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Radware Reports Fourth Quarter and Full Year 2022 Financial Results

Recurring revenue increased to 68%, full year 2022 cloud and subscription revenue increased 13%

“For the fourth quarter and full year of 2022, I’m pleased to report solid results, which were in-line with our guidance. The results were driven mainly by cloud and subscription revenue, which delivered double-digit growth during 2022, as well as a record number of new cloud wins in the fourth quarter,” said Roy Zisapel, Radware’s president and CEO. “While headwinds in the macro environment may continue to impact our results in the coming year, we remain optimistic about our long-term growth potential given the market adoption of our products. In 2023, the cloud will continue to play a pivotal role in our strategy as we increase our focus on our cloud security solutions, grow our presence in the mid-sized enterprise market, and expand our channel partnerships. Coupled with disciplined expense management, we remain committed to driving profitable growth.”

Revenue for the fourth quarter and full year of 2022 totaled $74.1 million and $293.4 million, respectively:

GAAP net loss for the fourth quarter of 2022 was $4.1 million, or $(0.09) per diluted share, compared to GAAP net loss of $5.6 million, or $(0.12) per diluted share, for the fourth quarter of 2021. GAAP net loss for the full year of 2022 was $0.2 million, or $0.00 per diluted share, compared to GAAP net income of $7.8 million, or $0.16 per diluted share, for the full year of 2021.

Non-GAAP net income for the fourth quarter of 2022 was $7.7 million, or $0.17 per diluted share, compared to non-GAAP net income of $10.3 million, or $0.22 per diluted share, for the fourth quarter of 2021. Non-GAAP net income for the full year of 2022 was $31.3 million, or $0.68 per diluted share, compared to non-GAAP net income of $38.3 million, or $0.81 per diluted share, for the full year of 2021.

As of December 31, 2022, the Company had cash, cash equivalents, short-term and long-term bank deposits, and marketable securities of $432.0 million. Net cash provided by operating activities was $9.6 million in the fourth quarter of 2022 and $32.1 million for the full year 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 of 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.

Radware management will host a call today, February 8, 2023, at 8:30 a.m. EST to discuss its fourth quarter and full year 2022 results and the Company’s 2023 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, 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.

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

		December 31,				December 31,
		2022				2021
		(Unaudited)				(Unaudited)
Assets
Current assets
Cash and cash equivalents			46,185				92,513
Marketable securities			44,180				39,497
Short-term bank deposits			207,679				155,879
Trade receivables, net			17,752				13,191
Other receivables and prepaid expenses			8,646				8,046
Inventories			11,428				11,580
			335,870				320,706
Long-term investments
Marketable securities			90,148				98,224
Long-term bank deposits			43,765				79,708
Severance pay funds			2,146				2,454
			136,059				180,386
Property and equipment, net			21,068				20,240
Intangible assets, net			19,686				10,731
Other long-term assets			43,636				37,334
Operating lease right-of-use assets			23,078				24,829
Goodwill			68,008				41,144
Total assets			647,405				635,370
Liabilities and equity
Current liabilities
Trade payables			8,067				4,310
Deferred revenues			108,243				99,922
Operating lease liabilities			4,685				5,090
Other payables and accrued expenses			45,444				56,565
			166,439				165,887
Long-term liabilities
Deferred revenues			72,219				67,065
Operating lease liabilities			19,461				22,360
Other long-term liabilities			20,843				10,065
			112,523				99,490
Equity
Radware Ltd. equity
Share capital			732				730
Additional paid-in capital			498,168				471,173
Accumulated other comprehensive loss, net of tax			(4,844	)			(455	)
Treasury stock, at cost			(303,299	)			(243,023	)
Retained earnings			141,402				141,568
Total Radware Ltd. shareholder's equity			332,159				369,993
Non–controlling interest			36,284				-
Total equity			368,443				369,993
Total liabilities and equity			647,405				635,370

		For the three months ended								For the year ended
		December 31,								December 31,
		2022				2021				2022				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues			74,083				76,642				293,426				286,496
Cost of revenues			13,917				14,048				53,884				52,446
Gross profit			60,166				62,594				239,542				234,050
Operating expenses, net:
Research and development, net			22,486				19,597				86,562				74,098
Selling and marketing			32,544				32,015				126,533				119,842
General and administrative			10,244				6,114				29,786				21,885
Total operating expenses, net			65,274				57,726				242,881				215,825
Operating income (loss)			(5,108	)			4,868				(3,339	)			18,225
Financial income (expense), net			2,018				(463	)			8,052				4,407
Income (loss) before taxes on income			(3,090	)			4,405				4,713				22,632
Taxes on income			1,034				9,996				4,879				14,821
Net income (loss)			(4,124	)			(5,591	)			(166	)			7,811
Basic net earnings (loss) per share attributed to Radware Ltd.'s shareholders			(0.09	)			(0.12	)			(0.00	)			0.17
Weighted average number of shares used to compute basic net earnings (loss) per share			44,586,590				46,004,419				44,943,168				45,919,835
Diluted net earnings (loss) per share attributed to Radware Ltd.'s shareholders			(0.09	)			(0.12	)			(0.00	)			0.16
Weighted average number of shares used to compute diluted net earnings (loss) per share			44,586,590				46,004,419				44,943,168				47,503,091

		For the three months ended								For the year ended
		December 31,								December 31,
		2022				2021				2022				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
GAAP gross profit			60,166				62,594				239,542				234,050
Stock-based compensation			112				87				399				236
Amortization of intangible assets			992				465				3,704				1,858
Non-GAAP gross profit			61,270				63,146				243,645				236,144
GAAP research and development, net			22,486				19,597				86,562				74,098
Stock-based compensation			2,073				1,626				7,292				5,412
Non-GAAP Research and development, net			20,413				17,971				79,270				68,686
GAAP selling and marketing			32,544				32,015				126,533				119,842
Stock-based compensation			2,993				2,517				11,241				8,811
Non-GAAP selling and marketing			29,551				29,498				115,292				111,031
GAAP general and administrative			10,244				6,114				29,786				21,885
Stock-based compensation			4,480				1,142				8,421				3,115
Litigation costs			-				-				-				288
Acquisition costs			819				296				1,961				925
Non-GAAP general and administrative			4,945				4,676				19,404				17,557
GAAP total operating expenses, net			65,274				57,726				242,881				215,825
Stock-based compensation			9,546				5,285				26,954				17,338
Litigation costs			-				-				-				288
Acquisition costs			819				296				1,961				925
Non-GAAP total operating expenses, net			54,909				52,145				213,966				197,274
GAAP operating income (loss)			(5,108	)			4,868				(3,339	)			18,225
Stock-based compensation			9,658				5,372				27,353				17,574
Amortization of intangible assets			992				465				3,704				1,858
Litigation costs			-				-				-				288
Acquisition costs			819				296				1,961				925
Non-GAAP operating income			6,361				11,001				29,679				38,870
GAAP financial income (loss), net			2,018				(463	)			8,052				4,407
Exchange rate differences, net on balance sheet items included in financial income (loss), net			413				1,592				(1,301	)			1,811
Non-GAAP financial income, net			2,431				1,129				6,751				6,218
GAAP income (loss) before taxes on income			(3,090	)			4,405				4,713				22,632
Stock-based compensation			9,658				5,372				27,353				17,574
Amortization of intangible assets			992				465				3,704				1,858
Litigation costs			-				-				-				288
Acquisition costs			819				296				1,961				925
Exchange rate differences, net on balance sheet items included in financial income (loss), net			413				1,592				(1,301	)			1,811
Non-GAAP income before taxes on income			8,792				12,130				36,430				45,088
GAAP taxes on income			1,034				9,996				4,879				14,821
Tax settlement			-				(8,247	)			-				(8,247	)
Tax related adjustments			61				61				246				246
Non-GAAP taxes on income			1,095				1,810				5,125				6,820
GAAP net income (loss)			(4,124	)			(5,591	)			(166	)			7,811
Stock-based compensation			9,658				5,372				27,353				17,574
Amortization of intangible assets			992				465				3,704				1,858
Litigation costs			-				-				-				288
Acquisition costs			819				296				1,961				925
Exchange rate differences, net on balance sheet items included in financial income, net			413				1,592				(1,301	)			1,811
Tax settlement			-				8,247				-				8,247
Tax related adjustments			(61	)			(61	)			(246	)			(246	)
Non-GAAP net income			7,697				10,320				31,305				38,268
GAAP diluted net earnings (loss) per share			(0.09	)			(0.12	)			(0.00	)			0.16
Stock-based compensation			0.21				0.11				0.60				0.37
Amortization of intangible assets			0.02				0.01				0.08				0.04
Litigation costs			0.00				0.00				0.00				0.01
Acquisition costs			0.02				0.01				0.04				0.02
Exchange rate differences, net on balance sheet items included in financial income (loss), net			0.01				0.03				(0.03	)			0.04
Tax settlement			0.00				0.17				0.00				0.17
Tax related adjustments			(0.00	)			(0.00	)			(0.01	)			(0.01	)
Non-GAAP diluted net earnings per share			0.17				0.22				0.68				0.81
Weighted average number of shares used to compute Non-GAAP diluted net earnings per share			45,227,288				47,655,351				45,947,476				47,503,091

		For the three months ended								For the twelve months ended
		December 31,								December 31,
		2022				2021				2022				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
GAAP net income (loss)			(4,124	)			(5,591	)			(166	)			7,811
Exclude:  Financial expense (income), net			(2,018	)			463				(8,052	)			(4,407	)
Exclude:  Depreciation and amortization expense			2,878				2,484				11,692				10,196
Exclude:  Taxes on income			1,034				9,996				4,879				14,821
EBITDA			(2,230	)			7,352				8,353				28,421
Share-based compensation			9,658				5,372				27,353				17,574
Litigation costs			-				-				-				288
Acquisition costs			819				296				1,961				925
Adjusted EBITDA			8,247				13,020				37,667				47,208

		For the three months ended								For the twelve months ended
		December 31,								December 31,
			2022				2021				2022				2021
Amortization of intangible assets			992				465				3,704				1,858
Depreciation			1,886				2,019				7,988				8,338
			2,878				2,484				11,692				10,196

		For the three months ended								For the year ended
		December 31,								December 31,
		2022				2021				2022				2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Cash flow from operating activities:
Net income (loss)			(4,124	)			(5,591	)			(166	)			7,811
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,878				2,484				11,692				10,196
Share-based compensation			9,658				5,372				27,353				17,574
Amortization of premium, accretion of discounts and accrued interest on marketable securities, net			766				817				2,345				2,720
Gain related to securities, net			(4	)			(14	)			(68	)			(438	)
Increase (decrease) in accrued interest on bank deposits			(1,424	)			1,003				(2,480	)			2,424
Increase in accrued severance pay, net			301				15				219				468
Decrease (increase) in trade receivables, net			(4,401	)			(1,715	)			(4,561	)			3,657
Decrease (increase) in other receivables and prepaid expenses and other long-term assets			(5,243	)			2,515				(5,716	)			(8,091	)
Decrease (increase) in inventories			(574	)			823				152				2,355
Increase in trade payables			1,297				1,316				3,757				428
Increase in deferred revenues			1,584				10,990				13,475				20,063
Increase (decrease) in other payables and accrued expenses			8,418				10,287				(12,301	)			12,238
Operating lease liabilities, net			428				632				(1,553	)			369
Net cash provided by operating activities			9,560				28,934				32,148				71,774
Cash flows from investing activities:
Purchase of property and equipment			(1,768	)			(1,653	)			(8,814	)			(5,603	)
Proceeds from (investment in) other long-term assets, net			(71	)			7				35				49
Proceeds from (investment in) bank deposits, net			5,824				20,168				(13,377	)			24,448
Investment in, redemption of and purchase of marketable securities ,net			1,640				(3,527	)			(3,862	)			(11,045	)
Payment for the business acquisition of SecurityDAM Ltd.			-				-				(30,000	)			-
Net cash provided by (used in) investing activities			5,625				14,995				(56,018	)			7,849
Cash flows from financing activities:
Proceeds from exercise of share options			832				2,828				2,034				10,590
Repurchase of shares			(12,301	)			(17,449	)			(59,492	)			(52,471	)
Proceeds from issuance of Preferred A shares in subsidiary			-				-				35,000				-
Net cash used in financing activities			(11,469	)			(14,621	)			(22,458	)			(41,881	)
Increase (decrease) in cash and cash equivalents			3,716				29,308				(46,328	)			37,742
Cash and cash equivalents at the beginning of the period			42,469				63,205				92,513				54,771
Cash and cash equivalents at the end of the period			46,185				92,513				46,185				92,513