A10 Networks(ATEN) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter revenue was $66.7 million, an increase of 15.5% year-over-year [21] - Year-to-date revenue was$ 187.5 million, up 3.4% year-over-year [25] - Non-GAAP net income for the quarter was $15.9 million or$ 0.21 per diluted share, compared to $12 million or$ 0.16 per diluted share in the year-ago quarter [24] - Gross margin in the third quarter was 81.3%, in line with the target range of 80% to 82% [23] - Adjusted EBITDA was $17.8 million for the quarter, reflecting 26.7% of revenue [23] Business Line Data and Key Metrics Changes - Enterprise revenue increased 5% year-to-date and is up 9% on a trailing 12-month basis [9] - Service provider revenue was up 2% year-to-date after being down in the first half of 2024 [11] - Security-led revenue increased 10% year-to-date [12][49] Market Data and Key Metrics Changes - North American service provider segment remains volatile, but overall trends are encouraging [11] - Deferred revenue increased 6%, demonstrating stronger product sales and continued demand for cyber-led solutions [22] Company Strategy and Development Direction - Company focuses on diversification to drive predictable performance and navigate challenging conditions [10] - Plans to expand security-led offerings and integrate AI capabilities throughout the portfolio [13][16] - Aiming to create integrated solutions that reduce cybersecurity risk and improve user experience [15] Management Comments on Operating Environment and Future Outlook - Management is cautiously optimistic that the worst is behind in the North American service provider market [12] - Investments in R&D are expected to enhance growth profile and lead to additional solutions [30] - Company is confident in its strategy and ability to translate incremental revenue into higher profitability [30] Other Important Information - Cash generated from operations was$ 21 million in the quarter, keeping the company on track for full-year targets [20] - The Board approved a quarterly cash dividend of $0.06 per share [29] - Company continues to target gross margins of 80% to 82% and adjusted EBITDA margins of 26% to 28% on a full-year basis [29] Q&A Session Summary Question: Demand outlook for service provider segment - Management expects some level of volatility but overall trend is improving and stabilizing [34] Question: Insights on enterprise revenue growth - Focus is on large enterprises, and the dollar-based growth is expected to continue [37][38] Question: Accounts receivable increase and management plan - Management is not concerned with the trend, attributing it to timing of the year [40][42] Question: Clarification on service provider volatility and optimism - North American business is volatile, but overall trends and customer conversations are more favorable than before [44][46] Question: Future expectations for security-led business growth - Near-term expectations for security-led growth are between 10% to 12% [51] Question: Strategic alternatives regarding M&A - Company is actively exploring scalable assets and partnerships to accelerate growth [52] Question: Margin profile and new solutions - Company aims to maintain gross margins of 80% to 82% while expanding product categories [55] Question: Cash position and buyback strategy - Company prioritizes reinvestment in business but remains open to opportunistic buybacks [58][59]