Categories: Wire Stories

Radware Reports Second Quarter 2023 Financial Results

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® (NASDAQ: 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® (NASDAQ: 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: FacebookLinkedIn, 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, ir@radware.com

Media Contact:
Gerri Dyrek, gerri.dyrek@radware.com

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 equivalents 42,644     46,185  
Available-for-sale marketable securities 77,222     44,180  
Short-term bank deposits 222,769     207,679  
Trade receivables, net 16,820     17,752  
Other receivables and prepaid expenses 9,815     7,196  
Inventories 12,323     11,428  
  381,593     334,420  
       
Long-term investments      
Available-for-sale marketable securities 59,375     90,148  
Long-term bank deposits 0     43,765  
Severance pay funds 2,092     2,146  
  61,467     136,059  
       
       
Property and equipment, net 20,224     21,068  
Intangible assets, net 17,702     19,686  
Other long-term assets 41,168     41,269  
Operating lease right-of-use assets 20,776     23,078  
Goodwill 68,008     68,008  
Total assets 610,938     643,588  
       
       
Liabilities and shareholders’ equity      
       
Current Liabilities      
Trade payables 7,847     6,464  
Deferred revenues 111,309     108,243  
Operating lease liabilities 4,633     4,685  
Other payables and accrued expenses 36,391     44,643  
  160,180     164,035  
       
Long-term liabilities      
Deferred revenues 70,369     72,219  
Operating lease liabilities 17,210     19,461  
Other long-term liabilities 18,809     19,430  
  106,388     111,110  
       
Shareholders’ equity      
Share capital 733     732  
Additional paid-in capital 514,743     498,168  
Accumulated other comprehensive loss, net of tax (4,680)     (4,844)  
Treasury stock, at cost (336,953)     (303,299)  
Retained earnings 132,513     141,402  
Total Radware Ltd. shareholder’s equity 306,356     332,159  
       
Non–controlling interest 38,014     36,284  
       
Total shareholders’ equity 344,370     368,443  
       
Total liabilities and shareholders’ equity 610,938     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     148,822
Cost of revenues   12,742     13,888   26,048     26,829
Gross profit   52,865     61,226   108,600     121,993
                 
Operating expenses, net:                
Research and development, net   21,141     21,623   42,291     41,993
Selling and marketing   31,917     32,290   63,836     62,573
General and administrative   8,307     5,737   16,554     12,264
Total operating expenses, net   61,365     59,650   122,681     116,830
                 
Operating income (loss)   (8,500)     1,576   (14,081)     5,163
Financial income, net   3,419     2,986   6,910     4,684
Income (loss) before taxes on income   (5,081)     4,562   (7,171)     9,847
Taxes on income   727     1,410   1,718     2,925
Net 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 ended   For the six months ended
    June 30,   June 30,
    2023     2022     2023     2022  
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
GAAP gross profit 52,865     61,226     108,600     121,993  
  Share-based compensation 113     94     226     184  
  Amortization of intangible assets 992     1,256     1,984     1,720  
Non-GAAP gross profit 53,970     62,576     110,810     123,897  
                 
GAAP research and development, net 21,141     21,623     42,291     41,993  
  Share-based compensation 2,177     1,635     4,136     3,444  
Non-GAAP Research and development, net 18,964     19,988     38,155     38,549  
                 
GAAP selling and marketing 31,917     32,290     63,836     62,573  
  Share-based compensation 3,537     3,043     6,931     4,892  
Non-GAAP selling and marketing 28,380     29,247     56,905     57,681  
                 
GAAP general and administrative 8,307     5,737     16,554     12,264  
  Share-based compensation 3,068     876     6,599     1,544  
  Litigation costs              
  Acquisition costs 545         558     1,142  
Non-GAAP general and administrative 4,694     4,861     9,397     9,578  
                 
GAAP total operating expenses, net 61,365     59,650     122,681     116,830  
  Share-based compensation 8,782     5,554     17,666     9,880  
  Litigation costs              
  Acquisition costs 545         558     1,142  
Non-GAAP total operating expenses, net 52,038     54,096     104,457     105,808  
                 
GAAP operating income (loss) (8,500)     1,576     (14,081)     5,163  
  Share-based compensation 8,895     5,648     17,892     10,064  
  Amortization of intangible assets 992     1,256     1,984     1,720  
  Litigation costs              
  Acquisition costs 545         558     1,142  
Non-GAAP operating income 1,932     8,480     6,353     18,089  
                 
GAAP financial income, net 3,419     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, net 3,387     1,066     6,103     1,870  
                 
GAAP income before taxes on income (loss) (5,081)     4,562     (7,171)     9,847  
  Share-based compensation 8,895     5,648     17,892     10,064  
  Amortization of intangible assets 992     1,256     1,984     1,720  
  Litigation costs              
  Acquisition costs 545         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 income 5,319     9,546     12,456     19,959  
                 
GAAP taxes on income 727     1,410     1,718     2,925  
  Tax related adjustments 61     61     123     123  
Non-GAAP taxes on income 788     1,471     1,841     3,048  
                 
GAAP net income (loss) (5,808)     3,152     (8,889)     6,922  
  Share-based compensation 8,895     5,648     17,892     10,064  
  Amortization of intangible assets 992     1,256     1,984     1,720  
  Litigation costs              
  Acquisition costs 545         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 income 4,531     8,075     10,615     16,911  
                 
GAAP diluted net earnings (loss) per share (0.13)     0.07     (0.20)     0.15  
  Share-based compensation 0.20     0.12     0.40     0.22  
  Amortization of intangible assets 0.02     0.03     0.05     0.04  
  Litigation costs 0.00     0.00     0.00     0.00  
  Acquisition costs 0.01     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 share 0.10     0.18     0.24     0.36  
                 
                 
Weighted average number of shares used to compute non-GAAP diluted net earnings per share 44,268,786     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 ended   For 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 expense 3,113     3,229     6,191     5,717  
  Exclude: Taxes on income 727     1,410     1,718     2,925  
EBITDA (5,387)     4,805     (7,890)     10,880  
                 
  Share-based compensation 8,895     5,648     17,892     10,064  
  Litigation costs             288  
  Acquisition costs 545         558     1,142  
Adjusted EBITDA 4,053     10,453     10,560     22,374  
                 
                 
    For the three months ended   For the six months ended
    June 30,   June 30,
    2023     2022     2023     2022  
                 
  Amortization of intangible assets 992     1,256     1,984     1,720  
                 
  Depreciation 2,121     1,973     4,207     3,997  
                 
    3,113     3,229     6,191     5,717  
                 

Alex

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