Market Overview

A10 Networks Reports First Quarter 2019 Financial Results

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A10 Networks (NYSE:ATEN), a leading provider of intelligent and
automated cybersecurity solutions, today announced financial results for
its first quarter ended March 31, 2019.

First Quarter 2019 Financial Summary

  • Revenue increased to $50.3 million, compared with $49.2 million in
    first quarter 2018
  • GAAP gross margin of 75.6 percent, non-GAAP gross margin of 76.3
    percent
  • GAAP operating margin of (21.8) percent, non-GAAP operating margin of
    (11.4) percent
  • GAAP net loss of $12.3 million, or $0.16 per basic and diluted share,
    non-GAAP net loss of $7.2 million, or $0.09 per diluted share

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

"During the quarter, we continued to make progress on our priorities for
2019, which include driving growth and innovation in security, 5G and
multi-cloud. Security product revenue grew 22 percent year-over-year to
34 percent of product revenue and we secured another 5G design win with
a top mobile provider in Korea and forged ahead in our efforts to drive
further product innovation that supports the commercial roll-out of 5G
networks," said Lee Chen, president and chief executive officer of A10
Networks. "We have a strong product portfolio, our win rate remains high
and our team is energized by our opportunities in the market."

Second Quarter 2019 Business Outlook (+)

For the second quarter of 2019, the company currently expects:

  • Revenue in the range of $51.0 million to $56.0 million
  • Non-GAAP gross margin in the range of 76.0 percent to 78.0 percent
  • Non-GAAP operating expenses in the range of $43.0 million to $44.0
    million
  • Non-GAAP earnings per share to be between a loss of $0.08 and
    breakeven using approximately 76.0 million fully diluted shares

(+) Please refer to the note below on forward-looking statements and the
risks involved with such statements as well as the note on non-GAAP
financial measures.

Prepared Materials and Conference Call Information

A10 Networks has made available a presentation with management's
prepared remarks on its first quarter 2019 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 first
quarter 2019 financial results and outlook for its second quarter 2019.
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 10130391.
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 projections for our future operating results,
the pace of growth in the market for our solutions, our pace of
innovation, the drivers of growth and innovation for our solutions, our
belief that we are on the right path, and our ability to maximize our
opportunities. 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 maintain or improve our
competitive position, competitive and execution risks related to
cloud-based computing trends, our ability to attract and retain new
end-customers and our largest end-consumers, our ability to maintain and
enhance our brand and reputation, changes demanded by our customers in
the deployment and payment model for our products, 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, risks associated with our presence in
international markets, weaknesses or deficiencies in our internal
control over financial reporting, and our ability to timely file
periodic reports required to be filed under the Securities Exchange
Act of 1934
.

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 gross profit and non-GAAP
operating 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 GAAP net income (loss) excluding: (i)
stock-based compensation, (ii) amortization expense related to
acquisition and (iii) non-recurring expenses associated with the
litigation settlement expense and internal investigation. We define
non-GAAP gross profit as our GAAP gross profit excluding stock-based
compensation. We define non-GAAP operating income (loss) as our GAAP
income (loss) from operations excluding (i) stock-based compensation,
(ii) amortization expense related to acquisition and (iii) non-recurring
expenses associated with the litigation settlement expense and internal
investigation.

We have included our non-GAAP net income (loss), non-GAAP gross profit
and non-GAAP operating 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. A reconciliation of
non-GAAP guidance measures to corresponding GAAP measures on a
forward-looking basis is not available due to high variability and low
visibility with respect to the charges which are excluded from these
non-GAAP measures.

About A10 Networks

A10 Networks (NYSE:ATEN) provides Reliable Security Always™, with a
range of high-performance application networking solutions that help
organizations ensure that their data center applications and networks
remain highly available, accelerated and secure. Founded in 2004, A10
Networks is based in San Jose, Calif., and serves customers globally
with offices worldwide. For more information, visit: www.a10networks.com
and @A10Networks.

The A10 logo and A10 Networks 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.

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A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 

Three Months Ended
March 31,

2019   2018
Revenue:
Products $ 28,230 $ 28,149
Services 22,060   21,034  
Total revenue 50,290   49,183  
Cost of revenue:
Products 7,516 7,109
Services 4,734   4,775  
Total cost of revenue 12,250   11,884  
Gross profit 38,040   37,299  
Operating expenses:
Sales and marketing 24,483 26,904
Research and development 16,166 18,797
General and administrative 8,358   11,594  
Total operating expenses 49,007   57,295  
Loss from operations (10,967 ) (19,996 )
Non-operating income (expense):
Interest expense (155 ) (33 )
Interest and other income (expense), net (633 ) 566  
Total non-operating income (expense), net (788 ) 533  
Loss before income taxes (11,755 ) (19,463 )
Provision for income taxes 517   207  
Net loss $ (12,272 ) $ (19,670 )
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