SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Chief Financial Officer
Tel. +972-3-7668666, Fax: +972-3-7668982
22 Raoul Wallenberg Street, Tel Aviv 6971917, Israel
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Title of each class | Trading Symbol | Name of each exchange on which registered |
Ordinary Shares, NIS 0.05 par value per share | RDWR | The Nasdaq Stock Market LLC |
Large Accelerated Filer ☐ | Accelerated Filer ☒ |
Non-Accelerated Filer ☐ | Emerging growth company ☐ |
☒ | U.S. GAAP |
☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board |
☐ | Other |
• | “Articles of Association” is to our Amended and Restated Articles of Association; |
• | “Companies Law” or the “Israeli Companies Law” are to the Israeli Companies Law, 5759-1999, as amended; |
• | “dollars,” “$,” or “US$” are to U.S. dollars; |
• | “EUR” are to euros; |
• | “Nasdaq” is to the Nasdaq Stock Market LLC; |
• | “NIS” or “shekels” are to New Israeli Shekels; |
• | “ordinary shares” are to our ordinary shares, par value NIS 0.05 per share; |
• | the “SEC” is to the U.S. Securities and Exchange Commission; |
• | the “U.S.” is to the United States; and |
• | “U.S. GAAP” are to generally accepted accounting principles in the United States. |
FORWARD-LOOKING STATEMENTS
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A. | [Reserved] | 9 |
B. | Capitalization and Indebtedness | 9 |
C. | Reasons for the Offer and Use of Proceeds | 9 |
D. | Risk Factors | 9 |
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A. | History and Development of the Company | 40 |
B. | Business Overview | 41 |
C. | Organizational Structure | 63 |
D. | Property, Plants and Equipment | 65 |
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A. | Operating Results | 66 |
B. | Liquidity and Capital Resources | 79 |
C. | Research and Development, Patents and Licenses, etc. | 82 |
D. | Trend Information | 83 |
E. | Critical Accounting Estimates | 87 |
92 | ||
A. | Directors and Senior Management | 92 |
B. | Compensation | 96 |
C. | Board Practices | 100 |
D. | Employees | 105 |
E. | Share Ownership | 106 |
F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation | 109 |
110 | ||
A. | Major Shareholders | 110 |
B. | Related Party Transactions | 112 |
C. | Interests of Experts and Counsel | 116 |
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A. | Consolidated Statements and Other Financial Information | 117 |
B. | Significant Changes | 117 |
118 | ||
A. | Offer and Listing Details | 118 |
B. | Plan of Distribution | 118 |
C. | Markets | 118 |
D. | Selling Shareholders | 118 |
E. | Dilution | 118 |
F. | Expenses of the Issue | 118 |
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A. | Share Capital | 119 |
B. | Memorandum and Articles of Association | 119 |
C. | Material Contracts | 119 |
D. | Exchange Controls | 119 |
E. | Taxation | 135 |
F. | Dividends and Paying Agents | 135 |
G. | Statement by Experts | 135 |
H. | Documents on Display | 135 |
I. | Subsidiary Information | 135 |
J. | Annual Report to Security Holders | 135 |
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[Reserved] | 140 | |
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Insider Trading Policy | 145 | |
Cybersecurity | 145 | |
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• | Changing or severe global economic conditions could have a material adverse effect on our results of operations. |
• | We depend upon independent distributors to sell our solutions to customers. If our distributors do not succeed in selling our products and services, we may not be able to operate profitably. |
• | We must manage our anticipated growth effectively in order to be profitable. |
• | A shortage of components or manufacturing capacity could cause a delay in our ability to fulfill orders or increase our manufacturing costs, and any disruption in our supply chain could have a material adverse effect on our results of operations. |
• | We rely on a few vendors to provide our hardware platforms and components for the manufacture of our products. |
• | Our success depends on our ability to attract, train and retain highly qualified personnel. |
• | Competition in the market for cyber security and application delivery solutions and in our industry, in general, is intense. If we are unable to compete effectively, we may lose market share, and we may be unable to maintain profitability. |
• | We must develop new solutions and enhance existing solutions to remain competitive. |
• | Our reputation and business could be harmed based on real or perceived shortcomings, defects or vulnerabilities in our solutions or if our end-users experience security breaches, which could have a material adverse effect on our business, reputation and operating results. |
• | As a security provider, if our information technology systems and data, or those of our service providers and other contractors, are compromised by cyber-attackers or other malicious actors, or by a critical system failure, our reputation, financial condition and operating results could be materially adversely affected. |
• | Outages, interruptions, or delays in hosting services could impair the delivery of our cloud-based security services and harm our business. |
• | Our global operations may expose us to additional risks. |
• | We have incurred net losses in the past two years and may incur losses in the future. |
• | A slowdown in the growth of the cyber security and application delivery solutions market would reduce our addressable market and solutions sales. |
• | If the market for our cloud-based solutions does not continue to develop and grow, we may incur capital and operating losses. |
• | Our solutions may have long sales cycles, which may reduce the predictability of our financial performance. |
• | We may pursue acquisitions or other investments that could disrupt our business and harm our financial condition. |
• | Our business in countries with a history of corruption and transactions with foreign governments increases the risks associated with our international activities. |
• | Currency exchange rates and fluctuations of exchange rates could have a material adverse effect on our results of operations. |
• | Undetected defects and errors may increase our costs and impair the market acceptance of our products. |
• | Our business and operating results could suffer if third parties infringe upon our proprietary technology. |
• | Our products may infringe on the intellectual property rights of others. |
• | Laws, regulations and industry standards affecting our business are evolving, and unfavorable changes could harm our business. |
• | Some of our solutions contain “open source” and third-party software, and any failure to comply with the terms of one or more of these open source and third-party software licenses could negatively affect our business. |
• | The amount of intangible assets and goodwill on our books may in the future lead to significant impairment charges. |
• | Additional tax liabilities, including due to tax positions we have taken, could materially adversely affect our results of operations and financial condition. |
• | The enactment of legislation changing the United States’ taxation of international business activities could materially impact our financial position and results of operations. |
• | If we are unable to realize our investment objectives, our financial condition and results of operations may be adversely affected. |
• | We rely on information technology systems to conduct our businesses, and failure to protect these systems against security breaches and otherwise to implement, integrate, upgrade and maintain such systems in working order could have a material adverse effect on our results of operations, cash flows or financial condition. |
• | Major disruptions or deficiencies of our information technology systems could disrupt our operations and cause unanticipated increases in our costs. |
• | Our business may be affected by sanctions, export controls and similar measures targeting Russia and other countries and territories as well as other responses to Russia’s military conflict in Ukraine, including indefinite suspension of operations in Russia and dealings with Russian entities by many multi-national businesses across a variety of industries. |
• | Climate change may have an adverse impact on our business. |
• | Our disclosures and initiatives related to environmental, social and governance (“ESG”) matters expose us to numerous risks, including risks to our reputation, business, financial performance and growth. |
Risks Related to the Market for Our Ordinary Shares
• | The late Yehuda Zisapel (and following his death, his estate), Nava Zisapel, and Roy Zisapel, our President, Chief Executive Officer and a director, may exert significant influence in the election of our directors and over the outcome of other matters requiring shareholder approval. |
• | Provisions of our Articles of Association and Israeli law as well as the terms of our equity incentive plan could delay, prevent or make a change of control of us more difficult or costly, which could depress the price of our ordinary shares. |
• | Our share price has been volatile in the past and may be subject to volatility in the future. |
• | If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences. |
• | If a U.S. person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences. |
• | Political, economic and military instability in the Middle East or Israel, including the state of war declared in Israel in October 2023, may harm our business. |
• | The tax benefits we may receive in connection with our preferred enterprise program require us to satisfy prescribed conditions and may be terminated or reduced in the future. This would increase taxes and decrease our net profit. |
• | We have obtained benefits from the Israeli Innovation Authority that subject us to ongoing restrictions. |
• | It may be difficult to enforce a U.S. judgment against us or our officers and directors and to assert U.S. securities laws claims in Israel. |
• | Your rights and responsibilities as a shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. companies. |
• | increasing throughput, capacity, performance algorithmic coverage and efficiency of our core products, to cope with growing velocity and complexity of attacks; |
• | adapting to fundamental changes in our customers’ data centers’ infrastructure and changes in the locations of applications and data by offering relevant solutions for multi-clouds and hybrid cloud environments; |
• | offering new solutions to adapt to the changes in applications’ deployment frameworks, workflows and architectures, massive usage of Application Programming Interface (API) stacks, third-party attacks that require browser security presence, supply chain attacks and new edge delivery technologies in response to the rise of modern applications buildup and delivery requirements; |
• | adapting to changes in the cyber threat landscape, by extending our security coverage to include client-side attacks, edge attacks, API-level attacks, cloud-native attacks (cloud access management and workloads), complex application-level attacks, such as Business Logic Attacks (BLA), encrypted attacks, usage of open source third-party attack libraries, and/or AI, natural language processing (NLP) and automated attacks; |
• | addressing new regulations and compliance standards, including those related to publicly exposed services that require the validation of safety of sensitive data provided or consumed by the service consumers; |
• | developing and enhancing our cloud, physical and virtual appliances and container offerings and expanding our managed security services capabilities to address the industry trend of providing services for the cloud and through the cloud – organically and inorganically; and |
• | increasing our support offerings to address the industry trend of increased customer reliance on third-party provided or managed information technology services. |
• | adversely affect the market’s perception of our security solutions, |
• | cause current or potential customers to look to our competitors for alternatives, |
• | require us to expend significant financial resources to analyze, correct or eliminate any vulnerabilities, and |
• | lead to investigations, litigation, fines and penalties, any of which could have a material adverse effect on our operations, financial condition and reputation. |
• | post-merger integration problems resulting from the combination of any acquired operations with our own operations or from the combination of two or more operations into a new unified entity; |
• | diversion of management’s attention from our core business; |
• | substantial expenditures, which could divert funds from other corporate uses; |
• | entering markets in which we have little or no experience; |
• | loss of key employees of the acquired operations; and |
• | known or unknown contingent liabilities, including, but not limited to, tax and litigation costs. |
• | A large portion of our expenses in Israel, principally salaries and related personnel expenses, are paid in NIS, whereas most of our revenues are generated in U.S. dollars. When the U.S. dollar is weak, our foreign currency-denominated expenses will be higher, whereas if the U.S. dollar is strong, our foreign currency-denominated expenses will be lower. If the NIS strengthens against the U.S. dollar, the dollar value of our Israeli expenses will increase and may have a material adverse effect on our business, operating results, and financial condition; |
• | A portion of our international sales are denominated in currencies other than U.S. dollars, such as euros, thereby exposing us to currency fluctuations in such international sales transactions; |
• | We incur expenses in several other currencies in connection with our operations in Europe and Asia. Devaluation of the U.S. dollar relative to such local currencies causes our operational expenses to increase; and |
• | The majority of our international sales are denominated in U.S. dollars. Accordingly, devaluation in the local currencies of our customers relative to the U.S. dollar could cause our customers to decrease orders or default on payment. |
• | blocking sanctions on some of the largest state-owned and private Russian financial institutions (and their subsequent removal from SWIFT); |
• | blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; |
• | blocking sanctions against certain Russian businessmen and their businesses, some of which have significant financial and trade ties to the European Union; |
• | blocking of Russia’s foreign currency reserves and prohibition on secondary trading in Russian sovereign debt and certain transactions with the Russian Central Bank, National Wealth Fund and the Ministry of Finance of the Russian Federation; |
• | expansion of sectoral sanctions in various sectors of the Russian and Belarusian economies and the defense sector; |
• | United Kingdom sanctions introducing restrictions on providing loans to, and dealing in securities issued by, persons connected with Russia; |
• | restrictions on access to the financial and capital markets in the European Union, as well as prohibitions on aircraft leasing operations; |
• | sanctions prohibiting most commercial activities of U.S., U.K., and E.U. persons in the so-called People’s Republic of Donetsk and the so-called People’s Republic of Luhansk (and, with respect to the E.U., the areas of Kherson and Zaporizhzhia not controlled by the Ukrainian government), with all of these new restrictions largely tracking prior prohibitions relating to Crimea and Sevastopol; |
• | enhanced import and export controls and trade sanctions targeting Russia’s imports of technological goods, including E.U. and U.K. prohibitions on exporting a wide range of “industrial” goods to Russia (and on importing a large number of “revenue-generating” goods from Russia). The restrictions also include bans on the export of large numbers of “luxury” items to Russia (and in some cases also to Belarus), tighter controls on exports and reexports of dual-use items, stricter licensing policy with respect to issuing export licenses, and/or increased use of “end-use” controls to block or impose licensing requirements on exports, as well as higher import tariffs; |
• | closure of airspace to Russian aircraft; |
• | ban on imports of Russian oil, liquefied natural gas and coal to the United States; |
• | ban on imports of Russian fish, seafood, and preparations thereof, alcoholic beverages, non-industrial diamonds, and gold to the United States; |
• | a ban on “new investment” in the Russian Federation by a U.S. person, which may be interpreted broadly (with a similar prohibition also enacted by the United Kingdom); |
• | bans on the provision of certain professional services, including accounting, trust and corporate formation, auditing, and management consulting services, among others; and |
• | bans on the provision of services related to the worldwide maritime transportation of seaborne Russian oil, if purchased above a specific price cap. |
• | operating results that do not meet forecasts by securities analysts; |
• | announcements concerning us or our competitors; |
• | the introduction of new products and new industry standards; |
• | general market conditions and changes in market conditions in our industry; |
• | the general state of securities markets (particularly the technology sector); |
• | political, economic and other developments in the State of Israel, the U.S. and worldwide, including, for example, the Ukraine-Russia and Israel-Hamas military conflicts; and |
• | any of the events underlying any of the other risks or uncertainties set forth elsewhere in this annual report actually occurs. |
• | subject to limited exceptions, the judgment is final and non-appealable; |
• | the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in such state; |
• | the judgment was rendered by a court competent under the rules of private international law applicable in Israel; |
• | the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts; |
• | adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence; |
• | the judgment is enforceable under the laws of State of Israel and its enforcement is not contrary to the law, public policy, security, or sovereignty of the State of Israel; |
• | the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and |
• | an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in the U.S. court. |
• | Products – We offer a range of cloud-based subscriptions, on-premises products, software products and product subscriptions (or a combination of these) to our customers. |
• | Services – We offer managed services, professional services, technical support and training and certification to our customers and partners. |
• | Radware’s Core Business - this segment consists of our core business operations, including our cloud security as-a-service products, application and data centers security products and our application availability products; and |
• | The Hawks’ Business – this segment consists of the operations of our two subsidiaries: SkyHawk Security, a spinoff of our former cloud native protector business which now provides an agentless Cloud-native threat Detection and Response (CDR), combined with Cloud Infrastructure Entitlement Manage (CIEM), Cloud Security Posture Management CSPM and Autonomous Purple Team for AWS Google Cloud and Azure, and EdgeHawk, which is engaged in transforming routers and network nodes into security platforms. |
o | Cloud DDoS Protection Service. Our Cloud DDoS Protection Service provides a full range of enterprise-grade DDoS protection services in the cloud. Based on our DDoS protection technology, it aims to offer organizations wide security coverage, accurate detection and short time to protect from today’s dynamic and evolving DDoS attacks. We offer a multi-vector DDoS attack detection and mitigation service, handling network-layer attacks, server-based attacks and application-layer DDoS attacks. |
◾ | Always-On Cloud DDoS Protection Service. This service provides always-on protection where traffic is always routed through Radware’s cloud security scrubbing centers with no on-premise device required for detection and mitigation. This service is recommended for organizations that have applications hosted in the cloud or those that are not able to deploy an on-premise attack mitigation device in their data center. |
◾ | Always-On Hybrid Cloud DDoS Protection Service. This service integrates with our on-premise DDoS Protection device. The traffic is mitigated in the on-premise device and diverted through Radware’s cloud security scrubbing centers upon a large volumetric DDoS attack that aims to saturate the internet pipe. This service is recommended for organizations that place a high premium on the user experience and wish to avoid even the slightest possible downtime as a result of DDoS attacks. |
◾ | On-Demand Cloud DDoS Protection Service. This service protects against internet pipe saturation and is activated when the attack threatens to saturate the organization’s internet pipe. This service is recommended for organizations that are looking for the lowest cost solution and are less sensitive to real-time detection of DDoS attacks. |
◾ | On-Demand Cloud Hybrid DDoS Protection Service. The on-premise DefensePro device detects and mitigates all types of DDoS attacks in real-time, while volumetric DDoS attacks are diverted and mitigated in the cloud. This service is recommended for organizations that can deploy an on-premise device in their data centers. |
o | Cloud Web DDoS Protection. We offer our Cloud DDoS Protection users an additional protection layer dedicated to detecting and mitigating sophisticated application-layer DDoS attacks. Our Cloud Web DDoS Protection uses advanced L7 behavioral-based detection and mitigation techniques to block sophisticated Web DDoS Tsunami attacks, offering protection against advanced HTTP/S floods that use randomization techniques to bypass traditional protections. |
o | Cloud WAF Service. Our Cloud WAF Service provides enterprise-grade, continuously adaptive web application and API protection. Based on our ICSA Labs certified web application firewall, it provides full coverage of OWASP Top-10 threats and automatically adapts protections to evolving threats and protected assets. Cloud WAF service includes built-in DDoS protection, integrated bot mitigation and application analytics to simplify security event management by taking massive amounts of alerts and consolidating them into a small, manageable set of user activities. With our SecurePath® architecture, Cloud WAF Service can be easily deployed as an API-based, out-of-path service across any hybrid or cloud environment, securing applications with centralized visibility and management console. Our Cloud WAF is available in two packages: |
o | Enterprise Package: Includes a comprehensive web security coverage, including OWASP Top-10, advanced attacks and zero-day attack protection, that is fully managed and monitored 24x7 and designed to guarantee service availability at any given time with protection against today’s emerging web application and DDoS attacks. |
o | Enterprise Premium Package: Includes all web security and managed services offered in the Enterprise package, in addition to a dedicated technical account manager and an Emergency Response Team (“ERT”) expert as well as pre and post attack alerts and reports and ongoing updates from Radware’s security experts. |
o | Bot Manager. Our Bot Manager provides comprehensive protection of web applications, mobile apps and APIs from automated threats like bots. Bot Manager provides precise bot management across all channels by combining behavioral modeling for granular intent analysis, collective bot intelligence and fingerprinting of browsers, devices and machines. It is designed to protect against all forms of account takeover (credential stuffing, brute force, etc.), denial of inventory, DDoS, ad and payment fraud and web scraping to help organizations safeguard and grow their online operations. |
o | Cloud-Native Protector (“CNP”) Service. The CNP service provides an agentless cloud-native security solution for applications, workloads and infrastructure hosted on AWS and Microsoft Azure. The CNP service offers multi-layered protection to reduce risk by continuously verifying compliance against multiple security standards, identifying publicly exposed assets, keeping track of asset inventory with prioritized cross-cloud visibility, fortifying the cloud threat surface with context-aware smart hardening, and providing advanced attack detection and remediation capabilities to stop data theft attempts. |
o | Cloud Application Protection Services. Our Cloud Application Protection Services secure business applications through a single platform, including WAF, bot management, API protection and application DDoS protection. Our Cloud Application Protection Services offer the following application security capabilities: |
◾ | Protect Digital Assets and Data. Our Cloud Application Protection Services protect digital assets and customer data in multiple environments, such as on-premise, virtual clouds, private clouds, public clouds, hybrid environments, or Kubernetes. |
◾ | Protect Against OWASP Vulnerabilities. Our solution helps protect against various known attack vectors, including the OWASP Top 10 Web Application Security Risks, Top 10 API Security Vulnerabilities, and Top 21 Automated Threats to Web Applications. |
◾ | Protect Against Zero-Day Attacks. Our positive security model assists in stopping unknown threats in their tracks. Our machine-learning analysis engine continuously studies application traffic and end-user behavior to build and enhance security policies that reduce exposure to zero-day attacks. |
◾ | Detect, Manage, and Mitigate Bots. Our solution detects and distinguishes between “good” bots and “bad” bots to protect websites, mobile apps, and APIs against a wide range of application attacks, such as account takeover credential, denial of inventory, ad and payment fraud, web scraping and more. |
◾ | Protect APIs. API attacks are a rapidly growing threat to business applications and customer data. Our solution combines behavioral analysis and policy automation to protect evolving API matrix from increasingly sophisticated API assaults. |
◾ | Client-Side Protection From Supply Chain Attacks. As server-side security improves, more hackers target the less protected and rarely monitored client side. Radware helps protect end users’ data when interacting with any third-party services in the application supply chain, including form jacking, skimming and DOM XSS. |
◾ | Mitigate Application-Level DDoS Assaults. Our Web DDoS Protection solution helps detect and mitigate HTTP-based DDoS assaults. Utilizing multi-patented, behavioral-based algorithms, it automatically generates precise signatures in real time to stop disruptive web DDoS attacks without blocking legitimate user traffic. |
o | DefensePro Attack Mitigation Device. DefensePro® provides automated DDoS protection from fast-moving, high-volume, encrypted, or very-short-duration threats and is part of Radware’s attack mitigation solution. It defends against Internet of Things (IoT)-based, Burst, DNS and TLS/SSL attacks to secure organizations against emerging network multi-vector attacks, ransom DDoS campaigns, IoT botnets, phantom floods, and other types of cyberattacks. |
o | Radware Kubernetes WAF. Radware Kubernetes WAF is a Web Application Firewall solution for CI/CD environments orchestrated by Kubernetes. Our Kubernetes WAF integrates with common software provisioning, testing and visibility tools in the CI/CD pipeline offering both IT security and DevOps personnel detailed insight down to the pod and container levels, and enables organizations to implement application and data security in on-premise and cloud-based implementations. |
o | Alteon® Application Delivery Controller (ADC). Alteon is our application delivery and security solution that manages application traffic across cloud and data center locations, optimizing availability and performance. It provides advanced, end-to-end local and global load balancing capabilities for web, cloud and mobile-based applications. Alteon integrates multiple application protection services to provide protection against an array of cyber threats. Alteon’s analytics also provides insightful visibility so that IT managers can manage and guarantee application service level agreement (SLA) and stay ahead of cyberattacks. |
• | Alteon Deliver Package. For applications that require high performance ADCs with advanced layer 4-7 ADC functionality. |
• | Alteon Perform Package. For deployments requiring performance optimization, advanced application performance monitoring, global server load balancing, link load balancing, and automated/optimized ADC service operation. |
• | Alteon Secure Package. For applications that require our most advanced protections, including an embedded WAF module, authentication gateway, bot management, threat intelligence feeds (ERT Security Updates Service, ERT Active Attackers Feed, and ERT Location-based Mitigation), and SSL processing from perimeter security devices (with its embedded SSL inspection module). |
o | LinkProof NG. LinkProof® NG is a multi-homing and enterprise gateway solution that allows service level availability and continuous connectivity of enterprise and cloud-based applications. It is an application-aware multi-homing and link load balancing module that delivers 24/7 continuous connectivity and service level assurance, improved performance, and cost-effective scalability of bandwidth for corporate and cloud-based applications. |
o | Cyber Controller. Our Cyber Controller is a unified solution for management, configuration and attack lifecycle. The Cyber Controller provides enhanced security, increased visibility and an improved user experience via multiple security operation dashboards for a unified view into attack lifecycle and mitigation analysis for both inline and out-of-path DDoS deployments. Cyber Controller provides network analytics with comprehensive visibility of traffic statistics during peacetime and attack, and simplified management and configuration with unified visibility and control. |
o | Cyber Controller Standard: Provides the network management tool and network monitoring tool for the Radware family of cyber security and application delivery solutions. It provides our customers immediate visibility to health, real-time status, performance and security of our products from one central, unified console. An analytics module provides an intuitive, customizable Graphical User Interface with granular forensic insights into application performance, denial-of-service and web application attacks. |
o | Cyber Controller X: In addition to the “Standard” license features, provides the ability to manage the DefensePro X product line using the new Cyber Controller X stream. |
o | Cyber Controller Plus: An add-on on top of either the “Standard” or “X” licenses, enabling orchestration, automation and out-of-path capabilities for attack life-cycle management. |
o | MSSP Portal. The Managed Security Service Provider (MSSP) Portal is a turnkey, multi-tenant DDoS detection and mitigation service portal. The Portal collects and aggregates security attack measurement and events (including traffic utilization, attack distribution and alerts) and displays them in real-time and historical reports. Our MSSP Portal enables service providers to resell cyber security mitigation services to their customers as a managed service. |
o | ERT Security Updates Subscription (SUS). Our Security Update Subscription is a security-advisory and managed monitoring and detection system dedicated to protecting network elements, hosts, and applications against the latest security vulnerabilities and threats. The Security Update Subscription delivers periodic, emergency, and custom attack signature updates to subscribers to protect against known attack patterns. The service is available for DefensePro and Alteon Integrated WAF. |
o | ERT Active Attackers Feed. Our ERT Active Attackers Feed (EAAF) is a threat intelligence feed designed to protect against emerging DDoS threats, including those involving IoT botnets and new DNS attack vectors. The EAAF subscription enhances our attack mitigation solution by identifying and blocking IP addresses involved in major attacks in real time to offer preemptive protection from known attackers. This subscription is available for DefensePro, Alteon ADC and Cloud Application Protection Services. |
o | ERT Protection Packages. Our ERT Protection packages bundle our ERT services into two packages: ERT Silver Protection Package and ERT Gold Protection Package. ERT Silver Protection Package consolidates ERT Security Update Subscription, ERT Active Attackers Feed, and Location-based Mitigation. ERT Gold Protection Package includes ERT under Attack Service on top of the ERT Silver Package. |
o | Alteon Global Elastic License (GEL). Alteon GEL is a purchasing and deployment subscription that enables a high level of flexibility for ADC services across datacenters, private and public clouds. GEL enables dynamic ADC capacity allocation and the ability to move that capacity across environments, without having to invest separately in a dedicated ADC infrastructure for each and every location where organization’s applications are deployed (e.g. on-premise, public cloud, etc.). This application delivery licensing model helps to eliminate planning risks in the purchase and deployment of ADC services, enabling continuous investment protection of the ADC infrastructure throughout its lifecycle duration. |
o | Location-based Mitigation. Our location-based mitigation solution is a subscription offering that enables network traffic filtering by countries and regions based on the geolocation mapping of IP subnets. The subscription also supports per-policy block and allow lists, making it a beneficial solution for carriers and service providers that wish to protect multitenant networks. The subscription helps organizations comply with global and industry regulation requirements such as the Office of Foreign Assets Control and others. This subscription is available for DefensePro and Alteon ADC. |
o | Certainty Support Program. We offer technical support for all our products through our Certainty Support Program. Certainty support levels include: |
o | Basic. This level provides business day access, including weekends from 9 a.m. to 5 p.m. (local time) to technical support center services, and technical documentation, either via the Web, e-mail or direct phone support during working days. New software releases are available for units covered under the certainty support program. |
o | Standard. This level increases access to the technical support center 24/7/365 and adds next business day replacement of failed hardware and waives customer shipping costs. |
o | Advanced. This level increases the certainty support level standard to four hours’ replacement of failed hardware advanced replacement. |
o | Professional Services. Our professional services group is staffed by a global team of experts possessing extensive knowledge and experience in security and application delivery both in data centers and the cloud. The group offers a full range of services to design, implement, automate, and optimize our customer solutions. We offer the following key professional services: |
o | Design and Planning. This service plans and designs applications for future growth with Radware engineers. The service starts with a review of business goals, network optimization assessment and an overview of application architecture and security requirements to help create a comprehensive deployment plan that is tailored to organizational IT requirements. |
o | Application and Security Optimization Services. This service analyzes and reviews the current implementation and design and provides recommendations to help optimize the system and achieve business goals. |
o | Resident Engineer. Our Resident Engineer service is a proactive on-site engineer who performs operations, design and automation activities. From initial deployment to ongoing management and day-to-day operation, our Resident Engineer service decreases the time demands on our customers’ staff, allowing them to focus on their core business. |
o | Technical Account Manager. Our technical account manager is a proactive consultant that implements best practices, provides guidance and optimizes networking and application resources. |
o | ERT Service. Our ERT is a group of security experts available 24x7 for proactive security support services for customers facing an array of application- and network-layer attacks. These services include: |
o | ERT Managed Security Service. Our ERT offers a fully managed application- and network-security service. The service covers a broad range of attack types from different forms of DDoS to a variety of application attacks against our customers’ servers or data centers. It includes immediate response, onboarding, consulting, remote management, and reporting. |
o | ERT Under-Attack Service. The ERT under-attack service offers 24x7 access to a security expert within 10 minutes. The ERT engineer will take the lead, fight off attacks and provide postmortem analysis of security events. The ERT under-attack service lets organizations know there is someone to rely on, guaranteeing support throughout the attack life cycle from the moment it begins. The ERT experts are available 24x7 and assist large enterprises worldwide with complex multi-vector attacks against their networks, data centers and application services. |
• | We have announced the opening of additional Cloud Security centers in Melbourne (Australia), Toronto (Canada), Auckland (New Zealand), and Tel Aviv (Israel). The facilities are designed to reduce traffic latency, as well as increase service redundancy and mitigation capacity to help customers defend against denial-of-service attacks, web application attacks, malicious bot traffic, and attacks on APIs. |
• | We have introduced a new Cloud Web DDoS Protection solution. The new solution is designed to minimize the growing gap between standard DDoS mitigation and an emerging generation of more aggressive, layer 7, HTTP, and HTTPS Flood attacks—also known as Web DDoS Tsunami attacks. Our solution mitigates these encrypted, high-volume, multi-vector threats that evade standard web application firewalls (WAF) and network-based DDoS tools, essentially rendering them ineffective. |
• | We have added to our Cloud WAF service a new advanced service called Client-Side Protection. As server-side security improves, more hackers target the less protected and rarely monitored client side. Our Cloud WAF Client-Side Protection service ensures the protection of end users’ data when interacting with any third-party services in the application supply chain, including form jacking, skimming and DOM XSS. |
• | We have announced enhancements to our Bot Manager solution to help organizations prevent nefarious bots from bypassing their defenses to gain unlawful access to native Android and iOS (Google and Apple) mobile applications. |
• | We have added to our Bot Manager Blockchain-based protection option. The Blockchain mitigation relies on Crypto Challenge mitigation, which is based on the cryptographic proof-of-work concept used in various blockchains, and designed to deliver continuous, invisible browser-based challenges to suspected bots that automatically and exponentially become more difficult if solved. The Blockchain-based protection mitigates CAPTCHA solving bots and avoider bots. |
• | We have improved our customer experience by launching a new unified portal for our cloud WAF, API Protection, Bot Manager, and Cloud DDoS. The new portal allows centralized security management through a single dashboard for a customer’s applications across all platforms and all security modules. |
• | We have introduced a new line of DefensePro X attack mitigation platforms. The next-generation solution combines high performance and DDoS mitigation capacity protection with enriched usability and visibility to defend against increasingly sophisticated cyber threats. To answer the cybersecurity needs of medium-sized businesses as well as enterprises, Tier-1 service providers, and carriers, the DefensePro X lineup offers five new hardware platforms and one virtual platform with a wide range of DDoS protections. |
• | We have announced new platforms for our Alteon ADC product line: |
• | Alteon 7 series. This is a high-end performance application delivery appliance with high performance SSL with support for latest encryption standards (i.e. ECC). The new platform, with models 7700 and 7100, offers on-demand 100 & 200 Gbps throughput scalability and designed for carriers, mobile operators and large enterprises. |
• | Alteon 6300. This is a modular platform with selectable I/O and SSL acceleration modules, high performance SSL with support for latest encryption standards (i.e. ECC). The platform is designed for carriers, mobile operators and very large enterprises with On-demand 60 and 90Gbps throughput scalability. |
• | In January 2023, we introduced a new global Radware Cybersecurity Partner Program. The global program offers our existing and prospective ecosystem partners a more lucrative and systematic approach to creating, managing, and growing sales opportunities based on our cloud security services and solutions. Equipped with new participation tiers, training, certifications, financial incentives, and support materials, it is designed to empower our ecosystem partners to accelerate their growth and improve operating margins. This includes resellers, managed security service providers, carriers, and cloud service providers. |
• | In September 2023, we launched an enhanced program for MSSPs, which is designed to make it easier for MSSPs to expand their value-added service portfolio and manage the hosted security services needed to address the surge in cyberattacks and shortage in skilled cybersecurity talent. To accelerate revenue growth, partners are granted access to new licensing models, expanded technical training, and more marketing and sales enablement tools. |
• | Innovation, Proprietary Technologies, and Thought Leadership. We are offering innovative solutions in our domain. We were one of the first companies to offer hybrid attack mitigation solutions; behavioral DDoS attacks detection with automated real-time signature creation for attack mitigation; device fingerprinting technology implementation for Bot-based attacks detection; auto-policy generation for our WAF solution; protection against encrypted attacks without opening the sessions for DDoS protection; and AI to detect attacks targeting workloads in public clouds. We believe this has given us significant expertise, know-how, and leadership in the market for cyber-attack mitigation solutions, and we take part in many technology communities, standard organizations, and open source projects. At the same time, we continue to invest in research and development of cyber security and application delivery technologies in order to introduce new and innovative solutions, which are supported and protected by multiple patents and proprietary rights. |
• | Automation. We are offering automated attack detection and mitigation solutions that reduce the total cost of ownership of cyber security solutions, including behavioral analysis technology to detect zero-day DDoS attacks; automated real-time signature creation for DDoS attacks mitigation; intent-based behavioral analysis and machine learning (or “ML”) models to detect automated Bot attacks; and machine learning (positive security model) to detect zero-day web application attacks. |
• | Wide attacks coverage. Our solutions offer a wide coverage against attacks, including mitigation of all four generations of Bot attacks; negative and positive security models to defend against known (OWASP top-10) and zero-day web application attacks (standard solutions typically cover OWASP top-10 attacks only); and advanced DDoS attacks protection such as DNS flood attacks, burst floods, SSL flood attacks, IoT botnets and Web DDoS attacks. |
• | Industry Awards. We gained multiple industry awards during 2023, including the following: |
o | Quadrant Knowledge Solutions – 2023 DDoS Mitigation SPARK Matrix™, July 2023 – Leader |
o | Quadrant Knowledge Solutions – 2023 WAF SPARK Matrix™, December 2023 – Leader |
o | Quadrant Knowledge Solutions – 2023 Bot Management SPARK Matrix™, July 2023 – Leader |
o | GigaOm Research – GigaOm Radar for DDoS Protection 2023 – Leader and Fast Mover |
o | GigaOm Research – GigaOm Radar for Application and API Protection: March 2023, Leader and Fast Mover |
• | Focus on cloud and application security. We aim to offer superior and innovative cyber security solutions and cloud-based solutions and expand our portfolio in these two dimensions. We also invest in go-to-market efforts related to cloud security services and public cloud solutions. |
• | Invest in data center solutions. We continue to develop and sell holistic cyber security and application delivery solutions for physical, cloud, and hybrid data centers and cloud applications. |
• | Increase our market footprint. We believe that a significant market opportunity exists to sell our solutions with the complementary products and services provided by other organizations with whom we wish to collaborate. To that end, we have already established strategic relationships with various third parties, including leading global-class partners, such as Cisco, Check Point, and Nokia, which provide critical access to certain large customers allowing us to sell our solutions. We intend to further increase our market footprint through collaboration with leading partners. |
• | Expand our footprint in the medium sized enterprise market. The needs of the mid-market enterprises regarding the management of cyber security risks are substantially similar to the needs of the large enterprise market, but their capacity and access to skilled talent are more limited. We believe that our fully managed cloud security services can be a great fit for this market, and we intend to further expand our market footprint in this segment. |
• | Pursue acquisitions and investments. In order to achieve our business objectives, we may evaluate and pursue the acquisition of, or significant investments in, other complementary companies, technologies, products, and/or businesses that enable us to enhance and increase our technological capabilities and expand our product and service offerings. |
• | DDoS Mitigation: Akamai Technologies, Inc., or Akamai, Imperva Inc., or Imperva, Netscout Systems, Inc., and Cloudflare, Inc. |
• | Web Application Firewalls and Bot Management: Akamai, Imperva, Cloudflare, Inc., F5 Networks, Inc., or F5, and AWS |
• | Application Delivery: F5, A10 Networks, Inc., and Citrix Systems, Inc. |
• | CDR: Gem Security, Inc. |
Environmental and Security Management Regulations
• | We have implemented key performance indicators (KPIs), which set quantitative reduction goals for the use of water, power and paper; |
• | We work with our suppliers to maintain compliance with various environmental laws and guidelines, such as RoHS and WEEE in the EU, and adopted our Conflict Minerals Policy available at www.radware.com/corporategovernance/conflictminerals (information contained on our website, including in our Conflict Minerals Policy, is not incorporated herein by reference and shall not constitute part of this annual report), which outlines our practices and procedures with respect to responsible sourcing of minerals from conflict-affected and high-risk areas; and |
• | Our corporate headquarters in Tel Aviv, Israel, as well as our training rooms in Tel Aviv are designed in the “TED” style to serve as multifunctional work spaces while the operations room utilizes NVX video technology in order to minimize the amount of copper wiring required to function and travel. At our headquarters, we offer EV charging stations to our employees and visitors, and where applicable according to local requirements, we offer recycling and properly dispose of e-waste. |
• | We are an equal-opportunity employer and make employment decisions based on a person’s qualifications and our business needs. This is demonstrated by our Human Rights and Labor Standards Policy; |
• | Our corporate policy maintains zero tolerance for harassment, sexual harassment, and discrimination, and it imposes significant consequences for behavior deemed to create a hostile work environment. This is demonstrated by our Code of Conduct and Ethics as well as our Human Rights and Labor Standards Policy; |
• | We offer what we believe is an attractive mix of compensation and benefit plans to support our employees’ and their families’ physical, mental, and financial well-being. This includes allowing the majority of our employees to have a direct ownership interest in Radware by participating in our equity-based incentive plans; and |
• | We are focused on maintaining a healthy, safe, and secure work environment that protects our employees and the public from harm. This is demonstrated by the measures we implemented in order to overcome the challenges presented by the COVID-19 pandemic. We implemented a hybrid work model, which enables our employees to work partly remote and partly in the office. We believe that this flexibility drives increased job satisfaction while addressing the major challenges of remote work, such as isolation and lack of community. |
• | Corporate Governance and Board Practices: Our corporate governance policies and practices are designed to foster effective board oversight in service of the long-term interests of our shareholders. Our Board of Directors consists of 8 members, of whom seven qualify as “independent directors” under the Nasdaq rules and one is female. The Audit and Compensation Committees of our Board of Directors, which are charged with significant functions in our risk oversight and compensation philosophy, respectively, both currently consist of three members, all of whom qualify as “independent directors” under the Nasdaq rules. For further details on our corporate governance, as well as our Board of Directors and its committees’ roles and practices, see Items 6.C “Board Practices” and 16.G “Corporate Governance.” |
• | Ethical Business Conduct: All our directors, officers, consultants, service providers and employees are expected to conduct themselves in accordance with our Code of Conduct and Ethics available at http://www.radware.com/corporategovernance/ (information contained on our website, including in our Code of Conduct and Ethics, is not incorporated herein by reference and shall not constitute part of this annual report). Our Code of Conduct and Ethics is intended to promote various elements of ethical business conduct, such as compliance with laws; avoiding conflict of interests and personal exploitation of corporate opportunities; fair dealing; confidentiality of information; and other policies and guidelines in connection with insider trading and anti-corruption laws and policies. |
Name of Subsidiary | Place of Incorporation |
Radware Inc. | New Jersey, United States |
Radware UK Limited | United Kingdom |
Radware France | France |
Radware Srl | Italy |
Radware GmbH | Germany |
Nihon Radware KK | Japan |
Radware Australia Pty. Ltd. | Australia |
Radware Singapore Pte. Ltd. | Singapore |
Radware Korea Ltd. | Korea |
Radware Canada Inc. | Canada |
Radware India Pvt. Ltd. | India |
Kaalbi Technologies Limited Ltd. | India |
Radware (India) Cyber Security Solutions Private Limited | India |
Radware China Ltd. 睿伟网络科技(上海)有限公司 | China |
Radware (Hong Kong) Limited | Hong Kong |
Radyoos Media Ltd.* | Israel |
Radware Canada Holdings Inc. | Canada |
Radware Iberia, S.L.U. | Spain |
Edgehawk Security Ltd. | Israel |
SkyHawk (CNP) Security Ltd.** | Israel |
SkyHawk Security, Inc.*** | Delaware, United States |
CSR Cloud Security Ltd. | Israel |
Radware (Colombia) S.A.S. | Colombia |
AB-NET Communications Ltd. Binat Business Ltd. BYNET Data Communications Ltd.* Bynet Data Centers Ltd. CloudRide Ltd.* BYNET Electronics Ltd.* BYNET SEMECH (outsourcing) Ltd.* Bynet Software Systems Ltd. Bynet System Applications Ltd.* | Ceragon Networks Ltd. Internet Binat Ltd.* Packetlight Networks Ltd. RAD-Bynet Properties and Services (1981) Ltd.* Radbit Computers, Inc. RADCOM Ltd. RAD Data Communications Ltd.* Radiflow Ltd. | RADWIN Ltd. DC Protection Ltd. (previously known as SecurityDAM Ltd.) |
• | We recognize physical and software product revenues when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs at shipment, and we recognize revenues from product and cloud subscriptions, as part of the product revenues, ratably over the subscription period. |
• | Revenues from post-contract customer support (PCS), which mainly represents help-desk support and unit repairs or replacements, professional services, and ERT services, are recognized ratably over the contract or subscription period, which is typically between one year and three years. |
2023 | 2022 | 2021 | ||||||||||
(US $ in thousands) | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 145,541 | $ | 172,161 | $ | 170,438 | ||||||
Services | 115,751 | 121,265 | 116,058 | |||||||||
261,292 | 293,426 | 286,496 | ||||||||||
Cost of revenues: | ||||||||||||
Products | 41,450 | 43,014 | 42,191 | |||||||||
Services | 10,260 | 10,870 | 10,255 | |||||||||
51,710 | 53,884 | 52,446 | ||||||||||
Gross profit | 209,582 | 239,542 | 234,050 | |||||||||
Operating expenses, net: | ||||||||||||
Research and development, net | 82,617 | 86,562 | 74,098 | |||||||||
Sales and marketing | 126,237 | 126,533 | 119,842 | |||||||||
General and administrative | 32,408 | 29,786 | 21,885 | |||||||||
Total operating expenses, net | 241,262 | 242,881 | 215,825 | |||||||||
Operating income (loss) | (31,680 | ) | (3,339 | ) | 18,225 | |||||||
Financial income, net | 13,927 | 8,052 | 4,407 | |||||||||
Income (loss) before taxes on income | (17,753 | ) | 4,713 | 22,632 | ||||||||
Taxes on income | 3,837 | 4,879 | 14,821 | |||||||||
Net income (loss) | (21,590 | ) | (166 | ) | 7,811 |
2023 | 2022 | 2021 | ||||||||||
Revenues: | ||||||||||||
Products | 56 | % | 59 | % | 59 | % | ||||||
Services | 44 | 41 | 41 | |||||||||
100 | 100 | 100 | ||||||||||
Cost of Revenues: | ||||||||||||
Products | 16 | 15 | 15 | |||||||||
Services | 4 | 4 | 3 | |||||||||
20 | 19 | 18 | ||||||||||
Gross profit | 80 | 81 | 82 | |||||||||
Operating expenses, net: | ||||||||||||
Research and development, net | 32 | 30 | 26 | |||||||||
Sales and marketing | 48 | 43 | 42 | |||||||||
General and administrative | 12 | 10 | 7 | |||||||||
Total operating expenses, net | 92 | 83 | 75 | |||||||||
Operating income (loss) | (12 | ) | (1 | ) | 6 | |||||||
Financial income, net | 5 | 3 | 2 | |||||||||
Income (loss) before taxes on income | (7 | ) | 2 | 8 | ||||||||
Taxes on income | (1 | ) | (2 | ) | (5 | ) | ||||||
Net income (loss) | (8 | )% | 0 | % | 3 | % |
(US$ in thousands, except percentages) | 2023 | 2022 | 2021 | % Change 2023 vs. 2022 | % Change 2022 vs. 2021 | |||||||||||||||||||||||||||
Products | 145,541 | 56 | % | 172,161 | 59 | % | 170,438 | 59 | % | (15 | )% | 1 | % | |||||||||||||||||||
Services | 115,751 | 44 | % | 121,265 | 41 | % | 116,058 | 41 | % | (5 | )% | 4 | % | |||||||||||||||||||
Total | 261,292 | 100 | % | 293,426 | 100 | % | 286,496 | 100 | % | (11 | )% | 2 | % |
(US$ in thousands, except percentages) | 2023 | 2022 | 2021 | % Change 2023 vs. 2022 | % Change 2022 vs. 2021 | |||||||||||||||||||||||||||
North, Central and South America (principally the United States)(*) | 103,435 | 40 | % | 123,947 | 42 | % | 128,770 | 45 | % | (17 | )% | (4 | )% | |||||||||||||||||||
EMEA (Europe, the Middle East and Africa) | 96,488 | 37 | % | 104,219 | 36 | % | 98,388 | 34 | % | (7 | )% | 6 | % | |||||||||||||||||||
Asia-Pacific | 61,369 | 23 | % | 65,260 | 22 | % | 59,338 | 21 | % | (6 | )% | 10 | % | |||||||||||||||||||
Total | 261,292 | 100 | % | 293,426 | 100 | % | 286,496 | 100 | % | (11 | )% | 2 | % |
(US$ in thousands, except percentages) | 2023 | 2022 | 2021 | |||||||||||||||||||||
Cost of Products | 41,450 | 28.5 | % | 43,014 | 25.0 | % | 42,191 | 24.8 | % | |||||||||||||||
Cost of Services | 10,260 | 8.9 | % | 10,870 | 9.0 | % | 10,255 | 8.8 | % | |||||||||||||||
Total | 51,710 | 19.8 | % | 53,884 | 18.4 | % | 52,446 | 18.3 | % |
(US$ in thousands, except percentages) | 2023 | 2022 | 2021 | % Change 2023 vs. 2022 | % Change 2022 vs. 2021 | |||||||||||||||
Research and development, net | $ | 82,617 | $ | 86,562 | $ | 74,098 | (5 | )% | 17 | % | ||||||||||
Sales and marketing | 126,237 | 126,533 | 119,842 | 0 | % | 6 | % | |||||||||||||
General and administrative | 32,408 | 29,786 | 21,885 | 9 | % | 36 | % | |||||||||||||
Total | $ | 241,262 | $ | 242,881 | $ | 215,825 | (1 | )% | 13 | % |
2023 | 2022 | 2021 | ||||||||||
Grants | 331,899 | 250,284 | 248,233 | |||||||||
Weighted-average grant-date fair value | 5.48 | 6.77 | 6.87 |
2023 | 2022 | 2021 | ||||||||||
Grants | 1,390,718 | 1,947,499 | 1,143,097 | |||||||||
Weighted-average grant-date fair value | 15.82 | 21.31 | 32.57 |
• | Radware’s Core Business - this segment consists of our core business operations, including our cloud security as-a-service products, application and data centers security products and our application availability products; and |
• | The Hawks’ Business – this segment consists of the operations of our two subsidiaries: SkyHawk Security, a spinoff of our former cloud native protector business which now provides an agentless Cloud-native threat Detection and Response (CDR), combined with Cloud Infrastructure Entitlement Manage (CIEM), Cloud Security Posture Management CSPM and Autonomous Purple Team for AWS Google Cloud and Azure, and EdgeHawk, which is engaged in transforming routers and network nodes into security platforms. |
Year ended December 31, 2023 | ||||||||||||
Radware Core | Hawks | Total | ||||||||||
Revenues | $ | 260,322 | $ | 970 | $ | 261,292 | ||||||
Operating loss | $ | (16,802 | ) | $ | (14,878 | ) | $ | (31,680 | ) |
Year ended December 31, 2022 | ||||||||||||
Radware Core | Hawks | Total | ||||||||||
Revenues | $ | 290,408 | $ | 3,018 | $ | 293,426 | ||||||
Operating income (loss) | $ | 8,416 | $ | (11,755 | ) | $ | (3,339 | ) |
Year ended December 31, 2021 | ||||||||||||
Radware Core | Hawks | Total | ||||||||||
Revenues | $ | 283,913 | $ | 2,583 | $ | 286,496 | ||||||
Operating income (loss) | $ | 24,114 | $ | (5,889 | ) | $ | 18,225 |
2023 | 2022 | 2021 | ||||||||||
Net cash provided by (used in) operating activities | $ | (3,500 | ) | $ | 32,148 | $ | 71,774 | |||||
Net cash provided by (used in) investing activities | 92,779 | (56,018 | ) | 7,849 | ||||||||
Net cash used in financing activities | (64,926 | ) | (22,458 | ) | (41,881 | ) |
Payments Due by Period (US $ in thousands) | |||||
Contractual obligations | Total | Less than 1 year* | 1-3 years | 3-5 years | More than 5 years |
Operating leases (1) | 22,265 | 4,937 | 7,673 | 5,834 | 3,821 |
Total contractual cash obligations (2) | 22,265 | 4,937 | 7,673 | 5,834 | 3,821 |
• | Applications are migrating to the public cloud. The migration to public cloud exposes organizations to new threats that require consistent security across all cloud environments. Organizations also prefer to purchase security services as a subscription, to match the subscription-based consumption of hosting services. |
• | Datacenter architecture is changing. Datacenter architecture is changing to include various models such as a physical datacenter, a virtual datacenter, a software defined datacenter, and private or public cloud. New emerging edge clouds, coupled with the emerging 5G breakouts and SD-WAN, will enable enterprises to effectively leverage cloud-native services and edge computing services. Many organizations use a mixed infrastructure that includes a combination of one or more of the above and therefore require broader overarching protection that encompasses both the datacenter and multi-cloud-based applications. In addition, this mixed environment often involves multiple vendors and creates challenges in IT staffing and operational costs, which increase the needs for hybrid cloud services, managed “single pane of glass” style security services and modern automated data center technologies. |
• | Application modernization requires new security tools. Application infrastructure is changing, from monolithic applications to modern applications and websites in which deployment workflows, front-end built-tools and API-centric architectures are used. The rise of cloud-native ecosystems, increasingly adapting cloud-direct and micro-services architecture packaged as containers, is providing a built-in “on-demand” elasticity and availability application infrastructure. This enables introducing and running the new generation of cloud-native applications, in a fast, adaptive and more efficient way by interacting with DevOps CICD tools and methods. As such, the AppSec blast radius is expanded and requires injection of security controls within the application lifecycle at early stages, to avoid slowdown in development, to sanitize, for example, usage of opensource software used by developers and might leak in malicious code (recent Log4J library). Various “shift-right” and “shift-left” methods are used and specifically adapted for various target deployment environments. |
• | The above-mentioned cloud-native application delivery opens the door for leakage through the open cloud interface. A new family of attack surfaces manifested by the fact that the cloud APIs are publicly published, and DevOps processes are done from the outside of the cloud “perimeter” (the insider becomes the outsider). “Cloud-native” infiltrations are enabled by the usage of cloud-IAM (identify and access) misconfigurations or account take over techniques and by various vulnerabilities of publicly exposed web and API interfaces. This creates a need for a new protection posture for compliance, permissions hardening, vulnerabilities detection as well as cloud-native detection (infiltrations and exfiltration) and response tools under new industry categories: CIEM (Cloud Infrastructure Entitlement Management), CSPM (Cloud Security Posture Management), CWPP (Cloud Workload Protector Platform), and CTDR (Cloud Threat Detection and Response). |
• | Organizations’ attack surfaces are increasing due to a changing economy. This was caused by a combination of two forces. First, working from home, primarily due to the restraints associated with COVID-19, required organizations to enable remote access to applications and services that were previously not exposed. This eliminated the traditional network perimeter, and now, even after The World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency, every home computer or mobile device has become the new perimeter. Second, an increase in the online consumption of goods has accelerated organizations’ digital transformation and migration to the cloud. The result is more opportunities for attackers to leverage the increased attack surface. |
• | Increasing complexity and intensity of security threats, including in view of AI-weaponized attacks. The increasing complexity and intensity of the security threats landscape requires expertise in identifying the attacks and state-of-the-art security to mitigate the attacks and safeguard the assets. Attack delivery is aided by the growing presence of connected devices (IoT), which increases the threat surface against any kind of infrastructure, as well as traffic encryption (dark data) assisting in hiding attacks. Furthermore, attack tools are increasingly available to all through the dark net and becoming more sophisticated as hackers use automation and weaponize AI. Increasing focus is currently centered around the new opportunities of weaponizing AI enabled by OpenAI. This leads to ever morphing and scalable attack vectors at all levels, from volumetric botnets through web and API-centric attacks, as well as new attack surfaces that utilize Kubernetes-platforms (container orchestration platform of choice). The mass amount of uncontrolled IoT devices and cloud hosting opens the door for a new generation of botnets and automated bots that are hard to classify and block. Most organizations are not able to keep up with these developments with their internal cyber security resources and seek managed security services. |
• | Increasing expectations for applications availability and frictionless performance, due to the increasing dependence on applications in today’s business world. Businesses are sensitive to the resilience and availability of their applications, given their customers’ expectations of flawless experience and optimal performance. As such, exposed web and API based applications are the target for attackers that utilize both the server side as well as the client/browser side platforms for spreading their malicious code. New security controls utilize the power of AI and machine learning to control the delivery of AppSec services (control false positives) as well as detection of zero-days. |
• | Israel-Hamas and Ukraine-Russia Military Conflicts. The state of war declared in Israel in October 2023 (see the risk factor titled “Political, economic and military instability in the Middle East or Israel, including the state of war declared in Israel in October 2023, may harm our business”) and the Russia-Ukraine war (see the risk factor titled “Our business may be affected by sanctions, export controls and similar measures targeting Russia and other countries and territories as well as other responses to Russia’s military conflict in Ukraine, including indefinite suspension of operations in Russia and dealings with Russian entities by many multi-national businesses across a variety of industries”). |
• | We have developed a broad portfolio of solutions to address the challenges and meet the requirements arising from these trends. |
• | We continuously focus on innovation and believe that our solutions have, in many instances, a technological advantage over competing solutions. |
• | We offer our solutions in a wide array of deployment models (on-premise solutions, managed services, cloud-based solutions, etc.), in order to support various customers’ business models. We believe this flexibility addresses the complexity and diversity of the current application and infrastructure ecosystem. |
• | We operate in a highly competitive environment, and some of our competitors have larger internal resources, and a larger installed base. |
• | While we believe that the shift towards a subscription-based business model is a strategic transition towards higher growth and profitability in the long term, we may not be successful in its execution, including an inability to maintain a high subscription renewal rate. |
• | In addition, our customers’ purchasing decisions are related to the conditions in our industry and in the various regions and geographical markets in which we operate and are tied to the overall IT spending climate. Uncertainty about current global economic conditions continues to pose a risk as customers may postpone or reduce spending in response to such uncertainties. In particular, the Israel-Hamas and Ukraine-Russia military conflicts may negatively affect economic conditions regionally, as well as globally, disrupt operations, affect supply chains, or otherwise negatively impact our business. |
• | The other risks and uncertainties we face, as described under Item 3.D “Risk Factors.” |
• | Revenue recognition; |
• | Investment in marketable securities; |
• | Business combinations; |
• | Goodwill and impairment of long-lived assets; |
• | Share-based compensation; and |
• | Income taxes. |
Name | Age | Position |
Yuval Cohen (1)(2) | 61 | Chairman of the Board of Directors |
Yair Tauman (1)(2)(3)(4) | 75 | Director |
Stanley B. Stern (2)(4)(6)(7) | 66 | Director, Chairman of the Nomination and Corporate Governance Committee |
Naama Zeldis (2)(3)(4)(5) | 60 | Director, Chairperson of the Audit Committee |
Meir Moshe (2)(3)(5)(7) | 69 | Director, Chairman of the Compensation Committee |
Israel Mazin (2)(6)(7) | 64 | Director |
Alex Pinchev (1)(2) | 73 | Director |
Roy Zisapel (5) | 53 | President, Chief Executive Officer and Director |
Guy Avidan | 61 | Chief Financial Officer |
Yoav Gazelle | 54 | Chief Business Officer |
David Aviv | 68 | Chief Technology Officer |
Gabi Malka | 48 | Chief Operating Officer |
Sharon Trachtman | 55 | Chief Marketing Officer |
Riki Goldriech | 47 | Chief People Officer |
Salaries, fees, commissions and bonuses | Pension, retirement and other similar benefits | |||||||
2022 - All directors and officers as a group, consisting of 14 persons* | $ | 3,307,407 | $ | 527,559 | ||||
2023 - All directors and officers as a group, consisting of 15 persons** | $ | 2,419,283 | $ | 475,235 |
Name and Principal Position (1) | Year | Salary | Bonus (including Sales Commissions) (2) | Equity-Based Compensation (3) | All Other Compensation (4) | Total |
(US$ In Thousands) | ||||||
Roy Zisapel, President, Chief Executive Officer and Director | 2023 | 450 (5) | (6) | 2,451 | 139* | 3,040 |
Guy Avidan, Chief Financial Officer | 2023 | 308 | 261 | 67 | 636 | |
Yoav Gazelle, Chief Business Officer | 2023 | 240 | 198 | 214 | 40 | 692 |
Gabi Malka, Chief Operating Officer | 2023 | 319 | 139 | 73 | 531 | |
David Aviv, Chief Technology Officer | 2023 | 300 | 139 | 72 | 511 |
(1) | Unless otherwise indicated herein, all Covered Executives are (i) employed on a full-time (100%) basis; and (ii) subject to customary confidentiality, intellectual property assignment and non-solicitation provisions as well as an undertaking not to compete with us or in our field of business for at least 12 months following termination of employment. |
(2) | Amounts reported in this column represent annual bonuses, including sales commissions. Consistent with our Compensation Policy, such bonuses are based upon (i) for non-sales executive officers - achievement of milestones and targets and the measurable results of the Company, as compared to our budget and/or work plan for the relevant year. The bonus (of up to 10% of the annual bonus) is based on the achievement and performance of pre-determined key performance indicators (KPIs), and, in any event, not to exceed the amount of 200% of the base salary; and (ii) for sales executive officers - achievement of targets of revenues generated by the individual and/or his/her team or division and/or the Company and in any event, not to exceed the amount of four annual base salaries of such executive. |
(3) | Amounts reported in this column represent the grant date fair value in accordance with accounting guidance for share-based compensation. For a discussion of the assumptions used in reaching this valuation, see Note 2(s) to our consolidated financial statements included elsewhere in this annual report. |
(4) | Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to the Covered Executive, payments, contributions and/or allocations for savings funds (e.g., Managers Life Insurance Policy), education funds (“keren hishtalmut”), pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurances (e.g., life or work disability insurance), phone, convalescence or recreation pay, relocation, payments for social security, tax gross-up payments and other benefits and perquisites consistent with Radware’s guidelines. Unless otherwise indicated herein, all Covered Executives (i) are entitled to a notice period of at least one month prior to termination (other than termination for cause), during which they are generally entitled to all compensation and rights under their employment agreements; and (ii) are not entitled to any special bonuses or benefits upon a change of control of our Company, other than a potential acceleration of the vesting of their share options pursuant to our equity incentive plan, as more fully described in Item 6.E “Share Ownership.” |
(5) | As approved by our shareholders on July 28, 2022, as of such date, Roy Zisapel’s gross base salary increased from $400,000 to $450,000 and his annual bonus increased from $400,000 to $600,000 (however, the actual payout, based on performance, could reach $900,000 for overperformance). |
(6) | Consistent with our Compensation Policy, and as approved by our shareholders on July 28, 2022, Roy Zisapel is entitled to an annual bonus of up to $600,000 (however, the actual payout, based on performance, could reach $900,000 for overperformance). |
Class | Term expiring at the annual meeting for the year | Directors | ||
Class I | 2024 | Yair Tauman and Yuval Cohen | ||
Class II | 2025 | Roy Zisapel, Naama Zeldis and Meir Moshe | ||
Class III | 2026 | Stanley Stern, Israel Mazin and Alex Pinchev* |
Name of Body | No. of Meetings in 2023 | Average Attendance Rate** | ||||||
Board of Directors | 13 | 94.23 | % | |||||
Audit Committee | 5 | 100 | % | |||||
Compensation Committee | 5 | 100 | % | |||||
Nomination and Corporate Governance Committee *** | 0 | N/A |
Directors’ Service Contracts
As of December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Approximate numbers of employees and subcontractors by geographic location: | ||||||||||||
Israel | 590 | 589 | 488 | |||||||||
North, Central and South America (principally the United States) | 229 | 252 | 226 | |||||||||
EMEA (Europe, the Middle East and Africa) | 113 | 124 | 125 | |||||||||
Asia-Pacific | 286 | 313( | *) | 304( | *) | |||||||
Total workforce | 1,218 | 1,278 | 1,143 | |||||||||
Approximate numbers of employees and subcontractors by category of activity: | ||||||||||||
Research and development | 479 | 494( | *) | 433( | *) | |||||||
Sales, technical support, business development and marketing | 602 | 647 | 578 | |||||||||
Management, operations and administration | 137 | 137 | 132 | |||||||||
Total workforce | 1,218 | 1,278 | 1,143 |
Name | Number of ordinary shares | Percentage of outstanding ordinary shares** | ||||||
Roy Zisapel (1) | 1,531,392 | 3.66 | % | |||||
Stanley Stern (2) | * | * | ||||||
Naama Zeldis (2) | * | * | ||||||
Yair Tauman (2) | * | * | ||||||
Yuval Cohen (2)(3) | * | * | ||||||
Meir Moshe (2) | * | * | ||||||
Israel Mazin (2) | * | * | ||||||
Alex Pinchev (3) | * | * | ||||||
Gabi Malka (2) | * | * | ||||||
David Aviv (2) | * | * | ||||||
Sharon Trachtman (2) | * | * | ||||||
Guy Avidan (2) | * | * | ||||||
Yoav Gazelle (2) | * | * | ||||||
Riki Goldriech (2) | * | * | ||||||
All directors and executive officers as a group (14 persons) (4) | 2,033,422 | 4.81 | % |
• | the persons to whom options or RSUs are granted; |
• | the number of shares underlying each equity award; |
• | the time or times at which the award shall be made; |
• | the exercise price, vesting schedule and conditions pursuant to which the awards are exercisable, including cashless exercises; and |
• | any other matter necessary or desirable for the administration of the plan. |
Name | Number of ordinary shares* | Percentage of outstanding ordinary shares** | ||||||
Senvest Management, LLC (1) | 4,115,597 | 9.85 | % | |||||
Morgan Stanley (2) | 3,534,162 | 8.46 | % | |||||
Nava Zisapel (3) | 3,060,176 | 7.32 | % | |||||
First Trust Portfolios L.P. (4) | 2,446,925 | 5.86 | % | |||||
Artisan Partners (5) | 2,360,703 | 5.65 | % | |||||
Legal & General Investment Management Limited (6) | 2,115,897 | 5.06 | % |
• | Based on Amendment No. 19 to the Schedule 13G filed with the SEC by Senvest on February 9, 2024, Senvest beneficially owned 4,115,597 of our outstanding ordinary shares. Based on previous amendments to the Schedule 13G filed with the SEC by Senvest, Senvest beneficially owned (i) as of February 10, 2023, 4,044,695 of our outstanding ordinary shares and (ii) as of February 9, 2022, 3,180,659 of our outstanding ordinary shares. |
• | Based on Amendment No. 3 to the Schedule 13G filed with the SEC by Artisan Partners on February 12, 2024, Artisan Partners beneficially owned 2,360,703 of our outstanding ordinary shares. Based on previous amendments to the Schedule 13G filed with the SEC by Artisan Partners, Artisan Partners beneficially owned (i) as of February 10, 2023, 2,925,957 of our outstanding ordinary shares and (ii) as of February 4, 2022, 4,097,761 of our outstanding ordinary shares. |
• | Based on Amendment No. 2 to the Schedule 13G filed with the SEC by The Phoenix Holdings Ltd., or Phoenix, on November 14, 2023, the Phoenix Subsidiaries beneficially owned 2,047,747 of our outstanding ordinary shares. Based on previous amendments to the Schedule 13G filed with the SEC by Phoenix, it beneficially owned (i) as of February 14, 2023, 2,840,213 of our outstanding ordinary shares, and (ii) as of November 8, 2022, 2,547,349 of our outstanding ordinary shares. |
• | Based on the Schedule 13G filed with the SEC by LGIM, LGIME, and UCITS on February 13, 2024, LGIM, LGIME, and UCITS beneficially owned 2,115,897 of our outstanding ordinary shares. Based on previous amendments to the Schedule 13G filed with the SEC by LGIM, LGIME, and UCITS, they beneficially owned (i) as of February 16, 2023, 2,570,026 of our outstanding ordinary shares and (ii) as of February 14, 2022, 2,398,808 of our outstanding ordinary shares. |
• | One lease is a five-story building in Tel Aviv, Israel, consisting of approximately 40,000 square feet, plus storage and parking space. The lease expires in June 2030 with an option to terminate by us by way of prior notice in June 2025. The annual rent amounts to approximately $704,000. |
• | A second lease consists of five floors in the Or Tower in Tel Aviv, Israel with approximately 68,000 square feet, plus parking spaces. The lease expires in June 2030. The annual rent amounts to approximately $2,000,000. In this annual report, we sometimes refer to this lease as well as the lease described above as the “Lease Agreements for the Company’s Headquarters.” |
• | We also lease approximately 3,600 square feet of space in Jerusalem, Israel, for development facilities from an affiliated company owned by the late Yehuda Zisapel and Nava Zisapel. This lease expires in July 2025. The annual rent amounts to approximately $97,000. |
• | In addition, we lease approximately 15,000 square feet of space in Jerusalem, Israel, for manufacturing facilities from an affiliated company owned by the late Yehuda Zisapel, Nava, and the late Zohar Zisapel (and following his death, his heirs – Michael Zisapel and Klil Zisapel). This lease expires in August 2028. The annual rent amounts to approximately $252,000. |
• | We lease approximately 16,900 square feet in Mahwah, New Jersey, consisting of approximately 12,700 square feet of office space and 4,200 square feet of warehouse space, from an affiliated company owned by the late Yehuda Zisapel, Nava, Zisapel and the late Zohar Zisapel (and following his death, his heirs – Michael Zisapel and Klil Zisapel). The annual rent amounts to approximately $195,000. The lease expires in December 2025. |
Entity | Products/Services |
Bynet Data Communications Ltd. | Network management, IT and communication equipment, testing and repair, mutual marketing activities |
Internet Binat Ltd. | IT and communication services |
Bynet System Applications Ltd. | Communication equipment and services |
Rad Data Communications Ltd. | Operating services and manpower |
Cloudride Ltd. | Cloud hosting services, mutual marketing activities |
Bynet Electronics Ltd. | Testing equipment and related services |
• | A reduced corporate tax rate for industrial enterprises, provided that more than 25% of their annual income is derived from export, which will apply to the enterprise’s entire preferred income. As of the tax year 2017 and onwards, the reduced tax rate is 7.5% for development zone A and 16% for the rest of Israel. |
• | The reduced tax rates will no longer be contingent upon making a minimum qualifying investment in productive assets. |
• | A definition of “preferred income” was introduced into the Investments Law to include certain types of income that are generated by the Israeli production activity of a preferred enterprise. |
• | Dividends paid out of preferred income attributed to a Preferred Enterprise during 2014 and thereafter are generally subject to withholding tax at the rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, withholding tax at a rate of 20% or such lower rate as may be provided in an applicable tax treaty will apply). |
• | Deduction of purchases of know-how and patents over an eight-year period for tax purposes; |
• | Right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli Industrial Companies; and |
• | Deductions over a three-year period of expenses involved with the issuance and listing of shares on a recognized stock market. |
• | the expenditures are approved by the relevant Israeli government ministry, which depends on the field of research; |
• | the research and development must be for the promotion of the company; and |
• | the research and development is carried out by or on behalf of the company seeking such tax deduction. |
• | An individual citizen or resident of the United States for U.S. federal income tax purposes; |
• | A corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any political subdivision thereof or the District of Columbia; |
• | An estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
• | A trust (i) if, in general, a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) that has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes. |
• | Broker-dealers or insurance companies; |
• | Dealers or traders in securities, commodities or currencies; |
• | Traders that have elected the mark-to-market accounting method; |
• | Tax-exempt entities, accounts, organizations or retirement plans; |
• | Grantor trusts; |
• | Partnerships or other pass-through entities or arrangements; |
• | Partners or other equity owners in partnerships or other pass-through entities or arrangements that hold our ordinary shares through such an entity or arrangement; |
• | U.S. Holders selling our ordinary shares short; |
• | U.S. Holders deemed to have sold our ordinary shares in a “constructive sale”; |
• | S corporations; |
• | Banks, financial institutions or “financial services entities”; |
• | Persons that hold their ordinary shares as part of a straddle, “hedge,” “integrated” or “conversion transaction” with other investments; |
• | Certain former citizens or long-term residents of the United States; |
• | Persons that acquired their ordinary shares upon the exercise of employee share options or otherwise as compensation; |
• | Real estate investment trusts or regulated investment companies; |
• | Pension funds; |
• | Persons subject to special tax accounting rules as a result of any item of gross income with respect to our ordinary shares being taken into account in an applicable financial statement; |
• | Persons that own directly, indirectly or by attribution at least 10% of our ordinary shares by vote or value; or |
• | Persons that have a functional currency that is not the U.S. dollar. |
• | such item is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States and, in the case of a resident of a country which has a treaty with the United States, such item is attributable to a permanent establishment or, in the case of an individual, a fixed place of business, in the United States; or |
• | the Non-U.S. Holder is an individual who holds the ordinary shares as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements are met. |
U.S. dollar against: | ||||||||
Year ended December 31, | NIS | Euro | ||||||
2019 | (7.8 | )% | 2.0 | % | ||||
2020 | (7.0 | )% | (8.5 | )% | ||||
2021 | (3.3 | )% | 8.4 | % | ||||
2022 | 13.2 | % | 6.1 | % | ||||
2023 | 3.1 | % | (3.6 | )% |
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Year Ended December 31, | ||||||||||||||||
2023* | 2022* | |||||||||||||||
(US$ in thousands) | ||||||||||||||||
Audit Fees (1) | 480 | 70 | % | 480 | 62 | % | ||||||||||
Audit-Related Fees (2) | - | 0 | % | - | 0 | % | ||||||||||
Tax Fees (3) | 126 | 18 | % | 214 | 28 | % | ||||||||||
All Other Fees (4) | 84 | 12 | % | 78 | 10 | % | ||||||||||
Total | 690 | 100 | % | 772 | 100 | % |
Period | Total Number of Shares Purchased | Average Price Paid per Share (in US$) | Total Number of Shares Purchased as Part of Publicly Announced Plans | Approximate Dollar Value of Shares that May Yet To Be Purchased Under the Plans (1)(2)(3)(4) | ||||||||||||
January 1 through 31 | 240,954 | 20.35 | 240,954 | $ | 62,543,697 | |||||||||||
February 1 through 28 | 152,413 | 21.33 | 152,413 | $ | 59,293,385 | |||||||||||
March 1 through 31 | 239,661 | 20.81 | 239,661 | $ | 54,305,274 | |||||||||||
April 1 through 30 | 148,939 | 20.88 | 148,939 | $ | 51,194,812 | |||||||||||
May 1 through 31 | 505,197 | 19.10 | 505,197 | $ | 41,546,833 | |||||||||||
June 1 through 30 | 391,862 | 19.61 | 391,862 | $ | 33,860,764 | |||||||||||
July 1 through 31 | 474,239 | 19.13 | 474,239 | $ | 24,786,459 | |||||||||||
August 1 through 31 | 362,621 | 16.93 | 362,621 | $ | 18,648,641 | |||||||||||
September 1 through 30 | 286,949 | 16.59 | 286,949 | $ | 75,238,481 | |||||||||||
October 1 through 31 | 112,344 | 16.40 | 112,344 | $ | 73,396,541 | |||||||||||
November 1 through 30 | 318,570 | 15.39 | 318,570 | $ | 68,494,670 | |||||||||||
December 1 through 31 | 128,216 | 15.72 | 128,216 | $ | 66,478,592 |
• | The Nasdaq rules require that an issuer have a quorum requirement for shareholders meetings of at least one-third of the outstanding shares of the issuer’s common voting stock. Our Articles of Association provide that the quorum for any meeting of shareholders is 35% or more of the voting rights in the Company, consistent with the Nasdaq rules; however, we have chosen to follow home country practice with respect to the quorum requirements of an adjourned shareholders meeting. Our Articles of Association, as permitted under the Companies Law and Israeli practice, provide that a meeting adjourned for lack of a quorum of at least 35% of the voting power, if convened upon requisition under the provisions of the Companies Law, shall be dissolved, but, in any other case, it shall be adjourned and, at such reconvened meeting, the required quorum consists of any two members present in person or by proxy. |
• | The Nasdaq rules require shareholder approval of share option plans and other equity compensation arrangements available to officers, directors or employees and any material amendments thereto. We have decided to follow home country practice in lieu of obtaining shareholder approval for our current or future equity incentive plans. However, subject to exceptions permitted under the Companies Law, we are required to seek shareholder approval of any grants of options and other equity-based awards to directors and controlling shareholders or plans that require shareholder approval for other reasons. |
• | Additionally, we have chosen to follow our home country practice in lieu of the requirements of Nasdaq Rule 5250(d)(1), relating to an issuer’s furnishing of its annual report to shareholders. Specifically, we file annual reports on Form 20-F, which contain financial statements audited by an independent accounting firm, electronically with the SEC and post a copy on our website. |
• | a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents and risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; |
• | a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; |
• | the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; and |
• | a third-party risk management process for key service providers based on our assessment of their criticality to our operations and respective risk profile. |
RADWARE LTD. | ||
By: | /s/ Roy Zisapel Roy Zisapel President and Chief Executive Officer |
Page | |
Reports of Independent Registered Public Accounting Firm (PCAOB ID:1281) | F2 – F4 |
F5 – F6 | |
F7 | |
F8 | |
F9 | |
F10 – F11 | |
F12 – F55 |
Revenue Recognition | ||
Description of the Matter | As described in Note 2 to the consolidated financial statements, some of the Company’s contracts with customers consist of products, services and subscriptions, which are accounted for as separate performance obligations when they are distinct. In such cases, the transaction price is then allocated to the distinct performance obligations on a relative standalone selling price basis and recognizes associated revenue as control is transferred to the customer. Auditing the estimate of standalone selling price for performance obligation not sold separately involved subjective auditor judgment due to the absence of directly observable data which requires the Company to make subjective assumptions used to estimate the standalone selling price for each performance obligation. Standalone selling price for products and services can evolve over time due to changes in the Company’s pricing practices that are influenced by intense competition, changes in demand for products and services, and economic factors, among others. Given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer contracts was extensive and required subjective auditor judgment. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls relating to the revenue recognition process, including the estimate of standalone selling prices for each distinct performance obligation and review of assumptions used. Our audit procedures included testing management's estimate of standalone selling price for each distinct performance obligation included, among others, evaluating the appropriateness of the methodology applied and the reasonableness of management’s judgment and assumptions by comparing these assumptions with prior years and with the Company's and industry’s general and specific trends. We also inspected the source of historical data, pricing and other observable inputs such as customer grouping, tested the mathematical accuracy of the underlying data and evaluated the accounting policies and practices related to the estimate of standalone selling prices by management. In addition, we have tested the accuracy of management’s allocation of the transaction price to the performance obligations contained within sampled contracts and purchase orders with customers and evaluated whether revenue was recognized in the appropriate amounts and period. We also evaluated and tested the Company’s disclosures included in Note 2 to the consolidated financial statements. |
Tel-Aviv, Israel
Tel-Aviv, Israel
December 31, | ||||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 70,538 | $ | 46,185 | ||||
Marketable securities | 86,372 | 44,180 | ||||||
Short-term bank deposits | 173,678 | 207,679 | ||||||
Trade receivables, net | 20,267 | 17,752 | ||||||
Other current assets and prepaid expenses | 9,529 | 7,196 | ||||||
Inventories | 15,544 | 11,428 | ||||||
Total current assets | 375,928 | 334,420 | ||||||
LONG-TERM INVESTMENTS: | ||||||||
Marketable securities | 33,131 | 90,148 | ||||||
Long-term bank deposits | - | 43,765 | ||||||
Other assets | 2,166 | 2,146 | ||||||
Total long-term investments | 35,297 | 136,059 | ||||||
Property and equipment, net | 18,221 | 21,068 | ||||||
Operating lease right-of-use assets | 20,777 | 23,078 | ||||||
Intangible assets, net | 15,718 | 19,686 | ||||||
Goodwill | 68,008 | 68,008 | ||||||
Other long-term assets | 37,967 | 41,269 | ||||||
Total assets | $ | 571,916 | $ | 643,588 |
F - 5
December 31, | ||||||||
2023 | 2022 | |||||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Trade payables | $ | 4,298 | $ | 6,464 | ||||
Deferred revenues | 105,012 | 108,243 | ||||||
Operating lease liabilities | 4,684 | 4,685 | ||||||
Employees and payroll accruals | 27,448 | 32,380 | ||||||
Other payables and accrued expenses | 13,573 | 12,263 | ||||||
Total current liabilities | 155,015 | 164,035 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Deferred revenues | 60,499 | 72,219 | ||||||
Operating lease liabilities | 16,020 | 19,461 | ||||||
Other long-term liabilities | 17,108 | 19,430 | ||||||
Total long-term liabilities | 93,627 | 111,110 | ||||||
COMMITMENTS AND CONTINGENT LIABILITIES | ||||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Share capital - | ||||||||
Ordinary shares of New Israeli Shekel (“NIS”) 0.05 par value - Authorized: 90,000,000 at December 31, 2023 and 2022; Issued: 62,099,850 and 61,345,900 shares at December 31, 2023 and 2022, respectively; Outstanding: 41,698,876 and 44,306,891 shares at December 31, 2023 and 2022, respectively | 742 | 732 | ||||||
Additional paid-in capital | 529,209 | 498,168 | ||||||
Treasury shares 20,400,974 and 17,039,009 of ordinary shares at December 31, 2023 and 2022, respectively | (365,749 | ) | (303,299 | ) | ||||
Accumulated other comprehensive income (loss) | 77 | (4,844 | ) | |||||
Retained earnings | 119,812 | 141,402 | ||||||
Total Radware Ltd. shareholders' equity | 284,091 | 332,159 | ||||||
Non-controlling interest | 39,183 | 36,284 | ||||||
Total shareholders’ equity | 323,274 | 368,443 | ||||||
Total liabilities and shareholders’ equity | $ | 571,916 | $ | 643,588 |
F - 6
RADWARE LTD. AND ITS SUBSIDIARIES
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Revenues: | ||||||||||||
Products | $ | 145,541 | $ | 172,161 | $ | 170,438 | ||||||
Services | 115,751 | 121,265 | 116,058 | |||||||||
Total revenues | 261,292 | 293,426 | 286,496 | |||||||||
Cost of revenues: | ||||||||||||
Products | 41,450 | 43,014 | 42,191 | |||||||||
Services | 10,260 | 10,870 | 10,255 | |||||||||
Total cost of revenues | 51,710 | 53,884 | 52,446 | |||||||||
Gross profit | 209,582 | 239,542 | 234,050 | |||||||||
Operating expenses, net: | ||||||||||||
Research and development, net | 82,617 | 86,562 | 74,098 | |||||||||
Sales and marketing | 126,237 | 126,533 | 119,842 | |||||||||
General and administrative | 32,408 | 29,786 | 21,885 | |||||||||
Total operating expenses, net | 241,262 | 242,881 | 215,825 | |||||||||
Operating income (loss) | (31,680 | ) | (3,339 | ) | 18,225 | |||||||
Financial income, net | 13,927 | 8,052 | 4,407 | |||||||||
Income (loss) before taxes on income | (17,753 | ) | 4,713 | 22,632 | ||||||||
Taxes on income | 3,837 | 4,879 | 14,821 | |||||||||
Net income (loss) attributable to Radware Ltd.’s shareholders | $ | (21,590 | ) | $ | (166 | ) | $ | 7,811 | ||||
Basic net earnings (loss) per share | $ | (0.50 | ) | $ | (0.00 | ) | $ | 0.17 | ||||
Diluted net earnings (loss) per share | $ | (0.50 | ) | $ | (0.00 | ) | $ | 0.16 | ||||
Weighted-average shares used to compute net income (loss) per share: | ||||||||||||
Basic | 42,871,770 | 44,943,168 | 45,919,835 | |||||||||
Diluted | 42,871,770 | 44,943,168 | 47,503,091 |
F - 7
RADWARE LTD. AND ITS SUBSIDIARIES
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Net income (loss) | $ | (21,590 | ) | $ | (166 | ) | $ | 7,811 | ||||
Other comprehensive income (loss) before tax: | ||||||||||||
Unrealized gains (losses) on marketable securities: | ||||||||||||
Changes in unrealized gains (losses) | 4,526 | (5,046 | ) | (2,999 | ) | |||||||
Less: reclassification adjustments for gains (losses) included in net income (loss) | (243 | ) | 68 | 438 | ||||||||
Cash flow hedging activities adjustments: | ||||||||||||
Changes in unrealized losses | (2,955 | ) | (3,427 | ) | - | |||||||
Less: reclassification adjustments for gains included in net income (loss) | 4,799 | 2,795 | - | |||||||||
Other comprehensive income (loss) before tax | 6,127 | (5,610 | ) | (2,561 | ) | |||||||
Unrealized gains (losses) on marketable securities: | ||||||||||||
Income tax benefits (income tax expenses) related to components of other comprehensive income (loss) | (985 | ) | 1,145 | 589 | ||||||||
Cash flow hedging activities adjustments: | ||||||||||||
Income tax benefits (income tax expenses) related to components of other comprehensive income (loss) | (221 | ) | 76 | - | ||||||||
Income tax benefits (income tax expenses) related to components of other comprehensive income (loss) | (1,206 | ) | 1,221 | 589 | ||||||||
Other comprehensive income (loss), net of tax | 4,921 | (4,389 | ) | (1,972 | ) | |||||||
Comprehensive income (loss) attributable to Radware Ltd.’s shareholders | $ | (16,669 | ) | $ | (4,555 | ) | $ | 5,839 |
F - 8
RADWARE LTD. AND ITS SUBSIDIARIES
Number of outstanding ordinary shares | Share capital | Additional paid-in capital | Treasury share, at cost | Accumulated other comprehensive income (loss) | Retained earnings | Total Radware Ltd. shareholders’ equity | Non-controlling interest | Total shareholders’ equity | ||||||||||||||||||||||||||||
Balance as of January 1, 2021 | 46,386,889 | $ | 721 | $ | 443,018 | $ | (190,552 | ) | $ | 1,517 | $ | 133,757 | $ | 388,461 | $ | - | $ | 388,461 | ||||||||||||||||||
Repurchase of ordinary shares | (1,871,119 | ) | - | - | (52,471 | ) | - | - | (52,471 | ) | - | (52,471 | ) | |||||||||||||||||||||||
Issuance of shares upon exercise of share options and vesting of restricted shares units | 1,356,187 | 9 | 10,581 | - | - | - | 10,590 | - | 10,590 | |||||||||||||||||||||||||||
Share-based compensation | - | - | 17,574 | - | - | - | 17,574 | - | 17,574 | |||||||||||||||||||||||||||
Other comprehensive loss, net of tax | - | - | - | - | (1,972 | ) | - | (1,972 | ) | - | (1,972 | ) | ||||||||||||||||||||||||
Net income | - | - | - | - | - | 7,811 | 7,811 | - | 7,811 | |||||||||||||||||||||||||||
Balance as of December 31, 2021 | 45,871,957 | 730 | 471,173 | (243,023 | ) | (455 | ) | 141,568 | 369,993 | - | 369,993 | |||||||||||||||||||||||||
Repurchase of ordinary shares | (2,269,919 | ) | - | - | (60,276 | ) | - | - | (60,276 | ) | - | (60,276 | ) | |||||||||||||||||||||||
Issuance of shares upon exercise of share options and vesting of restricted shares units | 704,853 | 2 | 2,032 | - | - | - | 2,034 | - | 2,034 | |||||||||||||||||||||||||||
Share-based compensation | - | - | 24,963 | - | - | - | 24,963 | 1,284 | 26,247 | |||||||||||||||||||||||||||
Other comprehensive loss, net of tax | - | - | - | - | (4,389 | ) | - | (4,389 | ) | - | (4,389 | ) | ||||||||||||||||||||||||
Issuance of Preferred A shares in subsidiary | - | - | - | - | - | - | - | 35,000 | 35,000 | |||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (166 | ) | (166 | ) | - | (166 | ) | ||||||||||||||||||||||||
Balance as of December 31, 2022 | 44,306,891 | 732 | 498,168 | (303,299 | ) | (4,844 | ) | 141,402 | 332,159 | 36,284 | 368,443 | |||||||||||||||||||||||||
Repurchase of ordinary shares | (3,361,965 | ) | - | (62,450 | ) | - | - | (62,450 | ) | - | (62,450 | ) | ||||||||||||||||||||||||
Issuance of shares upon exercise of share options and vesting of restricted shares units | 753,950 | 10 | 361 | - | - | - | 371 | - | 371 | |||||||||||||||||||||||||||
Share-based compensation | - | - | 30,680 | - | - | - | 30,680 | 2,899 | 33,579 | |||||||||||||||||||||||||||
Other comprehensive income, net of tax | - | - | - | - | 4,921 | - | 4,921 | - | 4,921 | |||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (21,590 | ) | (21,590 | ) | - | (21,590 | ) | ||||||||||||||||||||||||
Balance as of December 31, 2023 | 41,698,876 | $ | 742 | $ | 529,209 | $ | (365,749 | ) | $ | 77 | $ | 119,812 | $ | 284,091 | $ | 39,183 | $ | 323,274 |
F - 9
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | (21,590 | ) | $ | (166 | ) | $ | 7,811 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 12,244 | 11,692 | 10,196 | |||||||||
Share-based compensation | 34,022 | 27,353 | 17,574 | |||||||||
Loss (gain) on sale of marketable securities | 243 | (68 | ) | (438 | ) | |||||||
Amortization of premiums, accretion of discounts and accrued interest on marketable securities, net | 1,754 | 2,345 | 2,720 | |||||||||
Changes in accrued interest on bank deposits | (3,265 | ) | (2,480 | ) | 2,424 | |||||||
Increase (decrease) in accrued severance pay, net | (299 | ) | 219 | 468 | ||||||||
Decrease (increase) in trade receivables, net | (2,515 | ) | (4,561 | ) | 3,657 | |||||||
Changes in deferred income taxes, net | (551 | ) | (1,986 | ) | (3,466 | ) | ||||||
Decrease (increase) in other assets and prepaid expenses | 246 | (374 | ) | (4,625 | ) | |||||||
Decrease (increase) in inventories | (4,116 | ) | 152 | 2,355 | ||||||||
Increase (decrease) in trade payables | (2,166 | ) | 2,154 | 428 | ||||||||
Increase (decrease) in deferred revenues | (14,951 | ) | 13,475 | 20,063 | ||||||||
Increase (decrease) in other payables and accrued expenses | (1,415 | ) | (14,054 | ) | 12,238 | |||||||
Operating lease right-of-use assets | 3,934 | 6,033 | 5,532 | |||||||||
Operating lease liabilities | (5,075 | ) | (7,586 | ) | (5,163 | ) | ||||||
Net cash provided by (used in) operating activities | (3,500 | ) | 32,148 | 71,774 | ||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (5,429 | ) | (8,814 | ) | (5,603 | ) | ||||||
Proceeds from other long-term assets | 66 | 35 | 49 | |||||||||
Proceeds from (investing in) bank deposits | 81,031 | (13,377 | ) | 24,448 | ||||||||
Purchase of marketable securities | (33,274 | ) | (49,217 | ) | (88,300 | ) | ||||||
Proceeds from maturity of marketable securities | 46,177 | 34,589 | 59,980 | |||||||||
Proceeds from sale of marketable securities | 4,208 | 10,766 | 17,275 | |||||||||
Payment for the business acquisition of SecurityDAM Ltd. (“SecurityDAM”) | - | (30,000 | ) | - | ||||||||
Net cash provided by (used in) investing activities | 92,779 | (56,018 | ) | 7,849 |
F - 10
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from exercise of share options | 371 | 2,034 | 10,590 | |||||||||
Payment of contingent consideration related to acquisition | (2,063 | ) | - | - | ||||||||
Proceeds from issuance of Preferred A shares in subsidiary | - | 35,000 | - | |||||||||
Repurchase of ordinary shares | (63,234 | ) | (59,492 | ) | (52,471 | ) | ||||||
Net cash used in financing activities | (64,926 | ) | (22,458 | ) | (41,881 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 24,353 | (46,328 | ) | 37,742 | ||||||||
Cash and cash equivalents at the beginning of the year | 46,185 | 92,513 | 54,771 | |||||||||
Cash and cash equivalents at the end of the year | $ | 70,538 | $ | 46,185 | $ | 92,513 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the year for taxes on income | $ | 4,000 | $ | 18,069 | $ | 2,748 |
Non-cash investing activities: | ||||||||||||
Right-of-use assets recognized with corresponding lease liabilities | $ | 1,633 | $ | 4,282 | $ | 2,538 |
F - 11
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
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, on-premises, and Software Defined Data Centers (“SDDC”). The Group’s solutions secure the digital experience by providing infrastructure, application, and network protection and availability services to enterprises globally. The Group’s solutions are deployed by, among others, enterprises, carriers and cloud service providers worldwide. |
b. | On February 17, 2022, the Company acquired all of the technology and other intangible assets from SecurityDAM which was a related party and the sole single-managed security service provider of the Company for a total consideration of (1) $30,000 in cash and (2) additional contingent consideration of up to $12,500 based on the revenues of the Company’s cloud DDoS protection service subsequent to the acquisition. For additional details, see also Note 3 and Note 18b. |
c. | On January 18, 2022, the Company established Skyhawk (CNP) Security Ltd. ("Skyhawk") and transferred to Skyhawk all of the intangible assets related to the Cloud Native Protector business. On April 29, 2022, Skyhawk entered into the Series A Preferred Share Agreement (the "Agreement"). According to the Agreement, Skyhawk issued 31,210,708 Preferred A Shares NIS 0.001 par value each, for a total consideration of $35,000. |
d. | 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. |
e. | 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 platforms or 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. |
F - 12
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
a. | Use of estimates: |
b. | Financial statements in United States dollars: |
c. | Principles of consolidation: |
d. | Cash equivalents: |
F - 13
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
e. | Bank deposits: |
f. | Investment in marketable securities: |
F - 14
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
g. | Inventories: |
h. | Property and equipment, net: |
% | |
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 |
F - 15
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
i. | Impairment of long-lived assets and intangible assets subject to amortization: |
j. | Goodwill: |
F - 16
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
k. | Leases: |
l. | Contingencies: |
m. | Revenue recognition: |
• | 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 cloud subscriptions, included as product revenues, are recognized ratably, on a straight-line basis, over the subscription period. |
F - 17
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
• | 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. |
F - 18
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Year ended December 31, | ||||||||
2023 | 2022 | |||||||
Products | $ | 50,703 | $ | 84,508 | ||||
Services | 95,816 | 103,966 | ||||||
Subscriptions | 114,773 | 104,952 | ||||||
$ | 261,292 | $ | 293,426 |
F - 19
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
n. | Shipping and handling fees and costs: |
o. | Cost of revenues: |
p. | Accounts Receivable, net: |
F - 20
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
q. | Research and development expenses, net: |
r. | Government grants: |
s. | Accounting for share-based compensation: |
F - 21
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
F - 22
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Year ended December 31, | |||||
2023 | 2022 | 2021 | |||
Risk free interest rate | 4.06%-4.16% | 2.74%-2.75% | - | ||
Dividend yields | 0% | 0% | - | ||
Expected volatility | 29.83%-35.23% | 27.54%-32.88% | - | ||
Weighted-average expected term from grant date (in years) | 3-5.16 | 2.43-5.17 | - |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Risk free interest rate | 4.87 | % | 2.72 | % | 0.89 | % | ||||||
Dividend yields | 0 | % | 0 | % | 0 | % | ||||||
Expected volatility | 34 | % | 31 | % | 27 | % | ||||||
Weighted-average expected term from grant date (in years) | 3.39 | 3.41 | 3.46 |
t. | Income taxes: |
F - 23
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
u. | Concentrations of credit risks: |
F - 24
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
v. | Derivative and hedging activities: |
F - 25
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
w. | Employee related benefits: |
F - 26
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
x. | Fair value of financial instruments: |
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 that are supported by little or no market activity. |
y. | Non-controlling interests: |
F - 27
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
z. | Comprehensive income (loss): |
aa. | Treasury shares: |
ab. | Basic and diluted net income (loss) per share: |
F - 28
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
ac. | ASC 280, "Segment Reporting"' establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding (“CODM”) how to allocate resources and in assessing performance. The Company's CODM is its Chief Executive Officer. |
ad. | Business combinations: |
F - 29
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
ae. | New accounting pronouncements not yet effective: |
NOTE 3: - | ACQUISITIONS |
Consideration: | ||||
Cash consideration paid on closing date | $ | 30,000 | ||
Contingent consideration fair value | 9,525 | |||
Total purchase price | $ | 39,525 |
Identifiable assets acquired: | ||||
Technology | $ | 12,661 | ||
Goodwill | 26,864 | |||
$ | 39,525 |
F - 30
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 4:- | MARKETABLE SECURITIES |
December 31, | ||||||||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||||||||
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 | $ | 36,891 | $ | (312 | ) | $ | 45 | $ | 36,624 | $ | 18,642 | $ | (537 | ) | $ | - | $ | 18,105 | ||||||||||||||
Corporate debentures | 50,419 | (672 | ) | 1 | 49,748 | 26,639 | (595 | ) | 31 | 26,075 | ||||||||||||||||||||||
Total marketable securities | $ | 87,310 | $ | (984 | ) | $ | 46 | $ | 86,372 | $ | 45,281 | $ | (1,132 | ) | $ | 31 | $ | 44,180 |
December 31, | ||||||||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||||||||
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 | $ | 16,883 | $ | (132 | ) | $ | 38 | $ | 16,789 | $ | 16,451 | $ | (1,018 | ) | $ | - | $ | 15,433 | ||||||||||||||
Corporate debentures | 16,308 | (264 | ) | 12 | 16,056 | 77,876 | (3,433 | ) | - | 74,443 | ||||||||||||||||||||||
Total marketable securities | $ | 33,191 | $ | (396 | ) | $ | 50 | $ | 32,845 | $ | 94,327 | $ | (4,451 | ) | $ | - | $ | 89,876 |
December 31, | ||||||||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||||||||
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 | $ | 288 | $ | (2 | ) | $ | - | $ | 286 | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
Corporate debentures | - | - | - | - | 289 | (17 | ) | - | 272 | |||||||||||||||||||||||
Total marketable securities | $ | 288 | $ | (2 | ) | $ | - | $ | 286 | $ | 289 | $ | (17 | ) | $ | - | $ | 272 |
F - 31
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 4:- | MARKETABLE SECURITIES (Cont.) |
December 31, 2023 | ||||||||||||||||||||||||
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 Value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
Foreign banks and government debentures | $ | 3,618 | $ | (12 | ) | $ | 33,095 | $ | (434 | ) | $ | 36,713 | $ | (446 | ) | |||||||||
Corporate debentures | 9,985 | (34 | ) | 50,655 | (902 | ) | 60,640 | (936 | ) | |||||||||||||||
Total available-for-sale marketable securities | $ | 13,603 | $ | (46 | ) | $ | 83,750 | $ | (1,336 | ) | $ | 97,353 | $ | (1,382 | ) |
December 31, 2022 | ||||||||||||||||||||||||
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 Value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
Foreign banks and government debentures | $ | 1,574 | $ | (2 | ) | $ | 31,964 | $ | (1,552 | ) | $ | 33,538 | $ | (1,554 | ) | |||||||||
Corporate debentures | 27,677 | (739 | ) | 69,838 | (3,307 | ) | 97,515 | (4,046 | ) | |||||||||||||||
Total available-for-sale marketable securities | $ | 29,251 | $ | (741 | ) | $ | 101,802 | $ | (4,859 | ) | $ | 131,053 | $ | (5,600 | ) |
F - 32
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 5:- | FAIR VALUE MEASUREMENTS |
December 31, 2023 | ||||||||||||||||
Fair value measurements using input type | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 11,990 | $ | - | $ | - | $ | 11,990 | ||||||||
Other receivables and prepaid expenses: | ||||||||||||||||
Derivative instruments | - | 1,213 | - | 1,213 | ||||||||||||
Marketable securities: | ||||||||||||||||
Foreign banks and government debentures | - | 53,699 | - | 53,699 | ||||||||||||
Corporate debentures | - | 65,804 | - | 65,804 | ||||||||||||
Total financial assets | $ | 11,990 | $ | 120,716 | $ | - | $ | 132,706 | ||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | - | $ | - | $ | 6,332 | $ | 6,332 | ||||||||
Total financial liabilities | $ | - | $ | - | $ | 6,332 | $ | 6,332 |
F - 33
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 5:- | FAIR VALUE MEASUREMENTS (Cont.) |
December 31, 2022 | ||||||||||||||||
Fair value measurements using input type | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 3,642 | $ | - | $ | - | $ | 3,642 | ||||||||
Marketable securities: | ||||||||||||||||
Foreign banks and government debentures | - | 33,539 | - | 33,539 | ||||||||||||
Corporate debentures | - | 100,789 | - | 100,789 | ||||||||||||
Total financial assets | $ | 3,642 | $ | 134,328 | $ | - | $ | 137,970 |
Liabilities | ||||||||||||||||
Derivative instruments | $ | - | $ | 632 | $ | - | $ | 632 | ||||||||
Contingent consideration | - | - | 8,281 | 8,281 | ||||||||||||
Total financial liabilities | $ | - | $ | 632 | $ | 8,281 | $ | 8,913 |
Year ended December 31, | ||||||||
2023 | 2022 | |||||||
Fair value at the beginning of the year | $ | 8,281 | $ | - | ||||
Acquisition date fair value of contingent consideration related to investment in SecurityDAM (see Note 3) | - | 9,525 | ||||||
Changes in the fair value of contingent consideration in SecurityDAM | 1,128 | 819 | ||||||
Reclassification of payable related to contingent consideration to other payables and accrued expenses (see Note 10) | (3,077 | ) | (2,063 | ) | ||||
Fair value at the end of the year | $ | 6,332 | $ | 8,281 |
F - 34
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 6:- | INVENTORIES |
December 31, | ||||||||
2023 | 2022 | |||||||
Raw materials and components | $ | 1,991 | $ | 1,899 | ||||
Work-in-progress | 119 | 1,004 | ||||||
Finished products | 13,434 | 8,525 | ||||||
$ | 15,544 | $ | 11,428 |
December 31, | ||||||||
2023 | 2022 | |||||||
Cost: | ||||||||
Computer, peripheral equipment and software | $ | 112,320 | $ | 108,914 | ||||
Office furniture and equipment | 14,187 | 14,034 | ||||||
Leasehold improvements | 8,268 | 8,185 | ||||||
134,775 | 131,133 | |||||||
Accumulated depreciation: | ||||||||
Computer, peripheral equipment and software | 98,199 | 92,918 | ||||||
Office furniture and equipment | 11,993 | 11,374 | ||||||
Leasehold improvements | 6,362 | 5,773 | ||||||
116,554 | 110,065 | |||||||
Property and equipment, net | $ | 18,221 | $ | 21,068 |
F - 35
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 8:- | INTANGIBLE ASSETS, NET |
December 31, | ||||||||
2023 | 2022 | |||||||
Cost: | ||||||||
Acquired technology | $ | 45,607 | $ | 45,607 | ||||
Customers relationships and brand name | 9,817 | 9,817 | ||||||
55,424 | 55,424 | |||||||
Accumulated amortization: | ||||||||
Acquired technology | 29,889 | 25,921 | ||||||
Customers relationships and brand name | 9,817 | 9,817 | ||||||
39,706 | 35,738 | |||||||
Intangible assets, net | $ | 15,718 | $ | 19,686 |
December 31, | ||||
2024 | $ | 3,968 | ||
2025 | 3,968 | |||
2026 | 3,725 | |||
2027 | 3,662 | |||
2028 | 395 | |||
Total | $ | 15,718 |
F - 36
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 9:- | LEASES |
2024 | $ | 4,937 | ||
2025 | 4,168 | |||
2026 | 3,505 | |||
2027 | 3,058 | |||
2028 | 2,776 | |||
2029 and thereafter | 3,821 | |||
Total undiscounted lease payments | $ | 22,265 | ||
Less: adjustment to discounted lease payments | (1,561 | ) | ||
Total discounted lease payments | $ | 20,704 |
Weighted-average remaining lease term (years): | 5.49 | |||
Weighted-average discount rate: | 2.84 | % |
Weighted-average remaining lease term (years): | 6.42 | |||
Weighted-average discount rate: | 2.7 | % |
F - 37
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 10:- | OTHER PAYABLES AND ACCRUED EXPENSES |
December 31, | ||||||||
2023 | 2022 | |||||||
Accrued expenses and other payables | $ | 5,083 | $ | 5,067 | ||||
Subcontractors accrual | 2,267 | 2,105 | ||||||
Accrued taxes | 3,146 | 3,028 | ||||||
Contingent consideration related to acquisition | 3,077 | 2,063 | ||||||
$ | 13,573 | $ | 12,263 |
NOTE 11:- | COMMITMENTS AND CONTINGENT LIABILITIES |
a. | 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 that the Company has provided an adequate accrual to cover the costs to resolve such legal proceedings, demands and claims.
b. | Royalties: |
A wholly owned Israeli subsidiary of the Company has been partially financed its research and development efforts through grants received from the IIA. In connection with the IIA grants, the subsidiary is committed to pay royalties to the IIA from its revenue, up to 100% of the amount of the grants received plus 3% annual interest, in accordance with the rules and regulations thereunder. The grants are deducted from research and development expenses. As of December 31, 2023, the remaining contingent obligation of the Israeli subsidiary in connection with such payment of royalties amounted to $434.
F - 38
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 |
a. | Rights of shares: |
b. | Treasury shares: |
c. | Dividends: |
d. | Radware Ltd. Share Option Plans: |
F - 39
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.) |
2023 | ||||
Share options exercised and outstanding | 27,963,931 | |||
RSUs vested and outstanding | 6,932,439 | |||
Ordinary shares available for issuance under the Share Option Plans | 1,116,597 | |||
Total reserved and authorized shares as of December 31, 2023 | 36,012,967 |
Number of options | Weighted-average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
Outstanding at January 1, 2023 | 1,958,029 | $ | 25.01 | 3.15 | $ | - | ||||||||||
Granted | 331,899 | 17.63 | ||||||||||||||
Exercised | (13,552 | ) | 20.77 | |||||||||||||
Expired | (228,910 | ) | 25.56 | |||||||||||||
Forfeited | (43,527 | ) | 26.70 | |||||||||||||
Outstanding at December 31, 2023 | 2,003,939 | $ | 23.70 | 2.77 | $ | 152 | ||||||||||
Exercisable at December 31, 2023 | 1,232,748 | $ | 24.60 | 2.05 | $ | - | ||||||||||
Vested and expected to vest at December 31, 2023 | 1,983,281 | $ | 23.69 | 2.76 | $ | 149 |
F - 40
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.) |
December 31, 2023 | ||||||||||||||||||||||
Outstanding | Exercisable | |||||||||||||||||||||
Weighted- | ||||||||||||||||||||||
average | Weighted- | Weighted- | ||||||||||||||||||||
Ranges of | remaining | average | average | |||||||||||||||||||
exercise | Number of | contractual | exercise | Number of | exercise | |||||||||||||||||
price | options | life (years) | price | options | price | |||||||||||||||||
$ | 15.12-19.75 | 331,899 | 4.62 | $ | 17.63 | - | $ | - | ||||||||||||||
$ | 22.5-24.89 | 1,280,769 | 1.69 | $ | 23.29 | 987,866 | $ | 23.32 | ||||||||||||||
$ | 25.25-29.1 | 200,149 | 1.82 | $ | 27.40 | 134,488 | $ | 26.93 | ||||||||||||||
$ | 32.71-35.43 | 191,122 | 3.11 | $ | 33.06 | 110,394 | $ | 32.97 | ||||||||||||||
2,003,939 | 1,232,748 |
Year ended December 31, | ||||
2023 | ||||
Outstanding at January 1, 2023 | 3,111,206 | |||
Granted | 1,390,718 | |||
Vested | (740,398 | ) | ||
Forfeited | (400,491 | ) | ||
Outstanding as of December 31, 2023 | 3,361,035 |
F - 41
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.) |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Cost of revenues | $ | 515 | $ | 399 | $ | 236 | ||||||
Research and development, net | 7,709 | 7,215 | 5,412 | |||||||||
Sales and marketing | 12,395 | 11,196 | 8,811 | |||||||||
General and administrative | 10,531 | 7,286 | 3,115 | |||||||||
Total expenses | $ | 31,150 | $ | 26,096 | $ | 17,574 |
e. | Skyhawk (CNP) Security Ltd. Share Option Plans: |
F - 42
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.) |
Year ended December 31, | ||||||||
2023 | 2022 | |||||||
Cost of revenues | $ | - | $ | - | ||||
Research and development, net | 796 | 77 | ||||||
Sales and marketing | 159 | 45 | ||||||
General and administrative | 1,917 | 1,135 | ||||||
Total expenses | $ | 2,872 | $ | 1,257 |
Number of options | Weighted-average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
Outstanding at January 1, 2023 | 20,341,993 | $ | 0.33 | 6.43 | 3,017,612 | |||||||||||
Granted | 1,428,000 | 0.48 | - | - | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Expired | - | - | - | - | ||||||||||||
Forfeited | (3,093,688 | ) | 0.48 | - | - | |||||||||||
Outstanding at December 31, 2023 | 18,676,305 | $ | 0.32 | 5.74 | 3,017,612 | |||||||||||
Exercisable at December 31, 2023 | 2,140,151 | $ | 0.01 | 5.69 | 1,005,871 | |||||||||||
Vested and expected to vest at December 31, 2023 | 18,676,305 | $ | 0.32 | 5.74 | 3,017,612 |
F - 43
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share data
NOTE 13:- | EARNINGS (LOSS) PER SHARE |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Numerator for basic and diluted net earnings (loss) per share: | ||||||||||||
Net income (loss) | $ | (21,590 | ) | $ | (166 | ) | $ | 7,811 | ||||
Weighted-average shares outstanding, net of treasury shares: | ||||||||||||
Denominator for basic net earnings (loss) per share | 42,871,770 | 44,943,168 | 45,919,835 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee share options and RSUs | - | - | 1,583,256 | |||||||||
Denominator for diluted net earnings (loss) per share | 42,871,770 | 44,943,168 | 47,503,091 | |||||||||
Basic net earnings (loss) per share | $ | (0.50 | ) | $ | (0.00 | ) | $ | 0.17 | ||||
Diluted net earnings (loss) per share | $ | (0.50 | ) | $ | (0.00 | ) | $ | 0.16 |
F - 44
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- | TAXES ON INCOME |
a. | General: |
2023 | 2022 | |||||||
Beginning balance | $ | 7,434 | $ | 5,312 | ||||
Decrease related to expired tax years | (424 | ) | (723 | ) | ||||
Additions for prior year tax positions | 125 | 162 | ||||||
Decrease for prior year tax positions | (1,879 | ) | (244 | ) | ||||
Additions for current year tax positions | 933 | 2,927 | ||||||
Ending balance | $ | 6,189 | $ | 7,434 |
F - 45
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- | TAXES ON INCOME (Cont.) |
b. | Israeli taxation: |
1. | Foreign Exchange Regulations: |
2. | Tax rates: |
3. | Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Law"): |
F - 46
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- | TAXES ON INCOME (Cont.) |
F - 47
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, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Current taxes | $ | 3,255 | $ | 6,865 | $ | 18,287 | ||||||
Deferred taxes | 582 | (1,986 | ) | (3,466 | ) | |||||||
$ | 3,837 | $ | 4,879 | $ | 14,821 | |||||||
Domestic | $ | 1,079 | $ | 2,820 | $ | 10,741 | ||||||
Foreign | 2,758 | 2,059 | 4,080 | |||||||||
$ | 3,837 | $ | 4,879 | $ | 14,821 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Domestic taxes: | ||||||||||||
Current taxes | $ | 488 | $ | 2,967 | $ | 12,890 | ||||||
Deferred taxes | 591 | (147 | ) | (2,149 | ) | |||||||
1,079 | 2,820 | 10,741 | ||||||||||
Foreign taxes: | ||||||||||||
Current taxes | 2,767 | 3,898 | 5,397 | |||||||||
Deferred taxes | (9 | ) | (1,839 | ) | (1,317 | ) | ||||||
2,758 | 2,059 | 4,080 | ||||||||||
$ | 3,837 | $ | 4,879 | $ | 14,821 |
F - 48
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: |
December 31, | ||||||||
2023 | 2022 | |||||||
Carryforward losses and tax credit | $ | 12,249 | $ | 8,456 | ||||
Deferred revenues | 6,237 | 6,897 | ||||||
Unrealized loss on marketable securities | 296 | 1,281 | ||||||
ROU assets | 2,234 | 2,289 | ||||||
Temporary differences | 9,566 | 9,327 | ||||||
Deferred tax assets before valuation allowance | 30,582 | 28,250 | ||||||
Valuation allowance | (8,434 | ) | (5,162 | ) | ||||
Net deferred tax assets | 22,148 | 23,088 | ||||||
Intangible assets, including goodwill | (4,547 | ) | (4,529 | ) | ||||
Operating lease liabilities | (2,242 | ) | (2,289 | ) | ||||
Depreciable assets | (1,043 | ) | (1,299 | ) | ||||
Deferred tax liability | (7,832 | ) | (8,117 | ) | ||||
Net deferred tax assets | $ | 14,316 | $ | 14,971 |
e. | Foreign: |
F - 49
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- | TAXES ON INCOME (Cont.) |
f. | Income taxes of non-Israeli subsidiaries: |
F - 50
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 (loss) is as follows: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Income (loss) before taxes, as reported in the consolidated statements of income (loss) | $ | (17,753 | ) | $ | 4,713 | $ | 22,632 | |||||
Statutory tax rate | 23 | % | 23 | % | 23 | % | ||||||
Theoretical tax expense (benefit) on the above amount at the Israeli statutory tax rate | $ | (4,083 | ) | $ | 1,084 | $ | 5,205 | |||||
Tax adjustment in respect of different tax rate of foreign subsidiary | (57 | ) | 48 | 33 | ||||||||
Non-deductible expenses and other permanent differences | 536 | 197 | 305 | |||||||||
Deferred taxes on losses for which valuation allowance was provided, net | 2,635 | 2,402 | 896 | |||||||||
Utilization of tax losses and deferred taxes for which valuation allowance was provided, net | - | - | (128 | ) | ||||||||
Foreign withholding taxes | 637 | 3,138 | 2,656 | |||||||||
Share compensation relating to share options per ASC No. 718 | 3,716 | 1,517 | (2,369 | ) | ||||||||
Income taxes in respect of prior years | 1,246 | (1,388 | ) | 687 | ||||||||
Change of tax rate | - | (505 | ) | 462 | ||||||||
Approved, Privileged and Preferred enterprise loss (benefits) (*) | (1,086 | ) | (1,457 | ) | 6,869 | |||||||
Other | 293 | (157 | ) | 205 | ||||||||
Actual tax expense | $ | 3,837 | $ | 4,879 | $ | 14,821 |
(*) Basic earnings per share amounts of the benefit resulting from the "Approved, Privileged and Preferred Enterprise" status | $ | 0.06 | $ | 0.03 | $ | 0.15 | ||||||
Diluted earnings per share amounts of the benefit resulting from the "Approved, Privileged and Preferred Enterprise" status | $ | 0.06 | $ | 0.03 | $ | 0.14 |
F - 51
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, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Domestic | $ | (33,444 | ) | $ | (1,105 | ) | $ | 17,817 | ||||
Foreign | 15,691 | 5,818 | 4,815 | |||||||||
Income before taxes on income | $ | (17,753 | ) | $ | 4,713 | $ | 22,632 |
NOTE 15:- | SEGMENTS REPORTING |
• | Radware’s Core Business - this segment consists of our core business operations, including our cloud security as-a-service products, application and data centers security products and our application availability products; and |
• | The Hawks’ Business – this segment consists of the operations of our two subsidiaries: SkyHawk, a spinoff of our former cloud native protector business which now provides an agentless Cloud-native threat Detection and Response (CDR), combined with Cloud Infrastructure Entitlement Manage (CIEM), Cloud Security Posture Management CSPM and Autonomous Purple Team for AWS Google Cloud and Azure, and EdgeHawk, which is engaged in transforming routers and network nodes into security platforms. |
F - 52
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 15:- | SEGMENTS REPORTING (Cont.) |
Year ended December 31, 2023 | ||||||||||||
Radware Core | Hawks | Total | ||||||||||
Revenues | $ | 260,322 | $ | 970 | $ | 261,292 | ||||||
Operating loss | $ | (16,802 | ) | $ | (14,878 | ) | $ | (31,680 | ) | |||
Financial income, net | $ | 13,927 | ||||||||||
Loss before taxes on income | $ | (17,753 | ) |
Year ended December 31, 2022 | ||||||||||||
Radware Core | Hawks | Total | ||||||||||
Revenues | $ | 290,408 | $ | 3,018 | $ | 293,426 | ||||||
Operating income (loss) | $ | 8,416 | $ | (11,755 | ) | $ | (3,339 | ) | ||||
Financial income, net | $ | 8,052 | ||||||||||
Income before taxes on income | $ | 4,713 |
Year ended December 31, 2021 | ||||||||||||
Radware Core | Hawks | Total | ||||||||||
Revenues | $ | 283,913 | $ | 2,583 | $ | 286,496 | ||||||
Operating income (loss) | $ | 24,114 | $ | (5,889 | ) | $ | 18,225 | |||||
Financial income, net | $ | 4,407 | ||||||||||
Income before taxes on income | $ | 22,632 |
Depreciation expenses of the Hawks’ business segment for the years ended December 31, 2023, 2022 and 2021 were $85, $45 and $16, respectively.
Depreciation expenses of the Radware’s core business segment for the years ended December 31, 2023, 2022 and 2021 were $8,191, $7,941 and $8,323, respectively.
F - 53
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 16:- | GEOGRAPHIC INFORMATION |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Revenues from sales to customers located at: | ||||||||||||
The United States | $ | 72,963 | $ | 94,014 | $ | 98,937 | ||||||
America - other | 30,472 | 29,933 | 29,833 | |||||||||
EMEA*) | 96,488 | 104,219 | 98,388 | |||||||||
Asia Pacific | 61,369 | 65,260 | 59,338 | |||||||||
$ | 261,292 | $ | 293,426 | $ | 286,496 |
*) | Europe, the Middle East and Africa. |
December 31, | ||||||||
2023 | 2022 | |||||||
Long-lived assets by geographic region: | ||||||||
America (principally the United States) | $ | 1,905 | $ | 1,892 | ||||
Israel | 34,888 | 39,200 | ||||||
EMEA - other | 753 | 1,039 | ||||||
Asia Pacific | 1,452 | 2,016 | ||||||
$ | 38,998 | $ | 44,147 |
NOTE 17:- | SELECTED CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Financial income, net: | ||||||||||||
Interest on bank deposits and other | $ | 11,377 | $ | 5,137 | $ | 4,131 | ||||||
Amortization of premiums, accretion of discounts and interest on debt marketable securities, net | 2,787 | 1,754 | 1,855 | |||||||||
Gain (loss) on sale of marketable securities | (243 | ) | 68 | 438 | ||||||||
Bank charges | (197 | ) | (207 | ) | (200 | ) | ||||||
Foreign currency differences, net | 203 | 1,300 | (1,817 | ) | ||||||||
$ | 13,927 | $ | 8,052 | $ | 4,407 |
F - 54
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 18:- | BALANCES AND TRANSACTIONS WITH RELATED PARTIES |
a. | The following related party balances are included in the consolidated balance sheets: |
December 31, | ||||||||
2023 | 2022 | |||||||
Trade receivables and prepaid expenses | $ | 1,538 | $ | 745 | ||||
Trade payables and accrued expenses | $ | 707 | $ | 1,968 |
b. | The following related party transactions are included in the consolidated statements of income (loss): |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Revenues (1) | $ | 3,298 | $ | 2,327 | $ | 3,100 | ||||||
Cost of revenues (2) | $ | - | $ | 2,822 | $ | 11,482 | ||||||
Operating expenses, net - primarily lease, subcontractors and communications (3) | $ | 7,707 | $ | 8,018 | $ | 6,757 | ||||||
Purchase of property and equipment | $ | 194 | $ | 1,175 | $ | 189 |
(1) | Distribution of the Company's products by a related party on a non-exclusive basis. |
(2) | Related to cost of product purchased from one of the related parties (SecurityDAM). On February 17, 2022, the Company acquired all of the technology and other intangible assets from SecurityDAM, which was a related company and the sole single-managed security service provider of the company. For additional details, see Note 3. |
(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. |
F - 55