Q2 2024 A10 Networks Inc Earnings Call

Thank you all for joining. I would like to welcome you all to the A10 Networks second quarter 2024 financial results conference call. My name is Brita and I'll be your moderator for today.

Operator: 2, A10 Networks, 2nd Quarter, 2024, Financial Results Conference Club.

breaker: My name is Breaker, and I'll be your moderator for today. All lines will be due to during the presentation portion of the call, with an opportunity for questions and answers at the end.

Preeta: My name is Preeta, and I'll be your moderator for today. All lines are muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Tom Baumann with FNK IR. Thank you. You may proceed, Tom.

All lines were muted during the presentation portion of the call, with an opportunity for questions and answers at the end.

Tom Baumann: I would now like to pass a conference over to your host, Tom Baumann, with FNK, IR. Thank you.

I would now like to pass the conference over to your host, Tom Baumann with FNK IR. Thank you. You may proceed, Tom.

Tom Baumann: You may proceed, Tom.

Tom Baumann: Thank you all for joining us today. This call is being recorded in webcast live and may be accessed for at least 90 days via the A10 Networks website at A10Networks.com.

Tom Baumann: Thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its second quarter 2024 financial results.

Tom Baumann: Additionally, A10 published a presentation entitled Supplemental Trended Financial Statements. You may access the press release, the presentation, and the trended financial statements on the Investor Relations section of the company's website. During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, including timing, including our potential revenue growth, demand, industry, and customer trends, our capital allocation strategy, profitability, expenses, and investments, our positioning, our repurchase and dividend programs, and our market share.

Speaker Change: Thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com

Tom Baumann: Hosting the call today are Dhrupad Trivedi, A10's President and CEO, and CFO, Brian Becker. Before we begin, I would like to remind you that shortly after the march is closed today, A10 Networks issued a press release announcing its 2nd quarter 2024 financial results. Additionally, A10 published a presentation in supplemental trended financial statements. You may access the press release, presentation, and trended financial statements on the Investor Relations section of the company's website.

Hosting the call today are Dhrupad Trivedi, A10's President and CEO , and CFO Brian Becker.

Speaker Change: Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its second quarter 2024 financial results.

Speaker Change: Additionally, A10 published a presentation and supplemental Trended Financial Statements. You may access the press release, presentation, and Trended Financial Statements on the Investor Relations section of the company's website.

Tom Baumann: During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, including timing; including our potential revenue growth, demand, industry, and customer trends, our capital allocation strategy, profitability, expenses and investments, our positioning, our repurchase and dividend programs, and our market share. These statements are based on current expectations and beliefs as of today, July 30, 2024. 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, and you should not rely on them as predictions of future events.

Speaker Change: During the course of today's call, management will make forward-looking statements.

Speaker Change: including statements regarding projections for future operating results, including timing, including our potential revenue growth, demand, industry, and customer trends, our capital allocation strategy, profitability, expenses and investments, our positioning, our repurchase and dividend programs, and our market share.

Tom Baumann: These statements are based on current expectations and beliefs as of today, July 30, 2024. 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, and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law.

Speaker Change: These statements are based on current expectations and beliefs as of today, July 30, 2024. These forward-looking statements involve a number of risks and uncertainties.

Speaker Change: Some of which are beyond our control that could cause actual results to differ materially, and you should not rely on them as predictions of future events.

Tom Baumann: A10 does not intend to update information contained in these forward listening statements, whether as a result of new information, future events, or otherwise, unless required by law.

Speaker Change: A10 does not intend to update information contained in these forward listing statements, whether as a result of new information, future events, or otherwise, unless required by law.

Tom Baumann: For a more detailed description of these risks and uncertainties, please refer to a most recent 10-K in quarterly report on Form 10-Q. 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. The non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for prepared results in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. 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.

Tom Baumann: For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q. 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. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for prepared results in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies.

Speaker Change: For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q .

Speaker Change: 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.

Speaker Change: The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for prepared results in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies.

Tom Baumann: A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and in the trended quarterly financial statements posted on the company's website. Now, I'd like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Speaker Change: 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.

Dhrupad Trivedi: Now I would like to turn the call over to Drupor Trevetti, President and CEO of A10 Networks. Thank you, Dom, and thank you all for joining us today. The North American Service Provider Market remains choppy even as spending is trending positive and overall direction. The market sentiment improved in the first quarter versus the second half of 2023, but we still saw projects moving across quarters. Year-to-date, our service provider revenue, excluding North America, is up 20%, demonstrating that this is largely a North American market issue related to the timing of carrier capex. Encouragingly, much of these headwinds in the second quarter were offset by improving strength in the enterprise segment.

Dhrupad Trivedi: Now, I'd like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Dhrupad Trivedi: Thank you, Tom, and thank you all for joining us today. The North American service provider market remains choppy even as spending is trending positive in an overall direction. The market sentiment improved in the first quarter versus the second half of 2023, but we still saw projects moving across quarters. Year-to-date, our service provider revenue, excluding North America, is up 20%, demonstrating that this is largely a North American market issue related to timing of carrier capital. Encouragingly, much of these headwinds in the second quarter were offset by improving strength in the enterprise segment.

Dhrupad Trivedi: Thank you, Tom, and thank you all for joining us today.

Dhrupad Trivedi: The North American service provider market remains choppy, even as spending is trending positive in an overall direction. The market sentiment improved in the first quarter versus second half of 2023, but we still saw projects moving across quarters.

Dhrupad Trivedi: Year-to-date, our service provider revenue, excluding North America, is up 20%, demonstrating that this is largely a North American market issue related to timing of carrier CAPEX.

Dhrupad Trivedi: Encouragingly, much of these headwinds in the second quarter were offset by improving strength in the enterprise segment.

Dhrupad Trivedi: We have been devoting resources, both R&D investments and additional sales and marketing muscles, to target enterprise opportunities. These investments are bearing fruit. Enterprise-related revenue increased 25%, offsetting much of the 25% decline in the service provider segment. Additional investments are in process now, and we expect A10's position in the enterprise market to continue to improve.

Dhrupad Trivedi: We have been devoting resources, both R&D investments and additional sales and marketing muscle, to target the enterprise opportunity. These investments are bearing fruit. Enterprise-related revenue increased 25%, offsetting much of the 25% decline in the service provider segment.

Dhrupad Trivedi: We have been devoting resources, both R&D investments and additional sales and marketing muscles, to target enterprise opportunities.

Dhrupad Trivedi: These investments are bearing fruit. Enterprise-related revenue increased 25%, offsetting much of the 25% decline in the service provider segment.

Dhrupad Trivedi: Additional investments are in process now, and we expect A10's position in the enterprise market to continue to improve. During the quarter, one of the world's largest digital communication technology companies, with nearly 100,000 employees worldwide, chose A10, displacing their previous vendor for their hybrid infrastructure solution. Our commitment to technical performance with a re-energized enterprise portfolio and global technical support and alignment with customers' business goals led A10 to secure this win in the quarter and showcases our ability to compete and win in the enterprise space with the most demanding infrastructure. As we look at our pipeline for the second half of the year,

Dhrupad Trivedi: Additional investments are in process now and we expect A10's position in the enterprise market to continue to improve.

Dhrupad Trivedi: During the quarter, one of the world's largest digital communication technology companies, with nearly 100,000 employees worldwide, chose A10, displacing their previous vendor for their hybrid infrastructure solution. Our commitment to technical performance with a re-energized enterprise portfolio, global technical support, and alignment with customers' business goals led A10 to secure this win in the quarter and showcases our ability to compete and win in the enterprise space with the most demanding infrastructures. As we look at our pipeline for the second half of the year, this segment is expected to grow faster than the service provider segment and provides the basis for continued growth in this vertical.

Dhrupad Trivedi: During the quarter, one of the world's largest digital communication technology companies

Dhrupad Trivedi: with nearly 100,000 employees worldwide chose A10, displacing their previous vendor for their hybrid infrastructure solution.

Dhrupad Trivedi: Our commitment to technical performance with a re-energized enterprise portfolio.

Dhrupad Trivedi: Global technical support and alignment with customers business goals led A10 to secure this win in the quarter and showcases our ability to compete and win in the enterprise space with the most demanding infrastructures.

Speaker Change: As we look at our pipeline for the second half of the year, this segment is expected to grow faster than service provider segment and provides the basis for continued growth in this vertical.

Dhrupad Trivedi: This segment is expected to grow faster than the service provider segment and provides the basis for continued growth in this vertical. Growing the enterprise business is a part of our ongoing strategic focus on driving predictable performance. Diversification remains core to our overall strategy, enabling A10 to navigate challenging conditions better than peers and, over the long term, drive growth that outpaces the broader market segment. Clearly, 2024 has been a challenging year for North American service providers so far as they deal with market challenges for their own business.

Dhrupad Trivedi: Growing the enterprise business is a part of our ongoing strategic focus on driving predictable performance. The diversification remains core to overall strategy, enabling A10 to navigate challenging conditions better than peers and, over the long term, driving growth that outpaces the broader market segment. Clearly, 2024 has been a challenging year for North American service providers so far as they navigate market challenges for their own businesses. A10 is not alone in this exposure, but our business model and diversification has enabled us to maintain robust profitability in line with our targets despite these headwinds. For the first half of 2024, we delivered EPS expansion year over year in line with expectations and expect to accomplish this on a full-year basis.

Speaker Change: Growing the enterprise business is a part of our ongoing strategic focus on driving predictable performance.

Speaker Change: Diversification remains core to our overall strategy enabling A10 to navigate challenging conditions better than peers and over the long term driving growth that outpaces the broader market segment.

Speaker Change: Clearly, 2024 has been a challenging year for North American service providers so far as they navigate market challenges for their own businesses.

Dhrupad Trivedi: A10 is not alone in this exposure, but our business model and diversification have enabled us to maintain robust profitability in line with our targets despite these headwinds. For the first half of 2024, we delivered EPS expansion year-over-year in line with expectations, and we expect to accomplish this on a full year basis. Longer term, we continue to be built to grow at a low double-digit pace faster than the market, with our profitability and cash generation helping growth faster than the top.

Speaker Change: A10 is not alone in this exposure, but our business model and diversification has enabled us to maintain robust profitability in line with our targets despite these headwinds.

Speaker Change: For the first half of 2024, we delivered EPS expansion year-over-year in line with expectations.

Speaker Change: and expect to accomplish this on a full year basis.

Dhrupad Trivedi: Longer term, we continue to be built to grow at a low double-digit space faster than the market, with our profitability and cash generation helping growth faster than the top line. Simultaneously, we are investing in our next wave of growth products, including initiatives to capitalize on growth-type new AI solutions, which continue to grow in scope and have some time before their fully commercialization. As I have discussed in the past, A10 has long used AI in our security solutions, especially those that address D-Ross attacks. We are increasing the use of AI-focused agile solutions to enable our customers to better identify, address, and remediate a growing wave of security threats.

Speaker Change: Longer term, we continue to be built to grow at a low double-digit pace, faster than the market, with our profitability and cash generation helping growth faster than the top line.

Dhrupad Trivedi: Simultaneously, we are investing in our next wave of growth products, including initiatives to capitalize on growth-type new AI solutions, which continue to grow in scope and have some time before they are fully commercialized. As I have discussed in the past, A10 has long used AI in our security solutions, especially those that address DDoS attacks. We are increasing the use of AI-focused agile solutions to enable our customers to better identify, address, and remediate a growing wave of security threats. Bad actors are utilizing AI, and we are evolving our technology to address these new threats.

Speaker Change: Simultaneously, we are investing in our next wave of growth products, including initiatives to capitalize on growth tied to new AI solutions, which continue to grow in scope and have some time before they are fully commercialized.

Speaker Change: As I have discussed in the past, A10 has long used AI in our security solutions, especially those that address DDoS attacks.

Speaker Change: We are increasing the use of AI-focused agile solutions to enable our customers to better identify, address, and remediate a growing wave of security threats.

Dhrupad Trivedi: Bad actors are utilizing AI, and we are evolving our technology to address these new threats. These tools are increasingly must have for our customers, and we expect to add to our security and AI back to arsenal of solutions in the coming quarters. Security solutions as a percentage of sales continue to trend in line with our long-term growth goals. Our new engineering investments are related to developing AI-based solutions for customers to better manage and secure their networks. This includes better insights to predict network performance as well as new capabilities to address threats in real time that have emerged with AI in network traffic.

Speaker Change: Bad actors are utilizing AI and we are evolving our technology to address these new threats.

Dhrupad Trivedi: These tools are increasingly a must-have for our customers, and we expect to add to our security and AI-backed arsenal of solutions in the coming quarter. Security solutions as a percentage of sales continue to trend in line with our long-term growth. Our new engineering investments are related to developing AI-based solutions for customers to better manage and secure the network. This includes better insights to predict network performance, as well as new capabilities to address threats in real time that have emerged from AI network traffic.

Speaker Change: These tools are increasingly must-have for our customers, and we expect to add to our security and AI-backed arsenal of solutions in the coming quarters.

Speaker Change: Security solutions as a percentage of sales continue to trend in line with our long-term growth goals.

Speaker Change: Our new engineering investments are related to developing AI-based solutions for customers to better manage and secure their networks.

Speaker Change: This includes better insights to predict network performance, as well as new capabilities to address threats in real time that have emerged with AI network traffic.

Dhrupad Trivedi: In keeping with our historic strength on understanding network traffic in real time, we are also working with customers to evolve our hardware to support next generation data centers needed to support performance and latency needs for AI traffic in all kinds of new models. We are engaged with customers and channel partners to enable their roadmap as the market matures and moves into commercialization phase in the future. While we invest in new solutions, new technologies, and reallocate sales resources, eight and remain solidly profitable even as we navigate near-term revenue heads. Once again, I'm proud that we have achieved our non-GAAP EPS targets even with these investments and market challenges.

Dhrupad Trivedi: In keeping with our historic strength in understanding network traffic in real time, we are also working with customers to evolve our hardware to support next-generation data centers needed to support performance and latency needs for AI traffic in all kinds of new models.

Speaker Change: In keeping with our historic strengths on understanding network traffic in real-time, we are also working with customers to evolve our hardware to support next-generation data centers needed to support performance and latency needs for AI traffic in all kinds of new models.

Dhrupad Trivedi: We are engaged with customers and channel partners to enable their roadmaps as the market matures and moves into the commercialization phase in the future, while we invest in new solutions, new technologies, and reallocate sales resources. A10 remains solidly profitable even as we navigate near-term revenue headwinds. Once again, I'm proud that we have achieved our non-gap EPS targets even with these investments and market challenges. Just a few years ago, these factors would have resulted in significant losses.

Speaker Change: We are engaged with customers and channel partners to enable their roadmap as the market matures and moves into commercialization phase in the future.

Speaker Change: While we invest in new solutions, new technologies, and reallocate sales resources, A10 remains solidly profitable even as we navigate near-term revenue headwinds.

Speaker Change: Once again, I'm proud that we have achieved our non-gap EPS targets, even with these investments and market challenges.

Dhrupad Trivedi: Just a few years ago, these factors would have resulted in significant losses. Today, we are systematically profitable. Our growth margins in the second quarter were in line with stated goal of 80 to 82 percent, and our adjusted EBITDA margin was nearly 26 percent, in line with our profitability goals. As revenue conditions normalize, we expect our profitability to improve further. We remain committed to achieving our long-term stated goals while driving growth. Eight ends consistent ability to meet profitability targets, even amidst 70 challenges, underscores the resilience of our business model. The results here today position us to achieve our full-year business model objectives, including targets for growth margin and adjusted EBITDA margin, as well as growth in our full-year non-GAAP EPS.

Speaker Change: Just a few years ago, these factors would have resulted in significant losses.

Dhrupad Trivedi: Today, we are systematically profitable. Our gross margins in the second quarter were in line with our stated goal of 80 to 82 percent, and our adjusted EBITDA margin was nearly 26 percent, in line with our profitability goal. As revenue conditions normalize, we expect our profitability to improve further. We remain committed to achieving our long-term stated goals.

Speaker Change: Today, we are systematically profitable.

Speaker Change: Our gross margins in the second quarter were in line with stated goal of 80 to 82% and our adjusted EBITDA margin was nearly 26% in line with our profitability goals.

Speaker Change: As revenue conditions normalize, we expect our profitability to improve further.

Speaker Change: We remain committed to achieving our long-term stated goals.

Dhrupad Trivedi: A10's consistent ability to meet profitability targets, even amidst revenue challenges, underscores the resilience of our business. The results here today position us to achieve our full-year business model objectives, including targets for gross margin and adjusted EBITDA margin, as well as growth in our full-year non-GAAP EPS. We have continued to buy back stock, and our cash flow has more than funded our buyback and dividend program. With that said, I'd like to turn the call over to Brian for a detailed review of the quarter. Brian. Thank you.

Speaker Change: [inaudible]

Aten: A10's consistent ability to meet profitability targets, even amidst revenue challenges, underscores the resilience of our business model.

Aten: The results year-to-date position us to achieve our full-year business model objectives, including targets for gross margin and adjusted EBITDA margin, as well as growth in our full-year non-GAAP EPS.

Brian Becker: We have continued to buy back stock, and our cash flow has more than funded our buyback and dividend programs. With that, I'd like to turn the call over to Brian for a detailed review of the quarter.

Aten: We have continued to buy back stock and our cash flow has more than funded our buyback and dividend programs.

Aten: With that, I'd like to turn the call over to Brian for a detailed review of the quarter. Brian ?

Brian Becker: Brian, thank you, Drupit. Second quarter revenue was 60.1 million, a decrease of 8.7 percent year over year. As Drupit described, quoted to quarter volatility in the North American service provider sector can continue to be high, offset by improvements in the enterprise sector. Product revenue for the quarter was 29.5 million, representing 49% of total revenue. Services revenue was 30.6 million, or 51% of total revenue. Second quarter recurring revenue increased 11% compared to the second quarter last year, and deferred revenue increased 6%, demonstrating stronger product sales for the past several quarters and continued demand for our enterprise solutions.

Brian Becker: Thank you, Dhrupad. Second quarter revenue was $60.1 million, a decrease of 8.7% year-over-year. As Dhrupad described, quarter-to-quarter volatility in the North American service provider sector continued to be high, offset by improvements in the enterprise segment. Product revenue for the quarter was $29.5 million, representing 49% of total revenue. Services revenue was $30.6 million, or 51% of total revenue. Second quarter recurring revenue increased 11% compared to the second quarter last year. And deferred revenue increased 6%, demonstrating stronger product sales for the past several quarters and continued demand for our enterprise solution. These metrics, coupled with a strong pipeline of opportunities, further validate our confidence that we are not losing opportunities to competitors.

Brian Becker: Thank you, Dhrupad. Second quarter revenue was $60.1 million, a decrease of 8.7% year-over-year. As Dhrupad described, quarter-to-quarter volatility in the North American service provider sector continued to be high, offset by improvements in the enterprise segment.

Speaker Change: Product revenue for the quarter was $29.5 million, representing 49% of total revenue. Services revenue was $30.6 million, or 51% of total revenue.

Speaker Change: Second quarter recurring revenue increased 11% compared to the second quarter last year and deferred revenue increased 6% demonstrating stronger product sales for the past several quarters and continued demand for our enterprise solutions.

Brian Becker: These metrics, coupled with a strong pipeline of opportunities, further validate our confidence that we are not losing opportunities to competitors. As you can see on our balance sheet, our deferred revenue was 140 million as of June 30, 2024, up 6.3% yield over year. With the exception of revenue, all of the metrics discussed on this call are on a non-GAAP basis, unless otherwise stated. A full reconciliation of gap to non-gap results are provided in our press release and on our website. Gross margin in the second quarter was 80.9%, in line with our stated goal of 80 to 82%.

Speaker Change: These metrics, coupled with a strong pipeline of opportunities, further validate our confidence that we are not losing opportunities to competitors.

Brian Becker: As you can see on our balance sheet, our deferred revenue is $140 million as of June 30, 2024, up 6.3% year-over-year. With the exception of revenue, all of the metrics discussed on this call are on a non-GAAP basis unless otherwise stated. A full reconciliation of GAAP to non-GAAP results is provided in our press release and on our website.

Speaker Change: As you can see on our balance sheet, our deferred revenue is $140 million as of June 30th, 2024, up 6.3% year-over-year.

Speaker Change: With the exception of revenue, all of the metrics discussed on this call are on a not-GAAP basis, unless otherwise stated. A full reconciliation of GAAP to non-GAAP results are provided in our press release and on our website.

Brian Becker: Gross margin in the second quarter was 80.9%, in line with our stated goals of 80 to 82%. Adjusted EBITDA was $15.5 million for the quarter, reflecting 25.8% of total revenue. Non-GAAP net income for the quarter was $13.2 million, or $0.18 per diluted share, compared to $14.5 million, or $0.19 per diluted share in the year-ago quarter. Diluted-weighted shares used for computing non-GAAP EPS for the second quarter were approximately 75.5 million shares, compared to 75.4 million shares in the year-ago quarter.

Speaker Change: Gross margin in the second quarter was 80.9%, in line with our stated goals of 80 to 82%.

Brian Becker: Adjusted EBITDA was 15.5 million for the quarter, reflecting 25.8% of total revenue. Non-GAAP net income for the quarter was 13.2 million, or 18 cents per diluted share, compared to 15.5 million or 19 cents per diluted share in a year ago quarter. Deluted weighted shares used for computing non-gap EPS for the second quarter were approximately 75.5 million shares, compared to 75.4 million shares in a year-ago quarter. On a gap basis, net income for the quarter was 9.5 million, or 13 cents per diluted share, compared to net income of 11.6 million, or 15 cents per diluted share in a year ago quarter.

Speaker Change: Adjusted EBITDA was $15.5 million for the quarter, reflecting 25.8% of total revenue.

Speaker Change: non-GAAP net income for the quarter was $13.2 million, or $0.18 per diluted share, compared to $14.5 million, or $0.19 per diluted share in the year-ago quarter.

Speaker Change: Diluted weighted shares used for computing non-GAAP EPS for the second quarter were approximately 75.5 million shares, compared to 75.4 million shares in the year-ago quarter.

Brian Becker: On a GAAP basis, net income for the quarter was $9.5 million, or $0.13 per diluted share, compared to net income of $11.6 million, or $0.15 per diluted share, in the year-ago quarter. Turning to the year-to-date results, revenue was $120.8 million, down 2.2% year-over-year. Product revenue was down 15%, representing approximately 49% of total revenue, and services revenue was up 15%, representing about 51% of total revenue.

Speaker Change: On a gap basis, net income for the quarter was $9.5 million, or $0.13 per diluted share, compared to net income of $11.6 million, or $0.15 per diluted share in the year-ago quarter.

Brian Becker: Turning to the year-to-date results, revenue was 120.8 million, down 2.2% year-over-year. Product revenue was down 15%, representing approximately 49% of total revenue. And services revenue was up 15%, representing about 51% of total revenue. Year-to-date non-GAAP gross margin was 81.4% in line with our target range. We reported 23.9 million in non-GAAP operating income, down 16% compared with 28.5 million in the first six months last year. Adjusted even though it was 29.4 million, reflecting 24.3% of total revenue. Non-GAAP net income for the first six months was 25.9 million, or 35 cents per diluted share, up from 24.5 million or 32 cents per diluted share in a year ago quarter.

Speaker Change: Turning to the year-to-date results, revenue was $120.8 million, down 2.2% year-over-year. Product revenue was down 15%, representing approximately 49% of total revenue. And services revenue was up 15%, representing about 51% of total revenue.

Brian Becker: Year-to-date non-GAAP gross margin was 81.4%, in line with our target range. We reported $23.9 million in non-GAAP operating income, down 16%, compared with $28.5 million in the first six months last year. The adjusted EBIT bill is $29.4 million, reflecting 24.3% of total revenue. Non-GAAP Net Income for the first six months was $25.9 million, or $0.35 per diluted share, up from $24.5 million, or $0.32 per diluted share in the year-ago quarter. Period.

Speaker Change: Year-to-date non-gap gross margin was 81.4%, in line with our target range.

Speaker Change: We reported $23.9 million in non-GAAP operating income, down 16%, compared with $28.5 million in the first six months last year.

Speaker Change: Adjusted EBIT though is $29.4 million reflecting 24.3% of total revenue.

Speaker Change: non-GAAP net income for the first six months was $25.9 million, or $0.35 per diluted share, up from $24.5 million, or $0.32 per diluted share in the year-ago quarter.

Brian Becker: Period. On a gap basis, net income for the first six months was 19.2 million, or 26 cents per diluted share, compared with net income of 15.6 million, or 20 cents per diluted share. During the quarter, we generated 11.3 million in cash from operations. Year-to-date cash generated by operations was 43.8 million, in line with our four-year targets.

Brian Becker: On a gap basis, net income for the first six months was $19.2 million, or $0.26 per diluted share, compared with net income of $15.6 million, or $0.20 per diluted share. During the quarter, we generated $11.3 million in cash from operations. You today cash generated by operations with 43.8 million in line with our four year target. Turning to the balance sheet, as of June 30, 2024, we had $177 million in total cash, cash equivalents, and marketable securities, compared to $159.3 million at the end of 2023.

Speaker Change: Period.

Speaker Change: On a gap basis, net income for the first six months was $19.2 million, or $0.26 per diluted share, compared with net income of $15.6 million, or $0.20 per diluted share.

Speaker Change: During the quarter, we generated $11.3 million in cash from operations.

Speaker Change: You today, cash generated by operations was $43.8 million, in line with our four-year targets.

Brian Becker: Turning to the balance sheet, as of June 30, 2024, we had 177 million in total cash, cash equivalent, and marketable securities, compared to 159.3 million at the end of 2023. During the quarter, we played 4.5 million in cash dividends, and we purchased 11.8 million worth of shares. We also continue to carry no debt. The board has approved the quarterly cash dividend of six cents per share to be paid on September 3, 2024, to shareholders of record on August 15, 2024.

Speaker Change: Turning to the balance sheet, as of June 30, 2024, we had $177 million in total cash, cash equivalents, and marketable securities, compared to $159.3 million at the end of 2023.

Brian Becker: During the quarter, we paid $4.5 million in cash dividends and repurchased $11.8 million worth of shares. We also continue to carry no debt. The board has approved a quarterly cash dividend of $0.06 per share to be paid on September 3rd, 2024 to shareholders of record on August 15th, 2024. We have $34.8 million remaining in our $50 million share of purchase authorization as of June 30, 2024. We expect 2024 full-year EPS growth in single digits, in line with expectations, and we continue to target gross margins of 80% to 82% and adjusted EBITDA margins of 26% to 28% on a full-year basis. I'll now turn the call back to Dhrupad for closing comments.

Speaker Change: During the quarter, we paid $4.5 million in cash dividends and repurchased 11.8 million worth of shares.

Speaker Change: We also continue to carry no debt.

Speaker Change: The board has approved the quarterly cash dividend of six cents per share to be paid on September 3rd, 2024 to shareholders of record on August 15th, 2024.

Brian Becker: Network. We have 34.8 million remaining in our 50 million share of purchase authorization as of June 30, 2024. We expect 2020 for a full-year EPS growth in single digits, in line with expectations, and we continue to target growth margins of 80 to 82% and adjusted EBITDA margins of 26 to 28% on a full-year basis.

Speaker Change: We have $34.8 million remaining in our $50 million share of purchase authorization as of June 30, 2024.

Speaker Change: We expect 2024 full-year EPS growth in single digits in line with expectations, and we continue to target gross margins of 80% to 82% and adjusted EBITDA margins of 26% to 28% on a full-year basis.

Dhrupad Trivedi: I'll now turn the call back to Drupid for closing comments. Thank you, Brian. A10 maintains a strong competitive position in the market, supported by durable long-term growth catalysts. Short-term volatility in the North American service provider market does not alter our long-term strategy, and we are making steady progress to enhance our position in the enterprise market. Our strategic diversification remains a key advantage, enabling consistent profitability even during periods of revenue headwinds.

Speaker Change: I'll now turn the call back to Dhrupad for closing comments.

Dhrupad Trivedi: A10 maintains a strong competitive position in the market, supported by its Durable Long-Term Growth Catalyst. Short-term volatility in the North American service provider market does not alter our long-term strategy, and we are making steady progress to enhance our position in the enterprise market. Our strategic diversification remains a key advantage, enabling consistent profitability even during periods of revenue headwinds. We also continue to create shareholder value through the return of meaningful capital to shareholders. Operator, you can now open the call up for questions.

Dhrupad Trivedi: Thank you, Brian .

Dhrupad Trivedi: A10 maintains a strong competitive position in the market supported by durable long-term growth catalysts.

Dhrupad Trivedi: Short-term volatility in the North American service provider market does not alter our long-term strategy and we are making steady progress to enhance our position in the enterprise market.

Dhrupad Trivedi: Our strategic diversification remains a key advantage, enabling consistent profitability even during periods of revenue headwinds.

Dhrupad Trivedi: We also continue to create shareholder value through the return of meaningful capital to shareholders.

Dhrupad Trivedi: We also continue to create shareholder value through the return of meaningful capital to shareholders.

Operator: Operator, you can now open the call-up for questions. Thank you, Drupid. No one will begin the question in our session. If you would like to ask a question, please press the star flip-by-one on your telephone keyboard. If any reason you would like to remove that question, please press the star flip-by-two. And again, to ask a question, press star one. As a reminder, if you're using a speaker phone, please remember to pick up your hands before asking a question.

Speaker Change: Operator, you can now open the call up for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. And again, to ask another question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly whilst your questions are registered. You have the first question, Phil. Anja Soderstrom with Civilty. You may proceed.

Operator: Thank you, Dhrupad.

Speaker Change: We will now begin the question and answer session.

Operator: If you would like to ask a question, please press star followed by 1 on your telephone keypad.

Operator: If for any reason you would like to remove that question, please press star followed by 2.

Operator: And again, to ask a question, press star 1.

Operator: As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question.

Operator: We will pause every fleet while questions are registered.

Operator: We will pause here briefly whilst questions are registered.

Operator: You have the first question for me.

Joseph Strong: I'm Joseph Strong with Siddoti. He may proceed. All right, good afternoon.

Operator: You have the first question form. Anja Soderstrom with Siddholti. You may proceed.

Stefan Guillaume: Hi, good afternoon. This is Stefan Guillaume on behalf of Anja Soderstrom. Can you guys hear me? Yeah, we can hear you. Hi, thank you. I guess my first question is, are you still seeing service providers come back in the second half? And how are your conversations with them?

Joseph Strong: This is the same deal I'm on for Anya's Siddoti Strong. Can you guys hear me?

Operator: Hi, good afternoon. This is Stephane Guilliam on for Anja Soderstrom. Can you guys hear me?

Unnamed Speaker: Yeah, we can hear you. Thank you.

Speaker Change: Yeah, we can hear you. Thank you.

Dhrupad Trivedi: I guess my first question is, are you still seeing service providers come back in the second half? And how are your conversations with them? Yeah, good question.

Stephane Guilliam: Hi, thank you. I guess my first question is, are you still seeing service providers come back in the second half? And how are your conversations with them?

Dhrupad Trivedi: Yeah, good question. So I think, you know, first, as I mentioned in the body of the call, our service provider conversation is very much North America specific, right? Because we have healthy growth outside of that. So within North America, I think there are two things we are seeing. One is they continue to manage sort of the spending level, where projects can get Scope differently and move across periods. And our assumption, of course, is a lot of their decisions around making significant capital investments are related to A, cost of capital, B, market uncertainty, including, you know, an election period right now.

Dhrupad Trivedi: So I think, you know, first, as I mentioned in the body of the call, our service provider conversation is very much not America specific, right? Because we have healthy growth outside of that. So within North America, I think there's two things we are seeing. One is they continue to manage sort of the spending level where projects can get scope differently and move across periods. And our assumption, of course, is a lot of their decisions around making significant capital investments are related to a cost of capital, the market uncertainty, including, you know, an election period right now.

Speaker Change: Yeah, good question. So I think, you know, first, as I mentioned in the body of the call,

Speaker Change: Our service provider conversation is very much North America specific, right, because we have healthy growth outside of that.

Speaker Change: So, within North America, I think there's two things we are seeing. One...

Speaker Change: is they continue to manage sort of the spending level where projects can get

Speaker Change: scoped differently and moved across periods and our assumption of course is a lot of their

Speaker Change: Decisions around making significant capital investments.

Speaker Change: are related to A, cost of capital, B, market uncertainty, including, you know, election period right now.

Dhrupad Trivedi: So our conversations with them generally show that they continue to spend a little bit because a lot of the things we do are in the path of either revenue generation or becoming more secure. However, the newer projects tend to be pushed out in time a little bit.

Dhrupad Trivedi: So our conversations with them generally show that they continue to spend a little bit because a lot of the things we do are in the path of either revenue generation or becoming more secure. However, the newer projects tend to be pushed out in time a little bit.

Speaker Change: So our conversations with them generally show that they continue to spend a little bit because a lot of the things we do are in the path of either revenue generation or becoming more secure. However, the newer projects tend to be pushed out in time a little bit.

Dhrupad Trivedi: When we think of our second half, our assumptions really around delivering results are that we continue to make steady progress on enterprise footprint. Second, we continue to see execution that we saw in the first half from service providers outside of North America. And within North America, I think we continue to find ways between the balance of our customers to deliver that growth. At the point at which they get confident and start reinvesting CAPEX, of course, we will benefit from that as well. But our plan on the second half is not predicated on a sharp snapback in spending from them.

Dhrupad Trivedi: When we think of our second half, our assumptions really around delivering results are that we continue to make steady progress on the enterprise footprint, and second, we continue to see execution that we saw in the first half from service providers outside of North America. And then within North America, I think we continue to find ways between the balance of our customers to deliver that growth at the point at which they become confident and start reinvesting capex. Of course, we will benefit from that as well, right? But our plan for the second half is not predicated on a sharp snap back in spending from

Speaker Change: when we think of our second half

Speaker Change: Our assumptions really around delivering results are that we continue to make steady progress on enterprise footprint.

Speaker Change: Second is we continue to see execution that we saw in the first half from service providers outside of North America and then within North America I think we continue to find ways between the balance of our customers to deliver that growth.

Speaker Change: at the point at which they get confident and start reinvesting CapEx, of course, we will benefit from that as well, right? But our plan on second half is not predicated on a sharp snapback in spending from them.

Dhrupad Trivedi: Thank you for the call with me. Can you also talk about the competitive environment? In the past, you've said that you're taking share. Are you still doing that? Yes, so I would say there's two ways to look at that. So first is if you look at the broader market and you look at a lot of the growth rates that you're seeing from companies in our sector or industry, they're all plus minus 2% kind of range. So that's one. Second is the way we think about gaining share is when we can trace and point to an actual displacement of a competitive solution.

Stefan Guillaume: Thank you for the call today. Can you also talk about the competitive environment? In the past, you've said that you're taking a share. Are you still doing that?

Speaker Change: Thank you for the call today. Can you also talk about the competitive environment? In the past, you've said that you're taking share. Are you still doing that?

Dhrupad Trivedi: Yeah, so I would say, you know, there are two ways to look at that, right? So first, if you look at the broader market and you look at a lot of the growth rates that you're seeing from companies in our sector or industry, they're all kind of in the plus minus 2% kind of range. Right. So that's one.

Speaker Change: Yeah, so I would say, you know, there's two ways to look at that, right? So first is if you look at the broader market.

Speaker Change: And you look at a lot of the growth rates that you are seeing from companies in our sector or industry. They are all kind of plus minus 2% kind of range, right? So that's one.

Dhrupad Trivedi: Second, the way we think about gaining share is when we are, we can trace and point to an actual displacement of a competitive solution. And I would say that, certainly, in the enterprise market, we feel that we are able to replace some of that solution. And I would say that's kind of the most basic way we think about gaining share. And then if you look at our enterprise segment growth on a year to date basis, half to half, we grew about 7%, which I would say is at least slightly above market.

Speaker Change: Second is, the way we think about gaining share is when we are, we can trace and point to an actual displacement of a competitive solution.

Dhrupad Trivedi: And I would say that certainly in the enterprise market, we feel that we are able to replace some other solution. And I would say that's kind of the most basic way we think about gaining share. And then, if you look at our enterprise segment growth on a year-to-date basis, half to half, we grew about 7%, which I would say is at least slightly above market average.

Speaker Change: and I would say that certainly in the enterprise market we feel that we are able to replace some other solution and I would say that's

Speaker Change: Kind of the most basic way we think about gaining share

Speaker Change: And if you look at our enterprise segment growth on a year-to-date basis, half to half, we grew about 7%, which I would say is at least slightly above market average.

Unnamed Speaker: All right, thank you.

Stefan Guillaume: All right, thank you. And so what kind of pricing power do you have in this environment?

Dhrupad Trivedi: And so what kind of pricing power do you have in this environment? So I would say pricing is a balance thing. So obviously we have input cost inflation, which we try to find ways to offset, and we offset that with maybe price increases selectively to customers and then the rest with productivity. But I think we are very selective because we want to do it in a very methodical way versus going up and down on prices, right? So I think for us, it's a mix of overcoming input cost through productivity and selective price increases where we don't have a choice but to pass it on.

Speaker Change: All right, thank you. And so what kind of pricing power do you have in this environment?

Dhrupad Trivedi: And so I would say pricing is a balanced thing. So obviously, we have input cost inflation, which we try to find ways to offset, and we offset that with maybe price increases selectively to customers and then the rest with productivity. But I think we are very selective because we want to do it in a very methodical way versus going up and down on prices, right? So I think for us, it's a mix of overcoming input costs through productivity and selective price increases where we don't have a choice but to pass it on.

Speaker Change: I would say pricing is a balanced thing so obviously we have input cost inflation which we try to find ways to offset and we offset that with maybe price increases selectively to customers and then the rest with productivity but I think we are very selective because

Speaker Change: we want to do it in a very methodical way versus going up and down on prices, right? So I think for us it's a mix of overcoming input cost through productivity and selective price increases where we don't have a choice but to pass it on.

Unnamed Speaker: Thank you.

Stefan Guillaume: Thank you. And the last one for me is... Where are you in the innings of seeing results from changing your sales?

Dhrupad Trivedi: And the last one for me is where are your beginnings of seeing results from the changing of your sales plan? So I would say, you know, if you think of our business, two-thirds service provider, one-third enterprise. Enterprise is a little bit bigger now. On the service provider side, of course, we have a very mature experience sales team where the focus is on improving our capability to cross-sell more products to the existing customer base, right? So, on that dimension, I think we are making good progress. Some regions obviously are farther ahead than others. So there is still room for us to continue growing through that.

Speaker Change: Thank you. And the last one for me is, where are you in the innings of seeing results from the changing of your sales stream?

Dhrupad Trivedi: So I would say, you know, if you think of our business, two-thirds is service provider, and one-third is enterprise. Enterprise is a little bit bigger now.

Speaker Change: So, I would say, you know, if you think of our business, two-thirds is service provider, one-third enterprise. Enterprise is a little bit bigger now. On the service provider side, of course, we have a very mature, experienced sales team where the focus is on improving our capability to...

Dhrupad Trivedi: On the service provider side, of course, we have a very mature, experienced sales team where the focus is on improving our capability to cross-sell more products to our existing customer base, right? So on that dimension, I think we are making good progress. Some regions, obviously, are farther ahead than others, so there is still room for us to continue growing through that. On the enterprise side, we have brought in, obviously, new sales talent, as well as changed how we go to market in terms of our portfolio and products. And I would characterize that as, you know, we are probably somewhere in the third, third or between three, between the third and fourth inning on that journey.

Speaker Change: Transcribed by https://otter.ai

Dhrupad Trivedi: On the enterprise side, we have broadened obviously new sales talent, as well as how we go to market in terms of portfolio and products as well.

Speaker Change: On the enterprise side, we have brought in obviously new sales talent as well as how we go to market in terms of our portfolio and products as well and I would characterize that as you know we are probably somewhere in the third

Dhrupad Trivedi: And I would characterize that as, you know, we are probably somewhere in the third third or between three, between third and fourth inning on that.

Speaker Change: between 3rd and 4th inning on that journey.

Unnamed Speaker: Thank you so much for picking my questions.

Stefan Guillaume: Thank you so much for picking my questions.

Speaker Change: Thank you so much for picking my questions.

Gray Powell: No problem, thank you. Your next question comes from Gray Powell with PTIG; you may proceed. Okay, great, thanks.

Speaker Change: No problem, thank you.

Operator: Your next question comes from... Gray Powell with PTIG. You may proceed.

Speaker Change: Your next question comes from...

Gleipau: Gray Powell with PTIG. You may proceed.

Gray Wilson Powell: Okay, great, thanks. So yeah, a few questions on my side. Maybe just to start off, at a high level, can you talk about what you saw in terms of the overall spending environment and macro headwinds? And I mean, I know you've talked about it some in the prepared remarks, but it sounds like North American service providers may have caught you by surprise. But outside of that, would you say that things were stable? Did anything change positively or negatively? Just, I don't know, any more color you could provide there?

Dhrupad Trivedi: So yeah, a few questions on my side, maybe just to start off at a high level, can you talk about what you saw in terms of the overall spinning environment and macro headwinds. And I mean, I know you talked about it, someone that prepared remarks that sounds like North American service provider may have caught you by a surprise, but outside of that would you say that things were stable, that anything changed positively or negatively, just any more color you could provide there? Yeah, no, good question, Gray, so I would say absolutely that if I think of my three region, I would say APJ is stable on enterprise and service provider side, AMIA is stable on enterprise and service provider side, and North America, I would say we are making good progress on enterprise, so it offsets maybe some market weakness.

Gray Wilson Powell: Okay, great. Thanks. So, yeah, a few questions on my side. Maybe just to start off, at a high level,

Gray Wilson Powell: Can you talk about what you saw in terms of the overall spending environment and macro headwinds? And, I mean, I know you've talked about it some in the prepared remarks. It sounds like North American service provider may have caught you by surprise.

Speaker Change: But outside of that, would you say that things were stable, that anything changed positively or negatively, just, I don't know, any more color you could provide there?

Dhrupad Trivedi: Yeah, no, good question, Gray. So I would absolutely say that if I think of my three regions, I would say APJ is stable on the enterprise and service provider sides. AMEA is stable on the enterprise and service provider sides. And North America, I would say we are making good progress on the enterprise, so it offsets, maybe, some market weakness. And then within North America service provider, I think we were not necessarily surprised, but I think what evolved was some of the re-scoping of projects, right, versus cancellations or complete push out.

Gray: Yeah, no, good, good question, Gray. So I would I would say absolutely that if I think of my three regions,

Gray: I would say APJ is stable on enterprise and service provider side.

Amiya: Amiya is stable on enterprise and service provider side.

Amiya: And North America, I would say, we are making good progress on enterprise so it offsets maybe some market weakness.

Dhrupad Trivedi: And then within North America service provider, I think we were not necessarily surprised, but I think what involved was some of the rescoping of projects, right, versus cancellations of complete push-out. So that was only the thing where we, that's why we feel good about full-year. And if you remember, Q1 with it slightly better than with odd and Q2 is slightly worse, but it's still plus minus 2 or 3 million, right, so that's the sort of volatility or movement we see, and our goal is obviously to use the remaining pieces to offset that, so that when North America has the spending couple back, right, it only helps us from there.

Amiya: and then within North America, service provider.

Amiya: I think we were...

Amiya: Not necessarily surprised, but I think what evolved was...

Amiya: Some of the re-scoping of projects, right, versus cancellations or complete push-out. So,

Dhrupad Trivedi: So, that was the only thing where we, that's why we feel good about the full year. And if you remember, right, Q1 we did slightly better than we thought, and Q2 was slightly worse, but it's still plus minus 2 or 3 million, right? So, that's the sort of volatility of movement we see. And our goal is obviously to use the remaining pieces to offset that, so that when North America ISP spending comes back, it only helps us from there.

Amiya: So that was the only thing where we, that's why we feel good about full year. And if you remember, right, Q1 we did slightly better than we thought and Q2 is slightly worse, but it's still plus minus 2 or 3 million, right? So, so that's the sort of.

Amiya: volatility of movement we see and our goal is obviously to use the remaining pieces to offset that so that when North America has peace pending comes back right it only helps us from there

Unnamed Speaker: Got it.

Gray Wilson Powell: Got it. Okay. And then within the context of the full year, should we still be expecting, like, maybe single-digit growth and revenue or closer to flattening?

Dhrupad Trivedi: Okay, and then within the context of the full year, should we still be expecting like maybe both single-digit growth and revenue, or both sort of flat now? I think we would probably say no single-digit still feels right, although it's more back and loaded, so it's always risky. But our plan is obviously, if it's slightly below that, to that, how do we bridge back to getting our two-hour non-GAPPS results, right, so either way?

Speaker Change: Got it. Okay. And then within the context of the full year, should we still be expecting like maybe low single-digit growth in revenue or closer to flat now?

Dhrupad Trivedi: I think we would probably say low single-digit still feels right, although it's more back-end loaded. So it's always risky. But our plan is obviously if it's slightly below that, to that, how do we bridge back to getting out to our non-GAP EPS results, right?

Speaker Change: I think we would probably say low single digit still feels right although it's more back-end loaded so it's always risky but our our plan is obviously if it's slightly below that to that how do we bridge back to getting out to our non-GAP EPS results right so either way.

Gray Wilson Powell: Um, okay, and then last question: free cash flow in the first half of the year was actually really strong. What drove that, and just any directional pointers you can give us? You know, or maybe talk about like free cash flow margins relative to EBITDA margins. Is there any, any, any pointers there?

Unnamed Speaker: Okay, okay, great, and then last question: free cash flow in the first half of the year was actually really strong.

Speaker Change: Okay.

Speaker Change: Okay, great. And then last question, free cash flow in the first half of the year was...

Brian Becker: What drove that, and just any directional pointers you can give us, you know, or maybe talk about like free cash flow margins, relative to EBITDA margins, any pointers there? Yeah, good question.

Speaker Change: Actually, really strong. What drove that and just any directional pointers you can give us, you know, or maybe talk about like free cash flow margins relative to EBITDA margins. Any pointers there?

Operator: Yeah, good, good, good question. Yeah, go ahead. Yeah, no.

Brian Becker: Yeah, go ahead, Brandon. Yeah, no, free cash flow. A number of factors led into that. I mean, last year we had pretty poor linearity. I think we're seeing the benefits of some of that return to cash spending and releasing cash into the market, benefiting our free cash flow. As you pointed out, you know, we've talked about free cash flow being really strong last quarter at nearly 30 million, so we're getting another 10 million of free cash flow approximately this quarter, but our full-year cash flow target from a free cash flow perspective should be in the 60s.

Brian Becker: Yeah, no, free cash flow, a number of factors led into that. I mean, last year we had pretty poor linearity.

Speaker Change: Yeah, good, good, good question. Yeah, go ahead. Yeah, no, free free clash flow. A number of factors led into that. I mean, last year we had pretty poor linearity. I think we're seeing the benefits of some of that.

Brian Becker: I think we're seeing the benefits of some of that return to cash spending and releasing cash into the market, benefiting our free cash flow. As you pointed out, we talked about free cash flow being really strong last quarter at nearly $30 million. So, we've got another $10 million of free cash flow approximately this quarter. But our full year cash flow target from a free cash flow perspective should be in the 60s, you know, if everything continues to go as planned.

Speaker Change: return to cash spending and releasing cash into the market benefiting our free cash flow.

Speaker Change: As you pointed out, we've talked about free cash flow being really strong last quarter at nearly $30 million. So we've got another $10 million of free cash flow approximately this quarter.

Speaker Change: But our full year cash flow target from a free cash flow perspective should be in the 60s if everything continues to go as planned.

Brian Becker: You know, if everything continues to go as planned.

Brian Becker: And Brian, our EBITDA is a good proxy for free cash flow. Precisely because there's not too much capex variability.

Brian Becker: And Brian, our EBITDA is a good proxy for free cash flow. Precisely because there's not too much capex, really brilliant. Understood.

Speaker Change: And Brian , our EBITDA is a good proxy for free cash flow, because there's not too much capex variability.

Gray Wilson Powell: understood. Okay, thank you very much.

Unnamed Speaker: Okay, thank you very much.

Brian Becker: Understood. Okay. Thank you very much.

Unnamed Speaker: Thanks, Gray. Thank you, Gray.

Speaker Change: Thanks, guys.

Operator: As a reminder, if you'd like to ask any further questions, please press staff for it by one on your telephone keypads now.

Operator: As a reminder, if you'd like to ask any further questions, please press star followed by one on your telephone keypads now. We now have Hamed Khorsand with BWF Financial. You may proceed.

Speaker Change: Thank you Gray. As a reminder if you'd like to ask any further questions please press star followed by one on your telephone keypads now.

Hamed Khorsand: We now have Hamed Khorsand with BWS Financial. You may proceed. Hi, I'm talking about the North America service provider. This is the topic for about a year now. So, given the growth you saw in Q2, it obviously points to actual revenue decline on that part. So, are you losing share, or are these service providers just cutting back so much spending without you losing share? Yeah, so I think good question, Hamed.

Speaker Change: We now have Hamed Khorsand with BWF Financial. You may proceed.

Hamed Khorsand: Hi. So talking about this North American service provider, this has been a topic for about a year now. So is this, you know, given the growth you saw in Q2, it obviously points to actual revenue decline on that part. So are you losing share, or are these service providers just cutting back so much spending without you losing share?

Hamed Khorsand: Hi, I'm talking about this North America service provider.

Speaker Change: This has been a topic for about a year now.

Speaker Change: So is this, you know, given the growth you saw in Q2, it obviously points to actual revenue decline on that part.

Speaker Change: So, are you losing share or how are these service providers cutting back so much spending without you losing share?

Dhrupad Trivedi: Yeah, so I think this is a good question, Hamed. So maybe just level set on a couple of data points, right?

Dhrupad Trivedi: So, maybe you know, just level set on a couple of data points. So, if you look at North American service provider, I think in the last two or three days, I think AT&T, Verizon, they've all published capex. And you can see that in 2024, they're projecting capex declines of between six to eight percent year over year, right? So, and it's all of them, right? And cable companies are projecting slightly less than that. So, that's one data point. That's not that market is plus 10, and we are negative. Second is the way our products are designed at these customers.

Speaker Change: Yeah, so I think, good question, Hamed, so maybe, you know, just level set on a couple of data points, right? So if you look at North American service provider.

Dhrupad Trivedi: So if you look at North American service providers, I think in the last two or three days, I think AT&T, and Verizon, they've all published CapEx. And you can see that in 2024, they are projecting CapEx declines of between 6% to 8% year over year. And that's all of them.

Speaker Change: I think in the last two or three days, right, I think AT&T, Verizon, they've all published CapEx.

Speaker Change: And you can see that in 2024, they are projecting CapEx declines of between 6 to 8% year-over-year, right? So, and it's all of that, right? And cable companies are projecting slightly less than that.

Dhrupad Trivedi: And cable companies are projecting slightly less than that, so that's one data point that says it's not that the market is plus 10, and we are negative. Second, the way our products are designed for these customers. We are in their operational workflow to run the network and publish results on SLA achievement and things like that. Is it likely they are looking at competitors? Maybe, but we have a pretty good understanding of what is being deployed.

Speaker Change: So that's one data point that says it's not that market is plus 10 and we are negative.

Speaker Change: Second is the way our products are designed at these customers. We are in their operational workflow to run the network and publish results on SLA achievement and things like that. So,

Dhrupad Trivedi: We are in their operational workflow to run the network and publish results on SLA achievement and things like that. So, is it likely we are looking at competitors, maybe, but we have a pretty good understanding of what is deployed. We track all those devices; our support team knows every device that is active and how much traffic is going through it. So, that gives us confidence that it's more linked to their capex spending cycle versus competitive. And the last data point is when they do approve a data center, we do get the PO, right? So, we have a reasonably good correlation of when the project is approved, and we are in the mix; we get that PO.

Speaker Change: Is it likely they are looking at competitors? Maybe. But we have a pretty good understanding of what is deployed. We track all those devices. Our support team knows every device that is active and how much traffic is going through it. So that gives us confidence that

Dhrupad Trivedi: We track all those devices. Our support team knows every device that is active and how much traffic is going through it. So that gives us confidence that it's more linked to their CapEx spending cycle versus competitive. And the last data point is when they do approve a data center, we do get the PO, right? So we have a reasonably good correlation of when the project is approved, and we are in the mix, we get that view. But it is, I mean, I think the CapEx plans of these companies are public, right? So you can see those.

Speaker Change: It's more linked to their CapEx spending cycle versus competitive. And the last data point is when they do approve a data center, we do get the PO, right? So we have a reasonably good correlation of when the project is approved and we are in the mix, we get that PO.

Dhrupad Trivedi: So, but it is, I mean, I think the capex plans of these companies are public, right? So, you can see those there.

Speaker Change: But it is, I mean, I think the CapEx plans of these companies are public, right, so you can see those here.

Dhrupad Trivedi: Okay. And then, if I heard you write your investing more on the enterprise sales side, so does that mean we should see acceleration in enterprise revenue eventually, maybe two, three quarters down the line? Yeah, you should.

Hamed Khorsand: Okay. And then, if I heard you right, you're investing more on the enterprise sales side. So does that mean we should see an acceleration in enterprise revenue eventually, maybe two, three quarters down the line?

Speaker Change: Okay, and then, if I heard you right, you're investing more on the enterprise sales side. So, does that mean we should see an acceleration in enterprise revenue eventually, maybe two, three quarters down the line?

Dhrupad Trivedi: Yeah, you should. And I think, you know, the thing I would point to Hamed even now, which is very early, is that on a year-over-year basis, half to half, the enterprise business grew 7%, which you can compare to our peers, right? And even on the SP side, by the way, you can compare to Juniper, for example, to see if we are losing or gaining. So on the enterprise side, certainly, as the teams mature, and we get a better kind of value proposition market fit, we expect that to continue to grow. And as I said, if we don't want to do that instead of SP sales, we want to do that as a way to reduce the impact of that volatility.

Dhrupad Trivedi: And I think, you know, the, the thing I would point to, Mohammed, is even now, right, which is very early, is that on a year-over-year basis, half to half, the enterprise business grew 7%, which you can compare to our peers, right? And even on the SP side, by the way, you can compare to Juniper, for example, to see relatively if we are losing organic. So, on the enterprise side, suddenly as the team is mature and we get better value proposition market fit, we expect that to continue to grow.

Speaker Change: yeah you should and I think you know the the thing I would point to Hamed is even now right which is very early

Speaker Change: is that on a year-over-year basis, half to half, the enterprise business grew 7%, which you can compare to our peers, right? And even on the SP side, by the way, you can compare to Juniper, for example, to see relatively if we are losing or gaining.

Speaker Change: So on the enterprise side, certainly as the teams mature, and we get better kind of value proposition market fit, we expect that to continue to grow. And as I said, if we don't want to do that instead of SP sales, we want to do that as a way to reduce the impact of that volatility.

Dhrupad Trivedi: And as I said, if we don't want to do that instead of SP sales, we want to do that as a way to reduce the impact of that volatile.

Hamed Khorsand: Okay, my last question on that, when you were talking about digital tech companies, is how much of an impact does that have on revenue, if any, in Q2? And will it be, you know, how significant is this for revenue going forward?

Dhrupad Trivedi: Okay, my last question is on that when you were talking about digital tech company, how much of an impact do that have on revenue if any in Q2, and will it be a, you know, how significant of this is it for revenue going forward? Yes, so I think, you know, I would say it was not a 10% customer, but it has the potential to be somewhere between 5 and 10 over time. Okay, great, thank you.

Speaker Change: Okay, my last question is on that, when you were talking about digital tech company, how much of an impact does that have on revenue, if any, in Q2? And will it be a, you know, how significant of this is it for revenue going forward?

Dhrupad Trivedi: Yeah, so I think, you know, I would say it was not a 10% customer, but it has the potential to be somewhere between five and 10 over time.

Speaker Change: Yeah, so I think, you know, I would say it was not a 10% customer, but it has the potential to be somewhere between 5 and 10 over time.

Hamed Khorsand: Okay, great, thank you. Bye-bye, and thank you.

Unnamed Speaker: No problem, thank you, Anna. Appreciate it. Thank you, Anna. We would like to ask any further questions.

Dhrupad Trivedi: Thank you, Ahmed. I appreciate it. Thank you, Hamed.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you, Amit. Appreciate it.

Operator: If you would like to ask any further questions, please press star followed by 1 on your telephone keypad now. We have had no further questions registered, so I'd like to hand you back to President and CEO of A10 Networks, Dhrupad Trivedi, for some final remarks. Thank you.

Thomas: Thank you, Hamed.

Operator: Please press star followed by one on your telephone keypad now.

Speaker Change: If you would like to ask any further questions please press star followed by 1 on your telephone keypad now.

Dhrupad Trivedi: We have had the further questions registered, so I would like to hand back to President and CEO at A10 Networks, Dhrupad Trivedi, with some final remarks. Thank you. And thank you to all of our shareholders for joining us today and for your continued support. And thanks to also all the A10 employees around the world. Thank you.

Speaker Change: We have had no further questions registered, so I'd like to hand back to President and CEO at A10 Networks, Dhrupad Trivedi, for some final remarks.

Dhrupad Trivedi: And thank you to all of our shareholders for joining us today and for your continued support. And thanks also to all the A10 employees around the world.

Dhrupad Trivedi: Thank you. And thank you to all of our shareholders for joining us today and for your continued support. And thanks to also all the A10 employees around the world. Thank you.

Unnamed Speaker: Thank you for joining today's call. I can't confirm.

Operator: Thank you all for joining today's call. I can confirm that you may now disconnect, and please enjoy the rest of your day. You may now disconnect, and please enjoy the rest of your day.

Speaker Change: Thank you all for joining today's call. I can confirm you may now disconnect and please enjoy the rest of your day.

Unnamed Speaker: You may have this connect, and please enjoy the rest of your day. Thank you. You may have this connect, and please enjoy.

Speaker Change: You may now disconnect and please enjoy the rest of the event.