Radware Ltd.

Welcome to the Radware conference call discussing first quarter 2024 results and thank you all for holding. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. As a reminder, this conference is being recorded May 8, 2024. I would now like to turn the call over to Iska Erez, Director, Investor Relations at Radware. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Radware's first quarter 2024 earnings conference call. Joining me today are Roy Zisopel, President and Chief Executive Officer, and Gayavidan, Chief Financial Officer. A copy of today's press release and the financial statements, as well as the investor kit for the first quarter, 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. An actual result could differ materially from Rodworth's current forecast and estimates. Factors that could cause or contribute to such differences include, but are not limited to, impact from the 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 risks detailed from time to time in RADWIS filing. 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 20F as filed on March 25th, 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. I will now turn the call to Roy Zisopel.

Thank you, Yiska, and thank you all for joining us today. We ended the first quarter of 2024 with revenues of $65 million and non-GAAP earnings per share of $0.16, both above the high end of our guidance. We diligently managed expenses and improved our profitability. Similar to previous quarter, we witnessed a favorable business environment marked by an uptick in large capex deals more customer engagement, and a healthier pipeline. In the first quarter, total adjusted ARR increased 8% year-over-year, driven by growth in our cloud and subscription business. Subscription revenues now account for 46% of total revenue, compared to 41% in the first quarter of last year, demonstrating our ongoing shift to SaaS models. Our cloud security business sustained robust growth, with cloud ARR growing again 22% year-over-year. This performance is also underscored by a record number of new bookings and new logos. The momentum behind our cloud security business is driven by four key growth drivers that we believe are sustainable. First, our product offering fuel strength. consistently draws security conscious customers. Our cloud security offering leads with a large battery of AI powered security algorithms designed to detect and block attacks without disrupting legitimate traffic flows. Customers highly value these unique capabilities, driving numerous new logos and expansion deals. Second, The ongoing expansion of our cloud security offering creates additional growth and upsell opportunities. During the first quarter, we announced the expansion of our cloud application and network security services to include a new hardware load balancer as a service and enhanced cloud network analytics service. These services assist organizations in optimizing application performance, ensuring availability, and maximizing network monitoring and visibility during peacetime. They complement the value we provide, further strengthening our proposition to clients. Third, the steady expansion of our geographical footprint creates new customer acquisition opportunities. During the first quarter, we expanded our global cloud service network and launched a new DDoS scrubbing center in Paris. we plan to introduce additional locations later in the year. Fourth, a pivotal factor is the surge in application and network attacks, in particular Layer 7 Web DDoS attacks, fueling customer demand for enhanced protection. This new wave of Web DDoS attacks has been motivated by major geopolitical conflicts and activist activities. A trend set during Russia invasion of Ukraine had led to an increased frequency and sophistication of Web DDoS attacks. These attacks emerged last year and intensified in the previous quarter, with expectations for further escalation in frequency, complexity, and sophistication throughout 2024. The growing demand for advanced real-time protection is evident in the success of our DefenseProX solution. which provides protection against Web DDoS and advanced DNS attacks. Defense Core X has performed very well and been highly competitive. The AI-powered offering is unmatched in its ability to automatically detect and surgically block Web DDoS attacks. This result is improved security and faster time to resolution, crucial for maintaining customer business continuity. The strength of this value proposition is evident in some of our first quarter wins. For example, we signed two major seven-digit defense projects deals. One with a tier one carrier in North America that upgraded the DDoS protection. The other win was with a major European financial institution that experienced a large layer seven attack. The latter also replaced their incumbent cloud DDoS provider with our hybrid Cloudido solution for a complete protection. Our partnership with Cisco and Check Point was another contributor to our performance in the first quarter. We kicked off 2024 with record Cisco bookings following a record year in 2023, while Check Point also demonstrated a strong start for the year. To protect our customers, we're constantly innovating our offering. With AI at the fingertips of attackers, threats are becoming not only increasingly complex and adaptive, but also with reduced time to attack. In response, we're taking a fight AI with AI approach to security. A good example for our fight AI with AI strategy is the enhancements we introduced to our bot manager. The newest edition of our bot manager is designed to automatically mitigate a new generation of aggressive AI-driven and human-like bots without blocking legitimate users. For our customers, this means better end-user experience and a reduction in costly business impacts like customer churn and lost revenues. Another example is the AI-powered, all-free DNS DDoS protection solution. Using our patented algorithms, it automatically distinguishes between legitimate and attack traffic and instantly adapts DDoS defenses based on the specific attacker. According to our recent threat intelligence report, DNS flood attacks increased nearly 400% between 2022 and 2023. And these new algorithms will significantly shorten time to resolution when countering even the most sophisticated DNS attacks. Our offerings continue to receive recognition by industry analysts. In Quadrant 2024 Spark Metrics report for DDoS mitigation, Radwer was named a leader for the fourth consecutive year. Radwer was also named as an other leader as well as product, innovation, and market leader in Kappinger Call Leadership Compass Report for Web Application Fireworks. In GigaOM 2024 Report for Application and API Security, Radler earned recognition as a fast mover and leader. In addition, we were the only vendor to earn GigaOM's top scores for AI-enhanced vulnerability detection and key bot management features. In one quarter, we were recognized as a leader in DDoS, in web application firewall, and in API security. This is another evidence for our best-of-suite approach. We provide customers with an integrated suite to protect application and data center attacks, while our capabilities in each of the core pillars of DDoS, WAF, API, and bot security lead the market when evaluated as a standalone capability. Our customers receive best of bit security alongside a fully integrated suite and best of suite. In summary, we began 2024 with a solid performance. We delivered sustained growth in cloud ARR, improved profitability, expanded market presence, and leveraged momentum with our OEMs. These results were supported by improvements in the business environment, rebounding customer spending, and heightened cyber attacks. We believe Radu has the right offering to meet the market demand for best-in-class security and faster response and recovery times, and we intend to capitalize on that for ongoing growth and increased profitability.