Radware Announces Fourth Quarter and Full Year 2019 Earnings

Fourth Quarter 2019Results and Financial Highlights

• Record Revenues of $67.4 million, up 6% from the fourth quarter of 2018
  
  
• Non-GAAP operating income and margin of $9.5 million and 14%, respectively
  
  
• Non-GAAP EPS of $0.23; GAAP EPS of $0.15

Full Year 2019 Results and Financial Highlights

• Record Revenues of $252.1 million, up 8% from 2018
  
  
• Non-GAAP operating income and margin of $33.5 million and 13%, respectively
  
  
• Non-GAAP EPS of $0.84, up 53% from 2018; GAAP EPS of $0.47
  
  
• Net cash provided by operating activities of $53 million

TEL AVIV, Israel, Feb. 12, 2020 (GLOBE NEWSWIRE) -- Radware^® (NASDAQ: RDWR), a leading provider of cyber security and application delivery solutions, today announced its consolidated financial results for the quarter and year ended December 31, 2019.

“We are pleased with our performance in the fourth quarter, with record quarterly bookings and revenues,” said Roy Zisapel, Radware’s President & CEO. “Radware today is at a stronger financial, technological and competitive position than it has ever been. The intensity and complexity of the cyber-attacks landscape continue to drive demand for managed security services and strong growth in our cloud and subscriptions business. We look forward to continuing to bring value to our customers as we address additional cyber security challenges, while delivering growth and profitability.”

Financial Highlights for the Fourth Quarter of 2019
Revenues for the fourth quarter of 2019 totaled $67.4 million, up 6% from revenues of $63.8 million for the fourth quarter of 2018:

• Revenues in the Americas region were $29.7 million for the fourth quarter of 2019, up 7% compared to revenues of $27.7 million in the fourth quarter of 2018.
  
  
• Revenues in the APAC region were $17.1 million for the fourth quarter of 2019, up 32% from revenues of $12.9 million in the fourth quarter of 2018.
  
  
• Revenues in the EMEA region were $20.6 million for the fourth quarter of 2019, down 11% from revenues of $23.2 million in the fourth quarter of 2018.

Net income on a GAAP basis for the fourth quarter of 2019 was $7.3 million, or $0.15 per diluted share, compared with net income of $7.9 million, or $0.16 per diluted share, for the fourth quarter of 2018.

Non-GAAP net income for the fourth quarter of 2019 was $10.9 million, or $0.23 per diluted share, compared with non- GAAP net income of $11.4 million, or $0.24 per diluted share, for the fourth quarter of 2018.

Financial Highlights for the Full Year of 2019
Revenues for the full year of 2019 totaled $252.1 million, up 8% from revenues of $234.4 million for the full year of 2018:

• Revenues in the Americas region were $106.4 million for the full year of 2019, up 4% from revenues of $102.5 in the full year of 2018.
  
  
• Revenues in the APAC region were $70.4 million for the full year of 2019, up 25% from revenues of $56.2 in the full year of 2018.
  
  
• Revenues in the EMEA region were $75.3 million for the full year of 2019, down 1% from revenues of $75.8 in the full year of 2018.

Net income on a GAAP basis for the full year of 2019 was $22.6 million, or $0.47 per diluted share, compared with net income of $11.7 million, or $0.25 per diluted share, for the full year of 2018.

Non-GAAP net income for the full year of 2019 was $40.6 million, or $0.84 per diluted share, compared with non-GAAP net income of $26.0 million, or $0.55 per diluted share, for the full year of 2018.

Non-GAAP results are calculated excluding, as applicable, the impact of stock-based compensation expenses, amortization of intangible assets, acquisition costs, litigation costs, exchange rate differences, net on balance sheet items included in finance income, other gain adjustment and tax effect related to amortization of deferred tax liability related to intangible assets and other gain adjustment. A reconciliation of each of the Company’s non-GAAP measures to the comparable GAAP measure is included at the end of this press release.

As of December 31, 2019, the Company had cash, cash equivalents, short-term and long-term bank deposits and marketable securities of $427.7 million, up from $401.1 million as of December 31, 2018. Net cash provided by operating activities in the fourth quarter of 2019 totaled $4.0 million. Net cash provided by operating activities in the full year of 2019 totaled $52.9 million.

Conference Call

Radware management will host a call on Wednesday, February 12, 2020 at 8:30 a.m. ET to discuss its fourth quarter and full year 2019 results and the Company’s outlook for the first quarter and full year of 2020.

Participants in the US call: Toll Free 833-241-4257

Participants Internationally call:  [phone]

Conference ID: 8198484

A replay will be available for 2 days, starting 2 hours after the end of the call, on telephone number [phone] or (US toll-free) 800-585-8367. 

A live webcast of the conference call can also be heard by accessing 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
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, sales and marketing expense, general and administrative expense, other income, 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 stock-based compensation expenses, amortization of intangible assets, acquisition costs, litigation costs, exchange rate differences, net on balance sheet items included in finance income,  other gain adjustment and tax effect related to amortization of deferred tax liability related to intangible assets and other gain adjustment. 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 measures 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.

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.” For example, when we discuss the strong growth in our cloud and subscriptions business, we are using forward-looking statements. In addition, the announced financial results are preliminary, unaudited and subject to year-end audit adjustment. 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; changes in the competitive landscape; inability to realize our investment objectives; timely availability and customer acceptance of our new and existing products; 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 or the impact of the recent coronavirus outbreak; intense competition in the market for Application Delivery and Network Security solutions and in our industry in general; 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; outages, interruptions or delays in hosting services or our internal network system; undetected defects or errors in our products or a failure of our products to protect against malicious attacks; the availability of components and manufacturing capacity; 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 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 more than 12,500 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 www.radware.com.

©2020 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.

CONTACTS

Investor Relations:
Anat Earon-Heilborn
[phone]
[e-mail]

Media Contacts:
Deborah Szajngarten
Radware
201-785-3206
[e-mail]

Radware Ltd.
Condensed Consolidated Balance Sheets
(U.S. Dollars in thousands)
	December 31,		December 31,
	2019		2018
	(Unaudited)		(Unaudited)
Assets
Current assets
Cash and cash equivalents	40,751		45,203
Available-for-sale marketable securities	36,924		15,742
Short-term bank deposits	100,276		255,454
Trade receivables, net	22,610		17,166
Other receivables and prepaid expenses	8,032		7,071
Inventories	13,940		18,401
	222,533		359,037
Long-term investments
Available-for-sale marketable securities	112,696		84,669
Long-term bank deposits	137,095		-
Severance pay funds	2,300		2,973
	252,091		87,642
Property and equipment, net	22,971		23,677
Intangible assets, net	14,481		9,467
Other long-term assets	24,293		20,724
Operating lease right-of-use assets	18,144		-
Goodwill	41,144		32,174
Total assets	595,657		532,721
Liabilities and shareholders' equity
Current Liabilities
Trade payables	6,878		4,483
Deferred revenues	79,239		83,955
Operating lease liabilities	5,193		-
Other payables and accrued expenses	34,689		29,596
	125,999		118,034
Long-term liabilities
Deferred revenues	50,888		43,796
Operating lease liabilities	13,914		-
Other long-term liabilities	9,525		6,934
	74,327		50,730
Shareholders' equity
Share capital	710		693
Additional paid-in capital	414,581		383,536
Accumulated other comprehensive income (loss), net of tax	1,145		(1,110)
Treasury stock, at cost	(145,226)		(120,717)
Retained earnings	124,121		101,555
Total shareholders' equity	395,331		363,957
Total liabilities and shareholders' equity	595,657		532,721

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 year ended
	December 31,				December 31,
	2019		2018		2019		2018
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues	67,362		63,817		252,072		234,404
Cost of revenues	11,994		11,117		45,174		41,675
Gross profit	55,368		52,700		206,898		192,729
Operating expenses, net:
Research and development, net	16,103		13,945		61,841		57,674
Selling and marketing	29,121		28,137		109,556		111,386
General and administrative	4,375		4,294		18,584		16,145
Total operating expenses, net	49,599		46,376		189,981		185,205
Operating income	5,769		6,324		16,917		7,524
Financial income, net	2,745		2,397		8,792		7,274
Income before taxes on income	8,514		8,721		25,709		14,798
Taxes on income	1,183		778		3,143		3,063
Net income	7,331		7,943		22,566		11,735
Basic net earnings per share	0.16		0.17		0.48		0.26
Weighted average number of shares used to compute basic net earnings per share	46,900,711		46,357,278		46,816,899		45,289,296
Diluted net earnings per share	0.15		0.16		0.47		0.25
Weighted average number of shares used to compute diluted net earnings per share	48,304,507		48,279,751		48,523,120		47,691,868

	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 year ended
		December 31,				December 31,
		2019		2018		2019		2018
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
GAAP gross profit		55,368		52,700		206,898		192,729
	Stock-based compensation	53		50		224		221
	Amortization of intangible assets	486		212		2,304		866
Non-GAAP gross profit		55,907		52,962		209,426		193,816
GAAP research and development, net		16,103		13,945		61,841		57,674
	Stock-based compensation	791		694		2,855		3,123
	Acquisition costs	-		20		-		20
Non-GAAP Research and development, net		15,312		13,231		58,986		54,531
GAAP selling and marketing		29,121		28,137		109,556		111,386
	Stock-based compensation	1,696		1,727		6,954		7,071
	Amortization of intangible assets	17		21		69		82
Non-GAAP selling and marketing		27,408		26,389		102,533		104,233
GAAP general and administrative		4,375		4,294		18,584		16,145
	Stock-based compensation	742		775		3,032		2,087
	Acquisition costs	(18)		(222)		246		(222)
	Litigation costs	-		202		883		829
Non-GAAP general and administrative		3,651		3,539		14,423		13,451
GAAP total operating expenses, net		49,599		46,376		189,981		185,205
	Stock-based compensation	3,229		3,196		12,841		12,281
	Acquisition costs	(18)		(202)		246		(202)
	Amortization of intangible assets	17		21		69		82
	Litigation costs	-		202		883		829
Non-GAAP total operating expenses, net		46,371		43,159		175,942		172,215
GAAP operating income		5,769		6,324		16,917		7,524
	Stock-based compensation	3,282		3,246		13,065		12,502
	Acquisition costs	(18)		(202)		246		(202)
	Amortization of intangible assets	503		233		2,373		948
	Litigation costs	-		202		883		829
Non-GAAP operating income		9,536		9,803		33,484		21,601
GAAP financial income, net		2,745		2,397		8,792		7,274
	Other gain adjustment	-		-		(563)		-
	Exchange rate differences, net on balance sheet items included in financial income, net	(148)		(59)		2,270		196
Non-GAAP financial income, net		2,597		2,338		10,499		7,470
GAAP income before taxes on income		8,514		8,721		25,709		14,798
	Stock-based compensation	3,282		3,246		13,065		12,502
	Acquisition costs	(18)		(202)		246		(202)
	Amortization of intangible assets	503		233		2,373		948
	Litigation costs	-		202		883		829
	Other gain adjustment	-		-		(563)		-
	Exchange rate differences, net on balance sheet items included in financial income, net	(148)		(59)		2,270		196
Non-GAAP income before taxes on income		12,133		12,141		43,983		29,071
GAAP taxes on income		1,183		778		3,143		3,063
	Amortization of deferred tax liability related to intangible assets	39		-		286		-
	Tax related to other gain adjustment	-		-		(52)		-
Non-GAAP taxes on income		1,222		778		3,377		3,063
GAAP net income		7,331		7,943		22,566		11,735
	Stock-based compensation	3,282		3,246		13,065		12,502
	Acquisition costs	(18)		(202)		246		(202)
	Amortization of intangible assets	503		233		2,373		948
	Litigation costs	-		202		883		829
	Other gain adjustment	-		-		(563)		-
	Exchange rate differences, net on balance sheet items included in financial income, net	(148)		(59)		2,270		196
	Amortization of deferred tax liability related to intangible assets	(39)		-		(286)		-
	Tax related to other gain adjustment	-		-		52		-
Non-GAAP net income		10,911		11,363		40,606		26,008
GAAP diluted net earnings per share		0.15		0.16		0.47		0.25
	Stock-based compensation	0.07		0.07		0.27		0.26
	Acquisition costs	(0.00)		(0.00)		0.01		(0.00)
	Amortization of intangible assets	0.01		0.00		0.05		0.02
	Litigation costs	0.00		0.00		0.02		0.02
	Other gain adjustment	0.00		0.00		(0.01)		0.00
	Exchange rate differences, net on balance sheet items included in financial income, net	(0.00)		(0.00)		0.05		0.00
	Amortization of deferred tax liability related to intangible assets	(0.00)		0.00		(0.01)		0.00
	Tax related to other gain adjustment	0.00		0.00		0.00		0.00
Non-GAAP diluted net earnings per share		0.23		0.24		0.84		0.55
Weighted average number of shares used to compute Non-GAAP diluted net earnings per share		48,304,507		48,279,751		48,523,120		47,691,868

Radware Ltd.
Condensed Consolidated Statements of Cash Flow
(U.S. Dollars in thousands)
				For the three months ended								For the year ended
				December 31,								December 31,
				2019				2018				2019			2018
				(Unaudited)				(Unaudited)				(Unaudited)			(Unaudited)
Cash flow from operating activities:
Net income				7,331				7,943				22,566			11,735
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization				2,789				2,402				11,283			9,782
Stock based compensation				3,282				3,247				13,065			12,503
Amortization of premium, accretion of discounts and accrued interest on available-for-sale marketable securities, net				150				513				618			1,395
Other loss (gain)				26				-				(537)			-
Accrued interest on bank deposits				596				(962)				2,123			(2,391)
Increase in accrued severance pay, net				64				189				888			323
Decrease (increase) in trade receivables, net				(7,557)				1,325				(2,407)			(1,169)
Decrease (increase) in other receivables and prepaid expenses and other long-term assets				(2,599)				(1,765)				(7,448)			2,727
Decrease in inventories				1,143				2,062				4,461			371
Decrease (increase) in trade payables				2,873				(941)				2,338			(884)
Increase (decrease) in deferred revenues				(6,416)				10,048				2,260			14,440
Increase in other payables and accrued expenses				2,168				1,636				2,679			419
Operating lease liabilities, net				109				-				963			-
Net cash provided by operating activities				3,959				25,697				52,852			49,251
Cash flows from investing activities:
Purchase of property and equipment				(2,002)				(3,998)				(8,155)			(8,869)
Proceeds from (investment in) other long-term assets, net				(7)				-				4			40
Proceeds from (investment in) bank deposits, net				2,187				(29,935)				15,960			(71,002)
Investment in sale, redemption of and purchase of available-for-sale marketable securities ,net				(1,131)				(2,765)				(46,363)			(5,672)
Payment for acquisition of subsidiary, net of cash acquired				-				-				(12,239)			-
Net cash used in investing activities				(953)				(36,698)				(50,793)			(85,503)
Cash flows from financing activities:
Proceeds from exercise of stock options				3,406				2,224				17,999			21,803
Repayment of contingent consideration				-				(1,310)				-			(1,310)
Repurchase of shares				(5,616)				(4,275)				(24,510)			(4,275)
Net cash provided by (used in) financing activities				(2,210)				(3,361)				(6,511)			16,218
Increase (decrease) in cash and cash equivalents				796				(14,362)				(4,452)			(20,034)
Cash and cash equivalents at the beginning of the period				39,955				59,565				45,203			65,237
Cash and cash equivalents at the end of the period				40,751				45,203				40,751			45,203