A10 Networks Provides Business Update Amidst the Rapidly Evolving COVID-19 Situation; Reaffirms First Quarter 2020 Outlook and Guidance

A10 Networks (NYSE: ATEN), a leading provider of intelligent, automated and secure networking solutions, provided the following business update amidst the rapidly evolving COVID-19 situation and reaffirmed its first quarter 2020 business outlook.

Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks, commented, “As an organization, protecting the health and safety of our employees and our global community is our top priority, and we are committed to take the necessary actions to do our part to help slow the spread of COVID-19. Thankfully, to date, we have not experienced any meaningful negative impact to our business or our supply chain, and we anticipate our first quarter financial results to be in line with the guidance provided in our fourth quarter earnings release. Our team is productively working, with the vast majority of employees doing so remotely. Amidst the global quarantine and shelter in place orders, networks across the globe are being stressed with unprecedented usage and increasing demand for bandwidth, underscoring the need for the critical communications infrastructure solutions we provide. We are taking the necessary steps to mitigate any potential disruption given the macro uncertainty and unprecedented nature of the current environment, while remaining focused on the significant opportunity in front of us.”

“We are reaffirming our first quarter outlook and remaining focused on internal initiatives to improve operational efficiency while executing on our key objectives,” Trivedi added. “In the long-term, the need for critical communications infrastructure remains significant, and we believe we are well positioned with service providers, who must invest to keep up with network demand and increasing data usage. With $130 million in cash and no debt as of December 31, 2019, we are well positioned to operate from a position of strength to support our customers in any environment. We continue to focus on major industry trends like IOT, 5G, Cloud and others, and are working collaboratively with our customers to help them deliver business outcomes resulting from their investments in digital transformation.”

First Quarter 2020 Business Outlook Update¹

Based on its quarterly operating trends and current visibility, the Company is reaffirming its previously issued outlook for:

• Revenue in the range of $51 million to $53 million
• Non-GAAP gross margin in the range of 76% to 78%
• Non-GAAP operating expenses in the range of $37.5 million to $38.5 million
• Adjusted EBITDA in the range of $3.7 million to $5 million
• Non-GAAP earnings per share in the range of $0.01 to $0.03 using approximately 81 million diluted shares

¹ Please refer to the note below on forward-looking statements and the risks involved with such statements as well as the note on non-GAAP financial measures.

Business Continuity

A10 Networks has taken actions and precautions to keep our employees and business operations safe during these unprecedented times.

• On March 3, 2020, we implemented the World Health Organization (WHO) and Centers for Disease Control and Prevention (CDC) safety practices for the protection of our workforce. Our employees are fully equipped to work from home and non-essential employees are working remotely.
• As an “Essential Business” providing critical infrastructure support, A10 continues to operate globally following the guidelines, recommendations and mandates of local authorities in each of the markets we operate.
• We are providing ongoing service and support to ensure business continuity for our customers. 24x7 global customer support remains operational albeit with a select group of essential personnel.
• Our supply chain has not been directly impacted thus far, and we remain in close contact with suppliers, partners and customers monitoring for any potential indirect impacts or disruption.

Balance Sheet Update

In the current environment, maintaining a strong balance sheet remains a priority. As of December 31, 2019, A10 Networks had $129.9 million in cash and marketable securities, with no debt. The Company has put in place processes to reduce discretionary spending and is advancing initiatives as part of its ongoing effort to improve operational efficiency.

Forward-Looking Statements

This press release contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933. These forward-looking statements may be identified by terms such as anticipate, believe, foresee, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements regarding our reaffirmation of previously issued guidance for the financial results of our first fiscal quarter, an anticipated increase in the need for the critical communications infrastructure solutions we provide, the significant opportunity in front of us, the steps we are taking to mitigate any potential disruption given the macro uncertainty and unprecedented nature of the current environment, our continued efforts to improve operational efficiencies, the need of service providers to invest to keep up with network demand and increasing data usage and our ability to operate from a position of strength to support our customers in any environment. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on assumptions that may prove to be incorrect, which could cause actual results to differ materially from those expected or implied by the forward-looking statements. Factors that may cause actual results to differ include public health requirements in response to the outbreak of COVID-19 and the impact on our business and operations, which is evolving and beyond our control, and the timing of customer orders and product shipments; members of our management team or a significant number of our global employee base becoming ill with COVID-19; changes in government regulations and mandates to address COVID-19 that may adversely impact our ability to continue to operate without disruption; a significant decline in global macroeconomic conditions that may have an adverse impact on our business and financial results; challenges to our infrastructure because of the number of employees working from remote locations, a cyberattack or other issues associated with remote connectivity; business interruptions related to our supply chain; our ability to manage our business and expenses if customers cancel or delay orders; execution risks related to closing key deals and improving our execution; the continued market adoption of our products; our ability to successfully anticipate market needs and opportunities; our timely development of new products and features; our ability to achieve or maintain profitability, any loss or delay of expected purchases by our largest end-customers; our ability to maintain or improve our competitive position; competitive and execution risks related to cloud-based computing trends; our ability to attract and retain new end-customers and our largest end-consumers; our ability to maintain and enhance our brand and reputation; changes demanded by our customers in the deployment and payment model for our products; continued growth in markets relating to network security; the success of any future acquisitions or investments in complementary companies, products, services or technologies; the ability of our sales team to execute; our ability to shorten our sales cycles; the ability of our channel partners to sell our products; variations in product mix or geographic locations of our sales; risks associated with our presence in international markets and other risks discussed in “Risk Factors” in our filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Committee on March 10, 2020. We expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release contains certain projected non-GAAP financial measures, including projected non-GAAP net income (loss) per diluted share, non-GAAP gross margin, non-GAAP operating expenses, and Adjusted EBITDA. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies.

A10 Networks considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the company, exclusive of unusual events or factors that do not directly affect what we consider to be our core operating performance, and are used by the company's management for that purpose.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures on a forward-looking basis is not available due to high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures.

We define non-GAAP net income as our GAAP net income (loss) excluding: (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition and (iii) non-recurring expenses associated with the litigation settlement expense and internal investigation, (iv) restructuring expense, and related tax, and (v) non-recurring facilities expense. We define non-GAAP net income per diluted share as our non-GAAP net income (loss) divided by our diluted weighted-average shares outstanding. We define non-GAAP gross profit as our GAAP gross profit excluding stock-based compensation and related payroll tax. We define non-GAAP gross margin as our non-GAAP gross profit divided by our GAAP revenue. We define non-GAAP operating expenses as our GAAP operating expenses excluding (i) stock-based compensation, and related tax, (ii) amortization expense related to acquisition, (iii) non-recurring expenses associated with the litigation settlement expense and internal investigation, (iv) restructuring expense, and related tax, and (v) non-recurring facilities expense. We define Adjusted EBITDA as our GAAP net income (loss) excluding (i) interest expense, (ii) interest income and other (income) expense, net, (iii) depreciation and amortization expense, (iv) provision for income taxes, (v) stock-based compensation and related payroll tax, (vi) litigation settlement and internal investigation expense (vii) restructuring expense, and related tax, and (viii) non-recurring facilities expense.

About A10 Networks

A10 Networks (NYSE: ATEN) is a leading provider of secure application services and solutions, with a range of high-performance application networking solutions that help organizations ensure that their data center applications and networks remain highly available, accelerated and secure. Founded in 2004, A10 Networks is based in San Jose, Calif., and serves customers globally with offices worldwide. For more information, visit: www.a10networks.com and @A10Networks.

The A10 logo and A10 Networks are trademarks or registered trademarks of A10 Networks, Inc. in the United States and other countries. All other trademarks are the property of their respective owners.

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