Q3 2024 Radware Ltd Earnings Call
Speaker Change: Welcome to the Red Wear Conference Call discussing third quarter, 2024 results and thank you all for holding.
Speaker Change: As a reminder, this conference has been recorded October 31, 2024. I would now like to turn this call over to Yisca Erez, the director in Vester relations at Radware. Please go ahead.
Yisca Erez: Thank you, Ophorator. Good morning everyone and welcome to Redwood's third quarter 2021 earnings conference call. Jeremy Me today are Roy Zisapel, President and Chief Executive Officer and Guy Avidan, Chief Financial Officer.
Yisca Erez: A copy of today's press release and financial statements, as well as the investor key for the third quarter, are available in the investor relations section of our website.
Yisca Erez: During today's call we may make projections or other forward-looking statements regarding future events or the future financial performance of the company.
Yisca Erez: The full looking statements are subjective various risks and uncertainties. And actually our results could be from a theory for mudwase current forecast and estimates.
Yisca Erez: Factor that could cause or contribute to such differences, include, but are not limited to, impact from the changing or civil global economic conditions, general business conditions, and our ability to address changes in our industries.
Yisca Erez: Changes in demand for products, the timing in the amount of orders and other risks bitter from time to time in value of filings.
Yisca Erez: [inaudible]
Speaker Change: who undertake not commitment to revise or update any follow-up in statements in order to reflect events or circumstances after the date of such statement is made. I will now try to call it to Roy Zisapel.
Roy Zisapel: Thank you, Yisca, and thank you all for joining us today.
Roy Zisapel: I'm pleased to be put another solid quote and which I've seen at our guidance.
Roy Zisapel: We achieved 13% of the revenue growth while successfully managing our operating expense.
Roy Zisapel: Given the strong leverage in our business model, we recorded substantial increase in on-gap EPS in the quarter, delivering an earnings of 23 cents per share, more than 3 per the EPS recorded in the third quarter of 2020.
Roy Zisapel: This results under the school, the significant progress we are making in executing against our strategy. Despite the challenging economic environment and cautious spending behaviour of our customers.
Roy Zisapel: We continue to see strong traction across multiple areas of our business.
Roy Zisapel: To start, our cloud security business continues to grow. During the third quarter, we added a record number of new cloud customers, contributing to 15% of the real growth in cloud AI.
Roy Zisapel: Arthouse Security Business presents a significant long-term market opportunity in a T-growth to our deal.
Roy Zisapel: We are focused on accelerating growth by expanding our channel, expanding our global cloud security network, further broadening our cloud security suite and aligning our organization to support these efforts.
Roy Zisapel: One of our key cloud wings is a multimillion dollar cloud digital steel with a major US communication provider.
Roy Zisapel: replacing their incumbent window. A few years ago after suffering a costly deal of attack, the customer has turned to a different provider but faced service issues and limited traffic blocking granularity.
Roy Zisapel: This led them to initially implement an on-premise digital smithication with Radla. Last quarter, we expanded the relationship to include cloudy-doss services, consolidating the infrastructure and the Radla.
Speaker Change: In addition to Cloud AIR, Total subscription revenue also grew double digits and now account for 47% of our total revenue. As a reminder, or subscription revenue is comprised of products subscriptions and cloud subscription.
Speaker Change: During the third quarter, we saw significant strengths in our security products subscription. This momentum was driven by our defence pro-X refresh, which carries more content of software subscriptions.
Speaker Change: [inaudible]
Speaker Change: The third quarter was also marked by a stone performance among our OEM partners.
Speaker Change: Both Zisko and checkpoint are setting records for total bootings and are on track to achieve record yearly results.
Speaker Change: In addition, our cloud application security was added to the Cisco Enterprise Agreement. The expanded agreement was streamlined purchasing and licensing, where Cisco customers and unlock future growth opportunities for other.
Speaker Change: One example of our collaboration with SISCO is a significant deal with the major railway company.
Speaker Change: Following a digital attack that bypass the customer in common provider, we demonstrate that the superiority of our solutions and secure the cloud security fluid deal.
Speaker Change: This includes Defence Pro X for on-premise application and network protection, Cloud Digital Service, WebDidOS for Layer 7 application DidOS, Firewall as a service and network analytics.
Speaker Change: This deal demonstrates the breadth and effectiveness of our platform reinforcing the value and sticking as of our solution.
Speaker Change: [inaudible]
Speaker Change: We continue to see more customers upgrading the security posture with defence projects.
Speaker Change: Our AI powered solution stands out in detecting and blocking web deduciatax while ensuring legitimate traffic flows uninterrupted.
Speaker Change: With less than 20% of our install base already migrated to defence projects, the gross potential of this product is very likely substantial. Not to mention additional opportunities with new customers and gross and prospect.
Speaker Change: The End
Speaker Change: In the South Quarter, we close several significant defense pro-exdents, including a multi-million-dollar agreement with a leading financial group, building on a successful cloud expansion in the first quarter.
Speaker Change: Similarly, we secure the defence pro-AX and web application firewall deal with a major internet and telephone provider in IMEA, demonstrating our technical leadership.
Speaker Change: During the South Quarter, our solution continued to earn us recognition by industry analysts.
Speaker Change: For the fourth consecutive year, Quadrant Knowledge Solutions named Azuera Technology Leader in the Spark Matrix Analysis for the Web Application Firewall Market.
Speaker Change: We receive the highest rating in technology excellence.
Speaker Change: Additionally, we were named the leader in the 2024 SPAC Spark Matrix for both management, ranking strongest in both technology excellence and customer impact.
Speaker Change: On the product front, one of our strategic initiatives is to continue to broaden our cloud security platform. In the last quarter, we introduced a new cloud service, the Strat Intelligence Service.
Speaker Change: With this new service we are opening the door for customers to access the high value attack data lake that we use in Germany.
Speaker Change: Soptines can use the real-time intelligence and preemptive warning about potential attacks in attack sources to make more informed decisions about application and data standards right.
Speaker Change: Additionally, we're launching our AI SOC experts for digital services, following glass-coaster EPIKI-ELEASE, which integrates advanced AI and generative AI algorithms in our cloud security stack.
Speaker Change: The new AI stock experts automatically detect and mitigate the attacks and create for the mediation and mitigation plans. Significantly reducing response time.
Speaker Change: We're excited about the opportunities this framework presents to us and our customers and the impact it will bring going forward.
Speaker Change: In summary, we are pleased with our self-coatery results. Continue day-of-hour growth and upper-digit revenue gains despite the current business environment.
Speaker Change: Our cloud security business remains robust and the storm may at the moment be behind defense projects, with its high subscription component continues to drive double digit growth in subscription revenue, now nearly 50% of total revenues.
Speaker Change: As we close out the year we remain focused on executing our strategy to sustain growth and position ourselves for long-term success.
Speaker Change: With that, I will tell the call over to Guy.
Guy Avidan: Thank you, Roy and good day, everyone.
Guy Avidan: I'm pleased to provide the analysis of half-anancial results and business performance for the 3rd quarter of 2024. As well as our outlook for the 4th quarter of 2024.
Guy Avidan: For the getting the financial overview I would like to remind you that unless otherwise indicated, all financial results are not yet.
Guy Avidan: A full reconciliation of our results on the gap to non-gap faces is available in the earning press release issued earlier today and on the investment section of our website.
Guy Avidan: Revenue for the third quarter of 2024 reached $69.5 million, up from $61.6 million in the same period last year, representing 13% year of the year growth.
Guy Avidan: This cross was driven primarily made the expansion of our cloud security business, the defence for axe refresh and increase revenue from all year and partnership.
Guy Avidan: Totally RR increased by 9% year-old-year to 223.6 million dollars, the Cloud ARR rising 16% to 71.6 million dollars.
Guy Avidan: This growth boosted recurring revenue to 83% up from 79% into 3 of last year.
Speaker Change: On a regional breakdown, revenue in the America end the third quarter of 2024 grew 11% year over year to 27.7 billion dollars and accounted for 40% of the problem revenue.
Speaker Change: On a 12 month training basis, America's revenues decreased 1% year of the year.
Speaker Change: In May, revenue in the third quarter of 2024 increased 31st year of the year to 25.2 million dollars, and accounted for 36% of dollar revenue.
Speaker Change: On a 12 month trailing basis, I may have revenue was flat year of the year.
Speaker Change: A per craving in the third quarter of 2024 was $16.6 million, which represented a decrease of 5% year over year, and accounted for 24% of the revenue.
Speaker Change: On a 12 month training basis, APAC revenue decreased 3% year over year.
Speaker Change: I'll now discuss profits and expenses.
Speaker Change: Ross margin in Q32024 was 82.3% and extension of 120 basis points from Q32023.
Speaker Change: Operating income rich 7.2 million dollar compared to operating glass of 0.5 million dollar we had in the same period last year.
Speaker Change: We successfully grew our revenue while keeping operating expenses just low $50 million.
Speaker Change: We were pleased with our progress in leveraging our existing assets and resources to accelerate topline growth and enhance profitability.
Speaker Change: We remain committed to this approach, collectively increasing R&D investment to strengthen our offering and drive further growth in cloud security.
Speaker Change: We tend to increase our goal to market investments to capitalise on new opportunities in the cybersecurity market.
Speaker Change: By strengthening our sales and marketing capabilities, expanding our partner ecosystem, and enhancing customer engagement, we believe that we are positioning all ourself to accelerate growth and extend our market reach.
Speaker Change: Dizstrategic investment will enable us to better serve existing customers and we expect to capture market share in high growth areas.
Speaker Change: Rodgers adjusted Evidan for the third quarter increased to $9.2 million or $11.9 million excluding the hotstitness.
Speaker Change: Comprehensive $1.6 million or $4.2 million excluding the hotstwisness in the same period of last year.
Speaker Change: An National Income was $4.9 million in the third quarter and X-ray for the third quarter of 2024 was 15.5% compared to 14.8% in the same period of last year.
Speaker Change: We expect the text rate to remain approximately the same next quarter.
Speaker Change: Net income in the third quarter, more than 3,000 to 10,000 dollars as compared to 2,9 million dollars in the same period last year.
Speaker Change: The loaded LN in the share for Q3 2020-24 increase to 23 cents, compared to 7 cents we had in Q3 2020-23
Speaker Change: Turning to the cash flow statement and the balance sheet.
Speaker Change: Cash flow from operations in Q3 2024 reached 14.7 million dollars.
Speaker Change: Compared to the negative cash flow of 9.8 million dollars in the same period last year.
Speaker Change: Here today, cash flow from Operation now $0.9 million and Free Cash flow will $54.6 million.
Speaker Change: The End
Speaker Change: We ended the third quarter with approximately $412 million in cash.
Speaker Change: Cash equivalent.
Speaker Change: Back to positive and marketable securities.
Speaker Change: I'll conclude my remarks with Guy Avidan.
Speaker Change: We expect total revenue for the fourth quarter of 2024 to be in the range of 71 to 72 million dollars.
Speaker Change: We expect you for 2024 non-gap operating expenses to be between 50.5 to 51.5 million dollars.
Speaker Change: We expect Q4, 2024 non-gap, loaded net learning per share to be between 23 and 24 cents.
Speaker Change: I'll now turn the call over to the operator from questions. Operator please.
Speaker Change: Thank you. Well now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press R1 again.
Speaker Change: If you are caught upon to ask your question and are listening via loud speaker on your device, please pick up your hand set and ensure that your phone is not on mute when asking your question.
Speaker Change: And your first question comes from the light of George Nader from Jeffreeze. Please go ahead.
George Nader: Hi guys, thanks very much.
George Nader: and I was curious about...
George Nader: kind of the defense pro acts upgrade. You mentioned...
George Nader: that only 20% of the installed base of defense pro has been upgraded. Can you tell us a bit more about current shipments and just curious about...
George Nader: [inaudible]
George Nader: And then also I was curious about looking forward in the transition, is there a date out in the future when you guys would end up sale or end of life, the defense pro platform, I would imagine that would be a leverage point in terms of driving defense pro exit option.
George Nader: Thanks a lot.
Speaker Change: Thanks George, so...
Speaker Change: We don't have any shortage of shipment if that was what you would need to do, but it's a process, especially with the large customers.
Speaker Change: You know this migration to the new platform, in production so on. Defense projects brings it with its significant advantages in terms of security. First we've added a lot of new algorithms.
Speaker Change: Again, most current attacks like the web, it also delay a 7 application attacks.
Speaker Change: The DNA is a sophisticated attack, so a lot of
Speaker Change: AI and machine learning additional algorithms that
Speaker Change: Needs stronger platform, stronger CPUs, that's what we have in different projects in addition.
Speaker Change: It's our next generation FPGA that's built into the platform with completely revamped that layers, giving us you know between 3x to 5x.
Speaker Change: Performance across many, many different performance metrics, insecurities. So, it's significant, both power, capability, and we rounded it up with the new generation of the management and analytics and automation system which we call cyber control.
Speaker Change: and that's why we have way more, what I said subscription content with it. So it's important to know that for the same hundred dollars of sale or for a product with a, let's say, content of one year, the DPEX comes with more subscriptions.
Speaker Change: Now, regarding your second question about the end of the field, I think roughly...
Speaker Change: 60% of the current defense proline
Speaker Change: was announced in the last, I would say, 9 to 180 days. We still have some platforms on the defense supply that will go in the sale.
Speaker Change: Probably Q1, Q2 next year, but we definitely saw the impact once we announced end of sale in the last two quarters of the significant ramp in the move to DPAX and I think also our view for this quarter is strong regarding that.
Speaker Change: So would you say it's more than half of the hardware sales at this point? Is that, is that, is that for, to say?
Speaker Change: of the lineup of DPS.
Speaker Change: Yes.
Speaker Change: Garret, okay I guess I'll just ask you about the sales.
Speaker Change: A judge also I want to know that some of the customers without their platform and of sale are upgrading as well because of the security needs and content. So absolutely and of sale is a trigger, but the biggest trigger I must tell you is the security coverage and capabilities.
Speaker Change: [inaudible]
Speaker Change: You know, obviously you guys have built out this, you know, global cloud services model with scrubbing centers and pops obviously.
Speaker Change: I think going back the installed base of devices and those locations was defense pros. I mean, are you also going back and upgrading your those cloud scrubbing centers and then does that drive in criminal revenue for you or is that just a straight up replacement of CapEx cost that you've invested historically?
Speaker Change: Of course, we are upgrading our cloud, our cloud runs always the latest and greatest algorithms. Sometimes even you know we have it on a bit testing and so on leveraging the power of the cloud and the flexibility brings us. So definitely we are putting all our new generations stuff into those clouds. It's a replacement of our capex investments.
Speaker Change: You're right, but in turn, the additional capabilities, the storm you're efficacy are mentioned here, in my note, some of the customers with displaced income, for example, the communication provider, are referred to that was a very loud cloud contract.
Speaker Change: and
Speaker Change: Probably close to a million dollar a year, and that was done based on our significant capabilities in blocking voice of Roy P attacks.
Speaker Change: Sieb, you know, UDP, randomized attacks, all of that, and that's...
Speaker Change: Square Lee, based on these algorithms and capabilities.
Speaker Change: Great, super thanks very much, I appreciate it.
Speaker Change: Good job, good job
Speaker Change: Your next question comes from the line of Chris Rimer from Bart Gliss.
Speaker Change: Please go ahead.
Chris Rimer: Hi, thanks for taking my questions and congratulations on the strong results. You mentioned the 47% of total revenues being subscriptions. I'm wondering if that was a quarterly number or if that's a cumulative year to date number.
Speaker Change: The 46 is here today, number.
Speaker Change: 47.46.
Speaker Change: 47 on the quarter in 46 year did, Guy Avidan. But we're from revenue in last 9 months, that's 46%.
Speaker Change: Got it, okay? And can you talk maybe about what's driving the strong traction in Emia?
Speaker Change: I think you mentioned last quarter there was a large deal. I'm just wondering what kind of clients you're seeing now and what the behaviors like in that region.
Speaker Change: Yeah, I think you know where...
Speaker Change: We're relatively content with our performance in the media, we have many of the main markets.
Speaker Change: Executing well in a very diversified manner we do see strong cloud.
Speaker Change: Deals there and I mentioned some of the key wins in my remarks. We do see very good cooperation with both Zisco and Trackpoint in the region. So I think it's...
Speaker Change: It's our best region.
Speaker Change: For that.
Speaker Change: Globally and we do see a lot of also the large on-prem in career, government, deals as well. So it's really a very healthy mix of our business with strong, growth in clouds, strong, organic execution. And I think it shows in the consistent results.
Speaker Change: Got it. Yeah, that's great color. Thanks for that for me.
Speaker Change: Your next question comes from the line of Ryan Kooz from Meedam and company. Please go ahead.
Ryan Kooz: Thanks. Most of my Chris has been an entered here, but on the Americas, looks like that was a little soft. Is that mostly coming from a weaker service rider spending environment, I assume, and any pipeline indications if you think that can inflect a higher growth going forward?
Ryan Kooz: Yeah.
Speaker Change: So, you know, so you're right service provider was weak in North America and so, you know, we have our expectations both indeed.
Speaker Change: Security MS of SP and securing the networks and securing 5D deployment. And I'll go this quarter.
Speaker Change: and this year's so far goes not good, you know, I would not write it off at all. We do have expectations for the future, not so many conferences and areas of investment.
Speaker Change: and I think that we are putting a lot of effort, we see huge potential, we have marquee wins there and we need to scale that, I think that's significant upside.
Speaker Change: to our current performance and we look forward to to be post on progress in the coming quarters.
Speaker Change: That's great, sounds like you're optimistic and in terms of modeling
Speaker Change: In terms of, you know, op-acts, what you're doing on the go-to-market side, do you think you can continue to grow, you know, top line here, and how much of that means to make on the sales and marketing side to sustain that kind of growth, I know you've done some recent changes and go to market of like, can you maybe expand on your thoughts on that?
Speaker Change: So I think it's a mix I think that's in this song.
Speaker Change: Some more leverage and efficiency we can get from the current orpics.
Speaker Change: But given the size of opportunities and the global distribution, we are going to make investments also on the go-to-market specifically as it relates to work.
Speaker Change: or cloud security. So I think it's a mix, it's a profitable growth. What we're looking for, continuous leverage, but we are at the point that we would like to start investing again for stronger growth.
Speaker Change: And in terms of number we said that we are growing, we will continue to grow, we were shy of 50 overall null picks and we said it's we expect around a million more into 4.
Speaker Change: predominantly from South and Mark Ring and Roy already alluded to U.S.
Speaker Change: Right, great, thanks for the questions for your shit.
Speaker Change: There are no more questions I will now turn the conference back over to Roy Zisapel for closing remarks.
Roy Zisapel: Thank you everyone and have a great day.
Roy Zisapel: with the...
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.