Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- A10 Networks Inc (ATEN, Financial) reported a 25% increase in Enterprise-related revenue, offsetting a 25% decline in the Service Provider segment.
- The company secured a significant win by displacing a competitor for a major digital communications technology company's hybrid infrastructure solution.
- A10 Networks Inc (ATEN) achieved non-GAAP EPS targets despite market challenges, demonstrating robust profitability.
- The company's gross margins were in line with the stated goal of 80% to 82%, and adjusted EBITDA margin was nearly 26%.
- A10 Networks Inc (ATEN) continues to invest in AI-based solutions to enhance security offerings, aligning with long-term growth goals.
Negative Points
- Second quarter revenue decreased by 8.7% year-over-year, primarily due to volatility in the North American Service Provider sector.
- Product revenue was down 15% year-to-date, representing a challenge in maintaining growth in this segment.
- Non-GAAP net income for the quarter decreased to $13.2 million from $14.5 million in the year-ago quarter.
- The North American Service Provider market remains challenging, with projects being delayed and spending levels managed cautiously.
- Despite strong cash flow, the company faces ongoing revenue headwinds, particularly in the North American Service Provider market.
Q & A Highlights
Q: Are you still seeing service providers come back in the second half, and how are your conversations with them?
A: Yes, our service provider conversation is very much North America specific. Outside North America, we have healthy growth. Within North America, service providers continue to manage spending levels, with projects being scoped differently and moved across periods. Our assumptions are based on factors like cost of capital and market uncertainty. We expect steady progress in the Enterprise segment and execution from service providers outside North America. Our second-half plan is not predicated on a sharp snap back in spending from North American service providers.
Q: Can you talk about the competitive environment? Are you still taking market share?
A: Yes, we are gaining share, particularly in the Enterprise market where we have been able to replace competitive solutions. Our Enterprise segment growth year-to-date is about 7%, which is slightly above the market average. We track displacements of competitive solutions as a measure of gaining share.
Q: What kind of pricing power do you have in this environment?
A: Pricing is balanced. We offset input cost inflation with selective price increases and productivity improvements. We are methodical in our approach to pricing, ensuring we maintain competitiveness while managing costs.
Q: Where are you in the process of seeing results from the changes in your sales team?
A: On the Service Provider side, we have a mature sales team focused on cross-selling more products. We are making good progress, with some regions ahead of others. On the Enterprise side, we have brought in new sales talent and are evolving our go-to-market strategy. We are probably between the third and fourth inning in this journey.
Q: Can you talk about the overall spending environment and macro headwinds?
A: APJ and EMEA regions are stable in both Enterprise and Service Provider segments. In North America, we are making good progress in the Enterprise segment, offsetting some market weakness. The North American Service Provider segment saw some re-scoping of projects rather than cancellations, which was the only unexpected development. We feel confident about the full year, with volatility being within a manageable range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
