A10 Networks(ATEN) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Second quarter revenue was $60.1 million, a decrease of 8.7% year-over-year [16] - Year-to-date revenue was$ 120.8 million, down 2.2% year-over-year [18] - Non-GAAP net income for the quarter was $13.2 million or$ 0.18 per diluted share, compared to $14.5 million or$ 0.19 per diluted share in the year-ago quarter [17] - Gross margin in the second quarter was 80.9%, in line with stated goals of 80% to 82% [17] - Adjusted EBITDA was $15.5 million for the quarter, reflecting 25.8% of total revenue [17] Business Line Data and Key Metrics Changes - Service Provider revenue, excluding North America, was up 20% year-to-date, while Enterprise-related revenue increased 25% [9] - Service Provider segment experienced a 25% decline, offset by improvements in the Enterprise segment [9] - Product revenue for the quarter was$ 29.5 million, representing 49% of total revenue, while services revenue was $30.6 million or 51% of total revenue [16] Market Data and Key Metrics Changes - North American Service Provider market remains choppy, with spending trending positively overall [8] - APJ and EMEA regions are stable on both Enterprise and Service Provider sides [36] Company Strategy and Development Direction - Company is focusing on diversifying its business model to navigate market challenges and drive growth [11] - Investments are being made in R&D and sales to target Enterprise opportunities, with expectations for continued growth in this segment [9][12] - The company is also investing in AI solutions to enhance security offerings and address emerging threats [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that the North American Service Provider market is facing challenges, but the company is making steady progress in the Enterprise market [21] - The company expects low single-digit growth in revenue for the full year, with a focus on maintaining profitability [39] - Management remains confident in achieving full-year business model objectives, including targets for gross margin and adjusted EBITDA margin [15][20] Other Important Information - The company reported a quarterly cash dividend of$ 0.06 per share, with $34.8 million remaining in its share repurchase authorization [20] - Cash generated from operations was$ 43.8 million year-to-date, in line with full-year targets [19] Q&A Session Summary Question: Are service providers expected to return in the second half? - Management indicated that conversations with North American service providers show continued spending, but new projects are being pushed out [25] Question: How is the competitive environment? - Management stated that they are gaining share, particularly in the Enterprise market, with a year-to-date growth of about 7% [29] Question: What is the pricing power in the current environment? - Management mentioned that pricing is balanced, with selective price increases to offset input cost inflation [31] Question: Where is the company in the sales team restructuring? - Management indicated they are in the third to fourth inning of restructuring, with good progress in cross-selling [33] Question: What is the overall spending environment and macro headwinds? - Management noted stability in APJ and EMEA, while North America is facing some project re-scoping [36] Question: What drove the strong free cash flow in the first half? - Management attributed strong free cash flow to improved cash spending and linearity [41]