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A10 Networks, Inc. Reports Fourth Quarter and Year 2016 Financial Results

February 9, 2017

SAN JOSE, Calif.--(BUSINESS WIRE)-- A10 Networks, Inc. (NYSE: ATEN), a leading secure application services company, today announced financial results for its fourth quarter and year ended December 31, 2016.

Fourth Quarter 2016 Financial Summary

  • Record revenue of $64.0 million, grew 13 percent year-over-year
  • GAAP net loss of $1.8 million or $0.03 per share
  • Non-GAAP net income of $2.3 million or $0.03 per share

Year 2016 Financial Summary

  • Record revenue of $230.0 million, grew 16 percent over 2015
  • GAAP net loss of $20.9 million or $0.32 per share
  • Non-GAAP net loss of $2.7 million or $0.04 per share
  • Deferred revenue grew 28 percent year-over-year to reach $92.9 million
  • Ended the year with $114 million in cash, cash equivalents and marketable securities, an increase of $16 million from last year

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

“The fourth quarter was a strong close to the year with revenue exceeding guidance and growing 13 percent year-over-year to reach $64 million. Our record performance was driven by strong demand for our security solutions and continued expansion with cloud provider, service provider and web-scale customers,” said Lee Chen, president and chief executive officer of A10 Networks. “We also continued to drive leverage through our operating structure to make significant improvements in our bottom-line results, while at the same time, investing in key areas of our business.”

Management Transition

A10 Networks announced that Greg Straughn has decided to step down from the role of CFO effective as of the filing of the company’s 10-K. Straughn will remain with the company as an advisor until April to help facilitate a smooth transition. The board of directors has appointed Shiva Natarajan as the company’s interim CFO effective upon Straughn’s resignation. The company has initiated a search for a successor to Straughn.

“I would like to thank Greg for his service and many contributions to A10 over the past six years and wish him the best in his new pursuits. Greg was instrumental in taking the company public, has served as a trusted spokesperson to the investment community, and implemented many of the programs needed to foster and support our growth,” said Chen. “Greg also built a great finance team with a deep bench of talent. With over 20 years of accounting and leadership experience, we are confident Shiva will do a great job leading the organization through this transition.”

Natarajan joined A10 Networks in September 2015 as the company’s vice president and controller and is responsible for global accounting operations. Prior to A10 Networks, Natarajan served as vice president and chief accounting officer at Fluidigm Corporation. Prior to that, he held several roles at Applied Micro Circuits Corporation including vice president, chief accounting officer and interim chief financial officer. Natarajan also served as corporate controller of Open-Silicon, and director of accounting at Silicon Image. Previously, Natarajan was with Ernst & Young LLP, where he was a Senior Manager of Assurance and Advisory Business Services. Natarajan is a Certified Public Accountant and holds a Bachelor of Science from the University of Calcutta.

Prepared Materials and Conference Call Information

A10 Networks has made available a presentation with management’s prepared remarks on its fourth quarter and year 2016 financial results. These materials are accessible from the “Investors” 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 fourth quarter and year 2016 results and outlook for its first quarter of 2017. 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 “Investors” 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 one hour 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 10098758. The press release and supplemental financials will be accessible from 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 meet our financial goals for the year, including expanding our addressable market. 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 the continued market adoption of our products, our ability to successfully anticipate market needs and opportunities, our timely development of new products and features, any loss or delay of expected purchases by our largest end-customers, our ability to attract and retain new end-customers, continued growth in markets relating to network security, our ability to hire, retain and motivate qualified personnel, the success of any future acquisitions or investments in complementary companies, products, services or technologies and the ability to successfully integrate acquisitions such as Appcito, 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, our ability to achieve or maintain profitability while continuing to invest in our sales, marketing and research and development teams, variations in product mix or geographic locations of our sales, fluctuations in currency exchange rates, risks associated with our significant presence in international markets, the cost and potential outcomes of existing and future litigation, increased cost requirements of being a public company and future sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur.

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 tables 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 income (loss) excluding: (i) stock-based compensation ii) amortization expense related to acquisition and (iii) amounts paid in settlement of litigation, and other legal expenses associated with these settlements.

We have included 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 secure application services company, providing 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.

Source: A10 Networks, Inc.

       

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 

Three Months Ended
December 31,

Years Ended
December 31,
2016   2015 2016   2015
Revenue:
Products $ 43,474 $ 39,464 $ 153,920 $ 138,301
Services 20,527   17,160   76,083   60,654  
Total revenue 64,001   56,624   230,003   198,955  
Cost of revenue:
Products 10,383 9,595 37,680 33,096
Services 4,143   4,071   17,230   15,672  
Total cost of revenue 14,526   13,666   54,910   48,768  
Gross profit 49,475   42,958   175,093   150,187  
Operating expenses:
Sales and marketing 26,488 29,273 104,360 104,531
Research and development 15,469 13,301 60,700 54,843
General and administrative 6,867 6,933 27,063 27,055
Litigation and settlement expense 30   265   2,089   2,204  
Total operating expenses 48,854   49,772   194,212   188,633  
Income (loss) from operations 621   (6,814 ) (19,119 ) (38,446 )
Other income (expense), net:
Interest expense (27 ) (127 ) (424 ) (509 )
Interest and other income (expense), net (2,184 ) (165 ) (640 ) (332 )
Total other income (expense), net (2,211 ) (292 ) (1,064 ) (841 )
Loss before income taxes (1,590 ) (7,106 ) (20,183 ) (39,287 )
Provision for income taxes 196   250   757   747  
Net loss $ (1,786 ) $ (7,356 ) $ (20,940 ) $ (40,034 )
Net loss per share:
Basic and diluted $ (0.03 ) $ (0.12 ) $ (0.32 ) $ (0.64 )
Weighted-average shares used in computing net loss per share:
Basic and diluted 67,505   63,678   65,701   62,428  
 
       
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(unaudited, in thousands, except per share amounts)
 

Three Months Ended
December 31,

Years Ended
December 31,
2016   2015 2016   2015
GAAP net loss $ (1,786 ) $ (7,356 ) $ (20,940 )   $ (40,034 )
Stock-based compensation 3,853 3,615 16,922 16,861
Amortization expense related to acquisition 252 — 505 —
Litigation and settlement expense —   —   836   686  
Non-GAAP net income (loss) $ 2,319   $ (3,741 ) $ (2,677 ) $ (22,487 )
Non-GAAP net income (loss) per share:
Basic and diluted $ 0.03   $ (0.06 ) $ (0.04 ) $ (0.36 )

Weighted average shares used in computing non-GAAP net income (loss) per share:

Basic 67,505   63,678   65,701   62,428  
Diluted 73,146   63,678   65,701   62,428  
 
       
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 

December 31,
2016

December 31,
2015
ASSETS
Current Assets:
Cash and cash equivalents $ 28,975 $ 98,117
Marketable securities 85,372 —
Accounts receivable, net of allowances 66,755 57,778
Inventory 15,070 18,291
Prepaid expenses and other current assets 5,137   5,064  
Total current assets 201,309 179,250
Property and equipment, net 8,219 8,903
Goodwill and intangible assets 7,940 —
Other non-current assets 3,870   4,398  
Total Assets $ 221,338   $ 192,551  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 9,851 $ 10,508
Accrued liabilities 31,525 27,757
Deferred revenue, current 61,334   49,572  
Total current liabilities 102,710 87,837
Deferred revenue, non-current 31,574 23,232
Other non-current liabilities 988   1,414  
Total Liabilities 135,272   112,483  
Stockholders’ Equity:
Common stock and additional paid-in capital 328,870 301,887
Accumulated other comprehensive loss (45 ) —
Accumulated deficit (242,759 ) (221,819 )
Total Stockholders' Equity 86,066   80,068  
Total Liabilities and Stockholders' Equity $ 221,338   $ 192,551  
 
   
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Years Ended December 31,
2016     2015
Cash flows from operating activities:
Net loss $ (20,940 ) $ (40,034 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 8,267 8,716
Stock-based compensation 16,922 16,861
Provision for doubtful accounts and sales returns 1,731 2,531
Other non-cash items 875 (82 )
Changes in operating assets and liabilities:
Accounts receivable, net (11,319 ) (5,977 )
Inventory 892 (430 )
Prepaid expenses and other assets (96 ) (405 )
Accounts payable (334 ) 1,109
Accrued liabilities 3,140 5,344
Deferred revenue 20,104 15,583
Other (464 ) 175  
Net cash provided by operating activities 18,778   3,391  
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities 40,628 —
Purchases of marketable securities (126,231 ) —
Purchases of property and equipment (4,872 ) (3,477 )
Purchase of intangible asset (1,500 )
Payment for acquisition (4,380 ) —  
Net cash used in investing activities (96,355 ) (3,477 )
Cash flows from financing activities:
Proceeds from issuance of common stock under employee equity incentive plans, net of repurchases 10,334 6,019
Repurchase of common stock (1,799 ) —
Other (100 ) 279  
Net cash provided by financing activities 8,435   6,298  
Net increase (decrease) in cash and cash equivalents (69,142 ) 6,212
Cash and cash equivalents - beginning of period 98,117   91,905  
Cash and cash equivalents - end of period $ 28,975   $ 98,117  

Investor Contact:
The Blueshirt Group
Maria Riley, 415-217-7722
investors@a10networks.com
or
Media Contact:
A10 Networks
Ben Stricker, +1-916-842-9813
bstricker@a10networks.com

Source: A10 Networks, Inc.