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Radware Ltd (NASDAQ:RDWR), a cybersecurity company with a market capitalization of $975 million, reported its fourth-quarter 2024 earnings, surpassing analyst expectations with a notable increase in earnings per share (EPS) and revenue. The company’s EPS reached $0.27, exceeding the forecast of $0.22, while revenue came in at $73 million, above the anticipated $70.56 million. The positive results spurred a premarket stock price increase of 7.62%, reaching $25, which is above its 52-week high of $24.76. According to InvestingPro, analysts maintain price targets ranging from $23 to $30, suggesting potential upside from current levels.
Key Takeaways
- Radware reported a 12% year-over-year growth in Q4 revenue.
- The company’s EPS of $0.27 beat the forecast by 22.7%.
- Stock price surged 7.62% in premarket trading following the earnings release.
- Strong growth noted in cloud annual recurring revenue (ARR), up 19%.
- Radware ended Q4 with $420 million in cash and securities.
Company Performance
Radware’s performance in Q4 2024 demonstrated significant growth, with revenue rising by 12% year-over-year to $73 million. The company also saw its net income more than double to $11.9 million, reflecting a robust expansion in its profitability. InvestingPro data reveals an impressive gross profit margin of 80.48%, highlighting the company’s operational efficiency. This strong performance aligns with a broader trend in the cybersecurity industry, where demand for cloud and AI-driven security solutions is on the rise. InvestingPro subscribers have access to 8 additional key insights about Radware’s financial health and growth prospects.
Financial Highlights
- Revenue: $73 million, up 12% year-over-year
- EPS: $0.27, compared to $0.13 in Q4 2023
- Gross Margin: Expanded to 82.4%
- Operating Income: Nearly tripled to $9 million
- Cash Flow from Operations: $12.7 million
Earnings vs. Forecast
Radware’s actual EPS of $0.27 surpassed the forecast of $0.22, marking a 22.7% surprise. Revenue also exceeded expectations, coming in at $73 million against a forecast of $70.56 million. This represents a significant beat, reflecting the company’s effective cost management and strategic focus on high-growth areas like cloud security.
Market Reaction
Following the earnings announcement, Radware’s stock price rose 7.62% in premarket trading, reaching $25. This surge positions the stock above its previous 52-week high of $24.76, indicating strong investor confidence in the company’s performance and future prospects. With a beta of 0.97, the stock has historically shown stability relative to the market. InvestingPro’s comprehensive analysis indicates the stock is currently trading near its calculated Fair Value, with detailed valuation metrics available to subscribers through the Pro Research Report.
Outlook & Guidance
Looking ahead, Radware has provided a Q1 2025 revenue guidance of $70-$71 million and expects diluted EPS to range between $0.22 and $0.23. The company plans to continue its investment in cloud security and aims to accelerate ARR growth, targeting close to $100 million in cloud security ARR by the end of 2025.
Executive Commentary
CEO Roy Zisipel emphasized the company’s strategic focus, stating, "We are literally fighting AI with AI," highlighting Radware’s commitment to leveraging advanced technologies in its security solutions. He also remarked, "Good enough is not good at all in security," underscoring the company’s dedication to maintaining high standards in its offerings.
Risks and Challenges
- Cautious Enterprise Spending: Ongoing economic uncertainties may impact client budgets.
- Increased Cyber Attack Sophistication: The evolving threat landscape requires continuous innovation.
- Market Competition: Intense competition in the cybersecurity sector could pressure margins.
- Supply Chain Disruptions: Potential disruptions could affect hardware availability.
- Regulatory Changes: Evolving cybersecurity regulations may require strategic adjustments.
Q&A
During the earnings call, analysts focused on Radware’s investment in cloud security and its performance in the North American market. Questions addressed the company’s strategy to sustain growth amid cautious enterprise spending and its plans to capitalize on the platformization trend in the security market.
Full transcript - Radware Ltd (RDWR) Q4 2024:
Conference Operator: Welcome to the Radware Conference Call discussing Fourth Quarter and Full Year twenty twenty four Results. And thank you all for holding. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded 02/12/2025. I would now like to turn the call over to Yiska Erez, Director, Investor Relations at Radware. Please go ahead.
Yiska Erez, Director, Investor Relations, Radware: Thank you, operator. Good morning, everyone, and welcome to Radware’s fourth quarter and full year twenty twenty four earnings conference call. Joining me today are Roy Zisipel, President and Chief Executive Officer and Gaia (NASDAQ:GAIA) Vidhan, Chief Financial Officer. A copy of today’s press release and financial statements as well as the Investor Kit for the fourth quarter are available in the Investor Relations sector 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 Radware’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, general business conditions and our ability to address changes in our industry, changes in demand for products, the timing and 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. I will now turn the call to Roy Zisapel.
Roy Zisipel, President and Chief Executive Officer, Radware: Thank you, Iskall, 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% YROVERE 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 production 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 partnerships 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 growth last year was achieved amid the rapidly evolving cybersecurity landscape. 2024 was marked by a sharp escalation in both the frequency and sophistication of cyber attacks. 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 the precision of their attacks. AI powered tools effectively lowered the barrier to entry for attackers, while simultaneously raising the urgency for organizations to strengthen the cyber defenses. In parallel, throughout 2024, we made significant strides 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 APK AI. The new cloud service offers soft teams precisely tailored automated remediation plans for data center security incidents. It has already been well received by customers cutting Mean Time to Resolution by up to 95%. We have a comprehensive set of AI driven capabilities in our relief 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 a seven digit deal with a U.
S. Service provider for a hybrid cloud DDoS deal combining Defense Pro X and cloud DDoS protection and completely displacing the incumbent cloud DDoS provider. This wing is a great example of the significant competitive advantage we have with hybrid IDOS, which enhances both the customer security posture and network latency. Collaboration with our OEM partners further amplified our success in 2024. Cisco (NASDAQ:CSCO) 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 Radul customer. These important partnerships produced some notable deals during the fourth quarter. For example, in partnership with Checkpoint, we closed a seven digit deal with one of the largest banks in the world. As a long standing Radware customer, the bank relies on our Didos solution as a critical line of defense against attacks. In partnership with Cisco, we secured new logo win with a US IoT solution provider.
After Adidos attack in October 2024 and dissatisfaction with their incumbent ClouDios provider response, 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, Radul was named a leader and fast mover in the big arm 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.
Guy Vidhan, Chief Financial Officer, Radware: 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 are 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 four grew 12% year over year to SEK 73,000,000, while full year 2024 revenue increased by 5% to SEK $275,000,000.
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 (EPA:TTEF) ARR grew 8% year over year to $227,000,000 with cloud ARR rising 19% to SEK 77,300,000.0, 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 47% for the full year, compared to 44% in both period last year. Additionally, the increase is 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 growth in The Americas, where revenue increased 33% year over year to $32,800,000 accounting for 45% of total revenue.
Throughout 2024, the Americas demonstrated steady progress achieving a 14% year over year growth to SEK 117,700,000.0. In EMEA, Q4 revenue came in at SEK 23,300,000.0, 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 I’ll now discuss 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, $3,400,000 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 doubled to $11,000,000 compared to $5,400,000 in the same period of last year. Radware’s adjusted EBITDA excluding the Hox 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. Radware’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 HAWKS business, was $45,600,000 compared to $28,400,000 in 2023.
Radware’s core adjusted EBITDA margin, excluding the HAWKS business, were eighteen point eight percent and sixteen point six percent 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 quarter.
Net income in the fourth quarter more than doubled to $11,900,000 compared to $5,500,000 in the same period last year. For the full year, net income for 2024 doubled to $37,700,000 compared to $18,900,000 in 2023. Diluted earnings per share for Q4 twenty twenty four 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 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 equivalents, 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 R350 million dollars representing 13% year over year growth and underscoring our solid future revenue commitment. 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 total 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 expenses to be between $50,500,000 to $51,500,000 and we expect Q1 twenty twenty five non GAAP diluted net earnings per share to be between $0.22 and $0.23 I’ll now turn the call over to the operator for questions. Operator, please?
Conference Operator: Thank you. We will now conduct a question and answer session. Our first question comes from Chris Reimer with Barclays (LON:BARC). Please proceed.
Chris Reimer, Analyst, Barclays: 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 for 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?
Roy Zisipel, President and Chief Executive Officer, Radware: Yes. Okay. Thanks a lot, Chris. So first, I think what we’re seeing across the world was still some cautious spending 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 enterprise moving on 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 them moving because of the high necessity. So sometimes they need to allocate immediate budget if there’s incidental 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’re dealing with the real time protection all the time. Now we’ve seen strong market potential in North America and we continue to invest in that market. We think there’s huge opportunity for us for growth. At the same time in the international market, we do believe as we are leveraging the OEM partners, the MSSB, 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.
Chris Reimer, Analyst, Barclays: Great. Thanks. That’s good color. Just referring to your comments about your 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 other OpEx savings?
Roy Zisipel, President and Chief Executive Officer, Radware: 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 some reallocation of resources and expense 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 that we can do more with our OEM partners, we can do more with MSSBs. So cloud security specifically, we’re going to put more investment and we believe it would also match revenue growth as well.
Chris Reimer, Analyst, Barclays: Got it. Thanks. That’s it for me.
Roy Zisipel, President and Chief Executive Officer, Radware: Thank you.
Conference Operator: Thank you. The next question comes from Ryan Kontz with Needham and Company. Please proceed.
Ryan Kontz, Analyst, Needham and Company: Thanks for the question and really nice 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.
Roy Zisipel, President and Chief Executive Officer, Radware: 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 Check Point and Cisco. I highlighted only a couple of large ones, but we had 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 our 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 digit bookings, double digit customer growth. So a lot of the indicators in cloud were 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.
Ryan Kontz, Analyst, Needham and Company: That’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?
Roy Zisipel, President and Chief Executive Officer, Radware: So I think in cloud security for the applications and data centers, our position and you see it also from the analyst 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 AI and Gen AI based on LLMs or APIs and for Didos and this AI SoCX that I mentioned, some are other mathematical algorithms. So I think in that respect, we really strengthened our competitive advantage leading with security or best security this market.
We have very good competitors, Cloudflare (NYSE:NET) and Akamai (NASDAQ:AKAM), but I think as you can see, we’re doing well. I’ve mentioned we are putting our eye towards close to 100,000,000 ARR ARR by end of this year. So we feel very good about our competitive positioning.
Ryan Kontz, Analyst, Needham and Company: Great commentary. Thank you. And in terms of your broader ecosystem that you’re selling into with your customers, are there any integrations that you’re delivering to market that are maybe helping you in terms of partners or North Pine interfaces at all that you’re working on?
Roy Zisipel, President and Chief Executive Officer, Radware: 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 Checkpoint, 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 SIEM systems. So we released integration from our cloud security both for AWS and Azure, SIEM to Splunk (NASDAQ:SPLK) and so on.
So we are constantly integrating our systems into the broader security ecosystem. A lot of it is by the way through specific requests by our customers. It’s 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.
Ryan Kontz, Analyst, Needham and Company: Great. That’s all I have. And a brilliant nice quarter guys.
Roy Zisipel, President and Chief Executive Officer, Radware: Thank you.
Conference Operator: The next question comes from Tim Haran with Oppenheimer. Please proceed.
Chris Reimer, Analyst, Barclays: Thanks
Tim Haran, Analyst, Oppenheimer: guys. With Cochlear 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 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 do with the go to market on direct sales or how else you can improve it from here? Thank you.
Roy Zisipel, President and Chief Executive Officer, Radware: So 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 should target, which is the application and data center protection. So it’s the web application firewall, the DDoS, the API and bot. And we’ve integrated into our cloud apps, like 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 sell, 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 how 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 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. So, 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 are all set in that regard. So that’s for the first question. Regarding the go to market approach, we are a channel organization. We do have direct touch sales motion across the world. We did strengthen that, especially in North America on both hunting and farming go to market approaches.
And together with that we are putting more and more efforts into OEMs, into MSSDs to scale channels in general to scale the business and I think at least in the OEMs, MSSDs, some channel we are seeing that scale as mentioned OEM being record year by the way record for all and record for each one separately as well. So we are seeing that start of the scale through channels MSSBs and OEMs taking effect. Thank
Conference Operator: you. Thank you. There are no further questions in queue at this time. I would like to turn the call back to management for closing comments.
Roy Zisipel, President and Chief Executive Officer, Radware: Thank you everyone for attending and have a great day.
Conference Operator: This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
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