Business Wire | Oct 27, 2020 04:06PM EDT

A10 Networks Reports 7.1% Revenue Growth for Third Quarter of 2020

Oct. 27, 2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 27, 2020--A10 Networks (NYSE: ATEN), a leading provider of secure application services and solutions, today announced financial results for its third quarter ended September 30, 2020.

Third Quarter 2020 Financial Summary

* Revenue of $56.6 million, up 7.1% year-over-year. * GAAP gross margin of 76.8%; non-GAAP gross margin of 77.6%. * GAAP operating expenses of $37.2 million, unchanged sequentially; non-GAAP operating expenses of $33.9 million. * Record GAAP net income of $6.5 million, or $0.08 per share, compared with GAAP net income of $173,000, or $0.00 per share in the third quarter of 2019; record non-GAAP net income of $10.3 million, or $0.13 per basic and diluted share. * Record Adjusted EBITDA of $12.5 million, an improvement of $8.5 million compared with $4.0 million in Adjusted EBITDA in the third quarter last year. * Ended the quarter with $159.1 million in cash, cash equivalents and marketable securities, compared to $129.9 million as of December 31, 2019.

A reconciliation between GAAP and non-GAAP information is contained in the financial statements below.

"We have successfully positioned A10 for consistent organic growth and increased profitability amidst a challenging economic environment," said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. "Over the past two years, we have streamlined our fixed cost structure by approximately 25% and realigned our leaner sales organization on the highest quality opportunities. In the third quarter, this focus resulted in better than 7% organic growth, more than $6 million year-over-year improvement in net income and an $8.5 million improvement in Adjusted EBITDA. With a strong balance sheet, including more than $159 million of cash and cash equivalents, and no debt, we are on a solid footing and our improved financial profile enables us to prudently fund a significant stock buyback."

"Networks across the globe are being stressed with unprecedented usage and increasing demand for bandwidth capacity, underscoring the need for critical communications infrastructure combined with the ability to navigate ever-increasing volume and sophistication of cyberattacks," continued Trivedi. "These tailwinds directly align with our value proposition and increasingly, our customers are looking for solutions that help them manage their existing infrastructure while they continue to migrate parts of their infrastructure to the Cloud. Our global footprint and solutions-based sales approach is resonating."

Conference Call Information

A10 Networks will host a conference call today at 4:30 p.m. Eastern time / 1:30 p.m. Pacific time for analysts and investors to discuss its third quarter 2020 financial results. Open to the public, interested parties may access the conference call by dialing 1-844-792-3728 or 1-412-317-5105. A live audio webcast of the conference call will be accessible from the "Investor Relations" section of A10 Networks' website at investors.a10networks.com. The webcast will be archived for at least 90 days. A telephonic replay of the conference call will be available two hours after the call and will run for five business days and may be accessed by dialing 1-877-344-7529 or 1-412-317-0088 and entering the passcode 10147980. A presentation with management's prepared remarks on its third quarter 2020 financial results and supplemental financial information will be posted to the website following the issuance of the company's third quarter 2020 results press release after U.S. markets close on Tuesday, October 27, 2020. These materials will be accessible from the "Investor Relations" section of A10 Networks' website at investors.a10networks.com.

Forward-Looking Statements

This press release contains "forward-looking statements," including statements regarding organizational efficiencies, market demand and trends, our positioning as to organic growth and profitability and our cash position. 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 the impact of the COVID-19 pandemic, including public health requirements in response thereto, on our business and operations, which is evolving and beyond our control, and its impact on 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 have an adverse impact on our business and financial results; challenges to our infrastructure because of the number of employees working from remote locations; 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 well; our ability to shorten our close 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; weaknesses or deficiencies in our internal control over financial reporting; our ability to timely file periodic reports required to be filed under the Securities Exchange Act of 1934; and other risks that are described in "Risk Factors" in our periodic filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Commission on March 10, 2020. We do not intend 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 and the accompanying tables contain certain non-GAAP financial measures, including non-GAAP net income (loss), non-GAAP net income (loss) per basic and diluted share, non-GAAP gross profit and gross margin, non-GAAP operating income (loss) and operating 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.

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, (iii) non-recurring expenses associated with the litigation settlement and internal investigation expense (recovery), (iv) restructuring expense and related tax, and (v) non-recurring facilities expense. We define non-GAAP net income per basic and diluted share as our non-GAAP net income (loss) divided by our basic and 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 income (loss) as our GAAP income (loss) from operations excluding (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition, (iii) non-recurring expenses associated with the litigation settlement and internal investigation expense (recovery), (iv) restructuring expense and related tax, and (v) non-recurring facilities expense. We define non-GAAP operating margin as our non-GAAP operating income (loss) divided by our GAAP revenue. We define non-GAAP operating expenses as our GAAP operating expenses excluding (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition, (iii) non-recurring expenses associated with the litigation settlement and internal investigation expense (recovery), (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 (recovery), (vii) restructuring expense and related tax, and (viii) non-recurring facilities expense.

We have included our non-GAAP net income (loss), non-GAAP gross profit and gross margin, non-GAAP operating income (loss) and operating margin, non-GAAP operating expenses and Adjusted EBITDA in this press release. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company's operating results.

About A10 Networks

A10 Networks (NYSE: ATEN) provides secure application services and solutions for on-premises, multi-cloud and edge-cloud environments at hyperscale. Our mission is to enable service providers and enterprises to deliver business-critical applications that are secure, available and efficient for multi-cloud transformation and 5G readiness. We deliver better business outcomes that support investment protection, new business models and help future-proof infrastructures, empowering our customers to provide the most secure and available digital experience. Founded in 2004, A10 Networks is based in San Jose, Calif. and serves customers globally. For more information, visit?www.a10networks.com?and follow us @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.

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts, on a GAAP Basis)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Products $ 32,188 $ 30,052 $ 92,138 $ 85,067

Services 24,420 22,781 70,734 67,245

Total revenue 56,608 52,833 162,872 152,312

Cost of revenue:

Products 7,610 7,108 21,095 21,515

Services 5,513 4,812 15,592 13,926

Total cost of revenue 13,123 11,920 36,687 35,441

Gross profit 43,485 40,913 126,185 116,871

Operating expenses:

Sales and marketing 18,556 22,056 57,653 70,165

Research and development 13,694 15,784 42,459 46,567

General and administrative 4,994 2,854 16,126 17,311

Total operating expenses 37,244 40,694 116,238 134,043

Income (loss) from operations 6,241 219 9,947 (17,172 )

Non-operating income (expense):

Interest expense - (30 ) (1 ) (222 )

Interest and other income, 479 254 938 397 net

Total non-operating income, 479 224 937 175 net

Income (loss) before 6,720 443 10,884 (16,997 )provision for income taxes

Provision for income taxes 256 270 909 873

Net income (loss) $ 6,464 $ 173 $ 9,975 $ (17,870 )

Net income (loss) per share:

Basic $ 0.08 $ - $ 0.13 $ (0.24 )

Diluted $ 0.08 $ - $ 0.12 $ (0.24 )

Weighted-average shares usedin computing net income (loss) per share:

Basic 78,235 76,618 78,158 75,611

Diluted 80,424 79,093 80,232 75,611

A10 NETWORKS, INC.

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)

(unaudited, in thousands, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

GAAP net income (loss)

$

6,464

$

173

$

9,975

$

(17,870

)

Non-GAAP adjustments:

Stock-based compensation and related payroll tax

3,554

3,513

9,870

12,458

Amortization expense related to acquisition

253

253

759

759

Litigation and investigation expense (recovery)

-

(2,157

)

30

(1,108

)

Non-recurring facilities expense

-

-

795

-

Non-GAAP net income (loss)

$

10,271

$

1,782

$

21,429

$

(5,761

)

GAAP net income (loss) per share:

Basic

$

0.08

$

-

$

0.13

$

(0.24

)

Diluted

$

0.08

$

-

$

0.12

$

(0.24

)

Non-GAAP adjustments:

Stock-based compensation and related payroll tax

0.05

0.05

0.13

0.16

Amortization expense related to acquisition

0.00

0.00

0.01

0.01

Litigation and investigation expense (recovery)

-

(0.03

)

0.00

(0.01

)

Non-recurring facilities expense

-

-

0.01

-

Non-GAAP net income (loss) per share:

Basic

$

0.13

$

0.02

$

0.27

$

(0.08

)

Diluted

$

0.13

$

0.02

$

0.27

$

(0.08

)

Weighted-average shares used in computing non-GAAP net income (loss) per share:

Basic

$

78,235

$

76,618

$

78,158

$

75,611

Diluted

$

80,424

$

79,093

$

80,232

$

75,611

A10 NETWORKS, INC.

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)

(unaudited, in thousands, except per share amounts)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

GAAP net income (loss) $ 6,464 $ 173 $ 9,975 $ (17,870 )

Non-GAAP adjustments:

Stock-based compensation and 3,554 3,513 9,870 12,458 related payroll tax

Amortization expense related to 253 253 759 759 acquisition

Litigation and investigation - (2,157 ) 30 (1,108 )expense (recovery)

Non-recurring facilities expense - - 795 -

Non-GAAP net income (loss) $ 10,271 $ 1,782 $ 21,429 $ (5,761 )





GAAP net income (loss) per share:

Basic $ 0.08 $ - $ 0.13 $ (0.24 )

Diluted $ 0.08 $ - $ 0.12 $ (0.24 )

Non-GAAP adjustments:

Stock-based compensation and 0.05 0.05 0.13 0.16 related payroll tax

Amortization expense related to 0.00 0.00 0.01 0.01 acquisition

Litigation and investigation - (0.03 ) 0.00 (0.01 )expense (recovery)

Non-recurring facilities expense - - 0.01 -

Non-GAAP net income (loss) per share:

Basic $ 0.13 $ 0.02 $ 0.27 $ (0.08 )

Diluted $ 0.13 $ 0.02 $ 0.27 $ (0.08 )

Weighted-average shares used incomputing non-GAAP net income (loss) per share:

Basic $ 78,235 $ 76,618 $ 78,158 $ 75,611

Diluted $ 80,424 $ 79,093 $ 80,232 $ 75,611

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, on a GAAP Basis)

September 30,

2020

December 31,

2019

ASSETS

Current assets:

Cash and cash equivalents

$

83,069

$

45,742

Marketable securities

76,041

84,180

Accounts receivable, net of allowances of $818 and $52, respectively

42,803

53,566

Inventory

22,600

22,384

Prepaid expenses and other current assets

10,809

15,067

Total current assets

235,322

220,939

Property and equipment, net

7,297

7,656

Goodwill

1,307

1,307

Intangible assets, net

1,223

2,305

Other non-current assets

38,948

41,846

Total assets

$

284,097

$

274,053

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

7,289

$

7,592

Accrued liabilities

27,602

27,756

Deferred revenue

61,886

62,233

Total current liabilities

96,777

97,581

Deferred revenue, non-current

40,140

38,931

Other non-current liabilities

25,479

28,754

Total liabilities

162,396

165,266

Commitments and contingencies

Stockholders' equity:

Common stock, $0.00001 par value: 500,000 shares authorized; 78,487 and 77,580 shares issued and outstanding, respectively

1

1

Treasury stock

(18,226

)

(4,890

)

Additional paid-in-capital

419,758

403,490

Accumulated other comprehensive income

258

251

Accumulated deficit

(280,090

)

(290,065

)

Total stockholders' equity

121,701

108,787

Total liabilities and stockholders' equity

$

284,097

$

274,053

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, on a GAAP Basis)

September December 31, 30, 2019 2020

ASSETS

Current assets:

Cash and cash equivalents $ 83,069 $ 45,742

Marketable securities 76,041 84,180

Accounts receivable, net of allowances of $818 and 42,803 53,566 $52, respectively

Inventory 22,600 22,384

Prepaid expenses and other current assets 10,809 15,067

Total current assets 235,322 220,939

Property and equipment, net 7,297 7,656

Goodwill 1,307 1,307

Intangible assets, net 1,223 2,305

Other non-current assets 38,948 41,846

Total assets $ 284,097 $ 274,053

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 7,289 $ 7,592

Accrued liabilities 27,602 27,756

Deferred revenue 61,886 62,233

Total current liabilities 96,777 97,581

Deferred revenue, non-current 40,140 38,931

Other non-current liabilities 25,479 28,754

Total liabilities 162,396 165,266

Commitments and contingencies

Stockholders' equity:

Common stock, $0.00001 par value: 500,000 sharesauthorized; 78,487 and 77,580 shares issued and 1 1 outstanding, respectively

Treasury stock (18,226 ) (4,890 )

Additional paid-in-capital 419,758 403,490

Accumulated other comprehensive income 258 251

Accumulated deficit (280,090 ) (290,065 )

Total stockholders' equity 121,701 108,787

Total liabilities and stockholders' equity $ 284,097 $ 274,053

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands, on a GAAP Basis)

Nine Months Ended

September 30,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

9,975

$

(17,870

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

8,773

7,433

Stock-based compensation

9,382

12,221

Other non-cash items

466

(422

)

Changes in operating assets and liabilities:

Accounts receivable

10,777

8,735

Inventory

(810

)

(4,222

)

Prepaid expenses and other assets

3,716

468

Accounts payable

(322

)

(3,172

)

Accrued and other liabilities

(4,297

)

(9,183

)

Deferred revenue

861

107

Net cash provided by (used in) operating activities

38,521

(5,905

)

Cash flows from investing activities:

Proceeds from sales of marketable securities

8,330

22,189

Proceeds from maturities of marketable securities

39,280

33,449

Purchases of marketable securities

(39,695

)

(53,852

)

Purchases of property and equipment

(2,549

)

(3,939

)

Net cash provided by (used in) investing activities

5,366

(2,153

)

Cash flows from financing activities:

Proceeds from issuance of common stock under employee equity incentive plans

6,776

3,505

Repurchase of common stock

(13,336

)

-

Other

-

(1

)

Net cash provided by (used in) financing activities

(6,560

)

3,504

Net increase (decrease) in cash and cash equivalents

37,327

(4,554

)

Cash and cash equivalents-beginning of period

$

45,742

$

40,621

Cash and cash equivalents-end of period

$

83,069

$

36,067

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands, on a GAAP Basis)

Nine Months Ended September 30,

2020 2019

Cash flows from operating activities:

Net income (loss) $ 9,975 $ (17,870 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 8,773 7,433

Stock-based compensation 9,382 12,221

Other non-cash items 466 (422 )

Changes in operating assets and liabilities:

Accounts receivable 10,777 8,735

Inventory (810 ) (4,222 )

Prepaid expenses and other assets 3,716 468

Accounts payable (322 ) (3,172 )

Accrued and other liabilities (4,297 ) (9,183 )

Deferred revenue 861 107

Net cash provided by (used in) operating activities 38,521 (5,905 )

Cash flows from investing activities:

Proceeds from sales of marketable securities 8,330 22,189

Proceeds from maturities of marketable securities 39,280 33,449

Purchases of marketable securities (39,695 ) (53,852 )

Purchases of property and equipment (2,549 ) (3,939 )

Net cash provided by (used in) investing activities 5,366 (2,153 )

Cash flows from financing activities:

Proceeds from issuance of common stock under employee 6,776 3,505 equity incentive plans

Repurchase of common stock (13,336 ) -

Other - (1 )

Net cash provided by (used in) financing activities (6,560 ) 3,504

Net increase (decrease) in cash and cash equivalents 37,327 (4,554 )

Cash and cash equivalents-beginning of period $ 45,742 $ 40,621

Cash and cash equivalents-end of period $ 83,069 $ 36,067

A10 NETWORKS, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT

(unaudited, in thousands, except percentages)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

GAAP gross profit

$

43,485

$

40,913

$

126,185

$

116,871

GAAP gross margin

76.8

%

77.4

%

77.5

%

76.7

%

Non-GAAP adjustments:

Stock-based compensation and related payroll tax

459

334

1,256

1,126

Non-GAAP gross profit

$

43,944

$

41,247

$

127,441

$

117,997

Non-GAAP gross margin

77.6

%

78.1

%

78.2

%

77.5

%

A10 NETWORKS, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT

(unaudited, in thousands, except percentages)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

GAAP gross profit $ 43,485 $ 40,913 $ 126,185 $ 116,871

GAAP gross margin 76.8 % 77.4 % 77.5 % 76.7 %

Non-GAAP adjustments:

Stock-based compensation 459 334 1,256 1,126 and related payroll tax

Non-GAAP gross profit $ 43,944 $ 41,247 $ 127,441 $ 117,997

Non-GAAP gross margin 77.6 % 78.1 % 78.2 % 77.5 %

RECONCILIATION OF GAAP TOTAL OPERATING EXPENSES

TO NON-GAAP TOTAL OPERATING EXPENSES

(unaudited, in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

GAAP total operating expenses

$

37,244

$

40,694

$

116,238

$

134,043

Non-GAAP adjustments:

Stock-based compensation and related payroll tax

(3,095

)

(3,179

)

(8,614

)

(11,332

)

Amortization expense related to acquisition

(253

)

(253

)

(759

)

(759

)

Litigation and investigation expense (recovery)

-

2,157

(30

)

1,180

Non-recurring facilities expense

-

-

(795

)

-

Non-GAAP total operating expenses

$

33,896

$

39,419

$

106,040

$

123,132

RECONCILIATION OF GAAP TOTAL OPERATING EXPENSES

TO NON-GAAP TOTAL OPERATING EXPENSES

(unaudited, in thousands)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

GAAP total operating $ 37,244 $ 40,694 $ 116,238 $ 134,043 expenses



Non-GAAP adjustments:

Stock-based compensation (3,095 ) (3,179 ) (8,614 ) (11,332 )and related payroll tax

Amortization expense (253 ) (253 ) (759 ) (759 )related to acquisition

Litigation andinvestigation expense - 2,157 (30 ) 1,180 (recovery)

Non-recurring facilities - - (795 ) - expense

Non-GAAP total operating $ 33,896 $ 39,419 $ 106,040 $ 123,132 expenses

RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS

TO NON-GAAP OPERATING INCOME (LOSS)

(unaudited, in thousands, except percentages)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

GAAP income (loss) from operations

$

6,241

$

219

$

9,947

$

(17,172

)

GAAP operating margin

11.0

%

0.4

%

6.1

%

(11.3

)%

Non-GAAP adjustments:

Stock-based compensation and related payroll tax

3,554

3,513

9,870

12,458

Amortization expense related to acquisition

253

253

759

759

Litigation and investigation expense (recovery)

-

(2,157

)

30

(1,108

)

Non-recurring facilities expense

-

-

795

-

Non-GAAP operating income (loss)

$

10,048

$

1,828

$

21,401

$

(5,063

)

Non-GAAP operating margin

17.8

%

3.5

%

13.1

%

(3.3

)%

RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS

TO NON-GAAP OPERATING INCOME (LOSS)

(unaudited, in thousands, except percentages)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

GAAP income (loss) from $ 6,241 $ 219 $ 9,947 $ (17,172 )operations

GAAP operating margin 11.0 % 0.4 % 6.1 % (11.3 ) %

Non-GAAP adjustments:

Stock-based compensation and 3,554 3,513 9,870 12,458 related payroll tax

Amortization expense related 253 253 759 759 to acquisition

Litigation and investigation - (2,157 ) 30 (1,108 )expense (recovery)

Non-recurring facilities - - 795 - expense

Non-GAAP operating income $ 10,048 $ 1,828 $ 21,401 $ (5,063 )(loss)

Non-GAAP operating margin 17.8 % 3.5 % 13.1 % (3.3 ) %

RECONCILIATION OF GAAP NET INCOME (LOSS) TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(unaudited, in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

GAAP net income (loss)

$

6,464

$

173

$

9,975

$

(17,870

)

Exclude: Interest expense

-

30

1

222

Exclude: Interest and other (income) expense, net

(479

)

(254

)

(938

)

(397

)

Exclude: Depreciation and amortization expense

2,676

2,451

8,772

7,433

Exclude: Provision for income taxes

256

270

909

873

EBITDA

8,917

2,670

18,719

(9,739

)

Exclude: Stock-based compensation and related payroll tax

3,554

3,513

9,870

12,458

Exclude: Litigation and investigation expense (recovery)

-

(2,157

)

30

(1,108

)

Exclude: Non-recurring facilities expense

-

-

795

-

Adjusted EBITDA

$

12,471

$

4,026

$

29,414

$

1,611

View source version on businesswire.com: https://www.businesswire.com/news/home/20201027006124/en/

CONTACT: Investor Contact: Rob Fink FNK IR 646.809.4048 aten@fnkir.com

CONTACT: Brian Becker Interim Chief Financial Officer investors@a10networks.com