A10 Networks Q4 2024 Earnings Call Transcript

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February 4, 2025
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Operator

Hello everyone and welcome to A10 Networks fourth quarter and full year twenty twenty four financial results call. My name is Lydia, and I'll be your operator today. After the prepared remarks, there will be an opportunity to ask questions. If you'd like to participate in the q and a, you can do so by pressing star followed by one on your telephone keypad. I'll now hand you over to Tom Baumann at FNK IR to begin.

Operator

Please go ahead.

Tom Baumann
Vice President at FNK IR

Thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least ninety days via the ATN Networks website at atenetworks.com. Hosting the call today are Drupert Trivedi, ATN's President and CEO and CFO, Brian Becker. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its fourth quarter and full year twenty twenty four financial results. Additionally, A10 published a presentation and supplemental trended financial statement.

Tom Baumann
Vice President at FNK IR

You may access the press release, presentation and 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, demand, industry and customer trends, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program. These statements are based on current expectations and beliefs as of today, 02/04/2025. 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.

Tom Baumann
Vice President at FNK IR

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 results prepared 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. Now, I'd like to turn the call over to Dhruvit Trivedi, President and CEO of A10 Networks.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Thank you, Tom, and thank you all for joining us today. ATN ended the 2024 year, delivering 5% growth for the quarter and 4% growth for the year as our service provider marketplace continues to normalize, and we are making the expected progress to expand our presence with enterprise customers. We enter 2025 expecting the current trends around service providers to continue and deliver continued growth with enterprise customers. Our optimism is bolstered by an improving competitive position with both customer segments and the recognition that security and AI related investments are increasingly serving as a catalyst for spending. We believe that ATN's offering is exceedingly well aligned with both of these secular trends.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

For service providers, the need to expand AI data centers continues. Data centers are incredibly hungry for power, and the availability and cost of reliable electricity are considerations for locations and logistics. As a result, we are seeing accelerating interest in ATN solution as part of AI data center development. Our products provide industry leading efficiency in terms of throughput and low latency, and also include integrated security capabilities. The result is that service provider customers need fewer ATN products compared to competitive offerings, materially reducing the power consumption without sacrificing performance.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

This is serving not only as a catalyst for our business, but also as a meaningful competitive advantage. Combined with the expected backfill of spending, following the pauses we experienced last year, we are seeing an improving pipeline from North American service provider customers. We expect this to continue while short term quarter to quarter volatility in spending patterns may persist. I'm encouraged that service provider revenue was up 2.5% for the year, considering that it was down nearly 8% through the first six months of the year. The turnaround in the second half, while expected, is a positive indicator heading into 2025.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

On the enterprise customer side, we responded to the slowdown in spending from service providers by accelerating investments to drive demand from enterprise. This initiative was successful as we grew revenue from enterprise customers faster at 6% for the year, then we did consolidated revenue at 4%. We have a compelling offering to enterprise customers, and we are investing heavily to further expand and bolster our suite of solutions, particularly to align with AI trends. Most of these investments are the culmination of several years of innovation and engineering, and we are just now beginning to see the benefits. We are developing additional solutions for bot protection, DDoS mitigation, and technologies that are designed specifically for GPU based AI infrastructure.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

We will integrate AI to predict performance with our solutions. And with ATN Control, we will enable centralized management for all ATN products. Within ATN Defend, our cybersecurity suite, we continue to develop solutions that will help our customers protect their mission critical applications and infrastructure from an ever growing number of cyber threats. We anticipate an improving pipeline related to these investments in 2025. AI has become an important near term catalyst for our business, and we are strong and getting stronger in this area.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

This, combined with our focus on cybersecurity solutions, continues to play a role in our growth. Security led revenue increased 6% for the quarter and 9% for the year. Our focus on security continues to make our solutions less optional, mitigating the impact of short term fluctuations in spending priorities and enabling ATN to outperform our peer group. We had previously stated our long term goal was to derive 65% of our revenue from security led solutions. And for the full year, security represented 63% of revenue.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

I think it's also worth noting that in Q4, we delivered growth in all key regions, North America, Asia Pacific, Japan, and EMEA. For the past year, we had been stating that demand was consistent in EMEA and Japan, but soft in North America. That trend has begun to correct in line with the improving market conditions for North American service providers, as previously mentioned, and validating the strength of our technical solutions in all markets. Our priorities continue to be a mix of internal investments to support revenue generation, returning capital to shareholders, and evaluating strategic opportunities to accelerate growth. I spoke in detail about the internal investment related to our long term cybersecurity blueprint in the last earnings call.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Simultaneously, we continue to consistently return significant capital to shareholders. In spite of a challenging macro environment, our strong second half performance continues to demonstrate the earnings power of our business model. We maintained robust profitability in line and slightly ahead of our targets in the quarter. Our strong results also enabled us to support our R and D investments while simultaneously accelerating our cash generation, ending the year with nearly $200,000,000 in cash and marketable securities, even as we return significant capital to shareholders. We have continued to buy back stock and our cash flow has more than funded our buyback and dividend programs.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

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

Brian Becker
Brian Becker
CFO at A10 Networks

Thank you, Dhruvit. Fourth quarter revenue was $74,200,000 an increase of 5.4% year over year. The growth was broad based with enterprise revenue increasing 8% faster than consolidated revenue and service provider revenue increasing 4%. The results reflect the continued normalization of service provider spending patterns and the investments we made in the enterprise segment. Quarter to date volatility in North America service provider sector persists, but the overall trends are increasingly positive.

Brian Becker
Brian Becker
CFO at A10 Networks

Product revenue for the quarter was $43,300,000 representing 58% of total revenue. Services revenue was $30,900,000 or 42% of total revenue. Deferred revenue increased 5% to $148,300,000 demonstrating stronger product sales in the fourth quarter and continued demand for our security led solutions. 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 are provided in our press release and on our website.

Brian Becker
Brian Becker
CFO at A10 Networks

Gross margin in the fourth quarter was 80.7% in line with our stated goals of 80% to 82%. Adjusted EBITDA was $27,400,000 for the quarter reflecting 36.8% of revenue. Non GAAP net income for the quarter was $23,000,000 or $0.31 per diluted share compared to $18,500,000 or $0.25 per diluted share in the year ago quarter. Diluted weighted shares used for computing non GAAP EPS for the fourth quarter were approximately 75,000,000 shares, effectively unchanged year over year. On a GAAP basis, net income for the quarter was $18,300,000 or $0.24 per diluted share compared to net income of $17,900,000 or 0.24 per diluted share in the year ago quarter.

Brian Becker
Brian Becker
CFO at A10 Networks

We recorded a one time gain in OI and E of $3,000,000 in the fourth quarter. Adjusted for this one time event, our non GAAP EPS for the quarter would have been 0.27 per diluted share. Turning to the full year results, revenue was $261,700,000 up 4% year over year. Year to date non GAAP gross margin was $81,200,000 in line with our target range. And adjusted EBITDA was $74,500,000 reflecting 28.5% of revenue.

Brian Becker
Brian Becker
CFO at A10 Networks

Non GAAP net income for the year was $64,800,000 or $0.86 per diluted share, up from $54,900,000 or $0.73 per diluted share last year. Adjusted for the non recurring gain in OI and E discussed earlier, our non GAAP EPS for the year would have been approximately $0.82 per diluted share. On a GAAP basis, net income for the year was $50,100,000 or $0.67 per diluted share, compared with net income of $40,000,000 or $0.53 per diluted share. During the year, we generated $90,500,000 in cash from operations ahead of our full year targets. Cash generation benefit from the timing of OpEx and working capital mix, and we anticipate future cash generation to be more in line with historical patterns.

Brian Becker
Brian Becker
CFO at A10 Networks

Turning to the balance sheet, as of 12/31/2024, we had $195,600,000 of total cash, cash equivalents, and marketable securities, compared to $159,300,000 at the end of twenty twenty three. During the quarter, we paid $4,400,000 in cash dividends and repurchased $5,800,000 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 03/03/2025 to shareholders of record on 02/14/2025. We have $44,200,000 remaining of our $50,000,000 share repurchase authorization as of December 31.

Brian Becker
Brian Becker
CFO at A10 Networks

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 over to Dhrupert for closing comments.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Thank you, Brian. This was a solid year for A10, with strong performance in the second half of the year, reflecting the ongoing normalization of service provider spending and consistent enterprise growth as a result of the strategic investments we made in this portion of our business. We are navigating market volatility successfully due to our focus on security solutions, our tight alignment with AI trends, and our strategic diversification. Our investments in R and D are expected to result in additional solutions, leveraging our growing position in the cybersecurity sector, further enhancing our growth profile. We have consistently proven the ability to convert incremental revenue into significantly higher profitability levels and we expect that to continue as we enter 2025.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

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

Operator

Thank you. Our first question comes from Grey Powell with BTIG. Please go ahead. Your line is open.

Gray Powell
Managing Director at BTIG

Okay, great. Thanks for taking the question and congratulations on the very solid looking results.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Thank you, Greg.

Gray Powell
Managing Director at BTIG

So yes, yes, absolutely. So yes, maybe just to get into it, just looking at the Q4 numbers, I'd be curious like how did seasonality in Q4 compare to the last couple of years? Did you see a normal budget flash? Just, you know, just any dynamics there

Gray Powell
Managing Director at BTIG

that you could

Gray Powell
Managing Director at BTIG

talk about would be helpful.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. I'll start off and Brian can add to it. So I think I would say that seasonality that we saw in Q4, it's probably consistent with previous years, but we saw less of a budget flush phenomenon this time around. And I would say this was probably just an extension of the idea that through the year, right, we were seeing increased kind of signatures and scrutiny around spending and CapEx as well as OpEx. And so we did not see maybe as much of that year end activity.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

But when you look at our seasonal pattern, it was pretty consistent with previous years as well.

Brian Becker
Brian Becker
CFO at A10 Networks

Yeah. And as Rupert mentioned Okay.

Gray Powell
Managing Director at BTIG

I'm sorry, go ahead. I didn't mean to cut you off.

Brian Becker
Brian Becker
CFO at A10 Networks

Apologies. I just wanted to add that it's in line with our typical seasonality pattern of 52% on back half, 48% on front half.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yes, 48%, fifty two %.

Gray Powell
Managing Director at BTIG

Okay. Understood. And then all right. So then you called out some new products coming up this year. Can you just repeat like the products again?

Gray Powell
Managing Director at BTIG

I think it's bot detection, something around DDoS and products protect GPU based AI infrastructure. I guess I'm just trying to the question is, how should we think about the timing of those products coming to market? And then just like what's the excitement level around them? Like could could it drive, upside to revenue this year?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. No. Good good questions. And maybe, you know, what I'll answer that, Chris, I would segment them between sort of our security products and then products that are influenced by AI spending, right, a little separate. So on the security side, I would say, you know, what we are focused on is really expanding the categories we can provide to customers with still a common way to manage and run them right.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

And so within that category, we are improving our DDoS detection and mitigation products, adding things like bot management, which may be adjacent to those categories. And this is, kind of ongoing expansion that you should see play out in second, third, fourth quarter of this year. That basically does two things, improves our competitive position, but at the same time, gives us a natural way to scale our security platform where we have done the work on the kind of foundation and the management layer already, right? So those, I would say, are, in the next six to twelve month window, we should start seeing those as enhancing our security story incrementally as well. As it relates to some of the AI oriented products, I would say on the first layer where people are building new data centers to support AI traffic, we will probably see that impact as a positive thing in 2025, probably, you know, again, towards the second half of the year.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

But the excitement around that is really that when they are building these data centers, things like throughput latency connectivity are more important. So our advantages as it relates to those attributes are a direct advantage then. So and the data point for us is customers are engaged with us in reviewing those kinds of build out plans, right? That is current products as well as kind of roadmap. Second layer of it is, you know, using AI to develop capabilities like predictive analytics is, I would say, customer excitement is good, but the deployment cycle is probably a little bit farther out.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

And the reason for that is, you know, as we have said before, there is a wave of there's a massive build out of AI. But then the real business is when enterprises are doing their local deployment of it, local learning centers, and inference models. And our engagement is with customers, right, who are using AI, not necessarily just building them today. So that's positive traction, but that is aligned more with the wave of mass adoption of AI versus just the massive initial build out, if that makes sense.

Gray Powell
Managing Director at BTIG

Yes. That's very helpful. Okay. Thank you very much.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. Thanks.

Operator

Our next question comes from Christian Schwab with Craig Hallum. Please go ahead.

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

Hey, guys. This is Tyler on behalf of Christian. Thanks for letting us ask a few questions. Maybe first, just following up on that last question. Could you break out what's your AI revenue, both to the customers building their own AI data centers and then selling your AI enabled products?

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

Kind of what that is at a baseline now and how you see that growing? Maybe what it could be at the end of the year, out a couple

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

of years?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yes. I think, you know, so I think thank you, Tyler. That's a good question. It's, something we'll have to figure out how to depict that view. And the reason for that is our current products are actually being used for those applications as well.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

So it's not necessarily linked to releasing new products that go into those build outs as it relates to products that are designed around inspecting and mitigating AI oriented threats as well as analytics. I think that's early in the cycle and I think we will have to come back maybe in the next quarter with a view of how we want to communicate that in terms of, you know, number of customers or funnel growth and things like that. Right? Because it's not going to convert to revenue in the next two

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

periods.

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

Okay. Yes, fair enough. So then, you know, maybe as you think about, you know, the full year 2025 here, you know, with service providers normalizing, you know, continued traction with the enterprise customers, you know, these AI opportunities layering in as well, kind of a backfill like you mentioned or maybe a catch up

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

in some of these.

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

Could it be possible that you're able to drive growth in 25% ahead of that 10% to 12% you know, longer term growth number that you're targeting?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yes. So I think for 2025, right, I would say this year, we were able to get back to 4% with that normalization of market. We are continuing to understand the impact of things that are outside of our control, like, you know, what can happen with interest rate, tariffs, everything else. But what we do know is we are on a positive trajectory in terms of what's it last year to this year to next year. And as we go through 2025, right, we expect, in the middle of the year to maybe have a better view if it can be better.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

But right now, I think we feel confident with where people are expecting us to be and still navigating some of these macro things that are outside our control.

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

Okay. That sounds great. And then last one, maybe for Brian. On OpEx, it fluctuated a little bit quarter to quarter through this last year, but with it being down almost $4,000,000 sequentially, I guess, from Q3 to Q4, like $35,500,000 non GAAP Q4 number. Could you help maybe level set us on OpEx?

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

What kind of run rate we should be thinking about, heading into 2025?

Brian Becker
Brian Becker
CFO at A10 Networks

Yes, of course. I mean, to your point, $149,000,000 of OpEx for twenty twenty four million dollars on a non GAAP basis. Looking forward, I mean, we're talking about AI. We're talking about products that we are innovating and developing for introduction in 2025. So I think the obvious point is that we're not going to continue the same run rate as a percent of revenue.

Brian Becker
Brian Becker
CFO at A10 Networks

You could expect it to tick up, you know, not materially, but to some level, just to because that's gonna reflect the investments we're making in cybersecurity and infrastructure products, not only with our existing portfolio, but then also with AI opportunities that are in the market.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. And maybe to add to that, Tyler, right, our long term goals are saying gross margin of 80% to 82% and EBITDA of 26% to 28% are still valid, right? But, we are investing within that envelope for growth as well.

Tyler Burmeister
Equity Research Analyst at Craig-Hallum Capital Group LLC

Perfect. All right. That's all for us. Thanks guys.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Thanks, Al.

Operator

Thank you. Our next question comes from Hamed Khorsand with BWS. Please go ahead.

Hamed Khorsand
Principal at Beating Wall Street(BWS)

Hi. So first question was the orders that you were seeing from the North American service providers, was that merely just an upgrade or tack ons to orders that you were receiving maybe a year or two years ago? And these are just purely because of constraints in their system? Or are these brand new sales expansion as far as ATN's role goes?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. No. Good question, Ahmed. So I would say, I would say it was a mix. I think there were definitely orders that were related to new kind of build outs and new data centers or network.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

And then with some of those customers as they continue to operate network based on capacity, they buy a little bit up or down. So, so but we were certainly seeing more of the new build out orders in Q4 than we did any other quarter this year or sorry, previous year.

Hamed Khorsand
Principal at Beating Wall Street(BWS)

All right. And then as far as enterprise is concerned, are the customers coming to you and asking

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

that AI is integrated into pretty much all of our product roadmap. So when they are buying a security product, their natural extensions are then inclusive in the future of, AI traffic detection, unique threats, managing all of that. So for us, AI is just a new capability we are enabling them with. And you are correct. The conversations with customers today are more about them partnering with us on the roadmap and their long term goals, more so than sort of a competitive bid against some other business, yes.

Hamed Khorsand
Principal at Beating Wall Street(BWS)

And then, Brian, your accounts receivable is up in this quarter. Is it safe to assume that many of the much of the order revenues came in towards the end of the quarter?

Brian Becker
Brian Becker
CFO at A10 Networks

Yes. Good question. I mean, as you could see, we had pretty significant success in driving cash flow during the quarter as well as building working capital. But, yes, you're exactly right. I mean, kind of like what Gray mentioned earlier, we saw a pretty significant increase in the amount of revenue balance in the back half, and that's reflective in the AR balance going up about the same rate that you see revenue.

Brian Becker
Brian Becker
CFO at A10 Networks

But, yeah, absolutely, it's linearity. It's normal, of course, of business for us. We always expect to have a pretty significant accounts receivable balance walking out of Q4 when compared to the prior quarters.

Brian Becker
Brian Becker
CFO at A10 Networks

And

Operator

And our next question comes from Anja Soderstrom with Sidoti and Co.

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

And congrats on the nice progress here. Just wondering for the product revenue, we saw good growth there. How long is the lag before that, first benefits to services revenue?

Brian Becker
Brian Becker
CFO at A10 Networks

Yes. I mean, nothing has really changed in our business model. Our average contract term is about two years. So, you know, simple rough math, when we do product sales growth, you expect that that's a lead indicator for services growth. And I think you can see that in the the services line as well as deferred revenue.

Brian Becker
Brian Becker
CFO at A10 Networks

Deferred revenue was up at almost the same rate as total revenue, which we would expect. But, yeah, I think to your to your question, you know, it's two year run out on average. So as you see product revenue growth today, then you'll expect, in the following year, the same growth rate in the services revenue line.

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

Okay. Thank you. And the margin, the gross margin for the products were a bit softer. What's going on there?

Brian Becker
Brian Becker
CFO at A10 Networks

Yeah. I mean, this is, you know, as we get through the end of the year, we get a lot of long term projects that we've been working through and, you know, it depends on the region, it depends on the customer mix, whether they're buying software, customer mix, whether they're buying software, hardware, there's all kinds of factors. But in this case, I mean, the the the change in gross margin is simply reflected of geographic and product mix.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. I think it's

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

Okay. I'm you might Yeah.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

That's why yeah. Sorry. And and that's why when we say 80 to 82%, that's reflective of accommodating that regional and product mix. So

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

Okay. Thank you. And are you at all affected by tariffs in terms of the products or?

Brian Becker
Brian Becker
CFO at A10 Networks

We will be. I mean, once that's locked in and we can expect what the impact will be, we're absolutely not impervious to the impact of, you know, tariff hikes in different regions from a procurement perspective. And then I'm I'm sure that'll put pressure on sales price in other regions, but to be determined, I think as we always talk about, you know, over the last five years is, you know, these are headwinds that we anticipate and expect in our operating plan, and we always deploy countermeasures to overcome those to deliver the results you see.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

And and maybe specifically, yeah, I mean, we

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

have a few more. Would you have to take a look?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. So, Diana, I was just gonna add one thing and Brian can talk to it. But remember, right now, we are talking about three major regions, right? And if you recall, we had made the decision and we don't have any exposure in China market, right? So that's not something that we have deliberately made that decision.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Obviously, we have business in Canada and Mexico, but it's not as large as most other countries. So we will continue to monitor what the puts and takes are on those, but as Brian said, obviously, we don't know what we don't know yet. So Yeah.

Brian Becker
Brian Becker
CFO at A10 Networks

And then I think to your follow on question, in terms of passing through those costs, I mean, it's case by case basis. I mean, we're we're not, you know, wholesale raise places to to overcome challenges. We typically deploy countermeasures internally to find cost savings that we can pass on to our customers. But, yeah, this won't be, an indicator of a price increase globally.

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

Okay. Thank you. And then within EMEA, yes, that was doing well for you. But can you just talk about Europe specifically? What do you see there?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. So I think when we talk about Europe, right, I think we typically internally look at it in three, three pieces. So that is core Europe, emerging, right, Europe, and then Middle East. And I think when we see the business there, we saw, our business in Europe continue to be pretty stable. Business in The Middle East, is mixed across countries.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

So some countries are fine, some are not. But if you look at the core Europe and what you'd normally think of as northern parts of Europe, we continue to build our business, pretty constantly over there. So we see that as good market for both service provider and enterprise growth.

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

Okay. Thank you. And then just one last one in terms of strategic opportunities. How active are you looking for that? And have you seen any changes there in sort of the activities?

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Yeah. So, of course, I think, you know, as the market has changed and companies have gotten kind of rerated on multiples and things like that, we see, you know, a lot of inbound ideas as well as companies looking for strategic fit. And so we are pretty actively looking at those. And as we said before, our focus is on things that accelerate our strategic goals around enterprise security and things like that. And, and we've continued to look at them, but we are pretty actively involved with looking at product gap fills as well as technology as well as market expansion.

Anja Soderstrom
Senior Equity Research Analyst at Sidoti & Company

Okay. Thank you. That was all for me.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Thank you, Adi.

Operator

Thank you. We have no further questions. So I'd like to turn the call back over to Dhupad for any closing comments.

Dhrupad Trivedi
Dhrupad Trivedi
President & Chief Executive Officer at A10 Networks

Thank you. Thank you all and thanks to all our shareholders for joining us today and for your continued support. Thanks.

Operator

This concludes our call today. Thank you very much for joining. You may now disconnect your line.

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Executives
Analysts
    • Tom Baumann
      Vice President at FNK IR
    • Gray Powell
      Managing Director at BTIG
    • Tyler Burmeister
      Equity Research Analyst at Craig-Hallum Capital Group LLC
    • Hamed Khorsand
      Principal at Beating Wall Street(BWS)
    • Anja Soderstrom
      Senior Equity Research Analyst at Sidoti & Company
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Earnings Conference Call
A10 Networks Q4 2024
00:00 / 00:00

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