- Earnings call transcript Q3 2022

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Operator

Welcome to the Radware Conference Call discussing Third Quarter 2022 Results and thank you all for holding. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, November 2, 2022. I would now like to turn this call over to Yisca Erez, Director, Investor Relations at Radware. ahead. go Please

Yisca Erez

Good quarter Dinesh. 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 Avidan, release financial kit Financial Investor well press section as and third and Chief Officer. in today's A quarter of the and statements available Guy Chief Executive Relations

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

Roy Zisapel

Thank you, all Yisca, thank joining for you today. us and

an globally impacted headwinds. of response which quarter, our trends third expanded came in phased in customer in delays some low weeks saw and end deals These last in to guidance. the we macroeconomic our closing below increase the few and multi During the contracts, revenue, of

impact term. to in environment this short business our continue the expect We to

We not in not continued has competitiveness aware did that in market continue competition. confident by as large regions. remain position and across seeing all we any are point, evidenced been and wins we to track at lost We the our this to deals that close are enterprises the

in strong We and among see prospects, have driven healthy continue be we activity to increase a customers and cyber-attacks. pipeline which by a level significant

success. to will the Given that, opportunities we're leverage several and taking business for Radware manage measures long-term that position

state-of-the-art continue market to we the even and market and to see are the to deals temporary to future. behavior there time enterprise the focus cater significant mature. believe with We First, opportunities believe the will current in large are larger from the and take enterprises expect in demand on our more protection. if environment strong We spending

new Latin logo example, based For security examples dollar and wins company. strong includes provider multimillion a large cloud deal capabilities. a during Other deal our We offering. our America application closed security a on unique security the of application SaaS partnership the Fortune complete a deal won for we service XXX third enterprise quarter, in leading with with

customer to We major Cisco, DDoS customer security provide displaced visibility logo approach who we the this that needed. environment. protection. to incumbent frictionless to partnership financial In closed the the provide of U.S. in services a with and protecting crucial the could deal cloud not complex Our was hybrid new protection with level another also company

an opening of cloud is taking cloud financial our are more we constantly threat their investments. investment and response security in measure are uncertainty landscape, In expanding market to In second increase footprint centers. increased CapEx and security need, security upfront initiatives. to growth larger security shift this cloud our resources can cloud by committing we times The to help boost without customers our to global

and our in the two centers new to Italy opened expand we market third share. quarter, During Dubai

the For DDoS One critical regulations. example, found in from center. the our sector Emirates, several new with financial solution customers the to to comply already cloud logo new onboarded security

the Another new wanted to media sector from strengthen logo and application moved which private to cloud is public from a their protection.

advantage, The capabilities new following customer our the cloud was jointly the convinced center. and logo other cloud Center. especially of was we won while Point which with local Radware advanced demonstration This our in Education the from Check technology considering bought

of cybersecurity reallocating third large we're expand needs mid-market to The the enterprise and the are our needs the identical step is the market. in risks The resources taking of sized market. footprint medium enterprise

and capacity environments that companies are skill more manage the have security limited. mid-market to talent However, their

services cloud relationships this our approach. to fine on leverage operations. cloud and protections flow And positive focused of investments making growth and to this a tune expenses cyber initiatives opportunity, reallocating market choosing managed cloud first we opportunities ensure from expect resources operational offering growth channel internal with by business expanding number the as taking to enterprises for we To our better we're that includes term fit strong profitable our lastly, measures This returns. through cash application evidenced security is on fully will are targeting that cloud to lead Our long focus are by sized medium great security our needs our mid-market security significant offering. are

are the state As at market advantage. of to the playing we cybersecurity our landscape, we look several forces believe there

we are right number sophistication bot the continue invest ensure has will attacks DDoS, for best infrastructure critical increase. level continue to applications WAF hardware [indiscernible] protections to and in the protecting the to offering and them. of relentless. the Organizations and First, believe and

third offering of Radware stronger security the as to once In security report, solution. again high set two Gartner critical of use on security the Radware recognized controls According Radware market. one use our solution application fact, Gartner, its API best security security DevOp of cases for offers case. provides well capabilities as WAF application and and Gartner number the quarter, XX in API its for In the companies ranked out

that to of confident not Second, to on-prem consistent And companies solution security in application multi short, security cloud suited to dedicated multi-cloud to security. their said by application achieve ability According across the don’t the to are high our looking in quality security to In offered respondents and have is struggle platforms. organizations a public reports, more public especially they trust apply platforms. XX% security the cloud Radware application are cloud continue that amid meet. XX%

I'd times, While to challenging underlying uncertain business fundamentals reiterate are are these and our the that strong. like

is balance with a healthy million more robust than customer and with base, company sheet Our on $XXX and large diversified hand.

operations, and cloud security from capacity. footprint business in invest We continue to annuity our generate our and cash build

in volume, quarter below Although our a we remain strong. for With to expect applications the and need with this complexity real expectations, believe sheer record will revenue revenue. in fell specifically time of we year end increasing solutions and gliding protection cyberattacks the

this positioned that, to good guys in for confident call world, growth. Radware turn and long for As term the fight are we I Guy. over the will that now With continue on the cyber is track we well right to

Guy Avidan

Roy, quarter results as business you, of pleased the good and our to third as of financial analysis of our the outlook provide Thank well I'm for fourth quarter performance for XXXX and XXXX. everyone. day,

results unless release indicated, available remind would in Investors basis you of our Before on financial and A GAAP to earnings that press results today issued beginning all is website. financial on non-GAAP the like section a otherwise the overview, of non-GAAP. full are earlier I and our the reconciliation

Third $XX.X quarter last of to declined the revenue million XXXX year-over-year in to $XX.X X% year. compared million period same

resizing well we some Roy as sales in longer saw customers. as large our noted, cycle As carriers enterprise and of

our and for compared by total X% XX% increase total revenues On in to same compared representing a APAC X% Americas million EMEA third basis, revenue As XX XX XX% Revenue for million a QX the decreased a X%. the revenue. margin in the a revenue discuss Americas in a in quarter QX third of an XXXX basis. the compared of grew XXXX. expansion as our On and affected XX%. on of result trailing month $XX.X QX the XXXX quarter quarter, revenue was to year. basis accounted was Gross revenue XX across as for when in revenue XX.X% third now XXXX X% revenue. trailing XX trailing last which I'll was decrease of QX basis, compared representing all expenses. of month headwind, XX.X% accounted in profit decrease period month $XX.X by points. EMEA XX% to of of the In APAC accounted Americas by and total increased $XX.X in macroeconomic regions. XXXX, the remaining to million, same to XX% period

lower our cost this impact with by higher margin as improvement evidenced operating ability XXXX, accordance X%, structure compared with and revenue. of is by to our R&D manner improve headcount the Security-Dam, full increase integration profitability, XXXX. in X% were representing resources The COVID. in the to travel demonstrating reallocating cloud Security-Dam related was a on the gross responsible Compared expenses second to quarter. additional increase as XXXX to million infrastructure in main growth $XX.X Increases to are the decreased in market and internal of to expenses recently related headcount period coupled launched the costs of offset an manage Our environment. To Operating third complete we the quarter X% hawks only QX compared integration to quarter predominantly same by in of and cost due of initiatives. cloud our partially focused

to and aspects of cost needed. strategically We structure our adjusting look all at are continue business our as

the that customers' $X.X Net need third we even met due QX Radware a quarter, key quarter to third Hawks growth in our, during million investment low testimony XXXX which challenging the negative programs lead of While Despite in of quarter for a as the $X.X adjusted share per QX resources period. as is to last cash EBITDA EBITDA increasing Hawks revenue to to compared to impact million the and which term of EBITDA $X.XX long in adjusted internally revenue resources. in generate the to Group. on $X.XX to times. navigate long in our earnings investing was million was our and expenses commitment $X.X a year's support adjusted same for income Decrease include year the in the the a, the compared $XX and last company guidance, term is revenue million our our XXXX. and decline in ability in reallocating will result initiatives compared growth. was manage R&D to Earnings

same in Turning as million to $X.X during last $XX.X compared from million during cash to of cash and sheet the operations generated flow items. year. the We period QX balance XXXX

securities. Within the million QX marketable million in approximately and we the amount bank $X third quarter, approximately $XXX of in with we repurchased deposit cash, ended shares XXXX and

with the us to provided sheet great foundation balance growth. on term in long strong conditions focusing and to market volatility, profitable Our while navigate current opportunities drive

of as with quarters, Board profitable $XX our professionals, third third company's quarter grew model a RPO team business. customer strong solution, the During the of buyback us my robust cyber authorized year in Moreover, shares. guidance. which million. of on Directors and the end last budget confidence critical today, company a an the with fundamentals for versus of a the remaining sheet of the is of loyal third the increase approved base. based the quarter $XX is and business remarks conclude of all Radware buyback I'll give balance ordinary million Radware of of And has global

some call, previous security uncertainties expect run. posed while remain said the microenvironment As on resilient long in in customer to we cyber spending a we demand behavior, challenging

approach However, Therefore, large term. carriers. end the is multi-phase and in among cycle to which sales a short deployment for preference we're witnessing still prudent enterprise protracted take growing

total million. expect for to in the to of revenue range million fourth We $XX the be quarter $XX

operating $XX expect million million. between We our to non-GAAP $XX.X be expenses to

diluted anticipate non-GAAP to Given developments $X.XX earnings be share to the net between per earlier, operator all turn call and questions. $X.XX. trends the Operator, we these and reviewed now QX please? over I'll for XXXX

Operator

Notter from Please with question George go ahead. first is Jefferies. your And line the of Instructions] [Operator

George Notter

out stuck Thanks I guess the annual that Hi, of one the guys. me things recurring was to revenue number. very much. that,

at number. I million $XXX looking I'm think

was sequentially. flat that's you're think number there's area? in that takes and and some of growth number, flat about but can that I you seeing in I assume puts not kind that talk why

Roy Zisapel

believe focus services growth revenues our and side. it's that upwards. revenues. will challenging increased and missing is That's that of I we end, In product the In I would drive say that And on Yeah. outcome should the it's data believe this say, ARR an (ph). with -- cloud line would we But on in continuous the see improve also and this in coming security low general, ARR translate obviously to the in we cloud more quarters. result figure

George Notter

guess the subscriptions assume that's and inside Is traditional sort here? that dynamic offset or maintenance that, And to softening contracts are products getting sequential hardware net appliances is the on like I on I I piece it. that's number that and are within therefore that's Got that the by getting and that flat you're of a assume number. that cloud sales, going

Guy Avidan

That’s exact. correct. That's

that, However, course, the believe should sequentially it we grow and of overall with yield.

that cloud the definitely if happening decline security drive growth faster but based of remarks level is the model, prepared in on overshadow that we've heightened on plus So noted even our believe maintenance we in revenues should any as of more to with focused our cloud contract. that

George Notter

ARR number. a give you can cloud Got services growth it. and product subscription then And us

quarter XX% this curious I'm told think it was year-on-year. that what I was just you last us quarter?

Guy Avidan

XX%. around was It

George Notter

Okay. on. I'll Thanks guys. it pass

Operator

question next of Alex go ahead. line the Henderson is Needham. Please Your with from

Alex Henderson

Great. Thanks.

how you in income step So it to going the will about $X.X rates obviously, you and would trend? got a through. interest million $X.X talk (ph) I here rolled as if rate mundane, go a run the rate balance quarter, to benefits about a Can it's fully million third talk can the the the numbers, bit little add in through up X Is interest expect your you've increase how once up, or about with line it you the sheet? point interest million balance seems -- just rates and large know interest cash but $X very

Roy Zisapel

from Alex, expect same million income $X.X we the less $X.X so million, quarter. in or coming interest more quarter, third

buyback. comments We do that in mentioned also the concerned prepared will we to continue

cash use some the buyback. we for So will of

Alex Henderson

three I So how how to more U.S. about quarters? probably gone mechanically, another have in you're the and Can of quarters it? talk next to three go than mean, structured that on up the are X% or today just interest be you up We'll that? rates roll have against you a longer maturities over -- sense a little four maturities Are investments those some going to that have disclosing lot

Roy Zisapel

Strategically, short term we're maturity. to shifting

bonds for currently in money investing six higher We which banks putting in XX are balancing between bonds convertible actually even just our feels in and interest the yields policy. that and than months, investment

term short shifting we're So now. towards more

Alex Henderson

Okay.

it's already nice interest going then talking the out more to we're -- trivial. number. point year, cash on to a X I swing is next not big pretty an $X looking So about it's not again, mean, get in million short a you're change your which a uptick seen income because we've and term investments, and

that million step to ‘XX? $X going million, $X up not $X is So in million,

Roy Zisapel

stay if obviously, that is And Definitely, will our in interest next function we rates interest it expect grow will from year interest. rate, even income as as it today.

Alex Henderson

Difficulty] right. still All We [Technical have

Roy Zisapel

in the Speakers] [Multiple convertible bonds past. from

Alex Henderson

What variable? portion is

Roy Zisapel

mean you variable? do What

Alex Henderson

to three next the months. over roll we'll six Well,

Roy Zisapel

rate. Let's lower interest is say that bonds say, let's based has about still on, half convertible still

Alex Henderson

you. Thank Okay.

to get the that to EMEA are winter under competitive clear conditions like quarters the there of worse landscape, back couple the next is going of economies lot pressure, as a sound decelerate. to pretty Going in comes it and over continue does

can you is dollars? a what is of and what So currency is just in what is bit base us in in portion EMEA your little remind position portion priced local terms

Roy Zisapel

is in Revenue all dollars.

Alex Henderson

in XXX% dollars? It's

Roy Zisapel

XXX%. to close Yeah,

Alex Henderson

of in talk you the about quarters pipeline? three, and pipeline operational six, that's what Okay. set nine an generally we kind can couple given And pipeline extent we robust into next environment, the structure? whether to months how going still as go the the of are up to there's been then erosion or And is

Roy Zisapel

close some the the And also levels, at to not would record I They're going driven closing classify it's very in robust. to level. by if delays that pipeline very is So deals.

on A challenged not that are deals is it's the and also activity competitive lot maturing. as mentioned, the think or robust. closing pressure the not pipeline more losses obviously So or pipeline. continues because only region, on but delays And overall of less the pipeline of current depends creation of I've but might that challenged, did see be we we that increases

to cycle about the So least, very not the cycle we feel the put aside at good going forward, or sales lengthening to sales pipeline. trying

Alex Henderson

question, I multi-phase it, how how does does see when does big the manifest? deployment, that an before One how last impact it

Roy Zisapel

as another carrier maybe for you MAX okay, end next up of another of one talking deploy had we one-third, They MAX the an I'll saying, shot give year mobile product thing. the (ph) XX example million et year an the first, MAX, with Initially that deal. deal the $X.X they and in we'll cetera, do will or were towards ended the we expected doing one XX protection. about we around do

-- own orders. So are they whatever they deployments their supply and because of are our phasing budgets, phasing they're chain

in generally revenues, $X.X case, that's million. deal million impact immediate So for recognition product course, a of is on create that from immediate us, to $X.X moving

Alex Henderson

you. I see. Thank

Operator

is of next the Your Tim ahead. Please question go from Horan with Oppenheimer. line

Timothy Horan

you. Thank

some or elaborate I'm little I cut grooming trying you customers that large they're think expenses. resizing. to are Can assuming a bit more? said their on

Roy Zisapel

think. I Yeah,

of just So phasing, cetera. I gave first, those example et an

We customers stage and they're full then are piece. seeing, of say to, I were some for used would the for one in one solution example, shot, security appliances to taking at of cloud, We trying get cetera. et all cloud it instead that that

pushed it delayed. getting So that approvals, and more of booked or the but of deal shapes some different of all has either see deal forms, then and budget cycles, and we the sales allocation, lengthening whole

this did enterprises the see or the not see the in maybe very in very commits, large, even did experience where that's board. phenomena. larger large large we to we on we areas, medium that. mid-sized yet, But we or Now the don't see deals, deals across it it regular not but We

Timothy Horan

maybe Are you customers on on like what new with some spend are spending existing customers products, they reducing you or customers? trying Well, not seeing to reduce existing? for are either legacy they now of existing their they're Yes.

Roy Zisapel

see We ones. that also large in existing

I customer do example, towards example value, from For over deployment phenomena. existing large But there, is we the XG gave see carrier, of the the an it's new. that

Timothy Horan

Got you.

how last quarter it kind timing? years can expect two without phenomenon, the So on Is any do what year, really companies two can of idea long you the slowdown investing? go

Roy Zisapel

on side new split the data would I of might And we So are new would it XG, of environment deploying one and thought et because a depends or and business cetera, are to et then overall long cetera. for other be plans end. build it so a it we that's center then where on infrastructure say, their aligned capability, to investment I

it's hackers existing existing On cyber be and the is the too when activity infrastructure think serving other much don't business, there. it because I can end, and delayed the

you time, would to resize to need would So budget, for et or fit to current can your you of buying et years needs try otherwise you delay make be it investment the but cetera, vulnerable. three ahead cetera, can versus more it

levels So existing infrastructure, long. accelerate I in spend our it budget think delay too would think long cetera, to heightened areas, existing to applications, I cyber as et as actually belongs activity the hard it's

Timothy Horan

And lastly, you other or have from any any but deals, you step activity a the up front competitive lost in competitors? on either haven't I know seen hyperscalers

Roy Zisapel

No, no.

four the general, in ratios going quarters. quite we've we're in current know our but last competitive up landscape I actually. numbers, cloud it does seen not especially well in quarter three, show on the win in think I the doing

about good references Gartner, same other to competitive et we reports customer in cetera. Gartner the I positioning. report, [indiscernible] very we the strong mentioned So feel and attesting have

the competitive growth. all take to feel mid-market our more we've to we strengthening the mentioned steps cloud, good. the do front, going need We So on accelerate

Timothy Horan

Thank you.

Operator

turn any call questions. At there further the this for are Roy time, now closing I over comments. to will no

Roy Zisapel

much day. very attending Thank great for and you have all a

Operator

joining. This does for call. Thank conference conclude today's all you

You may now disconnect.

Radware (RDWR) 2 Nov 222022 Q3 Earnings call transcript