Radware Reports Second Quarter 2022 Financial Results

Radware Ltd.

Second Quarter 2022 Results and Financial Highlights

• Revenue of $75.1 million, up 8% year-over-year

• Total ARR of $195 million, up 10% year-over-year

• Non-GAAP gross margin of 83.3% compared to 82.3% in the second quarter of last year

• Cash flow from operations of $31.5 million

• Non-GAAP EPS of $0.18; GAAP EPS of $0.07
  

TEL AVIV, Israel, Aug. 08, 2022 (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, 2022.

“We delivered solid revenue and earnings results in the second quarter. Our solutions, which protect our customers’ most critical applications and data centers in real time against cyber-attacks, are more critical to their businesses than ever before,” said Roy Zisapel, Radware’s president and CEO. “We have witnessed some delays in closing deals due to macro environment conditions that may have an impact on our short-term results. However, Radware is well-positioned to deliver sustained growth. Our business is backed by industry leading solutions, a diversified customer base, and strong balance sheet and positive cash flow. We plan to continue to invest in our business and global cloud footprint as we remain optimistic about the long-term opportunity ahead of us.”

Financial Highlights for the Second Quarter of 2022
Revenue for the second quarter of 2022 totaled $75.1 million:

• Revenue in the Americas region was $29.7 million for the second quarter of 2022, an increase of 6% from $28.1 million in the second quarter of 2021.

• Revenue in the Europe, Middle East, and Africa (“EMEA”) region was $29.7 million for the second quarter of 2022, an increase of 24% from $24.0 million in the second quarter of 2021.

• Revenue in the Asia-Pacific (“APAC”) region was $15.7 million for the second quarter of 2022, a decrease of 10% from $17.6 million in the second quarter of 2021.
  

GAAP net income for the second quarter of 2022 was $3.2 million, or $0.07 per diluted share, compared to GAAP net income of $4.5 million, or $0.10 per diluted share, for the second quarter of 2021.

Non-GAAP net income for the second quarter of 2022 was $8.1 million, or $0.18 per diluted share, compared to non-GAAP net income of $8.9 million, or $0.19 per diluted share, for the second quarter of 2021.

As of June 30, 2022, the Company had cash, cash equivalents, short-term and long-term bank deposits, and marketable securities of $442.0 million. Net cash provided by operating activities was $31.5 million in the second quarter of 2022.

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 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 8, 2022, at 8:30 a.m. EDT to discuss its second quarter 2022 results and the Company’s outlook. To participate in 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, income before taxes on income, taxes on income, net income and 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 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.

©2022 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,
		2022			2021
		(Unaudited)			(Unaudited)
Assets
Current assets
Cash and cash equivalents		49,199			92,513
Marketable securities		25,055			39,497
Short-term bank deposits		206,556			155,879
Trade receivables, net		11,841			13,191
Other receivables and prepaid expenses		13,360			8,046
Inventories		11,403			11,580
		317,414			320,706
Long-term investments
Marketable securities		112,053			98,224
Long-term bank deposits		49,160			79,708
Severance pay funds		2,154			2,454
		163,367			180,386
Property and equipment, net		20,742			20,240
Goodwill and intangible assets, net		89,678			51,875
Other long-term assets		37,608			37,334
Operating lease right-of-use assets		23,376			24,829
Total assets		652,185			635,370
Liabilities and shareholders' equity
Current Liabilities
Trade payables		7,440			4,310
Deferred revenues		112,190			99,922
Operating lease liabilities		4,454			5,090
Other payables and accrued expenses		38,120			56,565
		162,204			165,887
Long-term liabilities
Deferred revenues		75,297			67,065
Operating lease liabilities		19,771			22,360
Other long-term liabilities		19,384			10,065
		114,452			99,490
Shareholders' equity
Share capital		731			730
Additional paid-in capital		482,037			471,173
Accumulated other comprehensive loss, net of tax		(6,384)			(455)
Treasury stock, at cost		(284,345)			(243,023)
Retained earnings		148,490			141,568
Total shareholder's equity		340,529			369,993
Non–controlling interest		35,000			-
Total shareholders' equity		375,529			369,993
Total liabilities and shareholders' equity		652,185			635,370

Radware Ltd.
Condensed Consolidated Statements of Income
(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,
	2022		2021		2022		2021
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues	75,114		69,667		148,822		136,436
Cost of revenues	13,888		12,838		26,829		25,104
Gross profit	61,226		56,829		121,993		111,332
Operating expenses, net:
Research and development, net	21,623		18,127		41,993		35,862
Selling and marketing	32,290		29,248		62,573		58,239
General and administrative	5,737		4,551		12,264		9,747
Total operating expenses, net	59,650		51,926		116,830		103,848
Operating income	1,576		4,903		5,163		7,484
Financial income, net	2,986		1,187		4,684		3,857
Income before taxes on income	4,562		6,090		9,847		11,341
Taxes on income	1,410		1,558		2,925		2,904
Net income	3,152		4,532		6,922		8,437
Basic net earnings per share	0.07		0.10		0.15		0.18
Weighted average number of shares used to compute basic net earnings per share	44,914,427		45,618,971		45,288,463		45,918,605
Diluted net earnings per share	0.07		0.10		0.15		0.18
Weighted average number of shares used to compute diluted net earnings per share	45,835,440		47,138,142		46,476,687		47,369,008

	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,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
GAAP gross profit		61,226			56,829			121,993			111,332
	Stock-based compensation	94			51			184			98
	Amortization of intangible assets	1,256			465			1,720			929
Non-GAAP gross profit		62,576			57,345			123,897			112,359
GAAP research and development, net		21,623			18,127			41,993			35,862
	Stock-based compensation	1,635			1,013			3,444			2,352
Non-GAAP Research and development, net		19,988			17,114			38,549			33,510
GAAP selling and marketing		32,290			29,248			62,573			58,239
	Stock-based compensation	3,043			2,030			4,892			4,082
Non-GAAP selling and marketing		29,247			27,218			57,681			54,157
GAAP general and administrative		5,737			4,551			12,264			9,747
	Stock-based compensation	876			143			1,544			1,079
	Litigation costs	-			158			-			221
	Acquisition costs	-			-			1,142			-
Non-GAAP general and administrative		4,861			4,250			9,578			8,447
GAAP total operating expenses, net		59,650			51,926			116,830			103,848
	Stock-based compensation	5,554			3,186			9,880			7,513
	Litigation costs	-			158			-			221
	Acquisition costs	-			-			1,142			-
Non-GAAP total operating expenses, net		54,096			48,582			105,808			96,114
GAAP operating income		1,576			4,903			5,163			7,484
	Stock-based compensation	5,648			3,237			10,064			7,611
	Amortization of intangible assets	1,256			465			1,720			929
	Litigation costs	-			158			-			221
	Acquisition costs	-			-			1,142			-
Non-GAAP operating income		8,480			8,763			18,089			16,245
GAAP financial income, net		2,986			1,187			4,684			3,857
	Exchange rate differences, net on balance sheet items included in financial income, net	(1,920)			555			(2,814)			(169)
Non-GAAP financial income, net		1,066			1,742			1,870			3,688
GAAP income before taxes on income		4,562			6,090			9,847			11,341
	Stock-based compensation	5,648			3,237			10,064			7,611
	Amortization of intangible assets	1,256			465			1,720			929
	Litigation costs	-			158			-			221
	Acquisition costs	-			-			1,142			-
	Exchange rate differences, net on balance sheet items included in financial income, net	(1,920)			555			(2,814)			(169)
Non-GAAP income before taxes on income		9,546			10,505			19,959			19,933
GAAP taxes on income		1,410			1,558			2,925			2,904
	Tax related adjustments	61			61			123			123
Non-GAAP taxes on income		1,471			1,619			3,048			3,027
GAAP net income		3,152			4,532			6,922			8,437
	Stock-based compensation	5,648			3,237			10,064			7,611
	Amortization of intangible assets	1,256			465			1,720			929
	Litigation costs	-			158			-			221
	Acquisition costs	-			-			1,142			-
	Exchange rate differences, net on balance sheet items included in financial income, net	(1,920)			555			(2,814)			(169)
	Tax related adjustments	(61)			(61)			(123)			(123)
Non-GAAP net income		8,075			8,886			16,911			16,906
GAAP diluted net earnings per share		0.07			0.10			0.15			0.18
	Stock-based compensation	0.12			0.07			0.22			0.16
	Amortization of intangible assets	0.03			0.01			0.04			0.02
	Litigation costs	0.00			0.00			0.00			0.00
	Acquisition costs	0.00			0.00			0.02			0.00
	Exchange rate differences, net on balance sheet items included in financial income, net	(0.04)			0.01			(0.06)			(0.00)
	Tax related adjustments	(0.00)			(0.00)			(0.00)			(0.00)
Non-GAAP diluted net earnings per share		0.18			0.19			0.36			0.36
Weighted average number of shares used to compute non-GAAP diluted net earnings per share		45,835,440			47,138,142			46,476,687			47,369,008

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,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Cash flow from operating activities:
Net income		3,152			4,532			6,922			8,437
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,229			2,537			5,717			5,185
Stock-based compensation		5,648			3,237			10,064			7,611
Amortization of premium, accretion of discounts and accrued interest on marketable securities, net		798			727			1,386			1,135
Gain related to securities, net		(1)			(95)			(60)			(97)
Accrued interest on bank deposits		39			698			72			(83)
Increase (decrease) in accrued severance pay, net		(53)			140			94			365
Decrease (increase) in trade receivables, net		7,203			(8,591)			1,349			(1,651)
Increase in other receivables and prepaid expenses and other long-term assets		(509)			(5,519)			(4,325)			(9,981)
Decrease (increase) in inventories		(148)			211			177			735
Increase (decrease) in trade payables		(713)			1,422			3,130			1,666
Increase in deferred revenues		18,064			2,468			20,500			11,390
Increase (decrease) in other payables and accrued expenses		(3,850)			6,664			(22,182)			671
Operating lease liabilities, net		(1,335)			358			(1,772)			(424)
Net cash provided by operating activities		31,524			8,789			21,072			24,959
Cash flows from investing activities:
Purchase of property and equipment		(2,333)			(1,159)			(4,497)			(2,492)
Proceeds from (investment in) other long-term assets, net		92			(11)			37			31
Proceeds from (investment in) bank deposits, net		(42,550)			4,577			(20,201)			4,434
Proceeds from sale, redemption of and purchase of marketable securities ,net		(9,196)			10,825			(4,640)			8,334
Payment for the acquisition of intangible assets		-			-			(30,000)			-
Net cash provided by (used in) investing activities		(53,987)			14,232			(59,301)			10,307
Cash flows from financing activities:
Proceeds from exercise of stock options		239			3,695			801			5,847
Repurchase of shares		(18,060)			(4,638)			(40,886)			(34,827)
Proceeds from issuance of Preferred A shares in subsidiary		35,000			-			35,000			-
Net cash provided by (used in) financing activities		17,179			(943)			(5,085)			(28,980)
Increase (decrease) in cash and cash equivalents		(5,284)			22,078			(43,314)			6,286
Cash and cash equivalents at the beginning of the period		54,483			38,979			92,513			54,771
Cash and cash equivalents at the end of the period		49,199			61,057			49,199			61,057