Start with a presentation by Brian, and that will be followed by Q&A. And if you would like to participate, you can submit that question at the bottom of your screen, and we will go over the questions once Brian has concluded the presentation. And with that, I'll hand it over to you, Brian. Thank you for joining us today.
Thanks, Anja, for having me, and thanks everybody interested in joining our presentation. I hope it's valuable for you and give some insight as to what A10 is and where we've come from and where we're going. I'll start with our mission. Our mission is to enable business-critical networks that are secure, available, and efficient. Very important. Obviously, cybersecurity is top of mind for most people nowadays, but also being efficient allows for better performance as well as cost savings. So since Dhrupad joined A10 as the CEO in December 2019, we've transformed the business to deliver sustainable business results. We've evolved the business model to deliver durable business results, even in challenging environments, as evidenced by our 2023 results.
We were down in revenue growth but still deliver earnings and free cash flow. Growth is really driven by customer need for cybersecurity and efficient infrastructure, as I mentioned before. And really, you know, we aligned our commercial execution against our product roadmap. Those are the major transformation items that we've gone through the last few years. Secondly, we are expanding reach in the large enterprise market. This is critical for us. A part of the reason that we were challenged last year is our exposure to service provider CapEx cycles. We think, growing our enterprise segment faster will help us to be more durable. Continued strength and expansion into Tier 1 and service providers around the world is another way, a way that we continue to sustain, deliver growth.
In those environments, secular tailwinds are on cybersecurity, 5G, rural broadband, and cloud transformation, all of which we are very well positioned to take advantage of. Lastly, our value creation is based on growth, gross margin, and continuous productivity. As you can see in our results, which drives our, you know, the value to shareholders. You know, focus on top-line growth, really focusing on gross margins as well as EBITDA margins and delivering free cash flow is critical for delivering value to shareholders around the world. You know, we're really focused on customer-driven outcomes. You know, really basically looking at how do we help our customers achieve their business outcomes, whether it's with technology advances, whether it's with better protection, whether it's with the total cost of ownership challenges.
And then we have a track record of demonstrating operating leverage and multiple expansion and opportunity through cybersecurity transformation, meaning we have positioned ourselves away from a legacy hardware load balancing company and have really introduced a number of cybersecurity products that are expanding the value of our stock. As you can see here, we have a proven track record of profitable growth. 2023 is a little bit of an anomaly for us in terms of revenue. But, you know, 2021 revenue is $250 million, 10.9% growth. EBITDA was $62.4 million, or 25% of revenue. EPS was $0.63 on a non-GAAP basis, diluted.
2022, we grew revenue 12.1% over the year before, to $280.3 million. EBITDA was $75 million or 27% of revenue, and EPS was $0.74. 2023, and we saw a decline of 10% in revenue to $251.7 million. However, we still delivered EBITDA of $71.2 million or 28% of revenue, which is, you know, a record for us. And then we also delivered EPS of $0.73 per share, almost as expected by the Street, and then still flat year-over-year, despite the 10% decline in revenue. So really proving our business model is working in terms of driving profitability. So what are we doing?
We're changing customer buying decisions by really looking at where can we help with their outcomes. So growing cybersecurity attack, sophistication, and volume creates a need for holistically addressing infrastructure and network security. In addition, advancing technologies like AI is really accelerating the need for effective cyber defense and efficient network architecture, meaning, you know, efficiency and speed. So with speed, you know, comes challenges around threats, and as threats become more prolific and more complex, the need for cybersecurity enhances. We also have hybrid operating models which allow a flexible path to achieve customer business outcomes, meaning we can run our products on-prem, in the cloud, or in both as a hybrid.
We also have multiple ways that customers can consume our product, either as a perpetual license or a subscription over time, depending on if they want to look at CapEx versus OpEx. So growth drivers for us, you know, which I'm counting on for resuming driving growth for the next 12-24 months, is around cybersecurity. Our key products are DDoS detection and mitigation to counter growing attacks that are becoming so sophisticated and more frequent. I think 2023, we saw in July as many cyber attacks by that time last year that we saw of all of 2022. I'm interested to see how we're doing for 2024, but my guess is we're still seeing proliferation of complex cybersecurity attacks.
We're expanding our security category with new threat vectors to gain share with common A10 Defend portfolio. So this year we introduced A10 Defend, which is a threat intelligence product that is really driven towards cybersecurity-focused enterprise companies. And then cloud-based security protection in conjunction with on-prem solutions. So again, our hybrid solution hypothesis, how can we provide a service to enterprise companies without integrating into their data center and network, which really is a cybersecurity infrastructure, cloud scrubbing play? When it comes to infrastructure, you know, hybrid architectures are, you know, is what we offer, and it accommodates movement between applications to any consumption model. So, you know, you could run the applications on-prem and in the cloud simultaneously, and we can also offer different ways of consuming it, depending on their cost structure, OpEx or CapEx.
We also have the ability to do conversion of license model to subscription. Again, similar, allowing that flexibility is difficult and complex. It requires a lot of engineering work to be able to do that, but, you know, it's something that is a differentiator for us and allows for companies to choose between CapEx and OpEx, depending on their goals. And then we think we can do market share gain by aligning our solutions with our customers' economic goals. Meaning, you know, by looking at business outcomes and understanding their problems, what their KPIs are, it helps us to be more flexible on what we can bring to the table for their solutions.
You know, whether it's performance specifically, or best in suite, or a total cost of ownership play, we can be very flexible and meet what their business outcomes are driving. So we recognize the volatility of the service provider business and the impact it has on the predictability of our revenue. As you saw in 2023, two quarters, and specifically, we, you know, missed expectations as a result of North America service provider. So to create more predictable growth, we're expanding our investments in the enterprise segment, while we continue to maintain strong presence in service provider. We're doing that by investing in the development of infrastructure and security products that align to the needs and consumption models of enterprise customers that operate in hybrid cloud environments. We do that with software, cloud services, and flexible licensing models.
In addition, we're aligning sales and marketing resources to generate stronger inflow in those enterprise segments that represent growth opportunities for A10. You know, it's a little bit of a different go-to-market strategy at a service provider customer than it is at an enterprise, especially since enterprise business is mostly win-win-win versus a service provider business is typically, for us, more of a land and expand. So what are our business value drivers? We leverage a common hardware and software platform and a management layer on top of that for best-in-class technical performance that is all integrated and seamless, and creates really great customer return on investment. You need less of our product to perform the same function as our competitors, and because it's organically built from the ground up and integrated, less support, which translates into really flexible cost savings.
We will grow, though, however, by expanding share of wallet, better ways to manage data growth while becoming more secure. That's critical. We are leading with cybersecurity to really help create more TAM. You know, our addressable market right now, we're shifting away from infrastructure, which was typically a large portion of our business, into more of a cybersecurity market. You can see that in 2023, and so far in 2021, 60% of our revenue was led by cybersecurity. We're also growing our enterprise business faster than a service provider business with hybrid solutions that align with customer goals. And you can see that last year, our service provider business was down with the market at 22%, whereas our enterprise business was up 8%. So this gives you a view of our customers.
So we enable customers to deploy hybrid solutions on-prem and in the cloud, as I've mentioned. 65% of workloads will be cloud ready by 2027. So being able to deliver both on-prem, in cloud, and across both of those, is a huge differentiator for us. 20% of our revenue is from public and private cloud. So again, focusing on cloud companies, we've been growing that business, almost 2% every year. So it was 16% two years ago, last year was 18%, and now we're at 22%. Excuse me, 18, 20, 22. Also, you can see we have more than 7,000 customers globally. 80% of our revenue approximately comes from those customers. 21 of the top 50 Fortune Global 500 companies are with us.
We also have eight of the top 10 global cloud providers. And then we have 15 of the top 25 global video gaming companies, which are our largest enterprise business, and then nine of the top 10 telecommunications operators, which are service providers. Just as a reminder, service providers are in the business of building an infrastructure to deliver services to their customers, be it consumers or enterprise businesses. So they're, you know, our products are driving revenue for them. When it comes to large enterprise, we typically focus on companies like financial institutions doing high-frequency trading, gaming companies that are delivering online gaming services, and healthcare companies that are, you know, managing high volumes of very sensitive data. So this is, again, growing our enterprise business, which will hopefully give us, you know, a little bit more stability.
But we have a unique position with hybrid solutions. You know, I keep mentioning flexibility. Our solution is very flexible, not only in deployment but in consumption. You know, companies are more focused on managing ROI, especially over the last year and a half, especially in these uncertain markets. So being able to deliver total cost of ownership value proposition has been critical for the enterprise space. And then security is a top concern, no matter where you go. We continue to combine this with our network know-how, to be able to detect and mitigate threats better than our competition. So these are our differentiators. We have a unified product architecture that delivers lower latency, higher throughput, and higher scalability.
Its proprietary hardware elements, combined with our proprietary architectural design from a software perspective, that makes it the most efficient and effective delivery, throughput, and latency. State-of-the-art cybersecurity, again, with machine learning, and we've had that for years. I guess we call it AI now, but we detect and remediate complex, high-volume attacks quicker and better than competition. With that scale of data that we've got from our years of experience in data, using machine learning or AI, allows us to profile attacks, to detect and remediate and identify degradation of networks quicker, as well as to provide mitigation tools and effectiveness through our products. We support multiple security and IT infrastructure categories, meaning, you know, there's multiple groups within an organization.
There's security operations, there's developing, you know, developer operations around, you know, coding and engineering, and then there's the corporate IT environment. Each has a different buying pattern, but having different multiple categories of products allows us to, you know, really be able to penetrate different business units with the, you know, that we're looking for different specificity and functionality. We also, as I mentioned a few times already, have a flexible deployment model, with our hybrid environment, that allows us to really be more flexible with our customers as they're deciding and changing their position, whether it's on-prem, moving to the cloud, or being in a hybrid solution. And I think a lot of us have seen over the last 12 months, a pullback on, or maybe even 24 months, a pullback on moving to the cloud.
I think as a lot of companies have moved different workflows to the cloud, they realize how expensive it is, and have pulled back and brought some of the mission-critical data back on-prem to really not only reduce cost but maintain cybersecurity outlook. And then lastly, best-in-class technical support. You know, we have a TAC team that provides mission-critical application and infrastructure guidance. You know, we have real good and really best-in-class advanced replacement on our hardware, which really means that, you know, customers that have mission-critical applications, where downtime of milliseconds can mean millions of dollars of loss, you know, really rely on us to be able to identify, detect, and then if there is a problem in the field within an appliance or some kind of a configuration, quickly diagnose and remediate that issue.
Little bit of a busy, busy slide, but I'll try to touch on the key product releases that we have coming up in 2024 and onward that really are driving growth and opportunity for us. For service providers, you know, we have the highest performance on a rack unit. I mentioned this before, we're 30% faster than our competition. Also, we've got best-in-class DDoS detection and mitigation. So if you think of flooding the network with bad traffic, the biggest challenge is identifying and preventing it, as well as not dropping the good traffic. So we do that better than anyone else. As far as the enterprise, our products are hybrid and can be deployed in the cloud, on-prem, or both. We've talked about this already.
Next-Gen WAF is another element of introduction to last year that really helped us to gain more market share. It's a web application firewall. It prevents threat actors from penetrating an application and then laterally moving to another application within a network. We also introduced A10 Defend Threat Control this year, which is a threat intelligence feed, really using our data know-how and our real-time traffic expertise to really mitigate and continue to protect environments. We also have ultra low latency products for financial services, secure gaming, and other data center and cloud applications. So it means that our speed and throughput is better than anyone. So for those applications, you know, we do really well. And then lastly, we are. I keep mentioning this, but we have the flexible consumption model.
It can either be OpEx or CapEx, which is critical, especially in times of... that we've seen where macroeconomic headwinds are providing challenges for cost of capital, you know, resource constraints, and the like. This is a look at our customer, how they view us. You know, our products dramatically increase performance and substantially saves OpEx and CapEx. So if your product works 30% faster than someone else's, it means you need 30% less of it, which reduces, you know, rent, you need less space, reduces electricity bills, less cooling. Plus, because it's all built from the ground up organically, it's all integrated, and therefore you need less support from your IT support team. We are consistently rated as superior in features, performance, usability, reliability, and support.
82% of organizations are likely to recommend A10, this is based on our customer sat surveys. And then 79% of organizations experience a positive ROI in under 24 months and 54% in under 12. So a very good return on investment for all the features that I mentioned in the last few slides. This is a look at our diversification, which really, you know, has been a great balance of our durability over the years. 2023 was a little bit of an anomaly in our view. We're hoping that 2024 is a recovery year, and we'll see a return to growth. But, you know, being diversified, we have nearly 50% of our revenue is from North America, 30% from APJ, which includes Japan, and then about 15% from EMEA.
The other 5% is really APAC. 2/3 of our revenue comes from service providers, 1/3 from large enterprise. I don't have a specific target for that mix, but I would like to see our enterprise business growing faster than our service provider business, so I can stop, so I can have something to mitigate some of these CapEx cycles with the service provider market. Then nearly 50% of our revenue is recurring. We're continuing to deploy flexible consumption models and new service products, which is continuing to grow that as a larger percentage of revenue, which hopefully, you know, over time will be more stable and predictable. The last slide I have prepared is around ESG. You know, it was a pretty hot topic a couple of years ago.
I think last year with the economy, I think it was maybe not as high of a focus, but, you know, we continue to be focused on being environmentally responsible. We lead in various initiatives in conjunction with strategic partners. I mean, we're pretty small in terms of our competitors, and, you know, we need to find every angle that fits with our customer base, and a lot of them going through environmentally responsible initiatives, really lends us to be able to track and deliver performance while achieving, you know, their objectives around environmental safety. Also, when it comes to social, we foster a diverse, inclusive and safe environment for our employees, as well as customers. We're constantly reviewing security measures, continually improving our employee training, and really focusing on diversity and inclusion. And then lastly, governance.
I mean, we maintain strong governance that maintains, you know. We're retaining strong governance for delivering ethical accountability, as well as an engaged ecosystem for all of our stakeholders. So, you know, we believe we're ESG responsible. We continue to focus on that as an important element of the business, which really is focused on driving value for both employees, shareholders, as well as customers alike. You know, delivering on all aspects of the presentation I've talked to, is how we get to that, you know, delivering and satisfaction across those three components of where I'm focused: employees, investors, and customers. With that, I would like to open it up for any Q&A if anybody has any questions.
Okay. Thank you so much, Brian. That was a good overview. Yes, if you have a question, you can submit it in the Q&A function at the bottom of your screen, and I will kick it off with a few questions while we see that populate. So you mentioned value creation. One thing is expansion of the gross margins. What are the drivers you see for expanding the gross margin?
Yeah. So our gross margin guided would be 8% in the near term, and we hope to get above 82% in the long term. You know, a lot of it is operational, right? So our gross margin is based on cost of components as well as cost of service delivery. You know, we're constantly improving the business. You know, Dhrupad came from many years of running different business units within a lean organization, which is always driving productivity and looking for continuous improvement. So, you know, from a gross margin perspective, you know, getting more proficient at inventory turns is really gonna be my focus over the next couple of years to really drive gross margin profile.
You know, and then continuously looking for savings around component costs, you know, logistics costs and support costs alike, is really a key to driving higher gross margins.
Okay. You mentioned that you've been driving it towards a lean operating model since Dhrupad and you came on board. And with the revenue being kind of muted last year, and you've been prudent on the cost side, how should we think about the leverage there once the revenue come back?
Yeah. I mean, we've built the model to be flexible, as evidenced by last year. You know, obviously, I entered the year with a plan, with an expected, you know, revenue growth. But I, you know, have many touch points and a bunch of different levers within the business to be able to achieve margins in the event that, you know, if things don't go as planned. But yeah, it's, you know, luckily, there's two major elements that benefit me in times of need, which isn't always the greatest thing to say out loud. But, you know, my employee compensation plan when it comes to the corporate bonus is tied to performance, partly in revenue, partly EBITDA.
So it's really good from a culture perspective because everyone's focused on achieving the same results versus having different MBO programs or targets throughout different organizations that can cause distraction or, you know, misalignment. But yeah, that's a big element. If we don't hit those targets, then I unfortunately am not able to account for bonus. But then on the flip side, I've got sales and marketing. Obviously, if I don't hit my bookings targets, then I don't incur those commissions costs or channels costs. So that's a huge element of it. But you know, as you mentioned, running a lean company is, it's a weekly, monthly, quarterly process of evaluating, how are we tracking the KPIs? Do we need to make some adjustments? Do I need to divert resources to different areas for higher growth potential?
Do I need to scale back, you know, discretionary costs? And I think, you know, what compounds that point is, last year and even years past, we have not had, you know, full-scale layoffs. We had some minor actions last year, which I would characterize as, cleaning house, but, you know, we haven't had a challenge because of that mentality of, you know, running the business at such a granular level.
Okay. And in terms of the service providers, they're very CapEx intensive in their projects, and as you mentioned, the cycle there is sort of challenged now. What are you seeing there, and do you think once we see interest rates come down, will that sort of open up, or it depends on also, to what extent they are coming down, right? And how fast?
Well, I'd say you're probably in a better position to predict that than I am. But yeah, I think what I've seen is, you know, last year, and it's improving this year. I wouldn't say we hit an inflection point, but we weren't seeing changes in plans, like, you know, we would have architectural design wins. Our sales cycle is six to nine months. It starts with an architectural design, an evaluation, and then a technical win. Once you get through the engineering technical win, then it goes to procurement. So what we were seeing is that the projects weren't being canceled; it's that they were either resizing them and splitting them up into different periods or deferring them. So I still have good visibility in terms of projects. But I think you're right.
I think, you know, that as we see catalysts start to form, then we'll start to see release. And I think you see that in Q1, we had some success in Japan, 22% growth, because there was some pent-up demand. They hadn't been spending for 18 months in Japan and certain service providers. There was a natural disaster that there was a catalyst for disaster recovery spend, which benefited us. So I'd say, you know, I don't know what the catalyst would be. Maybe it's the election, maybe it's an interest rates, but, you know, I see good visibility to my opportunities. It's just a matter of, you know, when will that materialize? In this macroeconomic environment, it's a little too difficult for me to nail it on a quarterly basis.
Okay, thank you. In the meantime, you have the enterprise that's growing at a fairly good rate for you. What are you seeing there in terms of the customer sentiment?
Yeah, I mean, it's a little bit of a different play. You know, the service providers are expanding capacity or increasing cybersecurity, whereas I think enterprise is, for me, that's a lot of new business. So it's best in suite. You know, who has the best infrastructure and cybersecurity products that makes it easy for me to consume at a reasonable cost? That market, I don't know exactly how that's growing compared to peers, but as you mentioned, 8% growth in my enterprise business last year. I see it as more of a share play than I do a market play. I think we have an ability with some of our new products to take share gain, which is really want to focus on today.
What kind of pricing power do you have, and how's that changed over the past six years or so?
Well, you know, my pricing, I, I think our gross margins probably speak to that best. I mean, we've consistently been 80%-82% gross margin. I think last year, Q1, one of the toughest ones, years, or toughest quarter we've had in a long time, we still had 83% margins. But, you know, I think it's less about point product pricing and more about total cost of ownership. I think we price our products, you know, we, we try to work with our customers to pass through, you know, component costs. I think last year, component costs were up to 30%. But yeah, very little, you know, price increases. We never announced a wholesale 10% price increase. More opportunistic working with customers, but I'd, I'd say our leverage isn't that great because we're not that...
We're a pretty small player, and most of our customers are much bigger than us. So, I just point back to our financials to say we're doing pretty well, you know, maintaining price control. And we're, you know, opportunistically looking for ways to grow that, to expand margins. But, you know, I think we're pretty healthy right now, and I don't know that we could get a whole lot higher than 85%-83%, right?
Okay, and we're out of time, but I also wanted to touch on your balance sheet, 'cause you have a very strong balance sheet that should be in favor of the type of investors we work with at Sidoti. If you just wanna go over your cash position, you're essentially a debt-free and sort of your capital, capital allocation priorities.
... Yeah, I mean, we've been hovering around 180, $180 million of cash and cash equivalents. No debt, as you mentioned. And the reason for the cash is, you know, we've built this model so that we're generating. I mean, you saw this, Q1, we generated nearly $30 million of free cash flow. That's pretty unusual. It was a bit more of a catch-up of payments from last year in terms of timing of receivables, a little bit of a pull-in from Q2. But yeah, I, I'd say, look, you know, we're generating, you know, nearly $60 million of free cash flow a year.
From that, I'm funding, you know, growth and, and development and innovation in our, my R&D function, as well as sales and marketing, investing in technical resources that are focused on cybersecurity, software, hybrid sales, and the enterprise space. But then secondly, we, you know, we have a dividend program. You know, it's about $4.5 million a quarter that we've been running. We also do share repurchase, both of which I try to fund with cash from operations. You know, share repurchase, last year, we ended our $100 million program with, $86 million of repurchases. This year we have a $50 million program, and, and we're continuing to execute as, as quickly as possible with the constraints I have around volume and pricing guardrails.
Yeah, as you mentioned, you know, we're accumulating a lot of cash on the balance sheet, which just puts me in a good position to be strategic for any, you know, possible growth opportunities that could accelerate, you know, our organic growth initiatives.
Okay, great. And we're actually a few minutes over time here. So I wanna thank you, Brian, and A10 Networks for joining us today, and everyone who participated. I know you have a pretty full one-on-one schedule, but if anyone would like to catch up with you, I'm sure we can make that happen. You can either reach out to the company directly or to us at Sidoti, and we'll make sure it will happen. And with that, I'll hand it over to you, Brian, for some closing remarks.
Thanks, Anja, for having me and A10, and thanks everybody that's joined. As Anja said, if you have any... would like to follow up with any questions, you can go to our investor page on our website, and there's a link to our invest- our IR inbox. But send any questions or requests, and Anja can absolutely help coordinate a meeting. But thank you for your time and your interest.
Great. Thank you, and enjoy the rest of your day.