A10 Networks, Inc.

Good day and welcome to the A10 Network's first quarter 2019 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would like to now turn the conference over to Maria Riley with Investor Relations. Please go ahead.

Thank you, Alyssa, and thank you all for joining us today. This call is being recorded and webcast live and may be accessed for one year via the ATEN Networks website, www.atennetworks.com. Members of ATEN's management team joining me today are Lee Chen, founder and CEO, Chris White, EVP of Worldwide Sales, and Tom Constantino, CFO. Before we begin, I would like to remind you that shortly after the market closed today, ATEN Networks issued a press release announcing its first quarter 2019 financial results. Additionally, ATEN published a presentation along with its prepared comments for this call and supplemental trended financial statements. You may access the press release presentation and prepared comments and trended financial statements on the investor relations section of the company's website, www.atennetworks.com. During the course of today's call, management will make forward-looking statements, including statements regarding our projections for our future operating results, the capabilities of our sales team, our expectations regarding future opportunities, and our ability to execute on those opportunities, our commitment to innovation and bringing new solutions to market, our expectations for future revenue and market growth, development and performance of our products, our current and future strategies, our beliefs relating to our competitive advantages, our expectations with respect to the 5G market, responses to new security threats, our partnership with key technology providers and sales partnerships, our ability to penetrate certain markets, anticipated customer benefits from use of our products, the refining of our market engine, improvements in productivity, our priorities relating to 5G, growth in our security solutions, expected product launches and adoption of recent new product or software releases, and general growth of our business and our ability to incrementally grow, operating margin annually, and timeline to achieve our target operating margin. These statements are based on current expectations and beliefs as of today, April 25th, 2019. 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 we should not rely on them as predictions of future events. ATIN disclaims any obligation 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. 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 Results posted on the company's website. We will provide our current expectations for the second quarter of 2019 on a non-GAAP basis. However, we are unable to make available a reconciliation of non-GAAP guidance measures to corresponding GAAP measures on a forward-looking basis due to high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures. I would like to turn the call over to Lee Chen, founder and CEO of ATAN Networks. Lee?

Lee Chen Thank you, Maria, and thank you all for joining us today. We have decided to change the format of our call to include Chris White, our EVP of worldwide sales. I will provide a few comments on the quarters, our progress on the major initiatives, and product innovations. Chris will then discuss our market, customer wins, and go-to-market transformation. And Tom will provide details of our financial performance and outlook for Q2. We hope you find our new approach informative. Moving to our results. In the first quarter, we continued to make progress on our initiative in security 5G and multi-cloud. We delivered revenue of $50.3 million, non-GAAP gross margin of 76.3%, and delivered a non-GAAP loss per share of $0.09. Q1 is traditionally a seasonal quarter for us. And while our year-over-year revenue growth was modest, there are several points I would like to highlight that we believe demonstrate our growing momentum in security 5G and multicloud. First, we continue to see trends in security with both new and existing customers. Security product revenue grew 22% year-over-year to 34% of product revenue led by our Thunder CFW solution that integrates carrier firewall, data center firewall, secure web gateway, IPsec site-to-site VPN, integrated DDoS protection, SSL visibility, application visibility, and traffic steering capabilities. We have been investing in security and believe we are building momentum and recognition in the market with our highly scalable and intelligent automated software-based security solutions. In Q1, this included winning two Cyber Defense Magazine InfoSec Awards for all 5G security and DDoS protection solutions. Additionally, ATAN was top ranked in terms of market share for SSL visibility in Japan by ITR Corporation, which is the largest Japanese-based IT research and advisory firm. Second is 5G, which we believe is an exciting market opportunity for all security solutions. Our stronghold in the service provider segment and the high performance and scalability of our solution position us extremely well to meet the evolving security and performance needs of our 5G customers. One of our goals for 2019 is to grow our 5G design wings with leading mobile carrier globally. In Q1, we secured a new 5G design wing with another top mobile provider in Korea. which builds on ATAN's five-design wing from 2018. This customer selected our flagship Thunder CFW 5G appliance with Harmony controller. Of the three vendors invited to participate in the proof of concept, ATAN's solution was the only one that passes completely and successfully with zero packet loss. Korea is a pioneer in 5G commercial deployments. and new use cases. And I'm thrilled that ATEN has secured a design win with the three largest providers in the country. In fact, earlier this month, we helped the largest provider in Korea launch the first 5G commercial wireless network. We believe our win with these industry leaders will bode well for ATEN in the future as other providers around the world look to ready and secure their networks for 5G. The energy level at the Mobile World Congress was undeniable this year. A number of operators announced their 5G launch plans for 2019. The pioneers unveiled new use cases and several manufacturers announced 5G handsets. Another noteworthy development this year at MWC was security emerging as top of mind in operators keynote, and presentations. As a short, we have productive discussion with many service providers and partners about their security challenge of 5G. With our portfolio of high-performance and automation-driven 5G GISGI firewall, GTP firewall, DMS firewall, and integrated DDoS protection at a hyperscale, ATEM plans to be with NAND to help customers strengthen their 5G security posture. Third, in Monte Carlo, we made good progress with new wins with service provider, government, and financial service customers during the quarter. Tommy Controller is one of our growing number of products offered on a subscription basis, and it's driving our software's subscription revenue. While our subscription revenue remains small, It is growing rapidly, and we were pleased to see the number of Harmony Controller wins increase, which includes some of the marquee wins this quarter. On the product front, we continue to innovate and pioneer new solutions, and we have a robust Thunder TPS roadmap this year. Over the past quarter, we released a number of enhancements to our product portfolio. In March, we announced a new capacity enhancement to our Thunder GPS that now provides the highest performing DDoS defense appliance on the market. The added capacity will enable service provider, cloud, and online gaming providers to build profitable DDoS mitigation services and expand their service offerings while defending their networks and subscribers. With the proliferation of connected devices, expanding bandwidth, and new application services driven by 5G networks, the size and intensity of DDoS attacks will increase exponentially. We believe the performance and the automation available with our Thunder TPS delivers effective protection against this new and evolving attack landscape. In the quarter, We also forge ahead in our effort to drive further product innovation that supports the commercial rollout of 5G network and begin shipping our industry-leading virtual Thunder CFW 100 gigabit per second solution with the fastest throughput available in the market. This solution has already been adopted by a major telco provider in the Middle East for its 5G environment. We believe this new ATAN solution will be critical to helping customers transition to an agile, scalable, and software-defined network function virtualization infrastructure required for the commercial rollout of 5G networks. Overall, we continue to make progress on our top priorities for 2019, which include driving growth and innovation 5G, and multi-cloud. We remain on track to grow our security product revenue to be 40% to 45% of total 2019 product revenue and deliver total revenue growth in the back half of the year. With that, I will turn the call over to Chris.