A10 Networks(US:ATEN)2022-08-03 00:00Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $68 million, up 14.9% year-over-year, marking the second highest quarterly revenue in the company's history [17] - Product revenue, a leading indicator for future revenue, was $41.5 million, representing 61% of total revenue and up 20.7% year-over-year [17] - Gross margin for Q2 was 80.6%, with non-GAAP operating income of $16.1 million compared to $11.1 million in the same quarter last year [18][19] - Non-GAAP net income for Q2 was $13.4 million, or $0.17 per share, compared to $0.08 per share in the prior year [19][20] - Year-to-date revenue for the first half of 2022 was $130.6 million, up 14% year-over-year [20] Business Line Data and Key Metrics Changes - Standalone ADC revenue continued to decline as a percentage of overall revenue, while proprietary security-led product revenue increased by 26% on a trailing 12-month basis [11][12] - Services revenue, which includes maintenance and support, was $26.5 million, or 39% of total revenue [17] Market Data and Key Metrics Changes - Revenue from the Americas grew 33.7% year-over-year to $38.6 million, reflecting strong demand and investment in commercial initiatives [13][17] - EMEA revenue increased 10.5% year-over-year, while Asia revenue decreased 7.1% year-over-year due to currency impacts [13][17] Company Strategy and Development Direction - The company is focused on transitioning from legacy offerings to proprietary security-led solutions, positioning itself as a leader in network security [8][10] - A10 aims to achieve full-year revenue growth of 10% to 12% and adjusted EBITDA margins of 26% to 28% for 2022 [15][22] - The company is committed to a disciplined capital allocation strategy, prioritizing organic growth while remaining open to M&A opportunities [15][37] Management's Comments on Operating Environment and Future Outlook - Management noted that cybersecurity solutions are prioritized even amid economic challenges, particularly by service providers [9][10] - The company expressed confidence in its ability to navigate supply chain challenges and maintain gross margins despite external pressures [10][15] Other Important Information - A10 ended the quarter with nearly $167 million in cash, or $2.13 per share, and returned over $39 million to shareholders through share repurchases and dividends [10][22] - The board approved a quarterly cash dividend of $0.05 per share to be paid on September 1, 2022 [22] Q&A Session Summary Question: Impact of stronger dollar on international markets - Management indicated that the stronger dollar has not significantly impacted their North American business, while Japan faced headwinds due to currency fluctuations [25][26] Question: Sales funnel clarity and customer order delays - Management reported no significant delays in customer orders, attributing this to the essential nature of their solutions [29][30] Question: Competitive landscape and product differentiation - The company competes primarily with Arbor Networks and F5 Networks, with a focus on service providers and large enterprises [34][35] Question: Growth expectations between enterprise and service providers - Management expects service provider growth to remain strong, while enterprise growth may be slower due to macroeconomic factors [46][48] Question: Sustainability of gross margin levels - Management confirmed that they are tracking towards the higher end of their gross margin target of 78% to 80% for the year [49][50]