RDWR RADWARE Ltd

Second Quarter 2018 Results and Financial Highlights

 Radware® (NASDAQ:RDWR), a leading provider of cyber security and application delivery solutions, today announced its consolidated financial results for the quarter ended June 30, 2018.

“We are pleased to report another strong quarter, with continued growth in bookings, revenue, and profitability. We remain committed to our mission of ensuring network and application availability and security. The cyber threats landscape continues to evolve, and as threats grow more complex, our innovation around adaptive and analytics-based early attack detection, surgical mitigation, and advanced automation, all become more valuable” said Roy Zisapel, Radware President & CEO.

Financial Highlights for the Second Quarter of 2018

Revenues for the second quarter of 2018 totaled $57.3 million, up 12% from revenues of $51.0 million for the second quarter of 2017:

• Revenues in the Americas region were $23.9 million for the second quarter of 2018, down 2% from revenues of $24.3 million in the second quarter of 2017. For the first six months of 2018, revenues in the Americas region were up 13% over the same period in 2017
• Revenues in the EMEA region were $19.8 million for the second quarter of 2018, up 51% from revenues of $13.1 million in the second quarter of 2017. For the first six months of 2018, revenues in the EMEA region increased 26% over the same period of 2017
• Revenues in the APAC region were $13.6 million for the second quarter of 2018, same as in the second quarter of 2017. For the first six months of 2018, revenues in the APAC region decreased 3% over the same period of 2017

Net profit on a GAAP basis for the second quarter of 2018 was $1.7 million or $0.04 per diluted share, compared with net loss of ($4.1) million or ($0.09) per diluted share for the second quarter of 2017.

Non-GAAP net income for the second quarter of 2018 was $5.0 million or $0.10 per diluted share, compared with non- GAAP net income of $1.2 million or $0.03 per diluted share for the second quarter of 2017.

Non-GAAP results are calculated excluding the impact of stock-based compensation, exchange rate differences, net on balance sheet items included in financial income, amortization of intangible assets, acquisition costs and litigation costs. A reconciliation of each of the company’s non-GAAP measures to the comparable GAAP measured is included at the end of this press release.

As of June 30, 2018, the Company had cash, cash equivalents, short-term and long-term bank deposits and marketable securities of $367.2 million, up from $358.1 million as of the end of March 31, 2018.

Conference Call

Radware management will host a call on Wednesday, August 1, 2018 at 8:30 am ET to discuss its second quarter 2018 results and the company’s outlook for the third quarter of 2018.

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

Participants Internationally call:  +1-647-689-4208 

Conference ID: 8599407

A replay will be available for 2 days, starting 2 hours after the end of the call, on telephone number +1-416-621-4642 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 InformationIn addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), Radware uses non-GAAP measures of gross profit, operating income, financial income, net income and earnings per share, which are adjustments from results based on GAAP to exclude stock-based compensation expenses, in accordance with ASC No. 718, amortization of intangible assets, acquisition costs, litigation costs and exchange rate differences, net on balance sheet items included in finance income. Such exchange rate differences may vary from period to period due to changes in exchange rates driven by general market conditions or other circumstances outside of the normal course of Radware's operations. Management believes that exclusion of these charges allows comparisons of operating results that are consistent across past, present and future periods. Furthermore, Radware uses a measure called “total deferred revenues” which is defined as the sum of short and long term deferred revenues on the balance sheet and uncollected billed amounts that were offset against trade receivables, and are not presented on the balance sheet. Radware’s management believes the non-GAAP financial information provided in this release is useful to investors for the purpose of understanding and assessing Radware’s ongoing operations. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release, 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 information in evaluating and operating business internally and, as such, has determined that it is important to provide this information to investors.

Safe Harbor Statement

This press release may contain statements concerning Radware’s future prospects that are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Statements preceded by, followed by, or that otherwise include the words "believes", "expects", "anticipates", "intends", "estimates", "plans", and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. 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; 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; Competition in the market for Application Delivery and Network Security solutions and our industry in general is intense; and other factors and risks on 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, reference is made to Radware’s Annual Report on Form 20-F, which is on file 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.

©2018 Radware Ltd. All rights reserved. The 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+972 723917548ir@radware.com 

Media Contacts:Deborah SzajngartenRadware201-785-3206deborah.szajngarten@radware.com 

Radware Ltd.
Condensed Consolidated Balance Sheets
(U.S. Dollars in thousands)
	June 30,		December 31,
	2018		2017
	(Unaudited)		(Unaudited)
Assets
Current assets
Cash and cash equivalents	61,676		65,237
Available-for-sale marketable securities	41,234		42,573
Short-term bank deposits	149,622		93,151
Trade receivables, net	18,598		16,150
Other receivables and prepaid expenses	7,687		12,252
Inventories	18,443		18,772
	297,260		248,135
Long-term investments
Available-for-sale marketable securities	55,948		54,427
Long-term bank deposits	58,718		88,911
Severance pay funds	3,039		3,251
	117,705		146,589
Property and equipment, net	22,453		23,642
Intangible assets, net	9,932		10,415
Other long-term assets	18,492		8,133
Goodwill	32,174		32,174
Total assets	498,016		469,088
Liabilities and shareholders' equity
Current Liabilities
Trade payables	4,744		5,367
Deferred revenues	76,758		69,829
Other payables and accrued expenses	25,212		32,174
	106,714		107,370
Long-term liabilities
Deferred revenues	43,719		43,482
Other long-term liabilities	5,413		2,880
	49,132		46,362
Shareholders' equity
Share capital	685		673
Additional paid-in capital	368,318		349,250
Accumulated other comprehensive loss, net of tax	(1,212)		(443)
Treasury stock, at cost	(116,442)		(116,442)
Retained earnings	90,821		82,318
Total shareholders' equity	342,170		315,356
Total liabilities and shareholders' equity	498,016		469,088

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,
		2018		2017		2018		2017
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues		57,287		50,956		111,823		99,868
Cost of revenues		10,340		9,634		20,280		18,628
Gross profit		46,947		41,322		91,543		81,240
Operating expenses:
Research and development, net		14,633		15,013		29,295		29,253
Selling and marketing		27,803		26,410		55,986		52,389
General and administrative		3,811		4,380		7,866		9,160
Total operating expenses		46,247		45,803		93,147		90,802
Operating income (loss)		700		(4,481)		(1,604)		(9,562)
Financial income, net		1,701		640		3,390		1,747
Income (loss) before taxes on income		2,401		(3,841)		1,786		(7,815)
Taxes on income		(727)		(218)		(1,107)		(322)
Net income (loss)		1,674		(4,059)		679		(8,137)
Basic net income (loss) per share		0.04		(0.09)		0.02		(0.19)
Weighted average number of shares used to compute basic net earnings (loss) per share		44,839,420		43,821,006		44,583,442		43,282,607
Diluted net earnings (loss) per share		0.04		(0.09)		0.01		(0.19)
Weighted average number of shares used to compute diluted net earnings (loss) per share		47,396,099		43,821,006		46,936,309		43,282,607

	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,
		2018		2017		2018		2017
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
GAAP gross profit		46,947		41,322		91,543		81,240
	Stock-based compensation	59		61		117		116
	Amortization of intangible assets	212		419		442		672
Non-GAAP gross profit		47,218		41,802		92,102		82,028
GAAP research and development, net		14,633		15,013		29,295		29,253
	Stock-based compensation	679		1,028		1,610		1,926
Non-GAAP Research and development, net		13,954		13,985		27,685		27,327
GAAP selling and marketing		27,803		26,410		55,986		52,389
	Stock-based compensation	1,774		1,875		3,678		3,499
	Amortization of intangible assets	21		24		41		47
Non-GAAP selling and marketing		26,008		24,511		52,267		48,843
GAAP general and administrative		3,811		4,380		7,866		9,160
	Stock-based compensation	378		583		785		1,003
	Acquisition costs	-		-		-		340
	Litigation costs	143		600		413		1,619
Non-GAAP general and administrative		3,290		3,197		6,668		6,198
GAAP total operating expenses		46,247		45,803		93,147		90,802
	Stock-based compensation	2,831		3,486		6,073		6,428
	Acquisition costs	-		-		-		340
	Amortization of intangible assets	21		24		41		47
	Litigation costs	143		600		413		1,619
Non-GAAP total operating expenses		43,252		41,693		86,620		82,368
GAAP operating income (loss)		700		(4,481)		(1,604)		(9,562)
	Stock-based compensation	2,890		3,547		6,190		6,544
	Acquisition costs	-		-		-		340
	Amortization of intangible assets	233		443		483		719
	Litigation costs	143		600		413		1,619
Non-GAAP operating income (loss)		3,966		109		5,482		(340)
GAAP finance income		1,701		640		3,390		1,747
	Exchange rate differences, net on balance sheet items included in financial income	26		659		(177)		806
Non-GAAP finance income		1,727		1,299		3,213		2,553
GAAP income (loss) before taxes on income		2,401		(3,841)		1,786		(7,815)
	Stock-based compensation	2,890		3,547		6,190		6,544
	Acquisition costs	-		-		-		340
	Amortization of intangible assets	233		443		483		719
	Litigation costs	143		600		413		1,619
	Exchange rate differences, net on balance sheet items included in financial income	26		659		(177)		806
Non-GAAP income before taxes on income		5,693		1,408		8,695		2,213
GAAP net income (loss)		1,674		(4,059)		679		(8,137)
	Stock-based compensation	2,890		3,547		6,190		6,544
	Acquisition costs	-		-		-		340
	Amortization of intangible assets	233		443		483		719
	Litigation costs	143		600		413		1,619
	Exchange rate differences, net on balance sheet items included in financial income	26		659		(177)		806
Non GAAP net income		4,966		1,190		7,588		1,891
GAAP Net earnings (loss) per diluted share		0.04		(0.09)		0.01		(0.19)
	Stock-based compensation	0.06		0.08		0.13		0.15
	Acquisition costs	0.00		0.00		0.00		0.01
	Amortization of intangible assets	0.00		0.01		0.01		0.02
	Litigation costs	0.00		0.01		0.01		0.04
	Exchange rate differences, net on balance sheet items included in financial income	0.00		0.01		(0.00)		0.02
Non GAAP Net earnings per diluted share		0.10		0.02		0.16		0.04
Weighted average number of shares used to compute Non-GAAP diluted net earnings per share		47,396,099		45,054,172		46,936,309		44,279,284

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,
		2018		2017		2018		2017
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cash flow from operating activities:
Net income (loss)		1,674		(4,059)		679		(8,137)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		2,443		2,987		4,948		5,806
Stock based compensation		2,890		3,547		6,190		6,544
Amortization of premium, accretion of discounts and accrued interest on available-for- sale marketable securities, net		414		270		690		631
Accrued interest on bank deposits		(146)		150		(212)		1,532
Increase (decrease) in accrued severance pay, net		(97)		41		142		176
Decrease (increase) in trade receivables, net		(2,564)		3,352		(2,601)		1,902
Decrease (increase) in other current assets and prepaid expenses and other long-term assets		(2,501)		(196)		4,697		838
Decrease (increase) in inventories		477		(1,063)		329		(2,341)
Increase (decrease) in trade payables		424		1,574		(623)		(136)
Increase (decrease) in deferred revenues		(1,700)		8,135		7,166		14,949
Increase (decrease) in other payables and accrued expenses		1,245		(3,374)		(6,682)		(4,096)
Net cash provided by operating activities		2,559		11,364		14,723		17,668
Cash flows from investing activities:
Purchase of property and equipment		(1,187)		(2,475)		(3,276)		(4,357)
Proceeds from (investment in) other long-term assets, net		131		(31)		40		16
Investment in bank deposits, net		(9,067)		(1,219)		(26,067)		(35,126)
Investment in sale, redemption of and purchase of available-for-sale marketable securities ,net		(686)		(5,910)		(1,872)		(2,023)
Payment for acquisition of subsidiary, net of cash acquired		0		0		0		(8,269)
Net cash used in investing activities		(10,809)		(9,635)		(31,175)		(49,759)
Cash flows from financing activities:
Proceeds from exercise of stock options		7,939		1,228		12,891		2,538
Net cash provided by financing activities		7,939		1,228		12,891		2,538
Increase (decrease) in cash and cash equivalents		(311)		2,957		(3,561)		(29,553)
Cash and cash equivalents at the beginning of the period		61,987		47,129		65,237		79,639
Cash and cash equivalents at the end of the period		61,676		50,086		61,676		50,086