Radware Ltd. Net Income dropped on 57.3% and EBITDA Margin decreased on 6.7 pp from 13.4% to 6.7%
02/10/2021 • About Radware Ltd. (
$RDWR) • By InTwits
Radware Ltd. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 6.7% in FY2020, 13.4% in FY2019, 7.4% in FY2018, 2.2% in FY2017, -1.2% in FY2016
- Radware Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.7%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $8m in 2020, $10m in 2019, $16m in 2018, $17m in 2017, $26m in 2016
- The company has potentially unprofitable business model: ROIC is 1.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased slightly on 0.81%. Annual revenue decline showed slowdown in FY20Q4 - revenue increased on 2.5%. During FY2016-FY2020 Revenue growth topped in FY2018 at 10.9% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 8.9 pp from -0.50% to 8.4% in 2020. During FY2016-FY2020 EBITDA Margin topped in FY2019 at 13.4%.
Gross Margin showed almost no change in FY2020. SG&A as a % of Revenue increased slightly on 1.9 pp from 50.8% to 52.8% in FY2020. SG&A as a % of Revenue declined at -2.7 pp per annum in FY2016-FY2020.
Net Income margin decreased on 5.1 pp from 9.0% to 3.9% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2019 at 9.0%.
Investments (CAPEX, working capital and M&A)
In FY2020 Radware Ltd. had CAPEX/Revenue of 3.5%. The company's CAPEX/Revenue showed almost no change from FY2017 to FY2020. It's average level of CAPEX/Revenue for the last three years was 3.5%. Radware Ltd. invested a big chunk of EBITDA (51.8%) to CAPEX which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (1.5%) and ROE (2.5%). ROIC decreased on 2.9 pp from 4.4% to 1.5% in FY2020. ROE decreased on 3.5 pp from 5.9% to 2.5% in FY2020. During the last 5 years ROIC topped in FY2019 at 4.4%. During the last 5 years ROE topped in FY2019 at 5.9%.
Leverage (Debt)
Company's Net Debt / EBITDA is -1.5x and Debt / EBITDA is 1.8x. Debt surged on 57.4% while cash jumped on 34.4%.
Radware Ltd. has no short term refinancing risk: cash is higher than short term debt (1,048.4%).
Valuation and dividends
Radware Ltd.'s trades at EV/EBITDA 72.8x and P/E 128.9x.
Financial and operational results
Radware Ltd. ($RDWR) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 196.6 | 211.4 | 234.4 | 252.1 | 250.0 | -0.8% |
| Gross Profit | 160.9 | 171.8 | 192.7 | 206.9 | 204.9 | -0.9% |
| SG&A | 121.9 | 126.3 | 127.5 | 128.1 | 131.9 | 3.0% |
| EBITDA | -2.4 | 4.6 | 17.3 | 33.8 | 16.7 | -50.5% |
| Net Income | -8.7 | -7.5 | 11.7 | 22.6 | 9.6 | -57.3% |
Balance Sheet
|
|---|
| Cash | 79.6 | 65.2 | 45.2 | 40.8 | 54.8 | 34.4% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 5.2 | 5.2 | 0.6% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 13.9 | 24.9 | 78.6% |
Cash flow
|
|---|
| Capex | 9.4 | 7.2 | 8.9 | 8.2 | 8.7 | 6.3% |
Ratios
|
|---|
| Revenue growth | -9.2% | 7.5% | 10.9% | 7.5% | -0.8% | |
| EBITDA growth | -108.7% | -291.9% | 279.4% | 95.2% | -50.5% | |
|
|---|
| Gross Margin | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% | -0.1% |
| EBITDA Margin | -1.2% | 2.2% | 7.4% | 13.4% | 6.7% | -6.7% |
| SG&A, % of revenue | 62.0% | 59.8% | 54.4% | 50.8% | 52.8% | 1.9% |
| Net Income Margin | -4.4% | -3.5% | 5.0% | 9.0% | 3.9% | -5.1% |
| CAPEX, % of revenue | 4.8% | 3.4% | 3.8% | 3.2% | 3.5% | 0.2% |
|
|---|
| ROIC | -4.2% | -2.2% | 2.2% | 4.4% | 1.5% | -2.9% |
| ROE | -2.8% | -2.4% | 3.5% | 5.9% | 2.5% | -3.5% |
| Net Debt/EBITDA | | -14.3x | -2.6x | -0.6x | -1.5x | -0.8x |
Radware Ltd. ($RDWR) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 60 | 58 | 63 | 69 | | -2.3% | -3.3% | -0.5% | 2.5% |
| EBITDA | 3 | 2 | 5 | 7 | | -50.0% | -56.0% | -41.6% | -23.2% |
| Net Income | 3 | 1 | 4 | 3 | | -41.1% | -82.0% | -49.6% | -61.8% |
Balance Sheet
|
|---|
| Cash | 40 | 49 | 48 | 55 | | -23.2% | 42.3% | 21.2% | 34.4% |
| Short Term Debt | 5 | 5 | 5 | 5 | | -6.6% | -16.8% | -5.4% | 0.6% |
| Long Term Debt | 20 | 20 | 24 | 25 | | 30.1% | 36.2% | 66.5% | 78.6% |
Ratios
|
|---|
| Gross Margin | 82.2% | 81.9% | 81.4% | 82.3% | | 0.1% | -0.5% | -0.3% | 0.1% |
| EBITDA Margin | 5.3% | 4.1% | 7.3% | 9.5% | | -5.1% | -4.9% | -5.1% | -3.2% |
| Net Income Margin | 4.3% | 1.2% | 5.7% | 4.1% | | -2.8% | -5.0% | -5.6% | -6.8% |
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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.1% | 2.8% | 3.7% | 4.4% |
|---|
| Radware Ltd. ($RDWR) | - | 7.5% | 10.9% | 7.5% | -0.8% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
| EchoStar Corporation ($SATS) | 59.9% | 59.8% | 62.7% | 58.3% | 60.6% |
| |
|---|
| Median (33 companies) | 43.7% | 41.0% | 40.5% | 43.2% | 44.9% |
|---|
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
| |
|---|
| Median (32 companies) | 5.9% | 6.5% | 4.6% | 3.1% | 9.3% |
|---|
| Radware Ltd. ($RDWR) | -1.2% | 2.2% | 7.4% | 13.4% | 6.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| |
|---|
| Median (32 companies) | 1.9% | 1.8% | 1.6% | 2.4% | 2.0% |
|---|
| Radware Ltd. ($RDWR) | 4.8% | 3.4% | 3.8% | 3.2% | 3.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
| |
|---|
| Median (35 companies) | 2.4% | 2.2% | 0.3% | -1.6% | 2.3% |
|---|
| Radware Ltd. ($RDWR) | -4.2% | -2.2% | 2.2% | 4.4% | 1.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| |
|---|
| Median (24 companies) | -0.9x | -0.6x | 0.2x | -0.1x | -0.3x |
|---|
| Radware Ltd. ($RDWR) | - | -14.3x | -2.6x | -0.6x | -1.5x |
