Good day, and welcome to the A10 Networks Q3 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please contact a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then one from your touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Jeff Stanlis with A10 Investor Relations. Please go ahead. Thank you all for joining us today. This call is being recorded and can be accessed for at least 90 days through the A10 Networks website at a10networks.com. Members of A10's management team joining me today are Dhrupad Trivedi, President and CEO, and CFO Brian Becker. Before we begin, let me remind you that shortly after the market closed today, A10 Networks issued a press release announcing its Q3 2021 financial results. Additionally, A10 published a presentation and supplemental financial statements. You may access the press release, presentation, and other 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 our projections for our anticipated future financial results, quarterly dividend payments, and our expectations that we expect to utilize our entire net operating loss carryforward to future periods, future growth, key improvements to our business model, our visibility of future operations, and confidence in our ability to accelerate growth beyond previous targets, and our ability to continue to return capital to shareholders. These statements are based on current expectations and beliefs as of today, October 28, 2021. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, such as the potential impact of the COVID-19 pandemic on our business and operations, 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. For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K. 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. 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 traded quarterly financial statements posted on the company's website. I would now like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks. Thank you, Jeff, and thank you all for joining us today. This was another strong quarter for A10, with revenue growth above our expected range and profitability growth that was double our revenue growth rate, again demonstrating the earnings power of our business model. This quarter validates the strategic changes we have made to focus on high-value opportunities and regions, streamlining and adjusting our sales and marketing organization to better address these high-value opportunities, and focusing on differentiated security-led offerings that drive recurring revenue. Today, we are a faster-growing company outpacing the overall industry, and we are much more profitable with a strong balance sheet and robust cash flow. We delivered 15% year-over-year growth in the quarter, resulting in 10% growth for the first nine months of 2021. As a reminder, our growth target was 6%-8% at the beginning of the year. We are ahead of that for the year based on better than expected traction from our strategic initiatives, portfolio transformation, and improving execution, overcoming the impact of the pandemic and supply chain constraints. All of the underlying metrics, including sales mix and revenue geography, are in line with security and availability directly drive lower CapEx and OpEx for our customers. As a result, we are taking market share. For example, in the quarter, a U.S.-based tier one service provider wanted to deploy DNS, or HTTPS, or DoH, to increase user privacy and security while also maintaining more control over network traffic. A10 delivered the best price-to-performance ratio and reliability of any of the solutions the service provider considered, while also providing excellent support during the customer evaluation and solution deployment. The customer plans to rely on A10 for future DoH deployment when they are ready to expand. QOH is a critical part of zero trust security strategy. As you may have read in the news, an increasing target of cyber attacks is municipal utility companies. When a large Japanese utility provider sought an SSL visibility solution to address this challenge, A10 was able to answer the call and keep the lights on. The utility company chose A10's leading security solution in order to decrypt traffic across all ports and multiple protocols, eliminating the encryption blind spot and enabling their security infrastructure to inspect previously invisible traffic, detect hidden threats, and defend against them. In a final example from Q3, a leading telecom provider in Northern Europe had seen a significant increase of DDoS attacks on both their own and their customers' network traffic. These attacks were increasing in both size and frequency. While they had a strong DDoS detection system in place, they could not mitigate and scrub the affected traffic at speeds that did not negatively impact the experience of their customers and internal users. They chose A10 to provide a clean traffic solution because of the effectiveness mitigation modes we can provide and the ability to manage multi-attack vectors at speed. Another key area of progress is improving commercial execution in North America. Revenues in the Americas, which includes Latin America, increased +7% year-over-year in Q3 and is up 22% year-to-date. The sales funnel and our bookings, as well as improving market conditions, give us confidence that we are well aligned with secular tailwinds, including cybersecurity, 5G, and cloud. Led by our security solutions, we are capturing market share, driving larger sales, and a more diversified customer base. We continue to see strong growth in our long-term deferred revenue, which grew 16% year-over-year in Q3. We believe A10 is well positioned with a compelling portfolio that is increasingly serving faster-growing markets, resulting in consistent financial performance. Cybersecurity is the prime catalyst for our growth, and we are a proven partner to address ransomware attacks, hacks, and DDoS attacks. With that, I'd like to turn the call over to Brian for a detailed review of the quarter. Brian? Thank you, Dhrupad. As Dhrupad mentioned, revenue in the Q3 was $65.4 million, up 15.5% year-over-year. Product revenue, which is a lead indicator for future revenue, was $39.8 million, representing 60.9% total revenue, up 23.7% compared to $32.2 million in the Q3 last year. Services revenue, which includes maintenance and support revenue, was $25.5 million, or 39.1% of total revenue, up 4.6% compared to $24.4 million in the Q3 last year. Moving to our revenue from a geographic standpoint, revenue from the Americas, including Latin America, was $32.3 million, up more than $10 million or 46.9%. Revenue from EMEA was $11 million compared to $7.9 million last year. Revenue from Asia, including Japan, was $22.1 million, down 17.2% compared to $26.7 million in the Q3 last year. Dhrupad said revenue from the Americas increased due to stronger commercial execution and improving market conditions for cybersecurity solutions, which we expect to continue. As you can see on our balance sheet, our deferred revenue was $117.1 million as of September 30, 2021, up 14.8% compared to $102 million at September 30, 2020. Recurring revenue, defined as support and subscription revenue, grew 3% year-over-year. With the exception of revenue, all metrics discussed on this call are on a non-GAAP basis, unless otherwise stated. A full reconciliation of GAAP and non-GAAP results are provided in our press release and on our website. Gross margin in the Q3 was 80.4%. We successfully mitigated the impact of industry-wide global supply chain constraints and price increases. Non-GAAP operating expenses in Q3 were $38.1 million compared to $33.9 million in the Q3 last year, reflecting increasing investment in our strategic priorities, including cybersecurity and commercial execution. We reported $14.5 million in non-GAAP operating income compared with $10 million in the year ago quarter. We also continued to improve our adjusted EBITDA significantly, delivering a record $16.8 million for the quarter, a $4.3 million improvement year-over-year. This represents a 25.7% adjusted EBITDA margin for the quarter. Non-GAAP income for the quarter was $13.7 million, representing 3.9% of revenue or $0.17 per share basis. Diluted weighted shares used for computing non-GAAP EPS for the Q3 were approximately 79.9 million shares. On a GAAP basis, net income for the quarter was $74.9 million or $0.94 per share, compared with net income of $6.5 million or $0.08 per share in the Q3 last year. Approximately $65.4 million of our net income, or $0.82 per share, was related to a non-recurring tax benefit as a consequence of our sustained profitability over the last four quarters. For the quarter, we generated $21.8 million of cash from operating activities, resulting from organic growth and the financial leverage of our business model. We generated $20.8 million in free cash flow for Q3. As a reminder, we define free cash flow as net cash provided by operations less capital expenditures. Capital expenditures is the purchase of property and equipment. Turning to the year-to-date results. Revenue for the first nine months of 2021 was $179.4 million, compared to $162.9 million for the first nine months of 2020. We reported $36.4 million in non-GAAP operating income, compared with $21.4 million in the first nine months of last year. Year to date, adjusted EBITDA was $42 million, a $13.6 million or 26% improvement year over year. Non-GAAP net income was $33.6 million or $0.42 per share. On a GAAP basis, inclusive of the non-recurring tax benefit, year-to-date net income was $84.2 million or $1.05 per share, compared with net income of $10 million, or $0.12 per share last year. As of September 30, 2021, we had $187.5 million in total cash and cash equivalents, compared to $158.1 million at the end of 2020. We continue to carry no debt. In September of last year, the company approved a share repurchase plan for up to $50 million of our shares, common shares over the next 12 months. Following the Q3, there was no share repurchase activity under the plan. With that plan having expired, the board of directors has now approved a new $100 million stock repurchase plan. In addition, the board has approved a quarterly cash dividend of $0.05 per share to be paid subject to any prior revocation by the board on December fifteenth to shareholders of record on November twelfth. Based on the year-to-date results, our growing deferred revenue and improved visibility, we're increasingly confident in our ability to deliver consistent financial results. For the Q4 of 2021, we expect to generate revenue growth of approximately 10%, and we anticipate this growth rate to continue into 2022. This expectation is based on the quality and quantity of our sales funnel, market momentum, and improving execution. We expect to grow our bottom line faster than our top line. We anticipate security solutions will continue to become a larger portion of our revenue mix, and we anticipate conducting an Analyst Day in early 2022. At the end of the event, we expect to provide additional information about our business and future opportunities. I'll now turn the call back over to Dhrupad for closing comments. Thank you, Brian. In summary, this was another strong quarter for ATEN, one of the strongest in our company history, building upon a great foundation, and our year-to-date results are ahead of plan. The systematic improvements we have made in our organization and our business model are driving sustained organic growth and improving customer acceptance of our solutions. This is driving meaningful financial benefits, including improving operating and EBITDA margins, enabling us to fund a significant stock repurchase plan and to implement a quarterly cash dividend, all while continuing to generate free cash flow to continue growing the business. We are well-diversified in terms of product mix, regional sales mix, and customer mix, helping to insulate us to some degree from volatility within the dynamic industries we serve. More importantly, we are capturing more market share with proprietary and differentiated security-led solutions, enabling us to outpace the market. We are strategically well positioned to benefit from significant and growing catalysts, including private security and the 5G rollout. Operator, you can now open the call up for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Hamed Khorsand with BWS Financial. Please go ahead. Hi, just first a couple of housekeeping questions. Was there a 10% posture in the quarter? Yes. What's the split between software and hardware? I think we've discussed in the past, we sell a unified solution, hardware, software integrated into a platform. On a standalone basis, our software sales are approximately 10%. A question I wanted to ask you is, do you think any of the gains that you had in sales or in revenue beyond your original guidance, was that related to competitors having issues, supply chain, or was this purely, you know, wins, you know, based on quality and price? Yeah. Hamed, this is Dhrupad. Good question. I think, you know, typically, as you know, two-thirds of our customer base is service provider, one-third is enterprise. Even within that one-third, it's mostly large enterprise. This is not the profile of customer that is typically qualifying and running two or three different solutions at the same time and allocating share every quarter, right? In general, we would work with a customer six- to nine-month cycle to get the signed in and integrated into their operating systems and business processes. For us, it would be more an impact of was that revenue we were unable to realize because of supply chain constraints, more so than did we pick up orders because a competitor couldn't, right? It's a long cycle. On the tail end of enterprise that is possible, but most of our growth comes from, you know, the high performance value in customers. In those cases, it was because of them growing their infrastructure, second, being more concerned about cybersecurity and especially in light of government guidelines and things like that. Third, obviously, our ability to then fulfill that and translate to revenue. Okay. Then the guidance suggests that this was more than just a one-off demand from, you know, COVID reopenings. Is it all because security is becoming more and more important? Is it 5G related as far as 5G deployments are concerned? Sure, yeah. I think, as we noted on the call, on a year-to-date basis, our growth was about 10%. You know, I would say the bigger driver for improving market for us is really related to, cybersecurity and the fact that we are able to provide more integrated, more differentiated solutions. We do see signs on 5G side for new build outs. As we have noted in previous calls, while 5G is enabling the change for us, we certainly also continue to do a lot of business supporting existing deployments with service providers around security and traffic management. Okay. Thank you. Thank you. Your next question comes from Christian Schwab, Craig-Hallum. Please go ahead. Hey, guys, this is Tyler. We have Christian. Thanks for letting us ask a few questions. Congrats on the strong results and guidance here. I guess first question, a little bit of clarification. So you've obviously outperformed your 10% growth this year. Do you expect that 10% to grow into next year? Just any comments about full year 2022? No, I think, Tyler, good question. I think it's not, and I think that's why we pointed out that we plan to hold an analyst day. If you want to talk more specifically about drivers and things about our business. I think it's more reflective that we do not see this as a temporary trend and it continues going forward from now, right? We are not suggesting or providing that as piece of guidance, which we will do in much more detail at the analyst day. Okay, perfect. That's great. Appreciate the clarification. Then, you know, a question on supply chain. I think it's top of mind with a lot of people, and I'm pretty sure you guys are mitigating those impacts with your scope. You know, I was just wondering if there's, you know, potentially any indirect impact you guys might be seeing or benefit. You know, I understand your lead times aren't extended, but, you know, maybe customers' lead times are, customers' planning schedules are maybe extending. Potentially any benefit you're getting there, any color there you can provide. Yeah, no, good question. I would say, you know, the nature of that impact for us really is that, customers have a need right now. To the degree that we are able to fulfill that and deploy things on their timeline, certainly is advantageous to us. Typically, they are also prioritizing multiple types of projects. To the degree that we are able to meet their timeline, is also beneficial to us, right? Maybe as I said before, instances in multi-vendor enterprise where there are multiple vendors and we are the one who could supply in time. In general, for us it's more that we are able to align with and fulfill the customer timeline, which obviously related to things like security, again, is quite important to them. All right, that makes perfect sense. I appreciate that. Final question, a little bit on the model maybe for Brian. Your OpEx is, you know, a little bit elevated in the back half of the year. You know, understanding the revenues, obviously you guys are making, you know, these investments for growth and you're putting in cash in. I'm just wondering, you know, how we should maybe think through OpEx. You know, is a $40 million quarterly run rate into next year a good way to think about that? I guess, you know, do you expect next year to grow revenue faster than OpEx? Yeah, good question. You know, we are experiencing a pickup in operating expenses mostly related to driving growth and revenue. Be it commissions or travel on events and/or investment in strategic initiatives, be it product or other elements. On a going forward basis, I mean, it's running a little higher than I would expect for the full year next year on a quarterly basis, but it's a good indicator of where we're at, you know, adjusted for market growth to ten to 15%. Yeah. I think, Tyler, just to comment, to add to your specific question, you should expect OpEx to grow at a lower pace than revenue, as it has for the last eight quarters. The proof on that is in the EBITDA as a percent of revenue, increases every quarter, right? Which was this quarter we are 25%. That's great. All right. Thank you. That's That's all for us. Thank you. Our next question comes from Anja Soderstrom with Sidoti & Company. Please go ahead. Hi, thank you for taking my questions and congratulations on a strong quarter. I want to follow up on the supply chain question. You made comments that you had some headwinds this quarter, but despite that you had a strong margin performance. Should we assume then that the margins are gonna be better this quarter since or are the expected sort of headwinds from the supply chain? Yeah, great question. I would say, you know, we've navigated the supply chain crisis fairly well. You know, our sales cycle is 6-9 months, so some of this you're seeing as a lag of, you know, prior period management and execution. You know, as it's been trending, you know, we're always guiding between 78% and 82% margins, which we think is about the right range, looking forward. Okay. Yeah, that's protected by product mix and regional mix as much as well, right? We continue to navigate, but that's the range across it. Okay. Thank you. In terms of the growth as coming from existing customers or, do you add new logos as well? I think it's both. You know, consistent with what we said in the past, about 80% of our business growth comes from existing customers, about 20% from new. I think that trend is still true. You know, we continue to add new logos as well, right? I think it's same profile as previously. Okay. In terms of new contracts, could you sort of speak to the sort of duration and magnitude of those compared to past wins? Currently obviously we had a benefit in our tax expense as it relates to valuation allowance. I think we talked about that previously. Our expectation is that we continue our profitability on a go-forward basis, which requires us to analyze our deferred tax assets and our expectation to consume them. You know, we expect effective tax rate will continue to be stable. I don't expect that we'll see it, you know, trending up or down significantly in the next 12 or 14 months. Okay, thank you. Actually, that was not really my question. I have that before my next question to ask about that tax too. Yeah. No, I was asking about the contract wins, and the magnitude- Yeah. duration of those compared to past ones. I think it's pretty consistent, Anja. In some of the new customer wins, we certainly see the term is a little bit longer. I think if you look at our historic average, it's not a huge difference for us. The data point you can look at obviously is our deferred revenue and within that particularly long-term deferred revenue, which obviously increased 15% plus year-over-year in the quarter. That's obviously where you would see the financial impact of contracts that are longer and therefore appear in the long-term deferred revenue line. You can see that that is growing significantly for us, which is good and in line with our goal. That's the connection point to see how much faster that is growing. Okay, great. Thank you so much. That was all for me. Yeah. Thank you. Our next question comes from Hendi Susanto with Gabelli Funds. Please go ahead. Hi, Kris. Hi, Brian. Hey. Good evening. You mentioned about zero trust network. Companies mentioned that zero trust network is a wide area. Can you remind us, like what is unique in terms of APRM offering solutions, new use cases associated with zero trust network that you can capitalize? Sure. Yeah. I think, you know, the concept behind that architecture is historically cybersecurity was viewed as everything within a certain perimeter was considered safe. You know, like, if you are inside the castle, then you're fine. What happens with things like co-location and sharing and cloud and everything else, that you could be under attack from somebody who is in the same castle as you, not necessarily someone from outside. The concept of zero trust is you don't trust any device or any application until you can. In that context, our products, it is not a single product. The kind of approach requires multiple things. We highlighted, for example, our SSL Insight solution, which allows customers to manage encrypted traffic in a much stronger way, which is important part of zero trust. We talked about our ability to withstand and mitigate complex DDoS attacks at different levels of remediation automatically. That is an important part of zero trust. The way our platform is built further adds to the concept of where we can provide more end-to-end security in many cases part of application. You know, and the last element of zero trust is training and awareness of users and customers on what are the types of attacks and how do they protect themselves, starting from something as simple as not clicking on, you know, emails that look suspicious, right? In that context, obviously we provide that, and we have threat intelligence services we provide to customers as well. Those are all different elements that go into it. You know, it's not specifically a product, right? It's more of a cybersecurity philosophy and an approach. We are working with the customers typically on multiple elements of doing that. The expectation that the Zero Trust network will strengthen A10's covering and differentiation. I'm wondering whether it's of the other content, prepared or not multiplies other contents within the same scope of project. Yeah, I think it's difficult to say that yet, Hendi Susanto, and the reason for that is typically when you work with CISOs and CIOs, they are looking at, you know, six, seven, eight categories of things you could do to become more secure. In some ways, right, they're also prioritizing what to do first, what to do second. In some ways, zero trust can expand that opportunity, but also some elements it overlaps it, right? On a net basis, certainly we think that more customers adopting zero trust architecture is favorable to us, but it's too early probably for us to quantify what that means. Dhrupad, can you please ask, in terms of products mix, which products have higher gross margins? Because our products are all built on the same hardware platforms and foundation, there is not a significant difference on gross margin at that level across the products. For us, really, we really leverage very common platforms, so the same box can be considered as one of five products we sell, right, based on software persona and identity and loads we just dropped. For us, that's why we are able to maintain margins pretty similarly, even though we are selling much more of the security products. I see. Last question from me. For the new share buyback authorization is large, and then there's no new dividend initiation. The new dividend initiation does it imply that there is no potential rise of M&A in the short run? No, I think we're looking at it maybe, Hendi, in a balanced way, right? We have been paying, if you look at last quarter, $15-$20 million cash flow from operations every quarter. We think policy of buyback is reflective of our confidence in the business and where we think it's gonna grow in the future. The dividend for us is just a balanced way of providing returns to shareholders while we are still able to keep enough dry powder to fund, you know, growth or any other initiatives that we would consider. That we think of it as a sort of a balanced way to achieve our goals. I see. Okay. Dhrupad, Brian. Yes, sir. Thank you. Thank you, Hendi Susanto. This concludes our question and answer session. I would like to turn the conference back over to Dhrupad Trivedi for any closing remarks. Thank you. Thank you to all of our shareholders for joining us today and for your ongoing support. We look forward to talking to you again. Thank you. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.