Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow:
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 1:- GENERAL
a.Radware Ltd. (the "Company"), an Israeli company commenced operations in April 1997. The Company and its subsidiaries (the "Group") are engaged in the development, manufacture and sale of cyber security and application delivery solutions for cloud, physical, and Software Defined Data Centers (“SDDC”). The Group’s solutions secure the digital experience by providing infrastructure, application, and corporate IT protection and availability services to enterprises globally. The Group’s solutions are deployed by, among others, enterprises, carriers and cloud service providers worldwide.
b.The Company has established wholly-owned subsidiaries in various countries worldwide. The Company's subsidiaries are engaged primarily in sales, marketing and support activities of its core products.
c.The Group primarily relies on two original design manufacturers to supply certain hardware platforms and components for the production of its products. If one of these suppliers fails to deliver or delays the delivery of the necessary components, the Group will be required to seek alternative sources of supply. A change in suppliers could result in manufacturing delays, which could cause a possible loss of sales and, consequently, could adversely affect the Company's operation and financial performance.
The Group depended on a sole single-managed security service provider, which is a related party, to provide services as part of its protection services. If the managed security service provider were to fail to provide or delay the delivery of the services, the Group would be required to seek alternative sources of the services. A change in its managed security service provider could result in a possible loss of sales and, consequently, could adversely affect the Group’s operation and financial performance (see Note 17). However, on February 17, 2022, the Company acquired all of the technology and other intangible assets from the managed security service provider (see Note 18).
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
a.Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The coronavirus (“COVID-19”) pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on the Company’s customers and its sales cycles. The Company considered the impact of COVID-19 on the estimates and assumptions and determined that there were no material adverse impacts on the consolidated financial statements for the year ended December 31, 2021. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
b.Financial statements in United States dollars:
A majority of the Group’s revenues are denominated in United States dollars (“dollar” or “U.S. dollars”). In addition, a substantial portion of the Company’s and certain of its subsidiaries’ costs are denominated in dollar. The Company’s management believes that the dollar is the primary currency of the economic environment in which the Group operates. Thus, the functional and reporting currency of the Group is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are re-measured into dollars in accordance with Accounting Standards Codification (“ASC”) No. 830 “Foreign Currency Matters”. All transaction gains and losses from the re-measured monetary balance sheet items are reflected in the consolidated statements of income as financial income or expenses, as appropriate.
c.Principles of consolidation:
The consolidated financial statements include the accounts of the Group. All intercompany transactions and balances have been eliminated upon consolidation.
d.Cash equivalents:
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less, at acquisition.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
e.Bank deposits:
Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term bank deposits are stated at cost which approximate market values.
Bank deposits with maturities of more than one year are included in long-term bank deposits. Long-term bank deposits are stated at cost which approximates market values.
f.Investment in marketable securities:
The Company accounts for investments in marketable securities in accordance with ASC No. 320, “Investments - Debt and Equity Securities”. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.
The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date and the entity’s expectations of sales and redemptions in the following year.
The Company classified all of its securities as available-for-sale marketable securities. Debt securities are carried at fair value, with the unrealized gains and losses reported in “Accumulated other comprehensive income (loss)” in shareholders’ equity. Realized gains and losses on sales of investments are included in financial income, net and are derived using the specific identification method for determining the cost of securities.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities are included in financial income, net in the Company’s consolidated statements of income.
In 2020 the Company adopted Accounting Standard Update (“ASU”) 2016-13, Topic 326 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” which modified the other than temporary impairment model for available-for-sale debt securities. Available-for-sale securities are periodically evaluated for unrealized losses. For unrealized losses in securities that the Company intends to hold and will not more likely than not be required to sell before recovery, the Company further evaluates whether declines in fair value below amortized cost are due to credit or non-credit related factors. The Company considers credit related impairments to be changes in value that are driven by a change in the creditor’s ability to meet its payment obligations and records an allowance and recognizes a corresponding loss in financial income, net when the impairment is incurred. Unrealized non-credit related losses and unrealized gains, net of tax, are reported as a separate component of accumulated other comprehensive income (loss) in the consolidated balance sheets until realized.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net. Credit loss impairments for the years ended December 31, 2021, and 2020 were immaterial.
Prior to January 1, 2020, the Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. The factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company’s intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities that are deemed other-than-temporarily impaired, the amount of impairment recognized in the consolidated statements of income is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income. During 2019, the Company did not record other-than-temporary impairment loss (“OTTI”) with respect to its available-for-sale marketable securities.
g.Inventories:
Inventories are stated at the lower of cost or net realizable value. Inventory write-off is provided to cover risks arising from slow-moving items, technological obsolescence, excess inventories and discontinued products. Inventory write-offs totaled $2,028, $616 and $3,267 in 2021, 2020 and 2019, respectively, and have been included in cost of revenues of products in the Company’s consolidated statements of income.
Cost is determined as follows:
Raw materials and components - using the “first-in, first-out” method.
Work-in-progress and finished products - raw materials as above with the addition of subcontracting costs - calculated on the basis of direct subcontractors costs and with direct overhead costs.
The Company assesses the carrying value of its inventory for each reporting period to ensure inventory is reported at the lower of cost or net realizable value in accordance with ASC No. 330-10-35, “Inventory”. Charges for obsolete and slow-moving inventories are recorded based upon an analysis of specific identification of obsolete inventory items and quantification of slow-moving inventory items. These assessments consider various factors, including historical usage rate, technological obsolescence, estimated current and future market values and new product introduction. In cases when there is evidence that the anticipated utility of goods, in their disposal in the ordinary course of business, will be less than the historical cost of the inventory, the Company recognizes the difference as a current period charge to earnings and carries the inventory at the reduced cost basis until it is sold or disposed of.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
h.Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
|
|
% |
|
|
|
Computers, peripheral equipment and software |
|
15 - 33 (mainly 33) |
Office furniture and equipment |
|
6 - 20 (mainly 15) |
Leasehold improvements |
|
Over the shorter of the term of
the lease or the useful life of the asset |
i.Impairment of long-lived assets and intangible assets subject to amortization:
Property and equipment, right-of-use asset for leases and intangible assets subject to depreciation and amortization are reviewed for impairment in accordance with ASC No. 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Intangible assets acquired in a business combination are recorded at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives, which range from 7 to 9 years. Some of the acquired customer arrangements are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in accelerated amortization of such customer arrangements as compared to the straight-line method. All other intangible assets are amortized over their estimated useful lives on a straight-line basis. During 2021, 2020 and 2019, no impairment losses were recorded.
j.Goodwill:
Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC No. 350 “Intangibles – Goodwill and Other” (“ASC 350”), goodwill is not amortized, but rather is subject to an annual impairment test. ASC 350 requires goodwill to be tested for impairment at least annually or between annual tests in certain circumstances and written down when impaired. Goodwill is tested for impairment by comparing the fair value of the reporting unit with its carrying value.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ASC 350 allows a company to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If the Company elects not to use this option, or if the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company prepares a quantitative analysis to determine whether the carrying value of a reporting unit exceeds its estimated fair value. If the carrying value of a reporting unit exceeds its estimated fair value, the Company recognizes an impairment of goodwill for the amount of this excess.
The Company operates in one operating segment, and this segment comprises its single reporting unit. The Company conducts its annual test of impairment for goodwill on December 31st of each year, or more frequently if impairment indicators are present. No impairment was recorded during 2021, 2020 and 2019.
k.Leases:
The Company accounts for its leases according to ASC 842 - Leases (“ASC 842”). The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less.
ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured based on the discounted present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate the lease is considered unless it is reasonably certain that the Company will not exercise the option.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l.Contingencies
The Company is currently involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss (see Note 11).
m.Revenue recognition:
The Group’s revenues are derived from sales of its products, services and subscriptions:
•
Revenues from physical products and software-based products are recognized when control of the promised goods is transferred to the customer, either upon shipment or when the product is delivered, depending on the commercial terms of each transaction. Revenues from product subscriptions and cloud subscriptions, included as product revenues, are recognized ratably, on a straight-line basis, over the subscription period.
•
Revenues from post-contract customer support (“PCS”), which represent mainly, help-desk support and unit repairs or replacements, professional services, and emergency response team (“ERT”) services are recognized ratably, on a straight-line basis, over the term of the related contract, which is typically between one year and three years. Renewals of support contracts create new performance obligations that are satisfied over the term with the revenues recognized ratably, on a straight-line basis, over the renewed period.
The Company’s solutions are sold primarily through distributors and resellers, all of which are considered end-users.
The Company recognizes revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers”. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance obligation.
The Company’s arrangements typically contain various combinations of its products, subscriptions and PCS, which are distinct and are accounted for as separate performance obligations. The Company allocates the transaction price to each performance obligation based on its relative standalone selling price (“SSP”). If the SSP is not observable, the Company estimates the SSP taking into account available information such as geographic specific factors, customer grouping and internally approved historical pricing guidelines related to the performance obligation. For PCS, the Company determines the standalone selling price based on observable renewals prices. For subscriptions, the Company determines the standalone selling price based on standalone new subscription transactions and renewals.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
For products, the SSP is not observable, and therefore, the Company estimates the product SSP taking into account available information such as geographic specific factors, customer grouping and internally approved historical pricing guidelines.
Deferred revenues represent mainly the unrecognized revenue collected for subscriptions and for PCS. Such revenues are recognized ratably over the term of the related agreement. Out of the deferred revenues balance at the beginning of the year that ended December 31, 2021, approximately 64% was recognized as revenues during that year. Out of the deferred revenues balance at the beginning of the year that ended December 31, 2020, an amount of $110,544 was recognized as revenues during that year.
As of December 31, 2021, the aggregate amount of remaining performance obligations from contracts with customers was $281,565. The Company expects to recognize approximately 60% of its remaining performance obligations as revenue over the next twelve months, with the remaining recognized up to three years.
Remaining performance obligations represent the amount of the transaction price under contracts with customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the reporting date. This consists of future committed revenue for monthly, quarterly or annual periods within current contracts with customers, as well as deferred revenue arising from consideration invoiced in prior periods for which the related performance obligations have not been satisfied.
The following table provides information about disaggregated revenues by major product line:
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Products |
|
$ |
90,292 |
|
|
$ |
72,286 |
|
Services |
|
|
103,220 |
|
|
|
106,176 |
|
Subscriptions |
|
|
92,984 |
|
|
|
71,565 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
286,496 |
|
|
$ |
250,027 |
|
For information regarding disaggregated revenues by geographical market, please see Note 15.
The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the remaining performance obligations at the end of reporting period. In general, the Company expects to recognize the long-term portion of deferred revenue mainly over the remaining service period of up to three years.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company records a provision for estimated sale returns, credits and stock rotation granted to customers on products in the same period the related revenues are recorded. These estimates are based on historical sales returns, stock rotations and other known factors. Such provisions amounted to $2,494 and $2,739 as of December 31, 2021 and 2020, respectively. The provision for estimated sale returns, credits, and stock rotation as of December 31, 2021 and 2020, is included in other payables and accrued expenses in the consolidated balance sheets.
In instances of contracts where revenue recognition differs from the timing of invoicing, the Company generally determined that those contracts do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive or provide financing. The Company uses the practical expedient and does not assess the existence of a significant financing component when the difference between payment and revenue recognition is a year or less.
Costs to obtain contracts:
Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Commission costs related to long-term service contracts and performance obligations satisfied over time are deferred and recognized on a systematic basis that is consistent with the transfer of the products or services to which the asset relates. Sales commissions paid for new contracts, which are not commensurate with sales commissions paid for renewal contracts, are capitalized and amortized over an expected period of benefit and are included in sales and marketing expenses in the accompanying consolidated statements of income. The Company applies judgment in estimating the amortization period, by taking into consideration its product life term, history of renewals, expected length of customer relationship, as well as the useful life of the underlying technology and products. As of December 31, 2021, the Company has determined the expected period of benefit to be approximately 3.37 years. Deferred commission costs capitalized are periodically reviewed for impairment.
As of December 31, 2021 and 2020, the amount of deferred commission was $23,940 and $20,867, respectively and is included in other long-term assets on the consolidated balance sheets.
During the year ended December 31, 2021 and 2020, the Company recorded amortization expenses in connection with deferred commissions in the amount of $10,091 and $9,902, respectively.
n.Shipping and handling fees and costs:
Shipping and handling fees charged to the Company’s customers are recognized as product revenue in the period shipped and the related costs for providing these services are recorded as a product cost of revenues in the consolidated statements of income.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
o.Cost of revenues:
Cost of products is comprised of cost of software and hardware production, manuals, packaging, license fees paid to third parties, fees paid to managed security service provider (related parties), inventory write-offs and amortization of acquired technology.
Cost of services is comprised of cost of post-sale customer support and hosting services.
p.Warranty costs:
The Company generally provides a one year warranty for all of its products. A provision is recorded for estimated warranty costs at the time revenues are recognized based on the Company’s historical experience. Warranty expenses for the years ended December 31, 2021, 2020 and 2019 were immaterial.
q.Research and development expenses, net:
Research and development costs are charged to the consolidated statements of income as incurred. ASC No. 985-20, “Software - Costs of Software to Be Sold, Leased, or Marketed”, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.
Based on the Company’s product development process, technological feasibility is established upon completion of a working model. Costs incurred by the Company between completion of the working models and the point at which the products are ready for general release, have been insignificant. Therefore, all research and development costs are expensed as incurred.
r.Government grants:
During 2019-2021, the Company received non-royalty-bearing grants from the Israel Innovation Authority (“IIA”) for approved research and development projects. These grants are recognized at the time the Company is entitled to such grants on the basis of the costs incurred as provided by the relevant agreement and included as a deduction from research and development expenses, net.
Research and development grants deducted from research and development expenses, net amounted to $962, $924 and $937 for the years ended December 31, 2021, 2020 and 2019, respectively.
In addition, during 2021, an Israeli subsidiary of the Company received royalty-bearing grants from the IIA for approved research and development projects. These grants are recognized at the time the Israeli subsidiary is entitled to such grants on the basis of the costs incurred as provided by the relevant agreement and included as a deduction from research and development expenses, net.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Per the agreement with the IIA, and pursuant to applicable laws, the Israeli subsidiary is required to pay royalties at the rate of 3% of sales of products developed with funds provided by the IIA, up to an amount equal to 100% of the IIA research and development grants received. Grants amounted to $333 for the year ended December 31, 2021.
s.Accounting for share-based compensation:
The Company accounts for share-based compensation in accordance with ASC No. 718, “Compensation-Stock Compensation” (“ASC 718“). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of income.
The Company recognizes compensation expenses for the value of its awards based on the accelerated attribution method over the requisite service period of each of the awards, net of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures.
The Company selected the Black-Scholes-Merton option pricing model to account for the fair value of its share-options awards with only service conditions and whereas the fair value of the restricted share units awards (“RSUs”) is based on the market value of the underlying shares at the date of grant.
Compensation expense related to the market-condition based RSUs granted to the Chief Executive Officer of the Company is computed using the fair value of the awards at the date of grant. Potential shares to be issued for market-condition share awards granted in 2020 and 2019 are subject to a market condition based on the price of the Company’s ordinary share. The fair value of these awards was determined using a Monte Carlo simulation methodology.
The fair value of each market-condition based RSUs is estimated on the date of grant using the Monte Carlo model that uses the assumptions noted in the following table:
|
|
Year ended
December 31, |
|
|
|
2021 |
|
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
Risk free interest rate |
|
|
- |
|
|
|
0.36% |
|
|
1.59% |
|
Dividend yields |
|
|
- |
|
|
|
0% |
|
|
0% |
|
Expected volatility |
|
|
- |
|
|
|
24.97% |
|
|
27.67% |
|
The option-pricing models require a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical share price movements over an historical period equivalent to the option’s expected term.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The expected option term represents the period of time that options are expected to be outstanding based on historical experience. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The fair value of the Company’s share options granted to employees and directors for the years ended December 31, 2021, 2020 and 2019 was estimated using the following weighted average assumptions:
Employees’ share option plan:
|
|
Year ended
December 31, |
|
|
2021 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
Risk free interest rate |
|
0.89% |
|
0.33% |
|
1.86% |
Dividend yields |
|
0% |
|
0% |
|
0% |
Expected volatility |
|
27% |
|
26% |
|
26% |
Weighted average expected term from grant date (in years) |
|
3.46 |
|
3.68 |
|
3.83 |
t.Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes” (“ASC 740”). This statement prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes.
The second step is only addressed if the first step has been satisfied (i.e. the position is more likely than not to be sustained) otherwise a full liability in respect of a tax position not meeting the more likely than not criteria is recognized.
The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company accrues interest and penalty, if any related to unrecognized tax benefits in its taxes on income in the consolidated statements of income.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
u.Concentrations of credit risks:
Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, marketable securities and trade receivables.
The majority of the Group’s cash, cash equivalents and bank deposits are invested in major banks in Israel and the U.S. The Israeli bank deposits are not insured, while the deposits made in the United States are in excess of insured limits and are not otherwise insured. Generally, these cash equivalents may be redeemed upon demand and, therefore management believes that it bears a lower risk. The short-term and long-term bank deposits are held in financial institutions which management believes are institutions with high credit standing, and accordingly, minimal credit risk from geographic or credit concentration exists with respect to these bank deposits. As of December 31, 2021, 6%, 42%, and 31% of the Company’s short and long-term bank deposits were deposited in major Israeli banks in Israel which are rated A, AAA and BBB+, respectively, as determined by the Israeli affiliate of Standard & Poor’s (“S&P”), and 21% were deposited in the U.S. branch of another major Israeli bank which is also rated A, as determined by the Israeli affiliate of S&P.
As of December 31, 2021, the maximal contractual duration of any of the Company’s bank deposits was 2 years, the weighted average duration of the Company’s deposits was 1.5 years, and the weighted average time to maturity was 0.8 years.
The Company’s marketable securities included investment in foreign banks, government debentures and corporate debentures. The financial institutions that hold the Company’s marketable securities are major U.S. financial institutions, located in the United States. The Company’s management believes that the Company’s marketable securities portfolio is a diverse portfolio of highly-rated securities and the Company’s investment policy limits the amount the Company’s may invest in each issuer, and accordingly, management believes that minimal credit risk exists from geographic or credit concentration with respect to these securities.
From geographic prospective, 53% of the Company’s debt marketable securities portfolio was invested in debt securities of U.S. issuers, 7% was invested in debt securities of European issuers and 40% was invested in debt securities of other geographic-located issuers. As of December 31, 2021, 92% of the Company’s debt marketable securities portfolio was rated A- or higher, as determined by S&P and 8% was rated BBB or BBB+.
The trade receivables of the Group are mainly derived from sales to customers located primarily in the United States, Europe, the Middle East, Africa and Asia Pacific. The Company makes estimates of expected credit losses for the allowance for doubtful accounts based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions and other factors that may affect its ability to collect from customers.
The estimated credit loss allowance is recorded as general and administrative expenses on the Company’s consolidated statements of income. In certain circumstances, the Company may require from its customers letters of credit, other collateral or additional guarantees.
For the year ended December 2021, 2020 and 2019 bad debt expenses were $18, $104 and nil. Total write-offs during 2021 and 2020 amounted to nil and in 2019 amounted to $154.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
v.Employee related benefits:
Severance pay:
Effective April 1, 2007, the Company’s agreements with employees in Israel, are under Section 14 of the Israeli Severance Pay Law, 1963. The Company’s contributions for severance pay have extinguished its severance obligation. Upon contribution of the full amount based on the employee’s monthly salary for each year of service, no additional obligation exists regarding the matter of severance pay and no additional payments is made by the Company to the employee. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheets, as the Company is legally released from the obligation to pay severance amounts to employees once the required deposit amounts have been fully paid.
For the Company’s employees in Israel who are not subject to Section 14, the Company calculated the liability for severance pay pursuant to the Severance Pay Law based on the most recent salary of these employees multiplied by the number of years of employment as of the balance sheet date. The Company’s liability for these employees is fully provided for via monthly deposits with severance pay funds, insurance policies and accruals. The value of these deposits recorded as an asset on the Company’s balance sheet under other assets. The amount of accrued severance payable recorded as a liability on the Company’s balance sheet under other long-term liabilities as of December 31, 2021 and 2020 is $2,454 and $2,453, respectively.
Severance pay expenses for the years ended December 31, 2021, 2020 and 2019 amounted to approximately $5,455, $4,800 and $4,066, respectively. Accrued severance pay is included in other long-term liabilities in the consolidated balance sheets.
w.Fair value of financial instruments:
The Company measures its cash equivalents, bank deposits and marketable securities at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level 1 -Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 -Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 -Unobservable inputs which are supported by little or no market activity.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The carrying amounts of cash equivalents, trade receivables, trade payables, short-term bank deposits, other current assets and prepaid expenses and other payables and accrued expenses, approximate at fair value because of their generally short maturities.
x.Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC No. 220, “Comprehensive Income.” This statement establishes standards for the reporting and display of comprehensive income (loss) and its components in a full set of general purpose financial statements. Comprehensive income (loss) generally represents all changes in shareholders’ equity during the period except those resulting from investments by, or distributions to, shareholders. The Company determined that its only item of other comprehensive income (loss) relates to available-for-sale debt marketable securities adjustment.
y.Treasury stock:
The Company repurchases its ordinary shares from time to time on the open market and holds such shares as treasury stock. The Company presents the cost to repurchase treasury stock as a reduction of shareholders’ equity. The voting rights attached to treasury stock are revoked.
z.Basic and diluted net income per share:
Basic net income per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during each period, plus potential dilutive ordinary shares considered outstanding during the period, if any, in accordance with ASC No. 260, “Earnings Per Share”. The total number of ordinary shares related to outstanding stock options excluded from the calculation of diluted income per share as they would have been anti-dilutive was 35,208, 916,440 and 1,938,808 for the years ended December 31, 2021, 2020 and 2019, respectively.
aa.Business combinations:
The Company accounted for business combination in accordance with ASC No. 805, “Business Combinations” (“ASC 805”).
ASC No. 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date, measured at their fair values as of that date.
The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Under ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business (“2017-01”), the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single asset or group of assets, as applicable, is not a business.
NOTE 3:-ACQUISITIONS
On March 12, 2019 (the “Closing Date”), the Company completed the acquisition of all of the outstanding shares of Kaalbi Technologies Private Ltd. (“ShieldSquare”), a company engaged in Bot mitigation and Bot management solutions for a total consideration of $14,203 denominated in Indian Rupee, as determined in the agreement ($14,319 as of Closing Date). The total consideration was composed of (1) $12,558 in cash payable at closing (subject to certain working capital adjustments, $12,239 upon closing) and (2) $2,080 ($2,035 at December 31, 2019) deferred consideration to secure possible indemnity claims for damages arising out of breaches or inaccuracies of Shieldsquare’s or Shieldsquare shareholders’ representations, to be paid 18 months subsequent to the acquisition date. During 2020, the Company paid $2,054 with respect to the deferred consideration.
The acquisition was accounted for as a business combination and the purchase consideration was allocated to assets acquired and liabilities assumed based on their estimated fair values, as presented in the following table:
Consideration: |
|
|
|
Cash consideration paid on closing date, including working capital adjustments |
|
$ |
12,239 |
|
Deferred consideration |
|
|
2,080 |
|
|
|
|
|
|
Total purchase price |
|
$ |
14,319 |
|
|
|
|
|
|
Identifiable assets acquired, and liabilities assumed: |
|
|
|
|
Technology |
|
$ |
7,385 |
|
Goodwill |
|
|
8,970 |
|
Other current assets |
|
|
271 |
|
Deferred tax liability |
|
|
(2,307 |
) |
|
|
|
|
|
|
|
$ |
14,319 |
|
The estimated useful life of the technology is approximately 9 years.
The derived goodwill from this acquisition is attributable to additional capabilities of the Company to expand its products portfolio. Goodwill generated from this business combination is primarily attributable to synergies between the Company’s and Shieldsquare’s respective products and services. Pro forma results of operations for this acquisition have not been presented because they are not material to the consolidated statements of income.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 4:-MARKETABLE SECURITIES
Debt securities with contractual maturities of less than one year are as follows:
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
Amortized |
|
|
Gross unrealized |
|
|
Gross unrealized |
|
|
Market |
|
|
Amortized |
|
|
Gross unrealized |
|
|
Gross unrealized |
|
|
Market |
|
|
|
cost |
|
|
losses |
|
|
gains |
|
|
value |
|
|
cost |
|
|
losses |
|
|
gains |
|
|
value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign banks and government debentures |
|
$ |
18,246 |
|
|
$ |
- |
|
|
$ |
107 |
|
|
$ |
18,353 |
|
|
$ |
31,024 |
|
|
$ |
- |
|
|
$ |
390 |
|
|
$ |
31,414 |
|
Corporate debentures |
|
|
21,050 |
|
|
|
(5 |
) |
|
|
99 |
|
|
|
21,144 |
|
|
|
32,964 |
|
|
|
- |
|
|
|
306 |
|
|
|
33,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities |
|
$ |
39,296 |
|
|
$ |
(5 |
) |
|
$ |
206 |
|
|
$ |
39,497 |
|
|
$ |
63,988 |
|
|
$ |
- |
|
|
$ |
696 |
|
|
$ |
64,684 |
|
Debt securities with contractual maturities from one to three years are as follows:
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
Amortized |
|
|
Gross unrealized |
|
|
Gross unrealized |
|
|
Market |
|
|
Amortized |
|
|
Gross unrealized |
|
|
Gross unrealized |
|
|
Market |
|
|
|
cost |
|
|
losses |
|
|
gains |
|
|
value |
|
|
cost |
|
|
losses |
|
|
gains |
|
|
value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign banks and government debentures |
|
$ |
34,317 |
|
|
$ |
(304 |
) |
|
$ |
46 |
|
|
$ |
34,059 |
|
|
$ |
28,200 |
|
|
$ |
(28 |
) |
|
$ |
569 |
|
|
$ |
28,741 |
|
Corporate debentures |
|
|
64,699 |
|
|
|
(649 |
) |
|
|
115 |
|
|
|
64,165 |
|
|
|
37,362 |
|
|
|
(10 |
) |
|
|
743 |
|
|
|
38,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities |
|
$ |
99,016 |
|
|
$ |
(953 |
) |
|
$ |
161 |
|
|
$ |
98,224 |
|
|
$ |
65,562 |
|
|
$ |
(38 |
) |
|
$ |
1,312 |
|
|
$ |
66,836 |
|
The Company does not have any debt securities with contractual maturities of more than three years as of December 31, 2021 and 2020.
Debt securities with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values as of December 31, 2021 are as follows:
|
|
December 31, 2021 |
|
|
|
|
Investments with continuous unrealized losses for less than 12 months |
|
|
Investments with continuous unrealized losses for 12 months or greater |
|
|
Total investments with continuous unrealized losses |
|
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
|
Value |
|
|
losses |
|
|
value |
|
|
losses |
|
|
value |
|
|
losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign banks and government debentures |
|
$ |
22,075 |
|
|
$ |
(202 |
) |
|
$ |
10,491 |
|
|
$ |
(104 |
) |
|
$ |
32,566 |
|
|
$ |
(306 |
) |
|
Corporate debentures |
|
|
49,526 |
|
|
|
(521 |
) |
|
|
13,903 |
|
|
|
(132 |
) |
|
|
63,429 |
|
|
|
(653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale marketable securities |
|
$ |
71,601 |
|
|
$ |
(723 |
) |
|
$ |
24,394 |
|
|
$ |
(236 |
) |
|
$ |
95,995 |
|
|
$ |
(959 |
) |
|
Debt securities with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values as of December 31, 2020 were immaterial.
As of December 31, 2021, and 2020, interest receivable amounted to $994 and $1,103, respectively, and is included within marketable securities in the consolidated balance sheets.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:-FAIR VALUE MEASUREMENTS
In accordance with ASC No. 820, “Fair Value Measurements and Disclosures”, the Company measures its cash equivalents, marketable securities and deferred consideration at fair value on recurring basis. Cash equivalents and marketable securities are classified within Level 1 or Level 2 since these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The Company’s financial assets and liabilities measured at fair value on a recurring basis, including interest receivable components consisted of the following types of instruments as of December 31, 2021, and 2020:
|
|
December 31, 2021 |
|
|
|
Fair value measurements using input type |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
488 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign banks and government debentures |
|
|
- |
|
|
|
52,412 |
|
|
|
- |
|
|
|
52,412 |
|
Corporate debentures |
|
|
- |
|
|
|
85,309 |
|
|
|
- |
|
|
|
85,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
|
$ |
488 |
|
|
$ |
137,721 |
|
|
$ |
- |
|
|
$ |
138,209 |
|
|
|
December 31, 2020 |
|
|
|
Fair value measurements using input type |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
6,999 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign banks and government debentures |
|
|
- |
|
|
|
60,155 |
|
|
|
- |
|
|
|
60,155 |
|
Corporate debentures |
|
|
- |
|
|
|
71,365 |
|
|
|
- |
|
|
|
71,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets |
|
$ |
6,999 |
|
|
$ |
131,520 |
|
|
$ |
- |
|
|
$ |
138,519 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:-INVENTORIES
Inventories are comprised of the following:
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Raw materials and components |
|
$ |
2,028 |
|
|
$ |
1,859 |
|
Work-in-progress |
|
|
729 |
|
|
|
1,151 |
|
Finished products |
|
|
8,823 |
|
|
|
10,925 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,580 |
|
|
$ |
13,935 |
|
NOTE 7:-PROPERTY AND EQUIPMENT, NET
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer, peripheral equipment and software |
|
$ |
103,291 |
|
|
$ |
100,516 |
|
Office furniture and equipment |
|
|
13,489 |
|
|
|
13,126 |
|
Leasehold improvements |
|
|
7,493 |
|
|
|
7,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
124,273 |
|
|
|
121,067 |
|
Accumulated depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer, peripheral equipment and software |
|
|
88,323 |
|
|
|
83,822 |
|
Office furniture and equipment |
|
|
10,504 |
|
|
|
9,551 |
|
Leasehold improvements |
|
|
5,206 |
|
|
|
4,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
104,033 |
|
|
|
98,091 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
20,240 |
|
|
$ |
22,976 |
|
Depreciation expenses for the years ended December 31, 2021, 2020 and 2019 were $8,339, $8,666 and $8,912, respectively.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 8:-INTANGIBLE ASSETS, NET
Intangible assets:
|
|
Weighted |
|
|
|
|
|
|
average |
|
|
|
|
|
|
amortization |
|
|
December 31, |
|
|
|
period |
|
|
2021 |
|
|
2020 |
|
|
|
(years) |
|
|
|
|
|
|
|
Cost: |
|
|
|
|
|
|
|
|
|
Acquired technology |
|
8.7 |
|
|
$ |
32,946 |
|
|
$ |
32,946 |
|
Customers relationships and brand name |
|
5.8 |
|
|
|
9,817 |
|
|
|
9,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,763 |
|
|
|
42,763 |
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
|
|
|
Acquired technology |
|
|
|
|
|
22,215 |
|
|
|
20,358 |
|
Customers relationships and brand name |
|
|
|
|
|
9,817 |
|
|
|
9,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,032 |
|
|
|
30,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
$ |
10,731 |
|
|
$ |
12,588 |
|
Amortization expenses for the years ended December 31, 2021, 2020 and 2019 were $1,857, $1,893 and $2,371, respectively.
Future estimated amortization expenses for the years ending:
December 31, |
|
|
|
|
|
|
|
2022 |
|
$ |
1,857 |
|
2023 |
|
|
1,857 |
|
2024 |
|
|
1,857 |
|
2025 |
|
|
1,857 |
|
2026 |
|
|
1,615 |
|
2027 and thereafter |
|
|
1,688 |
|
|
|
|
|
|
Total |
|
$ |
10,731 |
|
NOTE 9:-LEASES
The Company has various operating leases for office space, vehicles and warehouse space that expire on different dates through 2030. Its lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. The Company provided several security deposits mainly to secure various operating lease agreements in connection with its office space.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 9:-LEASES (Cont.)
Aggregate lease payments for the right of use assets over the remaining lease period as of December 31, 2021 are as follows:
2022 |
|
$ |
5,545 |
|
2023 |
|
|
4,490 |
|
2024 |
|
|
3,956 |
|
2025 |
|
|
3,400 |
|
2026 |
|
|
2,874 |
|
2027 and thereafter |
|
|
9,950 |
|
|
|
|
|
|
Total undiscounted lease payments |
|
$ |
30,215 |
|
|
|
|
|
|
Less: adjustment to discounted lease payments |
|
|
(2,765 |
) |
|
|
|
|
|
Total discounted lease payments |
|
$ |
27,450 |
|
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of December 31, 2021:
Weighted average remaining lease term (years): |
|
|
7.37 |
|
|
|
|
|
|
Weighted average discount rate: |
|
|
2.7 |
% |
Total rent expenses for the years ended December 31, 2021, 2020 and 2019 were $6,193, $5,955 and $5,578, respectively (see also Note 17b).
NOTE 10:-OTHER PAYABLES AND ACCRUED EXPENSES
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Accrued expenses and other |
|
$ |
8,987 |
|
|
$ |
9,749 |
|
Subcontractors accrual |
|
|
2,344 |
|
|
|
2,494 |
|
Accrued taxes |
|
|
18,950 |
|
|
|
3,264 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,281 |
|
|
$ |
15,507 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 11:-COMMITMENTS AND CONTINGENT LIABILITIES
Litigation:
From time to time, the Company is party to other various legal proceedings, claims and litigation that arise in the normal course of business. It is the opinion of management that the ultimate outcome of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows and believes that it had provided an adequate accrual to cover the costs to resolve such legal proceedings, demands and claims.
NOTE 12:-SHAREHOLDERS' EQUITY
The Company's shares are listed for trade on the NASDAQ Global Select Market under the symbol “RDWR”.
a.Rights of shares:
Ordinary Shares:
The ordinary shares confer upon the holders the right to receive notice to participate and vote in shareholders meetings of the Company and to receive dividend, if declared.
b.Treasury stock:
In March 2020, the Company's board of directors authorized a new plan for the repurchase of up to an aggregate of $20,000 of the Company’s ordinary shares in the open market, subject to normal trading restrictions, or in privately negotiated transactions.
In May 2020, the Company’s board of directors authorized a new plan for the repurchase of up to an aggregate of $56,800 of the Company’s ordinary shares in the open market, subject to normal trading restrictions, or in privately negotiated transactions.
In February 2022, the Company’s board of directors authorized a new plan for the repurchase of the Company’s ordinary shares in the open market (see Note 18).
c.Dividends:
Dividends, if any, will be paid in NIS. Dividends paid to shareholders outside Israel may be converted to U.S. dollars on the basis of the exchange rate prevailing at the date of the conversion. The Company does not intend to pay cash dividends in the foreseeable future.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:- SHAREHOLDERS' EQUITY (Cont.)
d.Share Option Plans:
The Company has two stock option plans, the Company's Key Employee Share Incentive Plan (1997) as amended and restated (the “1997 Plan”) and the Directors and Consultants Option Plan (the “DC Plan” and together with the 1997 Plan, Stock Option Plans“). Under the Share Option Plans, options may be granted to officers, directors, employees and consultants of the Group. The exercise price per share under the Share Option Plans was generally not less than the market price of an ordinary share at the date of grant. The options vest primarily over four years. Each option is exercisable for one ordinary share. Any options, which are forfeited or not exercised before expiration, become available for future grants.
Pursuant to the Share Option Plans, the Company reserved for issuance 33,312,967 ordinary shares.
RSUs:
In addition to granting share options, since 2013, the Company started to routinely grant RSUs under the 1997 Plan. RSUs vest primarily over a four years period of employment. RSUs that are cancelled or forfeited become available for future grants.
The number of “Reserved and Authorized Shares” under the Equity Plans shall equal the sum of (i) the number of ordinary shares reserved and authorized under the Equity Incentive, and other awards granted under the Equity Incentive Plans as of such date, and (ii) the number of ordinary shares reserved.
As of December 31, 2021, the number of Reserved and Authorized Shares under the Equity Incentive Plans is as detailed below:
|
|
2021 |
|
|
|
|
|
Share options exercised and outstanding |
|
|
27,941,346 |
|
RSUs vested and outstanding |
|
|
4,501,870 |
|
Ordinary shares available for issuance under the Equity Incentive Plans |
|
|
869,751 |
|
|
|
|
|
|
Total reserved and authorized shares as of December 31, 2021 |
|
|
33,312,967 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:- SHAREHOLDERS' EQUITY (Cont.)
A summary of employees and directors options activity under the Company's Stock Option Plans as of December 31, 2021 is as follows:
|
|
|
Number of options |
|
|
Weighted-average
exercise price |
|
|
Weighted- average
remaining contractual
term
(in years) |
|
|
Aggregate intrinsic
value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2021 |
|
|
|
3,637,050 |
|
|
$ |
21.97 |
|
|
|
3.41 |
|
|
$ |
21,021 |
|
Granted |
|
|
|
252,233 |
|
|
|
32.18 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
(798,116 |
) |
|
|
17.50 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
|
(25,375 |
) |
|
|
17.66 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
(915,480 |
) |
|
|
23.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2021 |
|
|
|
2,150,312 |
|
|
$ |
24.17 |
|
|
|
3.39 |
|
|
$ |
37,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2021 |
|
|
|
651,141 |
|
|
$ |
22.13 |
|
|
|
2.28 |
|
|
$ |
12,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2021 |
|
|
|
2,022,211 |
|
|
$ |
24.12 |
|
|
|
3.35 |
|
|
$ |
35,420 |
|
The weighted-average grant-date fair value of options granted during the years ended December 31, 2021, 2020 and 2019 was $6.87, $4.74 and $5.54, respectively.
As of December 31, 2021, there was approximately $4,281 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Company's stock option plans. That cost is expected to be recognized over a weighted-average period of 1.46 years.
The total intrinsic value of options exercised during the years 2021, 2020 and 2019 was $14,003, $13,335 and $13,720, respectively.
The aggregate intrinsic value of the outstanding stock options at December 31, 2021 and 2020, represents the intrinsic value of 2,150,312 and 3,637,050, respectively, outstanding options that are in-the-money as of such dates. No outstanding options were out-of-the-money as of December 31, 2021.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:- SHAREHOLDERS' EQUITY (Cont.)
The options outstanding under the Company's Stock Option Plans as of December 31, 2021, have been separated into ranges of exercise price as follows:
December 31, 2021 |
|
Outstanding |
|
|
Exercisable |
|
Ranges of
exercise
price |
|
|
Number of
options |
|
|
Weighted
average
remaining
contractual
life (years) |
|
|
Weighted
average
exercise
price |
|
|
Number of
options |
|
|
Weighted
Average
Exercise
price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13.35-17.63 |
|
|
|
195,170 |
|
|
|
0.76 |
|
|
$ |
16.89 |
|
|
|
195,170 |
|
|
$ |
16.89 |
|
$ |
20.26-24.89 |
|
|
|
1,363,349 |
|
|
|
3.76 |
|
|
$ |
23.16 |
|
|
|
291,808 |
|
|
$ |
23.13 |
|
$ |
25.25-29.10 |
|
|
|
396,585 |
|
|
|
2.55 |
|
|
$ |
26.79 |
|
|
|
164,163 |
|
|
$ |
26.59 |
|
$ |
32.71-35.43 |
|
|
|
195,208 |
|
|
|
5.09 |
|
|
$ |
33.20 |
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,150,312 |
|
|
|
|
|
|
|
|
|
|
|
651,141 |
|
|
|
|
|
The following table summarizes information relating to RSUs, as well as changes to such awards during 2021:
|
|
Year ended
December 31,
2021 |
|
|
|
|
|
Outstanding at January 1, 2021 |
|
|
1,906,806 |
|
Granted |
|
|
1,186,397 |
|
Vested |
|
|
(558,071 |
) |
Forfeited |
|
|
(314,821 |
) |
|
|
|
|
|
Outstanding as of December 31, 2021 |
|
|
2,220,311 |
|
As of December 31, 2021, there was approximately $44,774 of total unrecognized compensation costs related to non-vested RSUs granted under the Company's share option plans. That cost is expected to be recognized over a weighted-average period of 1.75 years.
The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2021, 2020 and 2019 were $32.57, $22.54 and $23.41, respectively.
The weighted-average grant date fair value of RSUs vested during the year ended December 31, 2021, 2020 and 2019 were $21.77, $18.18 and $15.40, respectively.
The weighted-average grant date fair value of RSUs forfeited during the year ended December 31, 2021, 2020 and 2019 were $24.32, $23.24 and $19.40, respectively.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:- SHAREHOLDERS' EQUITY (Cont.)
Share-based compensation was recorded in the following items within the consolidated statements of income:
|
|
Year ended
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
236 |
|
|
$ |
188 |
|
|
$ |
224 |
|
Research and development, net |
|
|
5,412 |
|
|
|
4,409 |
|
|
|
2,855 |
|
Sales and marketing |
|
|
8,811 |
|
|
|
8,315 |
|
|
|
6,953 |
|
General and administrative |
|
|
3,115 |
|
|
|
3,633 |
|
|
|
3,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
$ |
17,574 |
|
|
$ |
16,545 |
|
|
$ |
13,064 |
|
NOTE 13:-EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net earnings per share:
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,811 |
|
|
$ |
9,636 |
|
|
$ |
22,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, net of treasury stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net earnings per share |
|
|
45,919,835 |
|
|
|
46,460,974 |
|
|
|
46,816,899 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee share options and RSUs |
|
|
1,583,256 |
|
|
|
1,278,566 |
|
|
|
1,706,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net earnings per share |
|
|
47,503,091 |
|
|
|
47,739,540 |
|
|
|
48,523,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
|
$ |
0.17 |
|
|
$ |
0.21 |
|
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per share |
|
$ |
0.16 |
|
|
$ |
0.20 |
|
|
$ |
0.47 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME
a.General:
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
7,125 |
|
|
$ |
5,597 |
|
Decrease related to settlement with tax authorities |
|
|
(4,258 |
) |
|
|
- |
|
Additions for prior year tax positions |
|
|
2,115 |
|
|
|
657 |
|
Decrease for prior year tax positions |
|
|
(1,428 |
) |
|
|
- |
|
Additions for current year tax positions |
|
|
1,758 |
|
|
|
871 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
5,312 |
|
|
$ |
7,125 |
|
As of December 31, 2021, the entire amount of the unrecognized tax benefits could affect the Company’s income tax provision and the effective tax rate.
The Company adjusts the unrecognized tax benefit liability and income tax expense in the period in which the uncertain tax position is effectively settled, the statute of limitations expires or when new information is available.
During the years ended December 31, 2021, 2020 and 2019 a net amounts of $243, $657 and $484, respectively, were added to the unrecognized tax benefits derived from interest and exchange rate differences expenses related to prior years’ uncertain tax positions. As of December 31, 2021, and 2020, the Company had accrued interest liability related to uncertain tax positions in the amounts of $97 and $698, respectively, which is included within other long-term liabilities on the consolidated balance sheets.
Exchange rate differences are recorded within financial income, net, while interest is recorded within taxes on income in the consolidated statements of income.
During November 2021, the Company reached a settlement with the Israeli Tax Authority (“ITA”) regarding the Company’s corporate tax returns for the years 2015-2018. As a result, the Company’s Israeli tax returns have been examined for all years including and prior to fiscal 2018, and the Company is no longer subject to audit for these periods. The settlement amounted to a total payment of $9,279 (NIS 28,858). The Company had provisions for the related years in the amount of $4,258 which were offset against such payment. In addition, as part of the settlement with the ITA, the Company received additional deductible expenses in the amount of $5,190.
The Company’s U.S subsidiary files income tax return in the U.S federal jurisdiction. As of December 31, 2021, the 2014 through 2020 tax years are open and may be subject to potential examinations in the U.S.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
The Company believes that it has adequately provided for any reasonably foreseeable outcome related to tax audits and settlement. The final tax outcome of its tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals. Such differences could have a material effect on the Company’s income tax provision and net income in the period in which such determination is made.
b.Israeli taxation:
1.Foreign Exchange Regulations:
Commencing taxable year 2003, the Company has elected to measure its taxable income and file its tax return under the Israeli Income Tax Regulations. Under the Foreign Exchange Regulations the Israeli company is calculating its tax liability in U.S. Dollars according to certain orders. The tax liability, as calculated in U.S. Dollars is translated into NIS according to the exchange rate as of December 31st of each year.
2.Tax rates:
The Israeli corporate tax rate in 2021, 2020 and 2019 was 23%. A company is taxable on its real capital gains at the corporate tax rate in the year of sale.
3.Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (“the Law“):
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments (“Amendment 73“) was published. According to Amendment 73, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%).
Amendment 73 also prescribes special tax tracks for technological enterprises, the new tax tracks under the amendment are as follows:
Technological preferred enterprise - an enterprise whose total consolidated revenues (parent company and all subsidiaries) is less than NIS 10 billion. Technological Preferred Enterprise, as defined in the law, which is located in the center of Israel (where our Israeli subsidiary is currently located) is subject to tax at a rate of 12% on profits deriving from intellectual property (in development area A, the tax rate is 7.5%), subject to satisfaction of a number of conditions, including compliance with a minimal amount or ratio of annual Research and development expenditure and Research and development employees, as well as having at least 25% of annual income derived from exports.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
The Company believes it meets the Technological preferred enterprise conditions.
Income not eligible for Preferred Technological Enterprise benefits is taxed at a regular rate, 23% from 2018 onwards.
Prior to 2014, most of the Company’s income was exempt from tax or subject to reduced tax rates under the Approved Enterprise program or the Beneficiary Enterprise in the Investment Law. Upon distribution of exempt income, the distributing company will be subject to corporate reduced tax rates ordinarily applicable to such income under the Investment Law.
Reduced income under the Investment Law including the Preferred Enterprise Regime and Preferred Technological Enterprise Regime will be freely distributable as dividends, subject to a 15% or 20% withholding tax (or lower rate for non-Israeli resident shareholder, under an applicable tax treaty).
On November 2, 2021, the Israeli Parliament approved a final bill regarding repatriations of trapped earnings out of Approved/Privileged Enterprises. The temporary provisions have come into effect as of November 15, 2021. The Israeli government agreed to grant relief on the amount of tax which should have been paid on distributable earnings in order to encourage companies to pay the reduced taxes during the next 12 months (the “temporary order”). The temporary order provides partial relief from previous Approved/Privileged Enterprise tax rates as defined in the Law for companies which opt to enjoy the privilege. The new temporary order does not require the actual distribution of the retained earnings, nor does it provides any relief from the 15% dividend withholding tax.
The partial relief from previous Approved/Privileged Enterprise tax rates is available to companies that elect to implement the temporary reduced tax relief by November 14, 2022, in respect of exempt retained earnings accrued up until December 31, 2021.
As part of the temporary order, the Company opted to implement the provisions included in the temporary order and completed the taxes on its trapped tax-exempt earnings. As a result, the Company has a tax payable amount as of December 31, 2021 of $8,247 included in other payables and accrued expenses in the consolidated balance sheets. As of December 31, 2021, the Company does not have any tax-exempted earnings attributable to its Beneficiary, Approved and Preferred Enterprise programs.
Through December 31, 2021, the Company has net operating carryforward losses of approximately $29,963 which can be carried forward and offset against taxable income in the future, for an indefinite period.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
c. Taxes on income are comprised as follows:
|
|
Year ended
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Current taxes |
|
$ |
18,287 |
|
|
$ |
3,995 |
|
|
$ |
4,678 |
|
Deferred taxes |
|
|
(3,466 |
) |
|
|
333 |
|
|
|
(1,535 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,821 |
|
|
$ |
4,328 |
|
|
$ |
3,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
10,741 |
|
|
$ |
2,648 |
|
|
$ |
1,833 |
|
Foreign |
|
|
4,080 |
|
|
|
1,680 |
|
|
|
1,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,821 |
|
|
$ |
4,328 |
|
|
$ |
3,143 |
|
|
|
Year ended
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Domestic taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxes |
|
$ |
12,890 |
|
|
$ |
3,166 |
|
|
$ |
3,670 |
|
Deferred taxes |
|
|
(2,149 |
) |
|
|
(518 |
) |
|
|
(1,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,741 |
|
|
|
2,648 |
|
|
|
1,833 |
|
Foreign taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxes |
|
|
5,397 |
|
|
|
829 |
|
|
|
1,008 |
|
Deferred taxes |
|
|
(1,317 |
) |
|
|
851 |
|
|
|
302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,080 |
|
|
|
1,680 |
|
|
|
1,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,821 |
|
|
$ |
4,328 |
|
|
$ |
3,143 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
d.Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s and its subsidiaries’ deferred tax liabilities and assets are as follows:
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Carryforward losses and tax credit |
|
$ |
9,336 |
|
|
$ |
6,962 |
|
Deferred revenues |
|
|
5,377 |
|
|
|
4,158 |
|
Unrealized gains on marketable securities |
|
|
136 |
|
|
|
- |
|
Temporary differences |
|
|
6,583 |
|
|
|
6,071 |
|
|
|
|
|
|
|
|
|
|
Deferred tax assets before valuation allowance |
|
|
21,432 |
|
|
|
17,191 |
|
Valuation allowance |
|
|
(2,760 |
) |
|
|
(1,992 |
) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
18,672 |
|
|
|
15,199 |
|
|
|
|
|
|
|
|
|
|
Intangible assets, including goodwill |
|
|
(4,543 |
) |
|
|
(4,699 |
) |
Depreciable assets |
|
|
(1,699 |
) |
|
|
(2,024 |
) |
Unrealized gains on marketable securities |
|
|
- |
|
|
|
(453 |
) |
|
|
|
|
|
|
|
|
|
Deferred tax liability |
|
|
(6,242 |
) |
|
|
(7,176 |
) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
12,430 |
|
|
$ |
8,023 |
|
e.Foreign:
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which among other provisions, reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. Apportioned income is also subject to tax in various states.
Through December 31, 2021, the U.S. subsidiary had a U.S. federal loss carryforward of $4,448, which can be carried forward and offset against taxable income up to 20 years, expiring between fiscal 2023 and fiscal 2038.
Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
On March 27, 2020, President Donald J. Trump signed the Coronavirus Aid Relief, and Economic Security Act (the “CARES Act”) into law. The Act includes several significant business tax provisions that, among other things, eliminate the taxable income limit for certain net operating losses and allow businesses and individuals to carry back Net Operating Losses (“NOLs”) arising in 2018, 2019, and 2020 to the five prior tax years. Consequently, management intend is to carry back NOLs generated in 2019 and 2020 to tax years 2014 and 2015. The applicable tax rate during these years was 34%, therefore, recognizing a deferred benefit of $1,202 due to the remeasurement of the NOLs deferred tax asset.
The Company continues to monitor tax implications resulting from new legislation passed in response to the COVID-19 pandemic in the federal, state and foreign jurisdictions where it has an income tax expense.
f.Income taxes of non-Israeli subsidiaries:
Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.
The Company does not provide deferred tax liabilities when it intends to reinvest earnings of foreign subsidiaries indefinitely.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
g.A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company and the actual tax expense as reported in the consolidated statements of income is as follows:
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes, as reported in the consolidated statements of income |
|
$ |
22,632 |
|
|
$ |
13,964 |
|
|
$ |
25,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory tax rate |
|
|
23 |
% |
|
|
23 |
% |
|
|
23 |
% |
Theoretical tax expense (benefit) on the above amount at the Israeli statutory tax rate |
|
$ |
5,205 |
|
|
$ |
3,212 |
|
|
$ |
5,913 |
|
Tax adjustment in respect of different tax rate of foreign subsidiary |
|
|
33 |
|
|
|
(185 |
) |
|
|
- |
|
Non-deductible expenses and other permanent differences |
|
|
305 |
|
|
|
83 |
|
|
|
188 |
|
Deferred taxes on losses for which valuation allowance was provided, net |
|
|
896 |
|
|
|
959 |
|
|
|
592 |
|
Utilization of tax losses and deferred taxes for which valuation allowance was provided, net |
|
|
(128 |
) |
|
|
(152 |
) |
|
|
(2,175 |
) |
Foreign withholding taxes |
|
|
2,656 |
|
|
|
1,489 |
|
|
|
|
|
Stock compensation relating to stock options per ASC No. 718 |
|
|
(2,369 |
) |
|
|
1,258 |
|
|
|
821 |
|
Income taxes in respect of prior years |
|
|
687 |
|
|
|
292 |
|
|
|
330 |
|
Change of tax rate |
|
|
462 |
|
|
|
(599 |
) |
|
|
- |
|
Approved, Privileged and Preferred enterprise loss (benefits) (*) |
|
|
6,869 |
|
|
|
(1,844 |
) |
|
|
(2,783 |
) |
Other |
|
|
205 |
|
|
|
(185 |
) |
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual tax expense |
|
$ |
14,821 |
|
|
$ |
4,328 |
|
|
$ |
3,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
Basic earnings per share amounts of the benefit resulting from the “Approved, Privileged and Preferred Enterprise” status |
|
$ |
0.15 |
|
|
$ |
0.04 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share amounts of the benefit resulting from the “Approved, Privileged and Preferred Enterprise” status |
|
$ |
0.14 |
|
|
$ |
0.04 |
|
|
$ |
0.06 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:-TAXES ON INCOME (Cont.)
h.Income before taxes on income is comprised as follows:
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
17,817 |
|
|
$ |
7,751 |
|
|
$ |
19,185 |
|
Foreign |
|
|
4,815 |
|
|
|
6,213 |
|
|
|
6,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes on income |
|
$ |
22,632 |
|
|
$ |
13,964 |
|
|
$ |
25,709 |
|
NOTE 15:-GEOGRAPHIC INFORMATION
Summary information about geographic areas:
The Company operates in one reportable segment (see Note 1 for a brief description of the Company's business). The total revenues are attributed to geographic areas based on the location of the end-users.
The following table presents total revenues for the years ended December 31, 2021, 2020 and 2019 from a geographical perspective:
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Revenues from sales to customers located at: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The United States |
|
$ |
98,937 |
|
|
$ |
93,706 |
|
|
$ |
85,447 |
|
America - other |
|
|
29,833 |
|
|
|
20,707 |
|
|
|
20,982 |
|
EMEA*) |
|
|
98,388 |
|
|
|
78,362 |
|
|
|
75,275 |
|
Asia Pacific |
|
|
59,338 |
|
|
|
57,252 |
|
|
|
70,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
286,496 |
|
|
$ |
250,027 |
|
|
$ |
252,072 |
|
*) Europe, the Middle East and Africa.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 15:- GEOGRAPHIC INFORMATION (Cont.)
The following table presents long-lived assets as of December 31, 2021 and 2020 from a geographical perspective:
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Long-lived assets, by geographic region: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
America (principally the United States) |
|
$ |
2,609 |
|
|
$ |
3,592 |
|
Israel |
|
|
39,467 |
|
|
|
43,711 |
|
EMEA - other |
|
|
1,201 |
|
|
|
1,314 |
|
Asia Pacific |
|
|
1,792 |
|
|
|
2,182 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
45,069 |
|
|
$ |
50,799 |
|
NOTE 16:-SELECTED CONSOLIDATED STATEMENTS OF INCOME DATA
Financial income, net:
|
|
Year ended
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Financial income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on bank deposits and other |
|
$ |
4,131 |
|
|
$ |
5,916 |
|
|
$ |
7,016 |
|
Amortization of premiums, accretion of discounts and interest on debt marketable securities, net |
|
|
1,855 |
|
|
|
3,700 |
|
|
|
3,639 |
|
Gain on sale of marketable securities |
|
|
438 |
|
|
|
639 |
|
|
|
537 |
|
Bank charges |
|
|
(200 |
) |
|
|
(189 |
) |
|
|
(124 |
) |
Foreign currency differences, net |
|
|
(1,817 |
) |
|
|
(2,270 |
) |
|
|
(2,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,407 |
|
|
$ |
7,796 |
|
|
$ |
8,792 |
|
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Represents transactions and balances with other entities in which certain members of the Company’s board of directors, management or shareholders have interest:
a.The following related party balances are included in the consolidated balance sheets:
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Trade receivables and prepaid expenses |
|
$ |
5,255 |
|
|
$ |
2,614 |
|
|
|
|
|
|
|
|
|
|
Trade payables and accrued expenses |
|
$ |
476 |
|
|
$ |
1,008 |
|
b.The following related party transactions are included in the consolidated statements of income:
|
|
Year ended
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Revenues (1) |
|
$ |
3,100 |
|
|
$ |
3,177 |
|
|
$ |
4,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (2) |
|
$ |
11,482 |
|
|
$ |
10,196 |
|
|
$ |
7,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, net - primarily lease, subcontractors and communications (3) |
|
$ |
6,757 |
|
|
$ |
5,201 |
|
|
$ |
4,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
$ |
189 |
|
|
$ |
1,586 |
|
|
$ |
1,944 |
|
(1)Distribution of the Company’s products on a non-exclusive basis.
(2)Related to cost of product purchased from one of the related companies. The Group depended on a sole single managed security service provider, which is a related party, to provide services as part of its protection services. If the managed security service provider were to fail to provide or delay the delivery of the services, the Group would be required to seek alternative sources of the services. A change in its managed security service provider could result in a possible loss of sales and, consequently, could adversely affect the Group’s operation and financial performance (See Note 18a).
(3)The Company leases office space and purchases other miscellaneous services from certain companies, which are considered to be related parties. In addition, the Company provides certain services to related parties.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 18:- SUBSEQUENT EVENTS
a.On February 17, 2022, the Company acquired all of the technology and other intangible assets from SecurityDam Ltd., which is a related company and the sole single-managed security service provider discussed in Note 1c and 17b(2) for a total consideration of (1) $30,000 in cash payable and (2) additional contingent consideration of up to $12,500 based on the performance of the Company’s cloud DDoS protection service after the acquisition.
b.In February 2022, the Company’s board of directors authorized a new plan for the repurchase of up to an aggregate of $80,000 of the Company’s ordinary shares in the open market, subject to normal trading restrictions, or in privately negotiated transactions.