A10 Networks, Inc. reports 1.4% revenue decline in 2018 and 7.7 pp EBITDA Margin decline from -0.79% to -8.5%
02/07/2019 • About A10 Networks, Inc. (
$ATEN) • By InTwits
A10 Networks, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- The company operates at negative EBITDA Margin: -8.5%
- A10 Networks, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 0.0%. Average EBITDA Margin for the same period was -7.8%
- A10 Networks, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $1m in FY2018, $1m in FY2017, $0m in FY2016, $0m in FY2015, $0m in FY2014
- The company has unprofitable business model: ROIC is -27.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased slightly on 1.4%. Annual revenue decline showed slowdown in 18Q4 - revenue increased on 3.0%. Revenue decline was accelerating on average at -6.3 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 24.8 pp from 20.4% to 45.2% in 2018.
Gross Margin showed almost no change in 2018. During the last 5 years Gross Margin bottomed in 2015 at 75.5% and was growing since that time. SG&A as a % of Revenue increased on 6.5 pp from 55.0% to 61.5% in 2018. During 2014-2018 SG&A as a % of Revenue bottomed in 2017 at 55.0%.
Net Income margin decreased on 7.3 pp from -4.6% to -11.9% in 2018.
Investments (CAPEX, working capital and M&A)
A10 Networks, Inc.'s CAPEX/Revenue was 1.2% in 2018. The company showed small CAPEX/Revenue decline of 0.54 pp from 1.7% in 2015 to 1.2% in 2018. Average CAPEX/Revenue for the last three years was 1.9%.
Return on investment
The company operates at negative ROIC (-27.2%) and ROE (-27.3%). ROIC dropped on 15.9 pp from -11.3% to -27.2% in 2018. ROE dropped on 15.4 pp from -11.9% to -27.3% in 2018. During 2014-2018 ROIC topped in 2017 at -11.3%.
Leverage (Debt)
The company has no debt. Cash dropped on 12.8%.
Management team
The company's CEO Lee Chen is a founder and has spent 5 years with the company. Tom Constantino is a the company's CFO. Tom Constantino has spent 2 years at the company.
Financial and operational results
FY ended 12/31/2018
A10 Networks, Inc. ($ATEN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 179.5 | 199.0 | 227.3 | 235.4 | 232.2 | -1.4% |
| Gross Profit | 136.6 | 150.2 | 172.9 | 182.1 | 180.3 | -1.0% |
| SG&A | 119.8 | 131.6 | 130.7 | 129.5 | 142.8 | 10.3% |
| EBITDA | -20.2 | -29.7 | -12.3 | -1.9 | -19.8 | |
| Net Income | -34.7 | -40.0 | -22.4 | -10.8 | -27.6 | |
Balance Sheet
|
|---|
| Cash | 91.9 | 98.1 | 29.0 | 46.6 | 40.6 | -12.8% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 6.1 | 3.5 | 4.9 | 5.7 | 2.8 | -51.2% |
Ratios
|
|---|
| Revenue growth | 26.6% | 10.8% | 14.2% | 3.6% | -1.4% | |
| EBITDA growth | 27.8% | 47.5% | -58.6% | -84.9% | 963.9% | |
|
|---|
| Gross Margin | 76.1% | 75.5% | 76.1% | 77.4% | 77.7% | 0.3% |
| EBITDA Margin | -11.2% | -14.9% | -5.4% | -0.8% | -8.5% | -7.7% |
| SG&A, % of revenue | 66.7% | 66.1% | 57.5% | 55.0% | 61.5% | 6.5% |
| Net Income Margin | -19.3% | -20.1% | -9.9% | -4.6% | -11.9% | -7.3% |
| CAPEX, % of revenue | 3.4% | 1.7% | 2.1% | 2.4% | 1.2% | -1.2% |
|
|---|
| ROIC | -53.2% | -41.8% | -24.4% | -11.3% | -27.2% | -15.9% |
| ROE | | -45.3% | -27.5% | -11.9% | -27.3% | -15.4% |
A10 Networks, Inc. ($ATEN) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 49 | 61 | 61 | 62 | | -23.1% | 12.5% | -2.4% | 3.0% |
| EBITDA | -18 | -2 | 0 | -1 | | -4,150.3% | | 123.7% | -108.8% |
| Net Income | -20 | -5 | -2 | -2 | | | | | -139.5% |
Balance Sheet
|
|---|
| Cash | 47 | 41 | 36 | 41 | | 53.6% | -12.5% | -9.4% | -12.8% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 75.8% | 78.3% | 78.5% | 77.7% | | -1.1% | 2.0% | 0.9% | -1.1% |
| EBITDA Margin | -36.3% | -2.8% | 0.6% | -0.9% | | -37.0% | 7.5% | 0.3% | -11.6% |
| Net Income Margin | -40.0% | -7.5% | -3.0% | -2.6% | | -37.9% | 7.3% | 0.6% | -9.4% |
Peers in Systems Software
Below we provide A10 Networks, Inc. benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 20.6% | 14.7% | 16.6% | 20.4% |
|---|
| A10 Networks, Inc. ($ATEN) | | 10.8% | 14.2% | 3.6% | -1.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 77.0% | 74.5% | 73.1% | 73.9% | 73.5% |
|---|
| A10 Networks, Inc. ($ATEN) | 76.1% | 75.5% | 76.1% | 77.4% | 77.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | 1.0% | -5.0% | -9.8% | -5.4% | -3.9% |
|---|
| A10 Networks, Inc. ($ATEN) | -11.2% | -14.9% | -5.4% | -0.8% | -8.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.7% | 2.2% | 2.0% | 2.2% | 2.6% |
|---|
| A10 Networks, Inc. ($ATEN) | 3.4% | 1.7% | 2.1% | 2.4% | 1.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | 0.0% | -2.7% | -0.9% |
|---|
| A10 Networks, Inc. ($ATEN) | -53.2% | -41.8% | -24.4% | -11.3% | -27.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (23 companies) | -2.4x | -1.4x | -1.2x | -0.6x | -0.4x |
|---|
