Market Overview

A10 Networks Reports Preliminary Second Quarter and First Half 2018 Financial Results

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A10 Networks (NYSE:ATEN), a provider of intelligent and automated
cybersecurity solutions, today announced preliminary financial results
for the quarter and six months ended June 30, 2018.

Second Quarter 2018 Financial Summary

  • Revenue of $60.7 million grew 12% year-over-year
  • GAAP net loss of $4.5 million, or $0.06 per share
  • Non-GAAP net income of $1.6 million, or $0.02 per share

First Half 2018 Financial Summary

  • Revenue of $109.9 million, compared with $117.9 million in the first
    half of 2017
  • GAAP net loss of $24.2 million, or $0.33 per share
  • Non-GAAP net loss of $5.5 million, or $0.07 per share

A reconciliation between GAAP and non-GAAP information is contained in
the financial statements below.

"We have made steady progress across our key initiatives including
strengthening our team, increasing our pace of innovation, and targeting
our R&D investments in cloud, security and 5G. While our first quarter
was impacted by our sales transformation, we were pleased to see
improved momentum in the second quarter," said Lee Chen, president and
chief executive officer of A10 Networks. "There are a number of trends
in the market that play to A10's strengths that we believe present many
opportunities for growth over the long-term. We are focused as a
management team and believe we are on the right path to continue to
improve our execution and drive growth."

Prepared Materials and Conference Call Information

A10 Networks has made available a presentation with management's
prepared remarks on its preliminary second quarter and first half 2018
financial results. These materials are accessible from the "Investor
Relations" section of the A10 Networks website at investors.a10networks.com.

A10 Networks will host a conference call today at 4:30 p.m. Eastern time
/ 1:30 p.m. Pacific time for analysts and investors to discuss its
second quarter and first half 2018 results and outlook for its third
quarter of 2018. Open to the public, investors may access the call by
dialing +1-844-792-3728 or +1-412-317-5105. A live audio webcast of the
conference call will be accessible from the "Investor Relations" section
of the A10 Networks website at investors.a10networks.com.
The webcast will be archived for a period of one year. A telephonic
replay of the conference call will be available two hours after the
call, will run for five business days, and may be accessed by dialing
+1-877-344-7529 or +1-412-317-0088 and entering the passcode 10123380.
The press release and supplemental financials will be accessible from
the "Investor Relations" section of the A10 Networks website prior to
the commencement of the conference call.

Forward-Looking Statements

This press release contains "forward-looking statements," including
statements regarding our ability to improve our execution, take
advantage of trends in the market, and drive growth and shareholder
value. Forward-looking statements are subject to known and unknown risks
and uncertainties and are based on assumptions that may prove to be
incorrect, which could cause actual results to differ materially from
those expected or implied by the forward-looking statements. Factors
that may cause actual results to differ include execution risks related
to closing key deals and improving our execution, the continued market
adoption of our products, our ability to successfully anticipate market
needs and opportunities, our timely development of new products and
features, our ability to achieve or maintain profitability, any loss or
delay of expected purchases by our largest end-customers, our ability to
attract and retain new end-customers, our ability to maintain and
enhance our brand and reputation, continued growth in markets relating
to network security, the success of any future acquisitions or
investments in complementary companies, products, services or
technologies, the ability of our sales team to execute well, our ability
to shorten our close cycles, the ability of our channel partners to sell
our products, variations in product mix or geographic locations of our
sales and risks associated with our presence in international markets.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP), this press release
and the accompanying table contain certain non-GAAP financial measures,
including non-GAAP net income (loss). Non-GAAP financial measures do not
have any standardized meaning and are therefore unlikely to be
comparable to similarly titled measures presented by other companies.

A10 Networks considers these non-GAAP financial measures to be important
because they provide useful measures of the operating performance of the
company, exclusive of unusual events or factors that do not directly
affect what we consider to be our core operating performance, and are
used by the company's management for that purpose. We define non-GAAP
net income (loss) as our net loss excluding: (i) stock-based
compensation, (ii) amortization expense related to acquisition and (iii)
legal expenses associated with the litigation and internal investigation.

We have included our non-GAAP net income (loss) in this press release.
Non-GAAP financial measures are presented for supplemental informational
purposes only for understanding the company's operating results. The
non-GAAP financial measures should not be considered a substitute for
financial information presented in accordance with GAAP, and may be
different from non-GAAP financial measures presented by other companies.
Please see the reconciliation of non-GAAP financial measures to the most
directly comparable GAAP measure attached to this release.

About A10 Networks

A10 Networks (NYSE:ATEN) is a provider of intelligent and automated
cybersecurity solutions, providing a portfolio of high-performance
secure application solutions that enable intelligent automation with
machine learning to ensure business-critical applications are secure and
always available. Founded in 2004, A10 Networks is based in San Jose,
Calif., and serves customers in more than 80 countries with offices
worldwide. For more information, visit: www.a10networks.com
and @A10Networks.

The A10 logo, A10 Networks, A10 Thunder and A10 5G-GiLAN are trademarks
or registered trademarks of A10 Networks, Inc. in the United States and
other countries. All other trademarks are the property of their
respective owners.

     

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 

 

Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Revenue:
Products $ 39,224 $ 32,828 $ 67,373 $ 76,526
Services 21,489   21,145   42,523   41,381  
Total revenue 60,713   53,973   109,896   117,907  
Cost of revenue:
Products 9,080 8,265 16,189 18,767
Services 4,107   4,535   8,882   8,776  
Total cost of revenue 13,187   12,800   25,071   27,543  
Gross profit 47,526   41,173   84,825   90,364  
Operating expenses:
Sales and marketing 25,788 25,561 52,692 51,824
Research and development 15,572 16,490 34,369 33,532
General and administrative 9,858   6,852   21,452   14,499  
Total operating expenses 51,218   48,903   108,513   99,855  
Loss from operations (3,692 ) (7,730 ) (23,688 ) (9,491 )
Non-operating income (expense):
Interest expense (32 ) (64 ) (65 ) (108 )
Interest and other income (expense), net (429 ) (26 ) 137   816  
Total non-operating income (expense), net (461 ) (90 ) 72   708  
Loss before income taxes (4,153 ) (7,820 ) (23,616 ) (8,783 )
Provision for income taxes 379   135   586   509  
Net loss $ (4,532 ) $ (7,955 ) $ (24,202 ) $ (9,292 )
Net loss per share:
Basic and diluted $ (0.06 ) $ (0.11 ) $ (0.33 ) $ (0.13 )
Weighted-average shares used in computing net loss per share:
Basic and diluted 72,707   69,770   73,486   69,173  
     

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

(unaudited, in thousands, except per share amounts)

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
GAAP net loss $ (4,532 ) $ (7,955 ) $ (24,202 ) $ (9,292 )
Stock-based compensation 2,571 4,963 10,722 9,279
Amortization expense related to acquisition 253 253 505 505
Litigation and investigation expense 3,282     7,500    
Non-GAAP net income (loss) $ 1,574   $ (2,739 ) $ (5,475 ) $ 492  
Non-GAAP net income (loss) per share:
Basic and diluted $ 0.02   $ (0.04 ) $ (0.07 ) $ 0.01  
Weighted average shares used in computing non-GAAP net income (loss)
per share:
Basic 72,707   69,770   73,486   69,173  
Diluted 74,634   69,770   73,486   74,177  
       

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

 
June 30,
2018
December 31,
2017
ASSETS
Current Assets:
Cash and cash equivalents $ 40,567 $ 46,567
Marketable securities 86,820 84,567
Accounts receivable, net of allowances 50,370 48,266
Inventory 14,965 17,577
Prepaid expenses and other current assets 13,977   6,825  
Total current assets 206,699 203,802
Property and equipment, net 8,676 9,913
Goodwill 1,307 1,307
Intangible assets 4,469 5,190
Other non-current assets 7,555   4,646  
Total Assets $ 228,706   $ 224,858  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,234 $ 9,033
Accrued liabilities 25,154 21,835
Deferred revenue 64,907   61,858  
Total current liabilities 96,295 92,726
Deferred revenue, non-current 33,176 32,779
Other non-current liabilities 760   967  
Total Liabilities 130,231   126,472  
Stockholders' Equity:
Common stock and additional paid-in-capital 367,526 355,534
Accumulated other comprehensive loss (221 ) (123 )
Accumulated deficit (1) (268,830 ) (257,025 )
Total Stockholders' Equity 98,475   98,386  
Total Liabilities and Stockholders' Equity $ 228,706   $ 224,858  
(1)   The adoption of ASU 2014-09, Revenue from Contracts with Customers
(Topic 606) in the first quarter of 2018 resulted in a reduction to
the accumulated deficit balance of $12.4 million as of January 1,
2018.
   

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 
Six Months Ended
June 30,
2018   2017
Cash flows from operating activities:
Net loss $ (24,202 ) $ (9,292 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 4,103 4,332
Stock-based compensation 10,722 9,279
Other non-cash items 63 386
Changes in operating assets and liabilities:
Accounts receivable, net (2,243 ) 20,984
Inventory 1,993 (1,593 )
Prepaid expenses and other assets (1,700 ) (3,112 )
Accounts payable (3,035 ) (1,810 )
Accrued liabilities 3,163 (5,544 )
Deferred revenue 7,447 108
Other 117   33  
Net cash provided by (used in) operating activities (3,572 ) 13,771  
Cash flows from investing activities:
Proceeds from sales of marketable securities 13,863 14,228
Maturities of marketable securities 30,669 32,314
Purchases of marketable securities (46,890 ) (47,074 )
Purchases of property and equipment (1,289 ) (1,513 )
Net cash used in investing activities (3,647 ) (2,045 )
Cash flows from financing activities:
Proceeds from issuance of common stock under employee equity
incentive plans
1,269 7,207
Repurchases and retirement of common stock (816 )
Payment of contingent consideration (650 )
Other (50 ) (57 )
Net cash provided by financing activities 1,219   5,684  
Net increase (decrease) in cash and cash equivalents (6,000 ) 17,410
Cash and cash equivalents - beginning of period 46,567   28,975  
Cash and cash equivalents - end of period $ 40,567   $ 46,385  

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