A10 Networks Inc

Previous wording

We sell our products globally to service providers and enterprises that depend on data center applications and networks to generate revenue and manage operations efficiently. We report two customer verticals: service providers and enterprises, and we report customer revenues in three broad geographic regions: the Americas, APJ and EMEA regions. The Americas region comprises the United States and all other countries in the Americas (excluding the United States). The APJ region comprises Japan and all other countries in APAC (excluding Japan). The EMEA region comprises Europe, Middle East and Africa. We believe this geographic revenue view is consistent with how we evaluate our financial performance.

Current wording

We sell our products globally to service providers and enterprises that depend on data center applications and networks to generate revenue and manage operations efficiently. We report two customer verticals: service providers and enterprises, and we report customer revenues in three broad geographic regions: the Americas, APJ and EMEA regions. The Americas region comprises the United States and other countries in the Americas (excluding the United States). The APJ region comprises Japan and other countries in Asia Pacific. The EMEA region comprises Europe, Middle East and Africa. We believe this geographic revenue view is consistent with how we evaluate our financial performance.

Previous wording

During the three months ended March 31, 2024, (i) 45% of our total revenue was generated from the Americas region, of which 38% was generated from the United States, (ii) 41% from the APJ region, of which 31% was generated from Japan, and (iii) 14% from the EMEA region. During the three months ended March 31, 2023, (i) 52% of our total revenue was generated from the Americas region, of which 42% was generated from the United States, (ii) 27% from the APJ region, of which 18% was generated from Japan, and (iii) 21% from the EMEA region. One of our priorities is to strengthen our sales efforts in North America. Our enterprise customers accounted for 38% and 44% of our total revenue during the three months ended March 31, 2024 and 2023, respectively, and our service provider customers accounted for 62% and 56% of our total revenue during the three months ended March 31, 2024 and 2023, respectively.

Current wording

During the three months ended June 30, 2024, (i) 51% of our total revenue was generated from the Americas region, of which 44% was generated from the United States and 7% was generated from the Americas-other, (ii) 32% from the APJ region and (iii) 17% from the EMEA region. During the three months ended June 30, 2023, (i) 56% of our total revenue was generated from the Americas region, of which 48% was generated from the United States and 8% was generated from the Americas-other, (ii) 33% from the APJ region and (iii) 11% from the EMEA region. One of our priorities is to strengthen our sales efforts in North America. Our enterprise customers accounted for 44% and 33% of our total revenue during the three months ended June 30, 2024 and 2023, respectively, and our service provider customers accounted for 56% and 67% of our total revenue during the three months ended June 30, 2024 and 2023, respectively.

Previous wording

As of March 31, 2024, we had $122.9 million of cash and cash equivalents and $59.2 million of marketable securities. Cash provided by operating activities was $32.4 million during the three months ended March 31, 2024, compared to cash used in operating activities of $0.8 million in the same period of 2023.

Current wording

As of June 30, 2024, we had $77.5 million of cash and cash equivalents and $99.7 million of marketable securities. Cash provided by operating activities was $44.7 million during the six months ended June 30, 2024, compared to $18.7 million in the same period of 2023.

Previous wording

A summary of our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 is as follows (dollars in thousands):

Current wording

A summary of our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 is as follows (dollars in thousands):

Previous wording

Total net revenue increased $3.0 million, or 5%, during the three months ended March 31, 2024, compared to the same period of 2023. Changes in revenue were due primarily to (i) a $9.3 million increase in the APJ region, comprised of an increase in the Japan region of $8.8 million and an increase in APAC of $0.5 million, (ii) a $3.8 million decrease in the EMEA region, and (iii) a $2.5 million decrease in the Americas region, comprised of a decrease in Americas-other of $1.5 million and a decrease in the United States of $1.0 million. The overall increase in revenue was attributable to a $5.1 million increase in revenue from service provider customers, partially offset by a $2.1 million decrease in revenue from enterprise customers during the three months ended March 31, 2024 compared to the same period of 2023. Products revenue decreased $1.1 million, of which the EMEA region decreased $4.6 million and the Americas region decreased $3.9 million, partially offset by an increase of $7.5 million in the APJ region for the three months ended March 31, 2024, compared to the same period of 2023. Services revenue increased $4.1 million, comprised of increase of $1.8 million, $1.4 million and $0.8 million in the APJ, Americas and EMEA regions, respectively, for the three months ended March 31, 2024, compared to the same period of 2023.

Current wording

Total net revenue decreased $5.7 million, or 9%, during the three months ended June 30, 2024, compared to the same period of 2023. Changes in revenue were due primarily to (i) a $6.1 million decrease in the Americas region, comprised of a decrease in the United States of $5.1 million and a decrease in Americas-other of $0.9 million, (ii) a $2.7 million decrease in the APJ region, and (iii) a $3.0 million increase in the EMEA region. The overall decrease in revenue was attributable to a $11.0 million decrease in revenue from service provider customers, partially offset by a $5.3 million increase in revenue from enterprise customers during the three months ended June 30, 2024 compared to the same period of 2023. Products revenue decreased $9.6 million, of which the Americas region decreased $7.0 million and the APJ region decreased $4.4 million, partially offset by an increase of $1.9 million in the EMEA region for the three months ended June 30, 2024, compared to the same period of 2023. Services revenue increased $3.8 million, comprised of increases of $1.7 million, $1.1 million and $1.0 million in the APJ, EMEA and Americas regions, respectively, for the three months ended June 30, 2024, compared to the same period of 2023.

Previous wording

Products revenue decreased $1.1 million, or 4%, during the three months ended March 31, 2024 compared to the same period of 2023, as a result of a decrease in demand from our enterprise customers in the EMEA and Americas regions.

Current wording

Products revenue decreased $9.6 million, or 24%, during the three months ended June 30, 2024 compared to the same period of 2023, as a result of a decrease in demand from our service provider customers in the Americas and APJ regions.

Previous wording

Services revenue increased $4.1 million, or 15%, during the three months ended March 31, 2024, compared to the same periods of 2023, primarily attributable to an increase in PCS sales as a result of our growing installed customer base, especially in the APJ and Americas regions.

Current wording

Services revenue increased $7.9 million, or 15%, during the six months ended June 30, 2024, compared to the same periods of 2023, primarily attributable to an increase in PCS sales as a result of our growing installed customer base, especially in the APJ and Americas regions.

Previous wording

During the three months ended March 31, 2024, $27.4 million, or 45% of total revenue, was generated from the Americas region, which represents an 8% decrease in revenue compared to the same period of 2023. The decrease was primarily due to lower products revenue due to a decrease in demand from our enterprise customers.

Current wording

During the six months ended June 30, 2024, $58.3 million, or 48% of total revenue, was generated from the Americas region, which represents an 13% decrease in revenue compared to the same period of 2023. The decrease was primarily due to lower products revenue due to a decrease in demand from our service provider customers.

Previous wording

During the three months ended March 31, 2024, $25.0 million, or 41% of total revenue, was generated from the APJ region, which represents a 59% increase compared to the same period of 2023. The increase was primarily due to higher services revenue due to an increase in demand from our service provider customers.

Current wording

During the six months ended June 30, 2024, $44.3 million, or 37% of total revenue, was generated from the APJ region, which represents a 17% increase compared to the same period of 2023. The increase was primarily due to higher products and services revenue due to an increase in demand from our service provider customers.

Previous wording

During the three months ended March 31, 2024, $8.2 million, or 14% of total revenue, was generated from the EMEA region, which represents a 32% decrease compared to the same period of 2023. The decrease was primarily due to lower products revenue due to a decrease in demand from our enterprise customers.

Current wording

During the three months ended June 30, 2024, $18.1 million, or 15% of total revenue, was generated from the EMEA region, which represents a 4% decrease compared to the same period of 2023. The decrease was primarily due to lower products revenue due to a decrease in demand from our enterprise customers.

Previous wording

Products cost of revenue increased 11.8% during the three months ended March 31, 2024 compared to the same periods of 2023, primarily due to an increase in products revenue.

Current wording

Products cost of revenue decreased 27.8% and 12.3% during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily due to a decrease in products revenue.

Previous wording

Services cost of revenue increased 12.4% during the three months ended March 31, 2024 compared to the same periods of 2023, primarily driven by the mix of services delivered, which include technical support, training and service costs.

Current wording

Services cost of revenue increased 29.7% and 21.0% during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily driven by the mix of services delivered, which include technical support, training and service costs.

Previous wording

Products gross margin decreased 3.1% during the three months ended March 31, 2024 compared to the same period of 2023, primarily due to product and regional mix.

Current wording

Products gross margin increased 1.0% and decreased 0.7% during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily due to product and regional mix.

Previous wording

Services gross margin increased 0.4% during the three months ended March 31, 2024 compared to the same period of 2023, primarily driven by the mix of services delivered, which include technical support, training and service costs.

Current wording

Services gross margin decreased 2.0% and 0.8% during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily driven by the mix of services delivered, which include technical support, training and service costs.

Previous wording

Sales and marketing operating expenses decreased $1.1 million, or 5.0%, in the three months ended March 31, 2024, compared to the same period in 2023, primarily due to a decrease in personnel costs.

Current wording

Sales and marketing operating expenses decreased $1.4 million, or 6.8%, in the three months ended June 30, 2024, compared to the same period in 2023, and decreased $2.5 million, or 5.9%, in the six months ended June 30, 2024, compared to the same period in 2023, primarily due to a decrease in personnel costs.

Previous wording

In 2024, we expect sales and marketing expenses to increase from 2023 levels in line with overall revenue growth as we apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Current wording

For the full year 2024, we expect sales and marketing expenses to increase from 2023 levels in line with overall revenue growth as we apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Previous wording

Research and development operating expenses increased $2.4 million, or 20.6%, in the three months ended March 31, 2024, compared to the same period in 2023, primarily due to an increase in personnel costs.

Current wording

Research and development operating expenses increased $0.8 million, or 5.5%, in the three months ended June 30, 2024, compared to the same period in 2023, and increased $3.2 million, or 12.4%, in the six months ended June 30, 2024, compared to the same period in 2023, primarily due to an increase in personnel costs.

Previous wording

In 2024, we expect research and development expenses to increase from 2023 levels reflecting strategic investments in our growth priorities, including cybersecurity technology.

Current wording

For the full year 2024, we expect research and development expenses to increase from 2023 levels reflecting strategic investments in our growth priorities, including cybersecurity technology.

Previous wording

General and administrative operating expenses decreased $0.6 million, or 7.8%, in the three months ended March 31, 2024, compared to the same period in 2023, primarily due to a decrease in professional services costs.

Current wording

General and administrative operating expenses increased $0.7 million, or 13.3%, in the three months ended June 30, 2024, compared to the same period in 2023, and increased $0.1 million, or 1.0%, in the six months ended June 30, 2024, compared to the same period in 2023, primarily due to a decrease in professional services costs.

Previous wording

In 2024, we expect general and administrative expenses to increase modestly as we apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Current wording

For the full year 2024, we expect general and administrative expenses to increase modestly from 2023 levels as we apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Previous wording

Non-operating income (expense), net, had a favorable change of $5.3 million for the three months ended March 31, 2024, compared to the same period of 2023. The favorable change for the three months ended March 31, 2024, compared to the same period of 2023, was primarily driven by a favorable change of $3.8 million in foreign exchange gains and losses. Foreign currency exchange gains and losses are primarily a result of fluctuations in the Japanese Yen versus the U.S. Dollar. Interest income increased $0.7 million and fair value adjustments increased $0.7 million for the three months ended March 31, 2024, compared to the same period of 2023, respectively.

Current wording

Non-operating income, net, had a favorable change of $5.8 million for the six months ended June 30, 2024, compared to the same period of 2023. The favorable change was primarily driven by a favorable change of $2.5 million in foreign exchange gains and losses, an increase in interest income of $1.8 million and fair value adjustment gains of $1.2 million for the six months ended June 30, 2024, compared to the same period of 2023.

Previous wording

We recorded income tax provisions of $1.5 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively. Our income tax provisions for the three months ended March 31, 2024 and 2023 primarily consisted of U.S. federal and state taxes.

Current wording

We recorded income tax provisions of $1.5 million and $3.2 million for the three months ended June 30, 2024 and 2023, respectively, and we recorded income tax provisions of $3.0 million and $4.2 million for the six months ended June 30, 2024 and 2023. Our income tax provisions for the three months ended June 30, 2024 and 2023 and for the six months ended June 30, 2024 and 2023 primarily consisted of U.S. federal and state taxes.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $122.9 million, including $2.2 million held outside the United States in our foreign subsidiaries, and $59.2 million of marketable securities. We currently do not have any plans to repatriate our earnings from our foreign operations. As of March 31, 2024, we had working capital of $163.2 million, accumulated deficit of $80.8 million and total stockholders’ equity of $214.3 million. Our marketable securities are highly liquid and are classified as available for sale should the Company decide to quickly raise cash at any time in the future.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $77.5 million, including $2.3 million held outside the United States in our foreign subsidiaries, and $99.7 million of marketable securities. We currently do not have any plans to repatriate our earnings from our foreign operations. As of June 30, 2024, we had working capital of $160.0 million, accumulated deficit of $71.3 million and total stockholders’ equity of $214.4 million. Our marketable securities are highly liquid and are classified as available for sale should the Company decide to quickly raise cash at any time in the future.

Previous wording

On November 1, 2022, the Company announced its Board of Directors authorized a new stock repurchase program (the “2022 Program”) of up to $50 million of its common stock over a period of twelve months. Under all programs, repurchased shares are held in treasury at cost. The Company’s stock repurchase programs do not obligate us to acquire any specific number of shares. Shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. Through March 31, 2023, no shares had been repurchased under the 2022 Program.

Current wording

On November 1, 2022, the Company announced its Board of Directors (the “Board”) authorized a new stock repurchase program (the “2022 Program”) of up to $50 million of its common stock over a period of twelve months. Under all programs, repurchased shares are held in treasury at cost. The Company’s stock repurchase programs do not obligate us to acquire any specific number of shares. Shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. Through December 31, 2023,the Company repurchased 1.2 million shares for a total cost of $15.7 million under the 2022 Program. The 2022 Program was active for twelve months and expired in the second half of 2023.

Previous wording

On November 7, 2023, the Company announced its Board of Directors authorized a new stock repurchase program of up to $50 million of its common stock over a period of twelve months (the “2023 Program”). During the three months ended March 31, 2024, the Company repurchased 0.2 million shares for a total cost of $3.0 million under the 2023 Program.

Current wording

On November 7, 2023, the Company announced its Board authorized a new stock repurchase program of up to $50 million of its common stock over a period of twelve months (the “2023 Program”). Through June 30, 2024, the Company repurchased 1.1 million shares for a total cost of $14.9 million under the 2023 Program.

Previous wording

In October 2021, our Board approved the initiation of a regular quarterly cash dividend on our common stock. In the three months ended March 31, 2024, the Company paid a cash dividend of $0.06 per share outstanding, for a total of $4.5 million as a return of capital. In the three months ended March 31, 2023, the Company paid a cash dividend of $0.06 per share outstanding, for a total of $4.4 million as a return of capital. The next dividend, in the amount of $0.06 per share, will be paid on June 3, 2024 to stockholders of record on May 15, 2024 as a return of capital. We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future. However, the payment, amount and timing of future dividends remain within the discretion of our Board and will depend upon our results of operations, financial condition, cash requirements, and other factors.

Current wording

In October 2021, our Board approved the initiation of a regular quarterly cash dividend on our common stock. In the three and six months ended June 30, 2024, the Company paid cash dividends of $0.06 per share outstanding, for a total of $4.5 million and $8.9 million, respectively, as a return of capital. In the three and six months ended June 30, 2023, the Company paid cash dividends of $0.06 per share outstanding, for a total of $4.4 million $8.9 million, respectively, as a return of capital. The next dividend, in the amount of $0.06 per share, will be paid on September 3, 2024 to stockholders of record on August 15, 2024 as a return of capital. We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future. However, the payment, amount and timing of future dividends remain within the discretion of our Board and will depend upon our results of operations, financial condition, cash requirements, and other factors.

Previous wording

During the three months ended March 31, 2024, cash provided by operating activities was $32.4 million, consisting of net income of $9.7 million, non-cash charges of $7.0 million and an increase in cash resulting from the net change in operating assets and liabilities of $15.7 million. Our non-cash charges consisted primarily of depreciation and amortization expenses of $2.7 million and stock-based compensation expense of $3.8 million. The net change in our operating assets and liabilities primarily reflects cash inflows from the changes in accounts receivable of $17.7 million, prepaid expense and other assets of $1.5 million and accrued liabilities of $1.8 million, partially offset by cash outflows from accounts payable of $2.7 million, inventory of $2.2 million and deferred revenue of $0.4 million.

Current wording

During the six months ended June 30, 2024 cash provided by operating activities was $44.7 million, consisting of net income of $19.2 million, non-cash charges of $13.2 million and an increase in cash resulting from the net change in operating assets and liabilities of $12.2 million. Our non-cash charges consisted primarily of depreciation and amortization expenses of $5.5 million and stock-based compensation expense of $8.1 million. The net change in our operating assets and liabilities primarily reflects cash inflows from the changes in accounts receivable of $16.7 million and accrued liabilities of $3.6 million, partially offset by cash outflows from inventory of $3.3 million, accounts payable of $2.9 million, deferred revenue of $1.4 million and prepaid expenses and other assets of $0.5 million.

Previous wording

The favorable change in accounts receivable was attributed to timing of billing and cash collections. The favorable change in prepaid expenses and other assets was primarily due to changes in the balance of prepaid marketing. The favorable change in accrued liabilities was attributed to variable cash compensation payments. The unfavorable change in accounts payable was attributable to the timing of payments to vendors. The unfavorable change in inventory was attributable to the timing of product shipments. The unfavorable change in deferred revenue was attributable to the timing of service contract bookings.

Current wording

The favorable change in accounts receivable was attributed to timing of billing and cash collections. The favorable change in accrued expenses was primarily due to an increase in accrued variable compensation. The unfavorable change in inventory was attributable to the timing of product shipments. The unfavorable change in accounts payable was attributable to the timing of payments to vendors. The unfavorable change in prepaid expenses and other assets was attributable to an increase in prepaid state and federal taxes. The unfavorable change in deferred revenue was attributable to the timing of service contract bookings.

Previous wording

During the three months ended March 31, 2023, cash used in operating activities was $0.8 million, consisting of net income of $4.0 million and non-cash charges of $5.7 million, partially offset by a decrease in cash resulting from the net change in operating assets and liabilities of $10.5 million. Our non-cash charges consisted primarily of depreciation and amortization expenses of $2.1 million and stock-based compensation expense of $3.7 million. The net change in our operating assets and liabilities primarily reflects cash outflows from the changes in accrued liabilities of $17.0 million, inventory of $1.5 million and accounts payable of $0.7 million, partially offset by cash inflows from changes in accounts receivable of $5.7 million, prepaid expense and other assets of $1.5 million and deferred revenue of $1.5 million.

Current wording

During the six months ended June 30, 2023, cash provided by operating activities was $18.7 million, consisting of net income of $15.6 million and non-cash charges of $11.3 million, partially offset by a decrease in cash resulting from the net change in operating assets and liabilities of $8.1 million. Our non-cash charges consisted primarily of depreciation and amortization expenses of $4.3 million and stock-based compensation expense of $7.2 million. The net change in our operating assets and liabilities primarily reflects cash outflows from the changes in accrued liabilities of $17.1 million, inventory of $1.7 million and accounts payable of $1.5 million, partially offset by cash inflows from changes in deferred revenue of $4.6 million, prepaid expense and other assets of $3.8 million and accounts receivable of $3.7 million.

Previous wording

The unfavorable change in accrued liabilities was attributed to variable cash compensation accruals. The unfavorable change in inventory was attributable to the timing of product shipments. The unfavorable change in accounts payable was attributable to the timing of payments to vendors. The favorable change in accounts receivable was attributed to timing of billing and cash collections. The favorable change in prepaid expenses and other assets was primarily due to the release and return of a security deposit. The favorable change in deferred revenue was attributable to the timing of service contract bookings.

Current wording

The unfavorable change in accrued liabilities was attributed to variable cash compensation accruals. The unfavorable change in inventory was attributable to the timing of product shipments. The unfavorable change in accounts payable was attributable to the timing of payments to vendors. The favorable change in deferred revenue was attributable to the timing of service contract bookings. The favorable change in prepaid expenses and other assets was primarily due to the release and return of a security deposit. The favorable change in accounts receivable was attributed to timing of billing and cash collections.

Previous wording

During the three months ended March 31, 2024, cash provided by investing activities was $0.6 million, consisting of maturities of marketable securities of $39.9 million and sales of marketable securities of $4.4 million, partially offset by purchases of marketable securities of $40.7 million and property and equipment of $2.9 million.

Current wording

During the six months ended June 30, 2023, cash provided by investing activities was $37.0 million, consisting of maturities of marketable securities of $44.5 million and sales of marketable securities of $42.3 million, partially offset by purchases of marketable securities of $44.7 million and capital expenditures of $5.1 million.

Previous wording

During the three months ended March 31, 2024, cash used in financing activities was $7.4 million and primarily consisting of $4.5 million used for cash dividend payments and $3.0 million used for repurchases of common stock, partially offset by $0.1 million of proceeds from common stock issued under the Company’s equity plans.

Current wording

During the six months ended June 30, 2024, cash used in financing activities was $22.0 million and primarily consisting of $14.9 million used for repurchases of common stock and $8.9 million used for cash dividend payments, partially offset by $1.9 million of proceeds from common stock issued under the Company’s equity plans.

Previous wording

During the three months ended March 31, 2023, cash used in financing activities was $4.0 million and primarily consisting of $4.4 million used for cash dividend payments, partially offset by $0.4 million of proceeds from common stock issued under the Company’s equity plans.

Current wording

During the six months ended June 30, 2023, cash used in financing activities was $12.6 million and primarily consisting of $8.9 million used for cash dividend payments and $6.2 million used for repurchases of common stock, partially offset by $2.6 million of proceeds from common stock issued under the Company’s equity plans.

Previous wording

Our contractual obligations consist of non-cancellable operating lease arrangements and totaled $15.6 million as of March 31, 2024. Our operating lease arrangements expire on various dates through July 2027. These arrangements require us to pay certain operating expenses, such as taxes, repairs and insurance, and contain renewal and escalation clauses.

Current wording

Our contractual obligations consist of non-cancellable operating lease arrangements and totaled $14.3 million as of June 30, 2024. Our operating lease arrangements expire on various dates through July 2027. These arrangements require us to pay certain operating expenses, such as taxes, repairs and insurance, and contain renewal and escalation clauses.

Previous wording

The Company’s significant accounting policies are disclosed in Part II – Item 8, “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2024.

Current wording

The Company’s significant accounting policies are disclosed in Part II – Item 8, “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2024.