Q4 2021 Tufin Software Technologies Ltd Earnings Call
[music].
Greetings and welcome to <unk> fourth quarter 2021 earnings call.
Speaker 1: Greetings. Welcome to Tufen's fourth quarter 2021 earnings call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation.
At this time, all participants are in listen only mode.
And answer session will follow the formal presentation.
Speaker 1: If anyone today should require operator assistance during the call, please press star zero from your telephone keypad.
If anyone should they should require operator assistance during the call. Please press star zero from your telephone keypad.
Please note that this conference is being recorded.
Speaker 1: At this time, I'll turn the conference over to Jackie Marcus with investor relations. Jackie, you may now begin.
This time I'll turn the conference over to Jackie Marcus with Investor Relations. Jackie you May now begin.
Thank you operator, and good day, everyone to been released results for the fourth quarter of fiscal 2020 . One ended December 31, 2021 earlier this morning.
Speaker 2: Tifin released results for the fourth quarter of fiscal 2021, ended December 31, 2021, earlier this year.
Speaker 2: If you did not receive a copy of our earnings press release, you may obtain it from the investor relations section of our website at investors.toothin.com.
You did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at investors start to thin dotcom.
Speaker 2: With me on today's call are Ruby Katoff, Tucson's co-founder and chief executive officer, and Jacqueline Q. Toussaint, chief financial officer.
With me on today's call are really catarrh seasons, co founder and Chief Executive Officer, and Jack with Kiwi <unk> Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.
Speaker 2: This call is being webcasted and will be archived on the investor relations section of our website.
Before we begin I would like to remind everyone that any statements made in today's webcast that relate to a future event or express a belief expectation projection forecast anticipation or intent regarding future events or the company's future performance may be considered forward looking statements within the meaning of the safe Harbor.
Speaker 2: Before we begin, I would like to remind everyone that any statements made in today's webcast that relate to a future event or express a belief, expectation, projection, forecast, anticipation, or intent regarding future events or the company's future performance may be considered forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other applicable securities.
Provision of the private Securities Litigation Reform Act of 1995, and other applicable securities laws.
Speaker 2: These forward-looking statements are based on information available to TUPIN's management team as of today and involve risks and uncertainty.
These forward looking statements are based on information available to <unk> management team as of today and involve risks and uncertainties, including those noted in this morning's press release and <unk> filings with the SEC.
Speaker 2: including those noted in this morning's press release and two since filings with the
Speaker 2: such forward-looking statements are not guaranteed as future performance.
Such forward looking statements are not guarantees of future performance.
Speaker 2: Actual results may differ materially from those projected in the forward-looking...
Actual results may differ materially from those projected in the forward looking statements.
Speaker 2: Toobin specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.
<unk>, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
Speaker 2: Please note that a reconciliation of any non-gap number to the mostly directly comparable gap number can be found in the tables of our earnings press release, located in the Investor Relations section of our web.
Please note that a reconciliation of any non-GAAP number to the mostly directly comparable GAAP number can be found in the tables of our earnings press release located in the Investor Relations section of our website.
Speaker 3: With that, I'd like to turn the call over to TUS and CEO and co-founder, Ruby Kitchoff. Ruby? Thank you, Jackie. Good morning, everyone, and thank you for joining us today. I'm excited to be here with you to review our fourth quarter results, reflect on the last year, and share our outlook for 2022. The end of 2021 marks the completion of year one in our transition to the subscription model, and I'm excited to say that we exceeded our transition targets for the year.
With that I'd like to turn the call over to <unk>, CEO and co founder Ruby Quito Ruby. Thank you Jackie and good morning, everyone and thank you for joining us today.
I am excited to be here with you to review our fourth quarter results reflect on the last year and share our outlook for 2022.
At the end of 2021 marks the completion of year, one and our transition to a subscription model and I'm excited to say that we exceeded our transition targets for the year.
Speaker 3: Additionally, we surpass our guidance in both the top and bottom line and we enter the new year with soluble momentum across the business.
Digitally we surpass our guidance on both the top and bottom line and we entered a new year with solid momentum across the business.
Speaker 3: As I reflect on our fourth quarter in the full year of 2021, we make significant progress, strengthening our sales team, improving our lead generation efforts, signing new logos, and adding subscription-based services. We saw increase awareness of security breaches as corporations are allocating more resources to implement policy-driven automation in order to navigate the security threats of tomorrow.
As I reflect on our fourth quarter and the full year of 2021, we've made significant progress.
<unk>, our sales team improving our lead generation efforts, signing new logos and adding subscription based services. We saw increased awareness of security breaches as corporations are allocating more resources to implement policy driven automation in order to navigate the security threats of tomorrow.
Turning to our fourth quarter performance I am pleased to report another strong quarter bolstered by healthy growth in new logos as well as continued momentum in Atlanta and expand with existing customers.
Speaker 3: Turning to our fourth quarter performance, I'm pleased to report another strong quarter, bolstered by healthy growth in new logos, as well as continue momentum in our land and expand with existing customers.
Speaker 3: We signed a record number of larger deals, including our most significant deal in the last three years.
We signed a record number of larger deals, including our most significant deal in the last three years.
Our fourth quarter revenues grew 16% year over year with 27% growth in product revenues.
Speaker 3: Our fourth quarter revenues grew 16% year over year with 27% growth in product revenues.
Speaker 3: Folier revenues were a record $110.9 million, with subscriptions representing approximately 56% of the new license bookings for the year.
Full year revenues were a record $110 $9 million with subscriptions, representing approximately 56% of the new license bookings for the year.
Speaker 3: In addition, 84% of the bookings from new logos in 2021, excluding hardware and professional services, were subscription.
In addition, 84% of the bookings from new logos in 2021, excluding hardware and professional services were subscription.
While Jack will discuss this in greater detail in a moment I'm pleased to share our <unk> as we believe it provides the best reflection for the health of the transition.
Speaker 3: While Jack will discuss this in greater detail in a moment, I'm pleased to share our ARR as we believe it provides the best reflection for the health of the transition.
Speaker 3: At the end of 2021, we reach $72 million in ARR, representing growth of 19% year-over-year.
At the end of 2021 were reached $72 million <unk>, representing growth of 19% year over year.
Speaker 3: Going forward, we will provide ARR on a quarterly basis.
Going forward, we will provide <unk> on a quarterly basis.
Speaker 3: As I mentioned earlier, we're ahead of our stated objectives and we feel confident going forward about our continued move from perpetual licensing to subscription.
As I mentioned earlier, we're ahead of our stated objectives and we feel confident going forward about a continued move from perpetual licensing to subscription.
Moving to the cloud we're pleased to report that to some cloud bookings totaled $3 $9 million in 2021, representing 40% year over year growth <unk> cloud bookings refers to the combined sales of secure cloud with secure track and secure change cloud licenses.
Speaker 3: Moving to the cloud, we're pleased to report that Susan Cloud Bookings totaled $3.9 million in 2021, representing 40% year-over-year growth. Susan Cloud Bookings refers to the combined sales of Secure Cloud with Secure Track and Secure Change Cloud like...
Speaker 3: Moving forward, we plan to report two-some-cloud bookings on an annual base.
Moving forward, we plan to report to some cloud bookings on an annual basis.
This has been an important year for <unk> as we completed our first chapter as a subscription based business. While also seeing growth in both new logos and expansion of existing accounts.
Speaker 3: This has been an important year for Toothin as we completed our first chapter as a subscription based business while also seeing growth in both new logos and expansion of existing accounts.
Speaker 3: Before I discuss our business in greater detail, I'd like to now turn the call over to Jack for a deeper discussion of our financials.
Before I discuss our business in greater detail I'd like to now turn the call over to Jack for a deeper discussion of our financials.
Jack.
Thank you Ravi.
As we mentioned, we're pleased with our performance in the fourth quarter and the full year as we made continued progress towards our initiatives in subscription vehicles.
Speaker 4: As we mentioned, we are pleased with our performance in the fourth quarter and the full year, as we may continue progress towards our initiatives and subscription-based goals.
Speaker 4: Q4 was another quarter of consecutive and year-over-year revenue improvement, and we are happy with our pace of conversion of customers from perpetual subscription and expect this trend to continue into next year.
Q4 was another quarter of consecutive and year over year revenue improvement and we're happy with the pace of conversion of customers from perpetual subscription and expect this trend to continue into next year.
Speaker 4: In 2022 we will be tracking subscription out of new license bookings as we believe this metric best represents our progress in the transition to our recurring revenue model.
In 2022, we will be tracking subscription out of new license bookings as we believe this metric best represents our progress in the transition to a recurring revenue model.
Speaker 4: In 2021, we reached 56% subscription out of the new license bookings and our target for 2022 is 68%.
In 2021 reached 56% subscription out of the new license bookings and our target for 2022, 68%.
Speaker 4: Before I get to our fourth quarter and fully results, I want to review how we measure ARR, which Ruby noted in its remarks was $72 million for the end of the quarter.
Before I get to our fourth quarter and full year results I want to review, how we measure here, which will be noted in his remarks was $72 million for the end of the quarter.
Speaker 4: ARR is comprised of the annualized value of one, our subscription contract for the license and the maintenance together, two, our SaaS business, and three, our maintenance and support contracts for our perpetual licensing business.
<unk> is comprised of the annualized value of one our subscription contracts for the license and the maintenance together to our SaaS business and three our maintenance and support contracts for our perpetual licensing business.
Historically, we have been primarily being a perpetual license company.
Speaker 4: Historically, we have been primarily being a perpetual lessons contest.
Speaker 4: The majority of RAR is still comprised of maintenance and support contracts, while subscription is growing fast and expected to surpass RAR from perpetual support within the next 4-6
The majority of array or are they still comprised of maintenance and support contracts was subscription is growing fast and expected to surpass IRR from perpetual support within the next four to six quarters.
Speaker 4: As Ruby mentioned, going forward, we will be sharing ARR on a quarterly basis.
It really mentioned going forward, we will be sharing IRR on a quarterly basis.
Let me now turn to our results in.
Speaker 4: In the fourth quarter total revenue was $35.8 million, which is 16% above Q4 of 2020.
In the fourth quarter total revenue was $35 $8 million, which is 16% above Q4 of 2020.
Speaker 4: Q4 product revenue increased 27% year over year to 19.1 million dollars, while maintenance and professional services revenue was up 5% to 16.8 million dollars year over year.
Q4 product revenue increased 27% year over year to $19 $1 million, while maintenance and professional services revenue was up 5% to $16 $8 million year over year.
Looking at the geographic mix of Q4, the Americas represented 53% of our revenue Europe represented 42% and 5% came from Asia Pacific.
Speaker 4: Looking at the geographic mix of Q4, the Americas represented 53% of our revenue, Europe represented 42%, and 5% came from Asia Pacific.
Speaker 4: Moving to margins and expenses, I will discuss our results based on non- GAAP financial measures.
Moving to margins and expenses I will discuss our results based on non-GAAP financial measures.
Speaker 4: Gras profit for the fourth quarter was 30.1 million dollars or 84% of revenue compared to 26.1 million dollars or 84% of revenue in Q4 of last
Gross profit for the fourth quarter was $30 1 million or <unk>, 84% of revenue compared to $26 1 million or 84% of revenue in Q4 of last year.
Speaker 4: Our operating expenses for the quarter totaled $30 million up 17% compared to 25.7 million in the Q4 of last
Our operating expenses for the quarter totaled $13 million up 17% compared to $25 7 million in Q4 of last year.
Speaker 4: R&D expense for the fourth quarter was 9.2 million dollars or 26% of revenue compared to 7.7 million dollars and 25% of revenue in Q4 of last year.
R&D expense for the fourth quarter was $9 2 million or 26% of revenue compared to $7 $7 million and 25% of revenue in Q4 of last year.
Speaker 4: Sales and marketing expense for Q4 was 15.7 million or 44% of revenue compared to 13.7 million or 44% of revenue in Q4 of last.
Sales and marketing expense for Q4 was $15 7 million or 44% of revenue compared to $13 7 million or 44% of revenue in Q4 of last year.
Speaker 4: GNA expense for Q4 was 5.2 million dollars or 14% of revenue compared to 4.3 million dollars or 14% of revenue in Q4 of last
G&A expense for Q4 was $5 2 million or 14% of revenue compared to $4 3 million or 14% of revenue in Q4 of last year.
Speaker 4: The increase in our operating expenses is primarily attributable to increased R&D costs and writing labor costs to remain competitive.
The increase in our operating expenses is primarily attributable to increased R&D costs and rising labor costs to remain competitive.
Operating profit for Q4 was zero point $1 million compared to zero point $4 million in Q4 of 2020.
Speaker 4: Operating profit for Q4 was $0.1 million, compared to $0.4 million in Q4 of 2020.
Speaker 4: Net loss for this quarter was 1.6 million dollars compared to a net loss of 1 million dollars in Q4 of last year and net loss per share basic and eluded was 4 cents for this quarter compared to 3 cents in Q4 of last.
Net loss for this quarter was $1 6 million compared to a net loss of $1 million in Q4 of last year and net loss per share basic and diluted was <unk> <unk> for this quarter compared to <unk> <unk> in Q4 of last year.
Speaker 4: During the quarter cashflow used for operating activities will $3.6 million versus 1.7 million in the year ago quarter.
During the quarter cash flow used for operating activities was $3 6 million versus $1 7 million in the year ago quarter.
Moving to full year results.
Speaker 4: Total revenue for 2021 was $110.9 million up 10% year over year.
Total revenue for 2021 was $110 $9 million.
Up 10% year over year.
Full year product revenue increased 20% year over year to $46 6 million, while full year maintenance and professional services revenue was up 4% to $64 4 million.
Speaker 4: A full-year product revenue increased 20% year-over-years to $46.6 million, while full-year maintenance and professional services revenue was up 4% to $64.4 million.
Looking at the geographic mix for the full year 2021, the Americas represented 51% of our revenue Europe represented 42% and 7% came from Asia Pacific.
Speaker 4: Looking at that geographic mix for the full year 2021, the Americas represented 51% of our revenue, Euro represented 42%, and 7% came from Asia Pacific. ?
Moving on to non-GAAP margins and expenses.
Speaker 4: Gross profit for the full year 2021 was $89.6 million or 81% of revenue compared to $82.6 million or 82% of revenue in 2020.
Gross profit for the full year, 2021 was $89 6 million or 81% of revenue compared to $82 6 million or 82% of revenue in 2020.
Speaker 4: Our operating expenses for the year totaled $112.1 million. Up 11% compared to $101.1 million a year ago.
Our operating expenses for the year totaled $112 1 million.
Up 11% compared to $101 1 million a year ago.
R&D expense for the full year was $35 7 million or 32% of revenue compared to $30 2 million.
Speaker 4: R&D expense for the fully-year was $35.7 million or 32% of revenue compared to $30.2 million and 30% of revenue in 2020.
And 30% of revenue in 2020.
Sales and marketing expense for the year was $56 6 million or 51% of revenue compared to $54 8 million.
Speaker 4: The sales and marketing expense for the year was 56.6 million dollars or 51% of revenue compared to 54.8 million dollars or 54% of revenue last.
Or 54% of revenue last year.
Speaker 4: GNA expense for the full year was 19.8 million dollars or 18% of revenue compared to 16 million dollars or 16% of revenue in 2020.
G&A expense for the full year was $19 8 million or 18% of revenue compared to $16 million or 16% of revenue in 2020.
Speaker 4: Operating loss for 2021 was $22.4 million compared to an operating loss of $18.5 million in 2020.
Operating loss for 2021 was $22 $4 million compared to an operating loss of $18 5 million in 2020.
Net loss for the full year was $25 8 million compared to a net loss of $26 million last year and net loss per share basic and diluted was <unk> 69 for the full year compared to 58 since last year.
Speaker 4: Net loss for the full year was 25.8 million dollars compared to a net loss of 20.6 million dollars last year And net loss per share, basic and diluted, was 69 cents for the full year compared to 58 cents last
Speaker 4: For the full year, cash flow used for operating activities was $14.2 million versus $17.4 million for Latvia.
For the full year cash flow used for operating activities was $14 2 million versus.
Versus $17 4 million for last year.
Turning to the balance sheet.
Speaker 4: As of December 31st 2021, we had total cash, cash equivalents, restricted cash and marketable securities of $89.4 million down for $10.6 million from the beginning of the year.
As of December 31, 2021, we had total cash cash equivalents restricted cash and marketable securities of $89 4 million down $14 $6 million from the beginning of the year.
Speaker 4: I will finish up with a discussion of guidance for the first quarter and full year 2022.
I will finish up with a discussion of guidance for the first quarter and full year 2022.
For the first fiscal quarter of 2022, we expect total revenue to be between 23% and $27 million.
Speaker 4: For the first fiscal quarter of 2022, we expect total revenue to be between $23.27 million and non-gap operating loss to be between $11.5 and $8.1 million.
And non-GAAP operating loss to be between 11, five and $8 1 million.
For the full fiscal year of 2022, we expect total revenue between 123 and $129 million.
Speaker 4: For the full fiscal year of 2022, we expect also revenue between $123 and $129 million, and we expect non-gap operating loss to be between $28.9 million and $23.8 million.
We expect non-GAAP operating loss to be between $28 9 million and $23 $8 million.
I am pleased with our progress over the past year and the opportunities that lie ahead for <unk>.
Speaker 4: I am pleased with our progress over the past year and opportunities that lie ahead for two days.
Speaker 4: We are working to prudently manage your costs, while also investing in the expansion of our business.
We are working to prudently manage our costs, while also investing in the expansion of our business.
Speaker 4: With that, I will turn the call back over to Ruby. Ruby?
With that I will turn the call back over to Ravi.
<unk>.
Speaker 3: Thank you, Jack. While companies around the world have mostly adjusted to working for the challenges of the COVID-19 pandemic, one unforeseen challenge is the scarcity of qualified IT personnel.
Thank you Jack.
While companies around the world have mostly adjusted to working through the challenges of the COVID-19 pandemic.
One unforeseen challenge is the scarcity of qualified personnel.
Speaker 3: Companies of all sizes are continuing to expand their staffing and hiring efforts for security professionals as they recognize the critical need for protection against the ever-changing threat landscape they face today.
Companies of all sizes are continuing to expand our staffing and hiring efforts for security professionals as they recognize the critical need for protection against the ever changing threat landscape they face today.
As a result, it is more difficult than ever before to higher maintain teams of security professionals that can manage a growing number of change requests and large enterprises the.
Speaker 3: As a result, it is more difficult than ever before to hire and maintain teams of security professionals that can manage a growing number of change requests and large enterprises.
Speaker 3: The difficulty of this challenge is magnified by the record rates of workforce turnover seen in the broader labor market.
The difficulty of this challenge is magnified by the record rates of workforce turnover similar broader labor market.
Speaker 3: Two-Sense Automation-Based Offering not only improves security and increases agility, but it also helps solve the critical shortage of security specialists that are needed to process network changes and handle other security challenges.
<unk> automation based offering not only improved security increases agility, but it also helps solve the critical shortage of security specialists that are needed to process network changes and handle other security challenges.
Speaker 3: In conjunction with labor shortages, security teams are hard pressed to define and enforce their security policy, which puts organizations at risk for non-compliance and security incidents.
In conjunction with labor shortages security teams are hard pressed to define and enforce their security policy, which puts organizations at risk for noncompliance and security incidents.
In the fourth quarter, we released another app on the total marketplace the security policy builder App.
Speaker 3: In the fourth quarter, we released another app on the two-pin marketplace. The Security Policy Builder app.
Speaker 3: This app automates the design of corporate security access policies across the hybrid environment, reducing the complexity and the time that it takes to create security policies from months down to days.
This app automate the design of corporate security access policies across the hybrid environment, reducing the complexity and the time that it takes to create security policies for months down to days.
Speaker 3: Integrating with Secure Track, the Security Policy Builder app automates the design of the Unipy Security Policy based on the existing access to align the compliance model.
Integrating with secure track the security policy builder App automate the design of a unified security policy based on the existing access to aligns the compliance models.
Speaker 3: This enables organizations to reduce the likelihood of a breach, avoid fines and penalties due to non-compliance, and maintain a strong security posture. I'd now like to highlight some of the interesting deals that we saw in the quarter.
This enables organizations to reduce the likelihood of a breach avoid fines and penalties due to noncompliance and maintain a strong security posture I'd now like to highlight some of the interesting deals that we saw in the quarter.
Speaker 3: The first deal I'll discuss was with a large airline that needed to automate security changes and struggled to maintain efficient
Firstly I'll discuss was with a large airline that needed to automate security changes and struggled to maintain efficiency.
Speaker 3: Their environment included over 300-pound alpha and checkpoint firewalls, thousands of routers and switches, hundreds of load balancers, and a growing cloud presence with over 100-total cloud accounts.
Their environment included over 300, Palo Alto and checkpoint firewalls, thousands of routers and switches hundreds of load balancers and a growing cloud presence with over 100 public cloud accounts.
Speaker 3: They were making over 150 rule and policy changes every week, with every change taking several days to implement, slowing down application change deployment for the business.
They were making over 150 rule and policy changes every week with every change taking several days to implement slowing down application change deployment for the business.
Speaker 3: With a near shutdown of the travel industry from March of 2020, they lost about one third of their staff. And as they return to businesses usual, they wanted to automate their IT processes as much as possible.
With the near shutdown of the travel industry for much of 2020, the lost about one third of their staff and as they return to business as usual and wanted to automate our processes as much as possible.
Speaker 3: The colonial pipeline hack caused them to look even closer at security automation as they could not afford to shut down the business for five days like colonial did due to the security incident.
The colonial pipeline have caused them to look even closer at security automation as they could not afford to shut down the business for five days like colonial debt due to the security incident.
Speaker 3: They bought secure track for compliance and secure change for automation of their on-premises and cloud networks.
They bought secure track for compliance and secure change for automation of their on premises and cloud networks.
Another significant deal this quarter was with the federal government in Europe .
Speaker 3: Another significant deal this quarter was with a federal government in Europe . They had a very complex infrastructure with over 1,000 firewalls that contain over 4 million rules. Spread over multiple data centers and multiple teams, some of them with different levels of that.
We had a very complex infrastructure with over 1000 firewalls that contained over $4 million rules spread over multiple data centers and multiple teams some of them with different levels of abaxis.
Speaker 3: They were using a homegrown tool for network visibility, which was insufficient for the audit and compliance needs, and they were looking to automate changes and scale their IT operations.
They were using a homegrown tool for network visibility, which was insufficient for the audit and compliance dates and they were looking to automate changes and scaled our operation.
Speaker 3: There are multiple security breaches in European federal agencies in the recent years, leading to a heightened awareness and a sense of urgency around security posture. They needed to move away from annual processes, reduce their attack surface, and build a well-documented process around making policy changes for compliance audit.
There are multiple security breaches and European federal agencies in the recent years, leading to heightened awareness and a sense of urgency around security posture, they needed to move away from manual processes reduce the attack surface and build a well documented process are making policy changes for compliance audits.
Speaker 3: They purchased both Secure Track and Secure Change and a multi-million dollar new logo subscription deal. This was our largest deal in the past three years.
Purchased both secure track and secure change and a multimillion dollar new logo subscription deal. This was our largest deal in the past three years.
Speaker 3: The last deal I mentioned today was with an online consumer shopping company with several billion dollars in revenue and over 15,000 employees worldwide.
The last deal I mentioned today was with an online consumer shopping company with several billion dollars in revenue and over 15000 employees worldwide.
Speaker 3: They have about 200 firewalls in their on-premise data center, and they've been two-pin customers since 2016. They were using secure track for visibility and compliance with regulations, such as PCI, since all of their businesses with online consumers.
Have about 200 firewalls in the on premise data center and they've been <unk> customers since 2016.
We're using secure track for visibility and compliance with regulations, such as PCI since all of their businesses with online consumers.
We expanded aggressively into the cloud with our cloud infrastructure team, adding about 3500 virtual firewalls and AWS over the course of several months.
Speaker 3: They expanded aggressively into the cloud with the cloud infrastructure team adding about 1300 virtual firewalls in AWS over the course of several months.
Speaker 3: At the same time, the network security team had no visibility or compliance over the security posture within these firewalls due to the fact that a different organization was managing the cloud firewalls, as well as the speed with which these changes remain.
At the same time the network security team had no visibility or compliance over the security posture within these firewalls due to the fact that a different organization was managing the cloud firewalls as well as the speed with which these changes were made.
Speaker 3: They bought an expansion secure track to monitor their cloud environment and signed a seven-figure one-year subscription deal in the fourth quarter. The future expansion potential with this customer is very significant with an upsell of secure change to automate network changes for their entire state.
Bought in expansion secure track to monitor their cloud environment and signed a seven figure one year subscription deal in the fourth quarter.
The future expansion potential with this customer is very significant with an OXXO a secure change to automate network changes for their entire state.
Speaker 3: We're very proud of the progress that we've made as we reach the one-year mark of announcing our transition to subscription. Our sales team is executing well, and we continue to see demand for our policy-driven automation solution.
We're very proud of the progress that we've made as we reached the one year mark of announcing our transition to subscription or.
Our sales team is executing well and we continue to see demand for our policy driven automation solutions.
Speaker 3: I wish to think everyone at Tufan for all their hard work and achieving our goals for the year. I would now like to turn the call over to the operator to open the line for questions.
I wish to thank everyone at <unk> for all their hard work in achieving our goals for the year I would now like to turn the call over to the operator to open the line for questions operator.
Operator.
Thank you.
Speaker 1: Thank you. At this time we'll now be conducting a question and answer session. If you'd like to ask a question, please press star one from your telephone keypad and a confirmation tone will indicate your line as in the question queue. You may press star two if you'd like to remove your
At this time I will now be conducting a question and answer session a.
If you'd like to ask a question. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Can you refresh start to view that to remove your question from the queue.
Speaker 1: distance or using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
For participants are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker 1: One moment please, so we pull for questions. Let's get that star one. Thank you.
One moment, please pull for questions once again Thats star one thank you.
To ask a question today, you May press Star one.
Thank you and our first question comes from the line of Sterling Auty with Jpmorgan. Please proceed with your questions.
Speaker 1: Thank you, and our first question comes from the line of Sterling Audie with JP Morgan. Pleasure to see you there.
Speaker 5: Hi, this is Drew on First Starline. I was wondering if you could provide some more color on what portion of the 2022 guidance is subscription.
Hi, This is Joe on for Sterling I was wondering if you could provide some more color on what portion of the 2022 guidance in subscription.
Hi, This is Jack.
So for 2022, we said.
Speaker 4: So for 2022 we said we're gonna...
Yes.
Speaker 4: follow the subscription metric that is measured as subscription license out of total new business.
Follow the subscription metric that is.
Measurements as subscription license out of total new business bookings.
Speaker 4: storyry up of two total new license book.
Sorry up too.
The new license bookings.
Speaker 4: And we said that for last year for 2021, this metric was...
And we said that for last year for 2021, this metric was 56%.
Speaker 4: And we said that we are looking to achieve 68% for that metric for 2022. Okay, got it.
And we said that we are looking to achieve 68% for that metric for 2022.
Okay got it thank you.
Thank you.
Our next question is from the line of.
So please press star one to ask a question. The next question comes from the line of <unk> <unk> with Barclays. Please proceed with your question.
Speaker 1: line of Sekai Kaliya with Barclays.
Speaker 6: Hey, great. Hey guys, thanks for taking my question here. Maybe just one for you, Jack. Can you just speak to sort of the average duration that you're seeing on deals and kind of what that assumption on duration is in 2022?
Okay, Great Hey, guys. Thanks for taking my question here, maybe just one for you Jack.
Can you just speak to sort of the average duration that youre seeing on deals and kind of what that assumption on duration is in 2022.
Yes sure.
Speaker 7: Yeah, sure. I see the refer to subscription deals, right? Yeah, absolutely. Sorry, subscription deals.
<unk> grew 13 subscription deals right, yes, absolutely sorry subscription deals.
Speaker 4: Yeah, so we said in the past and this is the case the vast majority of the deals are multi-year deals.
Yes. So you said in the past and this is not the case the vast majority of the deals are multiyear deals.
Speaker 4: And when we say multi-year deals within that, it's typically a three-year deal. Sometimes we see, you know, less than three years, but more than two years, so we have a group of like, you know, 30 months, two to three years. So that would be the average between those two bucks.
And when you say multi year deals within that.
Typically a three year deal, sometimes we see less than three years, but more than two years. So we have a group of.
So two months two to three years, so that would be the average between those two.
Buckets.
Speaker 6: and actually i lied sorry maybe maybe one fall per for you uh... ruvey here ruvey obviously very uh... you know healthy uh... firewall spending back drop
Got it and actually I lied sorry, maybe one follow up for for you Ruby here.
We obviously are very healthy.
Healthy firewall spending backdrop.
Speaker 6: you know just given all the years that you've been in the industry uh... i'm wondering kind of what you've seen historically
Just given all the years that you've been in the industry I'm wondering kind of what <unk> seen historically.
Speaker 6: that does demand for network security policy management.
Does demand for for network security policy management, typically lag sort of firewall refresh or or upticks in spending and if so what is that sort of lag been like in the past roughly.
Speaker 6: typically lag, sort of firewall, refresh or upticks and spending. And if so, what's that lag been like in the past? Rough.
Hi.
Speaker 3: Hi, Facket. So what we've said in the past, and I think that's still true, is that it's not directly correlated, right? We're selling into the install base of over five years worth of...
So what we said in the past and I think that's still true is that it's not directly correlated right, we're selling into the installed base of.
Over five years worth of.
Speaker 3: You networked here, if you will, not just firewalls, but low-balance of the Red Room switches, also cloud security.
Network gear, if you will not just firewall load balancers routers switches also.
Cloud security elements, so, it's not that fortinet or Palo Alto have a great quarter and suddenly in two quarters, you can track some growth for Susan.
Speaker 3: So it's not that fortenant or pal also have a great quarter and suddenly into quarters you can track some growth for two things. It's just, you know, good.
I think healthy network security spending overall and security spending.
Speaker 3: I think healthy network security spending overall and security spending, so demand is back.
So demand is back for US we mentioned on our last quarterly call that it's back to pre COVID-19 levels, and it's a passing that as well.
Speaker 3: We mentioned that in less quarterly call that it's back to pre-Covid levels and it's surpassing that as well. And it's not directly correlated to the firewall vendors having a strong quarter of that. Got it, very helpful. Thanks, Josh. Thanks.
And it's not directly correlated to the firewall vendors, having a strong quarter.
Got it very helpful. Thanks, guys.
Thanks.
Thank you.
As a reminder, you May press star one to ask a question at this time.
Speaker 1: Our next question comes from the line of Andrew King with colliers. Please receive your questions.
Our next question comes from the line of Andrew King with Colliers. Please proceed with your questions.
Speaker 8: Hey guys, thanks for taking my question. Congratulations on the good quarter. I just first off just wanted to dive into the product revenue. This is the first time since Q4 2018. It looks like that product revenue has been over 50% of total revenue. Can you just break out on why that was and where you expect that in FY22?
Hey, guys. Thanks for taking my question congratulations on a good quarter just first off just wanted to dive into the product revenues. This is the first time since Q4 2018, it looks like that product revenues and over 50% of total revenue can you just break out.
And where do you expect that.
FY 'twenty two.
Yeah.
Speaker 4: Yeah sure, and with this jack. Yeah, we reported the 53% product for Q4.
Yeah sure Andrew This is Jeff.
We reported a 63% product for Q4 for the full year.
Speaker 4: for the full year, we're still not at 50% where we want to be, but definitely it's product that's driving the growth.
We're still note that 50%, where we want to be but definitely its product thats driving the growth. So if we're looking at bookings for example, you can see the bookings growing even higher than our revenue bookings.
Speaker 4: So if you're looking at bookings, for example, you can see it's growing even higher than our revenue. So booking reflects the fact that the product is driving the growth. And as we think of it going forward,
To reflect the fact that product is driving the growth and as we think of it going forward.
Speaker 4: Continuing this growth and we did guide for accelerated growth for 2020 revenue And as we move forward we expect to go back to 50% 50% split as we were before
Continuing this growth and we did guide for.
Accelerated growth for 2020 revenue.
As we move forward, we expect to go back to 50%, 50% split as we were before the IPO.
Got it and then just.
Speaker 8: Got it. And then just on the hardware business itself, you've seen a lot of other people in this security space dealing with some supply chain issues. Can you just detail out any of those that you've seen or if You haven't why not
On the hardware business itself, we've seen a lot of other.
Other people in the security space dealing with some supply chain issues can you just detail out any of those that you've seen or if you.
Why not.
Speaker 3: Sure, so I'll take that, you know, nothing notable really to call out that infected unusual adults in terms of supply chain. We do have supply chain around appliances about a third of our customers choose to buy into political appliances, but so far we've been managing the supply chain challenges and ordering ahead of it.
Sure So I'll take that.
Nothing notable really to call out that impacted financial results in terms of supply chain, we do have supply chain around appliances about a third of our customers choose to buy and deploy tools on appliances, but so far we've been managing the supply chain challenges and ordering ahead of it.
Speaker 8: Got it. And then I might just miss this but you guys break out international contribution for us. Thank you.
Got it and then I might have missed this but could you just break out international contribution for us. Thank you.
I think Jack the question was about the international contribution geography wise.
Speaker 3: I think, Jack, the question was about international contribution, geography-wise.
Speaker 4: Yeah, we reported this on the prepared script. We had a balanced geographical split. It's still changing from year to year. We said it's about 50% for the US.
Yes, we reported this on the prepared script.
Great.
We had balanced.
Geographical split.
<unk> from year to year, we said it's above.
51% for the U S.
Speaker 4: percentage percentage.
But 40% for Europe .
I mean.
Speaker 4: table Over the years between the quarters we may see fluctuations because we're working with high high-speed But for the full year that has been stable Thanks
Table.
Over the years between the quarters, we may see fluctuations because we are working with high ASP.
For the full year that has been stable.
Got it thanks, congrats on a great quarter guys.
Thank you.
Yeah.
Speaker 1: Our next question is from the line of you coming him. Look how, please just do a third question.
Our next question is from the line of few Cunningham with Cowen. Please proceed with your questions.
Speaker 9: Hey guys, congratulations on this strong quarter.
Hey, guys congratulations on the strong quarter.
Speaker 9: Two questions first in terms of the labor tightness that you mentioned for your
Two questions first.
In terms of the labor tightness that you mentioned for your customers is that also impacting you.
Speaker 9: Is that also impacting you? And then secondly, in terms of the sort of wind down of COVID-19, do you expect?
And then secondly in terms of the sort of wind down of COVID-19, do you expect.
<unk>.
Speaker 9: What do you expect to happen with you? Let me just squeeze in a third on the insurance.
What do you expect to happen with you let me just squeezing in a third one on the insurance deal in.
Speaker 9: Who in general terms, who did you see competing against?
In General terms, who did you see competing against you for that deal. Thanks.
Speaker 3: Okay, so hopefully I'll remember those three questions. The first one I think was on Labor.
Okay. So hopefully I'll remember those three questions. The first one I think was done.
Labor.
Yeah, Yeah. So obviously, it's a very competitive environment that we're operating in.
Speaker 3: Yeah, so obviously it's a very competitive environment that we're operating in. Two things are great place to work. We continue to find ways always to track and retain the best talent. We did a just compensation or just take competitive with the market. And that's reflected in the expenses and guidance for the year. What was the, can you remind you the second question?
And so as soon as a great place to work, we continue to find ways always to attract and retain the best talent, we did adjust compensation or just stay competitive with the market and thats reflected in the expenses and guidance for the year.
Can you remind me the second question.
Speaker 9: It was about who did you see going up against you on the insurance deal, but actually even the other two large deals you mentioned, what sort of competition are you seeing?
It was about.
Who would you see going up against you.
On the insurance deal, but actually even though the two large deals you mentioned what sort of competition are you seeing is there any way you can mention that you're seeing more often.
Speaker 3: Right. So in terms of competitive landscape, it hasn't changed that much of the two direct competitors that we see most often are August 2nd, firemon. To a lesser extent, we sometimes see skybox as well. A lot of the large fields are competitive. Obviously, for the tooth and extension, but normally they would not be baking off against the competitor. They would...
Alright, so in terms of the competitive landscape. It hasnt changed that much of the two direct competitors that we see most often our ALDA second pharma to a lesser extent, we sometimes see skybox as well a lot of the large deals are competitive obviously with the <unk> expansion and normally there would not be taking off against a competitor they would just be.
Speaker 3: reviewing Tufan and making a decision on whether there's enough value there. But I would say Algotech and Fireman are probably the two closest direct competitors, and Skybox is a secondary competitor.
Reviewing Tucson, and making the decision on whether there is enough value there.
But I would say, Alberta environment, I'd, probably that too close to the direct competitors and skybox is.
Secondary competitor.
Speaker 9: A quick follow on to that. Is there a reason why you is it superiority of your products? How did you sort of ease them out? And my last question, by the way, was on COVID-19 and the wind down and impact on you. All right, so let's let's take the competitive piece.
A quick follow on to that is there a reason why you're is it superiority of your products. How did you sort of ease amount and my last question by the way was on COVID-19, and the wind down and the impact on you.
Alright, so, let's let's take the competitive piece first.
Sure I mean, we've got strong competitive advantages.
Speaker 3: We're the clear leader in automation, got the most accurate topology of any vendor out there. We have the best scalability. At the high end, you really need a solution that automates accurately, right? You can't trust automation unless the automation software is more accurate than the human, and that's what we've been able to achieve. So that's a major differentiator that we have against all of our competitors.
The clear leader in automation got the most accurate topology.
Any vendor out there we have the best scalability at the high end, you really need a solution that automates accurately right.
Trust automation unless the automation software is more accurate than the human and that's what we've been able to achieve such a major differentiator that we have against all of our competitors in.
Speaker 3: In terms of COVID-19 pandemic, I think, you know, there's still impact in the sense that
In terms of COVID-19, pandemic I think.
There's still impact in the sense that.
Speaker 3: you know, in terms of physical offices, not everybody's back to the office yet, and it really depends on the geography. We're hoping to get more people back in the office, let's say in a two-day-per-week basis, so a hybrid model, but it depends on how the pandemic is going to
In terms of physical offices, not everybody is back to the office, yet and it really depends on the geography, we were hoping to get more people back in the office, let's say on a two day per week basis or a hybrid model.
But it depends on how the pandemic is going to.
Speaker 3: move forward. And with customers, you know, we've shifted to selling virtually, there's a lot more virtual events. We hope to have more face-to-face meetings with customers. So we're now in this new environment, we know how to work, operate, sell within this new environment. If things open up, I think that'll just be upside for us, where we get more face-to-face with customers, and we'll be able to see more of the employees in the office. Awesome, thanks.
Move forward then with.
With customers.
We've shifted to selling virtually there is a lot more virtual events.
We hope to have more face to face meetings with customers. So we're now in this new environment and we know how to work operate sell within this new environment. If things open up I think that would just be upside for us where we'd get more face to face with customers and we will be able to see more of the employees in the office.
Awesome, Thanks, guys and congratulations again.
Thank you.
Speaker 1: Thank you. As a reminder, you may press star 1 to ask a question. The next question comes from the line of Adam Borg with Stiefel. Please proceed with your question.
Thank you.
As a reminder, you May press star one to ask a question. The next question comes from the line of Adam Borg with Stifel. Please proceed with your questions.
Speaker 5: Hi, this is Austin Gabrion for Adam Borg, and thank you for taking the question. I guess just first, it's nice to see the ARR growth in the quarterly disclosures. How should we be thinking about ARR growth in 2020?
Hi, This is Austin on for Adam Borg and thank you for taking the question I guess, just first see the AOR growth in the quarterly disclosures, how should we be thinking about <unk> growth in 2022.
Speaker 4: Hi Adam, so we reported the ARR $72 million as of the close of last year, we're not guiding for ARR, right? It's too early. We are...
Hi, Adam.
So we reported $72 million as of the close.
Last year, we were not guiding for IRR right. It's too early we are.
Speaker 4: share ARR on a quarterly basis. Ruby mentioned that.
I'm going to share.
Quarterly basis.
You mentioned that.
Speaker 4: on the call as well, but I think it's too early at this point for us to report it, to guide it forward. But the way you should think it may be some color, you can expect...
On the call as well, but we think it's too early at this point for us to report the guidance forward.
But the way you should think of maybe some color.
Can expect obviously subscription.
Speaker 4: Obviously, subscription ERR to be growing fast.
Be growing fast.
Speaker 4: as the major component comprising the ARR, while the maintenance support component actually growing slower, and over time, it's going to decrease. So these are going to be the traces within the ARR. But as for guidance, we're still not.
The major components component comprising well.
Support maintenance support component.
Actually growing slower and over time, it's going to decrease so these are going to be the trips within there are.
But the absolute guidance, we're still not there.
Speaker 5: Great, very helpful. And then maybe just one follow up. I'm just curious about early interest in support for Zscaler Cloud Firewalls, and if you could remind us the timeline of when you expect to support Zscaler for automation.
Great very helpful. And then maybe just one follow up just curious if that early interest and support for Zscaler cloud firewalls, and if you could remind us the timeline of when you expect to support the scale out for automation as well.
Thank you.
Sure. So I think youre, referring to the fact that in 'twenty. One for you last quarter, we announced the integration with Zscaler cloud firewall.
Speaker 3: Sure, so I think you're referring to the fact that in 21.3 last quarter, we announced integration with the Zscaler Cloud Firewall. You know, it's becoming a lot more popular with customers. And what we added is support for visibility now. We're going to add support for automation for Zscaler down the road. We still have not announced a release date for that. So, you know, when we're ready to announce a release date, we will.
Becoming a lot more popular with customers.
And what we added support for visibility now we're going to add support for automation to these color down the road, we still have not announced a release date for that so when we're ready to announce the release date, we will.
Speaker 3: Just in general, we're looking at other SASE and SD-WAN players.
In general we're looking at other SaaS CNS DRAM players.
Speaker 3: And you know the market is quite fragmented. There's several vendors. There's no clear winner yet emerging with the exception of Zscaler Zscaler has a firewall that now competes
And the market is quite fragmented there are several vendors theres no clear winner yet emerging with exception of this scalar.
Taylor has a firewall that now competes directly with Palo Alto Fortinet and checkpoints. So we're considering what are the next vendors as well to add in terms of staffing that we win and when we're ready we're going to announce that.
Speaker 3: directly with Palo Alto, Fortinet, and Checkpoint. So, we're considering what are the next vendors as well to add in terms of SaaS and SD-WAN, and when we're ready, we're going to announce that.
Great. Thank you very much.
Thanks.
Speaker 1: Thank you. At this time, we've reached the end of the question and answer session. I'll hand the call back over to Ruvi Katel for closing remarks.
Thank you at this time, we've reached the end of the question and answer session I will hand, the call back over to <unk> for closing remarks.
Speaker 3: All right. Thank you very much. I want to thank everybody for joining us today. Like I mentioned in my remarks, we're achieving our targets. We continue to execute on our strategic objectives. I believe our products and services stand up against today and tomorrow's challenges and rise above the competition. Really look forward to updating you all on our progress on our next earnings call. Thank you very much for joining today.
Alright, Thank you very much I want to thank everybody for joining us today.
Like I mentioned in my remarks, we were achieving our targets we continue to execute on our strategic objectives, I believe our product and services stand up against today and tomorrow challenges and rise above the competition really look forward to updating you all on our progress on our next earnings call. Thank you very much for joining today.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Speaker 1: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.