Q1 2025 Radware Ltd Earnings Call
Speaker Change: Welcome to the Radware Conference call discussing first quarter 2025 results. Thank you all for holding.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded on May 7, 2025.
Speaker Change: I would now like to turn the call over to Yisca Erez, Director and Investor Relations at Radware. Please go ahead.
Yisca Erez: Thank you, Operator, good morning everyone and welcome to Radware's first quarter, 2025 earnings conference call.
Speaker Change: Joining me today are Roy Zisapel, President and Chief Executive Officer, and Guy Avidan, Chief Financial Officer.
Speaker Change: A copy of today's press release and financial statements, as well as the investor key for the first quarter, are available in the Investor Relations section of our website.
Speaker Change: During today's call, we may make projections or add forward-looking statements regarding future events or the future financial performance of the company.
Speaker Change: The fall-looking statements are subjective risks and uncertainties, and actual results could differ materially from Radware's current forecast and estimates.
Speaker Change: Factored that could cause or contribute to such differences include, but are not limited to, impact from the changing or severe global economic conditions, general business conditions and our ability to address changes in our industry.
Speaker Change: Chances in demand for products, the timing in the amount of orders and other risks detailed from time to time in what was filing.
Speaker Change: We refer you to the documents of the company files and furnishes from time to time with the SEC specifically that company's last annual report on form 20F as filed on March 28, 2025.
Speaker Change: We undertake no commitments to revise or update any forward-looking statements in order to reflect events or circumstances after the date of such statement is made. I will now turn the call to Roy Zisapel.
Thank you for watching!
Roy Zisapel: Thank you, Yisca, and thank you all for joining us today.
Speaker Change: I'm pleased to report a strong start to 2025 exceeding our guidance.
Our first quarter revenue increased 11% of the Rio to $72 million.
Roy Zisapel: This is the third quarter in a row of double digits revenue growth.
Speaker Change: by non-GAAP Elning Persheros 69% to 27% demonstrating the high leverage in our business model.
And finally, cash flow from operations of $22 million.
Speaker Change: A major driver of our success is attributed to our cloud security business, which continues to grow in scale and potential.
Cloud security ARR increased by 19% of a year to $80 million.
Speaker Change: We also achieved double digit growth in our total number of cloud customers driven primarily by a rapid increase in new cloud application security booking.
. . . . . .
Speaker Change: Even these strong metrics we continue to believe that focus on an investment in this business will position us to exceed, at 20% the error growth rate, and achieve close to $100 million in cloud security error by end of this year.
Speaker Change: Our results also highlight the solid progress we've made against our strategy to lead us the best of great providers in application and data center security.
Our growth strategy continues to be centered around three pillars.
Speaker Change: Winx Significant Marketer in Cloud Security, Leads to AI Innovation and Automation, and Enhanced
Thank you very much.
Speaker Change: As we highlighted last quarter, we are expanding our cloud security infrastructure in order to further scale our business.
Speaker Change: Recently, we open new cloud service centers in Peru, India and Kenya, and have plans to expand in other regions in the near future.
Speaker Change: Today we support a network of over 50 cloud security service centers worldwide with a mitigation capacity of up to 15 terabit.
Speaker Change: This network enables customers to keep applications and data within their borders to meet strict data privacy regulations and provide excellent performance for local users.
Speaker Change: Our hybrid cloud security offering is another important business enable for our customers.
Speaker Change: This offering has become a major competitive differentiate for us, translated into continued
Speaker Change: For some customers may favor cloud-only models, which we offer, many large enterprise clearly have a requirement for high-blitz security across all their assets.
Speaker Change: Those that are located in the cloud and those that are located in the private data center.
and our pipeline proved it.
Speaker Change: We continue to see steady LC demand that include all defense pro-X refresh.
Speaker Change: With the push towards vandal consolidation, Radware hybrid approach for deduce and application security, which offers both cloud services and on-prem solutions with integrated and consistent security capabilities is giving us a clear edge.
. . . . .
Speaker Change: and please to report that our AI innovation efforts are also proving to be a competitive advantage.
Speaker Change: Our Advanced AI-based algorithms and algorithms first approach to security are delivering market leading detection and mitigation results for our customers.
making our solutions the preferred choice for many.
Speaker Change: We are seeing these first hand as we continue to replace the competition in Bigelty Cadillus.
Speaker Change: Between the 4th quarter of 2024 and 1st quarter of this year, the total contracts value of our competitive
Speaker Change: For example, we took out two competitors with our DDoS protection and web application firewall to close a seven-digit deal with a government IT company in Asia Pacific.
Speaker Change: The wind provides another proof point of the strength of our security offering in web application security, and dedosmitigation, and the reunified SecOps platform.
Speaker Change: Last hotel, we won our largest cloud security agreement to date.
Speaker Change: The multi-year 8-digit deal brought in our relationship with a US Fortune 500 financial services and payments company.
Speaker Change: They are significantly expanding with our full suite of cloud divots and application protection services to safeguard thousands of applications and billions of digital terms actions.
Speaker Change: Our OEM channel also produced some major wins and continues to play an important role in our growth strategy.
Speaker Change: During the first quarter, our partnership with Sisko in checkpoint once again generated strong results.
Both growing, more than 20% in over the year.
Speaker Change: Together with Cisco, we won a million dollar five-year cloud deal with a UK retailer.
Speaker Change: At the end of 2024, the retailer was the target of a series of cyber attacks that disrupted its primary data centers and operations.
Speaker Change: Following emergency onboarding onto our Cloud DDoS protection service, we successfully mitigated the attacks.
Speaker Change: With successful cross-selling, we expanded the deal to include our threat intelligence services as well as our web application and API protection.
So, really a great platform thing.
Speaker Change: In another part of the win, we worked with Checkpoint to close the Black Cloud Idols and Application Protection Deal with a Central Bank in Latin America.
Speaker Change: Our win was based on our superiority of technology, strongest delays and solid relationships.
Thank you for watching!
Speaker Change: Given our double digit growth over the past three quotas, strong demand for our security offerings and market opportunities ahead, particularly in cloud security, we plan to increase investments in sales, marketing and R&D.
These efforts will focus on scaling our cloud security business.
Speaker Change: Accelerating AI-driven innovation and strengthening our presence in North America.
Speaker Change: This morning, we announced plans to accelerate our expansion in the U.S. market, led by a new leadership team with deep experience in driving a rail for SAS companies.
Speaker Change: We are confident this team is the expertise to deliver meaningful results for our cloud business.
Speaker Change: In summary, in the first quarter of 2025, we demonstrated steady execution with progress across all financial parameters.
In addition, we continue to scale our cloud security business.
Speaker Change: Wynn, Marcia Koontz, and Rice Clay at Cloud ARR, which is now at $80 million.
Speaker Change: Looking forward, we intend to accelerate our Saudi Arab growth by securing new logos, collaborating with our OEM and channel partners and driving AI innovation and automation.
Speaker Change: Additionally, by strengthening our presence in the US market, we believe we will be well positioned to gain additional market share and accelerate our overall goals and consequently our profitability.
With that, I will turn the call over to Guy.
Thank you, Roy, and good day everyone.
Speaker Change: I'll provide an overview of our financial results and business performance for the first quarter as well as our outlook for the second quarter of 2025.
Speaker Change: Before beginning the financial overview, I would like to remind you that I let otherwise indicated all financial results are known yet.
Thank you for watching!
Speaker Change: A full reconciliation of our results on a gap to non-GAAP basis is available in the earning press release issued earlier today and in the investor section of our website.
Speaker Change: Revenue for the first quarter of 2025 grew 11% year-over-year to 72 million dollars, driven mainly by another solid performance of our cloud security business and good contribution from our OEM partnership.
Speaker Change: The total ARR increased 9% year-over-year to $230 million, with the cloud ARR growing 19% to $80 million.
Speaker Change: Furthermore, recurring revenues grew to 82% of total revenue in the first quarter of 2025, compared to 79% and 78% in Q1 2024 and Q4 2024 respectively.
Speaker Change: In the first quarter of 2025, a region of the fullness shows growth across all regions.
Speaker Change: The Americans increased by 1% year-over-year to $27.4 million, accounting for 38% of dollar revenue.
George Notter, Joseph Gallo, Ryan Koontz, David
For the 12 trailing months, America's revenue grew 14% year-over-year.
George Notter, Timothy Horan, Ryan Koontz
Speaker Change: May our revenue in Q1 2025 increased 25% year over year to $28.4 million and accounted for 39% of the revenue.
for the 12 trailing months in their revenue grew 11% year-over-year.
An APAQ-1 revenue increased 7% year of the year to $16.3 million.
Speaker Change: Contributing 23% of dollar revenue, and for the 12th trailing month, APA revenue was flat year over year.
and now discuss profits and expenses.
George Notter, Timothy Horan, Joseph Gallo,
Speaker Change: Gross margin in Q1 2025 was 82.1%, a slight increase from 82% gross margin that was recorded in Q1 2024.
Speaker Change: Operating income doubled in the first quarter of 2025 to $8.6 million compared to $4.3 million in the same period of last year.
As Roy highlighted in his preparatory remarks,
Speaker Change: In response to a strong demand for our security offering and the market opportunities ahead mainly in cloud security, we plan to increase investment in sales, marketing and R&D.
Thank you for watching!
Speaker Change: This investment will focus on branding and expanding our cloud security business, accelerating AI driven innovation and strengthening our presence in North America.
Speaker Change: A strong leverage in our business model allows us to increase investment that will support our ability to further drive top-line growth.
in the future while improving profitability.
Speaker Change: Radware is adjusted Avidan for the first quarter of 2025, increased by 72% to $10.8 million compared to $6.8 million in the same period of last year.
Speaker Change: Radware Adjusted EBITDA, excluding the Hawks business for the first four of 2025, was $13.4 million and 18.6% margin.
Speaker Change: Compared to $8.9 million and 13.7% margin in the same period of last year.
Speaker Change: Financial income was $5.4 million in the first quarter of 2025, of about $3.8 million in the first quarter of 2024.
George Notter, Timothy Horan, Ryan Koontz
Speaker Change: The tax rate for the first quarter of 2025 was 15.5% compared to 15.3% in the same period of last year.
Speaker Change: We expect the tax rate to remain approximately the same in the next quarter.
Thank you for watching!
Speaker Change: Net income in the first quarter of 2025 increased 73% year-over-year to $11.8 million, compared to $6.8 million in the same period last year.
Speaker Change: The loaded-earning pressure for Q1 2025 increased 69% year-over-year to 27 cents compared to the 16 cents we had in Q1 2024.
Turning to the cash flow statement and the balance sheet.
Speaker Change: Cash flow from operations in Q1 2025 reached $22.4 million compared to $21.1 million in the period last year.
Speaker Change: We enter the first quarter with approximately $448 million in cash.
Kesheck-Livalent, Packed the Positive and Markable Securities
Speaker Change: Before we move to guidance, I would like to address the recently announced tariffs and of potential impact on Radware.
We expect the effect on our business to be minimal.
Speaker Change: We are proactively adjusting our supply chains to further reduce any potential cost pressure.
Speaker Change: And currently, we do not anticipate any material impact on our operation of financial performance.
And now to the guiders.
George Notter, Timothy Horan, Ryan Koontz
Speaker Change: We expect all revenue for the second quarter of 2025 to be in the range off.
73 to 74 million dollars.
Speaker Change: We expect you to 2025 non-GAAP operating expenses to be between $51 to $52 million.
Speaker Change: We expect you to, 2025, non-GAAP , the load net earning per share, be between 26.
and twenty-seven cents.
Speaker Change: and now turn the call over to the operator. Operator, please.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: for participants using speaker equipment and may be necessary to pick up your handside before pressing the star keys.
One moment please, while we pull for questions.
Speaker Change: The first question is from Joseph Gallo from Jeffries. Please go ahead. Hey guys, thanks for the question. Nice job on a quarter. Appreciate the tariff color. Just regarding macro, did you see any changes in buying behavior from your customers? How was April and what's embedded in your QQ guidance?
George Notter, Timothy Horan, Joseph Gallo,
Okay, hi. We didn't see a notice about change.
In the last several months it was also starting.
Thank you very much.
Speaker Change: Shipments, but this has calmed down after a week or so, when the tariffs or the majority of them were put on hold. So, if you see anything specific, and as Guy mentioned, as we focus more and more on the cloud business in North America, that is a bit isolated.
from the old hardware, a portion of our business.
Thank you for watching!
Speaker Change: That makes sense. Thank you for that. And then just as a follow-up, can you double click on some of those US market changes? You know, a lot of new senior leadership, which is great, but that can also result in a couple quarters of disruption. So, is there any major change in process needed in the US market? And is that accounted for in the 2Q guide? Thank you.
Speaker Change: Yeah, so, so great question. Actually our announcement is after all those.
Speaker Change: You know, all this infrastructure is already in place, so Randy the head lead I think is now going into is
Speaker Change: A third quarter, like nine months into the company, a lot of the...
Individual, Fairfathers.
Speaker Change: You know, we're joining us between three to six months ago, so we're actually now...
Expecting more and more productivity ramp up from them.
Speaker Change: And I think the newest addition, Connie, our Chief Growth Officer, she's like a month now into the company. So a lot of the major changes were already done, actually last quarter I think, and a quarter before we already started to see.
The fruits of that, and we are...
Speaker Change: Very strong believers that the future is brighter and we can grow.
Speaker Change: Forward from here and add, and that's what we announced that we're going to add even more.
Speaker Change: Resources as we go forward, so we think we have a strong leadership team in place that's already executed several quarters and gets more and more productive as time passes now.
Speaker Change: So, we don't see any disruption, we are after that, so to speak. Great to hear. Thank you.
Okay, thank you very much and have a great day.
Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Thank you very much.