Okay, welcome to the SIDOTI Small- Cap Conference. As I mentioned, next up we have A10 Networks. I'm Anja Soderstrom, the analyst at SIDOTI covering the name, and it's my pleasure to have with me today the CEO, Dhrupad Trivedi, and Brian Becker, the CFO. This is going to be conducted as a presentation. We have a little bit of a video issue, so we will just show the presentation and not the presenters. This will start as a presentation by the management team, followed by Q&A. If you would like to participate, you can submit your question at the bottom of your screen, and we will address them at the conclusion of the presentation. With that, I'll hand it over to you guys.
Thank you, Anja. Thanks, everyone, for attending the session today. We will walk through our presentation, and as Anja said, happy to take some questions at the end. First of all, our traditional statements and disclosure page. For those that are new, I wanted to recap A10 and what we do and our history. A10, as a company, our mission is enabling business-critical networks that are secure, available, and efficient. These are all important terms because these directly relate to our areas of differentiation and our areas of investment, and where we focus on our customer applications, which are more business-critical in terms of security, efficiency of the network, and user experience and availability. From a highlight perspective, I think overall the company, we present a differentiated mission-critical platform.
It's a scalable, high-performance platform that defends against evolving threats while enabling, sorry, while enabling new, enterprise network AI as well as other networking applications. We support a broad variety of security, IT, and cost-saving initiatives. The company has demonstrated a track record of growth and profitability, where gross margins have expanded 3% and EBITDA margins expanded 23% over the last five years through a combination of productivity and operating leverage. Our profitability continues to grow faster than revenue. We have a global presence, and this presence with an international revenue mix provides further diversification of revenue and durability in our results. We have a robust balance sheet and consistent capital return.
We ended the year FY 2024 with cash and cash equivalents of $196 million, cumulative $300 million-plus of cash flow from operations over the last five years, $176 million in share buybacks, and historical quarterly dividends of $0.06 per share. If you look at our 2024 results, we delivered $262 million in revenue with an adjusted EBITDA of 29% and non-GAAP diluted EPS of $0.86.
Thank you, Dhrupad. This is Brian Becker, CFO. As you can see, the track record revenue growth, we have a CAGR of, call it, 4 %+ over the last five years. We're showing 2019 is when Dhrupad joined, and so what's relevant here is December 2019 began the what we see today, where Dhrupad has, you know, really changed the way the business has gone to market, changed the business model that we have today to really drive growth on the top line. We're continuing to return gross margins of 80%-82%, and then EBITDA margins of 26%-28%. As you can see, 2020, his first year, full year, 20% EBITDA, and we saw growth of, I think it was 2% year over year.
Non-GAAP EPS, which is, you know, a new thing to A10 in 2020, was to be profitable on a GAAP basis as well as generating EPS positively. You can see that trend growing from an EBITDA basis of 8% on a CAGR and then EPS on a non-GAAP basis on close to low, low double digits. You can see here, as I mentioned, our revenue CAGR, over the last five years since 2020, after Dhrupad took over, 4%. We're comparing that to our networking peer set, showing 3%, and my assertion here is that if we're growing faster than our peer set, we must be making share gain.
and then, as you can see, share price growth, total shareholder return we do not show here, but including just looking at the share alone, 216% return from 2020 compared to network peer set of 35%. This does not include the share repurchase impact and/or the dividend that we make every quarter of $0.06 per share.
Thank you, Brian. I think next I want to talk about what are the macro trends and opportunities we see forward in the business. First, increasing cyber risk creates a need to holistically address infrastructure and network security, versus approaching each of those as completely independent categories. Second, we continue to see, of course, the impact of AI in terms of transforming the industry and presenting a leap forward for cyber defense as well as network architecture. Last, through COVID and beyond, we have continued to believe in this is that hybrid operating models where customers are operating their infrastructure on-prem, in public cloud, and private cloud continues to offer the most flexible and cost-effective path for business outcomes. How we play into this trend really is by providing our customers a way to accomplish those goals while navigating significant technology transitions.
First, we have a unified software platform to deliver best-in-class technical performance. This also allows us to be efficient in terms of our R&D spending and our ability to cover new categories in security as well as infrastructure. Second, continuing to support our customer needs on a hybrid infrastructure build-out as well as an AI build-out, which is in very early cycle where we are seeing the first wave of large build-outs, which eventually will be followed by a much broader adoption in the industry as people build their own inference models and leverage AI for their own business goals.
Third, our ability to have a common way to manage all these applications, whether they are in our infrastructure portfolio or our defense or security portfolio, provides a consistent common way for our customers to better manage all these categories, and ultimately improve their ROI with the lower CapEx and OpEx by using A10 solutions. Where we play in our customer networks is ultimately they trust us with their critical applications, and they trust us as their partner for transition to cloud. We provide always available application delivery and security, whether they are on-prem or in the cloud. We continue to protect their investments for enterprise as well as service providers. We support them for seamless migration across technology without requiring them to adopt a particular technology or a solution point of view.
We continue to secure multi-generational devices and networks and defend them from new and more complex types of cyber attacks. If you see ultimately where our products create the most value, you can see the box on the bottom highlighting the hyperscale industry such as telecom operators, cloud providers, Fortune 500 companies, video gaming companies, and media companies, where all of them share the attributes of a large number of users, high premium on network performance, and high need for security. This chart illustrates some of the brands that we serve around the world. I think two key points to take away here are one, we have a very strong global footprint with about 50% of our business in Americas, 30% in Japan, 20% in EMEA.
We serve some of the biggest brands as it relates to the verticals or the categories I mentioned on the slide before. Typically, we would work with these customers over a period of multiple years to deploy their networks, continue to expand them, continue to enhance them, and at the same time, adding new features around security and availability that allows our customers to deliver more value from those networks. The business value drivers for us are threefold. A, we have about 6,000 customers around the world over a long period of time. Selling more products to that install base is ultimately a very effective way for us to manage growth, but at the same time, help our customers manage growth in data and networking traffic and become more secure. This relates to us just selling more categories to existing customers with existing products.
Second, cybersecurity continues to be a secular tailwind, and our ability to drive that with best-in-class solutions helps us create new spending opportunities with customers and also help expand their own plans to expand security coverage relative to increasing and new types of threats that they face in their network every day. Last, two-thirds of our business historically was service providers that included cloud, telecom companies, and cable companies, and one-third was large enterprise. While we continue to protect and build our share with service providers, one of our growth drivers is also driving growth in enterprise with hybrid solutions that better align with our customers' economic goals versus driving a specific technology point of view as it relates to on-prem or cloud, et cetera.
Leveraging a common platform and management layer is ultimately what helps us help our customers deliver more effective ROI when they choose to invest with our solutions. Our investments today and going into the future are focused on three areas. First, infrastructure evolution. We continue to help our customers drive efficient networking and security, enabling on-prem, public, and private cloud, or any combination thereof related to their own business goals. Second, we continue to invest in cybersecurity insights and tools with our own research teams that help us to help the customer networks defend against more complex and higher volume cyber attacks. Third, artificial intelligence, where we see this as enabling and securing the new AI stack and at the same time leveraging AI to predict and automate network performance, which creates value for our customers.
Specifically to AI, what we should see today is that AI has been used for years, but it is currently reshaping the industry with massive advances. As I mentioned before, hyperscalers are investing heavily to build that infrastructure. The challenge for our customers is that this now puts new demands on resiliency, security, and latency requirements of their networks. Attacks are more frequent because it is facilitated with AI and attack surface is expanding. At the same time, our customers are looking to use AI to improve experience, improve the performance of the network, and drive productivity for their own business. As it relates to A10, here are three examples of how we look at that need and what we are doing for our customers. First, new AI applications require low latency to support mission-critical services and user experience.
Our platform today connects to AI applications and continues to provide low latency, including load balancing for AI. This will be foundational to next-generation data center build-out. Second, new security solutions are needed to protect AI applications, the data and IP, where new threats have become possible because of the prevalence of new AI traffic, which did not exist five years ago. Our solutions are designed to detect and remediate those threats as well. At the same time, we are using AI to strengthen our current solutions to be more effective and efficient against more complex cyber attacks. Third, based on our legacy of 20 years of networking combined with a global footprint of several thousand customers, we are using AI to deliver automation and insight to our customers for improved resiliency in their network, where they could potentially address problems before they become network degrading issues.
The notion of predictive performance and predictive security while early in the cycle is a perfect example of where we are using our differentiation and combining it with what is possible with AI to fundamentally drive value for our customers. As I mentioned before, our differentiators are a unified product architecture that ultimately delivers low latency, high throughput, and high scalability, machine learning-based solution, which can detect and remediate complex high-volume cyber attacks. We continue to invest in enabling next-generation AI data center with AI-ready platform systems and solutions. Note that just as we did with cybersecurity, our investments in AI and R&D are still aligned with delivering our business model goals long-term of 26%-28% EBITDA and top-line growth. It is more related to us allocating our resources to the best growth opportunities and most important customer problems.
We continue to provide superior technical support around the world for mission-critical applications and infrastructure. As you will see from the last several years, one of our differentiators is disciplined execution with focus on preserving and improving on our business model. This chart highlights our revenue diversification by geography, vertical, and revenue type. The key point is we have deliberately continued to diversify the revenues so that we are better protected from economic cycles or macroeconomic or policy cycles or even COVID cycles in one specific part of the world and have the ability to still be able to get to our EPS goal through multiple measures, even if it takes different regions or different verticals to achieve that.
Now, with that, you know, I think we went through this a little bit, but revenue for fiscal 2024 was $226 million, adjusted EBITDA 29%, and non-GAAP diluted EPS $0.86 per share. The revenue of $262 million is a growth of 4%. On the left, you can see the reasons for that, you know, differentiated through scalable high-performance machine learning-powered solutions, as well as supporting an array of security, IT, and cost-saving initiatives. Performance and lower cost. Long-term goals, we continue to target, you know, double-digit revenue growth, adjusted EBITDA of 30%. We continue to focus on expanding EPS faster than revenue growth to the extent that, you know, we can deliver and execute on our strategic goals. We have a track record of growth and profitability.
Gross margin expanded 3% over the last few years and EBITDA margin expanded 23% over the last five. Profitability continues to grow faster than revenue. I'll leave you with that. I think we went through the rest of it earlier. Maybe a couple of comments to make about our balance sheet. We exited the year with $192 million of cash and marketable securities, $196 million, excuse me. Cumulative cash flow of $300 million from operations over the last five years. We have executed on $176 million of share buybacks over the last five years for the period ended December 31st, 2024. Historical quarterly cash dividend of $0.06 per share. I think with that, Anja, we can open the floor up for any Q&A.
Yes, thank you so much.
If you have a question, you can submit it in the Q&A function at the bottom of your screen. I just want to follow up on your comments on the balance sheet here. You have a very strong balance sheet already and strong cash flow generation, but still you raised about $225 million, I believe, in the convertible notes. Can you just talk about the thoughts behind that?
Yeah, you know, as you pointed out, $196 million of cash and cash equivalents on the balance sheet, plenty of dry powder for looking at strategic opportunities to grow our top-line revenue. You know, our focus is on expanding our enterprise business faster than service provider at this point and investing in enterprise and security.
Part of the offering was to raise capital to invest in those initiatives, again, accelerating enterprise cybersecurity products and to, again, focus on driving recurring revenue through different consumption models. You know, part of the reason for the debt offering was opportunistic with the market the way it is. Convertible notes are very attractive with the coupon rates in the market. Plus, you know, A10 stock at an all-time high made it a good opportunistic decision. I think as people have seen, we did an acquisition a number of weeks ago, something that wasn't material enough to disclose in detail, but something that we funded through cash from operations, you know, which is pretty significant in itself. It continues to be accretive to our EPS for 2025.
That's right. Yeah.
I think Anja, just yeah, to add to Brian's point, right, is we think that with the market volatility and how other companies' multiples have re-rated based on their performance, we think this puts us in a better situation to look at more aggressively ways to grow faster, right?
Yeah. It seems like you are more actively looking at acquisitions or further acquisitions, I would say. What are you looking at in terms of acquisitions?
Yeah. I think, you know, I think it's consistent with, you know, what we talked about, which is there's two types of acquisitions. There's bolt-on acquisitions where we are buying a product or a category that just expands our solution set today. That would be true for things we do in security and maybe some enterprise applications.
The second is more transformative ones, which are similar or adjacent to us, but again, once, you know, expands our solution set to customers. Our goals remain the same: grow with enterprise, security, and continue to invest in AI. Acquisitions, we would look whether they are kind of product bolt-on acquisitions or much bigger ones would be along those lines. Obviously, we have looked at many assets in the last 12 months. I think, you know, either they do not meet our criteria in terms of getting us to the business model we want eventually or accelerating one of our strategic objectives, right? We did not want to act on that.
We see in the current market more volatility, more opportunities to see assets that better match something that gets us to a good business model, which we have built over so many years and we do not want to lose, but at the same time, accelerate strategy and growth, not just so that we are bigger.
Okay. Thank you. In terms of competition, you have been talking in the past about gaining market share. Has the competitive landscape changed at all? Are you still gaining market share or?
Yeah, I think the competitive landscape has not changed a whole lot. I think, you know, we continue to execute our strategy. I would say the only way we look at whether we are gaining or losing share is if we are growing faster than our peer group, right?
In 2024, our enterprise business grew 8% year over year. Most of our peer group was zero or negative. We think that gives us some confidence we are gaining share. The second dimension of it is we know, right, when we are winning in cases with customers that we are replacing somebody, right? That is another kind of validation of that. We believe that if we continue to execute our strategic plan and outgrow the peer set, then ultimately we see that as gaining share. Of course, we track by customer, right, where we won, where we lost. On the service provider side, obviously, we have a very strong footprint. We continue to defend that. We see opportunities to grow share there, oftentimes in probably Europe or Asia. We continue to look at that as well.
That is a more difficult thing to judge because the market itself has gap cyclicality. We certainly see, again, even in that segment versus peer group, if we are growing faster, right? That is the test.
Yeah. Two-thirds of your revenue is derived from the service providers. That has been a little bit challenged over the time of the past couple of years. You said over, I think, the last two quarters, they started to stabilize. What are you seeing, that continuing stabilizing, or what are you seeing currently in that in terms of service providers?
Yeah. I mean, you know, I think in 2023, we saw a service provider business shrink 22% approximately. I think we saw it recover a little bit in 2024. I think we saw 4% or 6% growth in our service provider business. I would say it is stabilizing.
I wouldn't say it's returned to normal and/or resumed growing. As Dhrupad said, it's a defensive place for us right now. You know, it continues to be a good source of business for us. It continues to grow. You know, we're investing in our enterprise business and cybersecurity products to really make sure that we can continue to deliver on expectations on top-line growth as well as to return the margins that we guide.
Yep. Yep. I think, Brian, to add to that, right, we don't see that weakness with service providers in EMEA or APJ, right, which is 50% of our business. It's very much a North America phenomenon. You know, I think, as you saw even today, if Fed comes out and has some opinions on interest rate, that affects CapEx plans, right, for our customers.
I think where we have seen that the hardest hit was in North America service provider related to interest rate, inflation, CapEx, things like that. As Brian said, we saw 2024 certainly not getting worse than 2023 and improving slightly. We think it's stable, but it's hard for us to call that given the amount of uncertainty and economic volatility right now. We think it's certainly not getting worse.
Okay. Thank you. I have a question. We touched on it briefly, I think, on the strategic rationale behind the ThreatX acquisition. Also, what were the financial terms? Do you expect it to be immediately accretive?
Yeah. I think, you know, that acquisition was purely about adding product capability that strengthen our security platform.
I think our expectation is on a full year 2025 basis, it will not be diluted to EPS. Our goal is obviously to use that as a way to leverage growth and grow faster with our security platforms, right? What it brings to us is web application protocol security, API security, and it continues to expand the portfolio of things we can sell to our customers today. We do not expect as modeled our EPS to get worse. We will manage, obviously, the cost structure to make sure that is the case. Our expectation is that it more sets us up with a more competitive solution to grow faster with security in the future.
Okay. I am going to conclude with one last question that sort of ties into a couple of questions I have here.
In terms of AI, how do you incorporate that into your solution and how do you use that in your operations and business overall?
Yeah. I think, you know, obviously, one dimension of it is, are we going, are we using AI for our own efficiency? Yes. We use AI to look at our software development, automation, back office services, improving all of that. That's one. On our cybersecurity products, we are using AI to now be able to detect and remediate threats that occur because of AI that were not the case before, things like prompt injection. We are using AI for our customers to look at their historic network performance and traffic data to predictively talk about how the network will perform and if there is a potential issue with their SLA or risk, et cetera, right, which is extremely valuable to them.
Lastly, all our hardware platforms will start coming out where they are also supporting GPU architecture and they can be used in building next-generation data centers or they can be used in building out, you know, enterprise-level local data center for learning model hosting. For us, AI is a technology that applies to our cybersecurity software products, to our hardware products, to how we provide new insights to customers. Like everyone else in the world, we'll use it for cost efficiency.
Okay. Thank you. Time is up. This has been very informative. I want to thank you. I want to thank everyone who participated. I know you have a pretty full schedule, but if anyone wants to catch up with the management following this presentation, let us know or reach out to their IR or management team directly.
I'm sure they will make themselves available for you. With that, I'll hand it over to you, Dhrupad, for some final remarks.
Of course. No, thank you, Anja. Thank you for your time. Thanks to everyone. Yeah, I think we covered a lot of topics and I hope it provided an overall view of the company. We believe we are in a unique position based on our differentiation strategy where we are a $1.5 billion roughly cybersecurity company that's GAAP profitable, pays dividend, and continues to grow. We believe we present, you know, a unique opportunity for investors as well and have a track record of balancing growth and profitability and delivering returns to investors, customers, and employees. As Anja said, happy to follow up with any questions around a lot of the topics we presented and look forward to that. Thank you.
Okay.
Great. Thank you. Thank you, everyone.
Thanks.
Have a good rest of your day.
Thanks.