A10 Networks, Inc.

Hello and welcome to the A10 Network's first quarter 2023 financial results conference call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to withdraw your question, you may press star followed by two. I'll now hand over to Tom Bowen of FNK IR. Please go ahead.

Thank you. 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 ATEN Networks website at atennetworks.com. Hosting the call today are Drupal Trivedi, ATEN's President and CEO, and CFO Brian Becker. 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 2023 financial results. Additionally, ATEN 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. During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, including our potential revenue growth, industry and customer trends, our capital allocation strategy, supply chain constraints and expectations, our positioning, our repurchase and dividend programs, and our market share. These statements are based on current expectations and beliefs as of today, May 4th, 2023. 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. ATIN does not intend to update the information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to our most recent NQ. Please note that with the exception of revenue, financial measures discussed today are in 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 would like to turn the call over to Drupal Trivedi, President and CEO of A10 Networks.

Thank you, Tom, and thank you all for joining us today. Our first quarter results were in line with the estimates we shared on April 3rd. While revenue was impacted by the economy and slowing purchasing decisions, the team moved quickly to respond to these changes and we maintained our profitability at historical levels, better positioning us to achieve our full year targets for non-GAAP EPS. This was due in large part to the focus on driving a more resilient and durable business model. As previously communicated, we believe the first quarter will represent the floor for our results this year and we expect sequential improvements as we move through the balance of 2023. While large enterprises and especially tier one service providers are more carefully considering investments due to the economy, security solutions remain a priority and are increasingly not a discretionary consideration. Companies around the world even those with robust security processes and controls, are experiencing an ever-growing threat of cyber attacks. During the first quarter, we further augmented our already robust security infrastructure to enable us to better support our customers against these threats. Cyber attacks are simply a business reality for even the most prepared organizations, and that deploying solutions to mitigate this risk and the associated disruptions they cause is a priority even during challenging times. Like others, we are seeing longer sales cycles, particularly among larger North American customers due to concerns about the economy. We do not believe we have lost any meaningful forecasted deals to competitors, but they are taking longer to close impacting our normal revenue cadence. Indeed, North America declined 9% in the first quarter compared to last year, and revenue in the rest of the world was down 7% year over year. Effectively, all of this revenue decline was due to Tier 1 customers who paused planned buying in the quarter with expectations of resumption in the second half of the year. Our diversification, both in terms of geography and customers, helped us mitigate the macro environment as we believe we are navigating the economy better than most, but we were not immune from the conditions. Proactively, we have taken steps to align our cost structure. We deployed select austerity measures to reduce operating expenses by 10.3% year-over-year in Q1 in light of these macro headwinds. I want to note that we were mindful of our long-term goals, particularly related to growth, as we reviewed our near-term spending. Over the long term, I don't believe this effort will materially impact our business trajectory or ability to achieve multi-year targets as market conditions normalize. In reality, our ability to maintain solid profitability and cash generation, even during a quarter with significant revenue challenges, speaks to the durability of our business model and execution. As a result, we maintained our gross margins in excess of 80%, and significantly expanded our adjusted EBITDA margin to 26.8% versus 21.6% in last year's first quarter. This is in line with our business model goals of achieving 26 to 28% EBITDA and 80% gross margin. As we have previously communicated, our ability to proactively manage investments and certain expenses enables us to maintain robust profitability even when revenues are under external pressure. We have continued to methodically plan these actions, including supply chain, sales and marketing investments, and selected strategic investments in R&D. In an effort to improve the security and resiliency of our hybrid cloud offering, we recently announced a strategic partnership with Fastly, an industry leader in next-generation web application firewalls, or WAPs. By combining our leading ADC solution with their next-generation WAP, this first-to-market integrated solution can provide our large enterprise customers a single solution to enhance web defenses across software, and hardware appliances within their hybrid cloud environments. We believe this partnership strengthens our portfolio and unlocks further diversification of our revenue stream. Additionally, our collaboration should broaden our go-to-market strategy for this type of solution as we leverage the reach and capability of both ATEN and Fastly teams. Additionally, in Q1, and in line with these diversification efforts, a large partner in Japan introduced ATAN's Cloud Access Controller into their Security Operations Center service package. ATAN Network's Cloud Access Proxy is a complete enterprise solution designed specifically to help organizations optimize the performance, and security of their SaaS applications, enhance user experience, and provide comprehensive visibility into branch offices and the cloud. With a partner enabling this as a service, it is further proof that we continue to invest in comprehensive security solutions delivered through multiple form factors for our customers. In the first quarter, our revenue was negatively impacted by the combination of macro economic headwinds and internal company priorities to strengthen our security posture. But our business model and focus on execution enabled us to preserve our profitability. We are confident that we will show improvement as we move through the year and we continue to expect full-year EPS expansion. We also continue to maintain a disciplined, flexible, and opportunistic capital allocation strategy. Today, our board approved a quarterly dividend of $0.06 per share. With that, I'd like to turn the call over to Brian for a detailed review of the quarter. Brian?