Announces Election of Eric Singer to the Board of Directors
Announces Formation of Strategy Committee and Review of
Strategic Alternatives
Announces Search Committee Directed at Supporting CEO
Succession
A10 Networks (NYSE: ATEN), a provider of intelligent and
automated cybersecurity solutions, today announced financial
results for its second quarter ended June 30, 2019.
Second Quarter 2019 Financial
Summary
- Revenue of $49.2 million, compared with $60.7 million in second
quarter 2018
- GAAP gross margin of 77.1 percent, non-GAAP gross margin of
78.0 percent
- GAAP operating margin of (13.1) percent, non-GAAP operating
margin of (1.9) percent
- GAAP net loss of $5.8 million, or $0.08 per basic and diluted
share, non-GAAP net loss of $0.3 million, or $0.00 per basic and
diluted share
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“Second quarter revenue came in below our guidance as a number
of large deals in our pipeline pushed into future quarters or were
downsized. These deals were primarily in North America and within
the service provider and web giant verticals where opportunities
can be large but the timing is difficult to predict,” said Lee
Chen, president and chief executive officer of A10 Networks.
“Outside of North America, all of our major geographies met or
exceeded our Q2 expectations, and we continued to make progress on
our strategic initiatives in security, 5G and multi-cloud.”
Third Quarter 2019 Business Outlook
(+)
For the third quarter of 2019, the company currently
expects:
- Revenue in the range of $50.0 million to $54.0 million
- Non-GAAP gross margin in the range of 76 percent to 78
percent
- Non-GAAP operating expenses in the range of $40.0 million to
$41.0 million
- Non-GAAP earnings per share to be between a loss of $0.04 and
income of $0.03 using approximately 76.5 million basic and 79.5
million diluted shares
- The company currently anticipates that it will achieve
sequential revenue growth in the fourth quarter of 2019 over the
level expected in the third quarter
(+) 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.
Company Update
Election of Eric Singer to the Board of Directors, effective
immediately
The Board of Directors welcomes Eric Singer, Founder and
Managing Member of VIEX Capital Advisors, to the Board. In addition
to a long track record as a successful investor in technology
companies, Singer has substantial experience serving on public
boards and in assisting them in creating and expanding shareholder
value. Singer is currently a director of Quantum Corporation and
previously served on the boards of directors of Numerex Corp.,
YuMe, Inc., Support.com, Meru Networks, PLX Technology, Inc., and
Sigma Designs, Inc., among other companies.
Singer joins the Board in connection with the company’s entry
into a letter agreement with VIEX Capital Advisors and its
affiliates, in which the company has agreed to fix the size of the
Board at six and renominate Singer and Tor R. Braham for election
at the 2019 annual meeting of stockholders. Pursuant to the
agreement, VIEX Capital Advisors has also been granted the right to
identify, and A10 Networks will appoint within 15 days thereafter,
an additional director to the Board, with Phillip J. Salsbury
agreeing to resign from the Board in such event.
Formation of Strategy Committee of the Board and review of
Strategic Alternatives
As part of the election of Singer, the company has formed a
Strategy Committee, which consists of Singer, existing director
Peter Chung and existing director Tor Braham. The Strategy
Committee is tasked and empowered with overseeing and executing
specific activities directed to increasing shareholder value. In
furtherance of these activities, the company has retained Bank of
America Merrill Lynch to advise the company and the Board on
strategic matters, including a near term exploration of a potential
sale or change of control transaction. No assurance can be given
that such a transaction will be consummated in the near term or at
all.
Formation of Search Committee of the Board directed at
supporting CEO succession
The Board of Directors has also formed a Search Committee, which
is tasked with developing near term plans for CEO succession. The
Search Committee has retained a leading executive search firm for
the purpose of recruiting and exploring potential candidates for
the chief executive officer position. This search is under-way and
the company is optimistic that this search can be completed with
the announcement of a new CEO during the third quarter of 2019.
A10 Networks also announced today the planned retirement of Lee
Chen, president and chief executive officer of A10 Networks, to
take place upon the appointment of a successor. Chen commented,
“A10's future remains bright and I continue to be very excited
about the innovations we have brought to market and our position in
security, 5G and multi-cloud. However, I have decided that now is
the appropriate time for me to transition the company to a new
leader. I will work closely with the Board and management team to
help ensure a smooth transition.”
“The A10 Board of Directors wishes to thank Lee for his
leadership, entrepreneurial dedication and years of service in
building A10’s business with vision and integrity”, said Phil
Salsbury, lead independent director of the A10 Board.
Prepared Materials and Conference Call Information
A10 Networks has made available a presentation with management’s
prepared remarks on its second 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 second quarter 2019 financial results and outlook for
its third 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 10133387. 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 pipeline; projections for our
future operating results, including our anticipation that we will
achieve sequential revenue growth in the fourth quarter of 2019;
the size of opportunities in North America and within the service
provider and web giant verticals; progress on our strategic
initiatives; our position in security, 5G and multi-cloud; our
plans to explore strategic alternatives, including a potential sale
or change of control transaction; and the timing of completing a
search for a CEO successor. 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 and related
payroll tax, (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 and related payroll tax. We define non-GAAP operating
income (loss) as our GAAP income (loss) from operations excluding
(i) stock-based compensation and related payroll tax, (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.
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,
2019
2018
2019
2018
Revenue:
Products
$
26,785
$
39,224
$
55,015
$
67,373
Services
22,404
21,489
44,464
42,523
Total revenue
49,189
60,713
99,479
109,896
Cost of revenue:
Products
6,891
9,080
14,407
16,189
Services
4,380
4,107
9,114
8,882
Total cost of revenue
11,271
13,187
23,521
25,071
Gross profit
37,918
47,526
75,958
84,825
Operating expenses:
Sales and marketing
23,626
25,788
48,109
52,692
Research and development
14,617
15,572
30,783
34,369
General and administrative
6,099
9,858
14,457
21,452
Total operating expenses
44,342
51,218
93,349
108,513
Loss from operations
(6,424
)
(3,692
)
(17,391
)
(23,688
)
Non-operating income (expense):
Interest expense
(37
)
(32
)
(192
)
(65
)
Interest and other income (expense),
net
776
(429
)
143
137
Total non-operating income (expense),
net
739
(461
)
(49
)
72
Loss before income taxes
(5,685
)
(4,153
)
(17,440
)
(23,616
)
Provision for income taxes
86
379
603
586
Net loss
$
(5,771
)
$
(4,532
)
$
(18,043
)
$
(24,202
)
Net loss per share:
Basic and diluted
$
(0.08
)
$
(0.06
)
$
(0.24
)
$
(0.33
)
Weighted-average shares used in computing
net loss per share:
Basic and diluted
75,712
72,707
75,263
72,471
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,
2019
2018
2019
2018
GAAP net loss
$
(5,771
)
$
(4,532
)
$
(18,043
)
$
(24,202
)
Stock-based compensation and related
payroll tax
5,049
2,571
8,945
10,722
Amortization expense related to
acquisition
253
253
506
505
Litigation and investigation expense
173
3,282
1,049
7,500
Non-GAAP net income (loss)
$
(296
)
$
1,574
$
(7,543
)
$
(5,475
)
Non-GAAP net income (loss) per share:
Basic and diluted
$
0.00
$
0.02
$
(0.10
)
$
(0.08
)
Weighted average shares used in computing
non-GAAP net income (loss) per share:
Basic
75,712
72,707
75,263
72,471
Diluted
75,712
74,634
75,263
72,471
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in
thousands)
June 30, 2019
December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents
$
36,818
$
40,621
Marketable securities
82,478
87,754
Accounts receivable, net of allowances
45,251
53,972
Inventory
22,522
17,930
Prepaid expenses and other current
assets
14,746
14,662
Total current assets
201,815
214,939
Property and equipment, net
7,408
7,262
Goodwill
1,307
1,307
Intangible assets
3,026
3,748
Other non-current assets
13,256
8,620
Total Assets
$
226,812
$
235,876
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable
$
7,749
$
8,202
Accrued liabilities
20,209
25,291
Deferred revenue
60,571
63,874
Total current liabilities
88,529
97,367
Deferred revenue, non-current
37,220
34,092
Other non-current liabilities
2,737
534
Total Liabilities
128,486
131,993
Stockholders’ Equity:
Common stock and additional
paid-in-capital
388,357
376,273
Accumulated other comprehensive income
(loss)
258
(144
)
Accumulated deficit
(290,289
)
(272,246
)
Total Stockholders' Equity
98,326
103,883
Total Liabilities and Stockholders'
Equity
$
226,812
$
235,876
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in
thousands)
Six Months Ended June
30,
2019
2018
Cash flows from operating activities:
Net loss
$
(18,043
)
$
(24,202
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
4,982
4,103
Stock-based compensation
8,824
10,722
Other non-cash items
(310
)
(234
)
Changes in operating assets and
liabilities:
Accounts receivable
8,802
(1,941
)
Inventory
(5,045
)
1,993
Prepaid expenses and other assets
63
(705
)
Accounts payable
(434
)
(3,035
)
Accrued and other liabilities
(9,372
)
3,163
Deferred revenue
(175
)
7,447
Other
123
119
Net cash used in operating activities
(10,585
)
(2,570
)
Cash flows from investing activities:
Proceeds from sales of marketable
securities
16,134
13,877
Proceeds from maturities of marketable
securities
19,250
30,655
Purchases of marketable securities
(29,557
)
(46,890
)
Purchase of investment
—
(1,000
)
Purchases of property and equipment
(2,303
)
(1,289
)
Net cash provided by (used in) investing
activities
3,524
(4,647
)
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
3,258
1,269
Other
—
(52
)
Net cash provided by financing
activities
3,258
1,217
Net decrease in cash and cash
equivalents
(3,803
)
(6,000
)
Cash and cash equivalents - beginning of
period
$
40,621
$
46,567
Cash and cash equivalents - end of
period
$
36,818
$
40,567
A10 NETWORKS, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO NON-GAAP GROSS PROFIT
(unaudited, in thousands,
except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
GAAP gross profit
$
37,918
$
47,526
$
75,958
$
84,825
GAAP gross margin
77.1
%
78.3
%
76.4
%
77.2
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
468
197
792
1,090
Non-GAAP gross profit
$
38,386
$
47,723
$
76,750
$
85,915
Non-GAAP gross margin
78.0
%
78.6
%
77.2
%
78.2
%
RECONCILIATION OF GAAP LOSS
FROM OPERATIONS TO NON-GAAP OPERATING INCOME (LOSS)
(unaudited, in thousands,
except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
GAAP loss from operations
$
(6,424
)
$
(3,692
)
$
(17,391
)
$
(23,688
)
GAAP operating margin
(13.1
)%
(6.1
)%
(17.5
)%
(21.6
)%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
5,049
2,571
8,945
10,722
Amortization expense related to
acquisition
253
253
506
505
Litigation and investigation expense
173
3,282
1,049
7,500
Non-GAAP operating income (loss)
$
(949
)
$
2,414
$
(6,891
)
$
(4,961
)
Non-GAAP operating margin
(1.9
)%
4.0
%
(6.9
)%
(4.5
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190730005966/en/
Maria Riley & Chris Mammone The Blueshirt Group 415-217-7722
investors@a10networks.com
A10 Networks (NYSE:ATEN)
Historical Stock Chart
From Apr 2024 to May 2024
A10 Networks (NYSE:ATEN)
Historical Stock Chart
From May 2023 to May 2024