Third Quarter 2023 Financial Results and Highlights
Revenue of $61.6 million, down 13% year-over-yearCloud ARR of $62.5 million, up 25% year-over-yearNon-GAAP EPS of $0.07; GAAP net loss per diluted share of $0.16
TEL AVIV, Israel, Nov. 01, 2023 (GLOBE NEWSWIRE) — Radware® (NASDAQ: RDWR), a leading provider of cyber security and application delivery solutions, today announced its consolidated financial results for the third quarter ended September 30, 2023.
“During the third quarter of 2023, our cloud ARR growth accelerated to 25%,” said Roy Zisapel, Radware’s president and CEO. “Going forward, we intend to continue to focus on growing the cloud security business. Combined with cautious optimism regarding the recovery of our appliance business and prudent cost management, we believe we will emerge stronger from the current challenges.”
Financial Highlights for the Third Quarter 2023
Revenue for the third quarter of 2023 totaled $61.6 million:
Revenue in the Americas region was $24.9 million for the third quarter of 2023, a decrease of 24% from $32.9 million in the third quarter of 2022.Revenue in the Europe, Middle East, and Africa (“EMEA”) region was $19.3 million for the third quarter of 2023, a decrease of 13% from $22.2 million in the third quarter of 2022.Revenue in the Asia-Pacific (“APAC”) region was $17.4 million for the third quarter of 2023, an increase of 12% from $15.5 million in the third quarter of 2022.
GAAP net loss for the third quarter of 2023 was $6.9 million, or $(0.16) per diluted share, compared to GAAP net loss of $3.0 million, or $0.07 per diluted share, for the third quarter of 2022.
Non-GAAP net income for the third quarter of 2023 was $2.9 million, or $0.07 per diluted share, compared to non-GAAP net income of $6.7 million, or $0.15 per diluted share, for the third quarter of 2022.
As of September 30, 2023, the Company had cash, cash equivalents, short-term bank deposits, and marketable securities of $371.6 million. Cash flow from operations was negative $9.8 million in the third 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, restructuring 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, November 1, 2023, at 8:30 a.m. EDT to discuss its third quarter 2023 results and the Company’s fourth 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, restructuring 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; the effects of the current attacks by the terrorist groups Hamas and Hezbollah, and the war between Israel and Hamas and Israel and Hezbollah; 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: 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, ir@radware.com
Media Contact:
Gerri Dyrek, gerri.dyrek@radware.com
Radware Ltd.
Condensed Consolidated Balance Sheets
(U.S. Dollars in thousands)
September 30, December 31, 2023 2022 (Unaudited) (Unaudited)Assets Current assets Cash and cash equivalents32,422 46,185Available-for-sale marketable securities85,409 44,180Short-term bank deposits203,913 207,679Trade receivables, net12,372 17,752Other receivables and prepaid expenses10,915 7,196Inventories12,994 11,428 358,025 334,420 Long-term investments Available-for-sale marketable securities49,898 90,148Long-term bank deposits0 43,765Severance pay funds2,061 2,146 51,959 136,059 Property and equipment, net19,321 21,068Intangible assets, net16,710 19,686Other long-term assets40,047 41,269Operating lease right-of-use assets20,132 23,078Goodwill68,008 68,008Total assets574,202 643,588 Liabilities and shareholders’ equity Current Liabilities Trade payables6,069 6,464Deferred revenues106,109 108,243Operating lease liabilities4,439 4,685Other payables and accrued expenses33,206 44,643 149,823 164,035 Long-term liabilities Deferred revenues63,258 72,219Operating lease liabilities15,956 19,461Other long-term liabilities20,172 19,430 99,386 111,110 Shareholders’ equity Share capital733 732Additional paid-in capital521,196 498,168Accumulated other comprehensive loss, net of tax(4,174) (4,844)Treasury stock, at cost(356,969) (303,299)Retained earnings125,662 141,402Total Radware Ltd. shareholder’s equity286,448 332,159 Non–controlling interest38,545 36,284 Total shareholders’ equity324,993 368,443 Total liabilities and shareholders’ equity574,202 643,588 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 nine months ended September 30, September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues 61,612 70,521 196,260 219,343Cost of revenues 12,838 13,138 38,886 39,967Gross profit 48,774 57,383 157,374 179,376 Operating expenses, net: Research and development, net 20,614 22,083 62,905 64,076Selling and marketing 30,532 31,416 94,368 93,989General and administrative 7,824 7,278 24,378 19,542Total operating expenses, net 58,970 60,777 181,651 177,607 Operating income (loss) (10,196) (3,394) (24,277) 1,769Financial income, net 3,778 1,350 10,688 6,034Income (loss) before taxes on income (6,418) (2,044) (13,589) 7,803Taxes on income 433 920 2,151 3,845Net income (loss) (6,851) (2,964) (15,740) 3,958 Basic net earnings (loss) per share (0.16) (0.07) (0.36) 0.09 Weighted average number of shares used to compute basic net earnings (loss) per share 42,261,637 44,623,247 43,232,405 45,063,925 Diluted net earnings (loss) per share (0.16) (0.07) (0.36) 0.09 Weighted average number of shares used to compute diluted net earnings (loss) per share 42,261,637 44,623,247 43,232,405 46,189,437 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 nine months ended September 30, September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited)GAAP gross profit48,774 57,383 157,374 179,376 Share-based compensation177 103 403 287 Amortization of intangible assets992 992 2,976 2,712Non-GAAP gross profit49,943 58,478 160,753 182,375 GAAP research and development, net20,614 22,083 62,905 64,076 Share-based compensation2,064 1,775 6,200 5,219Non-GAAP Research and development, net18,550 20,308 56,705 58,857 GAAP selling and marketing30,532 31,416 94,368 93,989 Share-based compensation2,134 3,356 9,065 8,248 Restructuring costs1,273 – 1,273 -Non-GAAP selling and marketing27,125 28,060 84,030 85,741 GAAP general and administrative7,824 7,278 24,378 19,542 Share-based compensation2,884 2,397 9,483 3,941 Acquisition costs211 – 769 – Litigation costs- – – 1,142Non-GAAP general and administrative4,729 4,881 14,126 14,459 GAAP total operating expenses, net58,970 60,777 181,651 177,607 Share-based compensation7,082 7,528 24,748 17,408 Acquisition costs211 – 769 – Litigation costs- – – 1,142 Restructuring costs1,273 – 1,273 -Non-GAAP total operating expenses, net50,404 53,249 154,861 159,057 GAAP operating income (loss)(10,196) (3,394) (24,277) 1,769 Share-based compensation7,259 7,631 25,151 17,695 Acquisition costs211 – 769 – Amortization of intangible assets992 992 2,976 2,712 Litigation costs- – – 1,142 Restructuring costs1,273 – 1,273 -Non-GAAP operating income(461) 5,229 5,892 23,318 GAAP financial income, net3,778 1,350 10,688 6,034 Exchange rate differences, net on balance sheet items included in financial income, net37 1,100 (770) (1,714)Non-GAAP financial income, net3,815 2,450 9,918 4,320 GAAP income before taxes on income (loss)(6,418) (2,044) (13,589) 7,803 Share-based compensation7,259 7,631 25,151 17,695 Acquisition costs211 – 769 – Amortization of intangible assets992 992 2,976 2,712 Litigation costs- – – 1,142 Restructuring costs1,273 – 1,273 – Exchange rate differences, net on balance sheet items included in financial income, net37 1,100 (770) (1,714)Non-GAAP income before taxes on income3,354 7,679 15,810 27,638 GAAP taxes on income433 920 2,151 3,845 Tax related adjustments62 62 185 185Non-GAAP taxes on income495 982 2,336 4,030 GAAP net income (loss)(6,851) (2,964) (15,740) 3,958 Share-based compensation7,259 7,631 25,151 17,695 Acquisition costs211 – 769 – Amortization of intangible assets992 992 2,976 2,712 Litigation costs- – – 1,142 Restructuring costs1,273 – 1,273 – Exchange rate differences, net on balance sheet items included in financial income, net37 1,100 (770) (1,714) Tax related adjustments(62) (62) (185) (185)Non-GAAP net income2,859 6,697 13,474 23,608 GAAP diluted net earnings (loss) per share(0.16) (0.07) (0.36) 0.09 Share-based compensation0.17 0.17 0.57 0.38 Acquisition costs0.00 0.00 0.02 0.00 Amortization of intangible assets0.03 0.02 0.07 0.06 Litigation costs0.00 0.00 0.00 0.03 Restructuring costs0.03 0.00 0.03 0.00 Exchange rate differences, net on balance sheet items included in financial income, net0.00 0.02 (0.02) (0.04) Tax related adjustments0.00 (0.00) 0.00 (0.00)Non-GAAP diluted net earnings per share0.07 0.15 0.31 0.51 Weighted average number of shares used to compute non-GAAP diluted net earnings per share43,163,159 45,623,336 44,058,549 46,189,437 Radware Ltd.
Condensed Consolidated Statements of Cash Flow
(U.S. Dollars in thousands) For the three months ended For the nine months ended September 30, September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited)Cash flow from operating activities: Net income (loss) (6,851) (2,964) (15,740) 3,958Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,025 3,097 9,216 8,814Share-based compensation 7,259 7,631 25,151 17,695Amortization of premium, accretion of discounts and accrued interest on marketable securities, net 161 193 1,116 1,579Loss (gain) related to securities, net 0 (4) 244 (64)Decrease in accrued interest on bank deposits (2,289) (1,128) (3,814) (1,056)Decrease in accrued severance pay, net (401) (176) (506) (82)Decrease (increase) in trade receivables, net 4,448 (1,509) 5,380 (160)Decrease (increase) in other receivables and prepaid expenses and other long-term assets (215) 3,852 (2,541) (473)Decrease (increase) in inventories (671) 549 (1,566) 726Increase (decrease) in trade payables (1,778) (670) (395) 2,460Increase (decrease) in deferred revenues (12,311) (8,609) (11,095) 11,891Increase (decrease) in other payables and accrued expenses 644 1,463 (10,798) (20,719)Decrease in operating lease liabilities, net (804) (209) (805) (1,981)Net cash provided by (used in) operating activities (9,783) 1,516 (6,153) 22,588 Cash flows from investing activities: Purchase of property and equipment (1,130) (2,549) (4,493) (7,046)Proceeds from other long-term assets, net 29 69 77 106Proceeds from (investment in) bank deposits, net 21,145 1,000 51,345 (19,201)Proceeds from sale, redemption of and purchase of marketable securities, net 2,228 (862) 347 (5,502)Payment for the business acquisition of SecurityDAM Ltd. (2,063) 0 (2,063) (30,000)Net cash provided (used in) investing activities 20,209 (2,342) 45,213 (61,643) Cash flows from financing activities: Proceeds from exercise of stock options 0 401 308 1,202Repurchase of shares (20,648) (6,305) (53,131) (47,191)Proceeds from issuance of Preferred A shares in subsidiary 0 0 0 35,000Net cash used in financing activities (20,648) (5,904) (52,823) (10,989) Decrease in cash and cash equivalents (10,222) (6,730) (13,763) (50,044)Cash and cash equivalents at the beginning of the period 42,644 49,199 46,185 92,513Cash and cash equivalents at the end of the period 32,422 42,469 32,422 42,469 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 nine months ended September 30, September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited)GAAP net income (loss)(6,851) (2,964) (15,740) 3,958 Exclude: Financial income, net(3,778) (1,350) (10,688) (6,034) Exclude: Depreciation and amortization expense3,025 3,097 9,216 8,814 Exclude: Taxes on income433 920 2,151 3,845EBITDA(7,171) (297) (15,061) 10,583 Share-based compensation7,259 7,631 25,151 17,695 Litigation costs- – – 1,142 Restructuring costs1,273 – 1,273 – Acquisition costs211 – 769 -Adjusted EBITDA1,572 7,334 12,132 29,420 For the three months ended For the nine months ended September 30, September 30, 2023 2022 2023 2022 Amortization of intangible assets992 992 2,976 2,712 Depreciation2,033 2,105 6,240 6,102 3,025 3,097 9,216 8,814