$ATEN Stock Up On Beats, Growth Target

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ATEN stock rose on October 29, 2021, a day after the company reported beats in its quarterly report.

A10 Networks Reports 15% Organic Growth for Q3 2021

Growth driven by cybersecurity and portfolio transformation; Management expects double-digit growth in Q4

On October 28, 2021, A10 Networks (NYSE: ATEN), a leading provider of secure application services and solutions, announced financial results for its third quarter ended September 30, 2021.

A10 Networks reported Q3 EPS of 17c versus the consensus estimate of 14c. The company reported Q3 revenue of $65.4M versus the consensus estimate of $62.5M.

Third Quarter 2021 Financial Summary

  • Revenue of $65.4 million, up 15% year-over-year.
  • Sales of security products grew 18% year-over-year.
  • Improving commercial execution combined with favorable market conditions drove 47% growth in the Americas year-over-year.
  • Deferred revenue of a record $117.1 million, up 15% year-over-year.
  • GAAP gross margin of 79.8%; non-GAAP gross margin of 80.4% as the company successfully navigated short-term input cost pressures.
  • GAAP net income of $74.9 million (114.6% of revenue), or $0.94 per diluted share, inclusive of a non-recurring tax benefit, compared with net income of $6.5 million, or $0.08 per diluted share in the third quarter of 2020.
  • Non-GAAP net income of $13.7 million (20.9% of revenue), or $0.17 per diluted share, compared with non-GAAP net income of $10.3 million, or $0.13 per diluted share in the third quarter of 2020.
  • Adjusted EBITDA of $16.8 million, representing 25.7% of revenues, compared to $12.5 million in the third quarter of 2020.
  • Cash and cash equivalents as of September 30, 2021 was $187.5 million, up $20.6 million or 12.4% from the $166.8 million at June 30, 2021.

Subsequent to the end of the quarter, the Board of Directors declared a quarterly dividend of $0.05 per share, payable on December 15, 2021 to stockholders of record on November 12, 2021. In addition, the Board authorized a new share repurchase program under which the Company may repurchase up to $100 million of its outstanding common stock.
A reconciliation between GAAP and non-GAAP information is contained in the financial statements below.

“We achieved strong top- and bottom-line results as our security-led solutions are enabling us to capture market share and driving accelerated growth,” said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. “Long-term deferred revenue has grown 16% year-over-year, outpacing total revenue growth. Our diversified model is enabling us to successfully navigate regional and logistical challenges, as evidenced by our 15% revenue growth and nearly 26% adjusted EBITDA margin validating the business model transformation. The increasing profitability of our business required us to release our full tax valuation allowance, as we now expect to utilize our entire net operating loss carryforwards in future periods. Our business model positions us to meaningfully drive growth and continue to improve the business model. In addition, the strong, sustainable free cash flow has enabled our Board to return capital to stockholders by declaring a quarterly cash dividend and significantly expanding our share repurchase program.”

“With a transformed portfolio focused on cybersecurity, improving market conditions and our relentless focus on execution, we are outperforming the industry as well as the expectations we set at the start of the year,” continued Trivedi. “We have solid visibility and confidence in our ability to accelerate growth beyond the previous targets of 6-8%, though we are cognizant of continued supply chain challenges and other global headwinds which could impact quarter-to-quarter performance.”

Based on current visibility, management expects fourth quarter revenue to grow approximately 10% year-over-year with the bottom-line growing at a faster rate than the top-line. Based on our strategy and market traction for our solutions, we expect this positive momentum to sustain into 2022. The company will host an analyst day in Q1 to discuss growth strategy for 2022 and beyond.

In addition, in light of the significant improvement in profitability and A10’s strong balance sheet, the Board of Directors today approved a capital allocation strategy to return capital to stockholders. As part of this, the Board declared a quarterly dividend. The first dividend, in the amount of $0.05 per share, will be payable, subject to any prior revocation, on December 15, 2021 to stockholders of record on November 12, 2021. Future dividends will be subject to further review and approval by the Board in accordance with applicable law. The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews A10’s capital allocation strategy from time-to-time.

In addition, the Board authorized a new, $100 million share repurchase program under which the Company may repurchase up to $100 million of its outstanding common stock during the next 12 months. Under the share repurchase program, the Company is authorized to repurchase shares of common stock in the open market, privately negotiated transactions, in block trades or a combination of the foregoing. The Board will review the share repurchase program periodically and may authorize adjustment of its term and size. The Company plans to fund repurchases from its existing cash balance.

“These actions demonstrate the Board’s confidence in the Company’s ability to continue to sustainably grow revenues and profits, and signal the Board’s commitment to return capital to stockholders in a meaningful way,” concluded Trivedi.

A10 Networks sees Q4 revenue up 10% YoY

Based on current visibility, management expects fourth quarter revenue to grow approximately 10% year-over-year with the bottom-line growing at a faster rate than the top-line. Based on our strategy and market traction for our solutions, we expect this positive momentum to sustain into 2022. The company will host an analyst day in Q1 to discuss growth strategy for 2022 and beyond.

VIDEO Powering the most secure and available digital experiences – A10 Networks

Digital transformation is accelerating at a record pace. Enterprises and service providers must rapidly innovate to keep up. At A10, we have earned the trust of our customers to protect their hybrid cloud and subscriber networks today and into the future.

Powering the most secure and available digital experiences - A10 Networks

ATEN Stock Chart Technical Analysis

Large players volume has taken a sharp turn higher after the company released earnings. The money flow has gone positive.

Looking at the yearly performance, ATEN did better than 87% of all other stocks. We also observe that the gains produced by ATEN over the past year are nicely spread over this period. ATEN is part of the Software industry. There are 316 other stocks in this industry. ATEN outperforms 82% of them.

Although ATEN has an excellent technical rating, it does not present a decent entry opportunity at the moment. Price movement has been a little bit too volatile to find a nice entry and exit point. It is probably a good idea to wait for a consolidation first. Click here to sign up for email alerts on when ATEN stock is a good entry.

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