Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Gross Profit | $54,711 | $48,058 | +13.84% | | GAAP Gross Margin | 78.9% | 80.0% | -1.1 pp | | Non-GAAP Gross Profit | $55,494 | $48,621 | +14.14% | | Non-GAAP Gross Margin | 80.0% | 80.9% | -0.9 pp | Reconciliation of GAAP Total Operating Expenses to Non-GAAP Total Operating Expenses Non-GAAP total operating expenses for Q2 2025 were $39.136 million, an increase from $35.925 million in Q2 2024, with this adjustment primarily excluding stock-based compensation, acquisition-related expenses, amortization of purchased intangibles, one-time legal expenses, and tax planning expenses Reconciliation of GAAP Total Operating Expenses to Non-GAAP Total Operating Expenses (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Total Operating Expenses | $44,400 | $40,142 | +10.61% | | Non-GAAP Total Operating Expenses | $39,136 | $35,925 | +8.94% | Reconciliation of GAAP Income from Operations to Non-GAAP Operating Income For Q2 2025, non-GAAP operating income increased to $16.358 million from $12.696 million in Q2 2024, resulting in a non-GAAP operating margin of 23.6%, with this improvement driven by adjustments for non-cash and one-time expenses Reconciliation of GAAP Income from Operations to Non-GAAP Operating Income (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Income from Operations | $10,311 | $7,916 | +30.26% | | GAAP Operating Margin | 14.9% | 13.2% | +1.7 pp | | Non-GAAP Operating Income | $16,358 | $12,696 | +28.84% | | Non-GAAP Operating Margin | 23.6% | 21.1% | +2.5 pp | Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA (NON-GAAP) In Q2 2025, Adjusted EBITDA reached $19.659 million, up from $15.511 million in Q2 2024, with an Adjusted EBITDA margin of 28.3%, reflecting adjustments to GAAP net income for interest, depreciation, taxes, stock-based compensation, acquisition-related expenses, one-time legal expenses, and tax planning expenses Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Net Income | $10,538 | $9,476 | +11.21% | | EBITDA | $13,992 | $10,731 | +30.39% | | Adjusted EBITDA | $19,659 | $15,511 | +26.74% | | Adjusted EBITDA Margin | 28.3% | 25.8% | +2.5 pp |