A10 Networks, Inc. Announces Pricing of Offering of $200 Million of Convertible Senior Notes

Rhea-AI Summary

A10 Networks (NYSE: ATEN) has announced the pricing of $200 million convertible senior notes due 2030 in a private offering. The notes will carry a 2.75% annual interest rate, payable semi-annually, and will mature on April 1, 2030.

The initial conversion rate is set at 42.6257 shares per $1,000 principal amount, representing a conversion price of approximately $23.46 per share - a 20% premium over the last reported sale price of $19.55. The company expects net proceeds of approximately $193.8 million, with plans to use $44.2 million for immediate share repurchases at $19.55 per share.

The remaining proceeds will be used for working capital, general corporate purposes, and potential future acquisitions. The notes will become convertible under certain conditions before December 1, 2029, and freely convertible thereafter. The company maintains the option to redeem the notes after April 5, 2028, subject to specific conditions.

Positive

• Successful raising of $193.8 million in new capital through convertible notes
• 20% conversion premium indicates confidence in future stock appreciation
• Immediate $44.2 million share repurchase program shows commitment to shareholder value
• Flexible capital structure with conversion options and redemption features

Negative

• Potential future dilution for existing shareholders if notes are converted
• Additional interest expense of 2.75% annually on $200 million debt
• Increased debt liability on balance sheet

Insights

Financial Analyst

A10 Networks' $200 million convertible note offering represents a strategic capital raise that balances debt financing with equity considerations. With a 2.75% interest rate, the company has secured relatively low-cost capital in the current rate environment. The conversion premium of 20% (conversion price of $23.46 vs. current share price of $19.55) provides a reasonable buffer before dilution occurs.

Most notably, A10 is using $44.2 million of the proceeds for immediate share repurchases at current market prices, effectively recycling about 22% of the raised capital back to shareholders. This partially offsets potential future dilution while simultaneously sending a signal of management's confidence in the company's valuation.

The remaining $149.6 million significantly strengthens A10's financial position, providing capital for working capital needs and potential acquisitions. The conversion features are structured to be investor-friendly while giving the company redemption flexibility after 2028 if the share price appreciates substantially.

This financing approach threads the needle between minimizing current dilution, keeping interest costs low, and establishing a substantial war chest. The structure demonstrates financial sophistication in balancing shareholder interests with growth objectives, though it does introduce leverage and potential future equity dilution that must be weighed against the strategic flexibility gained.

Corporate Strategy Expert

This convertible note issuance reveals a dual-purpose capital allocation strategy by A10 Networks' management. First, by allocating $44.2 million to immediate share repurchases, A10 is effectively signaling that management views the current share price as undervalued. This repurchase completes their previously authorized buyback program, demonstrating commitment to returning capital to shareholders.

Second, retaining approximately $150 million for working capital and potential acquisitions points to a disciplined growth orientation. In the highly competitive network security and application delivery sector, having substantial dry powder provides A10 with multiple strategic options – whether pursuing organic growth initiatives or executing on strategic acquisitions to expand capabilities or market reach.

The financing structure itself shows sophistication. The 2.75% coupon rate minimizes immediate cash flow impact. The 20% conversion premium balances protection against immediate dilution with reasonable upside for note purchasers. Most critically, the delayed full convertibility until December 2029 and the company's redemption rights create a multi-year window where A10 can deploy this capital strategically before facing potential equity dilution.

This transaction enhances A10's strategic optionality in a rapidly evolving market while maintaining balance sheet discipline – a calculated approach to strengthen competitive positioning while respecting shareholder interests.

SAN JOSE, Calif.--(BUSINESS WIRE)-- A10 Networks, Inc. (NYSE: ATEN) (the “Company”) today announced the pricing on March 12, 2025 of its offering of $200,000,000 aggregate principal amount of 2.75% convertible senior notes due 2030 (the “notes”) in a private offering (the “offering”) that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The issuance and sale of the notes are scheduled to settle on March 17, 2025, subject to customary closing conditions. In connection with the offering, the Company also granted the initial purchasers of the notes an option to purchase, for settlement within a period of 13 days from, and including, the date the notes are first issued, up to an additional $25,000,000 aggregate principal amount of notes.

When issued, the notes will be senior, unsecured obligations of the Company and will accrue interest at a rate of 2.75% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2025. The notes will mature on April 1, 2030, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding December 1, 2029, the notes will become convertible only under certain circumstances and during specified periods. From and after December 1, 2029, noteholders may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions of the notes by paying cash up to the aggregate principal amount of the notes to be converted and paying or delivering, as the case may be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the notes being converted. The initial conversion rate is 42.6257 shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $23.46 per share of common stock. The initial conversion price represents a premium of approximately 20.0% over the last reported sale price of $19.55 per share of the Company’s common stock on March 12, 2025. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

Prior to April 5, 2028, the notes will not be redeemable. The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after April 5, 2028 and on or before the 60th scheduled trading day immediately before the maturity date, but only if (i) the notes are “freely tradable” (as defined in the indenture for the notes) as of the date the Company sends the related redemption notice and all accrued and unpaid additional interest, if any, has been paid in full as of the first interest payment date occurring on or before the date the Company sends such notice; and (ii) the last reported sale price per share of the Company’s common stock is at least 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends such redemption notice; and (2) the trading day immediately before the date the Company sends such notice. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

If certain corporate events that constitute a “fundamental change” occur, then, subject to a limited exception, noteholders may require the Company to repurchase their notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

The Company estimates that the net proceeds from the offering will be approximately $193.8 million (or approximately $218.1 million if the initial purchasers fully exercise their option to purchase additional notes), after deducting the initial purchasers’ discounts and commissions and the Company’s estimated offering expenses. The Company expects to use approximately $44.2 million of the net proceeds to repurchase shares of its common stock (the “share repurchases”) concurrently with the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as the Company’s agent, at a purchase price per share equal to $19.55, the closing price of the Company’s common stock on The New York Stock Exchange on the date of pricing of the notes. The Company intends to use the remainder of the net proceeds from the offering for working capital and other general corporate purposes. The Company may also use the net proceeds from the offering to fund future acquisitions of, or investments in, businesses, assets or technologies that the Company believes is complementary to its own, although the Company has no present commitments or agreements to do so. The Company will retain broad discretion over the use of the proceeds. Pending application of the net proceeds as described above, the Company intends to invest the net proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. The concurrent repurchases of shares of the Company’s common stock described above, and any other repurchases of the Company’s common stock, could increase, or reduce the size of any decrease in, the market price of the Company’s common stock. The Company cannot predict the magnitude of such market activity or the overall effect it will have on the price of the notes or its common stock.

In addition, any share repurchases following the offering could affect the market price of the notes and, if conducted during an observation period for the conversion of any notes, could affect the amount and value of the consideration that is due upon such conversion. The share repurchases will be effected as part of the Company’s share repurchase program authorized by its board of directors in 2024. Accordingly, the share repurchases will reduce the approximately $44.2 million remaining amount authorized and available under such share repurchase program as of the date hereof.

This press release is not an offer to repurchase the Company’s common stock and the offering of the notes is not contingent upon the share repurchases.

The offer and sale of the notes and any shares of common stock of the Company issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. The notes and the shares of the Company’s common stock issuable upon conversion of the notes, if any, have not been registered under the Securities Act or the securities laws of any other jurisdiction and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from such registration requirements.

About A10 Networks, Inc.

A10 Networks provides security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments. Our 7000+ customers span global large enterprises and communications, cloud and web service providers who must provide business-critical applications and networks that are secure, available, and efficient. Founded in 2004, A10 Networks is based in San Jose, Calif. and serves customers globally.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the expected closing date of the offering, the intended use of net proceeds from the offering, the expected terms of the offering and the extent and potential effects of the share repurchases. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including risks related to whether A10 Networks, Inc. will be able to satisfy the conditions required to close the sale of the notes, the fact that A10 Networks, Inc.’s management will have broad discretion in the use of the proceeds from any sale of the notes, whether the share repurchases will become effective, and other risks detailed from time to time in A10 Networks, Inc.’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2024. The forward-looking statements in this press release are based on information available to A10 Networks, Inc. as of the date hereof, and A10 Networks, Inc. does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made except as otherwise required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250313106115/en/

Rob Fink

Managing Partner at FNK IR

investors@a10networks.com

Source: A10 Networks

FAQ

What is the interest rate and maturity date for A10 Networks' (ATEN) new convertible notes?

The convertible notes carry a 2.75% annual interest rate, payable semi-annually, and will mature on April 1, 2030.

What is the conversion price for ATEN's 2030 convertible notes?

The initial conversion price is $23.46 per share, representing a 20% premium over the $19.55 closing price on March 12, 2025.

How much of the convertible note proceeds will ATEN use for share repurchases?

$44.2 million will be used for immediate share repurchases at $19.55 per share.

When can ATEN's 2030 convertible notes be converted to common stock?

The notes become convertible under certain conditions before December 1, 2029, and freely convertible thereafter until maturity.

What is the total value and expected net proceeds of ATEN's convertible note offering?

The total offering is $200 million, with expected net proceeds of approximately $193.8 million after expenses.