Radware Announces Third Quarter 2016 Earnings

2016 Third Quarter Highlights
  • Revenues of $ 46.9 Million
  • Non-GAAP EPS of $ 0.04; GAAP EPS of ( $0.06)
  • Cash and cash equivalents of $311 million

TEL AVIV, Israel, Nov. 01, 2016 (GLOBE NEWSWIRE) -- Radware ® (NASDAQ:RDWR), a leading provider of cyber security and application delivery solutions ensuring optimal service level for applications in virtual, cloud and software defined data centers, today announced its consolidated financial results for the quarter ended September 30, 2016.

"Radware's third quarter of 2016 was characterized by an accelerated shift towards an increased proportion of service and subscription sales, pressuring revenues in the short term, but reflecting a desired strategic transition in our business model," said Roy Zisapel, Radware President & CEO.  "Through our unified infrastructure for delivery and security of applications, we have become a key enabler of the transition of applications to the cloud, clearly one of the most dominant technological trends today. We are also strongly positioned to benefit from the ever-evolving security threats. Events over the past few weeks highlighted the Internet of Things security risks, and we expect demand for our products to increase as new threat vectors continue to emerge. Radware enjoys a unique product portfolio with very strong technologies, which provides genuine competitive advantages in a very exciting market. I therefore have strong confidence in the Company's growth prospects."   

Financial Highlights for the third quarter of 2016 Revenues for the third quarter of 2016 totaled $46.9 million, compared with revenues of $48.1 million for the third quarter of 2015, and revenues of $49.6 million for the second quarter of 2016.

Revenues in the Americas region were $20.0 million for the third quarter of 2016, up 4.6% from revenues of $19.1 million in the third quarter of 2015. Revenues in the EMEA region were $12.2 million for the third quarter of 2016, down 5.1% from revenues of $12.9 million in the third quarter of 2015. Revenues in the APAC region were $14.7 million for the third quarter of 2016, down 8.8% from revenues of $16.1 million in the third quarter of 2015.

Net loss on a GAAP basis for the third quarter of 2016 was ($2.4) million or ($0.06) per share, compared with net income of $0.7 million or $0.01 per diluted share for the third quarter of 2015.

Non-GAAP net income for the third quarter of 2016 was $1.6 million or $0.04 per diluted share, compared with non-GAAP net income of $4.8 million or $0.10 per diluted share for the third quarter of 2015.

Non-GAAP results are calculated excluding the impact of the patent litigation expense, stock-based compensation, exchange rate differences, net on balance sheet items and amortization of intangible assets. 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 September 30, 2016 the Company had cash, cash equivalents, short-term and long-term bank deposits and marketable securities of $311 million. Cash used for operations in the third quarter of 2016 totaled $1.3 million.

Fourth Quarter 2016 Guidance

Fourth quarter 2016 total revenues are expected to be in a range of $50 million to $52 million. Fourth quarter 2016 non-GAAP fully diluted earnings per share are expected to be in a range of $0.03 to $0.06.¿

Conference Call

Radware management will host a call Tuesday, November 1, 2016 at 8:30 am ET to discuss its third quarter 2016 results and the company's outlook for 2016.

Participants in the US call: Toll Free 866-393-4306

Participants Internationally call:  +1-734-385-2616 

Conference ID:  97011227

A replay will be available for 2 days, starting 2 hours after the end of the call, on telephone number +1-404-537-3406 or (US toll-free) 855-859-2056.  

A live webcast of the conference call can also be heard by accessing the Company's website at: http://www.radware.com/IR/. The webcast will remain available for replay during the next 12 months. 

Use of Non-GAAP Financial Information In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), Radware uses non-GAAP measures of gross profit, 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, 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 application delivery and cyber security solutions for virtual, cloud and software defined data centers. Its award-winning solutions portfolio delivers service level assurance for business-critical applications, while maximizing IT efficiency. Radware's solutions empower more than 10,000 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

©2016 Radware Ltd. All rights reserved. Radware and all other Radware product and service names are registered trademarks or trademarks of Radware in the U.S. and other countries. All other trademarks and names are property of their respective owners.

Radware Ltd.
Condensed Consolidated Balance Sheets
(U.S. Dollars in thousands)
         
    September 30,   December 31,
      2016       2015  
    (Unaudited)    
Assets        
         
Current assets        
Cash and cash equivalents     38,858       33,744  
Available-for-sales marketable securities     20,016       16,003  
Short-term bank deposits     148,122       80,922  
Trade receivables, net     21,346       26,410  
Other receivables and prepaid expenses     4,297       5,042  
Inventories     16,812       16,322  
      249,451       178,443  
         
Long-term investments        
Available-for-sales marketable securities     75,692       87,814  
Long-term bank deposits     28,187       96,643  
Severance pay funds     2,812       2,724  
      106,691       187,181  
         
         
Property and equipment, net     27,404       26,203  
Intangible assets, net     2,679       3,518  
Other assets     6,739       5,473  
Goodwill     30,069       30,069  
         
Total assets     423,033       430,887  
         
         
Liabilities and shareholders' equity        
         
Current Liabilities        
Trade payables     5,051       9,255  
Deferred revenues     48,618       46,061  
Other payables and accrued expenses     22,201       22,098  
      75,870       77,414  
         
Long-term liabilities        
Deferred revenues     24,400       25,136  
Other long-term liabilities     14,075       9,214  
      38,475       34,350  
         
Shareholders' equity        
Share capital     662       661  
Additional paid-in capital     321,338       312,784  
Accumulated other comprehensive income, net of tax     505       1,257  
Treasury stock, at cost     (105,761 )     (94,049 )
Retained earnings     91,944       98,470  
Total shareholders' equity     308,688       319,123  
         
Total liabilities and shareholders' equity     423,033       430,887  
         

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 Nine months ended
    September 30,   September 30,
      2016       2015       2016       2015  
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                 
Revenues     46,863       48,059       144,873       161,310  
Cost of revenues     8,558       8,506       26,099       28,290  
Gross profit     38,305       39,553       118,774       133,020  
                 
Operating expenses:                
Research and development, net     13,072       12,825       39,497       37,015  
Selling and marketing     24,853       22,739       75,630       68,401  
General and administrative     4,245       4,481       13,907       12,978  
Total operating expenses     42,170       40,045       129,034       118,394  
                 
Operating income (loss)     (3,865 )     (492 )     (10,260 )     14,626  
Financial income, net     1,706       1,373       4,878       3,473  
Income (loss) before taxes on income     (2,159 )     881       (5,382 )     18,099  
Taxes on income     (288 )     (220 )     (1,144 )     (3,793 )
Net income (loss)     (2,447 )     661       (6,526 )     14,306  
                 
Basic net earnings (loss) per share     (0.06 )     0.01       (0.15 )     0.31  
                 
  Weighted average number of shares used to compute basic net earnings (loss) per share     43,752,220       45,842,187       44,053,422       46,180,689  
                 
Diluted net earnings (loss) per share     (0.06 )     0.01       (0.15 )     0.30  
                 
  Weighted average number of shares used to compute diluted net earnings (loss) per share     43,752,220       46,557,853       44,053,422       47,221,057  
                 

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 Nine months ended  
    September 30,   September 30,  
      2016       2015       2016     2015  
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
                   
GAAP gross profit   38,305       39,553       118,774     133,020  
  Stock-based compensation   47       30       128     99  
  Amortization of intangible assets   253       253       760     860  
Non-GAAP gross profit   38,605       39,836       119,662     133,979  
                   
GAAP Research and development, net   13,072       12,825       39,497     37,015  
  Stock-based compensation   941       619       2,391     1,881  
Non-GAAP Research and development, net   12,131       12,206       37,106     35,134  
                   
GAAP selling and marketing   24,853       22,739       75,630     68,401  
  Stock-based compensation   1,256       1,005       3,918     2,911  
  Amortization of intangible assets   27       29       79     95  
Non-GAAP selling and marketing   23,570       21,705       71,633     65,395  
                   
GAAP general and administrative   4,245       4,481       13,907     12,978  
  Stock-based compensation   434       790       1,862     2,182  
  Litigation related charges   889       868       3,486     2,639  
Non-GAAP general and administrative   2,922       2,823       8,559     8,157  
                   
GAAP total operating expenses   42,170       40,045       129,034     118,394  
  Stock-based compensation   2,631       2,414       8,171     6,974  
  Amortization of intangible assets   27       29       79     95  
  Litigation related charges   889       868       3,486     2,639  
Non-GAAP total operating expenses   38,623       36,734       117,298     108,686  
                   
GAAP operating income (loss)   (3,865 )     (492 )     (10,260 )   14,626  
  Stock-based compensation   2,678       2,444       8,299     7,073  
  Amortization of intangible assets   280       282       839     955  
  Litigation related charges   889       868       3,486     2,639  
Non-GAAP operating income (loss)   (18 )     3,102       2,364     25,293  
                   
GAAP finance income   1,706       1,373       4,878     3,473  
  Exchange rate differences, net on balance sheet items included in financial income   176       535       333     1,059  
Non-GAAP finance income   1,882       1,908       5,211     4,532  
                   
GAAP income (loss) before taxes on income   (2,159 )     881       (5,382 )   18,099  
  Stock-based compensation   2,678       2,444       8,299     7,073  
  Amortization of intangible assets   280       282       839     955  
  Litigation related charges   889       868       3,486     2,639  
  Exchange rate differences, net on balance sheet items included in financial income   176       535       333     1,059  
Non-GAAP income before taxes on income   1,864       5,010       7,575     29,825  
                   
GAAP net income (loss)   (2,447 )     661       (6,526 )   14,306  
  Stock-based compensation   2,678       2,444       8,299     7,073  
  Amortization of intangible assets   280       282       839     955  
  Litigation related charges   889       868       3,486     2,639  
  Exchange rate differences, net on balance sheet items included in financial income   176       535       333     1,059  
Non GAAP net income   1,576       4,790       6,431     26,032  
                   
GAAP Net income (loss) per diluted share   (0.06 )     0.01       (0.15 )   0.30  
  Stock-based compensation   0.06       0.05       0.19     0.15  
  Amortization of intangible assets   0.01       0.01       0.02     0.02  
  Litigation related charges   0.02       0.02       0.08     0.06  
  Exchange rate differences, net on balance sheet items included in financial income   0.01       0.01       0.01     0.02  
Non GAAP Net income per diluted share   0.04       0.10       0.15     0.55  
                   
                   
Weighted average number of shares used to compute diluted net earnings (loss) per share   44,077,078       46,557,853       44,260,343     47,221,057  
                   

Radware Ltd.
Condensed Consolidated Statements of Cash Flow
(U.S. Dollars in thousands)
                 
    For the three months ended   For the nine months ended
    September 30,   September 30,
      2016       2015       2016       2015  
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Cash flow from operating activities:                
                 
Net income (loss)     (2,447 )     661       (6,526 )     14,306  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
Depreciation and amortization     2,614       2,437       7,709       6,990  
Stock based compensation     2,678       2,444       8,299       7,073  
Gain from sale of available-for-sale marketable securities     (651 )     (717 )     (1,778 )     (1,140 )
Amortization of premium, accretion of discounts and accrued interest on available-for- sale marketable securities     385       767       1,277       2,688  
Accrued interest on bank deposits     201       (519 )     (455 )     (1,350 )
Increase (decrease) in accrued severance pay, net     (51 )     84       290       125  
Decrease (increase) in trade receivables, net     4,711       (423 )     5,064       1,456  
Decrease (increase) in other current assets and prepaid expenses and deferred income taxes, net     149       (1,852 )     (260 )     (2,681 )
Decrease (increase) in inventories     (631 )     (78 )     (490 )     453  
Decrease in trade payables     (1,036 )     (1,288 )     (4,204 )     (3,791 )
Increase (decrease) in deferred revenues     (6,773 )     (5,101 )     1,821       (2,154 )
Increase (decrease) in other payables and accrued expenses     (421 )     1,115       4,512       2,202  
Excess tax benefit from stock-based compensation     0       (230 )     74       (690 )
Net cash provided by (used in) operating activities     (1,272 )     (2,700 )     15,333       23,487  
                 
Cash flows from investing activities:                
                 
Purchase of property and equipment     (2,561 )     (3,518 )     (8,071 )     (10,718 )
Investment in other long-term assets, net     (3 )     (33 )     0       (84 )
Proceeds from sale, investment in bank deposits, net     16,097       2,958       1,708       (37,887 )
Proceeds from sale, redemption of and purchase of available-for-sale marketable securities, net     4,339       19,706       7,600       36,224  
Net cash provided by (used in) investing activities     17,872       19,113       1,237       (12,465 )
                 
Cash flows from financing activities:                
                 
Proceeds from exercise of stock options     330       868       330       8,571  
Excess tax benefit from stock-based compensation     0       230       (74 )     690  
Repurchase of shares     0       (24,780 )     (11,712 )     (44,507 )
Net cash provided by (used in) financing activities     330       (23,682 )     (11,456 )     (35,246 )
                 
Increase (decrease) in cash and cash equivalents     16,930       (7,269 )     5,114       (24,224 )
Cash and cash equivalents at the beginning of the period     21,928       28,024       33,744       44,979  
Cash and cash equivalents at the end of the period     38,858       20,755       38,858       20,755  
                                 
                                 
CONTACTSInvestor Relations:Anat Earon-Heilborn+972 723917548ir@radware.comMedia Contacts:Deborah SzajngartenRadware201-785-3206deborah.szajngarten@radware.com

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