Radware Ltd. Price & Performance (RDWR)

Changes in demand for products, the timing in the amount of orders, and other risks detailed from time to time in Radware's filings. We refer you to the documents the company files and furnishes from time to time with the SEC specifically the company's last annual report on Form 20 F as filed on 03/18/2024.

We undertake no commitment to revise or update any forward looking statements in order to reflect events or circumstances after the date of such statement is made. Will now turn the call to Roy Zippel. Thank you, Iskra.

Istka, and thank you all for joining us today. I'm pleased to report a strong finish to 2024. With both our top and bottom line exceeding our fourth quarter guidance. During the fourth quarter, we achieved 12% year over year revenue growth and more than doubled our non GAAP earnings per share. A strong testament to the high leverage in our business model. A key driver of our growth in the quarter was our cloud security business. I'm pleased to report our focus here continues to pay off. In the fourth quarter, we accelerated cloud ARR growth to 19%, up from 15% in the third quarter of twenty twenty four. We also achieved double digit growth in cloud bookings and customer acquisition and surpassed 1,000 product customers in the cloud. In 2025, we will increase our investment in our cloud security business on multiple fronts. First, we plan to open a record number of new cloud security centers to expand our presence. Second, we intend to invest more in cloud R and D to continue to lead the market by the strength of our security capabilities. And finally, we plan to continue to grow our OEM and MSSP [indiscernible] to accelerate our market share gains in cloud security.

Through these combined efforts, we believe we can exceed a 20% ARR growth rate and establish close to $100,000,000 ARR cloud security business by the end of twenty twenty five. Our gross last year was achieved amid a rapidly evolving cybersecurity landscape. 2024 was marked by a sharp escalation in both the frequency and sophistication of cyberattacks. This was driven primarily by major geopolitical tensions and rapid adoption of Gen AI by threat actors. Countries like The U. S, Israel and Ukraine were among the most targeted nations with attackers leveraging AI powered tools to automate and enhance of their attacks. AI powered tools have effectively lowered barrier to entry for attackers while simultaneously raising the urgency for organizations to strengthen the cyber defenses. In parallel, throughout 2024, we made significant infusing AI across our security offering with our Epic AI framework giving us a distinct advantage in an evolving threat landscape. We are literally fighting AI with AI. The recent release of our AI stock expert is the latest addition to FTKI. The new cloud service offers soft things precisely tailored automated remediation plans for data center security incident.

It has already been well received by TASTE by up to 95%. We have a comprehensive set of AI driven capabilities in our release pipeline for 2025. Ensuring our customers stay ahead of emerging threats with the most advanced protection available. Moving to Defense Pro X, our DDoS protection solution, I'm happy to report a continuous steady uptake in adoption of Defense Pro X by our customers. Driven by its exceptional detection and blocking of sophisticated attacks. We recently expanded our Defense Pro X portfolio with new platforms complementing the full lineup. We are still in the early stages of Defense Pro X refreshes for our existing installed base, and see significant growth opportunities in the coming two years. A good example is a seven digit win in a European Internet service provider. Initially planned for late twenty twenty five, this Defense Pro X refresh was expedited after a massive cyber attack disrupted access to several of the services and critical customers. Similarly, we closed the seven digit deal with a U. S. Service provider for a hybrid cloud eDoS deal combining Defense Pro X and cloud DDoS protection and completely displacing the incumbent cloud DDoS provider. This win is a great example of the significant competitive advantage we have with hybrid DDoS which enhances both the customer security posture and network latency.

Collaboration with our OEM partners further amplified our success in 2024. Cisco and Checkpoint sustained double digit growth in the fourth quarter setting a new annual record for total OEM bookings. As we move forward, our recently expanded offering included in Cisco Enterprise Agreement will unlock even more new growth opportunities and further streamline purchasing and license management for Cisco Radu customer, These important partners For example, in partnership with Check Point, we closed a seven digit deal with one of the largest banks in the world. As a long standing Radware customer, the bank relies our DDoS solution as a critical line of defense against attacks. Partnership with Cisco, we secured new logo win with The U. S. IoT solution provider. After a DDoS attack in October 2024 and this with their incumbent, [indiscernible] the customers sought alternatives. We won the deal by offering the most comprehensive and automated cloud data solution in the market. In addition to customers, industry analysts continue to reinforce our position. As a trusted innovator in the cybersecurity space. In the fourth quarter, Radu was named a leader in fast mover in the Big Oom radar for application and API security. The report highlight our strength in vulnerability detection, account takeover protection and bot management.

In summary, I'm pleased to report a strong fourth quarter and a solid 2024. Last year, we made a significant progress advancing our cloud security business and OEM partnerships. Both key drivers of our success. We accelerated our transition to subscription and cloud business model achieving high levels in bookings and cash flow from operations. Looking ahead to 2025, our focus is on accelerating growth. With total ARR growth remaining the leading indicator of our revenue trajectory. We are committed to investing in the expansion of our security business particularly in cloud security. Additionally, our AI driven capabilities will fuel innovation and strengthen our security offerings. We are confident in our strategy to deliver strong near term performance and long term success.

And I'm excited about the opportunities that lie ahead. Before I close, I want to take this opportunity to thank our employees for their dedication and commitment in making our achievements in 2024 possible. With that, I will turn the call over to Guy. Thank you, Roy, and good day, everyone. I'm pleased to provide the analysis of our financial results and business performance for the fourth quarter and the full year of 2024. As well as our outlook for the first quarter of twenty twenty five. Before beginning the financial overview, I would like to remind you that unless otherwise indicated, all financial results non GAAP Full reconciliation of our results on a GAAP to non GAAP basis is available in the earnings press release issued earlier today and on the Investors section of our website. Revenue for the fourth quarter of twenty twenty twelve percent year over year to $73,000,000 while full year 2024 revenue increased by 5% to $25,000,000 This growth was fueled by the strong momentum in our cloud security business the successful Defense Pro X refresh and increased contribution from our OEM partnerships. Total ARR grew 8% year over year to $227,000,000 with cloud ARR rising 19% to $77,300,000 accelerating from 15% growth in Q3 twenty twenty four.

This ARR growth propelled cloud and subscription revenue to 48% of total revenue in Q4 and forty seven percent for the full year. Compared to 44% in both period last year. Additionally, increases reflected in our recurring revenue which accounted for 78% for the total revenue in the fourth quarter and 80% for the full year of 2024. In the fourth quarter of twenty twenty four, our regional performance highlighted strong in The Americas where revenue increased 33% year over year to $32,800,000 dollars accounting for 45% of dollar revenue. Throughout 2024, The Americas demonstrated steady progress achieving a 14% year over year growth to $117,700,000 In EMEA, Q4 revenue came in at $23,300,000 a 6% year over year decline contributing 32% of total revenue. Full year revenue for EMEA was $94,100,000 down 2% from previous year. In APAC, Q4 revenue increased 8% year over year to $16,900,000 contributing 23% of total revenue And for the full year, APAC revenue grew 3% to $63,100,000 allowed us to cash profits and expenses Gross margin in Q4 twenty twenty four was 82.4% an expansion of 40 basis points compared to Q4 twenty twenty three. For the full year of 2024, gross margin was 82.2% compared to 81.9% in 2023.

Operating income nearly tripled in the fourth quarter of twenty twenty four to $9,000,000 compared to 3.9 sorry, dollars 3,400,000.0 in the same period of last year. For the full year of 2024, operating income also nearly tripled to $26,800,000 compared to $9,300,000 for 2023.

A testament to our operational efficiency, and cost discipline. Throughout 2024, we maintained disciplined approach to managing expenses. Focusing on reducing operating costs while driving revenue growth. This strategy has enabled us to leverage existing resources efficiency fueling top line growth and enhancing profitability. Looking ahead, we remain committed to this disciplined approach with targeted investment to support continued growth, especially in cloud security. Radware adjusted EBITDA for the fourth quarter of twenty twenty four double to $11,000,000 compared to $5,400,000 in the same period of last year. BroadWorks adjusted EBITDA excluding the Hawx business for the fourth quarter of twenty twenty four was $13,700,000 compared to $8,200,000 in the same period of last year. Broadwood's adjusted EBITDA for the full year of 2024 nearly doubled to $34,700,000 compared to $17,600,000 in 2023. Radware's adjusted EBITDA for the full year of 2024 excluding the Hawx business, was $45,600,000 compared to $28,400,000 in 2023. Broadwear's core adjusted EBITDA margin, a excluding the Hawx business, were 18.816.6% for the fourth quarter and the full year of 2024 respectively. Financial income was $5,000,000 and $17,800,000 in the first quarter and full year of 2024, respectively, compared to $3,800,000 and $13,700,000 in the fourth quarter and full year of 2023, respectively.

The tax rate for the fourth quarter of twenty twenty four was 15.4% compared to 24.3% in the same period of last year. For the full year of 2024, tax rate was also 15.4% compared to 17.7% in the same period of last year. We expect the tax rate to remain approximately the same next [indiscernible] Net income in the fourth quarter more than doubled to $11,900,000 compared to $5,500,000 in same period? Last year. For the full year, net income for 2024 doubled to $37,700,000 compared to $18,900,000 in 2023. [indiscernible] '24 increased to $0.27 compared to the $0.13 we had in Q4 twenty twenty three. For the full year, diluted earnings per share doubled to $0.87 from $0.43 in 2023. Turning to the cash flow statement and the balance sheet. Cash flow from operation in Q4 twenty twenty four reached 12,700,000.0 compared to $2,700,000 in the same period last year. Cash flow from operation for 2024 was $71,600,000 compared to the negative cash flow from operation of $3,500,000 in 2023. We ended the fourth quarter with approximately $420,000,000 in cash cash equivalent, bank deposits and marketable securities. Before concluding with our guidance, I would like to highlight that we're entering 2025 with a strong RPO of $350,000,000 representing 13% year over year growth and underscoring our solid future revenue commitments.

Our focus remain on driving top line growth through strategic investment that support long term expansion predominantly in high potential areas like cloud security, and AI driven solution. While prioritizing revenue growth, we remain disciplined with our expenses ensuring OpEx align with top line performance. All while maintaining our strong commitment to profitability and operational excellence. And now I'll move to guidance. We expect our revenue for the first quarter of twenty twenty five to be in the range of $70,000,000 to $71,000,000 We expect Q1 twenty twenty five non GAAP operating will be between $50,500,000 to $51,500,000 and we expect Q1 twenty twenty five non GAAP net earnings per share to be between $22 and $0.23 I'll now turn the call over to the operator for questions.

Operator, please? Thank you.

We will now conduct a question and answer session. Our first question comes from Chris Reimer with Barclays. Please proceed. Hi. Thanks for taking my questions. And congratulations on a solid quarter.

I was wondering if you could describe the environment in the different regions Just example, looking at The Americas, you've had some strong growth there. Over the last three quarters. I was wondering if you could describe maybe some of the customer behavior and how we should be looking at the different regions going forward? What's impacting them? How are they making their decisions? Especially versus maybe some of the behaviors you were seeing? Let's say, two years ago.

Yes. Okay. Thanks a lot, Chris. So So first, I think what we're seeing across the world was still some cautious ending by the large enterprise customers. With that, the cyber activity and the cyber attacks are consistently rising in sophistication and in the critical impact on these enterprises. So we are seeing those enterprises moving on cloud cloud security and cybersecurity purchases and I want to remind, we are protecting the mission critical applications and data centers. So we are really protecting the crown jewels of our customers. We are seeing the moving because of these high necessity. So sometimes they need to allocate immediate budget if there's incidents or threats and sometimes they simply need to make sure they are ahead of the threat landscape. So I think this is really driving the behavior of our market, sometimes even Not correlated. To IT budgets or even security budgets to some extent as we are dealing with the real time protection. All the time. Now we've seen strong strong market potential in North America and we continue to invest in that market. We think there's huge opportunity for us [indiscernible] At the same time in the international markets, we do believe as we are leveraging the OEM part as the MSSP some of the points I've mentioned in my remarks, we can translate that to revenue growth In the booking side, we saw some good performance, I would say, in the international market in second half and specifically in Q4, it would flow into revenues.

As Guy mentioned, the RPO are high, etcetera. It would flow in the coming year also into the revenue recognition.

Great, thanks. That's good color. Just referring to your comments about [indiscernible] intention to increase investment especially in R and D and new centers. Should we be looking at increased R and D from the levels of this year? Or would that be kind of offset by by other OpEx savings?

Yes. So I think in general, we will look for investment above the current levels. Other investments we would make across the business, we would do so reallocation of resources and expenses internally. But for cloud specifically, and given that we're seeing accelerated growth and higher potential for growth, we want to invest a bit more in R and D and also in centers. As well as in the go to market. I think some of the we can do more with our OEM partners, we can do more with MSSPs, So cloud security specifically we're going to put more investment and we believe it would it would also match revenue growth as well.

Got it. Thanks. That's it for me.

Thank you. Thank you. The next question comes from Ryan Coats with Needham and Company. Please proceed. [indiscernible] quarter. Nice to see the cloud ARR reaccelerating here. Is this specifically related to some of the changes you've made to go to market in The Americas and or is this more maybe related to channels and efforts you've had underway for some time? Thanks.

Thank you. So I think it was broad based. Some of that came from North America. Obviously, some of it came from international.

I mentioned some of the wins we had with Checkpoint and [indiscernible] very strong activity with the OEMs and our channel partners in cloud. In general, we're seeing more and more of our channels and more of [indiscernible] sales teams and geographies embedded in cloud security and not only appliances. So we're definitely seeing quarter over quarter more and more pipeline growth, more I mentioned double double digit bookings, double digit customer growth, So a lot of the indicators in cloud were we're actually pointing in the right direction. I think we still have runway both with our channels and our internal organization with the current capacity to have everyone even more engaged in cloud security sales and that's obviously our plan. For 2025.

It's really great. It sounds very logical. On the competitive front then, are you seeing kind of any further differentiation What's the competitive environment like now compared to say a year ago for you?

So I think in cloud security for the applications and data centers, our position and You see it also from the analysts ratings industry analyst ratings and so on is that we are really excelling in the security in the level of security the automation, the algorithms, etcetera. In that respect, I think we had a very good year in 2024. We released many new algorithms, next generation algorithms. Some of them are and Gen AI based on LLMs or APIs and Fortidos and [indiscernible] some are other mathematical algorithms. So I think in that respect, we really strengthened our competitive advantage leading We secured your best security this market We have very good competitors. Cloudflare and Akamai, but I think as you can see, we're doing well. I've mentioned we are putting our eye towards close to ARR100 million. By end of this year. So we feel very good about our competitive positioning.

Great commentary. Thank you. And in terms of the your broader ecosystem that you're selling into, with your customers, Are there any integrations you're delivering to market that are maybe helping you in terms of partners or Northbound interfaces at all that that you're working on?

Yes. So first, with our existing set of partners, we're constantly enhancing the integration. I've mentioned some stuff on Cisco, but same with Check Point, we're constantly enhancing the use cases with Cisco into the routing platforms and so on and so forth. And then we have a whole set of for example, integration to SIM systems. So we released integration from our cloud security both for AWS and Azure has seen to Splunk and so on. So we are constantly integrating our systems into the broader security ecosystem lot of it is, by the way, through specific requests by our customers. Very our large customers are telling us what you're doing is really great and we really need your threat intelligence or your application protection as part of our complete system And obviously, we welcome that. It makes us more strategic It makes us more sticky and we do see our large customers also pointing and enjoying these capabilities. So definitely that's something we continue to work on.

Great. That's all I have. And a brilliant quarter guys.

Thank you.

The next question comes from Tim Horan with Oppenheimer. Please proceed. Thanks guys.

With copper and Akamai being to your primary competitors, they're very focused on bundling with CDN, other networking and compute Do you think that's the trend that customers are looking for or they do they want more best in class kind of a la carte at a high level? And then could you elaborate on specifically what you did with the go to market on direct sales or how else you can improve it from here? Thank you. [indiscernible] definitely, we see the trend of platformization or integrated solution in the broader security market And we are delivering the same in what we believe is the niche that we that we should target, which is the application and data center protection. So it's the web application firewall, the DDoS the API and bot.

We've integrated into our cloud upsec, CDN capabilities, load balancing as a service, DNS, network analytics, So everything you need in order to deliver the applications it's already bundled in our solution and we actually have a tiered approach It's not a la carte what we felt. It's really a standard advanced and complete packages of this platform and then based on the number of applications and the scale of capacity that you need, that's our pricing is being set. So we're definitely there And since we've added each and every quarter in the last, I think, six quarters, those additional capabilities we're actually seeing customers purchasing the firewall as a service the network analytics and using it as part of these of these packages.

What we don't do, we don't cross the line to compute. We feel compute is still or should rely with the public cloud providers or on the same side with large enterprises in the private cloud or regular data centers. So everything about delivering and mainly securing the application with the core being security, that's what we do in the platform and we are targeting very large enterprises and service provider where security is key. It's not nice to have. In our customers, good enough is not good at all. In security and that's where we are excelling. And over there, we don't see the need to bundle compute. They're all set in that regard. So that's for the first question. Regarding the go to market approach, we are are a channel organization. We do have direct touch. Sales motion across the world. We did strengthen that [indiscernible] On both hunting and farming go to market approaches And together with that, we are putting more and more efforts into OEMs, into MSSPs to scale channels in general to scale the business and I think it's lifting the OEMs and SSDs and channel, we are seeing that scale as mentioned OEM being record year by the way, records for all and records for each one separately as well.

So we are seeing that start of the scale through channels, MSSPs and OEMs taking effect. Thank you. Thank you. Are no further questions in queue at this time. I would like to turn the call back to management for closing comments.

Thank you everyone for attending and have a great day.

You for your participation and have a great day. [indiscernible]