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189. Bull, Bear & Beyond – Corero Network Security: executive interview
8 Plays5 days ago
In this video, we speak with Carl Herberger, CEO of Corero Network Security. Carl discusses the market background that is giving rise to the strong demand for the company’s solutions that protect customers against distributed denial of service attacks. Carl also discusses why 2025 was a transitional year for the business as Corero experienced a major shift in customer demand to procure solutions on long-term multi-year subscription contracts rather than through up front capex purchases. Carl explains how the company is expanding its addressable market opportunities through new product innovation, supporting ambitions to grow revenues ahead of industry growth rates. Finally, Carl comments on the drivers to the exceptional order intake that Corero achieved in the final quarter of 2025 and highlights management's confidence for the current year.
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Transcript
Introduction to Carl Herberger and Carrero Networks
00:00:07
Speaker
Hello and welcome to Edison TV. Today I'm joined by Carl Herberger, Chief Executive Officer at Carrero Networks. Carrero Networks supplies adaptive and real-time protection against distributed denial of service attacks.
00:00:21
Speaker
So this is technology that keeps your websites running, keeps your networks going without interruption. Carl, many thanks for joining me again today. It's a pleasure, Dan.
What are DDoS attacks?
00:00:30
Speaker
And can we start by, i guess, refreshing the audience in terms of what a den distributed denial of service attack is and why this is such a growing problem for enterprises and and and and institutions today?
00:00:44
Speaker
Yet DDoS is what people commonly refer to it as, is really a category of attacks that deal with resource exhaustion. It's a technical way that that hackers or purveyors of hacktivists that try to shut down resources on the internet so that you can't operate.
00:01:09
Speaker
There all sorts of motives around it. It could be sometimes crime, sometimes it's just political, sometimes it's economic, ah geopolitical, sometimes it's actually military. so they This is one of the top two attack types in the world.
00:01:29
Speaker
and it's it's extremely different than the classic ransomware that people think about. In fact, ransomware protections will not protect you from cyber attacks that lead to operational resiliency problems. This is a lot like swarms of drones as opposed to precision preci precision artillery or something along those lines.
00:01:55
Speaker
The technical pieces are incredibly varied and they there's kind of no end to the ta attack types. And no matter what people have thought about DDoS from a year gone by or even two years gone by, the everything continues to evolve.
00:02:14
Speaker
And the attacks have never been bigger, more effective, easier to be able to manufacture and harder to defend.
Carrero's Unique Solutions for DDoS Resilience
00:02:25
Speaker
And so your product has some unique selling points. Can you can you explain what those are? Dan, as you know, I've been at the helm of Carrero for a couple of years, coming most notably from a competitor where I ran the portfolio for 10 years. So I know the space quite well. And I can tell you one of the most amazing aspects that's unique to Carrero is that of the major providers in the world that do DDoS or cyber attack resiliency,
00:02:54
Speaker
We are the only company that's ever started out to just solve this problem. All the other providers that are out there, and there's a new there's a number of them, they have all come from different heritage, different products, and often entered the adjacency somewhat disabled by using and leveraging their current portfolio platforms.
00:03:17
Speaker
As a result, we have entered a world of tremendous powerful exceptions that are meaningful to a customer that results in them being able to buy protections in the way that they want to buy versus having to have to go to a platform or a specific kind of hardware in order to address these needs.
00:03:39
Speaker
So, Carrero is software only. We're agnostic to the platforms. We can deploy almost anywhere at scale, at at small enterprise, at large, large scales, that the largest of scales that you could possibly imagine. and we're very unique in that we are the fastest and highest reporting tool out there so when it comes to our world being able to see the problem is key and we have more telemetry capability than any other provider that's out there and lastly
00:04:13
Speaker
we will manage the entire solution for you. Nobody else in this space, for all sorts of reasons, has taken on the privilege to manage this for you. So we're a total turnkey if you'd like it to be.
00:04:26
Speaker
Right. And it seems as if the market is now recognizing that in in much more
Transition to Recurring Revenue Model
00:04:31
Speaker
volume. and looking Looking at 2025, it's very much a year of two halves. You had some, I guess, changes in dynamics that that influenced H1, but you really came through in H2 very strongly. Can you talk through the the dynamics? The dynamics change.
00:04:46
Speaker
2025 was a very interesting year, a tale of two cities in some ways. But um I guess that would be the outside looking in. From my perspective, the the prospects of the business have never been better. What you had in the first half, it would be as if you were a manufacturer of, of of let's say, very large planes and that all ah Kind of in a quick period of time, your buyers went from paying the planes up front to leasing the planes.
00:05:15
Speaker
And with our with our gear, with our software, you have a tradition that's gone back for decades where people normally procure the software up front.
00:05:27
Speaker
And that tradition has now been changing pretty fast. to more of a an OpEx model, like if you will, a credit card model, a leasing model. So what we had was nice, robust sales in the first half, but we had a change in our mix that was represented by 70% of our mix now being recurring revenue or OpEx.
00:05:51
Speaker
And that had a knock-on effect on our revenue and our EBITDA, just essentially because we're recognizing less revenue in the in the near term. But the company had beautiful 20 plus percent growth on recurring revenue in the first half.
00:06:06
Speaker
As you mentioned, the second half, we adjusted our OPEX associated with the changes in the revenue projections and continue to accelerate sales in the second half. So much so that we've had, I think, ah an incredible year, a record-breaking year across the board on everything from revenues to ARR growth to EBITDA to cash generation and so forth.
00:06:31
Speaker
And we moved momentum into 2026 for sure. and The most beautiful part about the performance of 2025 was the amount of competitive estates that we replaced.
00:06:47
Speaker
So we are being ah replacing we are replacing essentially all the world's providers. In 2025, there was not a provider of DDoS that we didn't replace in a state somewhere in the world. So we're not just good for a replacement of one vendor or the other vendor. It appears as though that across the board people see us as an eligible option.
Impact of Partnerships and EU Regulations
00:07:12
Speaker
And partnerships have been a big part of your focus and your go-to-market strategy. It's strengthening those. That's right. You've recently signed a ah large deal with European Financial Services company. That's right. company and What does that tell us about your partner strategy but also your ability to penetrate enterprises? The partnerships are are foundational to who we are. We have a company of 100 people that wake up every single day thinking about how to address these problems. And we work with our partners in materially commercializing the product.
00:07:42
Speaker
ah In that partner strategy, we have three what we call alliance partners. They're OEM relationships. whereby they maintain our portfolio on their price lists.
00:07:53
Speaker
So Akamai is one of those partners. Juniper Networks, which just got acquired by HPE, and they have now changed their names to HPE Networks, and GTT. And they're all wonderfully powerful partners for us. As you mentioned, one of the European banks came through the Akamai relationship.
00:08:11
Speaker
And this was a meaningful control bank, the top five European bank. And what's really powerful about that, I think you know, Dan, is that banks are no shrinking violence when it comes to sourcing and selecting and understanding and testing technically testing.
00:08:27
Speaker
ah and they often procure in packs. So when one bank tends to move in one way, another bank will take notice and and see and understand how that was befitting for them. it it might be likewise befitting for somebody else.
00:08:44
Speaker
What's very interesting about the European Bank was that was procured fundamentally on a new regulation in the EU. So the EU has this new regulation called DORA, the Digital Operational Resiliency Act.
00:09:00
Speaker
And DORA directs critical infrastructure of which banks are one, but not only. You have tier one operators for the internet, you have of course electric co-ops and water co-ops and so forth.
00:09:13
Speaker
All critical infrastructure must ensure that they're tending to the resiliency of their cyber operations. And they must do that through many ways. One way is having DDoS protection.
Sales Strategy and Leadership Enhancements
00:09:27
Speaker
And um getting the sales team, the sales engine motoring, has really been a key focus for your sales. and And recently you've strengthened further with a new channel sales. That's right. yeah that's right Can you talk through the rationale there?
00:09:42
Speaker
Yeah, sure. So for about two years, we've been focused on making sure that our sales team has great degree of efficacy. Right people, right geographies, right partners. rights mentality and honestly a sense of confidence. So some of this is qualitative, some of this is quantitative. And upon and upon reaching a ah great degree of efficacy with the deployed sales team,
00:10:12
Speaker
It sets conditions to be able to actually have now a more repeatable, more transaction based business building upon a partner community. So we took on a search to to find ah a really powerful ah channel leader that has done this many, many times. We had great candidates.
00:10:33
Speaker
ah and we selected Michelle, McBain is her name. She came on over from most notably from SonicWall, but she has a long history including running channels over at at Cisco Networks.
00:10:49
Speaker
And she was thrilled to have the opportunity to be able to take on our channel organization. Now she's building out an organization, it's just not her only. So she'll be she'll be employing numerous resources around the world that will be directed upon her. And and she comes with an ecosystem and with, frankly, a tribe of ah people that know her and love her. and We think that that's going to have tremendous knock-on effect on a business.
00:11:18
Speaker
And the other key, I guess, leg of your growth strategy has been product development, building that, expanding that.
Product Launches and Innovation
00:11:25
Speaker
And I guess the two key new products are Core and the 400... The 400 gig. Yeah.
00:11:33
Speaker
Can you discuss those? um so The product innovation that we had last year in Carrero has been the most robust product innovation I've ever had in my life. And that's not just my comment.
00:11:48
Speaker
the The SVP that runs our R&D engineering, who has been at this for also 40 years, ah lots of different organizations, has also suggested that he's never seen anything like it. So through a combination of fast adoption of AI and as well as having a really powerful, well-steeped engineering team, we have developed not only developed six new products,
00:12:18
Speaker
But they've all meaningfully added to revenue last year straight away. If you could tell if I could tell you that I could start a business with one product that if it's sold in the first year would indicate runaway success. But we've had six products.
00:12:36
Speaker
I could go through them in great detail. The core portfolio has four products underneath it. We have 400 gig that we released in ah a hardware version and then we just release it in a very compelling software version, something we call bare metal version. and it's been selling like wild, like hotcakes.
00:12:57
Speaker
And what you'll see is yet even more innovation in 2026, but the the acceptance in the marketplace for what we've produced and the ability for us to go into adjacent markets has just been really well accepted.
00:13:12
Speaker
So just going back to the performance at the back end of the year, it seems pretty clear to us that you had a really strong Q4. Order book was up 74% and obviously your ARR increased by 23%.
00:13:26
Speaker
twenty three percent So that obviously sets you up for a a strong 2026.
Strong Financials and Future Outlook
00:13:32
Speaker
From where you see it entering the year and what you've seen in terms of the sales pipeline and so on, what should we be thinking about for 2026?
00:13:39
Speaker
It was the first quarter we did eight digits, Stan, so we had a lot of we've had a lot of good fortune coming into the... And ah and as you suggest, we we added $5 million dollars of recurring revenue, 23% of last year. and having million dollars plus or minus heading into the year, allows us to have a lot of confidence in the estimates and the consensus estimates that are already in the street for 2026.
00:14:09
Speaker
um Moreover, the execution is demonstrating our ability to do more in the in the space. So whether it be the partnerships executing more effectively, our internal sales force, direct sales force executing more effectively, the investments that we're making in our internal channels organization to be able to have more transactional based business with the new product portfolio that provides for more addressable market execution.
00:14:37
Speaker
I think we're laying the conditions for an incredible year. Looks as if it you've got an exciting year ahead, Carl. Many thanks for joining us again today. Dan, it's been a pleasure. Thank you very much.