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Form 8-K A10 Networks, Inc. For: May 01

May 4, 2015 4:09 PM


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 8-K
____________________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
May 4, 2015
____________________________________________________________________________
A10 NETWORKS, INC.
(Exact name of registrant as specified in its charter)
____________________________________________________________________________

Delaware
 
001-36343

 
20-1446869

(State or Other Jurisdiction of Incorporation or Organization) 
 
(Commission File Number)
 
(I.R.S. Employer Identification Number)

3 West Plumeria Drive
San Jose, CA 95134
(Address of principal executive offices, including zip code)
(408) 325-8668
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 







Item 2.02. Results of Operations and Financial Condition.

On May 4, 2015, A10 Networks, Inc. (the “Company”) issued a press release regarding financial results for the first quarter ended March 31, 2015. The Company also posted on its website (www.a10networks.com) slides with accompanying prepared remarks regarding such financial results. Copies of the press release and slides with accompanying prepared remarks by the Company are attached as Exhibits 99.1 and 99.2, respectively, and the information in Exhibits 99.1 and 99.2 is incorporated herein by reference.

The information in Item 2.02 and Item 9.01 in this Current Report on Form 8-K and the exhibits attached hereto shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit
Description
99.1
99.2




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: May 4, 2015

 
By: /s/ Greg Straughn
 
Greg Straughn
 
Chief Financial Officer
(Principal Accounting and Financial Officer)












EXHIBIT 99.1


A10 Networks, Inc. Reports First Quarter 2015 Financial Results

SAN JOSE, Calif., May 4, 2015 -- A10 Networks, Inc. (NYSE: ATEN), a technology leader in application networking, today announced financial results for its first quarter ended March 31, 2015.

Total revenue for the first quarter was $44.0 million, compared with $45.7 million in the first quarter of 2014. A10 Networks first quarter 2015 GAAP net loss was $13.7 million, compared with a GAAP net loss of $5.1 million in the first quarter of 2014. Non-GAAP net loss for the first quarter of 2015 was $9.1 million, compared with non-GAAP net loss of $3.3 million in the first quarter of 2014. A reconciliation between GAAP and non-GAAP information is contained in the financial statements below.

Lee Chen, president and chief executive officer of A10 Networks, commented: “Our first quarter 2015 revenue came in at $44.0 million, reflecting 26 percent year-over-year growth in both the United States and sales to enterprise customers, offset by some first quarter seasonality and continued weakness in the service provider segment. We generated year-over-year product bookings growth and gained traction with our security solutions including our TPS DDoS mitigation product and Thunder ADC with advanced security features such as SSL Insight. Demonstrating our momentum, we added a record number of new TPS customers in the quarter and a new Fortune 50 enterprise customer selected our Thunder ADC SSL Insight solution to help protect their network from incoming threats in encrypted traffic. We believe our compelling product portfolio is well positioned to drive growth as we progress through the year.”

Recent Highlights

Collaborated with RSA Security to provide enhanced security capabilities for joint customers. RSA has validated interoperability with A10 Thunder Application Delivery Controller’s (ADC) innovative SSL Insight feature, which allows RSA Security Analytics to inspect SSL and uncover hidden threats in encrypted traffic.

C4L, a data center colocation and connectivity solutions provider, selected the A10 Networks Thunder TPS Threat Protection Systems to mitigate sophisticated distributed denial of service (DDoS) attacks and improve service availability. C4L will also use the A10 Thunder TPS platform to launch a new set of services, delivering additional DDoS protection for clients across its 300 network-connected locations.

Named Sanjay Kapoor as Vice President of global marketing overseeing the global structure, strategy, and execution of all aspects of A10’s marketing efforts. Sanjay joins A10 from Nominum, where he served as CMO and SVP Strategy and has previously served in marketing, product and general management leadership roles at Juniper Networks and Cisco Systems.







Prepared Materials and Conference Call Information

A10 Networks has made available a presentation with management’s prepared remarks on its first quarter 2015 financial results. These materials are accessible from the “Investors” section of 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 first quarter of 2015 results and outlook for its second quarter of 2015. Open to the public, investors may access the call by dialing +1-719-325-2315 or +1-888-539-3678. A live audio webcast of the conference call will be accessible from the “Investors” section of 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 +1-719-457-0820 or +1-888-203-1112 and entering the passcode 3977197. The press release and supplemental financials will be accessible from 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 product portfolio driving growth in future periods. 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 which 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 ability of our sales team to execute well, our ability to shorten our close cycles, the ability for 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, and litigation risks and costs.

More information about potential factors that could affect the company's business and financial results is included in our annual report on Form 10-K filed with the SEC on March 11, 2015. These filings are available on the SEC's website at www.sec.gov and the company’s website.

All forward-looking statements in this press release are based on information available to the company as of the date hereof. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

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 and (ii) amounts paid in settlement of, and other expenses associated with the Brocade litigation.

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 leader in application networking, 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: http://www.a10networks.com

A10 Networks, A10 Thunder, A10 Harmony and ACOS are trademarks or registered trademarks of A10 Networks, Inc. in the United States and other countries. All other trademarks are property of their respective owners.

Investor Contact:
The Blueshirt Group
Maria Riley, 415-217-7722
[email protected]
or
Media Contact:
A10 Networks
Karen Richardson, 408-592-4663
[email protected]
Source: A10 Networks, Inc.










A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)

 
Three Months Ended March 31,
 
2015
 
2014
Revenue:
 
 
 
Products
$
30,516

 
$
36,417

Services
13,501

 
9,328

Total revenue
44,017

 
45,745

Cost of  revenue:
 

 
 

Products
7,063

 
7,427

Services
3,723

 
2,626

Total cost of revenue
10,786

 
10,053

Gross profit
33,231

 
35,692

Operating expenses:
 

 
 

Sales and marketing
24,522

 
21,563

Research and development
14,309

 
11,205

General and administrative
7,527

 
5,363

Litigation expense (benefit)
445

 
1,846

Total operating expenses
46,803

 
39,977

Loss from operations
(13,572
)
 
(4,285
)
Other income (expense), net:
 

 
 

Interest expense
(127
)
 
(587
)
Interest income and other income (expense), net
27

 
(25
)
Total other income (expense), net
(100
)
 
(612
)
Loss before provision for income taxes
(13,672
)
 
(4,897
)
Provision for income taxes
62

 
205

Net loss
(13,734
)
 
(5,102
)
Accretion of redeemable convertible preferred stock dividend

 
(1,150
)
Net loss per share attributable to common stockholders:
$
(13,734
)
 
$
(6,252
)
Net loss per share attributable to common stockholders:
$
(0.22
)
 
$
(0.45
)
Weighted-average shares used in computing net loss per share attributable to common stockholders
61,485

 
13,940










A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Unaudited, in thousands, except per share amounts)

 
Three Months Ended March 31,
 
2015
 
2014
Other Financial Measures / GAAP to Non-GAAP Reconciliation
 
 
 
GAAP net loss
$
(13,734
)
 
$
(5,102
)
Stock-based compensation
4,633

 
1,770

Brocade litigation expense

 
20

Non-GAAP net loss
$
(9,101
)
 
$
(3,312
)
Non-GAAP net loss per share, basic and diluted
$
(0.15
)
 
$
(0.06
)
Weighted average shares used in computing Non-GAAP net loss per share, basic and diluted (1) (2)
61,485

 
51,271

 
 
 
 
(1) For the three months ended March 31, 2014, the non-GAAP share counts assume preferred stock was outstanding at 12-31-2013 (as-if converted basis)
(2) In connection with the Company's initial public offering in March 2014, we issued 9.0 million shares of common stock and converted all of its outstanding convertible preferred stock into 40.0 million shares of common stock.






A10 NETWORKS, INC.
Reconciliation of Selected GAAP to Non-GAAP Financial Measures
(Unaudited, in thousands)

 
 
Three Months Ended March 31,
 
 
2015
 
2014
Weighted average shares used in computing GAAP net loss per share, basic and diluted
 
61,485

 
13,940

Preferred stock adjustment
 

 
37,331

Weighted average shares used in computing Non-GAAP net loss per share, basic and diluted (1) (2)
 
61,485

 
51,271

 
 
 
 
 
(1) For the three months ended March 31, 2014, the non-GAAP share counts assume preferred stock was outstanding at 12-31-2013 (as-if converted basis)
(2) In connection with the Company's initial public offering in March 2014, we issued 9.0 million shares of common stock and converted all of its outstanding convertible preferred stock into 40.0 million shares of common stock.











A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
 
March 31,
2015
 
December 31,
2014
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
85,570

 
$
91,905

Accounts receivable, net of allowances
52,762

 
54,003

Inventory, net
19,768

 
20,701

Prepaid expenses and other current assets
4,200

 
4,732

Total current assets
162,300

 
171,341

Property and equipment, net
9,951

 
10,780

Other long-term assets
4,695

 
4,859

Total Assets
$
176,946

 
$
186,980

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
 
 
 
Accounts payable
$
7,989

 
$
8,994

Accrued liabilities
19,850

 
22,435

Deferred revenue, current
40,155

 
39,256

Total current liabilities
67,994

 
70,685

Deferred revenue, long-term
19,505

 
17,964

Other long-term liabilities
1,557

 
1,766

Total Liabilities
89,056

 
90,415

Stockholders’ Equity
Common stock and additional paid-in capital
283,409

 
278,350

Accumulated deficit
(195,519
)
 
(181,785
)
Total Stockholders' Equity
87,890

 
96,565

Total Liabilities And Stockholders' Equity
$
176,946

 
$
186,980












A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 

 
 

Net loss
$
(13,734
)
 
$
(5,102
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation and amortization
2,489

 
2,247

Stock-based compensation
4,633

 
1,770

Provision for doubtful accounts and sales returns
144

 
263

Unrealized foreign exchange gain
(162
)
 
(178
)
Changes in operating assets and liabilities:
 

 
 

Accounts receivable, net
1,311

 
(1,241
)
Inventory
185

 
(1,785
)
Prepaid expenses and other assets
709

 
(2,277
)
Accounts payable
(987
)
 
(341
)
Accrued liabilities
(2,639
)
 
870

Deferred revenue
2,438

 
2,714

Other
115

 
89

Net cash used in operating activities
(5,498
)
 
(2,971
)
Cash flows from investing activities:
 

 
 

Purchases of property and equipment
(901
)
 
(2,022
)
Net cash used in investing activities
(901
)
 
(2,022
)
Cash flows from financing activities:
 

 
 

Proceeds from initial public offering, net of offering costs

 
124,177

Principal payments on revolving credit facility

 
(20,000
)
Proceeds from issuance of common stock under employee equity incentive plans, net of repurchases
64

 
2,248

Other

 
(76
)
Net cash provided by financing activities
64

 
106,349

Net increase (decrease) in cash and cash equivalents
(6,335
)
 
101,356

Cash and cash equivalents—beginning of period
91,905

 
20,793

Cash and cash equivalents—end of period
$
85,570

 
122,149



A10 Networks – Q1 2015 Earnings 5/4/2015 1 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 2 | P a g e Thank you all for joining us today. I am pleased to welcome you to A10 Networks first quarter 2015 financial results conference call. This call is being recorded and webcast live and may be accessed for 90 days via the A10 Networks website, www.a10networks.com. Joining me today are A10’s Founder & CEO, Lee Chen; A10’s CFO, Greg Straughn; and our VP of Global Sales, Ray Smets. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its first quarter 2015 financial results. Additionally, A10 published a presentation along with its prepared comments for this call and supplemental trended financial statements. You may access the press release, presentation with prepared comments, and trended financial statements on the investor relations section of the company’s website www.a10networks.com.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 3 | P a g e During the course of today’s call, management will make forward-looking statements, including statements regarding our projections for our second quarter operating results, our expectations for future revenue growth, profitability and operating margin, expectations of customer buying patterns and the growth of our business generally. These statements are based on current expectations and beliefs as of today, May 4, 2015. A10 disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially. We disclaim any obligation to update these forward-looking statements as a result of future events or otherwise. For a more detailed description of these risks and uncertainties, please refer to our 10-K filed on March 11th.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 4 | P a g e Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis and have been adjusted to exclude certain charges. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company’s website. We will provide our current expectations for the second quarter of 2015 on a non-GAAP basis. However, we will not make available a reconciliation of non-GAAP guidance measures to corresponding GAAP measures on a forward-looking basis due to high variability and low visibility with respect to the charges, which are excluded from these non-GAAP measures. Before I turn the call over to Lee, I’d like to announce that management will attend the RBC Mobile and Cloud Networking Investor day in Boston on this Thursday, May 7th and present at the JP Morgan Global Technology, Media, and Telecom Conference on May 19th in Boston and at the Bank of America Merrill Lynch Global Technology conference on June 3rd in San Francisco. We hope to see many of you there. Now I would like to turn the call over to Lee for opening remarks.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 5 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 6 | P a g e Overall, the team executed well during the quarter. We delivered revenue within our guidance and drove leverage through our operating structure, resulting in a 24% sequential improvement in our bottom line. Looking at our results in more detail. Our first quarter 2015 revenue came in at 44.0 million dollars, reflecting stronger than expected demand in North America, offset by Q1 seasonality and continued weakness in the service provider segment. While we continue to see a cautious service provider spending environment, we gained traction with our security products, and we made good progress toward growing our presence in the enterprise and diversifying our revenue base. Our pipeline remains very strong, our win rate remains consistently high and we are pleased to report that in Q1, we returned to year over year product bookings growth.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 7 | P a g e Revenue from the enterprise grew 26% from the prior year and 6% sequentially and accounted for 57% of our total first quarter revenue. In total, we added close to 200 new customers in the quarter and we now serve over 4,000 customers.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 8 | P a g e We saw good demand for our ADC solutions driven by our rich security features including SSL insight and web application firewall. Industry analysts currently estimate that 20% to 35% of enterprise traffic is encrypted, and they expect this to grow rapidly throughout 2015 and beyond. With the growth in encrypted traffic, we believe we are very well positioned to gain market momentum. Our Thunder ADC solution is the first ADC to offer SSL Insight features and we provide a comprehensive and high performance SSL insight solution. In the first quarter, we landed a new Fortune 50 customer with our Thunder ADC SSL insight solution. This customer chose A10 to help protect their network from incoming threats because of our ability to seamlessly scale and inspect SSL traffic as well as load balance between their firewalls. We are very proud of this new win as it was our first sale into this very large enterprise where our largest competitor had a strong hold.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 9 | P a g e We also continue to gain momentum for our Thunder TPS DDoS mitigation security solution and we are receiving positive customer feedback from the recently released fully programmable policy engine. Although TPS revenue remains a small percentage of our total revenue, we are very excited by our momentum among both enterprise and service provider customers. Based on conversations with our customers, we estimate that our TPS opportunity within certain customers could grow to be between three to eight times the initial buy within a two-year period. In Q1, we added a record number of new TPS DDoS mitigation customers, many of which were international. It is important to note that 50% of our TPS customers in Q1 are new to A10, providing us with an opportunity to expand into new areas of their network. Let me share with you a few of our new TPS customer engagements:  A North America based broadband provider chose our Thunder TPS solution after repeated outages due to DDoS attacks. In this competitive win, we believe we won because our high- capacity, small form factor product, helping provide both CapEx and OpEx savings to the customer while at the same time increasing the protection of their network.  C4L, a data center colocation provider, chose our Thunder TPS solution because we demonstrated a four-fold increase in the available DDoS mitigation performance on their network versus the competition.  And in Japan, both an industry leading enterprise and a marquee service provider customer chose our Thunder TPS solution for an initial deployment. It has been close to one year since we launched our Affinity channel program and we have seen a nice uptick in channel led, closed and initiated deals compared with this time last year. Additionally our channel pipeline has grown over 75%.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 10 | P a g e In summary, our high performance Thunder product suite continues to gain momentum in the market driven by our high performance, flexibility and advanced security features as well as our ability to integrate with other leading networking, security and cloud providers. A10 addresses some of today’s most critical application and security challenges. As cyber attacks grow in size and sophistication -- the manageability, scalability and flexibility of the network becomes even more important in order to conserve and protect network resources. Our ACOS based Thunder platform enables an open, programmable interface that can easily scale from megabit to terabit of throughput and delivers 2-5 times the performance of our competitors. Our recently introduced proprietary ACOS 4.0, automatically generates Application Programming Interface (API), and provides A10 the agility to deliver new modules, new functions and new features, as well as, rapidly integrate with other solutions. We believe we are well positioned competitively, and are encouraged by the opportunities we see ahead. Furthermore, we strengthened our executive team with the recent appointment of Sanjay Kapoor as VP of Marketing. Sanjay is well recognized for developing global marketing programs that helped accelerate growth and increase brand awareness at some of the most well known technology companies. With that, I’d like to turn the call over to Greg to review the details of our first quarter financial performance and second quarter guidance.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 11 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 12 | P a g e We delivered first quarter revenue of 44.0 million dollars, compared with 45.7 million dollars in the prior year first quarter. Deferred revenue, consisting almost entirely of customer maintenance and support contracts, was up 36% year-over-year, totaling 59.7 million dollars.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 13 | P a g e First quarter product revenue totaled 30.5 million dollars, representing 69% of total revenue. This compares with 36.4 million dollars or 80% of total revenue in the prior year first quarter. As Lee mentioned, first quarter product bookings grew on a year-over-year basis. Service revenue was 13.5 million dollars, accounting for 31% of total revenue, compared with 9.3 million dollars or 20% in the first quarter of 2014. First quarter revenue from the United States grew 26% year-over-year and 12% sequentially to reach 22.9 million dollars, representing approximately 52% of total revenue. First quarter revenue from Japan was 8.8 million dollars, representing 20% of total revenue, compared with 17.3 million dollars or 38% of total revenue in the same quarter of the prior year, which was unusually high given the backlog from Japan we carried into the quarter. Revenue generated from EMEA was 6.2 million dollars, an increase of 50% over Q1 of the prior year and represented 14% of total revenue. Revenue from APAC (excluding Japan) was 4.6 million dollars, representing 10% of revenue, compared with 4.3 million or 9% in the prior year first quarter. Our enterprise and service provider revenue split this quarter was 57% and 43% of total revenue, respectively. Revenue from enterprise customers totaled 25.0 million dollars, up 26% from Q1 in the prior year and up 6% sequentially. Service provider revenue was 19.0 million dollars, compared with 21.7 million dollars in the prior quarter and 25.8 million dollars in the first quarter of 2014. Consistent with the revenue diversification we have seen over recent quarters we did not have any 10% or greater customers in Q1.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 14 | P a g e Moving beyond revenue, all further metrics discussed on this call are on a non-GAAP basis, unless expressly stated otherwise. We delivered a first quarter total gross margin of 76.6%, down 60 basis points when compared with Q4 of 2014. On a constant currency basis versus Q1 of 2014 gross margin was reduced by 50 basis points on a year-over-year basis due to changes in the Yen-to-Dollar conversion rate. While product gross margin remained relatively inline with the prior quarter and came in at 77.1%, our services gross margin came in at 75.5%, a decline of 167 basis points compared with Q4’14, and an increase of 280 basis points over Q1 of 2014. Services gross margin was impacted by our investment in building out our professional services organization.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 15 | P a g e We ended the quarter with staff of 761, up from 759 at the end of 2014. In Q1 Sales and marketing expense was 22.5 million dollars, compared with 24.9 million dollars in Q4 of 2014. On a percentage basis, sales and marketing expense was 51.0% of revenue, compared with 55.0% in the prior quarter. In Q1 R&D expense totaled 12.7 million dollars or 28.9% of revenue, compared with 13.1 million dollars and 29.0% in the preceding quarter. First quarter combined G&A and litigation expense was approximately 7.5 million dollars or 17.0% of total revenue, compared with 6.8 million dollars or 15.0% of revenue in Q4. This increase was primarily related to indirect taxes due in Q1 and litigation expenses. In total, first quarter non-GAAP operating expenses were 42.6 million dollars. First quarter non-GAAP operating loss was 8.9 million dollars, compared with 9.8 million dollars in the fourth quarter. Our non-GAAP net loss in the first quarter was 9.1 million dollars or 15 cents per share, a 24% improvement when compared with a net loss of 12.0 million dollars or 20 cents per share in Q4. Basic and diluted weighted outstanding shares for the quarter were approximately 61.5 million shares.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 16 | P a g e Moving to the balance sheet, at March 31, 2015 we had 85.6 million dollars in total cash and equivalents. During the quarter cash used for operations was 5.5 million dollars. We ended Q1 with 52.8 million dollars of net accounts receivable, compared with the Q4’14 balance of 54.0 million dollars. Average days sales outstanding were 110 days, up from 97 days in the prior quarter. The increase in the Q1 value is primarily related to the above average opening balance at the beginning of Q1 and its impact on calculating the average accounts receivable balance.


 
A10 Networks – Q1 2015 Earnings 5/4/2015 17 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 18 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 19 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 20 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 21 | P a g e


 
A10 Networks – Q1 2015 Earnings 5/4/2015 22 | P a g e


 

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