For us, it’s a great business opportunity as we are enjoying their power to the market and we’ve seen good outcomes with that, we’re planning to continue.
George Nader: Got it. Okay, that’s very helpful. And then just broader question, what are you seeing competitively in the marketplace, folks like Akamai or Cloudflare or F5? What’s the picture? Thanks.
Roy Zisapel: Yeah, so in our cloud security, it’s really competing with Akamai and Cloudflare. And we feel very good about our competitive positioning as it relates to the products. You see all the feedback from the analysts, very strong, large customer activity. But we also see the opportunity, the opportunity is very large. I think we are a very strong alternative, especially for the security conscious buyers, those that put security on top. That’s where we are excelling and the market opportunity is huge. And we actually liked our competitive position there. In the more traditional business of ADC on prem appliances, definitely we continue to see F5 and harbor there. I would not say there are much changes to the competitive landscape there.
Again, in DDoS with DefensePro X, we believe we have the best mitigator in the market. And as we said in Q4 and now in Q1, we started to see the large customers doing those refreshes towards the DefensePro X and we are quite satisfied with the level of activity. That’s one of the reasons for beyond the cloud security, for our optimism of 2024.
George Nader: Great, thank you very much.
Roy Zisapel: Thank you.
Operator: We have a follow up question from the line of Alex Henderson of Needham. Your line is open.
Alex Henderson: Great, thanks. Thanks so much. Clearly AI is getting a lot of attention. There seems to be an increase in the amount of spend going into it at most enterprises. Has there been an impact on their decision process as a result of the challenges that they have around the mechanics of the security and the mechanics of the AI deployment? If you think about last year, most of the concern was, gee, I don’t know about this economy, but now it seems like there’s a pretty big budget, but there’s hesitation resulting from, I know, I want to spend, but I’m not exactly sure how to get my AI deployed or how to secure it. And so I guess the question is, are you seeing that, and when do you think that that might loosen up? Is it going to be a bigger back half because of it? And how does AI applications drive your offerings?
Roy Zisapel: Yeah, so thanks, Alex. So I think there’s some discussions about it, but it’s very early on. The large enterprises are just starting their journey and obviously AI applications will need security, especially giving all the models and teaching the models and ensuring the, the data is correct and right and the criticality of that data and information. But it’s very early on. I don’t see that yet as a driver behind our cloud application security growth. Having said that, once they are deploying that, we have a very strong platform end to end, that encompasses DDoS, web application, firewall, API security, which is going to be very important with AI applications, bot security, which again is going to be very important with AI applications.
And that platform is getting stronger and stronger. So, whether it’s a mission critical application or it’s going to be an AI backed application, I think we are very well positioned. I don’t think that wave has started and also in our analysis and forecast for 2024, we are not building or counting on that to start. We think what we have with the current attack landscape, the customer need for better application security, our offering, that can drive sustained growth in that area.
Alex Henderson: Over the last two to three years, you guys have signed a slew, kind of lost count at over 20 partners on regional and basis across the globe. It does sound like some of that stalled because of the macro conditions and the supply chain issues. Is that, are all of those partnerships that you have and distribution expansion that you announced over those years coming back now, is that finally showing some traction and signs of life?
Roy Zisapel: Yes. So, like you said, some have stalled and I would not say they’re contributing, but some are definitely increasing the contribution and increasing their participation. We do see some of those partners scaling their ARR with us and the new logo wins. So that’s definitely helping our cloud application security. We see a mix of partners, carriers, MSSP’s regular vars playing in that area and we definitely are enjoying some of the growth in our cloud ARR. This consistent 20% plus in the last couple of years is driven by those partnerships. We do plan to enhance that. You know, if you look in our announcements around our MSSP programs and so on, it’s definitely targeting those partnerships.
Alex Henderson: Makes sense. And congratulations. One more question. The no name acquisition that Akamai just announced brings up the question about the API players that are in the private market. Are you seeing no names in the salts? And does that acquisition change the dynamics at all in competing with Akamai, do you think?
Roy Zisapel: Yeah. So I think it’s another proof point to the fact that you really need DDoS, WAF, API and BOS security in your cloud application security program and the importance and the value that the players are putting into that. Definitely we’re seeing still a whole set of private companies in API security, but I believe that the winning solution will be an integrated platform for application security. And that’s what we are working on and continue to develop. As I’ve mentioned, we just won leadership by GigaOm in API security. We feel very good there. I think based on our integrated platform and the algorithms we’ve put in place, we are positioned well but I think those are good signs for investors for the value and the potential that different market players are seeing in API security. So definitely another proof point to our strategy and we are focused as well on building and scaling our API security.
Alex Henderson: Great, look, congratulations on the quarter and the signs of life reacceleration. It’s nice to see it’s been a cold winter.
Roy Zisapel: Thank you.
Operator: Your next question comes from the line of Tim Horan of Oppenheimer. Your line is open.
Timothy Horan: Thanks, guys. Some of your competitors are also bundling in networking in different forms and different forms of compute. Do you think that’s the right kind of strategy or the, you know, what’s the benefits of that or not? And is that making things more or kind of less competitive for what you’re doing? And secondly, congratulations on the turnaround here. What’s the cut, the key kind of one or two things that you think has really caused the turnaround? I know there’s a lot going on, but how sustainable do you think it is? Thank you.
Roy Zisapel: Yeah. So, several points on the competitive landscape there are offering in the market that are bundling edge compute, networking security and so on. We are focused on the security side. So best of bridge security and as we’ve mentioned, this best of suite. So, taking everything in application and data center security and really providing the best integrated suite for that, we think that’s the right definition for our security conscious bias in the large enterprises. That’s the right definition. We are not planning to go into edge compute. We have our partnerships with AWS, GCP and others, and if needed we can leverage that. But we are not going to step into that. We’re going to put the complete focus on the security arena.
We think it’s critical. We think that’s what drives the buying decisions in our, a large enterprise segment. Regarding the improvement in the business, I think it comes from three areas. One, the continuous growth of cloud. The cloud upset the ARR. It’s becoming a bigger and bigger portion as we continue to grow it. And that’s impacting the business. It drives a lot of new customer logo wins and so on. So that’s the first item. The second item that we’ve mentioned, we’re starting to see the large CapEx deals and the movement in the large enterprises back to investment mode, especially with the DefensePro X. It’s a combination of the attacks that they’re seeing, all those web DDoS attacks, DNS attacks. They do need better protection on one end.
And second, the overall improvement, they stalled for quite some time. They need to move forward in capacity, in tools. So that is also assisting. And we believe we’ll continue to contribute in 2024. We like the pipeline and the progress we’re seeing there. And the third thing is that we’ve aligned our expenses better. And that also, like I mentioned, drives improvement in profitability and efficiency. So those are the three major building blocks. We believe we will continue to grow in cloud. We believe the movement we’re seeing in our overall security business, in the large enterprises driven by the attack landscape should continue. And as Guy mentioned, we are very prudent in managing the expenses to ensure there is the profitability leverage.
Timothy Horan: Very helpful. Thank you.
Operator: There are no further questions at this time. I will now turn the conference back over to Roy for the closing remarks.
Roy Zisapel: Okay. Thank you everyone for joining us today and have a great day.
Operator: Thank you. That concludes today’s conference call. Thank you all for joining, you may now disconnect.
