A10 Networks(US:ATEN)2023-11-08 01:18Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $57.8 million, a decrease of 20% year-over-year, reflecting industry headwinds [6][13] - Non-GAAP EPS for Q3 2023 was $0.16, down from $0.20 in the same quarter last year [15] - Year-to-date revenue was $181.2 million, down 10.6% year-over-year, with product revenue down 18.7% [16] - Gross margin for Q3 was 81.8%, consistent with expectations, while adjusted EBITDA was $14.4 million, reflecting 24.9% of revenue [14][15] Business Line Data and Key Metrics Changes - Product revenue for Q3 was $30.3 million, representing 52.4% of total revenue, while services revenue was $27.5 million, or 47.6% of total revenue [13] - Year-to-date, product revenue represented approximately 55.5% of total revenue, while services revenue accounted for about 44.5% [16] Market Data and Key Metrics Changes - Revenue from the Americas, including Latin America, was $25.8 million, down 28% year-over-year, primarily due to reduced spending from Tier 1 Service Providers [13][14] - Deferred revenue as of September 30, 2023, was $135.7 million, up 8% year-over-year [14] Company Strategy and Development Direction - The company emphasizes a diversified business model and structural profitability, which has allowed it to outperform the market and support a buyback program and cash dividends [6][9] - A10 launched a new security product, A10 Defend Detector, aimed at enhancing DDoS attack defenses, indicating a focus on innovation in security solutions [10][11] Management's Comments on Operating Environment and Future Outlook - Management noted that while market conditions have deteriorated, the company remains confident in its ability to navigate challenges and expects a rebound as the market normalizes [9][12] - The company anticipates Q4 2023 revenue to be between $70 million and $80 million, with expectations for year-over-year growth in full-year 2023 non-GAAP EPS [17] Other Important Information - The company returned $95.2 million to shareholders in the past 12 months through dividends and share repurchases [10] - A quarterly cash dividend of $0.06 per share has been approved, to be paid on December 1, 2023 [17] Q&A Session Summary Question: How long do you think the digestion phase will last? - Management indicated that the challenges faced in Q3 were not primarily due to supply chain issues but rather market conditions affecting purchasing decisions [21][24] Question: How much more room is there to control OpEx and grow EBITDA and EPS? - Management stated that while temporary cost changes are expected due to revenue impacts, they continue to seek efficiencies in G&A and expect OpEx to grow slower than revenue growth [27][29] Question: What is the outlook for Service Provider demand recovery? - Management noted that conversations with Service Provider customers indicate projects are being postponed rather than canceled, and they expect demand to resume as economic conditions normalize [32][34] Question: How is the company expanding its presence in the Enterprise segment? - Management highlighted that the Enterprise segment is growing 5% to 7% year-to-date, driven by the demand for hybrid solutions that integrate on-prem and cloud capabilities [35][36] Question: What factors could trigger the resumption of demand from telco Service Providers? - Management mentioned that network traffic growth and the need for capacity expansion are key drivers for resuming demand, alongside the ability to sell more categories to existing customers [49][51]