A10 Networks Reports Fourth Quarter and Full Year 2024 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)--A10 Networks, Inc. (NYSE: ATEN or the "Company"), a leading provider of cybersecurity and infrastructure solutions, today announced financial results for its fourth quarter and full year ended December 31, 2024.

Fourth Quarter 2024 Financial Summary

• Revenue of $74.2 million, compared to $70.4 million in the fourth quarter of 2023, representing a 5% increase.
• Enterprise revenue grew 8% for the quarter year-over-year, and service provider revenue grew 4%.
• GAAP gross margin of 79.9%; non-GAAP gross margin of 80.7%.
• GAAP net income was $18.3 million (24.7% of revenue), or $0.24 per diluted share, compared to net income of $17.9 million (25.4% of revenue) or $0.24 per diluted share in the fourth quarter of 2023.
• Non-GAAP net income of $23.0 million (30.9% of revenue), or $0.31 per diluted share (non-GAAP EPS) compared to non-GAAP net income of $18.5 million (26.2% of revenue) or $0.25 per diluted share in the fourth quarter of 2023.
• Adjusted EBITDA was $27.3 million (36.8% of revenue) compared to $24.0 million (34.0% of revenue) in the fourth quarter of 2023.
• The Company completed the quarter with cash and investments of $195.6 million, up from $159.3 million as of December 31, 2023. A10 generated $25.7 million in cash from operations during the quarter.
• The Company returned $10.2 million to investors, having repurchased 360,000 shares at an average price of $15.99 per share for a total of $5.8 million and having paid $4.4 million in cash dividends in the quarter.
• The Board of Directors approved a quarterly cash dividend of $0.06 per share, payable March 3, 2025, to stockholders of record at the close of business on February 14, 2025.

Full-Year 2024 Financial Summary

• Revenue of $261.7 million, up $10.0 million (4.0%) compared to $251.7 million in 2023.
• GAAP net income of $50.1 million (representing 19.2% of revenue), or $0.67 per diluted share.
• Non-GAAP net income of $64.8 million (representing 24.8% of revenue) or $0.86 per diluted share compared to $54.9 million (representing 21.8% of revenue), or $0.73 per diluted share (non-GAAP EPS).
• Adjusted EBITDA margin of 28.5% vs. 28.3% in 2023.

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

"The demand from service provider customers improved throughout the second half of 2024, and we enter 2025 with growing optimism of an ongoing normalization of spending from these customers," commented Dhrupad Trivedi, A10 Network's President and Chief Executive Officer. "AI continues to serve as a significant catalyst for spending in general, and for A10 customer's priorities in particular, because of the efficiency of our high throughput, low latency solutions for all operating environments. Our solutions lower the total cost of ownership, utilizing less power and integrated security capabilities, creating a durable competitive advantage within energy-hungry AI data centers."

"Simultaneously, we delivered significant growth with enterprise customers, and we are investing heavily to further enhance our offerings for these customers," added Trivedi. "During the coming year, we anticipate launching solutions to further expand our security offerings. We view 2025 as a year that will benefit from several years of R&D investment, furthering our competitive position with both service provider and enterprise customers."

"As we drive the company transformation to a more agile engineering and delivery model, focused on security and efficiency, we have transformed our processes and systems," concluded Trivedi. "The continued focus on operational excellence and long-term business model provides a strong foundation for a durable business model delivering consistent returns for all our stakeholders."

Conference Call

Management will host a call today at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) to discuss the results.

Interested parties may access the conference call by dialing [phone] (toll-free) or [phone] and referencing access code: 475407.

A live audio webcast of the conference call will be accessible from the "Investor Relations" section of A10 Network's website at investors.a10networks.com. The webcast will be archived for at least 90 days. A telephonic replay of the conference call will be available two hours after the conclusion of the live call and will run for seven days and may be accessed by dialing [phone] (toll-free) or [phone] and entering the passcode 596790.

About A10 Networks

A10 Networks (NYSE: ATEN) provides security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments. Our 7000+ customers span global large enterprises and communications, cloud and web service providers who must ensure business-critical applications and networks are secure, available, and efficient. Founded in 2004, A10 Networks is based in San Jose, Calif. and serves customers globally. For more information, visit A10networks.com and follow us at 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.

Forward-Looking Statements

This press release contains "forward-looking statements," including statements regarding our quarterly dividend payments, strategy, including as to AI, growth, demand, positioning, products, profitability, revenue expectations for 2025, market trends and investments. 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 any unforeseen need for capital which may require us to divert funds we may have otherwise used for the dividend program, which may in turn negatively impact our ability to administer the quarterly dividends; a significant decline in global macroeconomic or political conditions that have an adverse impact on our business and financial results; business interruptions related to our supply chain; our ability to manage our business and expenses if customers cancel or delay orders; 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; our ability to timely file periodic reports required to be filed under the Securities Exchange Act of 1934; and other risks that are described in "Risk Factors" in our periodic filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Commission on February 29, 2024. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), we refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP net income per basic and diluted share (or non-GAAP EPS), non-GAAP gross profit and gross margin, non-GAAP operating income and operating margin, non-GAAP operating expenses, Adjusted EBITDA and Adjusted EBITDA margin. 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.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

We define non-GAAP net income as our GAAP net income excluding: (i) stock-based compensation and related payroll tax, (ii) impairment expense, (iii) tax planning expense, (iv) workforce reduction expense, (v) cyber incident remediation expense, (vi) one-time legal expense and (vii) income tax effect of non-GAAP items (i) to (vi) listed above. We define non-GAAP net income per basic and diluted share as our non-GAAP net income divided by our basic and diluted weighted-average shares outstanding. We define non-GAAP gross profit as our GAAP gross profit excluding (i) stock-based compensation and related payroll tax, (ii) workforce reduction expense and (iii) cyber incident remediation expense. We define non-GAAP gross margin as our non-GAAP gross profit divided by our GAAP revenue. We define non-GAAP operating expenses as our GAAP operating expenses excluding (i) stock-based compensation and related payroll tax, (ii) impairment expense, (iii) tax planning expense, (iv) workforce reduction expense, (v) cyber incident remediation expense and (vi) one-time legal expense. We define non-GAAP operating income as our GAAP income from operations excluding (i) stock-based compensation and related payroll tax, (ii) impairment expense, (iii) tax planning expense, (iv) workforce reduction expense, (v) cyber incident remediation expense and (vi) one-time legal expense. We define non-GAAP operating margin as our non-GAAP operating income divided by our GAAP revenue. We define Adjusted EBITDA as our GAAP net income excluding (i) interest and other income, net, (ii) depreciation and amortization expense, (iii) provision for income taxes, (iv) stock-based compensation and related payroll tax, (v) impairment expense, (vi) tax planning expense, (vii) workforce reduction expense, (viii) cyber incident remediation expense and (ix) one-time legal expense. We define Adjusted EBITDA margin as our Adjusted EBITDA divided by our GAAP revenue.

Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company's operating results.

Source: A10 Networks, Inc.

A10 NETWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share amounts, on a GAAP Basis)
	Three Months Ended December 31,							Years Ended December 31,
		2024			2023				2024			2023
Revenue:
Products	$	43,335		$	40,550			$	139,799		$	141,082
Services		30,869			29,867				121,897			110,618
Total revenue		74,204			70,417				261,696			251,700
Cost of revenue:
Products		10,075			9,134				31,218			31,468
Services		4,823			4,140				20,201			16,494
Total cost of revenue		14,898			13,274				51,419			47,962
Gross profit		59,306			57,143				210,277			203,738
Operating expenses:
Sales and marketing		21,622			21,450				83,300			85,976
Research and development		13,192			11,979				57,726			55,229
General and administrative		6,096			5,708				25,283			23,885
Total operating expenses		40,910			39,137				166,309			165,090
Income from operations		18,396			18,006				43,968			38,648
Non-operating income (expense):
Interest income		1,671			1,677				6,747			5,078
Interest and other income (expense), net		1,440			(584	)			7,384			69
Total non-operating income (expense), net		3,111			1,093				14,131			5,147
Income before income taxes		21,507			19,099				58,099			43,795
Provision for income taxes		3,206			1,182				7,959			3,825
Net income	$	18,301		$	17,917			$	50,140		$	39,970
Net income per share:
Basic	$	0.25		$	0.24			$	0.68		$	0.54
Diluted	$	0.24		$	0.24			$	0.67		$	0.53
Weighted-average shares used in computing net income per share:
Basic		73,691			74,288				74,088			74,210
Diluted		74,975			74,972				75,302			75,550

A10 NETWORKS, INC. RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME (unaudited, in thousands, except per share amounts)
	Three Months Ended December 31,								Years Ended December 31,
		2024				2023				2024				2023
GAAP net income	$	18,301			$	17,917			$	50,140			$	39,970
Non-GAAP items:
Stock-based compensation and related payroll tax		4,811				2,922				17,625				14,674
Impairment expense		-				-				-				2,975
Tax planning expense		-				500				500				500
Workforce reduction expense		1,075				-				1,075				4,298
Cyber incident remediation expense		-				-				-				732
One-time legal expense		-				-				71				-
Income tax-effect of non-GAAP items		(1,232	)			(2,872	)			(4,575	)			(8,230	)
Total non-GAAP items		4,654				550				14,696				14,949
Non-GAAP net income (1)	$	22,955			$	18,467			$	64,836			$	54,919
GAAP net income per share:
Basic	$	0.25			$	0.24			$	0.68			$	0.54
Diluted	$	0.24			$	0.24			$	0.67			$	0.53
Non-GAAP items:
Stock-based compensation and related payroll tax		0.07				0.04				0.23				0.19
Impairment expense		-				-				-				0.04
Tax planning expense		-				0.01				0.01				0.01
Workforce reduction expense		0.01				-				0.01				0.06
Cyber incident remediation expense		-				-				-				0.01
One-time legal expense		-				-				-				-
Income tax-effect of non-GAAP items		(0.01	)			(0.04	)			(0.06	)			(0.11	)
Total non-GAAP items		0.07				0.01				0.19				0.20
Non-GAAP net income per share: (1)
Basic	$	0.31			$	0.25			$	0.88			$	0.74
Diluted	$	0.31			$	0.25			$	0.86			$	0.73
Weighted average shares used in computing net income per share:
Basic		73,691				74,288				74,088				74,210
Diluted		74,975				74,972				75,302				75,550

(1)

Net income and earnings per share excluding adjustments are non-GAAP financial measures presented as supplemental financial measures to enable a user of the financial information to understand the impact of these adjustments on reported results. These financial measures should not be considered an alternative to net income, operating income, cash flows provided by operating activities, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. Our adjusted net income and earnings per share may not be comparable to similarly titled measures of another company because companies may not all calculate adjusted net income and earnings per share in the same manner.

A10 NETWORKS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except par value, on a GAAP Basis)
	As of December 31, 2024				As of December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	95,129			$	97,244
Marketable securities		100,429				62,056
Accounts receivable, net of allowances of $465 and $405, respectively		76,687				74,307
Inventory		22,005				23,522
Prepaid expenses and other current assets		13,038				14,695
Total current assets		307,288				271,824
Property and equipment, net		39,142				29,876
Goodwill		1,307				1,307
Deferred tax assets, net		62,364				62,725
Other non-current assets		22,714				24,077
Total assets	$	432,815			$	389,809
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	12,542			$	7,024
Accrued and other liabilities		32,696				21,388
Deferred revenue, current		78,335				82,657
Total current liabilities		123,573				111,069
Deferred revenue, non-current		69,924				58,677
Other non-current liabilities		7,489				12,187
Total liabilities		200,986				181,933
Stockholders' equity:
Common stock, $0.00001 par value: 500,000 shares authorized; 90,520 and 89,003 shares issued and 73,693 and 74,359 shares outstanding, respectively		1				1
Treasury stock, at cost: 16,827 and 14,644 shares, respectively		(180,992	)			(150,909	)
Additional paid-in-capital		508,387				486,958
Dividends paid		(55,417	)			(37,619	)
Accumulated other comprehensive income (loss)		194				(71	)
Accumulated deficit		(40,344	)			(90,484	)
Total stockholders' equity		231,829				207,876
Total liabilities and stockholders' equity	$	432,815			$	389,809

A10 NETWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands, on a GAAP Basis)
	Years Ended December 31,
		2024				2023
Cash flows from operating activities:
Net income	$	50,140			$	39,970
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,293				9,346
Stock-based compensation		17,048				14,081
Provision for (recovery from) doubtful accounts and sales returns		59				(699	)
Other non-cash items		(424	)			117
Changes in operating assets and liabilities:
Accounts receivable		(2,555	)			(679	)
Inventory		(760	)			(6,302	)
Prepaid expenses and other assets		(67	)			(1,862	)
Accounts payable		2,224				(2,999	)
Accrued and other liabilities		6,609				(20,801	)
Deferred revenue		6,925				14,342
Net cash provided by operating activities		90,492				44,514
Cash flows from investing activities:
Proceeds from sales of marketable securities		25,531				45,420
Proceeds from maturities of marketable securities		81,146				64,504
Purchases of marketable securities		(142,759	)			(85,420	)
Capital expenditures		(12,268	)			(10,896	)
Net cash provided by (used in) investing activities		(48,350	)			13,608
Cash flows from financing activities:
Proceeds from issuance of common stock under employee equity incentive plans		3,624				4,943
Repurchases of common stock		(30,084	)			(15,975	)
Payments for dividends		(17,797	)			(17,817	)
Net cash used in financing activities		(44,257	)			(28,849	)
Net increase (decrease) in cash and cash equivalents		(2,115	)			29,273
Cash and cash equivalents-beginning of period		97,244				67,971
Cash and cash equivalents-end of period	$	95,129			$	97,244
Non-cash investing and financing activities:
Transfers between inventory and property and equipment	$	2,277			$	2,473
Capital expenditures included in accounts payable	$	3,294			$	3,298

A10 NETWORKS, INC. RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT (unaudited, in thousands, except percentages)
	Three Months Ended December 31,								Years Ended December 31,
		2024				2023				2024				2023
GAAP gross profit	$	59,306			$	57,143			$	210,277			$	203,738
GAAP gross margin		79.9	%			81.1	%			80.4	%			80.9	%
Non-GAAP adjustments:
Stock-based compensation and related payroll tax		523				441				2,091				1,814
Workforce reduction expense		20				-				20				42
Cyber incident remediation expense		-				-				-				3
Non-GAAP gross profit	$	59,849			$	57,584			$	212,388			$	205,597
Non-GAAP gross margin		80.7	%			81.8	%			81.2	%			81.7	%

A10 NETWORKS, INC. RECONCILIATION OF GAAP TOTAL OPERATING EXPENSES TO NON-GAAP TOTAL OPERATING EXPENSES (unaudited, in thousands)
	Three Months Ended December 31,								Years Ended December 31,
		2024				2023				2024				2023
GAAP total operating expenses	$	40,910			$	39,137			$	166,309			$	165,090
Non-GAAP adjustments:
Stock-based compensation and related payroll tax		(4,288	)			(2,481	)			(15,534	)			(12,860	)
Impairment expense		-				-				-				(2,975	)
Tax planning expense		-				(500	)			(500	)			(500	)
Workforce reduction expense		(1,055	)			-				(1,055	)			(4,256	)
Cyber incident remediation expense		-				-				-				(729	)
One-time legal expense		-				-				(71	)			-
Non-GAAP total operating expenses	$	35,567			$	36,156			$	149,149			$	143,770

A10 NETWORKS, INC. RECONCILIATION OF GAAP INCOME FROM OPERATIONS TO NON-GAAP OPERATING INCOME (unaudited, in thousands, except percentages)
	Three Months Ended December 31,								Years Ended December 31,
		2024				2023				2024				2023
GAAP income from operations	$	18,396			$	18,006			$	43,968			$	38,648
GAAP operating margin		24.8	%			25.6	%			16.8	%			15.4	%
Non-GAAP adjustments:
Stock-based compensation and related payroll tax		4,811				2,922				17,625				14,674
Impairment expense		-				-				-				2,975
Tax planning expense		-				500				500				500
Workforce reduction expense		1,075				-				1,075				4,298
Cyber incident remediation expense		-				-				-				732
One-time legal expense		-				-				71				-
Non-GAAP operating income	$	24,282			$	21,428			$	63,239			$	61,827
Non-GAAP operating margin		32.7	%			30.4	%			24.2	%			24.6	%

A10 NETWORKS, INC. RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA (NON-GAAP) (unaudited, in thousands)
	Three Months Ended December 31,								Years Ended December 31,
		2024				2023				2024				2023
GAAP net income	$	18,301			$	17,917			$	50,140			$	39,970
GAAP net income margin		24.7	%			25.4	%			19.2	%			15.9	%
Exclude: Interest and other income, net		(3,111	)			(1,093	)			(14,131	)			(5,147	)
Exclude: Depreciation and amortization		3,045				2,501				11,293				9,346
Exclude: Provision for income taxes		3,206				1,182				7,959				3,825
EBITDA		21,441				20,507				55,261				47,994
Exclude: Stock-based compensation and related payroll tax		4,811				2,922				17,625				14,674
Exclude: Impairment expense		-				-				-				2,975
Exclude: Tax planning expense		-				500				500				500
Exclude: Workforce reduction expense		1,075				-				1,075				4,298
Exclude: Cyber incident remediation expense		-				-				-				732
Exclude: One-time legal expense		-				-				71				-
Adjusted EBITDA	$	27,327			$	23,929			$	74,532			$	71,173
Adjusted EBITDA margin		36.8	%			34.0	%			28.5	%			28.3	%

Contacts

Investor Contact:
Rob Fink / Tom Baumann
FNK IR
646.809.4048 / 646.349.6641
[e-mail]

Brian Becker
Chief Financial Officer
[e-mail]

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