Radware Ltd. reports 279% EBITDA growth in 2018 and 5.2 pp EBITDA Margin growth from 2.2% to 7.4%
02/06/2019 • About Radware Ltd. (
$RDWR) • By InTwits
Radware Ltd. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 7.4% in 2018, 2.2% in 2017, -1.2% in 2016, 12.7% in 2015, 15.0% in 2014
- Radware Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.5%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $48m in FY2018, $22m in FY2017, $23m in FY2016, $23m in FY2015, $29m in FY2014
- The company has potentially unprofitable business model: ROIC is 2.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Radware Ltd.'s Revenue jumped on 10.9%. Revenue growth showed slowdown in 18Q4 - it was 9.2% YoY. During 2014-2018 Revenue growth bottomed in 2016 at -9.2% and was accelerating since that time. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 5.2 pp from 2.2% to 7.4% in 2018. During 2014-2018 EBITDA Margin bottomed in 2016 at -1.2% and was growing since that time.
Gross Margin increased slightly on 0.96 pp from 81.3% to 82.2% in 2018. SG&A as a % of Revenue decreased on 5.4 pp from 59.8% to 54.4% in 2018. During the last 5 years SG&A as a % of Revenue topped in 2016 at 62.0% and was declining since that time.
Net Income margin increased on 8.6 pp from -3.5% to 5.0% in 2018. During the last 5 years Net Income margin bottomed in 2016 at -4.4% and was growing since that time.
Investments (CAPEX, working capital and M&A)
Radware Ltd.'s CAPEX/Revenue was 3.8% in 2018. CAPEX/Revenue decreased on 2.6 pp from 6.4% in 2015 to 3.8% in 2018. Average CAPEX/Revenue for the last three years was 4.0%. To maintain its fast growth Radware Ltd. invested a large share of EBITDA (51.2%) to CAPEX.
Return on investment
The company operates at low ROIC (2.2%) and ROE (3.5%). ROIC increased on 4.3 pp from -2.2% to 2.2% in 2018. ROE increased on 5.9 pp from -2.4% to 3.5% in 2018. During 2014-2018 ROIC bottomed in 2016 at -4.2% and was growing since that time. During the last 5 years ROE bottomed in 2016 at -2.8% and was growing since that time.
Leverage (Debt)
The company has no debt. Cash dropped on 30.7%.
Valuation and dividends
Radware Ltd.'s trades at EV/EBITDA 60.3x and P/E 92.7x.
Financial and operational results
FY ended 12/31/2018
Radware Ltd. ($RDWR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 221.9 | 216.6 | 196.6 | 211.4 | 234.4 | 10.9% |
| Gross Profit | 182.2 | 178.4 | 160.9 | 171.8 | 192.7 | 12.2% |
| SG&A | 113.0 | 110.4 | 121.9 | 126.3 | 127.5 | 1.0% |
| EBITDA | 33.2 | 27.4 | -2.4 | 4.6 | 17.3 | 279.4% |
| Net Income | 25.0 | 18.6 | -8.7 | -7.5 | 11.7 | |
Balance Sheet
|
|---|
| Cash | 45.0 | 33.7 | 79.6 | 65.2 | 45.2 | -30.7% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 9.5 | 13.8 | 9.4 | 7.2 | 8.9 | 23.0% |
Ratios
|
|---|
| Revenue growth | 15.0% | -2.4% | -9.2% | 7.5% | 10.9% | |
| EBITDA growth | 29.3% | -17.4% | -108.7% | -291.9% | 279.4% | |
|
|---|
| Gross Margin | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% | 1.0% |
| EBITDA Margin | 15.0% | 12.7% | -1.2% | 2.2% | 7.4% | 5.2% |
| SG&A, % of revenue | 50.9% | 51.0% | 62.0% | 59.8% | 54.4% | -5.4% |
| Net Income Margin | 11.2% | 8.6% | -4.4% | -3.5% | 5.0% | 8.6% |
| CAPEX, % of revenue | 4.3% | 6.4% | 4.8% | 3.4% | 3.8% | 0.4% |
|
|---|
| ROIC | 8.0% | 5.6% | -4.2% | -2.2% | 2.2% | 4.3% |
| ROE | 7.9% | 5.7% | -2.8% | -2.4% | 3.5% | 5.9% |
| Net Debt/EBITDA | -1.4x | -1.2x | | -14.3x | -2.6x | 11.7x |
Radware Ltd. ($RDWR) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 55 | 57 | 59 | 64 | | 11.5% | 12.4% | 10.8% | 9.2% |
| EBITDA | 0 | 3 | 5 | 9 | | | | | 4.4% |
| Net Income | -1 | 2 | 3 | 8 | | | | | 274.5% |
Balance Sheet
|
|---|
| Cash | 62 | 62 | 60 | 45 | | 31.5% | 23.1% | 11.3% | -30.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 81.8% | 82.0% | 82.5% | 82.6% | | 0.2% | 0.9% | 1.2% | 1.5% |
| EBITDA Margin | 0.4% | 5.5% | 8.9% | 13.7% | | 5.0% | 8.4% | 9.0% | -0.6% |
| Net Income Margin | -1.8% | 2.9% | 5.3% | 12.4% | | 6.5% | 10.9% | 8.1% | 8.8% |
Peers in Communications Equipment
Below we provide Radware Ltd. benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.1% | 2.8% |
|---|
| Radware Ltd. ($RDWR) | | -2.4% | -9.2% | 7.5% | 10.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| Palo Alto Networks, Inc. ($PANW) | 73.3% | 72.9% | 73.2% | 72.9% | 71.6% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.9% | 6.5% | 4.6% |
|---|
| Radware Ltd. ($RDWR) | 15.0% | 12.7% | -1.2% | 2.2% | 7.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| Radware Ltd. ($RDWR) | 4.3% | 6.4% | 4.8% | 3.4% | 3.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.4% | 2.2% | 0.3% |
|---|
| Radware Ltd. ($RDWR) | 8.0% | 5.6% | -4.2% | -2.2% | 2.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.6x | -0.9x | -0.6x | 0.2x |
|---|
| Radware Ltd. ($RDWR) | -1.4x | -1.2x | | -14.3x | -2.6x |
