Good afternoon, and welcome to the A10 Networks Third Quarter 2018 Conference Call. [Operator Instructions]. Please note, today's conference call is being recorded. And at this time, I'd like to turn the conference call over to Ms. Maria Riley with Investor Relations. Ma'am, please go ahead.

Thank you, all, for joining us today. This call is being recorded and webcast live and may be accessed for 1 year via the A10 Networks' website, www.a10networks.com. Members of A10's management team joining me today are Lee Chen, Founder and CEO; Tom Constantino, CFO; and Chris White, EVP of Worldwide Sales. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its third quarter 2018 financial results. Additionally, A10 published the presentation, along with the prepared comments for this call and supplemental trended financial statements. You may access the press release, presentation with prepared comments and trended financial statements on the Investor Relations section of the company's website, www.a10networks.com. During the course of today's call, management will make forward-looking statements, including statements regarding our projections for future operating results, our ability to transform our sales team, our expectations regarding future opportunities and our ability to execute on those opportunities, our expectations for future revenue and market growth, the development and performance of our products, our current and future strategies, our beliefs relating to our competitive advantages or expectations with respect to the 5G market, our ability to penetrate certain markets, anticipated customer benefits from use of our products, expected product launches and the general growth of our business. These statements are based on current expectations and beliefs as of today, October 30, 2018. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. For a more…

Thank you, Maria, and thank you all for joining us today. The A10 team delivered solid results in the third quarter, building on the highest second quarter in our history. We delivered a revenue of $60.5 million in the third quarter, exceeding the high end of our guidance range. We also delivered a total non-GAAP gross margin of 78.8% and on the bottom line, generated non-GAAP EPS of $0.03. Our performance in the quarter was led by our security portfolio, strong growth large cloud customer, combined with our sharpened focus on execution. CFW And TPS was strong during the quarter. In the quarter, we continued to execute our initiatives to transform our sales team and improve our execution. Earlier this year, we made a number of important changes to reorganize and energize our global sales team. While it is still early in our sales transformation, we are pleased with the initial result of our efforts. In EMEA, which is a region where we have historically not have strong performance and recently changed leadership, we were especially pleased to see product revenue more than double sequentially. We are also seeing good progress in APAC, where product revenue grew nearly 50% year-over-year. We are building a culture to win in our selected markets and have an enhanced focus on new businesses. Our sales team did a terrific job driving sales into a number of new accounts, and we are building a strong funnel of opportunities for our 5G, security and cloud solutions. In total, we added over 200 new customers in the quarter. We have more work ahead to continue transforming our go to market engines, but believe we are on the right path and remain confident in our strategy to grow our business. 5G, security and cloud opportunities are large and…

Thank you, Lee. Third quarter revenue was $60.5 million compared with $62 million in the same period last year. We grew deferred revenue 5% year-over-year to reach $94.9 million. Third quarter product revenue was $38.3 million, representing 63% of total revenue, and service revenue was $22.2 million or 37% of total revenue. This compares with product revenue of $40.4 million or 65% of revenue and service revenue of $21.6 million or 35% of total revenue in Q3 of 2017. From a geographic standpoint, third quarter revenue from the United States was $27 million compared to $29 million in Q3 of last year. Third quarter revenue from Japan was $14 million compared with the record $16.6 million in Q3 of last year. Third quarter revenue from APAC, excluding Japan, was $9.3 million, up 30% year-over-year. Third quarter revenue from EMEA was $8.1 million, representing a 33% year-over-year increase. Revenue from LatAm was $2 million compared with $3.1 million in the same period last year. Enterprise revenue grew 21% year-over-year to reach $35.8 million or 59% of revenue. We had 1 cloud customer that contributed 15% of total third quarter revenue. Service provider revenue was approximately $24.8 million or 41% of revenue. As we move beyond revenue, all further metrics discussed on this call are on a non-GAAP basis unless stated otherwise. We delivered third quarter total gross margin of 78.8%, an increase of 20 basis points from last quarter and up 50 basis points from Q3 of last year. Third quarter product gross margin was 77.1%, an increase of 20 basis points from last quarter and up 10 basis points from Q3 of 2017. Our improvement in gross margin was driven by geo mix, which always plays a factor, as well as higher mix of software and security revenue. Services gross…

[Operator Instructions]. Our first question today comes from Catharine Trebnick from Dougherty.

Quick question. On your -- of your 200 new customers, how many of those would you say were -- are 5G-related? And really, you've introduced several products in the last couple of months. We spoke a great deal about 5G traction in the marketplace. I'm trying to really get a sense of where you are in this because a lot of -- there've been a lot of large deals that've been awarded to Ericsson and Cisco across the globe, so I'm just trying to figure out where you are in relationship to some of the awards that have been done.

Catharine, Lee. So I'll answer the 5G questions. The -- our strong 4G installed base of service providers provide us with advantages as we bring our 5G-ready product to market. So we have 2 5G customers, both came from our 4G installed base. So I will have Chris answer the rest of the 200 new customers.

Yes. Catharine, this is Chris. So to Lee's point, it's -- we just got a couple of customers today that we leveraged from the 4G installed base. But I will say that, holistically, we've got strong interest and strong pipeline around 5G and really leveraging early adopters at this point. So as they've said in the soft track, we -- it's early in the process of 5G, but we're really pleased with the traction and the opportunity that we have in front of us.

All right. And are these opportunities more Japan-related, the two customers, or any U.S.-based?

The two customers we have, one is in Asia, not Japan, the other one is in Austin, really the significant mobile carriers in Japan. And then we also have a good engagement with customers, carriers in both Europe and in Asia of our 5G. We're also going to host a Tech Talk and Q&A session with investors to discuss about 5G.

All right. Other quick question is, security look like that picked up. Looks like you ended up with some solid SSL wins. Are you using more of the channel to sell your SSL? Or are you using more direct sales?

Yes. So it's a great question. So we continue to enhance our partnerships and relationships in the channels. So the majority of our business today is through the channel and that will continue to be that way. And through our sales transformation, we're looking to gain increased leverage. But we're still early in that process of gaining leverage, but we are seeing increased access and interest from our partner community around SSLi.

[Operator Instructions]. Our next question comes from Luke from D.A. Davidson.

This is Luke on for Mark. I was hoping you guys could provide a little bit of color on how your sales force reorganization since Q1 has progressed. Do you view that as sort of an ongoing process. Or is there still progress to be made there?

Yes. Luke, thanks for joining the call. This is Chris White. Yes, it's definitely an ongoing process. I mean, we're excited by a lot of the early trends that we're seeing as part of that transformation. We were seeing increased sales productivity from the teams, increased participation rates from the teams, as you saw an increase in our security business and overall increase in our pipeline and early progress on our sales enablement strategy, right? So certification with both our field sales team and our partner community. But it's definitely ongoing, and we're early in the process but pleased with the results so far.

Great. And one other, I was hoping you could provide a little bit of color on the competitive environment. Is there any changes you guys have seen? Are you seeing anyone more or less often?

Yes. From my perspective, I think it's relatively the same and obviously varies a little bit by market. But we see the usual suspects, depending on which solution offering we're bringing to market. I don't see any increased engagement from what we've seen in prior quarters, and we still feel like we're well positioned with our solutions. One of the things I would say is that we have a lot of opportunity around what I will call the vendor consolidation strategy. So from a competitive landscape, we do bring a broader range of solutions to bear and we're seeing increase traction with that compared to what our competition could bring to the table.

And ladies and gentlemen, at this point, we reached the end of the allotted time for today's question-and-answer session. I'd like to turn the conference call back over to Lee Chen for any closing remarks.

Thank you and all of our shareholders who joined us today and for your support. Thank you. Good day.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.