Radware(RDWR) - 2024 Q1 - Quarterly Report

Financial Highlights and CEO Commentary Radware reported Q4 and full-year revenue declines, but strong cloud security ARR growth and CEO optimism for 2024 - The CEO highlighted a 22% year-over-year growth in cloud security ARR, closing 2023 on a positive note, with the company cautiously optimistic for 2024, focusing on cloud security, partner channels, and cost discipline to achieve revenue growth and improved profitability[3] Key Financial Metrics | Metric | Q4 2023 (Millions $) | Full Year 2023 (Millions $) | | :--- | :--- | :--- | | Revenue | $65.0 (-12% YoY) | $261.3 (-11% YoY) | | Cloud ARR | $64.9 (+22% YoY) | N/A | | GAAP Net Loss per Share ($) | $(0.14) | $(0.50) | | Non-GAAP EPS ($) | $0.13 | $0.43 | Revenue by Geographic Region Full-year 2023 revenues declined across all regions, with Americas seeing the largest drop, while Q4 saw EMEA growth Revenue by Geographic Region | Region | Q4 2023 Revenue (Millions $) | YoY Change | Full Year 2023 Revenue (Millions $) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Americas | $24.6 | -23% | $103.4 | -17% | | EMEA | $24.9 | +2% | $96.5 | -7% | | APAC | $15.5 | -13% | $61.4 | -6% | Profitability and Cash Position Profitability declined in 2023 with widened GAAP net loss and reduced non-GAAP net income, despite a strong cash position Profitability Metrics | Metric | Full Year 2023 (Millions $) | Full Year 2022 (Millions $) | | :--- | :--- | :--- | | GAAP Net Loss | $(21.6) | $(0.2) | | GAAP Diluted EPS ($) | $(0.50) | $0.00 | | Non-GAAP Net Income | $18.9 | $31.3 | | Non-GAAP Diluted EPS ($) | $0.43 | $0.68 | - As of December 31, 2023, the company held $363.7 million in cash, cash equivalents, short-term bank deposits, and marketable securities[8] - Cash flow from operating activities was $2.7 million in Q4 2023 but was negative at $3.5 million for the full year 2023[8] Financial Statements Financial statements reflect a challenging year with decreased assets and equity, increased net loss, and negative operating cash flow Condensed Consolidated Balance Sheets Total assets decreased to $572.3 million, total liabilities to $249.0 million, and total equity to $323.3 million by year-end 2023 Condensed Consolidated Balance Sheets | Balance Sheet Item (Thousands $) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents, deposits & marketable securities | $363,719 | $385,772 | | Total Assets | $572,288 | $643,588 | | Total Liabilities | $249,014 | $275,145 | | Total Equity | $323,274 | $368,443 | Condensed Consolidated Statements of Income Full-year 2023 revenues declined to $261.3 million, resulting in a gross profit decrease and a significant operating loss of $31.7 million Condensed Consolidated Statements of Income | Income Statement Item (Thousands $) | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | Revenues | $261,292 | $293,426 | | Gross Profit | $209,582 | $239,542 | | Operating Loss | $(31,680) | $(3,339) | | Net Loss | $(21,590) | $(166) | | Diluted Net Loss Per Share ($) | $(0.50) | $(0.00) | Reconciliation of GAAP to Non-GAAP Financial Information Non-GAAP operating income declined to $9.3 million and non-GAAP net income to $18.9 million in 2023 after adjustments Reconciliation of GAAP to Non-GAAP Financial Information | Reconciliation to Non-GAAP (Thousands $) | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | GAAP Operating Loss | $(31,680) | $(3,339) | | Share-based compensation | $34,022 | $27,353 | | Amortization of intangible assets | $3,968 | $3,704 | | Non-GAAP Operating Income | $9,289 | $29,679 | | GAAP Net Loss | $(21,590) | $(166) | | Total Adjustments | $40,516 | $31,471 | | Non-GAAP Net Income | $18,926 | $31,305 | Reconciliation to EBITDA and Adjusted EBITDA Adjusted EBITDA for full year 2023 decreased sharply to $17.6 million from $37.7 million in 2022 Reconciliation to EBITDA and Adjusted EBITDA (Non-GAAP) | Reconciliation to Adjusted EBITDA (Thousands $) | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | GAAP Net Loss | $(21,590) | $(166) | | EBITDA | $(19,436) | $8,353 | | Share-based compensation | $34,022 | $27,353 | | Restructuring costs | $1,851 | - | | Acquisition costs | $1,128 | $1,961 | | Adjusted EBITDA | $17,565 | $37,667 | Condensed Consolidated Statements of Cash Flow Full-year 2023 saw net cash used in operating activities of $3.5 million, a downturn from 2022, with significant share repurchases Condensed Consolidated Statements of Cash Flow | Cash Flow Item (Thousands $) | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(3,500) | $32,148 | | Net cash provided by (used in) investing activities | $92,779 | $(56,018) | | Net cash used in financing activities | $(64,926) | $(22,458) | | Increase (decrease) in cash and cash equivalents | $24,353 | $(46,328) | Supporting Information This section clarifies non-GAAP measures, defines ARR, and includes a Safe Harbor statement outlining risks to forward-looking statements - The company uses non-GAAP financial measures, excluding items like stock-based compensation and amortization, to provide what it believes are more meaningful comparisons of operating results[12] - Annual Recurring Revenue (ARR) is defined as the annualized value of booked orders for term-based cloud services, subscription licenses, and maintenance contracts, serving as a key indicator of the value of the company's recurring business[13] - The report contains forward-looking statements that are subject to risks including global economic conditions, the war between Israel and Hamas, supply chain shortages, and intense market competition[14]