Earnings call: A10 Networks reports steady Q3 2023 revenue, launches new security product

A10 Networks (NYSE:ATEN) has reported a Q3 2023 revenue of $57.8 million, in line with preliminary results, and a net income of $22.1 million for the first nine months of the year. Despite industry headwinds, the company has managed to achieve its stated EBITDA goals and continues to generate cash. Amid challenging macroeconomic circumstances, A10 Networks has launched a new security product, A10 Defend Detector, and remains optimistic about its global pipeline of opportunities.

Key takeaways from the call include:

A10 Networks achieved its EBITDA goals, despite industry headwinds, and generated $41.8 million in cash from operations.
The company launched A10 Defend Detector, a new security product that provides early warning capabilities for DDoS attacks.
The company’s global pipeline of opportunities remains strong, despite reduced visibility due to delayed purchasing decisions and elongated sales cycles.
A10 Networks reported a net income of $22.1 million or $0.29 per diluted share for the first nine months of the year, compared to $28.9 million or $0.37 per diluted share in the same period last year.
As of September 30, 2023, the company had $169 million in total cash, cash equivalents, and marketable securities, an increase of 12% compared to the end of 2022.
The company paid $4.5 million in cash dividends and repurchased 168,000 shares, with the Board approving a quarterly cash dividend of $0.06 per share to be paid on December 1, 2023, and a new $50 million share repurchase plan (NYSE: ATEN).
A10 Networks expects Q4 2023 revenue to be between $70 million and $80 million and anticipates revenue and EPS growth in 2024.
During the earnings call, Dhrupad Trivedi, President and CEO of A10 Networks, discussed the company’s growth in the Enterprise segment, which has been growing at a rate of 5% to 7%. This growth is attributed to the increasing preference of large Enterprise customers for on-prem and cloud operations. Trivedi also mentioned that the company aims to outperform its peer group by a couple of hundred basis points and expects the market to grow by 3% to 4% year-over-year.

Regarding the recovery of the Service Provider segment, Trivedi stated that it may resume in the first half of 2024 and that A10 Networks is derisking by working with regional providers worldwide. The company expects to achieve double-digit growth with its new products and security-led offerings.

The company also emphasized the importance of selling more categories to customers, even during a period of depressed spending. It highlighted its strong product gross margin, which is attributed to execution and demand planning, as well as cost-cutting measures and supply chain improvements. The company expects earnings growth to remain impacted throughout 2023, with full-year earnings projected to be above $0.73 of the previous year. They anticipate revenue of $70-80 million in Q4 and plan to maintain gross margins of 80-82%.

InvestingPro Insights
A10 Networks (ATEN) has been showing promising signs according to InvestingPro data and tips. With a market cap of $829.3M (NYSE:MMM) and a P/E ratio of 18.15 as of Q2 2023, the company is demonstrating a strong financial position. The company’s gross profit margin in the last twelve months as of Q2 2023 was an impressive 80.17%, aligning with the company’s own expectations of maintaining gross margins of 80-82%.

InvestingPro Tips highlight that ATEN management has been aggressively buying back shares, a sign of confidence in the company’s future. The company’s healthy balance sheet is further evidenced by the fact that it holds more cash than debt. Additionally, ATEN yields a high return on invested capital which is a strong indicator of efficient management.