Radware Ltd.

Welcome to the Radware conference call discussing fourth quarter and full year 2023 results, and thank you all for holding. As a reminder, this conference is being recorded February 7th, 2024. I would now like to turn this call over to Yiska Erez, Director, Investor Relations at Radware. Please go ahead.

Thank you, Ian. Good morning, everyone, and welcome to Radware's fourth quarter and full year 2023 earnings conference call. Joining me today are Roy Zissa, President and Chief Executive Officer, and Gaya Vidhan, Chief Financial Officer. A copy of today's press release and financial statement, as well as the investor kit for the fourth quarter and full year, are available in the investor relations section of our website. During today's call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. These forward-looking statements are subject to various risks and uncertainties, and actual results could differ materially from Redwood's current forecast and estimates. Factors that could cause or contribute to such differences include, but are not limited to, impact from changing or severe global economic conditions, the COVID-19 pandemic, general business conditions, and our ability to address changes in our industry, changes in demand for products, the timing in the amount of orders, and other risk details from time to time in RADWIS filings. We refer you to the documents that 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 March 30, 2023. We undertake no commitment to revise or update any forward-looking statement in order to reflect events or circumstances after the date of such statement is made. I will now turn the call to Roy Zisopel.

Thank you, Yizka, and thank you all for joining us today. We ended the fourth quarter of 2023 with revenue of $65 million and non-GAAP diluted earnings per share of 13 cents. In the fourth quarter of 2023, total adjusted ARR, as discussed in our last earning call, grew to $211 million, a 7% increase compared to the same period in 2022. The ARR growth is driving recurring revenues, which accounted for 77% of total revenue in 2023. This is a 900 basis point increase compared to last year. The total ARR growth was fueled by cloud ARR growth of 22%, once again exceeding 20% year-over-year growth and reaching $65 million. Subscription revenue that is comprised of cloud and product subscriptions accounted for 44% of total revenue in the fourth quarter, as well as for the full year, reaching $115 million for 2023. With that, we are making strong and steady progress to a cloud security as a service company. Looking forward, we are cautiously optimistic about 2024. First, we witnessed a better business environment in the fourth quarter. In addition to growth in our cloud and subscription business, we saw early signs of recovery in closing large CapEx deals, specifically across Europe and Asia Pacific. The recovery is also reflected in the pipeline and the progress we made in moving existing projects forward. Second, the demand in the market for cyber protection solutions continue to be solid as attacks intensify. According to our full year 2023 global threat intelligence report, the number of DDoS attacks per customer grew by 94% compared to 2022. In addition, we observed a surge in malicious web application and API attacks, which rose 171% last year. A significant part of this increased activity was driven by Layer 7 web application attacks or web DDoS attacks, a trend that has not slowed down. We believe the frequency, complexity, and sophistication of cyber attacks would intensify throughout 2024. Organizations, regardless of geography or industry, are facing increased cyber threats driven by major geopolitical tensions and conflicts. This plays directly to our value proposition, real-time protection against application and data center attacks. Third, we are confident we have the right solutions in place to address the emerging trends in the marketplace. To stay ahead of the attackers, we're continuously enhancing our offering with new algorithms and capabilities. One example is the Web DDoS attacks. These Layer 7 attacks emerged last year and caught companies that rely on pre-existing signatures or rate-based detection off guard. Our Cloud Web DDoS protection continues to be unmatched. in its ability to mitigate Web DDoS attacks based on a battery of algorithms we added last year. In the fourth quarter, we announced an on-premise version of our Web DDoS protection with Defense Pro X. This solution offers companies comprehensive protection against these attacks without decrypting, enthralling traffic, or adding latency. We believe this significant capability will strengthen the traction for defense projects in the market, boosting our appliance business. Another example is the recent expansion of our bot manager module in our cloud application security offering. We recently enhanced our solution to detect and mitigate the latest generation of bot threats. Those that are developed with the help of generative AI tools. These new enhancements enable organizations to defend against attackers who try to evade detection by exploiting vulnerabilities, rotating identities, manipulating headers, using capture farms, and more. The fourth reason we are cautiously optimistic about 2024 is the sustained growth of our cloud business. The cloud security ARR continues to grow over 20% year over year. We believe we can maintain this growth rate throughout 2024. We are diligently expanding and enhancing our cloud offering, creating more opportunities to cross-sell and up-sell within our customer base. We are also expanding our geographic footprint in the market, working with our MSSP and OEM channels. The cloud security market is large and growing with opportunities that we intend to capitalize on. Finally, our optimistic outlook is strengthened by the positive momentum behind our OEM relationships. During 2023, we expanded our business with Check Point and in particular with Cisco. Our inclusion in Cisco Enterprise Agreement has created many opportunities that we will build upon in 2024. Before I conclude my prepared remarks, I would like to share with you some of the notable deals that we closed in the fourth quarter of 2023. For example, with positive momentum beginning to return behind large CapEx deals, we expanded our long-term relationship with one of the top five carriers in the world. In a multimillion-dollar deal, the customer has extended the DDoS protection for its data center. We also closed the multi-million dollar deal with a leading telecom company in Asia Pacific. After winning its MSSP business in the second quarter, we successfully cross-sold our on-premise DDoS and cloud application security solutions in the fourth quarter, replacing two different incumbents. This deal highlights the strengths and breadth of our solution. In another customer expansion, we closed a large deal with a government agency in Asia Pacific. The customer launched a series of data centers to accommodate the growing customer base. We sold our entire product portfolio to them, including an upsell of our Altium application delivery controller and our DDoS and cloud DDoS protection. This is another win that showcased the success we have capitalizing on our full portfolio. In summary, we closed 2023 on a positive note. During the fourth quarter, we made important progress on our strategic initiatives. We continue to successfully grow our cloud security business, taking our claim as a cloud security as a service company. With strong cloud security opportunities ahead of us, positive signals in overall customer spending and continued cost discipline, We remain cautiously optimistic about 2024. We look forward to a return to top-line growth and improved profitability. With that, I would like to thank our employees around the world for their continued efforts and turn the call over to Guy.