Radware Reports Second Quarter 2023 Financial Results

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Aug 02, 2023

Second Quarter 2023 Financial Results and Highlights

  • Revenue of $65.6 million, down 13% year-over-year
  • Total ARR of $208.3 million, up 7% year-over-year
  • Non-GAAP gross margin of 82.3% compared to 83.3% in the second quarter of 2022
  • Non-GAAP EPS of $0.10; GAAP net loss per diluted share of $0.13

TEL AVIV, Israel, Aug. 02, 2023 (GLOBE NEWSWIRE) -- Radware® ( RDWR), a leading provider of cyber security and application delivery solutions, today announced its consolidated financial results for the second quarter ended June 30, 2023.

“During the second quarter of 2023, we continued to execute on our cloud security strategy, accelerating our cloud ARR growth 23% year-over-year,” said Roy Zisapel, Radware’s president and CEO. “At the same time, we encountered headwinds in on-premise appliance sales. As the macroeconomic environment evolves, we will continue to align our investments with our key priorities, which include driving cloud security growth, enhancing our go-to-market partnerships, and expanding into the mid-sized enterprise market.”

Financial Highlights for the Second Quarter 2023
Revenue for the second quarter of 2023 totaled $65.6 million:

  • Revenue in the Americas region was $26.8 million for the second quarter of 2023, a decrease of 10% from $29.7 million in the second quarter of 2022.
  • Revenue in the Europe, Middle East, and Africa (“EMEA”) region was $22.6 million for the second quarter of 2023, a decrease of 24% from $29.7 million in the second quarter of 2022.
  • Revenue in the Asia-Pacific (“APAC”) region was $16.2 million for the second quarter of 2023, an increase of 3% from $15.7 million in the second quarter of 2022.

GAAP net loss for the second quarter of 2023 was $5.8 million, or $(0.13) per diluted share, compared to GAAP net income of $3.2 million, or $0.07 per diluted share, for the second quarter of 2022.

Non-GAAP net income for the second quarter of 2023 was $4.5 million, or $0.10 per diluted share, compared to non-GAAP net income of $8.1 million, or $0.18 per diluted share, for the second quarter of 2022.

As of June 30, 2023, the Company had cash, cash equivalents, short-term bank deposits, and marketable securities of $402.0 million. Net cash provided by operating activities was $4.9 million in the second quarter of 2023.

Non-GAAP results are calculated excluding, as applicable, the impact of stock-based compensation expenses, amortization of intangible assets, litigation costs, acquisition costs, exchange rate differences, net on balance sheet items included in financial income, net, and tax-related adjustments. A reconciliation of each of the Company’s non-GAAP measures to the most directly comparable GAAP measure is included at the end of this press release.

Conference Call
Radware management will host a call today, August 2, 2023, at 8:30 a.m. EDT to discuss its second quarter 2023 results and the Company’s third quarter 2023 outlook. To participate on the call, please use the following numbers:
U.S. participants call toll free: 888-510-2008
International participants call: 1 646-960-0306
Conference ID: 1864701

A replay will be available for two days, starting two hours after the end of the call, on telephone number +1-647-362-9199 or (US toll-free) 800-770-2030. Passcode 1864701.

The call will be webcast live on the Company’s website at: http://www.radware.com/IR/. The webcast will remain available for replay during the next 12 months.

Use of Non-GAAP Financial Information and Key Performance Indicators
In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), Radware uses non-GAAP measures of gross profit, research and development expense, selling and marketing expense, general and administrative expense, total operating expenses, operating income, financial income, net, income before taxes on income, taxes on income, net income and diluted earnings per share, which are adjustments from results based on GAAP to exclude, as applicable, stock-based compensation expenses, amortization of intangible assets, litigation costs, acquisition costs, exchange rate differences, net on balance sheet items included in financial income, net, and tax-related adjustments. Management believes that exclusion of these charges allows for meaningful comparisons of operating results across past, present, and future periods. Radware’s management believes the non-GAAP financial measures provided in this release are useful to investors for the purpose of understanding and assessing Radware’s ongoing operations. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is included with the financial information contained in this press release. Management uses both GAAP and non-GAAP financial measures in evaluating and operating the business and, as such, has determined that it is important to provide this information to investors.

Annual recurring revenue ("ARR") is a key performance indicator defined as the annualized value of booked orders for term-based cloud services, subscription licenses, and maintenance contracts that are in effect at the end of a reporting period. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of operations. We consider ARR a key performance indicator of the value of the recurring components of our business.

Safe Harbor Statement

This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made herein that are not statements of historical fact, including statements about Radware’s plans, outlook, beliefs, or opinions, are forward-looking statements. Generally, forward-looking statements may be identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could.” Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results, expressed or implied by such forward-looking statements, could differ materially from Radware’s current forecasts and estimates. Factors that could cause or contribute to such differences include, but are not limited to: the impact of global economic conditions and volatility of the market for our products; natural disasters and public health crises, such as the coronavirus disease 2019 (COVID-19) pandemic; a shortage of components or manufacturing capacity could cause a delay in our ability to fulfill orders or increase our manufacturing costs; our business may be affected by sanctions, export controls and similar measures targeting Russia and other countries and territories as well as other responses to Russia’s military conflict in Ukraine, including indefinite suspension of operations in Russia and dealings with Russian entities by many multi-national businesses across a variety of industries; our ability to successfully implement our strategic initiative to accelerate our cloud business; our ability to expand our operations effectively; timely availability and customer acceptance of our new and existing solutions; risks and uncertainties relating to acquisitions or other investments; the impact of economic and political uncertainties and weaknesses in various regions of the world, including the commencement or escalation of hostilities or acts of terrorism; intense competition in the market for cyber security and application delivery solutions and in our industry in general, and changes in the competitive landscape; changes in government regulation; outages, interruptions, or delays in hosting services or our internal network system; compliance with open source and third-party licenses; the risk that our intangible assets or goodwill may become impaired; our dependence on independent distributors to sell our products; long sales cycles for our solutions; changes in foreign currency exchange rates; undetected defects or errors in our products or a failure of our products to protect against malicious attacks; the ability of vendors to provide our hardware platforms and components for our main accessories; our ability to protect our proprietary technology; intellectual property infringement claims made by third parties; changes in tax laws; our ability to realize our investment objectives for our cash and liquid investments; our ability to attract, train, and retain highly qualified personnel; and other factors and risks over which we may have little or no control. This list is intended to identify only certain of the principal factors that could cause actual results to differ. For a more detailed description of the risks and uncertainties affecting Radware, refer to Radware’s Annual Report on Form 20-F, filed with the Securities and Exchange Commission (SEC), and the other risk factors discussed from time to time by Radware in reports filed with, or furnished to, the SEC. Forward-looking statements speak only as of the date on which they are made and, except as required by applicable law, Radware undertakes no commitment to revise or update any forward-looking statement in order to reflect events or circumstances after the date any such statement is made. Radware’s public filings are available from the SEC’s website at www.sec.gov or may be obtained on Radware’s website at www.radware.com.

About Radware
Radware® ( RDWR) is a global leader of cyber security and application delivery solutions for physical, cloud, and software defined data centers. Its award-winning solutions portfolio secures the digital experience by providing infrastructure, application, and corporate IT protection, and availability services to enterprises globally. Radware’s solutions empower enterprise and carrier customers worldwide to adapt to market challenges quickly, maintain business continuity, and achieve maximum productivity while keeping costs down. For more information, please visit the Radware website.

Radware encourages you to join our community and follow us on: Facebook, LinkedIn, Radware Blog, Twitter, YouTube, and Radware Mobile for iOS and Android.

©2023 Radware Ltd. All rights reserved. Any Radware products and solutions mentioned in this press release are protected by trademarks, patents, and pending patent applications of Radware in the U.S. and other countries. For more details, please see: https://www.radware.com/LegalNotice/. All other trademarks and names are property of their respective owners.

Radware believes the information in this document is accurate in all material respects as of its publication date. However, the information is provided without any express, statutory, or implied warranties and is subject to change without notice.

The contents of any website or hyperlinks mentioned in this press release are for informational purposes and the contents thereof are not part of this press release.

CONTACTS
Investor Relations:
Yisca Erez, +972-72-3917211, [email protected]

Media Contact:
Gerri Dyrek, [email protected]



Radware Ltd.Condensed Consolidated Balance Sheets(U.S. Dollars in thousands) June 30, December 31, 2023 2022 (Unaudited) (Unaudited)Assets Current assets Cash and cash equivalents42,644 46,185 Available-for-sale marketable securities77,222 44,180 Short-term bank deposits222,769 207,679 Trade receivables, net16,820 17,752 Other receivables and prepaid expenses9,815 7,196 Inventories12,323 11,428 381,593 334,420 Long-term investments Available-for-sale marketable securities59,375 90,148 Long-term bank deposits0 43,765 Severance pay funds2,092 2,146 61,467 136,059 Property and equipment, net20,224 21,068 Intangible assets, net17,702 19,686 Other long-term assets41,168 41,269 Operating lease right-of-use assets20,776 23,078 Goodwill68,008 68,008 Total assets610,938 643,588 Liabilities and shareholders' equity Current Liabilities Trade payables7,847 6,464 Deferred revenues111,309 108,243 Operating lease liabilities4,633 4,685 Other payables and accrued expenses36,391 44,643 160,180 164,035 Long-term liabilities Deferred revenues70,369 72,219 Operating lease liabilities17,210 19,461 Other long-term liabilities18,809 19,430 106,388 111,110 Shareholders' equity Share capital733 732 Additional paid-in capital514,743 498,168 Accumulated other comprehensive loss, net of tax(4,680) (4,844) Treasury stock, at cost(336,953) (303,299) Retained earnings132,513 141,402 Total Radware Ltd. shareholder's equity306,356 332,159 Non–controlling interest38,014 36,284 Total shareholders' equity344,370 368,443 Total liabilities and shareholders' equity610,938 643,588



Radware Ltd.Condensed Consolidated Statements of Income (loss)(U.S Dollars in thousands, except share and per share data) For the three months ended For the six months ended June 30, June 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues 65,607 75,114 134,648 148,822Cost of revenues 12,742 13,888 26,048 26,829Gross profit 52,865 61,226 108,600 121,993 Operating expenses, net: Research and development, net 21,141 21,623 42,291 41,993Selling and marketing 31,917 32,290 63,836 62,573General and administrative 8,307 5,737 16,554 12,264Total operating expenses, net 61,365 59,650 122,681 116,830 Operating income (loss) (8,500) 1,576 (14,081) 5,163Financial income, net 3,419 2,986 6,910 4,684Income (loss) before taxes on income (5,081) 4,562 (7,171) 9,847Taxes on income 727 1,410 1,718 2,925Net income (loss) (5,808) 3,152 (8,889) 6,922 Basic net earnings (loss) per share (0.13) 0.07 (0.20) 0.15 Weighted average number of shares used to compute basic net earnings (loss) per share 43,400,635 44,914,427 43,725,443 45,288,463 Diluted net earnings (loss) per share (0.13) 0.07 (0.20) 0.15 Weighted average number of shares used to compute diluted net earnings (loss) per share 43,400,635 45,835,440 43,725,443 46,476,687



Radware Ltd. Reconciliation of GAAP to Non-GAAP Financial Information (U.S Dollars in thousands, except share and per share data) For the three months endedFor the six months ended June 30,June 30, 2023 2022 2023 2022 (Unaudited)(Unaudited)(Unaudited)(Unaudited)GAAP gross profit52,865 61,226 108,600 121,993 Share-based compensation113 94 226 184 Amortization of intangible assets992 1,256 1,984 1,720 Non-GAAP gross profit53,970 62,576 110,810 123,897 GAAP research and development, net21,141 21,623 42,291 41,993 Share-based compensation2,177 1,635 4,136 3,444 Non-GAAP Research and development, net18,964 19,988 38,155 38,549 GAAP selling and marketing31,917 32,290 63,836 62,573 Share-based compensation3,537 3,043 6,931 4,892 Non-GAAP selling and marketing28,380 29,247 56,905 57,681 GAAP general and administrative8,307 5,737 16,554 12,264 Share-based compensation3,068 876 6,599 1,544 Litigation costs- - - - Acquisition costs545 - 558 1,142 Non-GAAP general and administrative4,694 4,861 9,397 9,578 GAAP total operating expenses, net61,365 59,650 122,681 116,830 Share-based compensation8,782 5,554 17,666 9,880 Litigation costs- - - - Acquisition costs545 - 558 1,142 Non-GAAP total operating expenses, net52,038 54,096 104,457 105,808 GAAP operating income (loss)(8,500) 1,576 (14,081) 5,163 Share-based compensation8,895 5,648 17,892 10,064 Amortization of intangible assets992 1,256 1,984 1,720 Litigation costs- - - - Acquisition costs545 - 558 1,142 Non-GAAP operating income1,932 8,480 6,353 18,089 GAAP financial income, net3,419 2,986 6,910 4,684 Exchange rate differences, net on balance sheet items included in financial income, net(32) (1,920) (807) (2,814) Non-GAAP financial income, net3,387 1,066 6,103 1,870 GAAP income before taxes on income (loss)(5,081) 4,562 (7,171) 9,847 Share-based compensation8,895 5,648 17,892 10,064 Amortization of intangible assets992 1,256 1,984 1,720 Litigation costs- - - - Acquisition costs545 - 558 1,142 Exchange rate differences, net on balance sheet items included in financial income, net(32) (1,920) (807) (2,814) Non-GAAP income before taxes on income5,319 9,546 12,456 19,959 GAAP taxes on income727 1,410 1,718 2,925 Tax related adjustments61 61 123 123 Non-GAAP taxes on income788 1,471 1,841 3,048 GAAP net income (loss)(5,808) 3,152 (8,889) 6,922 Share-based compensation8,895 5,648 17,892 10,064 Amortization of intangible assets992 1,256 1,984 1,720 Litigation costs- - - - Acquisition costs545 - 558 1,142 Exchange rate differences, net on balance sheet items included in financial income, net(32) (1,920) (807) (2,814) Tax related adjustments(61) (61) (123) (123) Non-GAAP net income4,531 8,075 10,615 16,911 GAAP diluted net earnings (loss) per share(0.13) 0.07 (0.20) 0.15 Share-based compensation0.20 0.12 0.40 0.22 Amortization of intangible assets0.02 0.03 0.05 0.04 Litigation costs0.00 0.00 0.00 0.00 Acquisition costs0.01 0.00 0.01 0.02 Exchange rate differences, net on balance sheet items included in financial income, net(0.00) (0.04) (0.02) (0.06) Tax related adjustments(0.00) (0.00) (0.00) (0.00) Non-GAAP diluted net earnings per share0.10 0.18 0.24 0.36 Weighted average number of shares used to compute non-GAAP diluted net earnings per share44,268,786 45,835,440 44,513,899 46,476,687



Radware Ltd.Condensed Consolidated Statements of Cash Flow(U.S. Dollars in thousands) For the three months ended For the six months ended June 30, June 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited)Cash flow from operating activities: Net income (loss) (5,808) 3,152 (8,889) 6,922 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,113 3,229 6,191 5,717 Share-based compensation 8,895 5,648 17,892 10,064 Amortization of premium, accretion of discounts and accrued interest on marketable securities, net 718 798 955 1,386 Loss (gain) related to securities, net (1) (1) 244 (60) Increase (decrease) in accrued interest on bank deposits 229 39 (1,525) 72 Increase (decrease) in accrued severance pay, net (36) (53) (105) 94 Increase in trade receivables, net 1,937 7,203 932 1,349 Increase (decrease) in other receivables and prepaid expenses and other long-term assets 532 (509) (2,326) (4,325) Decrease (increase) in inventories (1,044) (148) (895) 177 Increase (decrease) in trade payables 3,020 (713) 1,383 3,130 Increase in deferred revenues 470 18,064 1,216 20,500 Decrease in other payables and accrued expenses (6,944) (3,850) (11,442) (22,182) Decrease in operating lease liabilities, net (215) (1,335) (1) (1,772) Net cash provided by operating activities 4,866 31,524 3,630 21,072 Cash flows from investing activities: Purchase of property and equipment (1,595) (2,333) (3,363) (4,497) Proceeds from other long-term assets, net 1 92 48 37 Proceeds from (investment in) bank deposits, net 21,000 (42,550) 30,200 (20,201) Proceeds from sale, redemption of and purchase of marketable securities, net (3,857) (9,196) (1,881) (4,640) Payment for the business acquisition of SecurityDAM Ltd. 0 0 0 (30,000) Net cash provided (used in) investing activities 15,549 (53,987) 25,004 (59,301) Cash flows from financing activities: Proceeds from exercise of stock options 88 239 308 801 Repurchase of shares (19,741) (18,060) (32,483) (40,886) Proceeds from issuance of Preferred A shares in subsidiary 35,000 35,000 Net cash provided by (used in) financing activities (19,653) 17,179 (32,175) (5,085) Increase (decrease) in cash and cash equivalents 762 (5,284) (3,541) (43,314) Cash and cash equivalents at the beginning of the period 41,882 54,483 46,185 92,513 Cash and cash equivalents at the end of the period 42,644 49,199 42,644 49,199



Radware Ltd. RECONCILIATION OF GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (NON-GAAP) (U.S Dollars in thousands) For the three months endedFor the six months ended June 30,June 30, 2023 2022 2023 2022 (Unaudited)(Unaudited)(Unaudited)(Unaudited)GAAP net income (loss)(5,808) 3,152 (8,889) 6,922 Exclude: Financial income, net(3,419) (2,986) (6,910) (4,684) Exclude: Depreciation and amortization expense3,113 3,229 6,191 5,717 Exclude: Taxes on income727 1,410 1,718 2,925 EBITDA(5,387) 4,805 (7,890) 10,880 Share-based compensation8,895 5,648 17,892 10,064 Litigation costs- - - 288 Acquisition costs545 - 558 1,142 Adjusted EBITDA4,053 10,453 10,560 22,374 For the three months endedFor the six months ended June 30,June 30, 2023 2022 2023 2022 Amortization of intangible assets992 1,256 1,984 1,720 Depreciation2,121 1,973 4,207 3,997 3,113 3,229 6,191 5,717 ti?nf=ODg4NTI1NyM1NzMxNzEyIzIwMTg5Mjc=
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