RDWR - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Radware Q3 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to hand the conference over to Anat Earon-Heilborn, VP-Investor Relations. ahead. go Please

Anat Earon-Heilborn

Good quarter Sharon. and to welcome Thank earnings morning, conference third XXXX call. Radware's you, everyone,

Joining me are website. copy today Officer; are for of as Roy Zisapel, President our investor the the Abramovitch, release financial kit Financial Investor well press section as and third and Chief Officer. in today's A quarter of the and statements available Doron Chief Executive Relations

in James is Roy December. that November turn made. after We SEC, to report from We in the with Network to to or of other time the Conference time Zisapel. the note During company. last or the forward-looking address from Security order regarding will risks the could Needham general estimates. commitment make statement ability today's to could time in April circumstances I the or no participate timing, of COVID-XX and and call, in our are or contribute products, refer in in performance demand orders we undertake any files changes differ as conditions, furnishes Factors forecast and future risks pandemic, Berenberg Please other and detailed not statements cause & such to statements such to future reflect include, and forward-looking from but Conference projections financial business now the update documents the annual to in various differences CEO and the filed or industry, XX-F amount of the the are forward-looking on Radware's for may These events you from XXXX. call materially to changes Raymond and the actual current Form that company's statements date on our the specifically company subject filings. X, Radware's will or in revise uncertainties, virtually time impact events management limited to results the to, Technology Conference

Roy Zisapel

results. Thank you, our strong application Anat. and We're broad-based booking offerings, pleased and to web geographic management solid firewall, data spanning across protection. product all all and bot our deliver growth, regions cloud security and DDoS, application lines quarter We enjoyed of of components center workload another across

growth. result, we a was we is With our benefit in the increasing the reflected solution and challenges coming book-to-bill for saw year-over-year from quarters, performance. As robust the regards one above continuous This cloud ARR product in to obvious subscriptions, environment. and business our visibility despite our

users XX% with XX%, quarter, rate reached product million, For accelerating. applications the which devices. cloud main and ARR, moving was the to attack the move quickly third digital surface. up time, The accelerating These The to cloud. growth driver and home, more $XXX year-over-year. XX% personal same to this The utilizing subscription computers approximately At mobile work create transformation is ARR from from trends in for are grew QX. expanded an growth

of the was the And doubled. and volume the more in in us security and larger times the the third reach all-time DDoS blocked attacks applications, a customers, as are our opportunities with whether business. a increased or by provided presence quarter, to of through traffic cloud operating attacks backdrop a this the blocked quarter, total than more in than the winning existing second of The they two has well half number sequentially blocked quarter. as application environment. than attacks web attack for continues This In of portfolio the number extensive our landscape with critical and attacks to needs business cloud increased hybrid active, highs. for be in On that DDoS security infrastructure the holistic expand us of infrastructure secures phenomena, These need that new security strategy over level QX. on-premise, the and XX% illustrate third approximately comprehensive very protects

a attack exchange, a stock for scale being time protected during solution, certain August, Attack three large example, the our in and stop the attack time ransom halt which days. forced to very blocked. the traffic by Radware was DefensePro DDoS For failed Despite to vectors. trading competing Cloud deployed the attack customer not at immediately service was short a appliances We a Mitigation

partner, secured we our result, in strategic a As early Cisco. through order QX an

infrastructure are addressing We investing demand and operations. increased own further in this by our

late India, As and new recently added scrubbing total centers and capacity. we Israel, Brazil, our August, in both geographic three coverage we in expanding announced our

security control systems. main enhanced and state-of-the-art We size equipping its our it also with expanded operations center, tripling and and monitoring

in protocol in developed We provide application algorithms against and with security needs for broaden API a highly protection attacks the announced gaming. of to online stack with In across to significant the We is algorithms algorithms our used believe sector offering full UDP differentiation applying core deliver behavioral June, our continue sophisticated our offering, specific the applications. accuracy security continues a from us for us a meet machine on we differentiated this competitive API set which on of protect our that to attacks, portfolio. effectiveness solutions. these of protection This in of investment providing announced we to calls advanced Recently, capabilities, differentiated new our we learning and capability. utilizing vision highly

quarter, Moving saw month. trading In last the to online platform we multimillion, an including win we sales major security and with third the front. announced multi-solution deals, customers a several cloud

and for Our delivered well OEM quarter. continued to the relationship record perform booking

growth. win was displace Cloud deal securing month, of we accelerating Radware to In macro-uncertainty Fortune our to continue while high, healthcare selected we're security is Cloud Fortune DDoS centers data leading and to these Last more. already supported Cloud through joint continues and new globally. ARR We the Under Airtel, now to India’s our relationship backlog integrated forward Manager that we've company Bot existing our security level across first services telco. to solution six customers. such reseller win is its Radware Services WAF agreement, Protection summary, with cloud increased offering Protection, a visibility its relationships, including DDoS One enterprise increase, XX looking this largest secured Airtel announced by with customers many new XXX with levels. and

With the accelerated the workers has in initiatives, at attack rapidly surface high. remote cloud cyber and migration time expanded transformation, digital activity is all

differentiated and addresses comprehensive the delivery. data security data business and continuous offering for Our center center application need security in critical

partners’ Doron. call large carrier the now will well market our future. enterprises in key solutions. Our for a and creates us All focus market access leveraging demand very on robust position I our us for these strategic segments to turn the for

Doron Abramovitch

Roy. you, Thank

other with quarter, countries limitations were be to of which an and uncertainty. in the environment results in that continues leading are the going achieved of lockdown out to regions pleased and We challenging continued with for

the environment. to healthy the employees organization way business Our From operational with well revenues XXXX and QX revenues year on third to under XX%. adapted $XX.X $XX revenues the in and continues year EMEA perspective, from a to region nine X% last $XX.X for And environment. are Pacific reflected revenues QX for Revenues months months quarter these from decreased across million circumstances Americas increased geographic from decreased year Americas decreased and our and nine months all perform nine guidance. million, below XX% and million, period were our to XX%. from to million, increased from functions. the X%. QX with the last demand Asia last Revenues $XX.X pleased Revenue line an decreased Americas XX% we X% the

recurring In together QX Our high revenues comprised revenues our were recurring revenues cloud and revenue. maintenance total reflecting revenues, delivery. with product XX% of subscription product

host XXXX, recurring recognition for of in reached ARR, and revenues timing growth were first a compared $XXX For nine our of revenues online represents XX, of in normalizes bookings, differences total of XXXX. record months revenue the the to This XX. first performance. nine over increasing XX% September invoicing XX% million September XX% months which the

the and million in XX% growth subscriptions, the million. of or revenues total was products approximately $XXX the total drivers year-over-year, for balance next Within the $XXX approximately cloud balance Out is months. The services used recognition reflecting for deferred the grew XX XX% quarter. portfolio approximately

We that appropriate, industry is revenues and revenues providing years the proportion indicator past growth. appliance more for the proportion decreasing future in given been indicator subscription the increased have more the few We sales. leading ARR of that of total standard is deferred as believe

and proportion We GAAP are quarter non-GAAP XX.X% in will of therefore regularly product provide for revenue now our quarter, ARR and starting in mix Gross results detailed margin reflecting higher we’ll the the was all the third stop quarter discuss information. for I will discussing differences press next the total between and non-GAAP profit the deferred and terms. subscriptions. release. expenses The

We centers in majority that the is or capacity our $XX.X X% of Let highs cloud expenses were me including network. headcount million, by subscriptions XXXX expenses. for XX% QX guidance. employees, per $X.X offset and employees high margin were income lower share third when especially accompanied are QX costs, scrubbing predominantly of ended that end services we our the by diluted was a to result by Operating end across million or open The million higher a the quarter XXXX. remind of from Operating expenses, actual new commissions year you ago. are X,XXX compared increasing $X.XX up up increase QX quarter travel cloud XX respectively. the in with profit at $X.X our Net

$X flow items. for Net sheet provided balance third million $XX operating for quarter the to was the million XX now the cash cash Turning and activities and months. last by

ended invested of investments. approximately We approximately repurchased During we of marketable approximately move of Most our available guidance financial securities months $XX with a deposits. the of I the our shares will million first XXXX. we And on $XXX the of and million the of quarter buybacks. for cash $XX liquid quarter as the for highly year, share fourth XXX,XXX total and spent in nine In purchasing. continued is had for quarter $XX approximately million to dollar, cash in U.S. approximately we million. end the September,

revenues between revenues are expect $XX $XX year million. We $XX QX QX and $XXX be be million to expenses $XXX leading million. be operating and millions, and between million to million full between to expected $XX

We impact cost headcount expect continued by a partially lower higher offset of expenses. to travel see

In impact. a moderate we addition, FX factor QX,

our a new coming quarters Although QX even the reflects expect decline performance, financial investment XXXX yield a in income we portfolio favorable marketable securities. lower for on

EPS year $X.XX call the $X.XX for full cents. to to We and I for now be be $X.XX expect between open will and QX Q&A. $X.XX between and EPS

Operator

Jefferies. Instructions] Notter question comes First George [Operator from with

George Notter

differential very guys. the I your Hi I wanted across much ask to guess there. about in growth rates, Thanks business. Americas

of think in in and investments EMEA And are middle. worse, year-on-year, XX% investing you can was in was America parts the into minds other about your aggressively be Any in fairly does revenue guys I those growth? would the the particular. translating it's to as North open And well? they're business investing there obviously talk APAC appreciated. of how great, I know you additional aggressively more thoughts kind this in

Roy Zisapel

our think we're I very America. So obviously general, with performance North in satisfied in

that we've way EBIT, I from point also our think U.S. already done on side. and governments COVID-XX of at the and seen business we've with reacted side the we'll less in we of from investments internationally also that the coupled view, on what February see lock business downs the shared the least the the in other versus – and

nicely and think our cyber also security the heightened performance. are level contributes which to U.S., in accelerated the in significantly, they've in and investments also I a cloud due

is think given the salesforce, the OEM increase we add planning both plan where unlimited our given across versus we now. high, to reselling. to potential is extremely we're and cloud America, and are our channels in investments more resources And North continue the So us that direct to for goals our almost

sharing strategy. So our across this all part drivers we're the growth of

this continue the to yet also seeing geographies comments. start saw we but relates international, into It you that obviously In the P&L. our revenues, growing, in geographies bookings. will detailed it in It's will QX. As our all in to QX, – in mentioned start I've already will not trend

performance also it, So improve. as that long there our as we're the stays as market the optimistic business will international climate in

Operator

Alex Needham. question from Next comes Henderson with

Alex Henderson

the whether think some talk some could and a I much is is very what U.S. Thank bit more part what was of and whether between that organic probably about acceleration And at much. follow-ups. you is got I've little Cisco I you business how – Great. strength Radware? drove split hoping the

Roy Zisapel

Yes.

want the U.S. in only we're the mentioned the up highlight ramping quarter, the as throughout record every a also year, definitely another relationship, the growth probably Cisco in booking significantly I seeing quarter. to but third quarter Checkpoint. from So not checkpoint

I've record OEMs. it booking for As mentioned, was quarter all a

coming is but our the wins organic growth So that a is lot helping also of us, though. from

taking strategy put with the we it all should and more of And are fruits results behind the resources place. we satisfied as really very it's to So continue. believe I've mentioned, the

Alex Henderson

company risk are you and doing the whether resources or a Cisco that's you front, you shifts hurt a Any will headwind? that X% or do help of On sense tailwind think the shifts the as they focus?

Roy Zisapel

Yes.

strategy early focus more to high completely definitely we on direction level but because more help on security the exactly to say, should complimentary portfolio. and So we where is focus are taking, the on the applications and area to us, their they're this

salesforce. seeing as high the our to fits and XXX, So well, affects huge. win comments more we're to ability Cisco XX, activity our XXX Fortune strategy, number with with see again, And need we're level the their reef Fortune them – significantly, their us we the I’ve to can I more is how starting Fortune think potential my as in very grow in performance. in increased mentioned But customers

Alex Henderson

ask know past Great. strategically I see could behind spending to into TNE also as current then I at that to your clear it XXXX, XXXX. I'll want And in you pretty of slowed back. an but see acceleration floor. and quarter, one that some somewhat. you seems If the XXXX, accelerate in investment question, I growth give will don't then outlook because assume last in the spending the – I into coming guidance would you had in intended go see we logic COVID

in on the margin you've year? little some Or deliver be investments, that we on operating more to margins we the that a crimp should a you been OpEx going careful XXXX of severe rebound? as So that historically assume be the growth should you're expect continue in put to to bit so mechanics,

Roy Zisapel

Yes.

to I continue to invest. America, will security to time North think relates and on cloud and offerings, while the our as So it continue especially investments, OEMs especially be conservative in think, it's we to I

grow, So is a but more put these directionally directional growth. we we mentioned, returns, OpEx to we yet support especially give parameters areas, to don't want investments, because you've ARR in follow. these behind will on guidance good very think all those see in good And these I parameter

Alex Henderson

Thank much. you very

Operator

Lee Oppenheimer. from Next Fu comes question Yi with

Yi Fu Lee

wave Roy, year-over-year, color? more and And other any with lockdown for fairly give hope can ask, vendors question And just broad-based follow-up the we’ve is in on America? you with the can my taking EMEA question. well. quick a Americas some Doron anything you for timing grown let's because commentary UK? Thanks APAC? from Roy, then with healthy also have a healthy. the I at seen first, in maybe everybody more seen safe on maybe we're and lockdown also I of the pull-forward XX% but hearing macro say as there start June us We've Were – second And

Roy Zisapel

Yes. there your Can whether repeat you on the just question U.S., were…

Yi Fu Lee

second were like we've Yes. seen in lockdown? Were California like Because I States the America, from there third some extended and the maybe there lockdown increase? pull-through measures the there the a drove region June quarter any Roy. would other would EMEA And in in macro in year-over-year lockdown June. like helpful, through very June pull-throughs say quarters late that be any APAC that healthy commentary from some vendors – the Were on

Roy Zisapel

Okay.

coming America. now specific result, of ratio us So and to North in levels continue slip has activity I North several deals for that quarterly win that. for in also not we see our that last strong can mentioned from very it's in nothing we and performance share good quarters America been

you past different move and well. said sure news in and in obviously EMEA second to in quite more dynamically is Having QX on. And from the follow the a also also new wave, I'm in the all wave, countries changing QX so weeks, APAC, less expectations our differently. theater as environment countries Europe lockdowns strong and international several for they forecasts good which quite over us. situation makes are the as behave as that, are for third the bit these Regarding there, complex,

maybe see three persist or to to it's it one the activity do more flow into two definitely quarter, we quarters, will the rebound than So of P&L. and business point going

internationally, to we as we're beyond looking see and worsening actually don't QX, business there And very conditions go I levels So good saw forward to back in well. any previous improvement.

Yi Fu Lee

investments the And helpful. that on some follow-up Israel. can then in the centers regions? some markets greenfield Can the a the expansion little to commentary, be colors like emerging would scrubbing on a Excellent performance the these Roy. Doron, the and with India and markets? in dealer us just Brazil, Thanks big Anything – of of of I And in the emerging you particular, the markets opportunities Airtel was contribution in give Doron. partnership India,

Roy Zisapel

take some the side, I'll So comments. Doron add will customer then on that and maybe

see In many So we data with ability countries, what company And cases, global world, centers competitive operations customers is significant very is advantage. and in some XX need India. we the large of global as first as protect in have then serve we customers, data facilities. I’ve or and a to manufacturing of on they our do centers when many all cover, additional a to Brazil also Fortune take across our them such locally the mentioned,

serve not user today, taking two data So allowed the is market is additional regulators. from the in coming of local of the we of opening by centers out information local course, directions. data many these want private and the One, and to markets country

need and facilities. local it as so do to institutions relates government, financial So, especially on, local you

And we've signing the that deals, we becoming needed acted to competitive more a based and are presence. when companies, and global that. it's In on more addition, global global have advantage

India these two. data our have on we Brazil based to already centers, both and So tenants

became we partnership. Airtel for specifically. and and in Cisco the to call And strategic overall think we our encouraged partners, And they is solution two Cloud And of APAC WAF, have Cloud theme. Airtel Radware, plans India, the Bot. business security, are if in in also They the you its progress. enthusiastic in the DDoS, terms by largest in will quarters of our about coming a this announcements, you strategy. We about are extremely very high security part India. They I we update Cloud their follow to Airtel material their new announced Specifically in main cloud Secure, partnership, business. very as telco this

Yi Fu Lee

Thank you Roy. much, very

Operator

from Securities. question King Next Andrew with Colliers comes

Andrew King

my for question. Thanks taking

deal, where in the the the an So you see get bot that’s why with Manager holidays just approach we opportunity Bot announcing with idea Commerce with the Cloud? for Salesforce of attacks, you especially

Operator

connected. you're Presenters,

Roy Zisapel

Okay. get Can the additional we questions?

Operator

Mr. question. King, repeat your please

Andrew King

Yes.

approach the you guys bit give color bot with in the and dealing, Commerce attack, just announcing just with guys So the Manager holidays a the can the for around Manager with opportunity little Salesforce us especially Bot Cloud? you more Bot

Roy Zisapel

Yes.

on targeting is So, automatic like like Dip] real more and in In business general both years, well quickly. related account the our [Audio and extremely the those in but capabilities and well. seeing algorithms logic will us. that we or also that market tie malicious. machine that that learning we those sense, are is our growing coming conversation We're problems they to that the security problems to that the will doing just We application API WAF not And – again, And our nice product, solved, buying bot are robots imitating it is business and still as small, we're to DDoS, with the grow space seeing those bot takeover, application as security user is expanding are space think from portfolio traffic. think is And web expanding which based are It's page so opportunity security. uptick not malicious. scraping intent conversation. is The customers additional attacks on. within and very itself business the for traffic the hence, security

seeing our satisfied that and our So business. area in of – we're growth are definitely, we're we the position with

Andrew King

idea you've been resources shift Checkpoint going of on looking really give just focused relationship. forward and then you're specifically us more of the And Cisco and your the investments Nokia you space, the will or Great. the Cisco? into the those investment to past, if at relationship, going focusing Can you OEM into in stay

Roy Zisapel

to and Cisco, the on several to the quarters seeing, other results continue we So, a we're I've Checkpoint mentioned to based to investments Nokia. add OEMs, row and both in to

and complimentary means architecture is it see Cisco those mutually don't we see generally in Checkpoint for quite when relationship Security customer, player are a and the and vice versa. plays a investments. end role we Cisco smaller exclusive So security Actually, Checkpoint that us customers because large the

XXX, or, and in either better the you generally, therefore of vendors in both we getting them and know Fortune end if customers. – many and would growth access I invest in with relationships So can on the look parallel two to be the together, them the enjoy

Andrew King

you. Thank it. Got

Operator

Next question Barclays. comes Tavy Rosner with from

Chris Reimer

or I Hi, decline long-term Thank ask, this relating just there seeing to if volatility? on Chris wanted following on to Reimer is you some Tavy. you in especially taking all you're APAC. for is geographies, Can for trends questions. question near-term it previous my the the clarify

Roy Zisapel

a from year. growth year this perspective, last think be We would over booking

and then especially did but in So major relates the in QX. year, – our since half – to I first I improvement, in we recovery, is and say countries do the the in see see I the suffer we see all as not would back. do the more, would I but markets would coming say and in business we in already an the do say, it booking, of yet,

APAC don't also bring long-term we recognition in I look P&L in to that issue. So the growth the soon. there's from a forward see And back revenue

Chris Reimer

M&A? on your cash just over do And Okay. or have $XXX color any any position you can you million, regarding views give

Roy Zisapel

Yes.

the We are relates something when there's report, to especially be it's looking to opportunity million as we’ve parallel for security and a and and for $XX that have looking this M&A, good think to growth buyback our year you active will to the of of we to organic one will we can of definitely to it we're cloud strategy. security beyond specific enterprise flow that, that. so So these add And we our but that a utilizing update of XXX% to for operating heightened we more market, than continue the in buybacks. spaces. basically pillars M&A see cash In the bit

Chris Reimer

Okay. much. That's helpful. Thank you very

Operator

Joshua with Berenberg. Tilton from comes question Next

Joshua Tilton

for my question. Thanks guys. taking Hi

quick didn't total Just I percentage one just Can as the and and a what last was in recurring catch what this. in a it apologies, year? the you revenue was of QX repeat quarter revenue

Doron Abramovitch

recurring quarter, XX% first revenues this months, last in XX%, from nine was on So it's year. a from XX% up

Joshua Tilton

So year, quarter, to the on want XX% was months for nine the in first just just first that's the time last or I the clarify.

Doron Abramovitch

so nine up first was to now Yes, months XX%. XX% and

Joshua Tilton

what – Okay. by Did helpful. did was year? quarter the percentage was That disclose you last any chance, the in you

Doron Abramovitch

was product that this we with overall, planning deals year fluctuated that year, issue. the large XX% we get that to I comments more mentioned higher than are But XX%, Last have – it it’s in XX%. a component. we certain my to around prepared mentioned

So of the be it drove area this RevRec XX%. to in

this is have product period, been we get moving and quarter, particular that we obviously obvious the again than to on with dropped of the do this we able to So why more few and now XX%. This bounded nine months this mix because obviously been XX% the trend of have trend. top deals the –

Joshua Tilton

That clarity. was Thanks the for very helpful.

Operator

I'll call over And at turn this Zisapel. to the time, Mr.

Roy Zisapel

day. a have great Okay. very attending for you. Thank Thank you everyone and much,

Operator

This call. conference concludes today's

disconnect. now may You

Radware (RDWR) 4 Nov 202020 Q3 Earnings call transcript