Q4 2021 Radware Ltd Earnings Call
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Speaker 1: Welcome to the Radware conference call discussing fourth quarter and full year 2021 results, and thank you all for holding. As a reminder, this conference is being recorded today, February 9th, 2022. I would now like to turn this call over to Yiska Erez, Director of Investor Relations at Radware. Please go ahead.
Welcome to the Radware conference call discussing fourth quarter and full year 2021 results and thank you all for holding as a reminder, this comprehensive being recorded today February nine 2022, I would now like to turn the call over to used car as director of Investor Relations. Please go ahead.
Speaker 2: Thank you, operator. Good morning, everyone, and welcome to Radwell's fourth quarter and full year 2021 earnings conference.
Thank you operator, and good morning, everyone and welcome to Rod was fourth quarter and full year 2021 earnings conference call.
Speaker 2: Joining me today are Lloyd Dissepert, President and Chief Executive Officer, and parliamentarian Vicky Feinh network.
Joining me today, I'm always disappointed president and Chief Executive Officer, and give people a VP finance.
Speaker 2: A copy of today's press release in the financial statement, as well as the investor piece for the fourth quarter, are available in the investor relations section of our website.
A copy of today's press release, and the financial statements as well as being the subject for the fourth quarter are available in the Investor Relations section.
Speaker 2: During today's call, we may make projections or other false blocking statements regarding future events or the future financial performance of the company.
During today's call, we may make projections or other forward looking statements regarding future events or the future financial performance of the company.
Speaker 2: These four docking statements are subject to various risks and uncertainties. And actual results could differ materially from others time focused in the field.
These forward looking statements are subject to various risks and I said I've.
I've chosen you shouldn't materially so I was kind of focused investments.
Speaker 2: Factors that could cause or contribute to such differences include, but are not limited to, impacts from the COVID-19 pandemic, general business conditions and our ability to address changes in our industry, changes in demand for the products, the timing in the amount of orders and other risks detailed from time to time in worldwide filing.
How soon that could cause or contribute to such differences include but are not doing what they do in fact from the COVID-19, pandemic general business conditions, and our ability to address changes in our industry changes in demand for the products the timing and the amount of orders and other risks detailed from time to time and Rod was fighting.
We refer you to the documents the company files in 'twenty shows from time to time with the SEC specifically the company's last how long report on form 20-F.
Speaker 2: We'll show you to the document that the company files and flourishes from time to time with the FCC. Specifically, the company's last annual report on Form 20F has filed on April 20, 2021.
On average once he wants it once you wanted.
Speaker 2: We undertake no commitment to revise or update any fold of the statement in order to reflect events or circumstances after the date of such statement is made. I will now turn the call to Roy Dicefel. Thank you, Iska.
Undertakes no commitment to revise or update any forward looking statements in order to reflect events or circumstances. After the date of such statements.
I'll now turn the call to always disappear.
Thank you Scott and thank you all for joining us today.
Q4 was another record will do which closed the recall deal for us.
Speaker 3: You fall with another record quarter which closed the record year for that.
Speaker 3: Our strategy to grow our cyber security and cloud services has proven very successful.
Our strategy to grow our cyber security and cloud services has proven very successful.
Speaker 3: In turn, we've made great progress transitioning from mainly a product based the Petrol License Revenue model.
In turn we've made great progress transitioning from mainly a product.
Your license revenue model.
Speaker 3: We have a new model that is based largely on ARR and Substrate.
Revenue model that is based largely on a love and subscription.
Speaker 3: The evidence of this shift is reflected in our 2021 performance.
The evidence of this shift is reflected in our 2021 performance.
Speaker 3: Total air air reached a record of 190 million dollars.
Totally reached a record of $119 million.
Speaker 3: Cloud and subscription ARR grew 23% year over year.
Cloud and subscription of yellow grew 23%.
Speaker 3: Cloud and subscription revenues grew 44% of the year to $93 million.
Cloud and subscription revenues grew 44% year over year to $93 million.
Speaker 3: And now they account for 32% of total revenues, up from 26% in 2020.
And now they account for 32% of total revenues up from 26% in 2020.
Speaker 3: And we exceeded 2021 with a run rate of more than $100 million of subscription rent.
We exited 2021 with a run rate of more than $100 million of subscription revenue.
Speaker 3: Looking forward, we see great momentum and significant potential in continuing to grow our data center and application security office.
Looking forward, we see great momentum and significant potential in continuing to grow our data center and application security offerings.
Speaker 3: Our customers are advancing normality closing structure and have an elevated need for a strong security strategy. This is a
Our customers are advancing their multi cloud infrastructure and had been elevated need for a strong security strategy.
This is a huge market opportunity for us.
Speaker 3: It is further magnified by an extremely active cyber attack environment. In our recent studies, the recentled meeting we had in standard concurring objects — how do you know if they arering different contact domains or different possible names It was a great discussion and a wonderful extrapolating way that JonggreSQL closed hisU.N hub smaller complex apps for reports, and we obtained
It is further magnified by an extremely active cyber attack environment.
In a recent statistics demonstrate that.
Speaker 3: Number of denial of service attacks that we blocked during 2021 increased by 45% compared to 2020.
Number of denial of service attacks, we blow during 2021 increased by 45% compared to 2020.
Speaker 3: The web application attacks blocked by us grew by 88%.
The web application attacks blocked by us grew by 88%.
Speaker 3: Both attacks increased by 123% of the real.
Both the docks increased like 123%.
Speaker 3: Based on these market drivers, the resulting needs for best in class cloud security.
Based on these market drivers, the resulting need for best in class cloud security.
Speaker 3: And our technology leadership, we continue to win many new customers and grow our existing relationships. In the fourth course,
And our technology leadership, we continue to win many new customers and grow our existing relationships.
In the fourth quarter, we closed several large cloud deals.
Speaker 3: For example, a Fortune 500 financial services company shows our cloud-dido solution for a worldwide deployment to better protect and serve the global operation.
For example.
Fortune 500 financial services company chose our cloud Ddos solution for a worldwide deployment to better protect and serve their global operations.
Speaker 3: Our global network footprint and quality, together with our security leadership, where the reasons noted by this new past.
Our global network footprint and quality together with our security leadership, where the reasons noted by this new customer.
Speaker 3: Our boss manager also earned us a seven-digit deal from a Fortune 500 customer and one of the largest e-commerce organizations in the world.
Our bulk manager also earned us a seven digit deal from a fortune 500 customer and one of the largest e-commerce organizations in the world.
Speaker 3: After we disclose the compatible solution a year ago
After we displaced a competitor solution a year ago.
Speaker 3: Based on last year's success in blocking real-time attacks, this customer extended and expanded the scope of our agreement in our largest bot manager's failed today.
Based on last year's success in blocking reassignment docks discussed them or extended and expanded the scope of our agreement.
Our largest wealth manager sales to date.
Speaker 3: Our state of the art technology continues to be a major driver in the purchase decisions of both our new and existing cars.
Our state of the art technology continues to be a major driver in the purchase decisions of both our new and existing customers.
Speaker 3: In the fourth quarter we continue to evolve our solution features in the capability.
In the fourth quarter, we continued to evolve our solution features and capabilities.
Speaker 3: In our Cloud AppSex service, we significantly strengthened our API security. With the introduction of the API...
In our cloud up six services, we significantly strengthened our API security.
With the introduction of the API discovery module.
Speaker 3: This feature uses an advanced machine learning algorithm to identify undocumented and legacy APIs that are how to observe and control.
This feature uses an advanced machine learning algorithm to identify and documented in legacy Adi, that's how how to observe and control.
Speaker 3: Protecting API experiments, seeing hackers and bots can use broken or exposed API as an entry and from denying cathode and
Protecting avid's Param Singh Packers and boats can use broken ore exposed.
As an entry point and from new launch of foresight.
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Speaker 3: We also recently released our integrated content delivery network, or CDN, that is now part of our cloud uptake of.
We also recently released our integrated content delivery network CDN.
Now part of our cloud uptake offering.
Speaker 3: In the fourth quarter we closed our first deals with our integrated speedy answer.
In the fourth quarter, we closed our first deals with our integrated CDN solution.
Speaker 3: For example, a multinational conglomerate company in Asia Pacific that spends many industries purchased our complete cloud wasp, both in civilian solutions.
For example, a multinational conglomerate company in Asia Pacific.
And many industries purchased our complete cloud WAF bolster and CDN solution.
Speaker 3: The company, which was an existing customer of our ADC and DDoS protection products, was looking to consolidate and centralize control of those services.
The company, which was an existing customer of our ADC and Ddos protection products was looking to consolidate and centralized control of those services.
Speaker 3: The customer decided to expand its relationship with Raju due to our superior technical solution and our strong strategic relations.
The customer decided to expand its relationship with us due to our superior technical solution and our strong strategic relationships.
Speaker 3: The fourth quota was a strong quota in carriers and service provides.
The fourth quarter was a strong quarter in carriers and service providers.
Speaker 3: As a result of Infos Structure Transformation and the evolving threat landscape, carriers and service providers are facing unprecedented level of attacks undercut.
As a result of infrastructure transformation and the evolving threat landscape.
There is some service providers are facing unprecedented level of attacks on their customers.
Speaker 3: Having to deal with new cybersecurity demands, they are looking to strengthen the security influence.
To deal with new cyber security demands there are looking to strengthen their security infrastructure.
Speaker 3: Following that, we start to witness expansion in their investments.
Following that we start to weakness expansion in their investments.
Speaker 3: And we closed multiple deals in the fourth quarter with major carriers, existing customers and also new customers that look to replace their incumbent.
We closed multiple deals in the fourth quarter with major carriers existing customers and also new customers that look to replace their incumbent vendors.
One of the largest European carriers needed to increase the security capacity based on the traffic growth with Linux multi network.
Speaker 3: One of the largest European carriers needed to increase the security capacity based on the traffic growth within its mobile network.
Speaker 3: This carrier is a long-term satisfied defense pro customer and awarded us a seven digit expansion.
This is a long term status slide defensible customer awarded us a seven digit expansion deal.
Speaker 3: Another example is a new customer to hardware that we want for our Cisco EM relationships. This Asian carrier would look...
Another example is a new customer that we won through our Cisco OEM relationships.
Asian carrier was looking for a new Ddos solution.
Speaker 3: customer acknowledged our superior technology and decided to replace the incumbent vendor and upgrade to our sub.
The customer acknowledged our superior technology and decided to replace the incumbent vendor and upgrade to our solution.
Speaker 3: In closing, we are very pleased with our performance in 2021. We executed well, achieved double digit revenue growth each quarter and for the full year. In record revenues for Q4 and 2021.
In closing we are very pleased with our performance in 2021, we executed well achieved double digit revenue growth each quarter and for the full year and record revenues for Q4 and 2021.
Speaker 3: We also grew our subscription business for $93 million and generated healthy operating income, earning for share and record cash flows from.
We also grew our subscription business grew $93 million and generated healthy operating income earnings per share and record cash flow from operations.
Speaker 3: In 2021, we witnessed an increase in demand for our security solution.
In 2021, we witnessed an increased demand for our security solutions.
Speaker 3: The social addressable market is large and offers tremendous opportunities in the future.
Total addressable market is large and offers tremendous opportunities in the future.
Speaker 3: In order to address these opportunities over the coming quotals, we are increasing our investment in field and marketing resources and accelerating investments in our cloud infrastructure and solutions.
In order to address these opportunities over the coming quarters, we are increasing our investment in field and marketing resources.
Accelerating investments in our cloud infrastructure and solutions.
Speaker 3: I would like to thank all of Radwar employees around the world for their dedication, execution, and contribution to our 2020-21 RID.
I would like to thank all of our employees around the world for their dedication execution and contribution to our 2021 results.
Speaker 3: I will now turn on the call to Gail who will review the financial result.
I will now turn the call to Gil who will review the financial results Gail.
Speaker 4: Thank you, Roy, and good day everyone. I'm pleased to provide the analysis of our financial results and business performance for the fourth quarter in full year of 2021.
Roy and good day, everyone I am pleased to provide the analysis of our financial results and business performance for the fourth quarter and full year of 2021.
Speaker 4: I would like to remind you that unless otherwise indicated, all financial results are non-gap reconciliation between the gap and non-gap results for the quarter are detailed in our press.
I would like to remind you that unless otherwise indicated all financial results are non-GAAP .
Reconciliation between the GAAP and non-GAAP results for the quarter are detailed in our press release.
Speaker 4: We had a strong border in a remarkable year with both the top and bottom line growing double digits in 2021 compared to
We had a strong quarter and a remarkable year with both the top and bottom line growing double digits in 2020 , one compared to 2020.
Speaker 4: Revenue for the fourth quarter, 2021, was record $76.6 million, an increase of 11% compared to the same period in 20%.
Revenue for the fourth quarter 2021 was record $76 6 million, an increase of 11% compared to the same period in 2020.
Speaker 4: Full year 2021 revenue was also a record, reaching $286.5 million in increase of 15% compared to 20%.
Full year 2021 revenue was also a record reaching 286 5 million.
An increase of 15% compared to 2020.
Looking at geographies 2021 revenue in the Americas grew 14% in the fourth quarter and 13% percent during the full year to $31 million and to $129 million respectively.
Speaker 4: Looking at geographies, 2021 revenue in the Americas grew 14% in the fourth quarter and 13% during the full year, to $31 million and to $129 million respect.
Speaker 4: 2021 revenues in the May, grew 23% in the fourth quarter, and 26% during this full year. The $30 million and $98 million respect.
2021 revenues in EMEA grew 23% in the fourth quarter and 26% during the full year to $30 million and $98 million respectively.
Speaker 4: APEC revenues in the first quarter of 2021 were $60 million compared to $17 million in the same period in 2020.
APAC revenues in the first quarter of 2021 were $60 million compared to $17 million in the same period in 2020.
Speaker 4: For the full year 2021, 8-back revenues increased 4% to $59 million compared to $57 million in 2020. Will
For the full year 2021, APAC revenues increased 4% to.
The $59 million compared to $57 million in 2020.
I will now discuss expenses and profit.
Speaker 4: Gross margin for the fourth quarter 2021 was 82.4% compared to 83.1% in the same period in
Gross margin for the fourth quarter of 2021 was 82, 4%.
Third to 83, 1% in the same period in 2020.
Speaker 4: For the full year 2021, Rufzmargin was 82.4% compared to 82.8% in 2020.
For the full year 2021 gross margin was 82, 4% compared to 82, 8% in 2020.
Speaker 4: Our gross margin can fluctuate from quarter to quarter due to product and geographic as well as cost related to the supply chain.
Our gross margin can fluctuate from quarter to quarter due to product and geography geographic mix as well as costs related to the supply chain.
Speaker 4: Operating expenses in the fourth quarter of 2021 increased 8% to $52.1 million compared to the same tiered in 2020.
Operating expenses in the fourth quarter of 2021 increased 8% to $52 1 million compared to the same periods in 2020.
Speaker 4: Full year 2021 operating expenses also increased by 8%. To $197.3 million compared to $182 million during the same period in 20...
Full year 2021 operating expenses also increased by 8% to $1 $97 $3 million compared to $182 million during the same period in 2020.
Speaker 4: The increase in operating expenses is as a result of higher employee count and commission cost coupled with currency in fact, mainly the weakening of the US dollar against the Israeli shake.
The increase in operating expenses is the result of higher employee count and commission costs, coupled with currency impact mainly the weakening of the U S dollar against the Israeli shekel.
Speaker 4: excluding the impact of the weakening of the shackle against the US dollar, operating expenses would have been approximately $1 million and $5 million lower for the fourth quarter in full year 2021.
Excluding the impact of the weakening of the U S.
The shekel against the U S. Dollar operating expenses would have been approximately $1 million and $5 million lower for the fourth quarter and full year 2021, respectively.
Speaker 4: Nevertheless, we were able to increase our operating income and operating market.
Nevertheless, we were able to increase our operating income and operating margin.
Speaker 4: Upwarding incoming freeze to $11 million in the fourth quarter of 2021 compared to $9 million in the fourth quarter of 2020.
Operating income increased to $11 million in the fourth quarter of 2021 compared to $9 million in the fourth quarter of 2020.
Speaker 4: In addition, operating margin increased to 14.4% in the fourth quarter of 2021, compared to 13.2% during the same period in 2020.
In addition, operating margin increased to 14, 4% in the fourth quarter of 2021 compared to 13, 2% during the same period in 2020.
Speaker 4: For the full year 2021 operating income increased by 55% to $39 million compared to $25 million in 2020. And operating margin increased to 13.6% in 2021 from 10% in 2020.
For the full year 2021, operating income increased by 55% to $39 million compared to $25 million in 2020.
And operating margin increased to 13, 6% in 2021 from 10% in 2020.
As discussed in previous earning calls.
Speaker 4: As discussed in previous earnings calls, the declining yield and marketable securities and deposits impacts our financial income, which decreased from $2.2 million in the fourth quarter of 2020 to $1.1 million during the same period in 2021, and from $10.4 million in 2020 to $6.2 million in 2021.
The declining yield on market marketable securities and deposits impacts our financial income, which decreased from $2 2 million in the fourth quarter of 2020 to $1 1 million during.
During the same period in 2021 and.
And from $10 4 million in 2020 to $6 2 million.
2021.
Speaker 4: Loading ahead, we expect financial income to continue to decrease in the coming calls.
Looking ahead, we expect financial income to continue to decrease in the coming quarters.
Speaker 4: In the fourth quarter of 2021, we decided to take advantage of special program initiated by the Israeli Tax Authority that allowed Israeli companies to release trapped profits at a discounted tax rate.
In the fourth quarter of 2021, we decided to take advantage of a special program initiated by the Israeli tax authority that allowed Israeli companies to release trapped profits at a discount to the tax rate.
Speaker 4: Persuant to this plan and due to the benefit of this program, we elected to
Pursuant to this plan and due to the benefit of this program, where we elected to participate.
Speaker 4: The effect of this one-time tax expense related to the release of the trapped profits and fourth quarter gap taxes was $8.2 million.
The effect of this one time tax expense related to the release of the trapped profits in the fourth quarter GAAP taxes was $8 2 million.
Speaker 4: Those are the one time nature of this expense. We excluded it from the non-gap results.
Due to the onetime nature of this expense were excluded from the non-GAAP results.
Speaker 4: The effective tax rate for the fourth quarter of 2021 was 14.9% compared to 13.7% in the fourth quarter of 2014.
The effective tax rate for the fourth quarter of 2021 was 14, 9% compared to 13, 7% in the fourth quarter of 2020.
Speaker 4: and 15.1% per full year, 21, 21, 21 compared to 13.1% in points.
And 15, 1% for full year 'twenty, one 'twenty, one compared to 13, 1% in 2020.
Speaker 4: The increase of the effective tax raise is related to multiple year tax settlement that occurred in the fourth quarter.
The increase of the effective tax rate is related to multiyear tax settlements that occurred in the fourth quarter.
Speaker 4: Expected tax rates for 2022 is approximately 14 to 15%.
The expected tax rates for 2022 is approximately 14% to 15%.
Speaker 4: despite the decrease in the financial income and the increased tax rate.
Despite the decrease in the financial income.
The increased tax rate.
Speaker 4: Starting for the limited share for the fourth quarter of 2021 increased to 22 cents compared to 21 cents in the same period in 2020 and earnings per share for full year 2021 increased by 25% to 81 cents compared to 64 cents in 2020. Okay 0-25 kicking out about 300 per share per share,
Earnings per diluted share for the fourth quarter of 'twenty, one increased to 22.
Impaired to 'twenty, one and the same period in 2020 and.
And earnings per share for full year 2021 increased by 25% to <unk> 81, compared to <unk> 64 in 2020.
Turning to the balance sheet and cash flow items.
Speaker 4: We have a very strong balance sheet. We had record cash flows. Cash flows from operations was 29 million, million compared to 80 million in the fourth quarter of 2020.
We have a very strong balance sheet we.
We had record cash flows.
Cash flow from operations was $29 million compared to $80 million in the fourth quarter of 2020.
Speaker 4: and cash from operations of $72 million in 2021 compared to $64 million in 2020.
Cash flow from operations of $72 million in 2021 compared to $64 million in 2020.
Speaker 4: During the fourth quarter, we purchased chair that approximately $17 million. And during the full year, we purchased approximately $52 million on share by the bill.
During the fourth quarter, we repurchased shares.
Sure that approximately $17 million.
And during the full year, we repurchased approximately $52 million.
On share buybacks.
Speaker 4: We ended 2021 with approximately $466 million in cash, bank deposits, and marketables.
We ended 2021 with approximately $466 million in cash bank deposits and marketable securities.
Speaker 4: I will turn the call back to Lloyd to discuss the outlook for the first quarter in the full year of 2020.
I will turn the call back to Roy to discuss the outlook for the first quarter and the full year of 2022.
Speaker 3: Thank you, Geo. I will now provide our guidance for the first quarter of 2020.
I will now provide our guidance for the first quarter of 2022.
Speaker 3: We expect Q1 revenues to be in the range of 72 to 74 million dollars, representing 8 to 11 percent yield of the yield growth.
We expect Q1 revenues to be in the range of $72 million to $74 million.
Representing 8% to 11% year over year growth.
Speaker 3: As we highlighted, we are increasing investments in the cloud business, and we expect our operating expenses to be between $50.5 to $52 million.
As Louis highlighted we are increasing investments in the cloud business and we expect our operating expenses to be between 55 to 50.
$32 million.
Speaker 3: With that, and taking into account the decline in financial income, few ones earnings per share, you've expected to be between 17 and 19 cents.
With that and taking into account the decline in financial income Q1 earnings per share is expected to be between 17 and 19.
Speaker 3: For the full year 2022 revenues, we expect to grow slightly above our three-year cargo.
For the full year of 2020 revenues, we expect to grow slightly above our three year CAGR.
Speaker 3: I will now turn the call over to the operator for questions. Operator?
I will now turn the call over to the operator for questions operator.
Speaker 1: Thank you. And at this time, I would like to remind everyone in order to ask a question, please press star one on your telephone keypad, and we'll pause for a moment to compile the Q&A roster.
Thank you and at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad, and we'll pause for a moment to compile the Q&A roster.
Speaker 1: And our first question comes from the line of George Nauder with Jeffries.
And our first question comes from the line of.
George Notter with Jefferies.
Please go ahead.
Speaker 5: Hi guys, thanks very much. Roy, maybe just to kind of continue on that. So you're in terms of the guidance for the full year. So if I look back, your guidance at one point for the long-term cager was nine to 10%.
Hi, guys, thanks very much.
Roy may be just to kind of continue on that.
So your.
In terms of the guidance for the full year so.
If I look back your guidance at one point for the long term CAGR was 9% to 10% so.
Speaker 5: I assume you're looking for a slightly better revenue growth this year than that type of number. Is that mid teams? Is that low teams? High teams? Is there some kind of tighter parameters you can put around that?
I assume youre looking for a slightly better revenue growth this year than that type of number or is that is that mid teens is that low teens high teens is there some kind of tighter parameters you can put around that.
Speaker 3: Yeah, unfortunately, our guidance will 7 to 9% and that's what I'm looking for.
Yeah. Unfortunately, you know our guidance was 7% to 9% and that's what I'm looking for.
Right Okay.
Speaker 5: Okay, because I think you at one point, the long-term growth rate was nine to 10, and then this is at the analyst day from 2020, and then I think you took it down at one point subsequent to that. So the bogey is 79%.
Okay, because I think you at one point the long term growth rate was nine to 10 and then this is at the analyst day from 2020, and then I think you took it down at one point subsequent to that is that so okay. So the bogie is the bogie is 7% to nine <unk>.
<unk>.
Speaker 3: Also in the analyst day, that was the figure, I would send you over after the call to the material.
Also in the analyst day, the figure I will send you over after the call the mosquito.
Speaker 3: Sure, no worries, of course. I think it's in line with that.
Sure no worries of course.
Sure.
In line with that.
Speaker 5: Great. Okay. And then OEM bookings is a number you guys have given us in the past.
Great, Okay, and then OEM bookings.
Is the number you guys have given us in the past.
<unk>.
Speaker 5: You know, I think you gave it in terms of, you know, compares, you know, in prior years, 2020 and 2019, but how did you guys do in terms of OEM bookings in 2021? Is there a number for that?
Yes, I think he gave it yeah.
In terms of.
Compares.
Yeah, I mean in prior years 2020 in 2019, but how did you guys do in terms of OEM bookings in 2021 is there a number for that.
Speaker 3: Yeah, so, you know, we did depends on the OEM vendor. Some did better than the others, but the growth, the significant growth in absolute revenues did not come from there. It came from actually from our, you know, other channels, other indirect business. As I've mentioned in the script and in other scripts along the way, we see the OEMs contributing a lot in bringing new, completely new customers to us.
Yes, so we did though depends on deal we unbundle, some did better than the others, but the growth the significant growth in the.
In absolute revenue did not come from Bill <unk>.
Came from the cloud from actually from our.
Yeah.
Other channels, although the indirect business as I've mentioned in the script and in other scripts alone along the way we see the Oems contributing a lot in bringing new completely new customers to us and this this continues to be strong going into next year. We are trying obviously to accelerate with several.
Speaker 3: This continues to be strong. Going into next year, we are trying, obviously, to accelerate with several programs, the OEM Resonies.
Grams, the OEM revenues, having said that I think our own go to market strategies also the enterprise indicate is executed well in 2021.
Speaker 3: Having said that, I think our own go to market strategies, also the enterprise and the carriers executed well in 2021.
Got it Okay and then.
Speaker 5: Got it. Okay. And then if I go back earlier in earnings season, it seems like this is long ago, but what of your competitors F5 was having issues with component availability? They were seeing a bigger shift towards hardware in their business.
Go back earlier in earnings season. It seems like this is long ago, but you know one of your competitors at five.
<unk> was having issues with component availability.
They were seeing a bigger shift towards hardware in their business.
Speaker 5: It sounds like from the monologue here today that you guys aren't really seeing those issues nor the shift towards hardware, but can you talk about what you're seeing in terms of supply chain impact?
It sounds like from the monologue here today that you guys arent really.
Seeing those issues.
Nor the shift towards hardware, but can you talk about what youre seeing in terms of supply chain impacts.
Speaker 3: So I think we're exposed to what everyone is seeing, obviously component prices are going up.
Yeah. So so I think we were exposed to what everyone is saying obviously component prices are going up.
Speaker 3: Applied chain, there are some challenges, but we built somewhat more inventory and we're paying more. We're paying more for the components, we're paying more for the shipment. You see some of the impact in our gross margin, but we ensure a continuous supply of our products to our customers. Okay, fair enough, thanks very much. I appreciate it. Thank you.
Light chain there are some challenges, but we built somewhat more inventory and we're paying more for.
We're paying more for the components were paying more for the shipment do you see some of the impact in our gross margin, but we ensure.
Continuous supply of our products to our customers.
Yeah.
Got it okay, all right fair enough. Thanks, very much I appreciate it.
Thank you.
Okay.
And our next question will come from Black Friday.
What come from Krish <unk> with Barclays.
Speaker 6: Please go ahead. Hi. Hi, yeah, this is Chris on Fritz Talley from Barkley. Thank you for taking my questions. Looking at the revenues across geographies, delivered strong growth, Amy and North America, well, this quarter A-PAC was down. Can you comment a little on some of the dynamics you're seeing, especially an A-PAC, and then in general just across a different region?
Please go ahead hi.
Hi, Yes. This is Chris on for Kevin from Barclays. Thank you for taking my questions.
Looking at the revenues across geographies each delivered strong growth in EMEA and North America as well.
This quarter APAC was Dan can you comment a little on some of the dynamics Youre seeing especially in APAC and then in general just across the different regions.
Yeah.
Speaker 3: Yeah. So at a high level, given we're selling more and more cloud security solutions, obviously we grow better where the region is more aligned to cloud computing, hybrid cloud and so on.
So it's a high level given you know, we're selling more and more cloud security solutions.
Yes, Lee we grow back to where the region is more aligned to cloud computing hybrid cloud and so on.
Speaker 3: Payback, again, obviously depends on the country, but in a general statement is a bit, after Europe and North America in these trends, and we see that in our ability to generate high amount of sales from our cloud security solution.
APAC again, obviously depends on the country, but in a general statement the beat.
After.
Europe , and North America, and these trends and we see that in our ability to generate high amount of sales from our cloud security solutions.
Speaker 3: So we are working hard to accelerate that and especially in specific markets that we believe there can be a good attainment of cloud security business. But for now, the growth rate there is more challenge versus the more developed markets for cloud security.
So we are working hard to accelerate that and especially in specific markets that we believe they can be.
Good the attainment of cloud security.
Business, but for now the closely there is more challenged versus the more developed markets for cloud security.
Speaker 6: Got it. And is there any color you can provide on the M&A pipeline? And can you expand a little on the investments you're undertaking to support growth in the business?
Mhm.
Got it.
And.
Just is there any other is there any color you can provide on the M&A pipeline and can you expand a little on the <unk>.
Adjustments, you're undertaking to support question business.
Speaker 3: Yeah, absolutely. So we continue to be active in the market to search for M&A candidates. However, I must tell you that some of the pricing we're seeing on private companies are making it hard to add well to a two-act opponent at this time. However, we have the time and the patience to find the right candidate and the right opportunity to do an M&A.
Yeah, absolutely. So we continue to be active in the market to search for M&A candidates. However, I must tell you that some of the pricing we're seeing on private companies are.
Or making it hard to hardware.
To act upon at this at this time, however, we have the.
You know the time and the patience to find the right candidate and the right opportunity to do an M&A.
Speaker 3: Regarding the investments we are making, as I've mentioned in my notes, we're focusing on growing our security business and specifically the cloud security. So we're making investment in dedicated sales, headcount, marketing investments towards that, as well as significant investment in the cloud infrastructure and the R&D to support future growth.
The investments, we're making as I've mentioned in my notes, we're focusing on growing our security business and specifically the cloud security.
We're making investments in dedicated sales head count and marketing investments towards that as well as significant investment in the cloud infrastructure and the R&D to support future growth.
Uh huh.
Speaker 6: So, just really all around. Yeah. Okay, that's it for me. Thank you.
So really just all around.
Okay, all right that's it thank you.
Yes.
Speaker 5: And our next question will come from Alex Henderson with Needham. Please go ahead. Great. Great. Thank you very much. So I was wondering if you could give us the sense of your target on headcount increases in 2022.
And our next question will come from Alex Henderson with Needham.
Please go ahead great great.
Great. Thank you very much.
So I was wondering if you could give us a sense of your target head count increases.
Increases in 2022.
Speaker 3: With all your think you will say 100 to 120 people at during the year.
We're targeting give or take a 100 to 128 blood during the year.
Speaker 7: And do you have any guide towards your expected growth rate, NARR in 2022? I don't know, is one of the key drivers of the business. Are we looking at say 25% type growth again?
Okay.
Do you have any guide towards your expected growth rate they are.
In 2020.
I know it's a.
It was one of the key drivers of the business.
We're looking at say, 25% type growth again.
Speaker 3: Yeah, so, you know, we're not giving specific guides to the ARO, but if you see the total ARO in recent quarters were 9% and that's also, by the way, the guiding figure of the whole revenue growth. For a cloud and subscription, we were in the, as you've mentioned, we were in the mid-20s and we would like to keep it again. It requires more work from us, but that's the direction we're taking. So, that's it.
Yeah. So no we're not giving specific guidance for <unk>, but if you see the total a lot of in recent quarters, we're at 9% and that's also by the way the diabetes.
And for the whole revenue growth for a cloud and subscription we were in the <unk>.
You've mentioned we were in the mid 'twenty than we would like to.
To keep it again it requires more work from us, but that's the direction we're taking.
I see.
Speaker 7: This is a little bit more of a longer term question, but you've signed, I don't know, 1820, pretty significant wins with companies that are going to be reselling your product as a service into their local economies, whether it be the deal in Poland or whether it be the one in Spain or a couple in Latin America. I mean, you've had a bunch of these.
This is a little bit more.
A longer term question, but you've signed I don't know 18 20.
Pretty significant wins.
With companies that are going to be reselling your product as a service into their local economies, whether it would be.
The deal in Poland, or whether it would be the one in Spain. There are couple of Latin America.
You had a bunch of these.
Speaker 7: My sense is that those programs take a long time.
My sense is that those programs take a long time.
Speaker 7: to roll out from the time they're announced.
Two to roll out from the time they are announced.
Speaker 7: And so there's somewhat of a pent-up incremental revenue growth that's coming down the pipe. Can you talk about how those
And so there is some somewhat of a pent up incremental revenue growth that's coming down the pike.
Can you talk about how those <unk>.
Speaker 7: Major wins will translate into revenues, assuming that that's not much of an impact in 22, but probably 23, 24 starts to be a considerable driver of your growth.
Major wins.
Well translate into revenues I am assuming that that's not much of an impact in 'twenty, two but probably 'twenty three 'twenty four starts to be a considerable driver of your growth.
Speaker 3: Like you've mentioned, we think those local partners, dedicated partners are key ways for us to grow our footprint.
So.
So let's you mentioned, we think those local partners dedicated both news our key ways for us to grow our footprint.
Speaker 3: It does require a lot of training for the management work joint marketing with them, white labeling and so on. We started to see.
It does require a lot of training product management, we're joint marketing with them white labeling and so on.
We started to see the first fruits.
Speaker 3: with some of them, you know, obviously not all of them will be successful, but we do see very good progress in this what we call active channels cloud retailers
Some of them you know obviously not all of them will be successful, but we do see very good progress in this what we call active John Adams cloud resellers, and we started to gain the first wins I would say in the second half of the year, it's still not in a big number but the signs are very good.
Speaker 3: And we started to gain the first wins. I would say in the second half of the year, it's still not in a big number, but the signs are very good. And we are ramping our investments, also in those channels, sales, marketing programs towards this go-to-market, which we believe is a unique opportunity.
And we are ramping our investments also in those channels sales marketing.
The programs towards this go to market soon.
Which we believe is a unique opportunity for us.
Speaker 7: So is it a 23, 24 ramped in that business? Is that bright?
So instead of 'twenty three 'twenty four ramp of that business is that right.
Speaker 3: I think it would also contribute to 2022. I would not push it as far as 2023, but there was a ramp and we planned to sign more. So we think this type of dedicated channel is very suitable for our cloud sales.
I think it would also contribute to 2022 I would not push it as far as 2023, but there was a ramp and we plan to to sign more.
So we think this type of dedicated channel is very suitable for our cloud sales.
Speaker 7: All right, Cisco has implemented, I think, four price hikes over the last year, including one effective February 1st, which I understand to be 10%. How does that, how do the price increases at Cisco impact you? And what are you doing on price relative to the increase in supply chain costs and inflation and semiconductors and the like?
Alright.
Cisco has implemented I think core price hikes over the last year.
Clothing, one effective February one.
Which I understand to be 10%, how does that how does.
The price increases at Cisco impact you and what are you doing on price relative to the increase in supply chain costs and inflation in semiconductors.
And the like.
Sure.
Speaker 3: So fiscal price list increases, obviously apply to all products, including products that they carry for a month. They can implement the price hike.
So Cisco price list the increases.
Obviously apply to all products, including products that they carry four months they can implement the price hikes.
Speaker 3: and by themselves, please don't there view of the market.
<unk> sales based on their view of the market.
Speaker 3: Regarding us, we did not increase our price list so far we were absorbing.
Regarding us we did not increase our price list. So far we were absorbing.
Speaker 3: the costs on one end. Of course, we were looking at these constructors, et cetera, but we did not implement a price increase. We're looking into that. For now, we are staying as it.
The costs in one and of course, we were looking at discount structures et cetera, but we did not implement.
Our price increase we're looking into that for now we are.
Thing is this.
Okay.
Speaker 7: Okay, and so the price hikes from Cisco, does that impact your growth with Cisco? I mean, are you expecting that to? I'm struggling with the disconnect here between 20% plus price hikes and big backlogs at these companies and the fact that
And so the price hikes from Cisco does that impact your growth with Cisco.
Are you expecting that to.
I'm struggling with the disconnect here between.
20% plus price hikes.
Big backlogs at these companies and the fact that.
Speaker 7: Most enterprises are increasing their IT spend in single digits. How do we think about...
Most enterprises are increasing.
Their it spend in single digits, how do we think about.
Speaker 7: the give and take between price hikes and decreased volume of production or orders going forward.
The give and take between price hikes and decreased volume of.
Production, our orders going forward.
Yes, So I think price list is one component is also a question about what discounts and whether some of those customers may be with Cisco in this case <unk>.
Speaker 3: Yeah, so I think price list is one component. There's also a question about what discounts and whether, you know, some of those customers maybe with Cisco in this case have agreement not with price list discount, but my actual price figure. So far, I did not see the 20% price icon on Cisco in our end.
Agreements not list price list histone <unk> actually.
Rice.
Figures, so so far I did not see the 20% price hike on Cisco on our end.
Speaker 3: I know there are some plans for certain percentage points and we will see if they maintain the same discount levels. We will see an increase from that, absolutely. But it's two...
I know there are some plans for.
Bruce.
<unk> points, and we will see if they maintain the same discount levels, we wouldn't see an increase from that absolutely, but it's too soon to tell.
Okay.
Speaker 7: Just to be clear so when Cisco takes the prices in your product that's not Passing true your prices therefore do they capture that price?
Just to be clear so when Cisco takes up prices in your product that's not passing through year prices. Therefore, do they capture that price.
No no no if assuming they sell it in the third in the same discount before we would see a bigger portion of that on our end. So there are certain.
Speaker 3: I don't know. If assuming they sell it in a certain, in the same discount as before, we would see a bigger portion of that on our end. So there are certain discounts and certain thresholds and transfer price. It's the multiple parameters, but in general, Alex, to make it simple, if Cisco will sell in higher prices, we will get a bigger share. Actually, okay.
<unk> and certain thresholds and transfer price.
There's a multiple but in general I'll, Alex to make it simple if Cisco will sell in higher prices, we will get a bigger share.
Okay cede the floor.
Thank you.
Yeah.
Yeah.
Speaker 1: And our next question will come from Andrew Keane with Collier Securities. Please go ahead.
And our next question will come from Andrew <unk> with Colliers Securities. Please.
Please go ahead.
Speaker 8: If there's anything to take my question, congratulations on the big quarter. Just wanted to dive under the guide a little farther. Can you just detail out what supply chain implications you have built into your revenue guidance to this next quarter and what you have built in when you say that you're looking to grow and it's seven to nine percent for FY22?
Hey, there. Thanks for taking my question congratulations on the great quarter, just wanted to dive into the guide are there can you just detail out what supply chain application.
Built into your revenue guidance for this next quarter and what you have built in.
They are looking to grow 7% to 9% for the talk for FY 'twenty sales.
Speaker 3: The question was, what have we built in terms of the guidance into the supply chain costs in the first quarter? Yes, first quarter and then the whole year.
The question was what we built in terms of the guidance into the supply chain.
And in the first quarter.
Yes first quarter end portfolio.
Yeah.
Okay. So.
<unk>.
Speaker 3: We took slightly lower the gross margin.
We took slightly lowered the the gross margin.
Speaker 3: You know, you saw already some of it in few four results. For next year, we think it might be a little bit lower, depending if the current pricing environment would stay, which is our current assumption. So it doesn't depend only on the components. It also depends on our product mix, but our current assumption is for a slight decline in the growth model.
You saw already some of it in Q4 results for next year, we think it might be a little bit.
The lower depending if the current pricing environment would stay with us our current assumption.
So it doesn't depend only on the components. It also.
It depends on the.
Our product mix, but our current assumption is for a slight decline in the gross margin.
Speaker 8: God, thank you. And you just, because within your new customers, how many of those were emerged and see onboarding versus traditional sales processes?
Got it thank you again.
We're seeing our new customers, how many of those were emergency onboard in Brooklyn traditional sales processes.
Speaker 3: How many of them were what? Emerging code onboarding? This quarter, yeah. I don't think we had many emergency onboarding of this quarter, maybe around 10 or so. So this Q4 was not a massive quarter, I think in terms of emergency onboarding, but we did see many, many customers coming simply because of the overall environment. We saw many customers that came after a failed.
How many of them were <unk>.
The emergence of Onboarding.
This quarter right.
Yeah.
I don't think we had many emergency onboarding this quarter may be around 10, or so so this Q4 was not.
A massive quarter I think in terms of emergency onboarding, but we did see many many customers coming simply because of the overall environment. We saw many customers that came after a failed.
Speaker 3: that they experienced in previous months and now they're revamping security. So the environment is very, very active and customers understand that it's not enough to say I have a security solution. You really need to make sure it will block the attack. So I think at least in the large enterprises, this notion of really going deep into the success of the technology in the future, that technology.
And block that they experienced in previous months and now they'll revamping security. So the environment is very very active and customers understand that there is it's not enough to say I have a security solution you really need to make sure. It will block the attack. So I think at least in the larger.
Surprises this notion of really going deeper into the success of the technology in real life.
Speaker 3: to block attacks, this notion is becoming more and more critical in the decision process.
The block attacks this notion is becoming more and more.
Critical in the decision process.
Got it thank you.
Okay.
Okay.
Speaker 1: And we do have a follow up from Alex Henderson with Necan. Please go ahead.
And we do have a follow up from Alex Henderson with Needham.
Please go ahead.
Great. Thanks.
Speaker 7: So you've given us a guidance on the revenue was seven and nine percent per 2022. You've also said that, uh,
So you've given us a guidance on the revenue was 7% and 9% for 2022, you've also said that.
Speaker 7: you're going to increase the investments. So if I think about the op-x line, should I be anticipating that that's growing at or faster than the seven to nine percent? Is that what you're implying? I mean, I think they exchange rate.
Youre going to increase.
Investments.
So if I think about the Opex line.
Should I be anticipating that that's growing at or faster than the 7% to 9% is that what you're implying.
I mean, I think the exchange rate.
Speaker 7: Versus last year is still somewhat negative in the first half, but it's kind of flattened out and actually rolled a little bit So that it's not as onerous as it was in the back half of the year So can you talk a little bit about what you're thinking in terms of op-x growth?
Versus last year is still somewhat negative in the first half, but has kind of flattened out and actually roll a little bit.
So it's not as onerous as it was in the back half of the year. So can you talk a little bit about what youre thinking in terms of Opex growth.
Speaker 3: Yeah, it depends on multiple factors. It might be at the high end of the revenue growth, maybe a little bit higher. At this point, we are not trying, I would say, to optimize the operating margin or the cash flow of the company. We reached already 70 million per year cash flow. We are investing for growth.
Yeah. It depends on multiple factors it might be at the high end of the revenue growth may be a little bit higher.
At this point, we are not trying I would say to optimize the operating margin or the cash flow of the company, we reached already $70 million.
Cash flow, we are investing for growth.
Speaker 3: So that would be our crime consideration for 2020.
That would be our primary consideration for 2022.
Speaker 7: and given the environment around the...
And given.
The environment around the.
Speaker 7: inflation around parts out, assume that your gross margin will remain under some pressure. Therefore, flat to at least to down somewhat. Is that fair? So he said that.
Inflation around parts I would assume that your gross margin will remain under some pressure and therefore flat to at least to down somewhat is that fair.
So you said the slight decline yes.
I see.
Speaker 3: In addition to the inflation, you know, there are also significant salary hikes in the cyber market, meaning if you look on the macro of supply chain issues, like interest rates going down and therefore financial income going down, FX, salary hikes, etc. The macro is putting some pressure, but on the other end, our business in cloud security, the trends we're seeing, the strengths in the market causing us to invest more.
Okay.
Turning to the inflation you know there are also significant salary hikes in the in the cyber market, meaning if you look on the macro of supply chain issues like interest rates going down and therefore financial income going down FX salary hikes et cetera, the macro.
<unk> is putting some pressure, but on the other than our business in cloud security the trends, we're seeing the strength in the market, causing us to invest more.
Speaker 7: Yeah, so you tacked into my...
Yeah, so you've tapped into.
My My next.
Speaker 7: My next question, which was only the churn rate and the wage inflation environment in your ability to hire. A part or call, I think you were seeing a little bit of an elevated churn versus the say the 2019 timeframe. Obviously it's...
Question, which was on the the churn rate.
The wage inflation environment.
And your ability to hire.
I recall I think you were seeing a little bit of an elevated churn versus the say the 2019 timeframe, obviously, it's different versus the 2020 period.
Speaker 7: different versus the 2020 period. And you were also seeing wage inflation, but you'd also said I thought that you were seeing some pressure on your ability to hire. Has that improved? I've heard a couple of companies say that there's seen some improvement in hiring availability. So could you comment on this three?
And you were also seeing wage inflation, but should also said I thought that you were seeing some pressure on your ability to hire has that improved ive heard a couple of companies say that they're seeing some improvement in hiring availability.
So could you comment on those three metrics.
Okay.
Speaker 3: I would say Alex, we are trying harder. So I don't think the market is difficult in that sense, both on the retention and the wages, but we try harder. We double down on the hiring and recruiting resources and efforts, and we are growing the headcount.
I would say, Alex we are trying to holiday.
So I don't think the market is difficult in that sense.
On the retention and the wages, but we try although we double down on the hiring.
And our recruiting resources and efforts and we are growing the head count.
Speaker 7: Okay, so there's no change in conditions on neither chair.
Okay. So there's no change in conditions on either churn.
Speaker 7: wage inflation or ability to hire. Is that fair? Okay. Thank you.
Wage inflation or ability to hire her.
Okay.
I'll cede the floor. Thanks.
Speaker 1: And with no further question, I would like to turn the call back to Roy, Disappell for closing remarks.
And with no further questions I would like to turn the call back to Ryan <unk> for closing remarks.
Okay. Thank you, everyone and have a great day.
Speaker 1: And this concludes today's conference. Thank you for your participation and you may now disconnect.
And this concludes today's conference. Thank you for your participation and you may now disconnect.
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Yeah.
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Yeah.
Yes.
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Okay.
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Speaker 9: Katrina.
Yeah.
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Yeah.
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