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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: 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)
   Â
 June 30,  December 31,
 2023  2022
 (Unaudited)  (Unaudited)
Assets   Â
   Â
Current assets   Â
Cash and cash equivalents 42,644 Â Â 46,185 Â
Available-for-sale marketable securities 77,222 Â Â 44,180 Â
Short-term bank deposits 222,769 Â Â 207,679 Â
Trade receivables, net 16,820 Â Â 17,752 Â
Other receivables and prepaid expenses 9,815 Â Â 7,196 Â
Inventories 12,323 Â Â 11,428 Â
 381,593   334,420 Â
   Â
Long-term investments   Â
Available-for-sale marketable securities 59,375 Â Â 90,148 Â
Long-term bank deposits 0 Â Â 43,765 Â
Severance pay funds 2,092 Â Â 2,146 Â
 61,467   136,059 Â
   Â
   Â
Property and equipment, net 20,224 Â Â 21,068 Â
Intangible assets, net 17,702 Â Â 19,686 Â
Other long-term assets 41,168 Â Â 41,269 Â
Operating lease right-of-use assets 20,776 Â Â 23,078 Â
Goodwill 68,008 Â Â 68,008 Â
Total assets 610,938 Â Â 643,588 Â
   Â
   Â
Liabilities and shareholders’ equity   Â
   Â
Current Liabilities   Â
Trade payables 7,847 Â Â 6,464 Â
Deferred revenues 111,309 Â Â 108,243 Â
Operating lease liabilities 4,633 Â Â 4,685 Â
Other payables and accrued expenses 36,391 Â Â 44,643 Â
 160,180   164,035 Â
   Â
Long-term liabilities   Â
Deferred revenues 70,369 Â Â 72,219 Â
Operating lease liabilities 17,210 Â Â 19,461 Â
Other long-term liabilities 18,809 Â Â 19,430 Â
 106,388   111,110 Â
   Â
Shareholders’ equity   Â
Share capital 733 Â Â 732 Â
Additional paid-in capital 514,743 Â Â 498,168 Â
Accumulated other comprehensive loss, net of tax (4,680) Â Â (4,844) Â
Treasury stock, at cost (336,953) Â Â (303,299) Â
Retained earnings 132,513 Â Â 141,402 Â
Total Radware Ltd. shareholder’s equity 306,356 Â Â 332,159 Â
   Â
Non–controlling interest 38,014   36,284 Â
   Â
Total shareholders’ equity 344,370 Â Â 368,443 Â
   Â
Total liabilities and shareholders’ equity 610,938 Â Â 643,588 Â
   Â

Radware Ltd. Â Â Â Â Â Â Â Â
Condensed Consolidated Statements of Income (loss) Â Â Â Â Â Â Â Â
(U.S Dollars in thousands, except share and per share data) Â Â Â Â Â Â Â Â
        Â
  For the three months ended  For the six months ended
  June 30,  June 30,
  2023   2022  2023   2022
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
        Â
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
        Â
Operating expenses, net: Â Â Â Â Â Â Â Â
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
        Â
Operating income (loss) Â (8,500) Â Â 1,576 Â (14,081) Â Â 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) Â (5,808) Â Â 3,152 Â (8,889) Â Â 6,922
        Â
Basic net earnings (loss) per share  (0.13)   0.07  (0.20)   0.15
        Â
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
        Â
Diluted net earnings (loss) per share  (0.13)   0.07  (0.20)   0.15
        Â
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.       Â
 Reconciliation of GAAP to Non-GAAP Financial Information       Â
 (U.S Dollars in thousands, except share and per share data)       Â
        Â
  For the three months ended  For the six months ended
  June 30,  June 30,
  2023   2022   2023   2022 Â
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
GAAP gross profit 52,865 Â Â 61,226 Â Â 108,600 Â Â 121,993 Â
 Share-based compensation 113   94   226   184 Â
 Amortization of intangible assets 992   1,256   1,984   1,720 Â
Non-GAAP gross profit 53,970 Â Â 62,576 Â Â 110,810 Â Â 123,897 Â
        Â
GAAP research and development, net 21,141 Â Â 21,623 Â Â 42,291 Â Â 41,993 Â
 Share-based compensation 2,177   1,635   4,136   3,444 Â
Non-GAAP Research and development, net 18,964 Â Â 19,988 Â Â 38,155 Â Â 38,549 Â
        Â
GAAP selling and marketing 31,917 Â Â 32,290 Â Â 63,836 Â Â 62,573 Â
 Share-based compensation 3,537   3,043   6,931   4,892 Â
Non-GAAP selling and marketing 28,380 Â Â 29,247 Â Â 56,905 Â Â 57,681 Â
        Â
GAAP general and administrative 8,307 Â Â 5,737 Â Â 16,554 Â Â 12,264 Â
 Share-based compensation 3,068   876   6,599   1,544 Â
 Litigation costs –   –   –   – Â
 Acquisition costs 545   –   558   1,142 Â
Non-GAAP general and administrative 4,694 Â Â 4,861 Â Â 9,397 Â Â 9,578 Â
        Â
GAAP total operating expenses, net 61,365 Â Â 59,650 Â Â 122,681 Â Â 116,830 Â
 Share-based compensation 8,782   5,554   17,666   9,880 Â
 Litigation costs –   –   –   – Â
 Acquisition costs 545   –   558   1,142 Â
Non-GAAP total operating expenses, net 52,038 Â Â 54,096 Â Â 104,457 Â Â 105,808 Â
        Â
GAAP operating income (loss) (8,500) Â Â 1,576 Â Â (14,081) Â Â 5,163 Â
 Share-based compensation 8,895   5,648   17,892   10,064 Â
 Amortization of intangible assets 992   1,256   1,984   1,720 Â
 Litigation costs –   –   –   – Â
 Acquisition costs 545   –   558   1,142 Â
Non-GAAP operating income 1,932 Â Â 8,480 Â Â 6,353 Â Â 18,089 Â
        Â
GAAP financial income, net 3,419 Â Â 2,986 Â Â 6,910 Â Â 4,684 Â
 Exchange rate differences, net on balance sheet items included in financial income, net (32)   (1,920)   (807)   (2,814) Â
Non-GAAP financial income, net 3,387 Â Â 1,066 Â Â 6,103 Â Â 1,870 Â
        Â
GAAP income before taxes on income (loss) (5,081) Â Â 4,562 Â Â (7,171) Â Â 9,847 Â
 Share-based compensation 8,895   5,648   17,892   10,064 Â
 Amortization of intangible assets 992   1,256   1,984   1,720 Â
 Litigation costs –   –   –   – Â
 Acquisition costs 545   –   558   1,142 Â
 Exchange rate differences, net on balance sheet items included in financial income, net (32)   (1,920)   (807)   (2,814) Â
Non-GAAP income before taxes on income 5,319 Â Â 9,546 Â Â 12,456 Â Â 19,959 Â
        Â
GAAP taxes on income 727 Â Â 1,410 Â Â 1,718 Â Â 2,925 Â
 Tax related adjustments 61   61   123   123 Â
Non-GAAP taxes on income 788 Â Â 1,471 Â Â 1,841 Â Â 3,048 Â
        Â
GAAP net income (loss) (5,808) Â Â 3,152 Â Â (8,889) Â Â 6,922 Â
 Share-based compensation 8,895   5,648   17,892   10,064 Â
 Amortization of intangible assets 992   1,256   1,984   1,720 Â
 Litigation costs –   –   –   – Â
 Acquisition costs 545   –   558   1,142 Â
 Exchange rate differences, net on balance sheet items included in financial income, net (32)   (1,920)   (807)   (2,814) Â
 Tax related adjustments (61)   (61)   (123)   (123) Â
Non-GAAP net income 4,531 Â Â 8,075 Â Â 10,615 Â Â 16,911 Â
        Â
GAAP diluted net earnings (loss) per share (0.13) Â Â 0.07 Â Â (0.20) Â Â 0.15 Â
 Share-based compensation 0.20   0.12   0.40   0.22 Â
 Amortization of intangible assets 0.02   0.03   0.05   0.04 Â
 Litigation costs 0.00   0.00   0.00   0.00 Â
 Acquisition costs 0.01   0.00   0.01   0.02 Â
 Exchange rate differences, net on balance sheet items included in financial income, net (0.00)   (0.04)   (0.02)   (0.06) Â
 Tax related adjustments (0.00)   (0.00)   (0.00)   (0.00) Â
Non-GAAP diluted net earnings per share 0.10 Â Â 0.18 Â Â 0.24 Â Â 0.36 Â
        Â
        Â
Weighted average number of shares used to compute non-GAAP diluted net earnings per share 44,268,786 Â Â 45,835,440 Â Â 44,513,899 Â Â 46,476,687 Â

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

 Radware Ltd.   Â
 RECONCILIATION OF GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (NON-GAAP)   Â
 (U.S Dollars in thousands)   Â
        Â
  For the three months ended  For the six months ended
  June 30,  June 30,
  2023   2022   2023   2022 Â
  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
GAAP net income (loss) (5,808) Â Â 3,152 Â Â (8,889) Â Â 6,922 Â
 Exclude: Financial income, net (3,419)   (2,986)   (6,910)   (4,684) Â
 Exclude: Depreciation and amortization expense 3,113   3,229   6,191   5,717 Â
 Exclude: Taxes on income 727   1,410   1,718   2,925 Â
EBITDA (5,387) Â Â 4,805 Â Â (7,890) Â Â 10,880 Â
        Â
 Share-based compensation 8,895   5,648   17,892   10,064 Â
 Litigation costs –   –   –   288 Â
 Acquisition costs 545   –   558   1,142 Â
Adjusted EBITDA 4,053 Â Â 10,453 Â Â 10,560 Â Â 22,374 Â
        Â
        Â
  For the three months ended  For the six months ended
  June 30,  June 30,
  2023   2022   2023   2022 Â
        Â
 Amortization of intangible assets 992   1,256   1,984   1,720 Â
        Â
 Depreciation 2,121   1,973   4,207   3,997 Â
        Â
  3,113   3,229   6,191   5,717 Â
        Â

Alex:
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