UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended
December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of event requiring this shell company report _________
Commission file number: 000-30324
RADWARE LTD.
(Exact name of registrant as specified in its charter)
Israel
(Jurisdiction of incorporation or organization)
22 Raoul Wallenberg Street, Tel Aviv 6971917, Israel
(Address of principal executive offices)
Guy Avidan
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)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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
- 2 -
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the
period covered by the annual report:
42,554,602 Ordinary Shares, NIS 0.05 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐
Accelerated Filer ☒
Non-Accelerated Filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). ☐
- 3 -
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in
this filing:
☒ U.S. GAAP
☐ International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item
the registrant has elected to follow:
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
☐ Yes ☒ No
4
INTRODUCTION
Unless the context otherwise requires, all references in this Annual Report on Form 20-F (this “annual report”) to
“we,” “us,” “our,” the “Company,” and “Radware” are to Radware Ltd. and its subsidiaries.
When the following terms and abbreviations appear in the text of this annual report, they have the meanings
indicated below:
•
“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.
We have registered trademarks for, among others, Radware®; Radware Logo:
®; OnDemand Switch®; Alteon®; APSolute®; LinkProof®; DefensePro®; SIPDirector®;
AppDirector®; AppXcel®; AppXML®; AppWall®; APSolute Insite®; StringMatch Engine®; Web Server Director®;
APSolute Vision®; vDirect®; Alteon VA®; AppShape®; DefenseFlow®; Virtual DefensePro®; VADI® (Virtual
Application Delivery Infrastructure); Radware SecurPath®; ShieldSquare® and the ShieldSquare Logo:
®,
and we have non-registered trademarks for, among others, ADC-VX™; Inflight™; EPIC-AI™ and CyberStack™. Unless
the context otherwise indicates, all other trademarks and trade names appearing in this annual report are owned by their
respective holders.
Our consolidated financial statements appearing in this annual report are prepared in dollars and in accordance
with U.S. GAAP and are audited in accordance with the standards of the Public Company Accounting Oversight Board in
the United States.
Statements made in this annual report concerning the contents of any contract, agreement or other document are
summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed
any of these documents as an exhibit to this annual report or to any registration statement or reports that we previously
filed, you may read the document itself for a complete description of its terms, and the summary included herein is qualified
by reference to the full text of the document, which is incorporated by reference into this annual report.
Unless otherwise indicated, information contained in this annual report concerning our industry and the markets in
which we operate, including our competitive position and market opportunity, is based on information from our own
management estimates and research, as well as from industry and general publications and research, surveys and studies
conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our
industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management
estimates have not been verified by any independent source, and we have not independently verified any third-party
information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to
a high degree of uncertainty and risk due to a variety of factors, including those described in Item 3.D “Risk Factors” below.
5
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, the statements contained in this annual report are forward-
looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities
laws with respect to our business, financial condition and results of operations. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of various factors, including all the risks discussed in “Risk
Factors” and elsewhere in this annual report. Factors that could cause or contribute to such differences include, but are not
limited to: the impact of global economic conditions, including as a result of the state of war declared in Israel in October
2023 and instability in the Middle East, the war in Ukraine, tensions between China and Taiwan financial and credit market
fluctuations (including elevated interest rates), impacts from tariffs or other trade restrictions, inflation, and the potential
for regional or global recessions; our dependence on independent distributors to sell our products; our ability to manage
our anticipated growth effectively; 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; the ability of vendors to provide our hardware platforms and components for the
manufacture of our products; our ability to attract, train, and retain highly qualified personnel; intense competition in the
market for cybersecurity and application delivery solutions and in our industry in general, and changes in the competitive
landscape; our ability to develop new solutions and enhance existing solutions; the impact to our reputation and business
in the event of real or perceived shortcomings, defects, or vulnerabilities in our solutions, if our end-users experience
security breaches, or 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 use of AI Technologies
that present regulatory, litigation, and reputational risks; risks related to the fact that our products must interoperate with
operating systems, software applications and hardware that are developed by others; outages, interruptions, or delays in
hosting services; the risks associated with our global operations, such as difficulties and costs of staffing and managing
foreign operations, compliance costs arising from host country laws or regulations, partial or total expropriation, export
duties and quotas, local tax exposure, economic or political instability, including as a result of insurrection, war, natural
disasters, and major environmental, climate, or public health concerns; our net losses in the past and the possibility that we
may incur losses in the future; a slowdown in the growth of the cybersecurity and application delivery solutions market or
in the development of the market for our cloud-based solutions; long sales cycles for our solutions; risks and uncertainties
relating to acquisitions or other investments; risks associated with doing business in countries with a history of corruption
or with foreign governments; changes in foreign currency exchange rates; risks associated with undetected defects or errors
in our products; our ability to protect our proprietary technology; intellectual property infringement claims made by third
parties; laws, regulations, and industry standards affecting our business; compliance with open source and third-party
licenses; complications with the design or implementation of our new enterprise resource planning (“ERP”) system; our
reliance on information technology systems; our ESG disclosures and initiatives; and other factors and risks over which we
may have little or no control.
We urge you to consider that statements that use the terms “believe,” “expect,” “plan,” “intend,” “estimate,”
“anticipate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could”
are intended to identify forward-looking statements. Such forward-looking statements appear in Item 3.D “Risk Factors,”
Item 4 “Information on the Company,” and Item 5 “Operating and Financial Review and Prospects” as well as elsewhere
in this annual report. These statements reflect our current views with respect to future events, are based on assumptions and
are subject to risks and uncertainties, including those discussed under Item 3.D “Risk Factors” and in our other filings with,
or submissions to, the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States,
we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise.
6
Table of Contents
PART I
............................................................................................................................................................................
............................................................................................................................................................................
............................................................................................................................................................................
8
ITEM 1.
Identity of Directors, Senior Management and Advisers
..................................................................................................................................................
9
ITEM 2.
Offer Statistics and Expected Timetable
..................................................................................................................................................
9
ITEM 3.
Key Information
..................................................................................................................................................
9
A. [Reserved]
..................................................................................................................................................
9
B. Capitalization and Indebtedness
..................................................................................................................................................
9
C. Reasons for the Offer and Use of Proceeds
..................................................................................................................................................
9
D. Risk Factors
..................................................................................................................................................
9
ITEM 4.
Information on the Company
..................................................................................................................................................
33
A. History and Development of the Company
..................................................................................................................................................
33
B. Business Overview
..................................................................................................................................................
34
C. Organizational Structure
..................................................................................................................................................
49
D. Property, Plants and Equipment
..................................................................................................................................................
50
ITEM 4A.
Unresolved Staff Comments
..................................................................................................................................................
51
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
..................................................................................................................................................
51
A. Operating Results
..................................................................................................................................................
51
B. Liquidity and Capital Resources
..................................................................................................................................................
61
C. Research and Development, Patents and Licenses, etc.
..................................................................................................................................................
64
D. Trend Information
..................................................................................................................................................
65
E. Critical Accounting Estimates
..................................................................................................................................................
67
ITEM 6.
Directors, Senior Management and Employees
..................................................................................................................................................
71
A. Directors and Senior Management
..................................................................................................................................................
71
B. Compensation
..................................................................................................................................................
74
C. Board Practices
..................................................................................................................................................
78
D. Employees
..................................................................................................................................................
82
E. Share Ownership
..................................................................................................................................................
83
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
..................................................................................................................................................
85
7
ITEM 7.
Major Shareholders and Related Party Transactions
..................................................................................................................................................
85
A. Major Shareholders
..................................................................................................................................................
85
B. Related Party Transactions
..................................................................................................................................................
87
C. Interests of Experts and Counsel
..................................................................................................................................................
90
ITEM 8.
Financial Information
..................................................................................................................................................
91
A. Consolidated Statements and Other Financial Information
..................................................................................................................................................
91
B. Significant Changes
..................................................................................................................................................
91
ITEM 9.
The Offer and Listing
..................................................................................................................................................
91
A.
Offer and Listing Details
..................................................................................................................................................
91
B.
Plan of Distribution
..................................................................................................................................................
91
C.
Markets
..................................................................................................................................................
91
D.
Selling Shareholders
..................................................................................................................................................
91
E.
Dilution
..................................................................................................................................................
91
F.
Expenses of the Issue
..................................................................................................................................................
91
ITEM 10.
Additional Information
..................................................................................................................................................
92
A.
Share Capital
..................................................................................................................................................
92
B.
Memorandum and Articles of Association
..................................................................................................................................................
92
C.
Material Contracts
..................................................................................................................................................
92
D.
Exchange Controls
..................................................................................................................................................
92
E.
Taxation
..................................................................................................................................................
92
F.
Dividends and Paying Agents
..................................................................................................................................................
101
G.
Statement by Experts
..................................................................................................................................................
101
H.
Documents on Display
..................................................................................................................................................
101
I.
Subsidiary Information
..................................................................................................................................................
101
J.
Annual Report to Security Holders
..................................................................................................................................................
102
8
ITEM 11.
Quantitative and Qualitative Disclosures about Market Risk
...................................................................................................................................................
102
ITEM 12.
Description of Securities other than Equity Securities
...................................................................................................................................................
103
PART II
.............................................................................................................................................................................
104
ITEM 13.
Defaults, Dividend Arrearages and Delinquencies
...................................................................................................................................................
104
ITEM 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
...................................................................................................................................................
104
ITEM 15.
Controls and Procedures
...................................................................................................................................................
104
ITEM 16.
[Reserved]
...................................................................................................................................................
105
ITEM 16A. Audit Committee Financial Expert
...................................................................................................................................................
105
ITEM 16B. Code Of Ethics
...................................................................................................................................................
105
ITEM 16C. Principal Accountant Fees And Services
...................................................................................................................................................
105
ITEM 16D. Exemptions From The Listing Standards For Audit Committees
...................................................................................................................................................
106
ITEM 16E. Purchases Of Equity Securities By The Issuer And Affiliated Purchasers
...................................................................................................................................................
106
ITEM 16F. Change In Registrant’s Certifying Accountant
...................................................................................................................................................
107
ITEM 16G. Corporate Governance
...................................................................................................................................................
107
ITEM 16H. Mine Safety Disclosure
...................................................................................................................................................
107
ITEM 16I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
...................................................................................................................................................
107
ITEM 16J. Insider Trading Policy
...................................................................................................................................................
108
ITEM 16K. Cybersecurity
...................................................................................................................................................
108
PART III
.............................................................................................................................................................................
110
ITEM 17.
Financial Statements
...................................................................................................................................................
110
ITEM 18.
Financial Statements
...................................................................................................................................................
110
ITEM 19.
Exhibits
...................................................................................................................................................
110
SIGNATURE
.............................................................................................................................................................................
112
9
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.
[Reserved]
B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
You should carefully consider the following risks before deciding to purchase, hold or sell our ordinary shares.
Our business, operating results, and financial condition could be seriously harmed due to any of the following risks. The
following risks are not the only risk factors faced by our Company. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also affect our business. The trading price of our ordinary shares could
decline due to any of these risks. You should also refer to the other information contained or incorporated by reference in
this annual report before making any investment decision regarding our Company.
Summary of Risk Factors
The following constitutes a summary of the material risks relevant to an investment in our Company:
Risks Related to Our Business and Our Industry
•
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 cybersecurity 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.
10
•
We use AI Technologies that present regulatory, litigation, and reputational risks that could materially and adversely
affect our business, financial condition and results of operations.
•
We face risks related to the rapidly evolving regulatory framework for AI Technologies.
•
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 products must interoperate with operating systems, software applications and hardware that are developed by
others and if we are unable to devote the necessary resources to ensure that our products interoperate with such
software and hardware, we may fail to increase, or we may lose market share and we may experience a weakening
demand for our products.
•
Our global operations may expose us to additional risks.
•
We have incurred net losses in the past and may incur losses in the future.
•
A slowdown in the growth of the cybersecurity 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 condition and results of operations.
11
•
If we are unable to realize our investment objectives, our financial condition and results of operations may be adversely
affected.
•
Complications with the design or implementation of our new ERP system, or major disruptions or deficiencies of our
other information technology systems, could adversely impact our business and operations.
•
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.
•
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.
•
We have in the past, and may in the future, become subject to litigation or claims arising in or outside the ordinary
course of business that could negatively affect our business operations and financial condition.
Risks Related to the Market for Our Ordinary Shares
•
The estate of the late Yehuda Zisapel, along with 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.
Risks Related to Operations in Israel
•
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.
12
Risks Related to Our Business and Our Industry
Changing or severe global economic conditions could have a material adverse effect on our results of
operations.
Our business is affected by global economic conditions, uncertainties and downturns, including as a result of the
state of war declared in Israel in October 2023 and instability in the Middle East (see the risk factor below 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”), the war in Ukraine (see the risk factor below 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”), the tensions between China and Taiwan, export
controls recently imposed by the United States with respect to, among other things, graphics processing units (GPUs), and
central banks in the markets in which we operate that have tightened their monetary policies and, until recently, raised
interest rates, which may impact current and anticipated market demand for our solutions. Uncertainties about current
global economic conditions continue to pose a risk as our current or prospective customers may postpone or reduce demand
and spending priorities in response to such uncertainties. This could result in, among other things, a reduction in our
revenues or a failure to achieve anticipated revenue growth, longer sales cycles, and slower adoption of new technologies,
as well as downward pressure on the price of our solutions. Other macro conditions may have other adverse effects on the
economy, which are difficult to predict, such as instability of any bank with which we maintain a commercial relationship,
inflation pressures, rising interest rates or a period of elevated interest rates or impacts from tariffs or other trade restrictions.
Each of the above events could have a material adverse effect on our business, operating results, and financial condition.
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.
Our growth strategy depends upon, among other things, increasing sales of our solutions, both directly and
indirectly through our different distribution channels. We sell our solutions primarily to independent distributors, including
value added resellers (VARs), original equipment manufacturers (OEMs) and global system integrators (GSIs), and are
highly dependent upon these distributors’ active marketing and sales efforts. Our distribution agreements with our
distributors generally are non-exclusive, ranging in duration with no renewal obligation on the part of our distributors. Our
distribution agreements also typically do not prevent our distributors from selling products and services of our competitors
and do not contain minimum sales or marketing performance requirements. As a result, our distributors may give higher
priority to products and services of our competitors or their own products, thereby reducing their efforts to sell our products
and services. In addition, we may not be able to maintain our existing distribution relationships, and we may not be
successful in replacing them on a timely basis, or at all. We may also need to develop new distribution channels for new
products and services, and we may not succeed in doing so. Any changes in our distributor relationships or distribution
channels, including a termination or other disruption of our commercial relationship with our distributors or our inability
to establish distribution channels for new products and services, could impair our ability to sell our products and services
and have a material adverse effect on our business, financial condition and results of operations.
We must manage our anticipated growth effectively in order to be profitable.
We have actively expanded our operations in the past and may continue to expand them in the future in order to
gain market share in the evolving market for cybersecurity and application delivery solutions. This expansion has required,
and may continue to require, managerial, operational and financial resources.
In some cases, we may choose to increase our cost of operations at the expense of our short-term profitability in
order to support future expansion and growth. We cannot assure you that we will continue to expand our operations
successfully. If we are unable to manage our expanding operations effectively, our revenues may not increase or may
decline, our cost of operations may increase, and we may not be profitable. For example, in 2024, 2023 and 2022, we
recorded an operating loss of $3.9 million, $31.7 million and $3.3 million, respectively, and in 2023 and 2022, we recorded
a net loss of $21.6 million and $0.2 million, respectively.
13
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.
Our ability to meet customer demands depends in part on our ability to obtain timely deliveries of parts from our
suppliers and contract manufacturers. We cannot assure you that we will not encounter supply and fulfilment issues in the
future and certain components are presently available to us only from limited sources (see the risk factor below titled “We
rely on a few vendors to provide our hardware platforms and components for the manufacture of our products” and the
discussion under Item 4.B “Business Overview—Manufacturing and Suppliers”). We may not be able to diversify sources
in a timely and cost-effective manner, which could harm our ability to deliver products to customers and adversely impact
present and future sales and profitability.
We may experience a shortage of certain component parts as a result of our own manufacturing issues,
manufacturing issues at our suppliers or contract manufacturers, capacity problems or transportation and freight carriers
issues experienced by our suppliers or contract manufacturers, or strong demand in the industry for those parts, especially
if there is growth in the overall economy. If there is growth in the economy, such growth is likely to create greater pressures
on us and our suppliers to accurately project overall component demand and component demands within specific product
categories and to establish optimal component levels. If shortages or delays persist, such as due to the worldwide chipset
shortage, the price of these components may increase, or the components may not be available at all.
We may also encounter shortages if we do not accurately anticipate our needs. We may not be able to secure
enough components at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities
or configurations needed. Accordingly, our revenues and gross margins could be materially and adversely affected until
other sources can be developed.
In addition, our operating results could be materially and adversely affected if we anticipate greater demand than
what transpires, and we commit to purchasing more components than we actually need. We see this specifically with respect
to dated components, which we need to order in large quantities due to manufacturing stoppage. Due to technology
advancements, we are required from time to time to make “last buy” type of stock purchases of such dated components for
our products.
Any disruption in our supply chain, such as disruptions resulting from failure in telecommunication systems; acts
of war, terrorism, cyber-attacks or natural disasters, including major environmental or public health concerns, such as the
COVID-19 pandemic, lack of skilled labor, the disruption of transportation networks, and adverse weather conditions,
could have a material adverse effect on our business, financial condition and results of operations.
We rely on a few vendors to provide our hardware platforms and components for the manufacture of our
products.
We primarily rely on a few original design manufacturers, or ODMs, for the manufacture and supply of our
hardware platforms, with approximately 82% of our direct product costs in 2024 related to these vendors. If we are unable
to continue to acquire from these ODMs and/or other components vendors on acceptable terms or should any of these
ODMs and/or components vendors cease to supply us with such platforms or components for any reason, we may not be
able to identify and integrate an alternative source of supply in a timely fashion or at the same costs. Any transition to one
or more alternate manufacturers could result in delays, operational problems and increased costs, and may limit our ability
to deliver our products to our customers on time during such a transition period, any of which could have a material adverse
effect on our business, financial condition and results of operations.
Our success depends on our ability to attract, train and retain highly qualified personnel.
Our products and services require sophisticated technology, marketing and sales expertise. Accordingly, we need
highly trained research and development, sales, marketing, technical, customer support, operations and IT personnel.
Competition for such qualified personnel, especially in the cybersecurity domain, is intense. In particular, while there has
been intense competition for such qualified personnel in the Israeli high-tech industry historically, the industry experienced
record growth and activity in the past few years, which contributed to significant levels of employee attrition. The Israeli
high-tech industry still faces a shortage of skilled human capital, including qualified personnel in the cybersecurity domain.
Additionally, we may be unable to hire or retain talent who are trained in artificial intelligence (AI) or generative artificial
intelligence (Gen AI), machine learning and advanced algorithms, to keep pace with the rapid and continuous technological
changes in our industry. In addition, while we utilize non-competition agreements with our employees as a means of
improving our employee retention, we may be unable to enforce these agreements under applicable laws. In light of the
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foregoing, we may not be able to hire or retain sufficient personnel to support our business operations or, if we do, we may
be required to offer increased compensation to attract such employees, which could have a material adverse effect on our
business, financial condition and results of operations.
Competition in the market for cybersecurity 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.
The cybersecurity and application delivery solutions marketplace is highly competitive and has very few barriers
to entry, particularly in our focus areas. We expect competition to intensify in the future, and we may lose market share if
we are unable to compete effectively.
Most of our competitors have greater financial, personnel and other resources than we have, which may limit our
ability to effectively compete with them. We expect to continue to face additional competition as new participants enter
the market or extend their portfolios into related technologies. Current and future participants may also be able to respond
more quickly to new or emerging technologies and changes in customer demands and to devote greater resources to the
development, promotion and sale of their products than we can. Larger companies with substantial resources, brand
recognition and sales channels may form consolidation and alliances with or acquire competing cybersecurity and
application delivery solutions and emerge as significant competitors.
Competition may result in lower prices or reduced demand for our solutions and a corresponding reduction in our
ability to recover our costs, which may impair our ability to achieve, maintain and increase profitability. Furthermore, the
dynamic market environment poses a challenge in predicting market trends and expected growth. We cannot assure you
that we will be able to implement our business strategy in a manner that will allow us to be competitive. If any of our
competitors offer products or services that are more competitive than ours, we could lose market share and our business,
financial condition and results of operations could be materially and adversely affected as a result.
We must develop new solutions and enhance existing solutions to remain competitive.
The market for cybersecurity and application delivery solutions is characterized by rapid technological changes,
driven primarily by accelerated digital transformation including work from home initiatives, a rapid shift to online business
activity, increased migration to cloud environments and the introduction of interactive Gen AI technologies (LLM eco-
system: transformers/embedding techniques) that enable adversaries to create focused exploits and faster time to launch
cyber attacks. Such technological changes and transformations are accompanied by, in addition to a rapidly evolving and
active cyber threat landscape that is accelerated by weaponized Gen AI tools, changes in networks infrastructure and
topologies, applications architecture and infrastructure development methodologies and increasingly demanding
compliance mandates. The challenges we face are centered around the timing and effectiveness of response and include:
•
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, Account Takeover
(ATO) and 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, Domain Name System (DNS) attacks, API-level attacks, cloud-native attacks
(cloud access management and workloads), complex application-level attacks, such as Business Logic
Attacks (BLA), ATO attacks, encrypted or Web Distributed Denial of Service (DDoS) attacks, usage of
open source third-party attack libraries, and/or Gen AI, natural language processing (NLP) and automated
attacks;
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•
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.
In order to meet these challenges and remain competitive in the market, we have introduced, and must continue
to introduce, new solutions and enhancements to our existing solutions. Accordingly, our future success will depend, to a
substantial extent, on our ability to accurately and timely identify market trends and anticipate changing market
requirements and needs; to invest (including through acquisition of complimentary solutions) in research and development
and timely develop, introduce and support relevant and desired new solutions and enhancements; and to gain market
acceptance of our offerings. There can be no assurances that our continued investment in research and development,
including associated capital expenditures, will ultimately allow us to remain competitive in our industry or otherwise result
in successful solutions that generate expected sales and support our growth. In addition, diversifying our solution portfolio
might expose us to direct competition with new players and might require additional investments in the associated sales
and marketing practices.
If our research and development efforts do not lead to a corresponding increase in our revenues, if we fail to timely
develop and deploy new solutions and enhancements to our existing solutions, or if we fail to gain market acceptance of
our new solutions or enhanced solutions, our business, operating results, and financial condition could be materially
adversely affected.
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.
Any errors, defects, or misconfigurations could cause our solutions to not meet specifications, be vulnerable to
security attacks or fail to secure networks or applications, which could negatively impact customer operations and
consequently harm our business and reputation. In addition, we may suffer significant adverse publicity and reputational
harm and become subject to regulatory and litigation claims if our solutions are associated, or are believed to be associated
with, or fail to reasonably protect against, a security attack or a breach at a high-profile customer, a significant customer
base or a significant business partner. Many of our customers and business partners are themselves highly regulated entities,
which may result in enhanced scrutiny of our security program and controls in the event of a significant cybersecurity
incident. Moreover, any actual or perceived cyber-attack, other security breach, exposure or theft of our or our customers’
data, regardless of whether the breach or theft is attributable to the failure of our solutions, could:
•
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.
Cyber-attackers or other malicious actors are increasingly sophisticated, may be state actors or affiliated with
organized crime, and may operate large-scale and complex automated attacks. In addition, the techniques they use to access
or sabotage networks or applications or to disrupt operations (for example, via ransomware) change frequently and
generally are not recognized until launched against a target. As a result, our solutions may be unable to anticipate these
techniques and provide timely or effective protection to our end-users’ networks or applications, particularly due to the
increased use by attackers of tools and techniques that are designed to circumvent security controls, to avoid detection and
to remove or obfuscate evidence. The global marketplace also expects actors to increasingly develop innovative attack
methodologies utilizing AI as well as new tools to identify and exploit vulnerabilities from both technical and social
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engineering perspectives. In addition, continued remote and hybrid working arrangements at our Company (and at many
third-party providers), such as those that evolved during the COVID-19 pandemic and continued after the pandemic, also
increase cybersecurity risks due to the challenges associated with managing remote computing assets and the security
vulnerabilities that are present in many non-corporate and home networks. We may acquire companies or enter into
information technology system integrations with companies that have cybersecurity vulnerabilities or unsophisticated
security measures, which would expose us to increased risks. In addition, we cannot comprehensively identify all
misconfigurations, “bugs” or vulnerabilities in proprietary or third-party systems or software used by our business, or
guarantee that patches or compensating controls will be applied before vulnerabilities can be exploited by a threat actor. If
we fail to identify and respond to new and increasingly complex methods of attack or to update our solutions to detect or
prevent such threats in time to protect our end-users’ critical business data, the integrity of our solutions and reputation, as
well as our business and operating results, could suffer.
Furthermore, security breaches or defects in our solutions could result in loss or alteration of, or unauthorized
access to, data of customers, employees, business partners and others, including personally identifiable information, as well
as proprietary information belonging to our business such as trade secrets, and compromise our customers’ networks and
applications that are secured by our physical and cloud solutions. Moreover, any use or integration of generative or other
AI in our, or any third party’s, operations, products or services will pose new and/or unknown cybersecurity risks and
challenges. AI tools and applications have created a new attack vector to infect unsuspecting users with malware, such as
ransomware and data extraction routines. If such a security breach results in the disruption or loss of availability, integrity
or confidentiality of customers’ data, we could incur significant liability to our customers and to businesses or individuals
whose information was being handled by our customers, in addition to liability imposed by regulatory agencies. There can
be no assurance that limitation of liability, indemnification or other protective provisions that we attempt to include in our
contracts would be applicable, enforceable or adequate in connection with a security breach, or would otherwise protect us
from any such liabilities or damages with respect to any particular claim.
There is no guarantee that our solutions will be free of flaws or vulnerabilities. Our end-users may also misuse
our solutions, which could result in vulnerabilities to a breach or theft of business data. Furthermore, there can be no
assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures,
will be fully implemented, complied with or effective in protecting our information technology systems and confidential
information.
We use AI Technologies that present regulatory, litigation, and reputational risks that could materially and
adversely affect our business, financial condition and results of operations.
We use AI, Gen AI, machine learning, and automated decision-making technologies, including proprietary AI and
machine learning algorithms and models (collectively, “AI Technologies”) throughout our business, and are making
significant investments in this area.
For example, we use AI Technologies to serve some of our cloud customers. There are significant risks involved
in developing, maintaining and deploying AI Technologies.
In particular, if the models underlying our AI Technologies are: incorrectly designed or implemented; trained or
reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data, or on data to which we do not have
sufficient rights or in relation to which we and/or the providers of such data have not implemented sufficient legal
compliance measures; used without sufficient oversight and governance; and/or adversely impacted by unforeseen defects,
technical challenges, cybersecurity threats or material performance issues, the performance of our products, services and
business, as well as our reputation, could suffer, or we could incur liability resulting from the violation of laws or contracts
to which we are a party or civil claims.
With respect to our products or services that incorporate AI Technologies, the market for such products and
services is rapidly evolving. We cannot be sure that the market will continue to grow or that it will grow in ways we
anticipate. In addition, market acceptance and consumer perceptions of products and services that incorporate AI
Technologies is uncertain. Our failure to successfully develop and commercialize our products or services involving AI
Technologies could depress the market price of our ordinary shares and impair our ability to raise capital, expand our
business, provide, improve and diversify our product offerings, efficiently manage our operating expenses; and respond
effectively to competitive developments.
In particular, we are working to incorporate Gen AI into our solutions and internal business practices. There is a
risk that Gen AI could produce inaccurate or misleading content or other discriminatory or unexpected results or behaviors,
such as hallucinatory behavior that can generate irrelevant, nonsensical, or factually incorrect results, all of which could
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harm our reputation, business, or customer relationships. While we take measures designated to ensure the accuracy of such
AI generated content, those measures may not always be successful, and in some cases, we may need to rely on end users
to report such inaccuracies.
Further, if we are deemed to not have sufficient rights to the data we use to train our Gen AI, we may be subject
to litigation by the owners of the content or other materials that comprise such data, similar to the litigation that is currently
pending in various U.S. courts against other developers of Gen AI, and in which the outcome of such litigation is uncertain.
We may not be successful in our ongoing development and maintenance of these technologies in the face of novel
and evolving technical, reputational and market factors. Our efforts to develop proprietary AI models could increase our
operating costs. Our ability to develop proprietary AI models may be limited by our access to processing infrastructure or
training data, and we may be dependent on third-party providers for such resources.
We face significant competition from other companies in our industry in relation to the development and
deployment of AI Technologies. Those other companies may develop AI Technologies that are similar or superior to ours
and/or are more cost-effective and/or quicker to develop, deploy and maintain. Any inability to develop, offer or deploy
new AI Technologies as effectively, as quickly and/or as cost-efficiently as our competitors could have a materially adverse
impact on our operating results, customer relationships and growth.
Further, our ability to continue to develop or use such technologies may be dependent on access to specific third-
party software, services and infrastructure, such as processing hardware, and we cannot control the availability or pricing
of such third-party software and infrastructure, especially in a highly competitive environment.
We face risks related to the rapidly evolving regulatory framework for AI Technologies.
The regulatory framework for AI Technologies is rapidly evolving as government bodies and agencies in many
geographical jurisdictions have introduced or are currently considering additional laws and regulations. Additionally,
existing laws and regulations may be interpreted in ways that would affect the operation of our AI technologies, or could
be rescinded or amended as new administrations take differing approaches to evolving AI technologies. As a result,
implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot
determine the impact future laws, regulations, standards, or market perception of their requirements may have on our
business and may not always be able to anticipate how to respond to these laws or regulations. Already, certain existing
legal regimes (e.g., relating to data privacy) regulate certain aspects of AI technologies, and new laws regulating AI
technologies have either entered into force in the United States, the EU, China and Israel or are expected to enter into force
in 2025.
For example, in Europe, on August 1, 2024, the EU Artificial Intelligence Act (the “EU AI Act”) entered into
force, and establishes a comprehensive, risk-based governance framework for AI in the EU market. It is possible that
additional new laws and regulations will be adopted in the United States and other jurisdictions, or that existing laws and
regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI
technologies for our business, or require us to change the way we use AI technologies in a manner that negatively affects
the performance of our products, services, and business and the way in which we use AI technologies. We may need to
expend resources to adjust our products or services in certain jurisdictions if the laws, regulations, or decisions are not
consistent across jurisdictions. Further, the cost to comply with such laws, regulations, or decisions and/or guidance
interpreting existing laws, could be significant and would increase our operating expenses (such as by imposing additional
reporting obligations regarding our use of AI technologies). Such an increase in operating expenses, as well as any actual
or perceived failure to comply with such laws and regulations, could adversely affect our business and operating results.
It is also possible that the AI technologies we use may, or may be viewed as, having unintended biases or
discriminatory outcomes, exposing us to risks that we have discriminated against persons belonging to a protected class.
Any resulting investigation or litigation could have an adverse impact on our results of operations due to the associated
costs and any related fines, and could also have an adverse impact on our customer relationships.
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.
We will not succeed with our application and network security solutions unless the marketplace is confident that
we provide effective cybersecurity protection. We provide security solutions, and as a result, we have been, and continue
to be, an attractive target of cyber-attacks and other security incidents, which we have experienced from time to time, that
threaten the confidentiality, integrity and availability of our computer and information technology at our computer and
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information technology systems and network environment. We are subject to many different types of attacks, including,
among others, malware, viruses and attachments to e-mails, web application attacks, DDoS attacks, and other disruptive
activities of individuals or groups, all of which are designed to impede the performance of our solutions, penetrate our
network security or the security of our cloud platform or our internal systems, misappropriate proprietary and other
important data and personal information we process or maintain and/or cause other interruptions to our services. We and
certain of our third-party providers regularly experience cyberattacks and other incidents, and we expect such attacks and
incidents to continue in varying degrees. While to date no attacks or incidents have had a material impact on our operations
or results, we cannot guarantee that material incidents will not occur in the future. We expect cyberattacks to accelerate on
a global basis in both frequency and magnitude, as threat actors are increasingly sophisticated in using techniques and tools
– including AI – that can circumvent controls, evade detection and remove forensic evidence. As a result, we may be unable
to detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact on our
information technology systems, confidential information or business. Furthermore, third parties may attempt to illegally
induce employees or customers into disclosing our proprietary information or otherwise compromising the security of our
internal networks, systems or physical facilities in order to gain access to our data or our customers’ data. An actual or
perceived breach of security in our internal systems could adversely affect the integrity and market perception of our
solutions. Furthermore, the costs to eliminate or address security threats and vulnerabilities before or after a cyber-security
incident and any resulting regulatory or litigation actions could be significant.
We rely on third-party service providers to supply physical hosting, cloud environments, and specific support
technologies in order to deliver and support our security solutions, in addition to internal functions, such as human
resources, finance, and electronic communications, all of which are designed to enable us to conduct, monitor, and/or
protect our business, operations, systems, and data assets. Such third-party service providers have from time to time been
subject to, and continue to be subject to, cyber-attacks, malicious actors, and other security incidents. While we periodically
evaluate the internal security posture of each third-party service provider to determine their level of compliance, we may
not be able to detect any breach in the first instance it occurs. These risks may impact the integrity and availability of our
solutions and may expose us to legal and reputational liability.
Any significant system failure, accident, attack or security breach could have a material adverse effect on our
business, financial condition and results of operations. Remediation efforts or system redundancy or other continuity
measures may be ineffective or inadequate and could result in interruptions, delays or cessation of service and loss of
existing or potential customers. There can be no assurance that limitation of liability, indemnification or other protective
provisions in our contracts would be applicable, enforceable, or adequate in connection with a security breach, or would
otherwise protect us from any such liabilities or damages with respect to any particular litigation (including class actions),
reputational impacts, and the loss of partners, collaborators and customers. Additionally, our professional, product, and
cyber liability insurance coverages may only cover certain liabilities in connection with a security breach or other security
incident and may not adequately cover all liabilities actually incurred, and we cannot assure you that insurance will continue
to be available to us on commercially reasonable terms, if at all, or that any insurer will not deny coverage as to any future
claim.
In addition, any such security breach could disrupt or impair our ability to operate our business, including our
ability to provide maintenance and support services to our customers. If this happens, our revenues could decline and our
reputation and business could suffer.
Outages, interruptions, or delays in hosting services could impair the delivery of our cloud-based security
services and harm our business.
We offer infrastructure that supports our DDoS Protection services, web application firewall (WAF) and bot
management cloud-based services. In addition, we provide other services through the cloud, such as Content Delivery
Network (CDN). Despite precautions taken within our own internal network and at these third-party facilities, the
occurrence of a natural disaster or an act of terrorism or other unanticipated problems could result in lengthy interruptions
in our services.
The cloud-based security services that we provide are operated from a network of third-party facilities that host
the software and systems that operate these security services. Any damage to, failure of, or significant disruptions (for
example, due to ransomware) to, our internal systems or systems at third-party hosting facilities could result in outages or
interruptions in our cloud-based services. Outages or interruptions in our cloud-based security services, whether as a result
of impacts to our or our third-party hosting facilities or otherwise, may cause our customers to experience cyber-attacks
and to believe that our cloud-based security services are unreliable, cause us to issue credits or pay penalties or damages,
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cause customers to terminate their subscriptions, and adversely affect our reputation and renewal rates and our ability to
attract new customers, ultimately harming our business and results of operations.
Our products must interoperate with operating systems, software applications and hardware that are
developed by others and if we are unable to devote the necessary resources to ensure that our products interoperate
with such software and hardware, we may fail to increase, or we may lose market share and we may experience a
weakening demand for our products.
Our products must interoperate with our customers’ existing infrastructure, including their networks, servers,
software and operating systems, which may be manufactured by a wide variety of vendors and original equipment
manufacturers. As a result, when problems occur in a network, it may be difficult to identify the source of the problem.
The occurrence of software or hardware problems, whether caused by our products or another vendor’s products, may result
in the delay or loss of market acceptance of our products. In addition, when new or updated versions of our end-customers’
software operating systems or applications are introduced, we must sometimes develop updated versions of our software
so that our products will interoperate properly. We may not accomplish these development efforts quickly, cost-effectively
or at all. These development efforts require capital investment and the devotion of engineering resources. If we fail to
maintain compatibility with these applications, our end-customers may not be able to adequately utilize our products, and
we may, among other consequences, fail to increase, or we may lose market share and experience a weakening in demand
for our products, which would adversely affect our business, operating results and financial condition.
Our global operations may expose us to additional risks.
We currently offer our solutions in over 80 countries. For the years ended December 31, 2024 and 2023, our sales
outside North, Central and South America represented approximately 57% and 60%, respectively, of our total sales. We
also rely on third-party service providers around the world to supply physical hosting and cloud environments in order to
deliver and support our cloud-based services. Our global business operations involve varying degrees of risk and
uncertainty inherent in doing business in so many different jurisdictions. Such risks include, among others: difficulties and
costs of staffing and managing foreign operations; the possibility of unfavorable circumstances and additional compliance
costs arising from host country laws or regulations, including unexpected changes in the interpretations thereof and reduced
protection for intellectual property rights in some countries; partial or total expropriation; export duties and quotas; local
tax exposure; economic or political instability, including as a result of insurrection, war, natural disasters, and major
environmental, climate or public health concerns, such as the COVID-19 pandemic; differences in business practices;
recessionary environments in multiple foreign markets; and damage to, or failure of, systems at third-party hosting facilities
around the word resulting in outages or interruptions in our cloud-based services. We cannot be certain that the foregoing
factors will not have a material adverse effect on our future revenues and, as a result, on our business, operating results,
and financial condition.
We have incurred net losses in the past and may incur losses in the future.
Although we reported net income in 2024, we incurred net losses during the years 2023 and 2022. Our ability to
maintain or increase profitability in the future depends in part on the following factors: the economic health of the global
economy, including geopolitical tensions; record levels of inflation and rising interest rates or a period of elevated interest
rates; impacts from tariffs or other trade restrictions; the rate of growth of, and changes in technology trends in our market
and other industries in which we currently or may in the future operate; our ability to develop and manufacture new products
and technologies and deliver new solutions in a timely manner; the competitive position of our products and services; the
continued acceptance of our solutions by our customers and in the industries that we serve; and our ability to manage
expenses. In the future, it may be necessary to undertake cost reduction initiatives to be profitable, which could lead to a
deterioration of our competitive position. Any difficulties that we encounter as we reduce our costs could negatively impact
our results of operations and cash flows. Our revenues may not increase or may grow at a lower rate than we have
experienced in the past several years or may even decline, which would negatively impact our results of operations and
cash flows. We cannot assure you that we will continue to be profitable.
We may increase our operating expenses in future periods. Our decision to increase operating expenses and the
scope of such increases depends upon several factors, including the market situation and the effectiveness of our past
expenditures. We may continue to make additional expenditures in anticipation of generating higher revenues, which we
may not realize, if at all, until sometime in the future. This could cause reductions in our profitability or lead to losses.
Additionally, a failure of any acquisition or product development initiative to produce increased revenues could have a
material adverse effect on our operations and profitability.
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A slowdown in the growth of the cybersecurity and application delivery solutions market would reduce our
addressable market and solutions sales.
The cybersecurity and application delivery market in which we operate is rapidly evolving, and we cannot assure
you that it will continue to develop and grow. In addition, we cannot assure you that our solutions and technology will keep
pace with the changes to this market. Market acceptance of cybersecurity and application delivery solutions may be
inhibited by, among other factors, a lack of anticipated congestion and strain on existing network infrastructures and the
availability of alternative solutions. If demand for cybersecurity and application delivery solutions does not continue to
grow, or grows at a slower pace than expected, we may not be able to sell enough of our solutions to maintain or increase
our profitability.
If the market for our cloud-based solutions does not continue to develop and grow, we may incur capital
and operating losses.
As we continue to expand our cloud-based solution offerings, our investments, both capital and operational, in our
cloud business increase. We cannot assure you that sales of our cloud-based solutions will continue to develop and grow.
In addition, we cannot assure you that our services and technology will keep pace with the changes in this market.
Specifically, the emergence of alternative solutions, such as those offered by Amazon Web Services, Inc. (AWS), Microsoft
Azure or Google’s public cloud, may negatively affect sales of our solutions. We recognize a significant portion of revenue
from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not
immediately reflected in full in our results of operations.
Our solutions may have long sales cycles, which may reduce the predictability of our financial performance.
Our solutions are technologically complex and are typically intended for use in applications that may be critical
to the business of our customers. As a result, our pre-sales process can be subject to delays associated with customers’
budgetary constraints and lengthy approval and procurement processes. The sales cycles of our solutions to new customers
can last for as long as 12 months (and in some cases even longer, for example, with carrier customers) from initial
presentation to sale. Long sales cycles result in a delay to our generation of revenue. Long sales cycles also subject us to
risks not usually encountered in short sales cycles, including our customers’ budgetary constraints and internal acceptance
reviews and processes prior to purchase. In addition, orders expected in one quarter could shift to another because of the
timing of our customers’ procurement decisions. Furthermore, customers may defer orders in anticipation of new solutions
or product enhancements introduced by us or by our competitors. These factors complicate our planning processes and
reduce the predictability of our financial performance.
We may pursue acquisitions or other investments that could disrupt our business and harm our financial
condition.
As part of our business strategy, we may invest in or acquire complimentary businesses, technologies or assets or
enter into joint ventures or other strategic relationships with third parties. Past acquisitions have caused, and future
acquisitions may cause, us to assume liabilities, incur acquisition-related costs, incur amortization expenses or realize
write-offs on assets no longer being used or phased out. In addition, the future valuation of these acquisitions may decrease
from the market price paid by us, which could result in the impairment of our goodwill and other intangible assets associated
with the relevant acquired assets. Moreover, our operation of any acquired or merged businesses, technologies or assets
could involve numerous risks, including:
•
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.
21
We cannot be certain that any past or future acquisitions or mergers will be successful. If the operation of the
business of any future acquisitions or mergers disrupts our operations, our results of operations may be adversely affected,
and even if we successfully integrate the acquired business with our own, we may not receive the intended benefits of the
acquisition. In addition, our pursuit of potential acquisitions may divert our management’s attention from our core business
and require considerable cash outlays at the expense of our existing operations, whether or not such transactions are
consummated. A failure of any acquisitions or product developments to produce increased revenues could have a material
adverse effect on our operations and profitability.
Our business in countries with a history of corruption and transactions with foreign governments
increases the risks associated with our international activities.
As we operate and sell internationally, we are subject to the Foreign Corrupt Practices Act of 1977, as amended
(the “FCPA”), the U.K. Bribery Act of 2010 (the “UK Bribery Act”) and other laws that prohibit improper payments or
offers of payments to foreign governments and their officials and political parties for the purpose of obtaining or retaining
business. We have operations, deal with and make sales to governmental customers in countries known to experience
corruption, particularly certain emerging countries in Eastern Europe, South and Central America, East Asia, Africa and
the Middle East. Our activities in these countries create the risk of unauthorized payments or offers of payments by one of
our employees, consultants, channel partners or sales agents that could be in violation of various anti-corruption laws, even
though these parties may not be under our control. While we have implemented safeguards to prevent these practices by
our employees, consultants, channel partners and sales agents, our existing safeguards and any future improvements may
prove to be less than effective, and our employees, consultants, channel partners or sales agents may engage in conduct for
which we might be held responsible. Violations of the FCPA, the UK Bribery Act or other anti-corruption laws may result
in severe criminal or civil sanctions, including suspension or debarment from government contracting, and we may be
subject to other liabilities, which could negatively affect our business, operating results, and financial condition.
Currency exchange rates and fluctuations of exchange rates could have a material adverse effect on our
results of operations.
We are impacted by exchange rates and fluctuations thereof in a number of ways, including:
•
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.
Not all of our potential exposure to the effect of fluctuations in foreign currency exchange rates on our financial
condition and results of operations is covered by the foreign currency hedging transactions we engage in from time to time.
Furthermore, there can be no assurance that any such hedging transactions will materially reduce the effect of fluctuations
in foreign currency exchange rates on such results. For a further discussion of the impact on currency exchange rates on
our business, see Item 11 “Quantitative and Qualitative Disclosures About Market Risk.”
Undetected defects and errors may increase our costs and impair the market acceptance of our products.
Our products have occasionally contained, and may in the future contain, undetected defects or errors, especially
when first introduced or when new versions are released, due to defects or errors that we fail to detect, including in
components supplied to us by third parties. These defects or errors may be found after the commencement of commercial
shipments. In addition, because our customers integrate our products into their networks with products from other vendors,
it may be difficult to identify the product that has caused the problem in the network. Regardless of the source of these
defects or errors, we will then need to divert the attention of our engineering personnel from our product development
22
efforts to detect and correct these errors and defects. We cannot assure you whether we will incur significant warranty or
repair costs, be subject to liability claims for material damages related to product errors or defects or experience any material
lags or delays as a result thereof in the future. Any insurance coverage that we maintain may also not provide sufficient
protection should a claim be asserted. Moreover, the occurrence of errors and defects, whether caused by our products or
the components supplied by another vendor, may result in significant customer relations problems and injure our reputation,
thereby impairing the market acceptance of our products.
Our business and operating results could suffer if third parties infringe upon our proprietary technology.
Our success depends, in part, upon the protection of our proprietary software installed in our products, our trade
secrets and trademarks. We seek to protect our intellectual property rights through a combination of trademark and patent
law, trade secret protection, confidentiality agreements, and other contractual arrangements with our employees, affiliates,
distributors, and others. In the United States and several other countries, we have registered or acquired trademarks. In
addition, we have registered patents in the U.S. and other jurisdictions and have pending patent applications and provisional
patents in connection with several of our products’ features.
The protective steps we have taken may be inadequate to deter infringement upon our intellectual property rights
or misappropriation of our proprietary information. We may be unable to detect the unauthorized use of our proprietary
technology or take appropriate steps to enforce our intellectual property rights. Effective trademark, patent and trade secret
protection may not be available in every country in which we offer, or intend to offer, our products. In addition, our
competitors may independently develop technologies that are substantially equivalent or superior to our technology. Any
licenses for intellectual property that might be required for our services or products may not be available on reasonable
terms. Failure to adequately protect our intellectual property rights could devalue our proprietary content, impair our ability
to compete effectively, and eventually harm our operating results. Furthermore, defending our intellectual property rights,
either by way of initiating intellectual property litigation or defending such, could result in the expenditure of significant
financial and managerial resources. Moreover, any adverse outcome of litigation proceedings could impact the value of our
proprietary technology and have additional significant financial impacts, which may harm our operating results.
Our products may infringe on the intellectual property rights of others.
Third parties may assert claims that we have violated a patent, trademark, copyright or other proprietary
intellectual property right belonging to them. As is characteristic of our industry, there can be no assurance that our products
do not or will not infringe the proprietary rights of third parties, that third parties will not claim infringement by us with
respect to patents or other proprietary rights, or that we would prevail in any such proceedings. We have received in the
past, and may receive in the future, communications asserting that the technology used in some of our products requires
third-party licenses. Any infringement claims, whether or not meritorious, could result in significant costly litigation or
arbitration and divert the attention of technical and management personnel. Any adverse outcome in litigation alleging
infringement could require us to develop non-infringing technology or enter into royalty or licensing agreements. If, in
such situations, we are unable to obtain licenses on acceptable terms, we may be prevented from manufacturing or selling
products that infringe such intellectual property of a third party. An unfavorable outcome or settlement regarding one or
more of these matters could have a material adverse effect on our business, reputation and operating results.
Laws, regulations and industry standards affecting our business are evolving, and unfavorable changes
could harm our business.
Laws, regulations and industry standards that apply to our business are becoming more prevalent and constantly
evolving, particularly in the area of data privacy and cybersecurity. We may be impacted by changes in privacy-related and
cybersecurity-related regulations governing the collection, use, retention, sharing and security of personal data that we
collect, utilize, or otherwise process from our customers and/or visitors to their websites and others. Complying with a
diverse range of privacy and cybersecurity requirements could cause us to incur substantial costs or require us to change
our business practices in a manner adverse to our business. Any failure, or perceived failure, by us to comply with any
privacy or cybersecurity-related laws, government regulations or directives, or industry self-regulatory principles could
result in damage to our reputation or proceedings or actions against us by governmental entities or others, which could
potentially have an adverse effect on our business.
For example, in the European Economic Area (EEA), we are subject to the General Data Protection Regulation
2016/679 (GDPR) and in the United Kingdom we are subject to the United Kingdom data protection regime consisting
primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018 (UK DP Laws), in each case
in relation to our collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living
individual (personal data). The GDPR, and national implementing legislation in EEA member states and the United
23
Kingdom, impose a strict data protection compliance regime. GDPR and UK DP Laws can expose us to enforcement actions
and investigations by regulatory authorities and potentially result in regulatory penalties and significant legal liability, if
our information technology security efforts fail and if we fail to disclose any material cybersecurity incident in an adequate
and timely manner. Accordingly, a data security breach or privacy violation that leads to unauthorized access to, disclosure
or modification of personal information, that prevents access to personal information or materially compromises the
privacy, security, or confidentiality of the personal information, could result in fines, increased costs or loss of revenue.
Our compliance with GDPR and UK DP Laws, as well as other data privacy and cybersecurity laws around the world,
evolving regulations of cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations,
has required and will continue to require us to invest significant resources in compliance and compliance-related areas.
Furthermore, laws, regulations and industry standards are subject to constant and, at times, drastic changes that,
particularly in the case of industry standards, may arrive with little or no notice, and these could either help or hurt the
demand for our solutions. If we are unable to adapt our solutions to changing laws, regulations and industry standards in a
timely manner, or if our solutions fail to assist our customers with their compliance initiatives, our customers may lose
confidence in our solutions and could switch to competing solutions. Recent legal developments in Europe have created
complexity and uncertainty regarding transfers of personal data from the EEA and the United Kingdom to the United States.
These recent developments may require us to review and amend the legal mechanisms by which we make and/or receive
personal data transfers to or in the U.S. Such legal developments also cause us to look at our operations and review our
data flows to ensure we can continue to meet clients’ increasing requests for data to remain in-country or in-region. At the
same time, if, contrary to this trend, regulations and standards related to cybersecurity are changed in a manner that makes
them less onerous, our customers may view government and industry regulatory compliance as less critical to their
businesses, and our customers may purchase fewer of our solutions, or none at all. In either case, our sales and financial
results would be negatively impacted and could be materially adversely affected.
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.
Some of our products utilize open source technologies. Some open source software licenses require users who
distribute or make available as a service open source software as part of their own software product to publicly disclose all
or part of the source code of the users’ software product or to make available any derivative works of the open source code
on unfavorable terms or at no cost. We cannot be sure that all open source software is submitted for approval prior to use
in our products and while we scan the open-source software that we use in our products and patch discovered vulnerabilities,
we have no assurance that they will be free from vulnerabilities or malicious code. The use of open-source software in our
solutions may expose us, and our customers using our solutions, to additional vulnerabilities and security breaches, which
may result in significant adverse impacts to us and our customers. In addition, open source license terms may be ambiguous
and many of the risks associated with use of open source software cannot be eliminated, and could, if not properly
addressed, negatively affect our business. We may face ownership claims from third parties over, or seeking to enforce the
license terms applicable to, such open source software, including by demanding the release of the open source software,
derivative works or our proprietary source code. Any such requirement to disclose our source code or other confidential
information related to our products could materially and adversely affect our competitive position and may adversely impact
our business, results of operations and financial condition. In addition, if the license terms for the open source code change,
we may be forced to re-engineer our software or incur additional costs.
In addition, some of our solutions include other software or intellectual property licensed from third parties. This
exposes us to risks over which we may have little or no control. There can be no assurance that the licenses from such third-
party licensors will continue to be available to us on acceptable terms, if at all. In addition, while we believe we are
compliant with the terms of our third-party licenses, such licensors may still assert that we are in breach of the terms of a
license, which could give such licensors the right to terminate a license or seek damages from us, or both. Our inability to
maintain such licenses or the need to engage in litigation regarding these matters, could result in delays in releases of new
products, and could otherwise disrupt our business, unless and until equivalent technology can be identified, licensed, or
developed at substantially the same costs to us.
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The amount of intangible assets and goodwill on our books may in the future lead to significant impairment
charges.
The amount of goodwill and intangible assets on our consolidated balance sheets was, as of December 31, 2024,
approximately $79.8 million, compared to $83.7 million as of December 31, 2023. We regularly review our intangible and
tangible assets, including goodwill, for impairment. Goodwill is subject to impairment review at least annually, and other
intangible assets are reviewed for impairment when there is an indication that impairment may have occurred. Impairment
testing has led to, and 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.
We operate our business in various countries, and we attempt to utilize an efficient operating model to optimize
our tax payments based on the laws in the countries in which we operate. This can cause disputes between us and various
tax authorities in the countries in which we operate, whether due to tax positions that we have taken in various tax returns
we have filed or due to determinations we have made not to file tax returns in certain jurisdictions. In particular, not all of
our tax returns are final and may be subject to further audit and assessment by applicable tax authorities. There can be no
assurance that the applicable tax authorities will accept our tax positions, and, if they do not, we may be required to pay
additional taxes. In the past few years, certain tax authorities who have audited our tax returns have rejected our tax
positions, and we cannot be sure that our positions will be accepted, and we may end up paying additional taxes, whether
as a result of litigation, if instituted, or settlement negotiations. Our reserves, which are based on various assumptions and
estimates, may prove to be insufficient and as such, our future results may be adversely affected.
In recent years, we have seen changes in tax laws resulting in an increase in applicable tax rates, especially
increased liabilities of corporations and limitations on the ability to benefit from strategic tax planning, with these laws
particularly focused on international corporations. Such legislative changes in one or more jurisdictions in which we operate
may have implications on our tax liability and may have a material adverse effect on our results of operations and financial
condition.
Moreover, in 2015, the Organization for Economic Co-operation and Development (“OECD”) released various
reports under its Base Erosion and Profit Shifting (“BEPS”) action plan to reform international tax systems and prevent tax
avoidance and aggressive tax planning. These actions aim to standardize and modernize global corporate tax policy,
including cross-border taxes, transfer-pricing documentation rules and nexus-based tax incentive practices which in part
are focused on challenges arising from the digitalization of the economy. The reports have a very broad scope including,
but not limited to, neutralizing the effects of hybrid mismatch arrangements, limiting base erosion involving interest
deductions and other financial payments, countering harmful tax practices, preventing the granting of treaty benefits in
inappropriate circumstances and imposing mandatory disclosure rules. It is the responsibility of OECD members to
consider how the BEPS recommendations should be reflected in their national legislation. Many countries are beginning
to implement legislation and other guidance to align their international tax rules with the OECD’s BEPS recommendations,
for example, by signing up to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS
(“MLI”) which currently has been signed by over 100 jurisdictions, including Israel, who deposited its instrument of
ratification to implement the MLI on September 13, 2018.
The MLI implements some of the measures that the BEPS initiative proposes to be transposed into existing treaties
of participating states. Such measures include the inclusion in tax treaties of one, or both, of a “limitation-on-benefit”
(“LOB”) rule and a “principal purposes test” (“PPT”) rule. The application of the LOB rule or the PPT rule could deny the
availability of tax treaty benefits (such as a reduced rate of withholding tax) under tax treaties. In addition, the OECD has
been working on proposals, commonly referred to as “BEPS 2.0,” which would make important changes to the international
tax system, by allocating taxing rights in respect of certain profits of multinational enterprises above a fixed profit margin to
the jurisdictions within which they carry on business (subject to threshold rules) and imposing a minimum effective tax
rate on certain multinational enterprises. The rules for a global minimum tax have been implemented in a number of
jurisdictions with effect from 2024. There have been and are likely to be significant changes in the tax legislation of various
OECD jurisdictions during the period of implementation of BEPS or BEPS 2.0. While certain BEPS initiatives are in the
final stages of approval and/or implementation, we cannot comprehensively predict their outcome or what impact they will
have on our tax obligations and operations or our financial statements, up to their final enactment in national and
international legislation. Such legislative initiatives may materially and adversely affect our plans to expand internationally
and may negatively impact our financial condition, tax liability or results of operations and could increase our
administrative efforts.
25
The enactment of legislation changing the United States’ taxation of international business activities could
materially impact our financial condition and results of operations.
Due to the expansion of our international business activities, any changes in the U.S. taxation of such activities
may increase our worldwide effective tax rate, and adversely affect our financial condition and results of operations. For
example, the recent Inflation Reduction Act enacted in the United States introduced, among other changes, a 15% corporate
minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States
corporations (which the U.S. Treasury indicated may also apply to certain stock redemptions by a foreign corporation
funded by certain United States affiliates). Significant changes or developments in U.S. laws and policies, such as laws and
policies surrounding international trade, foreign affairs, manufacturing and development and investment in the territories
and countries where we or our customers operate, can materially adversely affect our business, results of operations, and
financial condition. The U.S. government has imposed (in certain cases, subject to deferral) significant tariffs on imports
from certain jurisdictions and indicated the likely imposition of or significant increases in tariffs on goods imported into
the United States from many other jurisdictions in the future, which could lead to corresponding punitive actions by the
countries with which the U.S. trades. Further the U.S. presidential administration has indicated the intent to propose
significant changes to the U.S. tax system. Many aspects of these potential proposals are unclear or undeveloped and we
are unable to predict which, if any, changes to the U.S. tax system will be enacted into law, and what effects any enacted
legislation might have on our tax liabilities. In addition, the U.S. presidential administration has indicated that the United
States may impose retaliatory measures with respect to jurisdictions that have, or are likely to, put in place tax rules that
are extraterritorial or disproportionately affect American companies. The likelihood of these changes being enacted or
implemented is unclear. Further, other foreign governments may enact tax laws in response to any changes in the U.S.
taxation of international business activities that could result in further changes to global taxation and materially affect our
financial condition and results of operations. We are currently unable to predict whether these or other changes will occur
and, if so, the ultimate impact on our business. To the extent that such changes have a negative impact on us, our suppliers
or our consumers, including as a result of related uncertainty, these changes may materially and adversely impact our
business, financial condition, results of operations and cash flow.
If we are unable to realize our investment objectives, our financial condition and results of operations may
be adversely affected.
We maintain substantial balances of cash and liquid investments as strategic assets for purposes of acquisitions
and general corporate purposes, including share repurchases. Our cash, cash equivalents, short- and long-term bank deposits
and marketable securities totaled $419.7 million as of December 31, 2024, compared to $363.7 million as of December 31,
2023. The performance of the capital markets is the primary factor that affects the values of funds that are held in marketable
securities. These assets are subject to market fluctuations and various developments, including, without limitation, rating
agency downgrades that may impair their value. We expect that market conditions will continue to fluctuate and that the
fair value of our investments may be affected accordingly, including, without limitation, by rising levels of inflation and
interest rates or a period of elevated interest rates.
Financial income is a component of our net income and the outlook for our financial income is dependent, in part,
on the future direction of interest rates, exchange rates, the amount of any share repurchases or acquisitions that we make
and the amount of cash flows from operations that are available for investment. For example, for the years ended December
31, 2024 and 2023, we had $16.6 million and $13.9 million, respectively, of net financial income, that was primarily derived
from changes in foreign currency exchange rates and the value of our investments and interest income from our bank
deposits. The performance of the capital markets affects the values of our funds that are held in marketable securities. These
assets are subject to market fluctuations and will yield uncertain returns. Due to certain market developments, including
investments’ rating downgrades, the fair value of these investments may decline. If market conditions continue to fluctuate,
the fair value of our investments may be impacted accordingly. Although our investment guidelines stress diversification
and capital preservation, our investments are subject to a variety of risks, including risks related to general economic
conditions, interest rate fluctuations and market volatility.
In particular, our investment portfolios include a significant amount of interest rate-sensitive instruments, such as
bonds, which, in addition to the inherent risk associated with the debt, may be adversely affected by changes in interest
rates. Changes in interest rates and credit quality may also result in fluctuations in the income derived from, or the valuation
of, our fixed income securities. Interest rates are highly sensitive to many factors, including governmental monetary
policies, domestic and international economic and political conditions and other factors beyond our control. For example,
benchmark interest rates, such as the U.S. Federal Funds Rate, are currently relatively high, which is likely to significantly
impact our investment income. Increases in interest rates might decrease the value of our investments in fixed-income
securities. If increases in interest rates occur during periods when we sell investments to satisfy liquidity needs, we may
26
experience investment losses. Conversely, if interest rates decline, reinvested funds and our investment in bank deposits
will earn less than expected.
In terms of credit risk, our investment portfolio policy is “buy and hold” while minimizing credit risk by setting
maximum concentration limit per issuer and credit rating. Our investments consist primarily of government and corporate
bonds and bank deposits. Although we believe that we generally adhere to conservative investment guidelines, if turmoil
in the financial markets reoccurs in the future, it may result in impairments of the carrying value of our investment assets
since we classify our investments in marketable securities as available-for-sale. Changes in the fair value of investments
classified as available-for-sale are not recognized as income (loss) during the period, but rather are recognized as a separate
component of equity until realized. Realized losses in our investments portfolio may adversely affect our financial condition
and results. For example, if we had reported all the changes in the fair values of our investments into income (loss), our
reported net income would have increased by $1.4 million during the year ended December 31, 2024, and our net loss
would have decreased by $4.3 million during the year ended December 31, 2023. Any significant decline in our financial
income or the value of our investments as a result of continued high interest rates, deterioration in the credit worthiness of
the securities in which we have invested, general market conditions or other factors could have an adverse effect on our
results of operations and financial condition.
Complications with the design or implementation of our new ERP system, or major disruptions or
deficiencies of our other information technology systems, could adversely impact our business and operations.
We rely extensively on information systems and technology to manage our business and summarize operating
results. We are in the process of implementing a new cloud-based global enterprise resource planning (“ERP”) system,
which replaced our previous ERP system commencing in January 2025. The ERP system implementation process has
required, and will continue to require, the investment of significant personnel and financial resources. We may not be able
to successfully implement the ERP system without experiencing delays, increased costs and other difficulties. If we are
unable to successfully implement the new ERP system as planned, our financial condition, results of operations and cash
flows could be negatively impacted. Additionally, if we do not effectively implement the ERP system as planned or the
ERP system does not operate as intended, our reporting timelines might be delayed, the effectiveness of our internal control
over financial reporting could be adversely affected, and/or our ability to assess those controls adequately could be delayed.
In addition, any major disruptions or deficiencies in the design and implementation of our other information technology
systems, particularly those that impact our operations, could adversely affect our ability to run our business.
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.
The efficient operation of our businesses depends on our computer hardware and software systems. For instance,
we rely on information technology systems, including our new ERP system, to process customer orders and invoices,
manage accounts receivable collections, manage accounts payable processes, track costs and operations, calculate revenues
and expenses, monitor client relationships and accumulate financial results. Despite our implementation of industry-
accepted security measures and technology, our information technology systems are vulnerable to, and have been in the
past subject to, computer viruses, attempts to insert malicious codes, unauthorized access, phishing efforts, denial-of-
service attacks and other cyber-attacks, and we expect to be subject to similar attacks in the future as such attacks become
more sophisticated and frequent. A breach of our information technology systems could result in decreased performance,
operational difficulties and increased costs, any of which could have a material adverse effect on our business and operating
results.
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.
As a result of Russia’s military conflict in Ukraine, governmental authorities in the United States, the European
Union and the United Kingdom, among others, launched an expansion of coordinated sanctions and export control
measures, including, for example:
•
blocking sanctions on some of the largest state-owned and private Russian financial institutions (and their
subsequent removal from SWIFT);
27
•
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 persons operating in the technology sector of the Russian economy, including
companies providing or receiving goods or services related to the Russian technology sector, and
financial institutions conducting or facilitating significant transactions involving such parties;
•
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.
As the conflict in Ukraine continues, there can be no certainty regarding whether the governmental authorities in
the United States, the European Union, the United Kingdom or other counties will impose additional sanctions, export
controls or other measures targeting Russia, Belarus or other territories. Furthermore, in retaliation against new
international sanctions and as part of measures to stabilize and support the volatile Russian financial and currency markets,
the Russian authorities also imposed significant currency control measures aimed at restricting the outflow of foreign
28
currency and capital from Russia, imposed various restrictions on transacting with non-Russian parties, banned exports of
various products and imposed other economic and financial restrictions.
Our business must be conducted in compliance with applicable economic and trade sanctions laws and regulations,
including those administered and enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the U.S.
Department of State, the U.S. Department of Commerce, the United Nations Security Council and other relevant
governmental authorities. We must be ready to comply with the existing and any other potential additional measures
imposed in connection with the conflict in Ukraine. The imposition of such measures could adversely impact our business,
including preventing us from performing existing contracts, recognizing revenue, pursuing new business opportunities or
receiving payment for products already supplied or services already performed with customers.
In each of 2024 and 2023, 3% of our total revenues were from sales to customers located in Russia. We
continuously review and monitor our contractual relationships with suppliers and customers to establish whether any of
them are the target of the applicable sanctions. In the event that we identify a party with which we have a business
relationship that is the target of applicable sanctions, we would immediately activate a legal analysis of what gives rise to
the business relationship, including any contract, to estimate the most appropriate course of action to comply with the
sanction regulations, together with the impact of a contractual termination according to the applicable law, and then proceed
as required by the regulatory authorities. However, given the range of possible outcomes, the full costs, burdens, and
limitations on our and our customer’s and business partners’ businesses are currently unknown and may become significant.
Furthermore, even if an entity is not formally subject to sanctions, customers and business partners of such entity
may decide to reevaluate or cancel projects with such entity for reputational or other reasons. As a result of the ongoing
conflict in Ukraine, many U.S. and other multi-national businesses across a variety of industries, including consumer goods
and retail, food, energy, finance, media and entertainment, tech, travel and logistics, manufacturing and others, have
indefinitely suspended their operations and paused all commercial activities in Russia and Belarus. Depending on the
extent and breadth of sanctions, export controls and other measures that may be imposed in connection with the conflict in
Ukraine, it is possible that our business, financial condition, and results of operations could be materially and adversely
affected.
Finally, any deterioration in relations between Taiwan and China could lead to additional sanctions or export
controls on China, on specific individuals or entities, or otherwise in the region which could impact our ability to sell to
certain of our customers, source components from China or other impacted countries, or otherwise negatively impact our
business.
Climate change may have an adverse impact on our business.
Global climate change may result in certain natural disasters occurring more frequently or with greater intensity,
such as earthquakes, droughts, wildfires, storms, sea-level rise, and flooding, and many believe that the risks related to
climate change are increasing in both impact and type of risk. While we do not believe there will be significant near-term
impacts to our business and operations due to climate change, long-term impacts remain unknown. These include
operational risks impacting, among other things, our supply chain, our personnel or electrical power availability from
climate changed-related weather events as well as business and regulatory risks. For example, regulatory risks include
changes in laws and regulations on climate change, which may increase our compliance costs and limit our ability to
operate. Similarly, evolving customer and other stakeholder expectations and regulatory requirements to reduce carbon
emissions could present a risk of loss of business if we are not able to meet those expectations or requirements.
Our disclosures and initiatives related to ESG matters expose us to numerous risks, including risks to our
reputation, business, financial performance and growth.
There has been increasing public focus by investors, customers, employees, policymakers, environmental activists,
the media and governmental and nongovernmental organizations, as well as other stakeholders, on a variety of ESG matters,
which may result in increased costs (including but not limited to increased costs related to compliance, stakeholder
engagement, and contracting), impact our reputation, or otherwise affect our business performance. As we identify ESG
topics for voluntary disclosure, we have expanded and, in the future, may continue to expand, our voluntary disclosures in
these areas. Statements about our ESG initiatives and goals, and progress against those goals, may be based on standards
for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions
that are subject to change in the future. As a result, we cannot guarantee that our approach will align with any particular
stakeholder’s expectations or preferences. If our ESG-related data, processes and reporting are incomplete or inaccurate,
or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our reputation, business, financial
performance and growth could be adversely affected. In addition, this emphasis on ESG matters has resulted and may result
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in the adoption of new laws and regulations, including new reporting requirements. If we fail to comply with new laws,
regulations or reporting requirements, our reputation and business could be adversely impacted.
Moreover, various stakeholders have different, and at times conflicting expectations. If we do not meet the
evolving and varied expectations of our stakeholders with respect to ESG-related matters, we could experience loss of
customers or contracts, reputational harm, or other negative impacts on our business and results of operations. In addition,
proponents and opponents of ESG matters are increasingly resorting to activism, including litigation, to advance their
perspectives, which will be costly for us to address.
We have in the past, and may in the future, become subject to litigation or claims arising in or outside the
ordinary course of business that could negatively affect our business operations and financial condition.
We have in the past, and may in the future, become subject to litigation or claims arising in or outside the ordinary
course of business that could negatively affect our business operations and financial condition, including securities class
actions and shareholder derivative actions, both of which are typically expensive to defend. Such claims and litigation
proceedings may be brought by third parties, including our competitors, advisors, service providers, partners or
collaborators, employees, shareholders, and governmental or regulatory bodies. Any claims and lawsuits, and the
disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention
and resources, and lead to attempts on the part of other parties to pursue similar claims. We may not be able to determine
the amount of any potential losses and other costs we may incur due to the inherent uncertainties of litigation and settlement
negotiations. In the event we are required or decide to pay amounts in connection with any claims or lawsuits, such amounts
could be significant and could have a material adverse impact on our liquidity, business, financial condition and results of
operations. In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could
materially affect our future operating results, our cash flows or both. Additionally, we may be unable to maintain directors’
and officers’ liability insurance at satisfactory rates or adequate coverage amounts and may incur significant increases in
insurance costs.
Risks Related to the Market for Our Ordinary Shares
The estate of the late Yehuda Zisapel, along with 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.
As of March 21, 2025, the estate of the late Yehuda Zisapel beneficially owned approximately 2.47% of our
outstanding ordinary shares, which is held in two equal parts by Roy Zisapel’s siblings (namely, Carmi Zisapel and Adi
Zisapel); Nava Zisapel beneficially owned approximately 6.79% of our outstanding ordinary shares; and their son, Roy
Zisapel (our President, Chief Executive Officer and a director), beneficially owned approximately 5.06% of our outstanding
ordinary shares (which includes 1/3 of our outstanding ordinary shares of the estate of the late Yehuda Zisapel) (see Items
6.E “Share Ownership” and 7.A “Major Shareholders”). As a result, if these shareholders act together, they could exert
significant influence on the election of our directors and on decisions by our shareholders on matters submitted to
shareholder vote, including mergers, consolidations and the sale of all or substantially all of our assets. This concentration
of ownership of our ordinary shares could delay or prevent proxy contests, mergers, tender offers, or other purchases of
our ordinary shares that might otherwise give our shareholders the opportunity to realize a premium over the then-prevailing
market price for our ordinary shares. This concentration of ownership may also adversely affect our share price.
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.
The provisions in our Articles of Association relating to the election of our directors in three staggered classes,
the submission of shareholder proposals for shareholder meetings and the quorum requirement for adjourned shareholder
meetings may have the effect of delaying or making an unsolicited acquisition of our Company more difficult. Israeli
corporate and tax laws, including the ability of our Board of Directors to adopt a shareholder rights plan without shareholder
approval, may also have the effect of delaying, preventing or making an acquisition of us more difficult. For example,
under the Companies Law, upon the request of a creditor of either party to a proposed merger, an Israeli court may delay
or prevent the merger if it concludes that there is a reasonable concern that, as a result of the merger, the surviving company
will be unable to satisfy the obligations of any of the parties to the merger. In addition, our Key Employee Share Incentive
Plan (1997), as amended, or the Share Incentive Plan, provides that, in the event of a “Hostile Takeover” (which is defined
to include, among others, an unsolicited acquisition of more than 20% of our outstanding shares), the vesting of all or a
portion of our outstanding equity awards will accelerate, unless otherwise determined by our Board of Directors (or a
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committee thereof). As a result, an acquisition of our Company that triggers the said acceleration will be more costly to a
potential acquirer. These provisions could cause our ordinary shares to trade at prices below the price for which third parties
might be willing to pay to gain control over us. Third parties who are otherwise willing to pay a premium over prevailing
market prices to gain control of us may be unwilling to do so because of these provisions.
Our share price has been volatile in the past and may be subject to volatility in the future.
The market price for our ordinary shares, as well as the prices of shares of other technology companies, has been
volatile. For example, during 2024, the lowest closing price of our share was $15.71, compared to the highest closing price
of our share of $24.52 during the same year. The volatility of our share price may have a negative impact on our financial
performance as a result of its negative impact on employee retention. Numerous factors, many of which are beyond our
control, may cause the market price and trading volume of our ordinary shares to fluctuate significantly and decrease
further, including:
•
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.
If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse
tax consequences.
Generally, if for any taxable year, after applying certain “look through” tax rules, (i) 75% or more of our gross
income is passive income, or (ii) at least 50% of the fair market value of our assets, averaged quarterly over our taxable
year, are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment
company, or PFIC, for U.S. federal income tax purposes. If we are classified as a PFIC, our U.S. shareholders could suffer
adverse U.S. tax consequences, including having gain realized on the sale of our ordinary shares treated as ordinary income,
as opposed to capital gain income, and having potentially punitive interest charges apply to such gain. Similar rules would
apply to certain “excess distributions” made with respect to our ordinary shares.
For our taxable year ended December 31, 2024, we do not believe that we should be classified as a PFIC. There
can be no assurance, however, that the IRS will not challenge this treatment, and it is possible that the IRS could attempt
to treat us as a PFIC for 2024 and prior taxable years. The tests for determining PFIC status are applied annually, and
require a factual determination that depends on, among other things, the composition of our income, assets and activities
in each taxable year, and can only be made annually after the close of each taxable year. Furthermore, the aggregate value
of our gross assets is likely to be determined in part by reference to the trading price of our ordinary shares, which could
fluctuate significantly. We have a substantial balance of cash and other liquid investments, which are passive assets for
purposes of the PFIC determination. Accordingly, if our market capitalization declines significantly, it may make our
classification as a PFIC more likely for the current or future taxable years. Accordingly, there can be no assurance that we
will not become a PFIC in future taxable years. U.S. shareholders should consult with their U.S. tax advisors with respect
to the U.S. tax consequences of investing in our ordinary shares. For a more detailed discussion of the rules relating to
PFICs and related tax consequences, please see the section of this annual report titled Item 10.E “Taxation—United States
Federal Income Tax Considerations.”
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.
Depending upon the aggregate value and voting power of our ordinary shares that U.S. persons are treated as
owning (directly, indirectly, or constructively), we could be treated as a controlled foreign corporation (a “CFC”).
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Additionally, because our group consists of one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries will be
treated as CFCs, regardless of whether or not we are treated as a CFC. If a U.S. person is treated as owning (directly,
indirectly or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated
as a “U.S. shareholder” with respect to each CFC in our group (if any), which may subject such person to adverse U.S.
federal income tax consequences. Specifically, a U.S. shareholder of a CFC may be required to annually report and include
in its U.S. taxable income its pro rata share of each CFC’s “Subpart F income,” “global intangible low-taxed income” and
investments in U.S. property, whether or not we make any distributions of profits or income of a CFC to such U.S.
shareholder. If you are treated as a U.S. shareholder of a CFC, failure to comply with these reporting obligations may
subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal
income tax return for the year for which reporting was due from starting. Additionally, a U.S. shareholder that is an
individual would generally be denied certain tax deductions or indirect foreign tax credits that may otherwise be allowable
to a U.S. shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist investors in
determining whether we or any of our non-U.S. subsidiaries are treated as CFCs or whether any investor is treated as a U.S.
shareholder with respect to any of such CFC, nor do we expect to furnish to any U.S. shareholders information that may be
necessary to comply with the aforementioned reporting and tax paying obligations. The United States Internal Revenue
Service provided limited guidance on situations in which investors may rely on publicly available alternative information
to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. U.S. investors should
consult their advisors regarding the potential application of these rules to their investment in our ordinary shares.
Risks Related to Operations in Israel
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.
We are incorporated under Israeli law, and our principal offices and manufacturing and research and development
facilities are located in Israel. In addition, the majority of our key employees, officers and directors are residents of
Israel. Accordingly, political, economic, and security conditions in Israel and the surrounding region could directly affect
our business, and our operations and financial results could be adversely affected in the event of any political instability,
terrorism, armed conflicts, or other hostilities in the Middle East or Israel.
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from Gaza and conducted a series of
attacks on civilian and military targets. In response, Israel’s security cabinet declared war against Hamas, and later against
Hezbollah. Hostilities subsequently escalated between Israel and a number of its other neighbors, including conflicts with
Hezbollah along Israel’s northern border with Lebanon, with Iran and with the Houthi movement in Yemen, who both
launched drone and missile attacks on military and civilian targets within Israel. In addition, the Houthi movement has
disrupted international commerce by launching a number of attacks on commercial vessels traversing the Gulf of Aden and
the Red Sea and, following the fall of the Assad regime in Syria, Israel has conducted limited military operations targeting
Syrian and Iranian military assets and infrastructure linked to Hezbollah and other Iranian-supported groups. While a
ceasefire between Israel and Lebanon (with respect to Hezbollah) was recently announced, the recently announced ceasefire
between Israel with Hamas did not last and hostilities could also break out in Lebanon, and it is possible that other ongoing
conflicts in the region, including cyber attacks, will eventually escalate into a greater regional conflict, including the
potential for war between Israel and Iran, and that other countries and non-state organizations will join or escalate their
involvement in such hostilities. Circumstances are evolving, and the intensity and duration of any regional hostilities is
difficult to predict, as are their impacts on our business and operations. Prolonged and/or heightened instability could
adversely impact our business, financial condition and results of operations in the future.
Furthermore, some of our officers and employees are, unless exempt, obligated to perform annual military reserve
duty, depending upon their age and prior position in the army. They may also be subject to being called to active duty at
any time under emergency circumstances. For example, during 2024, in connection with the October 2023 war,
approximately 3% of our total workforce was called to perform immediate military service, and additional employees may
be called as these armed conflicts progress. Such employees may be absent for an extended period of time. Our operations
could be disrupted by the absence, for a significant period, of one or more of these officers or other key employees due to
military service, and any disruption in our operations could harm our business.
Our commercial insurance does not cover losses that may occur as a result of events associated with the security
situation in the Middle East, including the October 2023 war, such as damages to our facilities resulting in the disruption
of our operations. Although the Israeli government currently covers the reinstatement value of direct damages that are
caused by terrorist attacks or acts of war, we cannot be assured that this government coverage will be maintained or will
be adequate in the event we submit a claim. We could be adversely affected by any major hostilities, including acts of
32
terrorism as well as cyber-attacks or any other hostilities involving or threatening Israel, the interruption or curtailment of
trade between Israel and its trading partners, a significant downturn in the economic or financial condition of Israel, or a
significant increase in the rate of inflation. For example, in September 2024, in connection with the October 2023 war,
Moody’s Investors Service (Moody’s) downgraded the Government of Israel’s foreign-currency and local-currency issuer
ratings to BAA1 from A2, and in October 2024, S&P global downgraded Israel long-term ratings to A from A+. Other
global rating agencies may take similar actions. Such downgrades might adversely affect the macroeconomic conditions in
which we operate and also potentially deter foreign investment in Israel or Israeli companies, which may, among other
things, hinder our ability to raise additional funds, if deemed necessary by our management and Board of Directors.
Furthermore, some neighboring countries, as well as certain companies, organizations and movements, continue
to participate in a boycott of Israeli firms and others doing business with Israel or with Israeli companies. In the past
several years, and with greater intensity commencing with the October 2023 war, there have been increased efforts by
activists, influenced by actions of international judicial bodies, to cause companies and consumers to boycott Israeli goods,
services, and academic research or restrict business with Israel, which could affect business operations. Similarly, Israeli
companies are limited in conducting business with entities from several countries. Restrictive laws, policies or practices
directed towards Israel or Israeli businesses could have an adverse impact on our operating results, financial condition or
the expansion of our business.
Finally, prior to the October 2023 war, the Israeli government pursued changes to Israel’s judicial system and has
recently renewed its efforts to effect such changes. In response to the foregoing developments, certain individuals,
organizations, and institutions, both within and outside of Israel, voiced concerns that such proposed changes, if adopted,
may negatively impact the business environment in Israel, including by causing a downgrade to Israel’s sovereign credit
rating and Israel’s international standing. Such proposed changes may also lead to political instability or civil unrest. If
such changes to Israel’s judicial system are pursued by the government and approved by the parliament, this may have an
adverse effect on our business, results of operations, and ability to raise additional funds, if deemed necessary by our
management and Board of Directors.
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 in the past benefited, and currently benefit, from certain government programs and tax benefits in Israel,
including in connection with our preferred enterprise program (see under Item 10.E “Taxation—Israeli Tax
Considerations”). To remain eligible to obtain such tax benefits, we must continue to meet certain conditions. If we fail to
comply with these conditions in the future, the benefits we receive could be cancelled, and we may have to pay certain
taxes. We cannot guarantee that these programs and tax benefits will be continued in the future, at their current levels or at
all. If these programs and tax benefits are ended, our tax expenses and the resulting effective tax rate reflected in our
financial statements may increase and as such our business, financial condition and results of operations could be materially
and adversely affected.
We have obtained benefits from the Israeli Innovation Authority that subject us to ongoing restrictions.
We have in the past received, and in the future may apply for, royalty-bearing or non-royalty bearing grants from
the Israeli Innovation Authority (formerly known as the Office of the Chief Scientist of the Israeli Ministry of Economy
and Industry), or the IIA, for research and development programs that meet specified criteria pursuant to the Law for the
Encouragement of Research, Development and Technological Innovation in Industry, 1984 (formerly known as the Law
for Encouragement of Research and Development in Industry, 1984), and the regulations promulgated thereunder, or the
Innovation Law. The terms of the IIA grants limit our ability to manufacture products outside of Israel or to transfer
technologies in or outside Israel if such products or technologies were developed using know-how developed with or based
upon IIA grants. In addition, a change of control in us and the acquisition of 5% or more of our ordinary shares by a non-
Israeli may require notification to the IIA and the provision of an undertaking to comply with the Innovation Law, some of
the principal restrictions and penalties of which are the transferability limits described above and elsewhere in this annual
report.
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.
We are incorporated under the laws of the State of Israel, our corporate headquarters is located in Israel and several
of our current officers and directors reside in Israel. Service of process upon us, our Israeli subsidiary, our directors and
officers and the Israeli experts, if any, named in this annual report, substantially all of whom reside outside the United
33
States, may be difficult to obtain within the United States. Furthermore, because a majority of our assets and investments,
and substantially all of our directors, officers and such Israeli experts are located outside the United States, any judgment
obtained in the United States against us or any of them may be difficult to collect within the United States and may not be
enforced by an Israeli court.
We have been informed by our legal counsel in Israel that it may also be difficult to assert U.S. securities law
claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S.
securities laws if they determine that Israel is not the most appropriate forum to bring such a claim. In addition, even if an
Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. There is
little binding case law in Israel addressing these matters. If U.S. law is found to be applicable, the content of applicable
U.S. law must be proven as a fact, which can be a time-consuming and costly process. Certain matters of procedure will
also be governed by Israeli law.
Subject to specified time limitations and legal procedures, under the rules of private international law currently
prevailing in Israel, Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil
liability provisions of the U.S. securities laws as well as a monetary or compensatory judgment in a non-civil matter, only
if the following key conditions are met:
•
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 the 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.
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.
The rights and responsibilities of the holders of our ordinary shares are governed by our Articles of Association
and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders
in typical U.S.-based corporations. For example, a shareholder of an Israeli company has a duty to act in good faith toward
the company and other shareholders and to refrain from abusing its power in the company, including, among other things,
in voting at the general meeting of shareholders on matters such as amendments to a company’s articles of association,
increases in a company’s authorized share capital, mergers and acquisitions and interested party transactions requiring
shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a
shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of
fairness toward the company. There is limited case law available to assist us in understanding the implications of these
provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations and
liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.
ITEM 4. INFORMATION ON THE COMPANY
A.
History and Development of the Company
Corporate History and Details
Radware Ltd. was organized in May 1996 as a corporation under the laws of the State of Israel and commenced
operations in 1997. Our principal executive offices are located at 22 Raoul Wallenberg Street, Tel Aviv 6971917, Israel
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and our telephone number is 972-3-766-8666. Our website address is www.radware.com (information contained on our
website is not incorporated herein by reference and shall not constitute part of this annual report). In addition, the SEC
maintains a website that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC: http://www.sec.gov.
As of September 1, 1998, we established Radware Inc., our wholly owned subsidiary in the United States, which
conducts the sales and marketing of our products and services primarily in the United States and Canada and is our
authorized representative and agent in the United States. The principal offices of Radware Inc. are located at 575 Corporate
Dr., Lobby 2, Mahwah, New Jersey 07430 and its telephone number is 201-512-9771. We also have several other wholly
owned subsidiaries worldwide handling primarily local support and promotion activities.
In September 1999, we conducted the initial public offering of our ordinary shares that commenced trading on the
Nasdaq.
In the past decade, we have made several acquisitions, including, most recently (February 2022), the acquisition
of the technology and operations of DC Security Ltd. (previously known as SecurityDAM Ltd., or SecurityDAM), a related
party and a cloud DDoS network operator that supplied us with scrubbing center services used for the provision of our
cloud DDoS Protection Service.
Recent Major Business Developments
For recent major product activities, see Item 4.B “Business Overview—Our Solutions” under the captions “Recent
Solution Offering Activities” and “Recent Partnerships Activities.”
For a discussion of our capital expenditures and divestitures, see Item 5.B “Liquidity and Capital Resources –
Principal Capital Expenditures and Divestitures.”
B.
Business Overview
Overview
General
We are a provider application security and delivery solutions for multi-cloud environments. Our solutions secure
the digital experience by providing infrastructure, application, and network protection and availability services to
enterprises globally. Our solutions are deployed by, among others, enterprises, carriers, and cloud service providers.
Our solutions are offered in two main categories:
•
Products – We offer a range of cloud-based security as a service subscriptions, on-premises hardware and
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.
The sections below provide an overview of our key solutions and services according to the above go-to-market targets.
Reportable Segments
In previous reporting periods (until December 31, 2022), we operated in one reportable segment. Commencing
January 1, 2023, we have determined that the Company operates in two reportable segments:
•
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 (CNP)
Security Ltd., or SkyHawk Security, which provides an agentless Cloud-native threat Detection and
Response (CDR), combined with Cloud Infrastructure Entitlement Management (CIEM), Cloud Security
Posture Management (CSPM) and Autonomous Purple Team for AWS Google Cloud and Azure, and
EdgeHawk Security Ltd., or EdgeHawk, which is engaged in providing carrier security solutions by
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transforming routers and network nodes into security platforms. We refer to SkyHawk Security and
EdgeHawk collectively as the “Hawks.”
While we transitioned into two reportable segments, we remain focused on the consolidated results as an important
measure of performance.
For additional details regarding these two reportable segments, see Item 5.A – “Operating Results” and Notes 2ad
and 15 to our consolidated financial statements included elsewhere in this annual report.
Our Products
Our cloud-based subscription offering consists of the following key cloud-based subscriptions:
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.
Our Cloud DDoS Protection Service is offered in multiple deployment options to meet an organization’s specific needs:
o
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.
o
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.
o
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.
o
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.
We offer several Add Ons to our Cloud DDoS Protection Service:
o
Cloud Web DDoS Protection. We offer our cloud customers 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 Firewall as a Service. Our Cloud Firewall-as-a-Service (FWaaS) provides a cloud-based network firewall
solution that helps offload unwanted traffic before it reaches the organization’s network, thereby improving
network efficiency and providing consistent protection for the entire network. With no appliance to manage and
IP blocking at scale, the service helps organizations manage their traffic in a more efficient and less human-
intensive manner.
o
Cloud Network Analytics. Our Cloud Network Analytics Service, part of our Cloud DDoS Protection Service,
provides users with detailed, granular insight into network traffic, network services in use and much more. The
network analytics service allows administrators to eliminate errors when planning network deployments and stay
ahead of DDoS threats via early detection of network abuse and intrusion. The service is divided into a graphical
representation of data; the filtering of capabilities and an investigation mode.
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o
AI SOC Xpert DDoS. Our AI SOC Xpert empowers SOC teams by providing real-time detection and adaptive
responses, significantly reducing the time and effort required to manage incidents. This service allows SOC teams
to quickly identify and resolve issues, minimizing downtime and enhancing overall security posture. The intuitive
AI assistant streamlines data access and decision-making, allowing teams to focus on strategic tasks rather than
manual processes. By lowering operational costs and expediting onboarding, it ensures that SOC teams can operate
more efficiently and effectively, improving their ability to protect the organization.
Our Cloud Application Protection Services
Our Web Application and API Protection (WAAP) suite is a one stop shop for organization’s application security needs,
providing WAF, API Security, bot management, Layer 7 DDoS mitigation, account takeover (ATO) protection and client-
side protection. Our Cloud Application Protection Services are offered in three service plans. Each plan is designed to cater
to different cybersecurity needs and risk exposure, as well as different levels of managed services:
o
Standard Plan: Our Standard Plan offers the industry benchmark protection level. It includes our Cloud WAF,
API protection, zero-day attack protection, Basic Bot Protection, and 1Gbps of network DDoS protection.
o
Advanced Plan: Our Advanced Plan offers advanced protection capabilities for those that want to ensure they are
well protected from more sophisticated and unknown attacks. The plan includes, on top of the Standard Plan, our
Advanced WAF with its path access protection engine that protects against more sophisticated unknown and zero-
day attacks, AI-based Correlation Engine (Source Blocking), 10Gbps of network DDoS Protection, as well as JS
supply chain mapping, monitoring, and attack detection for client-side protection. It also includes Radware’s
intelligence feed – the ERT Active Attackers Feed (EAAF), and further support for onboarding and policy
reviewing.
o
Complete Plan: Our Complete Plan provides a security blanket for the entire application environment. From client-
side to server-side and everything in between. This plan includes everything the Advanced Plan has to offer, with
the addition of our Bot Manager and its behavioral-based multi-layered detection and mitigation, automated API
discovery and API security policy generation, real-time API Business Logic Attack Protection, and client-side
protection enforcement.
We offer several Add Ons to our Cloud Application Protection Services:
o
Cloud Web DDoS Protection. We offer 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
CDN. For enterprises that wish to combine website delivery with their web application security, we offer a content
delivery network (CDN) solution integrated directly into our Cloud Application Protection portal. Our CDN solution
is based on the Amazon CloudFront CDN for a globally distributed footprint, enhanced performance, and DevOps-
friendly usability.
o
PCI DSS 4 Compliance. In addition to the WAF and API protection against business logic attacks, which are necessary
for PCI DSS 4 compliance and included in our Cloud Application Protection service plans, the PCI DSS 4 add-on
offers customers extended, specific client-side protection controls as required by PCI DSS 4 Sections 6.4.3 and 11.6.1.
o
DNS as a Service (DNSaaS). Our DNSaaS provides comprehensive Domain Name System (DNS) management, which
is essential for the seamless functioning of any online application. It's about safeguarding businesses’ digital presence
and ensuring end-users a seamless experience.
o
Load Balancer as a Service. Our Load Balancer as a Service (LBaaS) complements cloud application protection
services with improved SLA and scalability while maintaining high availability and protecting all origin sites. It
provides Active/Active traffic and user load balancing between origin sites.
o
Threat Intelligence Service. Our Threat Intelligence services shed light on why certain IPs are flagged, providing
insights and context in real-time. The actionable intelligence allows organization to confidently assess threats, enable
37
informed decisions and proactively defend against threats before they escalate. The Threat Intelligence Services key
features include:
o
Actionable Data from Real Cyber Attacks
o
Research into any suspicious IP address with IP insights and Open Proxys and Malware Data
o
Reputation alert to ensure Network Security and Integrity by proactively informing of potential cyber-attacks
originating from the organization's own network.
o
Seamless REST API Integration to any environment, existing security workflows and systems
Our hardware and software products consist of the following key products:
o
DefensePro X 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 Transport Layer Security / Secure Sockets Layer (TLS/SSL) attacks
to secure organizations against emerging network multi-vector attacks, ransom DDoS campaigns, IoT botnets,
phantom floods, and other types of cyberattacks.
The DefensePro X lineup is combined with additional subscriptions for Network and Application protection:
o
Network Protection Subscription – Silver – includes ERT Security Update Subscription, ERT Active Attacker
Feed (EAAF) and Location based mitigation (GeoIP) subscriptions.
o
Network Protection Subscription – Gold – includes, on top of the Silver subscription, also ERT under attack
service.
o
Application Protection Subscription - provides advanced behavioral protection for encrypted flood attacks,
TLS inspection, application aware protection and threat intelligence under attack.
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.
We offer Alteon ADC in three different packages (available on each of its models and throughput levels) to address
different deployment scenarios and needs:
•
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. Provided on top of Alteon Deliver Package.
•
Alteon Secure Package. For applications that require our most advanced protections, including an
embedded WAF module, authentication gateway, bot management, threat intelligence feeds (Emergency
Response Team (ERT) Security Updates Service, ERT Active Attackers Feed, and ERT Location-based
Mitigation), and SSL offloading from perimeter security devices (with its embedded SSL inspection
module). Provided on top of Alteon Perform Package.
We offer Alteon with a Global Elastic Licensing (GEL) solution, 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 an organization’s
applications are deployed (e.g., on-premises, 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.
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o
Radware Kubernetes WAF. Radware Kubernetes WAF is a Web Application Firewall solution for continuous
integration and continuous delivery (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
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.
Cyber Controller supports several licenses according to each customer-managed environment and customer
needs:
o
Cyber Controller Standard: Provides the network management tool and network monitoring tool for the
Radware family of cybersecurity 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.
o
Cyber Controller MSSP Portal: the MSSP Portal is designed to help service providers to deliver cyber
security services while simultaneously reducing Total Cost of Ownership (TCO) and Mean Time to Resolve
(MTTR), and surpassing margin revenue targets. It provides end-customers with comprehensive insights into
the status of their protected network, offering visibility into both peacetime and attack traffic. Additionally,
our portal allows service providers to offer invaluable services such as self-operating capabilities to their
customers, particularly for those with expertise in security operations. Leveraging the power of multitenancy,
our MSSP portal enables service providers to efficiently manage multiple customers, ensuring seamless
operations and optimal resource utilization.
Customer Services
We offer managed services, professional services, technical support and training and certification to our customers and
partners. Our key customer services consist of the following:
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:
39
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.
Recent Solution Offering Activities
During 2024, our key solution offering activities consisted of the following:
•
We have announced a new threat intelligence service designed to help security operation center (SOC) teams,
threat researchers, and incident responders enhance threat detection, identify compromised systems, and ultimately
lower mean time to resolution (MTTR). The service, which is an expansion of our cloud security platform, offers
them real-time intelligence and pre-emptive warnings about potential network attacks so they can make more
informed decisions about application and data center threats.
•
We have introduced a new one-stop solution, called PCI DSS 4.0, to help organizations easily navigate and
streamline the process in meeting the new application protection requirements, which went into effect on March
31, 2024 and will become mandatory beginning March 31, 2025 after a 12-month grace period. The new solution
offers dedicated controls, extensive visibility, easy-to-access reports, and streamlined auditing.
•
We have launched our proprietary EPIC-AI solution, which adds multiple layers of AI-powered intelligence and
capabilities across our application and network security solutions and services. EPIC-AI infuses advanced AI and
Gen AI algorithms across Radware’s security solutions, designed to deliver precise, hands-free, consistent
protections across cloud, on-prem, and hybrid environments. The AI-based innovations are designed to help
organizations not only significantly improve real-time attack detection and mitigation, but also reduce MTTR,
gain more control over their security, and protect their brands.
•
We have launched AI SOC Xpert, a new cloud security service that helps security operation centers (SOCs)
manage DDoS and application security incidents, leveraging AI-based technology to reduce MTTR. Designed to
instantly resolve incidents, the new technology provides SOC teams automated attack detection, immediate
forensics data, and precisely tailored remediation plans that can be implemented by a click of a button. The AI
40
SOC Xpert is an addition to our EPIC-AI™, which integrates Agentic-AI architecture and Gen AI algorithms
across the customer’s cloud security platform.
•
We have enhanced our API Protection solution with a new AI-driven, auto-learning protection engine designed to
immediately detect and mitigate business logic attacks. Working in real-time, the engine is designed to expose
bad actors’ identities and automatically detect and block malicious API calls by continuously learning the
application’s business logic. The solution offers organizations comprehensive coverage for the OWASP API 2023.
•
We have announced a new solution for private key protection, storage, and management called NoKey. The
NoKey solution, which integrates with third-party hardware security modules (HSMs), enables customers to route
encrypted traffic through Radware’s Cloud Application Protection Service without exposing or relinquishing
control of their SSL keys. Customers have the flexibility to tailor and manage their private key storage to match
their unique technology requirements, business priorities, and privacy needs, while benefiting from the scale and
comprehensive protection of Radware’s solution.
•
We have introduced a new AI-powered, rule-free edition of our DNS DDoS Protection solution. Using our
patented algorithms, the enhanced version is designed to automatically distinguish between legitimate and attack
traffic and instantly adapt DDoS defenses based on the specific attacker. For DNS service providers or companies
that host their own DNS services, this can significantly shorten time to resolution and reduce total cost of
ownership when countering even the most sophisticated DNS DDoS attack campaigns.
•
We have expanded our cloud services to include a new Domain Name System as a Service (DNSaaS). The
DNSaaS enables customers to benefit from exceptional reliability, comprehensive management tools, and
advanced security measures, all designed to keep applications available, performant, and protected.
•
We have expanded our cloud application and network security services to include a new Radware Load Balancer
as a Service and enhanced Cloud Network Analytics Service. The services are designed to help organizations
optimize application management and performance as well as maximize network monitoring and visibility, even
during peacetime.
•
We have introduced a new evolution of our Bot Manager, now equipped with AI-based protections. Designed to
prioritize the end user experience and meet the needs of enterprise security teams, it mitigates a new generation
of aggressive AI-driven, human-like bots without blocking legitimate users.
•
We have launched a new cloud security service center in Paris, France. The launch of the new facility extends our
DDoS attack mitigation capacity to 15Tbps across a network of more than 50 cloud security service centers
worldwide.
Our Competitive Strengths
Our solutions incorporate proprietary and innovative cybersecurity and application delivery technologies that help
our customers to secure the digital experience for users of business-critical applications. We believe our competitive
strengths are based on several elements, including the following:
•
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 cybersecurity 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 cybersecurity solutions, including behavioral analysis technology to detect zero-day DDoS
attacks; automated real-time signature creation for DDoS attacks mitigation; intent-based behavioral analysis
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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 2024, including the following:
•
Quadrant Knowledge Solutions – 2024 DDoS Mitigation SPARK Matrix™ – Leader
•
Quadrant Knowledge Solutions – 2024 WAF SPARK Matrix™– Leader
•
Quadrant Knowledge Solutions – 2024 Bot Management SPARK Matrix™ – Leader
•
2024 KuppingerCole Leadership Compass Report for Web Application Firewalls (WAF) – Leader
•
IDC MarketScape: Worldwide Web Application and API Protection (WAAP) Enterprise Platforms
2024 Vendor Assessment – major player
•
Gartner Peer Insights: Voice of the Customer for Cloud Web Application and API Protection
(WAAP) Report 2024 – Strong Performer
•
GigaOm Research – GigaOm Radar for Application and API Protection 2024 – Leader and Fast
Mover
We are not responsible for the determinations of any of these awards or the entities or publications that award
them.
Our Growth Strategy
Our growth strategy is based on several key elements:
•
Focus on cloud and application security. We aim to offer superior cloud services and application security
solutions for our customers, and plan to continue to innovate and provide advanced security capabilities
helping enterprises and businesses to keep up with emerging cyber threats and growing compliance and
regulation requirements. We also offer managed services for our customers who lack security expertise in
network and application security domains.
•
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 and Check Point, which provide critical access to certain
large customers allowing us to sell our solutions. In addition, 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 cybersecurity 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.
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Sales and Marketing
Sales. We market and sell our products and services primarily through indirect sales channels that consist of
distributors and resellers located in North, Central and South America, Europe, Africa, Asia, and Australia. In addition, we
generate direct sales to selected customers mainly in the United States. Our direct sales channels are supported by our sales
and marketing managers who are also responsible for recruiting potential distributors and resellers and for initiating and
managing marketing projects in their assigned regions. The sales managers are supported by our internal sales support staff
that help generate and qualify leads for the sales managers. We have subsidiaries and representative offices and branches
in multiple countries to cover the above mentioned regions (see Item 4.C “Organizational Structure”), to promote and
market our products and services and provide customer support in their respective regions.
Marketing. Our marketing strategy is to enhance brand recognition and maintain our reputation as a provider of
technologically advanced, quality cybersecurity and application delivery solutions to help drive demand for our products
and services. We seek to build upon our marketing and branding efforts globally to achieve greater worldwide sales and
leverage sophisticated digital platforms and activity to scale our presence globally. Our marketing initiatives are principally
directed at developing brand awareness, optimizing our digital presence, searchability and awareness, generating qualified
leads and providing sales and marketing tools to our distributors/resellers to promote sales. We participate in major trade
shows and virtual events, regionally based events/seminars and offer support to our distributors and resellers who
participate in these events. We also participate in our partners’ events, such as Cisco Live and Checkpoint Experience, to
promote our solutions within their audiences. Additionally, we focus on our customer base to deliver an integrated
Customer 360 experience including regular communications, facilitating support and training needs, maximizing customer
lifetime value and developing customer advocacy. We also invest in online and search engine advertising campaigns, public
relations, and regionalized field marketing campaigns. In addition to our independent marketing efforts, we invest in joint
marketing efforts with our distributors, OEMs, VARs, GSIs, and other companies that have formed strategic alliances with
us.
Customers and End-Users
With the exception of our limited direct sales to selected customers, we sell our products and services through
distributors or resellers who then sell our products and services to end-users.
We have a globally diversified end-user base, consisting of corporate enterprises, including banks, insurance
companies, manufacturing, retail companies, media companies, government agencies and utilities, and service providers,
such as telecommunication carriers, internet service providers, cloud service providers, and application service providers.
Customers in these different vertical markets deploy Radware products for availability, performance and security of their
applications.
In 2024, approximately 43% of our revenues were in North, Central and South America (principally in the United
States), 34% were in Europe, the Middle East and Africa (EMEA) and 23% in Asia-Pacific, compared to 40%, 37% and
23%, respectively, in 2023, and 42%, 36% and 22%, respectively, in 2022. Other than the United States, which accounted
for 30% of our total revenues in 2024, no other single country accounted for more than 10% of our revenues for 2024,
2023, and 2022.
In 2024, approximately 57% of our revenues derived from product sales, and 43% derived from service
sales, compared to 56% and 44%, respectively, in 2023 and 59% and 41%, respectively, in 2022.
In 2024, approximately 79% of our revenues derived from the enterprise market and 21% derived from the carrier
market, compared to approximately 77% and 23%, respectively, in 2023, and 74% and 26%, respectively, in 2022.
As of December 31, 2024, 2023, and 2022, no single customer accounted for more than 10% of our revenues.
For additional details regarding the breakdown of our revenues by geographical distribution and by activity, see
Item 5.A – “Operating Results.”
Seasonality
Our quarterly operating results have been, and are likely to continue to be, influenced by seasonal fluctuations in
our sales and by seasonal purchasing patterns of some of our customers. Our operating results in the fourth quarter tend to
be higher than other quarters as some of our customers tend to make greater capital and operational expenditures as well
as expenditures relating to service renewals towards the end of their own fiscal years, thereby increasing orders for our
products, support and subscription services in the fourth quarter.
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Customer Support Services
Our technical support team, which consisted of 369 employees worldwide as of December 31, 2024, supports our
sales force during the sales process, assists our customers, resellers and distributors with the initial installation, set-up and
ongoing support of our products, and trains them on how to best use our solutions. The technical support team also assists
with service onboarding processes and provides training to end-users of our services. In addition, our technical team trains
and certifies our distributors and resellers to provide limited technical support in each of the geographical areas in which
our products are sold and is directly responsible for remote support. Our Certainty Support Program offerings allow
customers to automatically obtain new software versions of their products and obtain optimized performance by purchasing
any of the following optional offerings: extended warranty, software updates, 24x7 help-desk (directly to our customers
and through our distributors), on-site support and unit replacement. Some of our on-site services are provided by third-
party contractors.
Research and Development
We invest in research and development to expand and enhance the features of our existing solutions, to develop
new solutions and features and to improve our existing technologies and features. We believe that our future success is
dependent upon our ability to maintain our technological expertise, enhance our existing solutions and introduce, on a
timely basis, new commercially viable solutions that will address the needs of our customers. Accordingly, we intend to
continue devoting a significant portion of our personnel and financial resources to research and development. In order to
identify market needs and to define appropriate product specifications, as part of the product development process we seek
to maintain close relationships with current and potential distributors, customers and vendors in related industry sectors.
As of December 31, 2024, our research and development staff consisted of 378 employees and 71 subcontractors.
Research and development activities take place mainly at our facilities in Israel; Bangalore, India; Vancouver, Canada; and
North Carolina, United States. We employ established procedures for the required management, development and quality
assurance of our new product developments. Our research and development organization is divided into Application
Security, Infrastructure Security, Application Delivery, Management and Control, Cloud Services, and Chief Technology
Officer groups. Within those groups the organization is divided according to our existing product solutions. Each product
group is headed by a group leader and includes team leaders and engineers. Each group has a dedicated quality assurance
team. In addition, we have an infrastructure department responsible for the development of our platforms that are the basis
for all products, serving all product groups, which consist of a senior group leader, group leaders, team leaders, and
engineers. The heads of all research and development divisions report to either the Chief Operating Officer or the Chief
Technology Officer.
See also below under “Government Regulations – Israeli Innovation Authority.”
Manufacturing and Suppliers
Our quality assurance testing, final integration, packaging, and shipping operations as well as part of our final
assembly activities are primarily performed at our facility in Jerusalem, Israel. All our products are Underwriters
Laboratories (UL), conformité européenne (CE), Federal Communications Commission (FCC) and ISO 9001:2008
compliant and some of them have also achieved industry certifications.
We rely to a large extent on third-party manufacturing vendors to provide our finished products. In this respect,
these vendors primarily provide us with design and manufacturing assembly services in order to deliver the finished goods
while we perform the final integration of the products. All components and subassemblies included in our products are
supplied to the manufacturing vendors by several suppliers and subcontractors. Each of the manufacturing vendors monitors
each stage of the components production process, including the selection of components and subassembly suppliers.
Thereafter, each of the manufacturing vendors makes the final assembly in their own facility. Our primary manufacturing
vendors are ISO 9001 certified, indicating that each of their manufacturing processes adheres to established quality
standards.
We primarily rely on two ODMs to manufacture and to supply our hardware platforms. In 2024, approximately
60% of our direct product costs were from one of these vendors and 12% were from the other vendor. Additionally, we
rely on two other vendors, which, together with the two ODMs noted above, made up 82% of our direct product costs in
2024.
We conduct a business continuity plan (BCP) with all our vendors to ensure an immediate recovery in case of
crisis that might jeopardize the supply of our products and services. For example, in order to overcome the risk of not
meeting the committed SLA to our customers due to importation blocking in different countries associated with the
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outbreak of the COVID-19 pandemic, we had allocated sufficient inventory that was sent directly from the ODM vendors
to worldwide warehouses to be shipped to customers, when needed, at the destination country, rather than being shipped
from Israel. In this respect, we have been certified during 2021 for ISO 22301 (Business Continuity Management System).
Furthermore, in order to minimize potential delays in product supplies by certain of our ODMs whose lead time had been
significantly extended due to the worldwide chipset shortage, we had paid expedite fees to several components
manufacturers. However, if we are unable to continue to acquire those platforms or components from these platform
manufacturers and vendors on acceptable terms, or should any of these suppliers cease to supply us, on a timely basis, with
such platforms or components for any reason, we may not be able to identify and integrate an alternative source of supply
in a timely fashion or at the same costs. Any transition to one or more alternate suppliers would likely result in delays,
operational problems, and increased costs, and may limit our ability to deliver our products to our customers on time for
such transition period, although we believe we have levels of inventory that will assist us to transition to alternate suppliers
smoothly.
Proprietary Rights
We rely on patent, trademark and trade secret laws, as well as confidentiality agreements and other contractual
arrangements with our employees, distributors and others to protect our technology. We have a policy that requires our
employees to execute employment agreements, including confidentiality and non-competition provisions.
We have registered trademarks for, among others, Radware®, Radware Logo:
®, OnDemand Switch®, Alteon®, APSolute®, LinkProof®, DefensePro®, SIPDirector®,
AppDirector®, AppXcel®, AppXML®, AppWall®, APSolute Insite®, StringMatch Engine®, Web Server Director®,
APSolute Vision®, vDirect®, Alteon VA®, AppShape®, DefenseFlow®, Virtual DefensePro®, Radware SecurPath®,
VADI® (Virtual Application Delivery Infrastructure), ShieldSquare® and the ShieldSquare Logo:
®, and
we have non-registered trademarks for, among others, ADC-VX™, Inflight™, EPIC-AI™ and CyberStack™. We own
registered U.S. copyrights in all of our primary software product lines.
We have registered patents in the United States, Canada and other jurisdictions for, among others, our triangle
redirection method used for the global load balancing in our AppDirector product; our mechanism for efficient management
and optimization of multiple links used in our LinkProof product; our method for load balancing by global proximity used
in our AppDirector product; our method for controlling traffic on links between autonomous Border Gateway Protocol
(BGP) systems; the stateful distribution of copied SSL traffic; the transparent inspection of encrypted client traffic; the
activation of multiple virtual services on a switching platform; the behavioral analysis and detection of zero-day and DDoS
network attack patterns, including a revised and adaptive ways for improved real-time signatures (BDoS-X) and ongoing
policies (Policy-X); a new method based on Quantiles for network edge DDoS and network anomalies protection in our
DefensePro product; our new paraphrase-based algorithm for WebDDoS or Web floods and keyless HTTPS attack
mitigation behavioral mechanisms in our DefensePro; our enhanced domain name service floods behavioral protection and
UDP protections; our web and API application protection (including the business logic attacks), including our Bot Manager
augmented by the new public identity and block-chain based methods for addressing automated threats (for public-facing
services) and advanced threats such as ATO attacks; our new client side protection to address sensitive PII leakage attacks
resulting from untrusted third parties; our new AI/ML methods to address and automate analysis of our cloud WAF
(CWAF) customer’s applications for proactive false-positive and false-negative service tuning, a geographically based
traffic distribution; Zero-day attacks such as Log4j malicious strings, use of OpenAI-related APIs for embedding AI-
assistance in various use-cases; a new SoC-X framework utilizing AI/LLM technologies supporting the ERT to understand
and reduce drastically the MTTR of leaked attacks, which provides competitive advantage in the MSSP market; a generic
proximity based site selection for global load balancing; an internal hardware connectivity plane architecture; a specific
proximity-based site selection for global load balancing of HTTP transactions implemented in our Alteon products; and
additional patents in the software-defined networking (SDN) field, around a new concept of cyber control and automation
for our DefenseFlow product.
We have pending patent applications and provisional patents in connection with several methods and features used
in our products or that we plan to implement in the future. These applications may not result in any patent being issued,
and, even if issued, the patents may not provide adequate protection against competitive technology and may not be held
valid and enforceable if challenged. In addition, other parties may assert rights as inventors of the underlying technologies,
which could limit our ability to fully exploit the rights conferred by any patent that we receive. Our competitors may be
able to design around a patent we receive, and other parties may obtain patents that we would need to license or circumvent
in order to exploit our patents.
45
Competition
The cybersecurity and application delivery market is highly fragmented and competitive, and we expect
competition to intensify in the future.
Our principal competitors are:
•
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.
We expect to continue to face additional competition as new participants enter the market or extend their portfolios
into related technologies. Larger companies with substantial resources, brand recognition and sales channels may also form
consolidation and alliances with or acquire competing providers of application delivery or application and network security
solutions and emerge as significant competitors.
We are seeing new types of competitors from within the public cloud providers – as more companies rely on these
environments to host their services and applications, these vendors start providing cybersecurity solutions that are typically
fairly basic and customized for their own environment. As we see more and more companies relying on more than one
public cloud vendor, we expect to see additional competitors and rapid evolution of solutions and offerings.
An increase in competition may lower prices and reduce demand and margins as well as increase costs associated
with sales and marketing to maintain or increase market share; which, in turn, may impair our ability to increase
profitability. Furthermore, the dynamic market environment poses a challenge in predicting market trends and expected
growth. We believe that our products and services have several competitive advantages in performance and accuracy and
that our future success will depend primarily on our continued ability to provide more technologically advanced and cost-
effective application delivery and cybersecurity solutions, and more responsive customer service and support, than our
competitors. However, we cannot assure you that all products and services we offer in our portfolio will compete
successfully with similar competitor solutions. See also above under “Business Overview.”
Government Regulations
Data Privacy, Data Protection and AI Laws
Our activities in the cybersecurity market require that we comply with laws and regulations in the area of data
privacy and data protection governing the collection, use, retention, sharing and security of personal data. For example, the
GDPR and UK DP Laws (each as referenced above), include operational requirements for companies that receive or process
personal data of residents of the European Union and the UK, and non-compliance could result in significant penalties.
Many other countries in which we operate have their own data protection and data security laws that we need to comply
with in collecting, utilizing, or otherwise processing personal data from our customers and/or visitors to their websites and
others.
In addition, our use of AI is facing increasing regulatory scrutiny (see the risk factor above titled “We face risks
related to the rapidly evolving regulatory framework for AI Technologies.”).
Environmental and Security Management Regulations
Our activities in Europe require that we comply with European Union Directives with respect to product quality
assurance standards and environmental standards. The Restriction of Hazardous Substances (RoHS) and RoHS II Directives
require products sold in Europe to meet certain design specifications, which exclude the use of hazardous
substances. Directive 2002/96/EC on Waste Electrical and Electronic Equipment (known as the “WEEE” Directive)
requires producers of electrical and electronic equipment to register in different European countries and to provide
collection and recycling facilities for used products. We believe we are currently in compliance with the RoHS and WEEE
regulations, ISO 14001 standards (regarding Environmental Management Systems), ISO/IEC 27001:2013 and ISO 27032:
2012 standards (both in regard to Information Security Management System), ISO 28000 (Supply Chain Security
management) and OHSAS 18001:2007 (Occupational Health and Safety Management).
46
Israeli Innovation Authority
From time to time, eligible participants may receive grants under programs of the IIA. This governmental support
is conditioned upon the participant’s ability to comply with certain applicable requirements and conditions specified in the
IIA’s programs and the Innovation Law.
Under the Innovation Law, research and development programs that meet specified criteria and are approved by
the Research Committee of the IIA are eligible for grants usually of up to 55% of certain approved expenditures of such
programs, as determined by said committee.
The Innovation Law provides that know-how developed under an approved research and development program or
rights associated with such know-how (1) may not be transferred to third parties in Israel without the approval of the IIA
(such approval is not required for the sale or export of any products resulting from such research or development) and (2)
may not be transferred to any third parties outside Israel, except in certain special circumstances and subject to the IIA’s
prior approval, which approval, if any, may generally be obtained, subject to payment of a transfer fee pursuant to which
the grant recipient pays to the IIA a portion of the sale price paid in consideration for such IIA-funded know-how; or a
portion of the consideration paid in respect of licensing the IIA-funded know-how, as the case may be (according to certain
formulas, which may result in repayment of up to 600% of the grant amounts plus interest). Under certain circumstances,
such as in the event that the grant recipient receives know-how from a third party in exchange for its IIA-funded know-
how, such transfer fee may not apply.
The Innovation Law imposes reporting requirements with respect to certain changes in the ownership of a grant
recipient. The law requires the grant recipient and its controlling shareholders and foreign interested parties to notify the
IIA of any change in control of the recipient or a change in the holdings of the means of control of the recipient and requires
a non-Israel interested party to undertake to the IIA to comply with the Innovation Law. In addition, the rules of the IIA
may require additional information or representations in respect of certain of such events. For this purpose, “control” is
defined as the ability to direct the activities of a company other than any ability arising solely from serving as an officer or
director of the company. A person is presumed to have control if such person holds 50% or more of the means of control
of a company. “Means of control” refers to voting rights or the right to appoint directors or the chief executive officer. An
“interested party” of a company includes a holder of 5% or more of its outstanding share capital or voting rights, its chief
executive officer and directors, someone who has the right to appoint its chief executive officer or at least one director, and
a company with respect to which any of the foregoing interested parties owns 25% or more of the outstanding share capital
or voting rights or has the right to appoint 25% or more of the directors. Accordingly, any non-Israeli who acquires 5% or
more of our ordinary shares will be required to notify us that it has become an interested party and needs to sign an
undertaking to comply with the Innovation Law.
The Israeli authorities have indicated in the past that the government may further reduce or abolish the IIA grants
in the future. Even if these grants are maintained, we cannot presently predict what would be the amounts of future grants,
if any, that we might receive.
47
In 2024, 2023, and 2022, we were qualified to participate in projects funded by the IIA to develop generic
technology relevant to the development of our products. We were eligible to receive grants constituting between 30% and
55% of certain research and development expenses relating to these projects. The grants under these projects are not
required to be repaid by way of royalties.
In addition, one of our Israeli subsidiaries received royalty-bearing grants from the IIA for an approved research
and development project. The grants under this project are required to be repaid based on revenues from the sale of products
incorporating or based upon know-how developed, in whole or in part with the grants. These grants amounted to $0.4
million for the year ended December 31, 2024.
Research and development grants deducted from research and development expenses, net amounted to $0.04
million, $0.4 million, and $1.35 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Environmental, Social and Governance Matters
At Radware, we aim to help customers protect their critical applications and secure their digital experiences. As
we pursue this goal, we recognize our responsibility to promote socially and environmentally responsible economic growth
through our business practices. In order to promote this corporate responsibility and sustainability approach, we have
implemented, and will continue to implement, various ESG principles and activities into our daily business practices,
including, but not limited to, those summarized below.
Our most recent ESG Report is available at www.radware.com/corporategovernance (information contained on
our website, including in our ESG report, is not incorporated herein by reference and shall not constitute part of this annual
report).
Environmental
We aim to build a more sustainable world through the products, services, and solutions we offer and the way we
operate. This means, among other things, that we aim to operate our business in a manner that meets or exceeds all
environmental laws and compliance guidelines and strive to improve our environmental performance across our entire
supply chain.
While we continue to develop a program that recognizes our environmental impact, we have already implemented
various activities to measure and foster our environmental focus, including the following highlights:
•
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.
Social
We believe that the foundation of our success lies in our diverse, engaged, and motivated workforce, and we
continuously advocate for our team by creating a work environment in which our employees can thrive in the spirit of
productivity and development. This means, among other things, that we aim to operate our business in a manner that
promotes a work environment that is free of discrimination on the basis of any protected characteristics and harassment
and otherwise attends to our employees’ wellbeing.
48
While we continue to develop a program that recognizes our social impact, we have already implemented various
activities to measure and foster our focus on social impact, including the following highlights:
•
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 against
individuals on the basis of any protected characteristics, 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.
Governance
As part of our sustainable and other ESG operations policies, we aim to conduct our corporate governance and
build corporate behavior mechanisms to align with the interest of all our stakeholders. This means, among other things,
that we developed and strive to maintain a strong set of corporate values that will inspire ethical behavior across all decision-
making processes, and a management and control system so that ethics and security issues are given their due weight. This
includes the following highlights:
•
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. A majority of the
members of our Board of Directors qualify as “independent directors” under the Nasdaq rules. 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 16G “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.
49
C.
Organizational Structure
We have a wholly owned subsidiary in the United States, Radware Inc., which conducts the sales and marketing
of our products and services in the United States. We also have subsidiaries in other countries, most of which typically
conduct sales and marketing of our products and services in their respective locations. Our subsidiaries include (unless
otherwise indicated, all subsidiaries are wholly owned):
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) 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
* We own approximately 91.0% of this subsidiary, which ceased its activities in 2017.
** We own approximately 76.2% of this subsidiary.
*** Wholly-owned by SkyHawk (CNP) Security Ltd.
50
The late Yehuda Zisapel, one of our co-founders and shareholders, was the father of Roy Zisapel, our President,
Chief Executive Officer and director. Either the heirs of the late Yehuda Zisapel (namely, Roy Zisapel, Carmi Zisapel and
Adi Zisapel, to which we sometime refer in this annual report as the heirs of the late Yehuda Zisapel), the heirs of his late
brother, Zohar Zisapel (namely, Michael Zisapel and Klil Zisapel, to which we sometime refer in this annual report as the
heirs of the late Zohar Zisapel), and Nava Zisapel, the mother of Roy Zisapel, or all of them together, are founders, directors
and/or shareholders of several other companies which, together with our Company and our subsidiaries listed above, are
known as the RAD-Bynet Group. These companies include, among others:
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.*
RADWIN Ltd.
DC Protection Ltd. (previously
known as SecurityDAM Ltd.)
*Denotes a RAD-Bynet Group company with which we currently transact business
The heirs of the late Yehuda Zisapel and the heirs of the late Zohar Zisapel also hold shares in Carteav Ltd., Tupaia
Ltd. and Radiflow Ltd., start-up companies that are not considered part of the RAD-Bynet group.
The RAD-Bynet Group also includes several other holdings, real estate companies, and biotech and
pharmaceutical companies, and the above list does not constitute a complete list of all entities within the RAD-Bynet Group
or of all the holdings of the heirs of the late Yehuda Zisapel, the heirs of the late Zohar Zisapel and Nava Zisapel.
Members of the RAD-Bynet Group are actively engaged in designing, manufacturing, marketing, and supporting
data communications products and services, none of which currently compete with our products. Some of the products of
members of the RAD-Bynet Group are complementary to, and may be used in connection with, our products and services.
See also Item 7.B “Related Party Transactions.”
D.
Property, Plants and Equipment
General. We operate from leased premises mainly in Tel Aviv, Jerusalem and Ramat Gan in Israel and New Jersey
in the United States. We also lease premises in several locations in Europe, North America, South America and Asia-Pacific
for the activities of our subsidiaries, representative offices and branches. Our aggregate annual rent expenses under these
leases were approximately $5.5 million in 2024.
We believe that the following offices and facilities are suitable and adequate for our operations as currently
conducted and as currently foreseen. In the event that additional or substitute offices and facilities are required, we believe
that we could obtain such offices and facilities at commercially reasonable rates.
Israel. Our headquarters and principal administrative, finance, research and development and marketing
operations are located in approximately 108,000 square feet of leased office space in Tel Aviv, Israel, in two buildings: one
building, consisting of approximately 40,000 square feet, plus storage and parking space, and the second building,
consisting of approximately 68,000 square feet, plus parking spaces. Both buildings have leases that expire in June 2030
(with one of the two buildings having a termination option by us in June 2025 by way of prior notice) and are leased from,
among others, affiliated companies owned by the heirs of the late Yehuda Zisapel, Nava Zisapel and/or the heirs of the late
Zohar Zisapel, as applicable. For more information, see Item 7.B “Related Party Transactions.”
In addition, we lease approximately 3,600 square feet of space in Jerusalem, Israel, for development facilities from
an affiliated company owned by the heirs of the late Yehuda Zisapel and Nava Zisapel. The lease expires in July 2025. We
also lease approximately 15,000 square feet for manufacturing facilities in Jerusalem, Israel, from an affiliated company
owned by the heirs of the late Yehuda Zisapel, Nava Zisapel and the heirs of the late Zohar Zisapel. The lease expires in
August 2028. For more information, see Item 7.B “Related Party Transactions.”
We also lease approximately 6,620 square feet of space in Ramat Gan, for operations of one of our subsidiaries.
The lease expires in September 2026.
51
Other locations. In the United States, we lease approximately 16,900 square feet of property in Mahwah, New
Jersey, consisting of approximately 12,700 square feet of office space and 4,200 square feet of warehouse space from a
company controlled by the heirs of the late Yehuda Zisapel, Nava Zisapel and the heirs of the late Zohar Zisapel. The lease
expires in December 2025. For more information, see Item 7.B “Related Party Transactions.”
We lease approximately 3,850 square feet of property for our research and development facilities in North
Carolina, the lease for which will expire in March 2026.
We also lease facilities for the operation of our subsidiaries and representative offices in several locations in
Europe, North America, South America, and Asia-Pacific, all from unrelated third parties.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Our discussion and analysis of our financial condition and results of operation are based upon our consolidated
financial statements, which have been prepared in accordance with U.S. GAAP. Our operating and financial review and
prospects should be read in conjunction with our financial statements, accompanying notes thereto and other financial
information appearing elsewhere in this annual report.
A.
Operating Results
Overview
General
We are a provider of cybersecurity and application delivery solutions for cloud, on-premises, and SDDC. Our
solutions secure the digital experience by providing infrastructure, application, and network protection and availability
services to enterprises globally. Our solutions are deployed by, among others, enterprises, carriers, and cloud service
providers.
We began sales in 1997, and currently have 28 local offices, subsidiaries or branches globally across Asia-Pacific,
Europe, and North, Central and South America.
Most of our revenues are generated in dollars or are dollar-linked, and the majority of our expenses are incurred
in dollars. As such, the dollar is our functional currency. Our consolidated financial statements are prepared in dollars and
in accordance with U.S. GAAP.
Our revenues are derived from sales of our solutions:
•
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.
Most of our sales are through channels such as resellers and distributors. Our revenues are also attributed to
geographic areas based on the location of the end-users.
In the years ended December 31, 2024, 2023, and 2022, revenues derived from sales of the Company’s products
and product subscriptions constituted approximately 57%, 56%, and 59%, respectively, of our total revenues, with the
remaining revenues being derived from services.
Results of Operations
The following discussion of our results of operations for the years ended December 31, 2024, 2023, and 2022,
including the following tables, which present selected financial information in dollars and as a percentage of total revenues,
are based upon our consolidated statements of operations contained in our financial statements for those periods, and the
related notes, included in this annual report.
52
The following table sets forth, for the periods indicated, certain financial data concerning our consolidated
operating results:
2024
2023
2022
(US $ in thousands)
Revenues:
Products ...............................................................................................
$
155,437 $
145,541 $
172,161
Services ...............................................................................................
119,443
115,751
121,265
274,880
261,292
293,426
Cost of revenues:
Products ...............................................................................................
42,178
41,450
43,014
Services ...............................................................................................
11,074
10,260
10,870
53,252
51,710
53,884
Gross profit ..........................................................................................
221,628
209,582
239,542
Operating expenses, net:
Research and development, net .............................................................
74,723
82,617
86,562
Sales and marketing .............................................................................
122,450
126,237
126,533
General and administrative ...................................................................
28,342
32,408
29,786
Total operating expenses, net ................................................................
225,515
241,262
242,881
Operating loss ......................................................................................
(3,887)
(31,680)
(3,339)
Financial income, net ...........................................................................
16,552
13,927
8,052
Income (loss) before taxes on income ...................................................
12,665
(17,753)
4,713
Taxes on income ..................................................................................
6,627
3,837
4,879
Net income (loss) ................................................................................
6.038
(21,590)
(166)
The following table sets forth, for the periods indicated, certain financial data expressed as a percentage of our total
revenues:
2024
2023
2022
Revenues:
Products
.............................................................................................................
57 %
56%
59%
Services
.............................................................................................................
43
44
41
100
100
100
Cost of Revenues:
Products
.............................................................................................................
15
16
15
Services
.............................................................................................................
4
4
4
19
20
19
Gross
profit
.............................................................................................................
81
80
81
Operating expenses, net:
Research
and
development,
net
.............................................................................................................
27
32
30
Sales
and
marketing
.............................................................................................................
45
48
43
General
and
administrative
.............................................................................................................
10
12
10
Total
operating
expenses,
net
.............................................................................................................
82
92
83
Operating
loss
.............................................................................................................
(1 )
(12)
(1)
53
Financial
income,
net
.............................................................................................................
6
5
3
Income
(loss)
before
taxes
on
income
.............................................................................................................
5
(7)
2
Taxes
on
income
.............................................................................................................
(2 )
(1)
(2)
Net
income
(loss)
.............................................................................................................
2 %
(8)%
0%
54
Comparison of Years Ended December 31, 2024, 2023, and 2022.
Revenues.
Our revenues are derived from sales of our solutions. 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 are
recognized ratably over the subscription period. Revenues from post-contract customer support, which represent mainly
help-desk support, unit repairs or replacements, professional services and ERT services are recognized ratably over the
contract period. For additional details regarding the manner in which we recognize revenues, see the discussion under the
caption “Critical Accounting Estimates – Revenue Recognition” below.
The following table provides a breakdown of our consolidated revenues by type of revenues both in dollars and
as a percentage of total revenues for the past three fiscal years, as well as the percentage change between such periods:
(US$ in thousands,
except percentages)
2024
2023
2022
%
Change
2024 vs.
2023
%
Change
2023 vs.
2022
Products
.................................
155,437
57% 145,541
56% 172,161
59 %
7%
(15)%
Services
.................................
119,443
43% 115,751
44% 121,265
41 %
3%
(5)%
Total
.................................
274,880
100% 261,292
100% 293,426
100 %
5%
(11)%
The following table shows a breakdown of our consolidated revenues by geographical distribution both in dollars
and as a percentage of total revenues for the past three fiscal years, as well as the percentage change between such periods:
(US$ in thousands,
except percentages)
2024
2023
2022
%
Change
2024 vs.
2023
%
Change
2023 vs.
2022
North, Central and
SouthAmerica
(principally the
United States)(*)
.................................
117,740
43% 103,435
40% 123,947
42%
14%
(17)%
EMEA (Europe, the
Middle East and
Africa)
.................................
94,075
34% 96,488
37% 104,219
36%
(2)%
(7)%
Asia-Pacific
.................................
63,065
23% 61,369
23% 65,260
22%
3%
(6)%
Total
.................................
274,880
100% 261,292
100% 293,426
100%
5%
(11)%
(*) For the years ended December 31, 2024, 2023, and 2022, our revenues from the United States were $83.4
million, $73.0 million, and $94.0 million, respectively, representing 30%, 28%, and 32% of total revenues for these years,
respectively.
Revenues in 2024 were $274.9 million compared with revenues of $261.3 million in 2023, an increase of 5%. The
increase in revenue was primarily attributed to the growing demand for our cloud-based solutions, especially our cloud
security products, the successful DefensePro X refresh, and the increased contribution from our OEM partnerships, fueling
a growth in the Americas, where revenue increased 14% year-over-year.
Revenues in 2023 were $261.3 million compared with revenues of $293.4 million in 2022, a decrease of 11%. The
decline in revenue was primarily attributed to delays in closing large deals due to greater budget constraints of customers,
55
mainly in the Americas, which resulted in a decrease in our on-premises products revenues in 2023 compared to 2022. This
decline was partially offset by a growing demand for our cloud-based solutions.
In 2024, our product revenues were $155.5 million, an increase of 7% compared to $145.5 million in 2023. The
increase in revenues is attributed primarily to an increase in our cloud DDoS protection and cloud application protection
subscription products revenues, the growing demand for our cloud-based solutions, and an increase in our DefensePro X
product revenues, primarily due to the successful DefensePro X refresh.
In 2023, our product revenues were $145.5 million, a decrease of 15% compared to $172.2 million in 2022. The
decline in revenues is attributed primarily to a decrease in our hardware-based products revenues, as the number of large
deals in 2023 declined compared to 2022. Those large deals usually include significant hardware-based products revenues.
Additionally, the increase in demand for our cloud-based solutions impacted our revenues from hardware-based products.
In 2024, our service revenues were $119.4 million, an increase of 3% compared to $115.8 million in 2023. The
increase in service revenues was mainly attributed to the increase in revenues from support services for our on-premises
devices and an increase in our managed services revenues.
In 2023, our service revenues were $115.8 million, a decrease of 5% compared to $121.3 million in 2022. The
decrease in service revenues was mainly attributed to the decrease in service revenues derived from large deals and a
decrease in revenues from support services for our on-premises devices, partially offset by an increase in service
subscription revenues.
During 2024, our revenues from the enterprise market increased by 8% to $216.5 million from $201.2 million in
2023, and revenues from the carrier market decreased by 3% to $58.4 million from $60.1 million in 2023. During 2023,
our revenues from the enterprise market decreased by 8% to $201.2 million from $218.0 million in 2022, and revenues
from the carrier market decreased by 20% to $60.1 million from $75.4 million in 2022.
Our revenues in North, Central and South America increased in 2024 by 14% compared to 2023. Revenues in the
Asia-Pacific region increased in 2024 by 3% compared to 2023. The growth in our North, Central and South America and
Asia-Pacific regions revenues was mainly attributed to an increase in our cloud security subscription products revenues
and our DefensePro X product revenues. Revenues from the EMEA region decreased in 2024 by 2% compared to 2023.
The decrease in our EMEA region was mainly attributed to a decrease in sales of our hardware-based products, partially
offset by an increase in customer services revenues.
Our revenues in North, Central and South America decreased in 2023 by 17% compared to 2022. Revenues from
the EMEA region decreased in 2023 by 7% compared to 2022. Revenues in the Asia-Pacific region decreased in 2023 by
6% compared to 2022. The declines in revenues were mainly attributed to decreases in sales of our hardware-based products
as described above, and decreases in support services for our on-premises devices across all regions, partially offset by
increases in our cloud and subscription revenues, mainly in the EMEA and Asia-Pacific regions.
Other than the United States, no other single country accounted for more than 10% of our revenues for each of the
years ended December 31, 2024, 2023 and 2022.
Cost of Revenues.
Cost of revenues refers to both products and services revenues and consists primarily of the cost of circuit boards
and other components required for the assembly of our products, salaries and related personnel expenses for those engaged
in the final assembly, and in providing support and maintenance service of our products, license and hosting fees paid to
third parties, fees paid to managed security service providers (related parties), inventory write-offs, amortization of acquired
technology and other overhead costs.
The following table sets forth a breakdown of our cost of revenues between products and services for the periods
indicated, in absolute figures and as a percentage of the relative product and services revenues:
(US$ in thousands, except percentages)
2024
2023
2022
Cost of Products .............................
42,178
27.1 %
41,450
28.5%
43,014
25.0%
Cost of Services .............................
11,074
9.3 %
10,260
8.9%
10,870
9.0%
Total .............................................
53,252
19.4 %
51,710
19.8%
53,884
18.4%
Cost of products as a percentage of product revenues in 2024 was 27.1%, compared to 28.5% in 2023. Cost of
products in both 2024 and 2023 included amortization of intangible assets of $4.0 million. Our cost of products as a
56
percentage of product revenues, excluding amortization of intangible assets, represented approximately 24.6% of product
revenues in 2024, compared to 25.7% in 2023. Excluding amortization of intangible assets, the decrease in cost of products
as a percentage of product revenues was mainly attributed to the increase in our products revenues.
Cost of services as a percentage of service revenues in 2024 was 9.3% compared to 8.9% in 2023.
Cost of products as a percentage of product revenues in 2023 was 28.5%, compared to 25.0% in 2022. Cost of
products in 2023 and 2022 included amortization of intangible assets of $4.0 million and $3.7 million, respectively. Our
cost of products as a percentage of product revenues, excluding amortization of intangible assets, represented approximately
25.7% of product revenues in 2023, compared to 22.8% in 2022. Excluding amortization of intangible assets, the increase
in cost of products as a percentage of product revenues was mainly attributed to the decrease in our products revenues.
Cost of services as a percentage of service revenues in 2023 was 8.9% compared to 9.0% in 2022.
Operating Expenses.
The following table sets forth a breakdown of our operating expenses, net for the periods indicated as well as the
percentage change between such periods:
(US$ in thousands, except percentages)
2024
2023
2022
% Change
2024 vs.
2023
% Change
2023 vs.
2022
Research and development, net
.....................................................................
$
74,723 $
82,617 $
86,562
(10 )%
(5)%
Sales and marketing
.....................................................................
122,450
126,237
126,533
(3 )%
0%
General and administrative
.....................................................................
28,342
32,408
29,786
(13 )%
9%
Total
.....................................................................
$
225,515 $
241,262 $ 242,881
(7 )%
(1)%
Our operating expenses decreased by 7% in 2024 to $225.5 million from $241.3 million in 2023. The decrease of
$15.8 million was primarily attributed to a decrease of $7.9 million in share-based compensation expenses and a decrease
of $5.8 million in personnel costs and related expenses, mainly due to a decrease in average headcount compared to the
previous year, partially offset by an increase in incentive commissions due to better sales performances in 2024, as well as
a decrease of $1.1 million in fees paid to subcontractors and a decrease of $1.0 million in marketing costs.
Our operating expenses decreased by 1% in 2023 to $241.3 million from $242.9 million in 2022. The decrease of
$1.6 million was primarily attributed to the decrease of $6.1 million in personnel costs and related expenses, mainly due to
a decrease in average headcount compared to the previous year and a decrease in other salary related expenses, such as
sales incentive commissions and a decrease of $2.2 million in fees paid to subcontractors. The decrease was partially offset
by an increase of $6.5 million in share-based compensation expenses
Research and Development Expenses, Net.
Research and development, or R&D, expenses, net consist primarily of salaries and related personnel expenses,
costs of subcontractors, and prototype expenses related to the design, development, quality assurance and enhancement of
our solutions, and depreciation of equipment purchased for the development and testing processes. All R&D costs are
expensed as incurred. We believe that continued investment in R&D is critical to attaining our strategic product objectives.
R&D expenses, net, were $74.7 million in 2024, a decrease of $7.9 million, or 10%, compared with R&D
expenses, net of $82.6 million in 2023. This decrease was primarily a result of: (1) a $5.2 million decrease in personnel
costs, mainly due to a decrease in average headcount compared to the previous year, (2) a $1.1 million decrease in amounts
paid to subcontractors, and (3) a decrease of $2.4 million in share-based compensation expenses (see also “Share-based
compensation expenses” below), partially offset by a $0.7 million increase in hosting fees.
R&D expenses, net, were $82.6 million in 2023, a decrease of $3.9 million, or 5%, compared with R&D expenses,
net of $86.6 million in 2022. This decrease was primarily a result of: (1) a $2.5 million decrease in personnel costs, mainly
due to a decrease in average headcount compared to the previous year, and (2) a $2.2 million decrease in amounts paid to
57
subcontractors, partially offset by a $1.2 million increase in share-based compensation expenses (see also “Share-based
compensation expenses” below).
Sales and Marketing Expenses.
Sales and marketing expenses consist primarily of salaries, commissions, and related personnel expenses for those
engaged in the sales and marketing of our products and services, operational costs of our offices that are located outside
Israel and are engaged in the promotion, marketing and support of our solutions, in addition to the related trade shows,
advertising, promotions, website maintenance, and public relations expenses, and amortization of intangible assets.
Sales and marketing expenses were $122.5 million in 2024, a decrease of $3.7 million, or 3%, compared with
sales and marketing expenses of $126.2 million in 2023. This decrease was mainly related to a decrease of $1.0 million in
personnel costs, due to a decrease in average headcount compared to the previous year, partially offset by an increase in
sales incentive commissions, a decrease of $1.7 million in share-based compensation expenses (see also “Share-based
compensation expenses” below) and a decrease of $1.0 million in marketing related costs.
Sales and marketing expenses were $126.2 million in 2023, a decrease of $0.3 million, or less than 1%, compared
with sales and marketing expenses of $126.5 million in 2022. This decrease was mainly related to a decrease of $3.6 million
in personnel costs, largely due to a decrease in average headcount compared to the previous year, and also a decrease in
other salary-related expenses, such as sales incentive commissions, partially offset by an increase of $2.0 million in
marketing-related expenses, and a $1.3 million increase in share-based compensation expenses (see also “Share-based
compensation expenses” below).
General and Administrative Expenses.
General and administrative expenses consist primarily of salaries and related personnel expenses for executive,
accounting, and administrative personnel, professional fees (which include legal, audit and additional consulting fees), bad
debt expenses, acquisition related costs, and other general corporate expenses.
General and administrative expenses were $28.3 million in 2024, a decrease of $4.1 million, or 13%, compared to
a general and administrative expenses of $32.4 million in 2023. The decrease in general and administrative expenses in
2024 was primarily due to (1) a $3.8 million decrease in share-based compensation expenses (see also “Share-based
compensation expenses” below), and (2) a decrease of $0.4 million related to revaluation of contingent consideration
recorded as part of the acquisition of the business of SecurityDAM.
General and administrative expenses were $32.4 million in 2023, an increase of $2.6 million, or 9%, compared
with general and administrative expenses of $29.8 million in 2022. The increase in general and administrative expenses in
2023 was primarily due to (1) a $4.0 million increase in share-based compensation expenses (see also “Share-based
compensation expenses” below), and (2) an increase of $0.3 million related to revaluation of contingent consideration
recorded as part of the acquisition of the business of SecurityDAM, partially offset by a $2.1 million decrease in
professional services due to lower D&O insurance costs and one time transaction costs we recorded in 2022, as part of the
acquisition of the business of SecurityDAM.
For a discussion of the impact of foreign currency fluctuations on our business, see Item 11 “Quantitative and
Qualitative Disclosures about Market Risk.”
Share-based compensation expenses.
Our expenses also include the recognition of share-based compensation, which is allocated among cost of sales,
research, and development expenses, sales and marketing expenses and general and administrative expenses, based on the
division in which the recipient of the option grant is employed. The share-based compensation is amortized to operating
expenses over the requisite service period of the individual options.
The following tables summarize the share options and restricted share units (RSUs) that were granted during the
years 2024, 2023, and 2022, and their weighted average grant-date fair value:
Share options:
2024
2023
2022
Grants
................................................................................................................
299,856
331,899
250,284
58
Weighted-average grant-date fair value
................................................................................................................
6.11
5.48
6.77
RSUs:
2024
2023
2022
Grants
...............................................................................................................
1,517,180 1,390,718 1,947,499
Weighted-average grant-date fair value
...............................................................................................................
21.49
15.82
21.31
Share-based compensation expenses in 2024 totaled $26.0 million, a decrease of $8.0 million, or 24%, compared
with expenses of $34.0 million in 2023. The decrease in our share-based compensation expenses in 2024 was mainly due
to RSU grants made at a lower weighted-average price granted towards the end of 2023, which resulted in recording lower
expenses in 2024 and lower expenses from the equity-based grants made to our Chief Executive Officer during 2022.
Share-based compensation expenses in 2023 totaled $34.0 million, an increase of $6.6 million, or 24%, compared
with expenses of $27.4 million in 2022. The increase in our share-based compensation expenses in 2023 was primarily due
to equity-based grants made to our Chief Executive Officer during 2022 and certain equity-based grants made to employees
of Skyhawk Security, our majority-owned subsidiary, during the last quarter of 2022, which resulted in recording higher
expenses in 2023.
Financial Income, Net.
Financial income, net consists primarily of interest earned on short- and long-term bank deposits, amortization of
premiums, accretion of discounts, interest and dividends earned on investments in marketable securities, gain from the sale
of marketable securities and from income and expenses from the translation of monetary balance sheet items denominated
in non-dollar currencies.
Financial income, net was $16.6 million in 2024, compared with $13.9 million in 2023. The net increase of $2.7
million was primarily due to higher average interest rates on our bank deposits, which resulted in a $3.9 million increase
in interest income and gains from our investments and bank deposits, partially offset by a $1.4 million decrease in foreign
currency exchange gains, mainly due to revaluation of balance sheet items stated in foreign currencies.
Financial income, net was $13.9 million in 2023, compared with $8.1 million in 2022. The net increase of $5.9
million was primarily due to higher average interest rates on our bank deposits, which resulted in a $7.0 million increase
in interest income and gains from our investments and bank deposits, partially offset by a $1.1 million decrease in foreign
currency exchange gains, mainly due to revaluation of liabilities stated in NIS.
Income Taxes.
Israeli companies are generally subject to corporate tax on their taxable income at the rate of 23% for the 2024,
2023, and 2022 tax years. We elected to apply the Preferred Enterprise regime under the Law for the Encouragement of
Capital Investment, 1959 (the “Investments Law”) as of the 2014 tax year. The election is irrevocable. Under the Preferred
Enterprise regime, a preferred income of an enterprise located in the center of Israel is subject to a tax rate of 16%. Pursuant
to Amendment 73 to the Investments Law adopted in 2017, a company located in the center of Israel that meets the
conditions for “Preferred Technological Enterprises” is subject to a tax rate of 12%. We believe we meet those conditions.
We operate our business in various countries and attempt to utilize an efficient operating model to optimize our
tax payments based on the laws in the countries in which we operate. This can cause disputes between us and various tax
authorities in different parts of the world.
In 2024, we recorded pre-tax income of $12.7 million as compared to pre-tax loss of $17.8 million in 2023, and
our tax expenses were $6.6 million in 2024, an increase of $2.8 million, or 73%, compared with tax expenses of $3.8
million in 2023. The increase in tax expenses was mainly attributed to the increase in our pre-tax income compared to the
previous year and to an increase in our uncertain tax positions provision.
In 2023, we recorded pre-tax loss of $17.8 million as compared to pre-tax income of $4.7 million in 2022, and our
tax expenses were $3.8 million in 2023, a decrease of $1.1 million, or 21%, compared with tax expenses of $4.9 million in
2022. The decrease was mainly attributed to the decrease in our pre-tax income (loss) compared to the previous year and
to a decrease in our uncertain tax positions provision.
59
For additional disclosure and explanations regarding our income taxes, including the Preferred Technology
Enterprise program, see Note 14 to our consolidated financial statements included elsewhere in this annual report and Item
10.E “Taxation—Israeli Tax Considerations.”
Reportable Segments
In previous reporting periods (until December 31, 2022), we operated in one reportable segment. Commencing
January 1, 2023, we have determined that the Company operates in two reportable segments:
•
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.
The following tables set forth, for the periods indicated, certain financial data concerning our reportable segments
(U.S. dollars in thousands):
Year ended
December 31, 2024
Radware
Core
Hawks
Total
Revenues
...............................................................................................................
$
274,384 $
496 $
274,880
Operating income (loss)
...............................................................................................................
$
9,749 $
(13,636) $
(3,887)
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)
60
Revenues of the Hawks’ reportable segment were immaterial during the years ended December 31, 2022 through
December 31, 2024; therefore, there is no separate discussion about revenues of each segment during those years. For a
discussion about the revenues on a consolidated basis, see Item 5.A “Operating Results.”
Operating expenses of the Hawks’ business consist primarily of salaries and related personnel expenses, costs of
subcontractors, agent fees and share-based compensation expenses.
Operating loss of the Hawks’ business was $13.6 million in 2024, $14.9 million in 2023 and $11.8 million in
2022.
The decrease of $1.3 million in the operating loss of the Hawks’ segment in 2024 compared to 2023 was primarily
a result of a decrease of $1.3 million in the share-based compensation expenses and a decrease of $0.5 million in costs of
subcontractors and agents. The decrease in expenses was partially offset by a decrease of $0.5 million in the segment’s
revenues.
The increase of $3.1 million in the operating loss of the Hawks’ segment in 2023 compared to 2022 was primarily
a result of an increase of $1.9 million in salaries and related personnel costs, mainly due to an increase in average headcount,
$1.6 million increase in share-based compensation expenses and a decrease of $2.0 million in revenues. This was partially
offset by a decrease of $1.7 million in costs of subcontractors and agents and a decrease of $0.5 million in hosting fees.
Operating expenses of the Radware core business segment consist primarily of salaries and related personnel
expenses including commissions paid to our sales team, marketing related expenses, hosting services fees, rent and office
maintenance fees, professional services, costs of subcontractors and share-based compensation expenses.
The operating income of the Radware core business segment was $9.7 million in 2024, compared to operating
loss of $16.8 million in 2023 and operating income of $8.4 million in 2022.
The change of $26.5 million in the operating income (loss) in 2024 compared to 2023 was primarily a result of
the increase of $14.1 million in the Radware core segment’s revenues, and a $5.1 million decrease in salaries and related
personnel costs, mainly due to the decrease in average headcount compared to the previous year, and a decrease of $6.7
million in share-based compensation expenses, mainly due to RSU grants made at a lower weighted-average price granted
towards the end of 2023, which resulted in lower expenses in 2024, and lower expenses from the equity-based grants made
to our Chief Executive Officer during 2022.
The operating loss of the Radware core business segment was $16.8 million in 2023, compared to operating
income of $8.4 million in 2022.
The change of $25.2 million in the operating income (loss) in 2023 compared to 2022 was primarily a result of
the decrease of $30.1 million in the Radware core segment’s revenues. This was partially offset by a decrease of $2.5
million in cost of sales and a $2.5 million decrease in salaries and related personnel costs, mainly due to the decrease in
average headcount compared to the previous year.
For additional details regarding these two reportable segments, see below and Notes 2ad and 15 to our consolidated
financial statements included elsewhere in this annual report.
Currency Fluctuations and Inflation
Our financial results may be negatively impacted by foreign currency fluctuations and inflation. Information
required by this section is set forth in Item 11 “Quantitative and Qualitative Disclosures about Market Risk” and in Item
3.D “Risk Factors—Currency exchange rates and fluctuations of exchange rates could have a material adverse effect on
our results of operations.”
Impact of Governmental Policies
For information on the impact of governmental policies on our operations, see Item 4.B “Business Overview—
Government Regulations,” Item 3.D “Risk Factors—Laws, regulations and industry standards affecting our business are
evolving, and unfavorable changes could harm our business,” and Item 3.D “Risk Factors—Risks Related to Operations in
Israel.”
Impact of Ukraine-Russia and Israel-Hamas Military Conflicts
61
Following Russia’s military conflict in Ukraine, the United States and other countries launched economic
sanctions and severe export control restrictions against Russia and Belarus, and the United States and other countries could
launch wider sanctions and export restrictions and take other actions should the conflict further escalate. For information
on the possible adverse impact of the Russia-Ukraine conflict, see Item 3.D “Risk Factors—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.”
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from Gaza and conducted a series of
attacks on civilian and military targets. In response, Israel’s security cabinet declared war against Hamas, and later against
Hezbollah. Hostilities subsequently escalated between Israel and a number of its other neighbors, including conflicts with
Hezbollah along Israel’s northern border with Lebanon, with Iran and with the Houthi movement in Yemen, who both
launched drone and missile attacks on military and civilian targets within Israel. In addition, the Houthi movement has
disrupted international commerce by launching a number of attacks on commercial vessels traversing the Gulf of Aden and
the Red Sea and, following the fall of the Assad regime in Syria, Israel has conducted limited military operations targeting
Syrian and Iranian military assets and infrastructure linked to Hezbollah and other Iranian-supported groups. These armed
conflicts may further escalate into a greater regional conflict and could adversely affect our business, operations and
financial results. However, to date, we have not experienced any major interruption or material adverse impact on our
business activities. For information on the possible adverse impact of the state of war declared in Israel in October 2023,
see Item 3.D Risk Factors—“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.”
Related Parties
We have entered into a number of agreements for the lease of real property and the purchase of certain products
and services from certain companies, of which the heirs of the late Yehuda Zisapel, the heirs of the late Zohar Zisapel,
and/or Nava Zisapel are co-founders, directors and/or shareholders, which form part of the RAD-Bynet Group. In February
2022, we also acquired the technology and operations of one of these RAD-Bynet Group entities, SecurityDAM. The heirs
of the late Yehuda Zisapel, including his son, Roy Zisapel, our President and Chief Executive Officer and a director, hold
all of the outstanding shares of SecurityDAM. Roy Zisapel also serves as a director of RAD Data Communications Ltd.,
Bynet Electronics Ltd., AB-NET Communications Ltd. and its wholly owned subsidiary, Bynet Data Centers Ltd., Bynet
Data Communications Ltd. (and its wholly owned subsidiary RAD Negev Ltd.), and other companies in the RAD-Bynet
Group.
We believe that the terms of the transactions in which we have entered with these member entities of the RAD-
Bynet Group are not different in any material respect from terms we could obtain from unaffiliated third parties and are
beneficial to us and no less favorable to us than terms that might be available to us from unaffiliated third parties. The
pricing of the transactions was determined based on negotiations between the parties. Members of our management
reviewed the pricing of the agreements and confirmed that they were not different in any material respect than that which
could have been obtained from unaffiliated third parties.
For more details about these transactions, see below under Item 7.B “Related Party Transactions.”
B.
Liquidity and Capital Resources
General
In the past several years, we have financed our operations primarily through cash generated by operations.
The total Radware Ltd. shareholders’ equity as a percentage of its total assets was 51% on December 31, 2024,
compared with 50% on December 31, 2023 and 52% on December 31, 2022.
Cash and cash equivalents, short- and long-term bank deposits and short- and long-term marketable securities
were $419.7 million on December 31, 2024, compared with $363.7 million and $432.0 million on December 31, 2023 and
2022, respectively.
Principal Capital Expenditures and Divestitures
Capital expenditures were $5.3 million, $5.4 million, and $8.8 million for the years ended December 31, 2024,
2023, and 2022, respectively. These expenditures were mainly comprised of investments in computers and peripheral
equipment, lab equipment and testing tools, office furniture and equipment and leasehold improvements.
62
In 2025, we anticipate that the majority of our capital expenditures will be primarily for additional infrastructure
to support our cloud-based solutions and for R&D testing, lab equipment and computers.
In May 2022, we announced the launch of SkyHawk Security, a spinoff of our former cloud-native Cloud Native
Protector business with a strategic external investment of an affiliate of Tiger Global Management (the “SkyHawk
Spinoff”).
Other than the SkyHawk Spinoff, we did not have any principal divestitures in the past three years.
Working Capital and Cash Flows
The following table presents the major components of net cash flows used in and provided by operating, investing,
and financing activities for the periods presented (dollars in thousands(:
2024
2023
2022
Net cash provided by (used in) operating activities
................................................................................................................
$
71,609 $
(3,500) $
32,148
Net cash provided by (used in) investing activities
................................................................................................................
(39,520)
92,779
(56,018)
Net cash used in financing activities
................................................................................................................
(3,913)
(64,926)
(22,458)
Net cash provided by (used in) operating activities for 2024, 2023 and 2023 was $71.6 million, $(3.5) million, and
$32.1 million, respectively. Our net income (loss) in 2024, 2023, and 2022 was $6.0 million, $(21.6) million, and $(0.2)
million, respectively.
Net cash provided by operating activities was $71.6 million for the year ended December 31, 2024, compared to
net cash used in operating activities of $3.5 million for the year ended December 31, 2023. The change resulted primarily
from an increase of $27.6 million in net income, an increase of $14.7 million in other payables and accrued expenses, an
increase of $20.5 million in deferred revenues, an increase of $6.6 million in accrued interest on bank deposits, an increase
of $5.6 million in inventories, an increase of $3.4 million in trade payables, and a $6.0 million increase in trade receivables.
These increases were partially offset by a decrease of $8.0 million in share-based compensation and a $2.2 million decrease
in amortization of premium, accretion of discounts and accrued interest on marketable securities.
Net cash used in operating activities was $3.5 million for the year ended December 31, 2023, compared to net
cash provided by operating activities of $32.1 million for the year ended December 31, 2022. The change resulted primarily
from an increase in our net loss of $21.4 million, a decrease of $0.8 million in accrued interest on bank deposits, a decrease
of $28.4 million in deferred revenues, a decrease of $4.3 million in inventories, and a decrease of $4.3 million in trade
payables. These decreases were partially offset by an increase of $12.6 million in other payables and accrued expenses, an
increase of $6.7 million in share-based compensation, an increase of $0.6 million in other assets and prepaid expenses, and
a $2.0 million increase in trade receivables.
Net cash used in investing activities was $39.5 million for the year ended December 31, 2024, compared to net
cash provided by investing activities of $92.8 million for the year ended December 31, 2023. The change was primarily
due to a net increase of $134.1 million in investments in short-term, long-term and other deposits.
Net cash provided by investing activities was $92.8 million for the year ended December 31, 2023, an increase of
$148.8 million compared to net cash used in investing activities of $56.0 million for the year ended December 31, 2022.
The change was primarily due to a net increase of $115.4 million in proceeds from short- and long-term deposits and
marketable securities, the non-recurrence of the $30.0 million acquisition payment related to SecurityDAM in 2022, and a
decrease of $3.4 million in capital expenditures.
Net cash used in financing activities was $3.9 million for the year ended December 31, 2024, a decrease of $61.0
million compared to net cash used in financing activities of $64.9 million for the year ended December 31, 2023. The
decrease in net cash used in financing activities was mainly attributed to the decrease of $62.4 million in repurchase of our
ordinary shares, partially offset by a $1.0 million increase in the contingent consideration paid to SecurityDAM.
Net cash used in financing activities was $64.9 million for the year ended December 31, 2023, an increase of $42.5
million compared to net cash used in financing activities of $22.5 million for the year ended December 31, 2022. The
increase in net cash used in financing activities was attributed to the non-recurrence of the $35.0 million proceeds from the
issuance of Preferred A shares in our subsidiary SkyHawk Security in 2022, the $2.1 million contingent consideration paid
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to SecurityDAM and an increase of $3.7 million in repurchase of our ordinary shares. In addition, proceeds from the
exercise of share options decreased by $1.7 million.
Cash and Cash Equivalents
As of December 31, 2024, we had cash and cash equivalents, including short- and long-term bank deposits and
short- and long-term marketable securities, of $419.7 million, compared to $363.7 million as of December 31, 2023 and
$432.0 million as of December 31, 2022. As of December 31, 2024, all of our short- and long-term bank deposits were
deposited in Israel with major Israeli banks, which are all rated AAA, as determined by S&P’s Maalot. As of December
31, 2024, the longest contractual duration of any of our bank deposits was 3.0 years, the weighted-average duration of our
deposits was 1.44 years, and the weighted average time to maturity was 1.12 years.
Our marketable securities portfolio includes investments in debt securities of corporations, debt securities of U.S.
government and in foreign banks and government debentures. The financial institutions that hold our marketable securities
are major U.S. financial institutions, located in the United States. As of December 31, 2024, 94% of our marketable
securities portfolio was invested in debt securities of corporations, 4% in debt securities of the U.S. government and 2% in
financial institutions. From a geographic perspective, 87% of our marketable securities portfolio was invested in debt
securities of U.S. issuers, 4% was invested in debt securities of European issuers and 9% was invested in debt securities of
other geographic-located issuers. As of December 31, 2024, 90% of our marketable securities portfolio was rated A- or
higher and 10% was rated BBB or BBB+, as determined by S&P.
There are no material legal restrictions, taxes, or other costs associated with transferring our funds held in U.S.
financial institutions to Israeli financial institutions, and we have access to all of our cash as needed for our operations.
Although we have various subsidiaries throughout the world, there are no material legal, tax, or other cost impediments to
our transferring cash to these subsidiaries for operations as and when needed or to such subsidiaries transferring cash to us
to meet our own cash obligations. Further, we believe we generate sufficient cash from our Israeli operations to fund our
operating and capital requirements and, therefore, do not need or intend to repatriate any of the earnings of our foreign
subsidiaries.
Other Material Contractual Obligations
The following table summarizes our material contractual obligations as of December 31, 2024 and the effect those
commitments are expected to have on our liquidity and cash flow.
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)
.....................................................................
19,540
5,029
7,558
5,690
1,263
Total contractual cash obligations (2)
.....................................................................
19,540
5,029
7,558
5,690
1,263
* Become due during 2025.
(1) Consists of outstanding operating leases for the Company’s facilities. The lease agreements expire in the years
2025 to 2030, although certain of our leases have renewal options.
(2) Severance payments of $4.3 million are payable only upon termination, retirement, or death of the respective
employee, and there is no obligation for benefits accrued prior to 2007 if the employee voluntarily resigns. Since we are
unable to reasonably estimate the timing of settlement, such payments are not included in the table. See also Note 2(x) of
our consolidated financial statements.
Market Risk
We are exposed to market risk, including fluctuations in interest rates and foreign currency exchange rates.
Additional information about market risk is set forth in Item 11 “Quantitative and Qualitative Disclosures about Market
Risk.”
Outlook
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Our capital requirements depend on numerous factors, including market acceptance of our products and services
and the resources we allocate to our operating expenses. Since our inception, we have experienced substantial increases in
our expenditures consistent with growth in our operations and personnel, and we may increase our expenditures in the
foreseeable future in order to execute our strategy.
We anticipate that operating activities as well as capital expenditures will demand the use of our cash resources.
We believe that our cash balances will provide sufficient cash resources to finance our operations and the projected
marketing and sales activities and research and development efforts and other elements of our strategy for a period of no
less than the next 12 months.
C.
Research and Development, Patents and Licenses, etc.
In order to accommodate the rapidly changing needs of our markets, we place considerable emphasis on research
and development projects designed to improve our existing product lines, develop new product lines and customize our
products to meet our customers’ needs. As of December 31, 2024, we had 378 employees and 71 subcontractors engaged
primarily in research and development activities, compared to 408 employees and 71 subcontractors at the end of 2023,
and 419 employees and 75 subcontractors at the end of 2022. For a further discussion of research and development, see
Item 5.A “Operating Results.”
For a discussion regarding the benefits provided under programs of the IIA, see Item 4.B “Business Overview—
Israeli Innovation Authority.”
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D.
Trend Information
General
We have identified the following key trends and uncertainties that we believe will materially influence our market,
financial condition and the demand for our solutions:
•
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, new AI-datacenters processing AI-enabled front-ends, 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. The second wave of remote and automated trade is boosted mainly by the “API
economy” (a term used to describe that all of the enterprise communication is built on top of the APIs
and all platforms expose the APIs to exchange data, thereby exposing them to cyber attacks) where both
B2B and B2C transactions are using machines for trade automations. 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.
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•
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. We have
also observed a new generation of availability attacks against application infrastructure utilizing new
generation of Web/L7 DDoS tools that aim to evade all network DDoS/L3-4 protections. 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 cybersecurity 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 believe that our business, comprised of application security and delivery solutions, is positioned to effectively
navigate the headwinds resulting from the above-mentioned industry dynamics due to the following key factors:
•
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 believe that the advantages of our offerings, coupled with the above-mentioned industry dynamics and trends,
place us in a position to meet our business plans. Nevertheless, meeting our business plans and implementing our growth
strategy, as more fully described under Item 4.B “Business Overview–Our Growth Strategy” above, may not convert into
revenues growth in a given period, due to our shift towards subscription-based product sales, where revenues are recognized
throughout the subscription period.
In addition, while we believe that the above trends may present some opportunities for us, they also pose
significant challenges, risks, and uncertainties, including the following:
•
We operate in a highly competitive environment, and some of our competitors have larger internal
resources, and a larger installed base.
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•
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.”
State of War in Israel Update
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from Gaza and conducted a series of
attacks on civilian and military targets. In response, Israel’s security cabinet declared war against Hamas, and later against
Hezbollah. Hostilities subsequently escalated between Israel and a number of its other neighbors, including conflicts with
Hezbollah along Israel’s northern border with Lebanon, with Iran and with the Houthi movement in Yemen, who both
launched drone and missile attacks on military and civilian targets within Israel. In addition, the Houthi movement has
disrupted international commerce by launching a number of attacks on commercial vessels traversing the Gulf of Aden and
the Red Sea and, following the fall of the Assad regime in Syria, Israel has conducted limited military operations targeting
Syrian and Iranian military assets and infrastructure linked to Hezbollah and other Iranian-supported groups. While a
ceasefire between Israel and Lebanon (with respect to Hezbollah) was recently announced, the recently announced ceasefire
between Israel with Hamas did not last and hostilities could also break out in Lebanon and it is possible that other ongoing
conflicts in the region, including cyber attacks, will eventually escalate into a greater regional conflict, including the
potential for war between Israel and Iran, and that other countries and non-state organizations will join or escalate their
involvement in such hostilities. Circumstances are evolving, and the intensity and duration of any regional hostilities is
difficult to predict, as are their impacts on our business and operations. Prolonged and/or heightened instability could
adversely impact our business, financial condition and results of operations in the future.
We could be adversely affected by any major hostilities, including acts of terrorism as well as cyber-attacks or
any other hostilities involving or threatening Israel, the interruption or curtailment of trade between Israel and its trading
partners, a significant downturn in the economic or financial condition of Israel, or a significant increase in the rate of
inflation. For example, in September 2024, in connection with the October 2023 war, Moody’s Investors Service (Moody’s)
downgraded the Government of Israel’s foreign-currency and local-currency issuer ratings to BAA1 from A2, and in
October 2024, S&P global downgraded Israel long-term ratings to A from A+ Other global rating agencies may take similar
actions. Such downgrades might adversely affect the macroeconomic conditions in which we operate and also potentially
deter foreign investment in Israel or Israeli companies, which may, among other things, hinder our ability to raise additional
funds, if deemed necessary by our management and Board of Directors.
Furthermore, some neighboring countries, as well as certain companies, organizations and movements, continue
to participate in a boycott of Israeli firms and others doing business with Israel or with Israeli companies. In the past
several years, and with greater intensity commencing with the October 2023 war, there have been increased efforts by
activists, influenced by actions of international judicial bodies, to cause companies and consumers to boycott Israeli goods,
services, and academic research or restrict business with Israel, which could affect business operations. Similarly, Israeli
companies are limited in conducting business with entities from several countries. Restrictive laws, policies or practices
directed towards Israel or Israeli businesses could have an adverse impact on our operating results, financial condition or
the expansion of our business.
In addition, some of our officers and employees are, unless exempt, obligated to perform annual military reserve
duty, depending upon their age and prior position in the army. They may also be subject to being called to active duty at
any time under emergency circumstances. For example, in connection with the state of war declared in Israel in October
2023, certain of our employees and consultants in Israel were called to perform immediate military service and additional
employees may be called as these armed conflicts progress. Our operations could be disrupted by the absence, for a
significant period, of one or more of these officers or other key employees due to military service, and any disruption in
our operations could harm our business.
E.
Critical Accounting Estimates
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In many cases, the accounting treatment of a particular transaction is specifically dictated in U.S. GAAP and does
not require management’s judgment in its application. There are also areas in which management’s judgment in selecting
among available alternatives would produce a materially different result. Our management has reviewed these critical
accounting policies and related disclosures with the Audit Committee of our Board of Directors (the “Audit Committee”).
See Note 2 to our consolidated financial statements included elsewhere in this annual report, which contains additional
information regarding our accounting policies and other disclosures required by U.S. GAAP.
Our management believes that the significant accounting policies that affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements and that are the most critical to aid in fully
understanding and evaluating our reported financial results include the following:
•
Revenue recognition;
•
Investment in marketable securities;
•
Business combinations;
•
Goodwill and impairment of long-lived assets;
•
Share-based compensation; and
•
Income taxes.
Revenue Recognition. We recognize revenues in accordance with Accounting Standards Codification (ASC) No.
606, “Revenue from Contracts with Customers.” As such, we identify a contract with a customer, identify the performance
obligations in the contract, determine the transaction price, allocate the transaction price to each performance obligation in
the contract and recognize revenues when (or as) we satisfy a performance obligation.
The transaction price is determined based on the consideration which we expect to be entitled to in exchange for
transferring the promised goods or services to our customer. This transaction price is exclusive of amounts collected on
behalf of third parties, such as sales tax and value-added tax. Payment terms and conditions vary by contract type, although
terms generally include a requirement to pay within less than a year.
Our solutions are sold primarily through distributors and resellers, all of which are considered end-users.
Our arrangements typically contain various combinations of our products, subscriptions and PCS, which are
distinct and are accounted for as separate performance obligations. We allocate the transaction price to each performance
obligation based on its relative standalone selling price (“SSP”). If the SSP is not observable, we estimate the SSP taking
into account available information such as geographic specific factors, customer grouping and internally approved historical
pricing guidelines related to the performance obligation. For PCS and subscriptions, we determine the standalone selling
price based on observable renewals prices or standalone subscription transactions. For products, the SSP is not observable,
and therefore, we estimate the product SSP taking into account available information such as geographic specific factors,
customer grouping and internally approved historical pricing guidelines.
Deferred revenues represent mainly the unrecognized revenue collected for subscriptions and for PCS. Such
revenues are recognized ratably over the term of the related agreement and are classified as short- and long-term based on
their contractual term.
We record a provision for estimated sale returns, credits and stock rotation granted to customers on our products
in the same period that the related revenues are recorded in accordance with ASC 606. Those estimates are based on
historical sales returns and other factors known to us. Such provisions amounted to $5.3 million and $3.3 million as of
December 31, 2024 and 2023, respectively.
Investment in Marketable Securities. We account for investments in marketable securities in accordance with
Accounting Standards Codification, or ASC 320, “Investments – Debt Securities.” Management determines the appropriate
classification of our investments at the time of purchase and reevaluates such determinations at each balance sheet date.
We classified all our debt securities as available-for-sale marketable securities. Debt securities are carried at fair
value, with the unrealized gains and losses reported in “accumulated other comprehensive income (loss)” in shareholders’
equity, except for changes in allowance for expected credit losses, which is recorded in financial income, net. Realized
69
gains and losses on sales of investments are included in financial income, net and are derived using the specific
identification method for determining the cost of securities.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization together with interest on securities are included in financial income, net.
We periodically evaluate our available-for-sale debt securities for impairment. If the amortized cost of an
individual security exceeds its fair value, we consider our intent to sell the security or whether it is more likely than not
that we will be required to sell the security before recovery of its amortized basis. If either of these criteria are met, we
write down the security to its fair value and record the impairment charge in financial income, net in our consolidated
statements of income (loss). If neither of these criteria are met, we determine whether credit loss exists. Credit loss is
estimated by considering changes to the rating of the security by a rating agency and any adverse conditions specifically
related to the security, as well as other factors. Credit loss impairments for both the years ended December 31, 2024 and
2023 were immaterial.
Business Combinations. We account for business combinations in accordance with ASC No. 805, "Business
Combinations" ("ASC 805"). Under ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of
a Business” (“2017-01”), we first determine whether substantially all of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single asset
or group of assets, as applicable, is not a business.
ASC No. 805 requires allocations of tangible assets acquired, liabilities assumed and intangible assets acquired
based on their estimated fair values. Any excess of the fair value of purchase consideration over the fair values of these
identifiable assets and liabilities is recorded as goodwill.
When we acquire a business, the purchase price is allocated to the tangible and identifiable intangible assets, net
of liabilities assumed. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires
management to make significant estimates in determining the fair values of assets acquired and liabilities assumed,
especially with respect to intangible assets. We use the Discounted Cash Flow Method to assign fair values to acquired
identifiable intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to
generate in the future, forecasted future revenue, forecasted operating results, discount rates and the appropriate weighted-
average cost of capital. These estimates are inherently uncertain and unpredictable.
These models are based on reasonable estimates and assumptions given available facts and circumstances,
including industry estimates and averages, as of the acquisition dates and are consistent with the plans and estimates of
management.
During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair
value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding
offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired
or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to in our consolidated statements
of income (loss).
Goodwill and impairment of long-lived assets. Goodwill represents the excess of the purchase price in a business
combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350 “Intangibles – Goodwill
and Other” (ASC 350), goodwill is not amortized, but rather is subject to an annual impairment test. ASC 350 requires
goodwill to be tested for impairment at least annually or between annual tests in certain circumstances and written down
when impaired. Goodwill is tested for impairment by comparing the fair value of each reporting unit with its carrying value.
ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform a
quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of
impairment, no further impairment testing is required. If the entity elects not to use this option, or if the entity determines
that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the entity prepares a
quantitative analysis to determine whether the carrying value of a reporting unit exceeds its estimated fair value. If the
carrying value of a reporting unit exceeds its estimated fair value, the entity recognizes an impairment of goodwill for the
amount of this excess.
In previous reporting periods (until December 31, 2022), we operated in one reportable segment. Commencing
January 1, 2023, we have determined that the Company operates in two reportable segments. We conduct our annual test
of impairment for goodwill on December 31 of each year, or more frequently if impairment indicators are present. No
impairment loss was recorded during each of 2024, 2023, and 2022.
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Share-based compensation. We account for share-based compensation in accordance with ASC 718,
“Compensation-Stock Compensation” (ASC 718). ASC 718 requires companies to estimate the fair value of equity-based
payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately
expected to vest is recognized as an expense over the requisite service periods in our consolidated statements of income
(loss).
Some of our subsidiaries have share option plans pursuant to which qualified directors and employees may be
granted options for the purchase of securities of the subsidiaries. Share-based compensation expenses recorded on the
subsidiaries' level are presented in non-controlling interests.
We recognize compensation expenses for the value of our awards based on the accelerated attribution method
over the requisite service period of each of the awards, net of estimated forfeitures. Forfeitures are estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures
are based on actual historical pre-vesting forfeitures.
We selected the Black-Scholes-Merton option pricing model to account for the fair value of our share-options
awards with only service conditions and whereas the fair value of the RSUs awards is based on the market value of the
underlying shares at the date of grant.
During 2020, the Board of Directors of the Company approved a market-condition based RSUs equity grant to the
Chief Executive Officer of the Company. The vesting of the market-condition based RSUs granted during 2020 is
dependent upon the Company’s share performance over the requisite service period.
On July 28, 2022, our shareholders approved an equity grant to the Chief Executive Officer of the Company,
which is comprised of RSUs, market-condition based RSUs and market-condition based share options. The equity grant
includes grants for the years 2022, 2023, and 2024 and are fixed monetary amounts ($7,725, $5,000, and $5,000,
respectively).
Market-condition based RSUs’ vesting is dependent upon the fulfillment of certain market conditions and will
vest, or partially vest, depending on the Company's share performance compared to other companies that are listed on the
NASDAQ CTA Cybersecurity Index over the requisite service period, which is up to three years.
Market-based condition share options’ vesting is dependent upon the fulfillment of certain market conditions and
will vest depending on the Company's share performance over the requisite service period, which is up to three years.
The fair value of the market-condition based awards was determined using a Monte Carlo simulation methodology.
The option-pricing model requires a number of assumptions, of which the most significant are the expected stock
price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price
movements over a historical period equivalent to the option’s expected term. The expected option term represents the period
of time that options are expected to be outstanding. Expected term of options is based on historical experience. The risk-
free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. We have historically not paid
dividends and have no foreseeable plans to pay dividends.
Income Taxes. We account for income taxes in accordance with ASC 740, “Income Taxes.” This statement
prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based
on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance, if
necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all
of the deferred tax assets will not be realized.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The
first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available
evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be
sustained on audit, including resolution of any related appeals or litigation processes. The second step is only addressed if
the first step has been satisfied (i.e., the position is more likely than not to be sustained), otherwise a full liability in respect
of a tax position not meeting the more likely than not criteria is recognized. The second step is to measure the tax benefit
as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We accrue interest and penalty,
if any, that are related to unrecognized tax benefits in taxes on income. Although we believe we have adequately reserved
for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.
71
We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, the
refinement of an estimate or changes in tax laws. To the extent that the final tax outcome of these matters is different than
the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination
is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are
considered appropriate, as well as the related interest and penalties.
Accounting for tax positions requires judgments, including estimating reserves for potential uncertainties. We also
assess our ability to utilize tax attributes, including those in the form of carryforwards for which the benefits have already
been reflected in the financial statements. We do not record valuation allowances for deferred tax assets that we believe are
more likely than not to be realized in future periods. While we believe the resulting tax balances as of December 31, 2024
and 2023 are appropriately accounted for, the ultimate outcome of such matters could result in favorable or unfavorable
adjustments to our consolidated financial statements and such adjustments could be material. See Note 14 to our
consolidated financial statements included elsewhere in this annual report for further information regarding income taxes.
We have filed or are in the process of filing local and foreign tax returns that are subject to audit by the respective tax
authorities. The amount of income tax we pay is subject to ongoing audits by the tax authorities, which often result in
proposed assessments. See “Results of Operations—Income Taxes” above.
While we believe that we have adequately provided for any reasonably foreseeable outcomes related to tax audits
and settlement, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the
period the assessments are made or resolved, audits are closed or when statutes of limitation on potential assessments
expire.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
The following table lists our current directors and senior management:
Name
Age
Position
Yuval Cohen (1)(2)
................................................
62
Chairperson of the Board of Directors
Yair Tauman (1)(2)(3)(4)
................................................
76
Director
Stanley B. Stern (2)(4)(6)(7)
................................................
67
Director, Chairperson of the Nomination and Corporate Governance Committee
Naama Zeldis (2)(3)(4)(5)
................................................
61
Director, Chairperson of the Audit Committee
Meir Moshe (2)(3)(5)(7)
................................................
70
Director, Chairperson of the Compensation Committee
Israel Mazin (2)(6)(7)
................................................
65
Director
Alex Pinchev (2)(6)
................................................
74
Director
Roy Zisapel (5)
................................................
54
President, Chief Executive Officer and Director
Guy Avidan
................................................
62
Chief Financial Officer
Yoav Gazelle
................................................
55
Chief Business Officer
David Aviv
................................................
69
Chief Technology Officer
Gabi Malka
................................................
49
Chief Operating Officer
Sharon Trachtman
................................................
56
Chief Marketing Officer
Riki Goldriech
................................................
48
Chief People Officer
(1)
Term as director expires at the annual meeting of shareholders to be held in 2027.
72
(2)
Qualified as an independent director, as determined under the Nasdaq rules.
(3)
Serves on the Compensation Committee of the Board of Directors (the “Compensation Committee”).
(4)
Serves on the Audit Committee.
(5)
Term as director expires at the annual meeting of shareholders to be held in 2025.
(6)
Term as director expires at the annual meeting of shareholders to be held in 2026.
(7)
Serves on the Nomination and Corporate Governance Committee of the Board of Directors (the “Nomination and
Corporate Governance Committee”).
Yuval Cohen has served as Chairperson of our Board of Directors since November 2023 and as a member of our
Board of Directors since December 2021. He is the founding and managing partner of Fortissimo Capital, a private equity
fund headquartered in Israel, which was established in 2004. From 1997 through 2002, Mr. Cohen was a General Partner
at Jerusalem Venture Partners, an Israeli-based venture capital fund, and prior thereto, he held executive positions at various
Silicon Valley companies, including DSP Group, Inc. (Nasdaq: DSPG) and Intel Corporation (Nasdaq: INTC). Currently,
Mr. Cohen serves as the chairman of the board of directors of Kornit Digital Ltd. (Nasdaq: KRNT) and as the Chairman of
Cellcom Israel Ltd. (TASE: CEL). He also serves on the board of directors of several privately-held portfolio companies
of Fortissimo. Mr. Cohen holds a B.Sc. degree in industrial engineering from the Tel Aviv University and an M.B.A. from
Harvard University.
Yair Tauman has served as a member of our Board of Directors since October 2010. He is the Vice Dean of the
Adelson School of Entrepreneurship at Reichman University in Herzliya, Israel and was previously the Dean of the Arison
School of Business at Reichman University. He is also a Leading Professor of Economics and the Director of the Stony
Brook Center for Game Theory, New York. He was a professor at Tel Aviv University for 25 years until 2009 and, prior
thereto, served as a professor at the Kellogg School of Management at Northwestern University. His areas of research
include game theory and industrial organization. Professor Tauman currently serves on the board of directors of other
private companies from different sectors, including online auctions, social networking and fintech. Professor Tauman
obtained his Ph.D. and M.Sc. degrees in mathematics as well as a B.Sc. in mathematics and statistics from The Hebrew
University, Israel.
Stanley B. Stern has served as a member of our Board of Directors since September 2020. Mr. Stern is currently
the chairman of the board of directors of AudioCodes Ltd. (Nasdaq, TASE: AUDC) (AudioCodes), a leading vendor of
advanced communications software, products and productivity solutions for the digital workplace, serves as the lead
director of Ormat Technologies, Inc. (NYSE: ORA) and is a director on the Board of Directors of Tigo Energy, Inc.
(Nasdaq: TYGO). He previously served as a member of the board of directors of Ekso Bionics Holdings, Inc. (Nasdaq:
EKSO) from 2014 until 2023. Since 2013, Mr. Stern has served as the president of Alnitak Capital, a strategic advisory
firm, engaged primarily in high-tech, alternative energy and healthcare. Previously, from 1982 until 2000 and from 2004
until 2013, Mr. Stern served in various positions at Oppenheimer & Co., including as a Managing Director and Head of
Investment Banking, Technology, Israeli Banking and FIG. From 2002 until 2004, he was a Managing Director and the
Head of Investment Banking at C.E. Unterberg, Towbin. From January 2000 until January 2002, Mr. Stern was the
President of STI Ventures Advisory USA Inc., a venture capital firm focusing on technology investments. In the past, Mr.
Stern was a board member of several public and private companies, including Given Imaging Ltd. and Fundtech Ltd., and
the chairman of the boards of directors of Tucows, Inc. and of SodaStream International Ltd., until its sale to Pepsico in
December 2018. Mr. Stern holds a B.A. degree in economics and accounting from City University of New York, Queens
College, and an M.B.A. from Harvard University.
Naama Zeldis has served as a member of our Board of Directors since September 2020. Ms. Zeldis served as the
Chief Executive Officer of Aquarius-Spectrum Ltd., a private company specializing in innovative solutions for monitoring
urban water pipes and detecting hidden leaks from the earliest stage, until January 2023. Formerly, Ms. Zeldis served as
Chief Financial Officer for a variety of high-tech and industrial companies, such as Tahal Group from 2013 to 2020,
Netafim Ltd. from 2005 to 2013, the Israeli subsidiary of Electronic Data Systems from 2001 to 2005 and Radguard Ltd.,
formerly with the RAD-Bynet Group, from 1999 to 2001. Ms. Zeldis currently serves on the board of directors of Electra
Real Estate Ltd. (TASE: ELCRE), a global real estate private equity firm, Orbit Technologies Ltd. (TASE: ORBI), a
company specializing in satellite communications, tracking systems, airborne communication and audio managements
solutions, ZOOZ POWER Ltd. (NASDAQ and TASE: ZOOZ), a leading provider of Flywheel-based power boosting and
power management solutions, enabling ultra-fast multi ports charging infrastructure for electric vehicles (EV), Scodix Ltd.
(TASE: SCDX), a leading provider of digital print enhancement presses, and Aquarius Engines (A.M.) Ltd. (TASE:
AQUA), a developer of a Free Piston Linear Engine. Ms. Zeldis has also served as a member of the boards of directors of
several other companies, including Nova Measuring Instruments Ltd. (Nasdaq: NVMI), Rafael Advanced Defense Systems
Ltd. and Metalink Ltd. She holds a B.A. degree in accounting from the Tel Aviv University and a B.A. degree in economics
and an M.B.A. from the Hebrew University in Jerusalem.
73
Meir Moshe has served as a member of our Board of Directors since May 2022. Mr. Moshe has held senior
positions in the financial sector over the past four decades, including as our Chief Financial Officer from 1999 to 2016 and
as our interim Chief Financial Officer from June 2021 to February 2022. Mr. Moshe has served as a director and member
of the audit committee in multiple public companies, including Otonomo Technologies Ltd. (Nasdaq: OTMO) from 2022
to 2023, Ability Inc. (Nasdaq: ABIL) from 2016 to 2017, Carasso Motors Ltd. (TASE: CRSM) from 2018 to 2019 and
Albert Technologies Ltd. (LSE: ALB) from 2018 to 2019. He currently provides consulting services to public companies.
He holds a B.Sc. degree in economics and accounting from Tel Aviv University, Israel and is a certified public accountant.
Israel Mazin has served as a member of our Board of Directors since October 2023. Mr. Mazin is the Chairman,
CEO and Co-Founder of MEMCYCO (Memco-Cyber-Corporation), a Digital-Watermark Authentication technology for
B2B and B2C online communication, since 2021. Prior to that, Mr. Mazin was a founding member of several technology
companies, including OpTier, an APM market leader that was acquired by SAP in 2015, and Memco Software, a security
software company that went public on Nasdaq and was later acquired by Platinum Technology. Mr. Mazin also co-founded
Shadow Technologies, a non-profit company that consolidates crowd opinion online reviews. Mr. Mazin is also an active
investor in real estate, high tech, and bio-tech startups. In 2018, Mr. Mazin received an honorary degree from the Holon
Institute of Technology.
Alex Pinchev has served as a member of our Board of Directors since November 2023. Mr. Pinchev has held
numerous leadership and board positions across several high-tech companies throughout his career, including, most
recently, as the Chairman of Flicent, Inc. and as a board member in several private companies, including SuSe S.A.,
StackState B.V. and Velotix Ltd. He previously served as an Executive Vice President and president of global sales,
services, and field marketing of Red Hat, Inc. from 2003 to 2012 and as an Executive Vice President and president of global
sales and marketing of Rackspace Limited (NASDAQ: RXT) from 2016 to 2017. He also served as the CEO of Acronis
from 2012 to 2013. He was a board member of several public companies, including Quantum Corporation (NYSE: QMCO)
and BMC Software, Inc. (NYSE: BMC). He currently serves on the boards of several privately owned companies and
continues to advise and invest in startups and firms seeking global expansion through Capri Ventures, an early-stage fund
that he founded. Mr. Pinchev holds a Masters degree in applied mathematics and computer science from the ITMO
University in St. Petersburg, Russia.
Roy Zisapel, co-founder of our Company, has served as our President and Chief Executive Officer and a director
since our inception in May 1996. Mr. Zisapel also serves as a director of Radware Inc. and other subsidiaries. From 1996
to 1997, Mr. Zisapel was a team leader of research and development projects for RND Networks Ltd. From 1994 to 1996,
Mr. Zisapel was employed as a software engineer for unaffiliated companies in Israel. Currently, Mr. Zisapel serves on the
board of directors of Israel Acquisitions Corp (NASDAQ: ISRL). Mr. Zisapel also serves as a director of also serves as a
director of RAD Data Communications Ltd., Bynet Electronics Ltd., AB-NET Communications Ltd. and its wholly owned
subsidiary, Bynet Data Centers Ltd., Bynet Data Communications Ltd. (and its wholly owned subsidiary RAD Negev Ltd.),
and other companies in the RAD-Bynet Group. Mr. Zisapel has a B.Sc. degree in mathematics and computer science from
Tel Aviv University, Israel.
Guy Avidan has served as our Chief Financial Officer since February 2022. Prior to joining Radware, he was
with Kornit Digital (NASDAQ: KRNT), where he served as President at KornitX from November 2020 to November 2021
and as Chief Financial Officer from November 2014 to November 2020, in which role he led Kornit to its initial public
offering on Nasdaq. Prior to joining Kornit Digital, Mr. Avidan was Vice President of Finance and Chief Financial Officer
at AudioCodes (NASDAQ: AUDC). In addition, Mr. Avidan has 15 years of experience serving in various other executive
capacities, including co-President and Chief Financial Officer at MRV Communications, Inc. (NASDAQ: MRVC), as well
as Vice President of Finance and Chief Financial Officer at Ace North Hills, which was acquired by MRV Communications.
Mr. Avidan is a certified public accountant and holds a B.A. degree in economics and accounting from Haifa University in
Israel.
Yoav Gazelle has served as our Chief Business Officer since January 2022 and as our Vice President, International
Sales since January 2019. Prior to that, Mr. Gazelle served as our Vice President, EMEA & CALA from June 2013 to
January 2019. Prior to joining Radware, between 2000 and 2013, Mr. Gazelle held a variety of sales, marketing and business
development positions in ECI Telecom Ltd., including President, Head of Europe and the Americas from January 2012 to
March 2013. Mr. Gazelle holds a B.Sc. degree in electrical and electronic engineering from the Technion – The Israeli
Institute of Technology, Israel.
David Aviv has served as our Chief Technology Officer since 2016 and as our Vice President, Advanced Services,
since 2004. Mr. Aviv oversees the technology strategy for the Company’s solutions for enterprise, carrier and cloud
solutions and is involved in researching and developing key algorithms and concepts that will guide the direction of the
74
Company’s future solutions. Prior to joining Radware, he was the VP of Engineering at Ofek, an Israel-based ILEC and a
senior consultant. Prior to that, until 2000, Mr. Aviv served in the Israeli Air Force as a senior technical leader. He also
serves as the Technical Chairman of the Israeli Telecom Standards Body committee. Mr. Aviv holds a Ph.D. degree in
Electrical Engineering (EE) from the Naval Postgraduate School in Monterey, California, a B.S. degree in Electrical
Engineering from Ben-Gurion University and a M.S. degree in Electrical Engineering from Tel Aviv University, Israel.
Gabi Malka has served as our Chief Operating Officer since March 2014. Mr. Malka oversees product
management, research & development, cloud services, and customer support. From May 2005 to February 2014, Mr. Malka
served as Vice President of Research & Development at HP Software (formerly Mercury). Prior to HP Software, from 2000
to 2005, Mr. Malka served as Vice President of Research & Development of AppStream (acquired by Symantec). Prior to
AppStream, from 1998 to 2000, Mr. Malka directed Research & Development at Amdocs Limited. Mr. Malka holds a B.A.
from American InterContinental University and has furthered his post-graduate education at Tel Aviv University (Lahav
Business School) and Harvard Business School.
Sharon Trachtman has served as our Chief Marketing Officer since February 2021. In parallel she continues to
serve as our Chief Business Operation Officer. Ms. Trachtman has been with our Company since its start of operations in
1997. Since September 1997, she has held various senior positions in Radware, such as Product Management Vice President
and Marketing Vice President. From November 1994 to September 1997, Ms. Trachtman was a product line marketing
manager for Scitex Corporation. Ms. Trachtman holds a B.A. degree in computer science and philosophy from Bar-Ilan
University, Israel.
Riki Goldriech has served as our Global VP HR since 2016 and as our Chief People Officer since 2022. Ms.
Goldriech brings more than 13 years of human resources experience to her role. Prior to Radware, Ms. Goldriech managed
the human resources function at Hewlett-Packard Enterprise (HPE) Software in Israel. Ms. Goldriech has also held multiple
human resources posts at HPE Israel. Ms. Goldriech holds a B.Sc. degree in computer science and logistics-economics and
an MBA from Bar-Ilan University.
Additional Information
Under Nasdaq requirements, a majority of the members of our Board of Directors are required to be “independent”
as defined under the Nasdaq rules. We currently satisfy this requirement because seven of our eight directors qualify as
“independent directors” under the Nasdaq rules.
On March 10, 2024, Yehuda Zisapel, a co-founder and shareholder of the Company who served as a member of
our Board of Directors since our inception in May 1996 and as Chairperson of our Board of Directors from May 1996 until
August 2006 and again from November 2009 until November 2023, passed away. Roy Zisapel, our President, Chief
Executive Officer and director, is the son of Nava Zisapel, who is one of our major shareholders, and the late Yehuda
Zisapel. There are no other family relationships between any of the directors or members of senior management named
above.
We are not aware of any arrangements or understandings with major shareholders, customers, suppliers or others,
pursuant to which (1) any person referred to above was selected as a director or member of senior management or (2) any
director will receive compensation by a third party in connection with his or her candidacy or board service in the Company.
B.
Compensation
General
Our objective is to attract, motivate and retain highly skilled personnel who will assist Radware to reach its
business objectives, performance and the creation of shareholder value and otherwise contribute to our long-term success.
Our compensation policy for our executive officers and directors, or the Compensation Policy, which is approved by our
shareholders, is designed to correlate executive compensation with our objectives and goals.
75
The following table sets forth all salaries, fees, commissions and bonuses and pension retirement and other similar
benefits we paid or accrued with respect to all of our directors and officers as a group for the 2024 fiscal year. The table
does not include any amounts we paid to reimburse any of our affiliates for costs incurred in providing us with services
during such period.
Salaries, fees,
commissions
and bonuses
Pension,
retirement
and other
similar
benefits
2023 – All directors and officers as a group, consisting of 15 persons*
..............................................................................................................................
.............................................................................................................................. $
2,419,283
$
475,235
2024 – All directors and officers as a group, consisting of 14 persons**
.............................................................................................................................. $
3,067,952
$
488,356
* Includes one person who served as our director in 2023 and is no longer serving on our Board of Directors and two
directors who were appointed during 2023.
** Includes one person who served as our director in 2024 and is no longer serving on our Board of Directors.
During 2024, we granted to our directors and officers listed in Item 6.A “Directors, Senior Management and
Employees” in the aggregate, 322,177 RSUs at a weighted average grant date fair value per RSU of $18.66 and options to
purchase 299,856 ordinary shares at a weighted average exercise price per share of $19.04. The options expire 62 months
after grant. The weighted-average grant date fair value of these options was $6.11 per option.
For a discussion of the accounting method and assumptions used in valuation of such share-based compensation,
see Note 2(t) to our consolidated financial statements included elsewhere in this annual report. See also Item 6.E “Share
Ownership.”
For a discussion of the compensation granted to our five most highly compensated executive officers during 2024,
see “Compensation of Executive Officers” below, and for a discussion of the compensation paid to our non-employee
directors, see “Compensation of Directors” below.
We currently hold directors and officers liability insurance with an aggregate coverage limit of $40 million,
including side A coverage. In addition, we provide our directors and officers indemnification pursuant to the terms of a
Letter of Indemnification substantially in the form approved by our shareholders.
Compensation of Executive Officers
The table and summary below outline the compensation granted to our five most highly compensated executive
officers during or with respect to the year ended December 31, 2024. We refer to the five individuals for whom disclosure
is provided herein as our “Covered Executives.”
For purposes of the table and the summary below, “compensation” includes base salary, bonuses, equity-based
compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits, and any
undertaking to provide such compensation. All amounts reported in the table are in terms of cost to the Company, as
recognized in our financial statements for the year ended December 31, 2024.
Name and Principal Position (1)
Year Salary
Bonus (including
Sales Commissions)
(2)
Equity-Based
Compensation
(3)
All Other
Compensation
(4)
Total
(US$ In Thousands)
Roy Zisapel, President, Chief Executive
Officer and Director
...............................................................
2024 450 (5)
465 (6)
2,489
155*
3,559
Guy Avidan, Chief Financial Officer
............................................................... 2024
294
110
282
57
743
76
Yoav Gazelle, Chief Business Officer
............................................................... 2024
253
172
248
40
713
Gabi Malka, Chief Operating Officer
............................................................... 2024
325
86
602
79
1,092
David Aviv, Chief Technology Officer
............................................................... 2024
287
61
210
69
627
77
(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(t) 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).
* Social contributions paid in Israel are denominated in NIS, whereas our functional currency is dollars and therefore
fluctuations in dollar amounts may be attributed to exchange rate fluctuations.
As approved by our shareholders on July 28, 2022, the terms of compensation of Roy Zisapel, our President, Chief
Executive Officer and director, were modified, such that, commencing July 28, 2022, (i) his gross base salary is $450,000
per annum (payable in NIS); (ii) his annual bonus is $600,000 (payable in NIS) for on-target (100%) performance; however,
the actual payout, based on performance, could reach $900,000 for overperformance (or the equivalent in NIS); and (iii) he
is entitled to annual grants of a combination of time-based restricted share units, performance-based restricted share units,
and performance-based share options, with a total grant value of $7.725 million, $5.0 million and $5.0 million, for 2022,
2023, and 2024, respectively. For additional details, see Proposal 3 of the Proxy Statement filed as Exhibit 99.2 to the
Report of Foreign Private Issuer on Form 6-K we submitted to the SEC on June 23, 2022.
Compensation of Directors
Our non-employee directors are entitled to the following compensation: (i) annual compensation in the amount of
NIS 120,800 (equivalent to approximately $32,650, based on the exchange rate published by the Bank of Israel on March
21, 2025, which was NIS 3.70 = $1.00) per year of service; (ii) per meeting remuneration of NIS 3,600 (equivalent to
approximately $973, based on the exchange rate published by the Bank of Israel on March 21, 2025, which was NIS 3.70
= $1.00) for each Board or committee meeting attended, provided that the director is a member of such committee; (iii)
compensation for telephonic participation in board and committee meetings (where other members physically attend) in an
amount of 60% of what is received for physical participation; and (iv) compensation for board and committee meetings
78
held via electronic means without physical participation in an amount of 50% of what is received for physical meetings.
All amounts payable under items (i), (ii), (iii), and (iv) above are subject to adjustment for changes in the Israeli consumer
price index after December 2007 and changes in the amounts payable pursuant to Israeli law from time to time.
In addition, our non-employee directors are entitled to a grant of options under our share option plans to purchase
20,000 ordinary shares for each year in which such non-employee director holds office. The options are granted for three
years in advance, and therefore every director receives an initial grant of options to purchase 60,000 ordinary shares that
vest over a period of three years, with a third (20,000) to vest upon each anniversary of service, provided that the director
still serves on the Company’s Board of Directors on the date of vesting. The grant is made on the date of the director’s
election (or the date of commencement of office, if different), and thereafter, every three years, if reelected, an additional
grant of options to purchase an additional 60,000 ordinary shares will be made on the date of each annual meeting in which
such director is reelected. The exercise price of all options shall be equal to the fair market value of the ordinary shares on
the date of the grant (i.e., an exercise price equal to the market price of our ordinary shares on the date of the annual meeting
approving the election or reelection of a director or the date of commencement of office, if different).
C.
Board Practices
Introduction
Since we are incorporated as an Israeli company, we are subject to the provisions of the Companies Law and the
regulations adopted thereunder. In addition, since our ordinary shares are listed on the Nasdaq Global Select Market, we
are also subject to the Nasdaq rules.
According to the Companies Law and our Articles of Association, the oversight of the management of our business
is vested in our Board of Directors. Our Board of Directors may exercise all powers and may take all actions that are not
specifically granted to our shareholders. As part of its powers, our Board of Directors may cause us to borrow or secure
payment of any sum or sums of money for our purposes, at times and upon terms and conditions as it determines, including
the grant of security interests in all or any part of our property.
Our Articles of Association provide for a Board of Directors of not less than five and not more than nine directors.
Currently, our Board of Directors consists of eight directors. In accordance with current Nasdaq requirements, nominees
for election as directors are approved and recommended to the Board of Directors by our Nomination and Corporate
Governance Committee.
Under the Companies Law, our Board of Directors is required to determine the minimum number of directors
having accounting and financial expertise, as defined in regulations promulgated under the Companies Law, that our Board
of Directors should have. In determining the number of directors required to have such expertise, the Board of Directors
must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our
Board of Directors has determined that we require at least one director with the requisite financial and accounting expertise
and that Naama Zeldis has such expertise.
Staggered Board
In accordance with the terms of our Articles of Association, our Board of Directors is divided into three classes
with each class of directors serving until, generally, the third annual meeting following their election as follows:
Class
Term expiring at
the annual meeting
for the year
Directors
Class II
................................
2025
Roy Zisapel, Naama Zeldis and Meir Moshe
Class III
................................
2026
Stanley Stern, Israel Mazin and Alex Pinchev
Class I
................................
2027
Yair Tauman and Yuval Cohen
79
At each annual meeting of shareholders after the initial classification, the successors to directors whose terms will
then expire will be elected to serve from the time of election and qualification until the third annual meeting following such
election. Directors are elected by a simple majority of the votes cast by our shareholders at an annual general meeting,
whereas a director’s removal from office requires the vote of at least 75% of the voting power represented at the general
meeting. Any additional directorships resulting from an increase in the number of directors will be distributed among the
three classes so that, to the nearest extent possible, each class will consist of one-third of the directors. This classification
of our Board of Directors may have the effect of delaying or preventing changes in control or management of our Company.
For a description of how long our directors and officers have served in their current positions, please see Item 6.A
“Directors and Senior Management.”
External Directors and Israeli Relief Regulations
Under the Companies Law, companies incorporated under the laws of Israel whose shares are listed for trading on
a stock exchange or have been offered to the public in or outside of Israel, are required to appoint at least two external
directors. However, pursuant to Israeli regulations promulgated under the Companies Law, companies whose shares are
traded on specified non-Israeli stock exchanges, including Nasdaq, and which do not have a controlling shareholder, such
as Radware, may elect to opt out of the requirement to maintain external directors as well as elect to opt out of the
composition requirements under the Companies Law with respect to the audit and compensation committees.
Consistent with the aforesaid relief regulations, in February 2020, we elected to opt out from the requirement to
appoint external directors and from the composition requirements for the audit and compensation committees under the
Companies Law. Our eligibility to opt out is conditioned upon: (i) the continued listing of our ordinary shares on the Nasdaq
(or one of a few other specified non-Israeli stock exchanges); (ii) there not being a controlling shareholder of our Company;
and (iii) our compliance with the SEC rules and Nasdaq requirements as to the composition of (a) our board of directors
(which requires that we maintain a majority of independent directors on our board of directors) and (b) the audit and
compensation committees of our Board of Directors (which, subject to certain exceptions, requires that such committees
consist solely of independent directors (at least three and two members, respectively), as described under the Nasdaq rules).
Our election to exempt our Company from compliance with the external director and audit and compensation
committee requirements under the Companies Law can be reversed at any time by our Board of Directors, in which case
we would need to hold a shareholder meeting to once again appoint external directors, whose election, by a special majority,
would initially be for a three-year term.
Our Committees
The Board of Directors appoints committees to help carry out its duties. Each committee reports the results of its
meetings to the full Board of Directors. The Board of Directors established an Audit Committee, a Compensation
Committee and a Nomination and Corporate Governance Committee, and, from time to time, establishes other “ad-hoc”
committees of members of the Board of Directors for specific duties or assignments and limited duration.
Audit Committee
Our ordinary shares are listed on the Nasdaq Global Select Market, and we are subject to the Nasdaq rules
applicable to listed companies. Under the Nasdaq rules, we are required to have an audit committee consisting of at least
three independent directors, all of whom are financially literate and one of whom has accounting or related financial
management expertise. To the extent a company is required to appoint external directors, the audit committee must include
all of the external directors and comply with additional requirements as to the composition thereof under the Companies
Law. However, when we elected to exempt our Company from the external director requirement, we concurrently elected
to exempt our Company from all of such requirements.
Our Board has determined that all directors serving on our Audit Committee (namely, Naama Zeldis, Stanley
Stern and Prof. Yair Tauman) meet the independence standards required of Audit Committee members by the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and the Nasdaq rules. In addition, the Board of Directors has
determined that Naama Zeldis is considered an “audit committee financial expert” (as defined by SEC rules).
80
In accordance with the Nasdaq rules, our Audit Committee has adopted a charter that sets forth the Audit
Committee’s purpose and responsibilities, which include, among other things, (1) assisting the Board of Directors in
fulfilling its responsibility for oversight of the quality and integrity of our accounting, auditing and financial reporting
practices and financial statements, and the independence qualifications and performance of our independent auditors, and
(2) selecting, evaluating and, where appropriate, recommending to replace the independent auditors (or to nominate the
independent auditors subject to shareholder approval) and pre-approving audit engagement fees and all permitted non-audit
services and fees. Our Audit Committee must also review and approve all related party transactions specified under Item
7.B “Related Party Transactions” of Form 20-F.
In accordance with the Companies Law, the duties of our Audit Committee, in addition to the requirements
imposed by the Nasdaq rules, include, among other things, (1) identifying irregularities in the business management of the
Company, including in consultation with the internal auditor and/or the Company’s independent accountants, and
recommending remedial measures to the Board of Directors, (2) reviewing, and, where appropriate, approving certain
interested party transactions specified under the Companies Law, as more fully described in Exhibit 2.1 to this annual report
under the heading “Approval of Specified Related Party Transactions under Israeli Law,” and (3) examining and monitoring
the work of our internal auditor.
Our Audit Committee also functions as our Qualified Legal Compliance Committee, or the QLCC. In its capacity
as the QLCC, our Audit Committee is responsible for investigating reports of perceived material violations of U.S. federal
or state securities laws, breaches of fiduciary duty or similar violations by our officers, directors, employees, or any of our
agents.
Compensation Committee
Pursuant to applicable Nasdaq rules, the compensation payable to a company’s chief executive officer and other
executive officers must generally be approved by a compensation committee comprised solely of independent directors.
To the extent a company is required to appoint external directors, the compensation committee must include all of the
external directors and comply with additional requirements as to the composition thereof under the Companies Law.
However, when we elected to exempt our Company from the external director requirement, we concurrently elected to
exempt our Company from all of such requirements.
Under the Companies Law, the role of the compensation committee includes recommending to the Board of
Directors, for ultimate shareholder approval by a special majority, a policy governing the compensation of office holders
based on specified criteria; reviewing, from time to time, modifications to the compensation policy and examining its
implementation; approving the actual compensation terms of office holders prior to approval thereof by the Board of
Directors; and resolving whether to exempt the compensation terms of a candidate for chief executive officer from
shareholder approval. The Companies Law defines the term “office holder” of a company to include a director, the chief
executive officer, the chief financial officer, a vice president and any officer of the company that reports directly to the
chief executive officer.
Pursuant to its charter, our Compensation Committee is authorized to make decisions regarding executive
compensation and terms and conditions of employment, to follow market trends and provide recommendations to the Board
of Directors in connection with the Company’s general compensation philosophy and policies, as well as to recommend
that the Board of Directors issue options under our share option plans. The Compensation Committee reviews,
recommends, and determines, on behalf of the Board of Directors, the amounts and types of compensation to be paid to the
Company’s Chief Executive Officer and other executive officers.
Our Compensation Committee currently consists of Meir Moshe, Prof. Yair Tauman, and Naama Zeldis, all of
whom are independent directors.
Nomination and Corporate Governance Committee
The role of our Nomination and Corporate Governance Committee is, among other things, to assist our Board of
Directors by identifying individuals qualified to become Board members, consistent with criteria approved by the Board,
and to recommend to the Board the director nominees for the next annual meeting of shareholders and the individuals to
be appointed to the Board from time to time; to develop and recommend to the Board matters of corporate governance; to
lead the Board in its annual review of the Board and management’s performance; and to recommend to the Board director
nominees for each committee.
81
Pursuant to its charter, our Nomination and Corporate Governance Committee is authorized, among other things,
to seek individuals qualified to become directors for recommendation to the Board, consistent with criteria identified by
the Board; monitor and evaluate the orientation and training needs of directors and make recommendations to the Board
where appropriate; assist the Board in determining and monitoring whether or not each director and prospective director is
“independent” within the meaning of any rules and laws applicable to us; receive comments from all directors and report
annually to the Board with an assessment of the Board’s performance; periodically review our policies, practices and
disclosures with respect to sustainability and environmental, social and governance factors; and review, as it deems
appropriate, the succession planning for our senior executive officers.
Our Nomination and Corporate Governance Committee currently consists of Stanley Stern, Meir Moshe, and
Israel Mazin, all of whom are independent directors.
Nomination of Directors
Nominees for election as directors are approved and recommended to the Board of Directors by our Nomination
and Corporate Governance Committee.
Board and Committee Meetings
The table below describes the number of meetings and attendance rates of our Board of Directors, Audit
Committee and Compensation Committee in 2024*:
Name of Body
No. of
Meetings in
2024
Average
Attendance
Rate**
Board of Directors
........................................................................................................
10
92.8%
Audit Committee
........................................................................................................
7
100.0%
Compensation Committee
........................................................................................................
6
100.0%
Nomination and Corporate Governance Committee
........................................................................................................
4
91.7%
* Excludes ad-hoc committees.
** Meetings, if any, at which a director was not allowed to attend as a matter of applicable law were not counted
as a failure to attend.
Each director attended at least 80% of all Board meetings.
Directors’ Service Contracts
Except as described in Item 6.B “Compensation”, we do not, as of the date of filing of this annual report, have
service or employment contracts with our directors providing for benefits upon termination of employment.
Internal Auditor
Under the Companies Law, the board of directors of a public company must appoint an internal auditor proposed
by the audit committee. The role of the internal auditor is to examine, among other things, whether the company’s conduct
complies with applicable law and orderly business procedure. The internal auditor may participate in all audit committee
meetings and has the right to demand that the chairperson of the audit committee convene a meeting. Under the Companies
Law, the internal auditor may be an employee of the company but may not be an interested party, an office holder or a
relative of any of the foregoing, nor may the internal auditor be the company’s independent accountant or its representative.
Oren Groupi, CPA, Partner in KPMG Israel, is our internal auditor.
Additional Information
For additional information regarding the fiduciary duties and other legal requirements relating to the conduct of
our directors and executive officers, see Exhibit 2.1 to this annual report under the heading “Board of Directors.”
82
D.
Employees
At the time of commencement of employment, our employees in North America generally sign offer letters
specifying basic terms and conditions of employment, whereas our employees in Israel, including our executive officers,
generally sign standard written employment agreements. The employees in our other jurisdictions sign employment
agreements, which differ according to customary practices in the countries where they are located. All our employees
worldwide sign confidentiality and non-compete terms and conditions.
The following table details certain data on our workforce (including temporary employees and subcontractors) as
at the period indicated:
As of December 31,
2024
2023
2022
Approximate numbers of employees and subcontractors by geographic location:
Israel
.............................................................................................................................
560
590
589
North, Central and South America (principally the United States)
.............................................................................................................................
235
229
252
EMEA (Europe, the Middle East and Africa)
.............................................................................................................................
109
113
124
Asia-Pacific
.............................................................................................................................
304
286
313(*)
Total workforce
.............................................................................................................................
1,208
1,218
1,278
Approximate numbers of employees and subcontractors by category of activity:
Research and development
.............................................................................................................................
449
479
494(*)
Sales, technical support, business development and marketing
.............................................................................................................................
621
602
647
Management, operations and administration
.............................................................................................................................
138
137
137
Total workforce
.............................................................................................................................
1,208
1,218
1,278
(*) Includes 71, 71, and 75 subcontractors, as of December 31, 2024, 2023, and 2022, respectively.
We are subject to Israeli labor laws and regulations with respect to our Israeli employees. These laws principally
concern matters such as paid annual vacation, paid sick days, length of the workday and work week, minimum wages, pay
for overtime, insurance for work-related accidents, severance pay and other conditions of employment.
Furthermore, we and our Israeli employees are subject to provisions of the collective bargaining agreements
between the “Histadrut,” the General Federation of Labor in Israel, and the Coordination Bureau of Economic
Organizations, including the Industrialists Association, by governmental order. These provisions principally concern social
benefits, cost of living increases, recreation pay and other conditions of employment. We generally provide our employees
with benefits and working conditions above the required minimums.
The employees of our subsidiaries are subject to local labor laws, regulations and/or collective bargaining
agreements that vary from country to country.
Our employees are not represented by a labor union.
We consider our relations with our employees to be good, and we have never experienced a strike or work
stoppage.
83
E.
Share Ownership
The following table sets forth certain information regarding the beneficial ownership of our ordinary shares by
our directors and officers as of March 21, 2025. Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options or
RSUs currently exercisable or exercisable (vested in the case of RSUs) within 60 days of the date of this table are deemed
outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for
computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table below have sole voting and investment power with respect to all shares
shown as beneficially owned by them. See also Item 7.A “Major Shareholders” below.
Name
Number of
ordinary
shares
Percentage of
outstanding
ordinary
shares**
Roy Zisapel (1)
.................................................................................................................................
2,162,244
5.06 %
Stanley Stern (2)
.................................................................................................................................
*
*
Naama Zeldis (2)
.................................................................................................................................
*
*
Yair Tauman (2)
.................................................................................................................................
*
*
Yuval Cohen (2)(3)
.................................................................................................................................
*
*
Meir Moshe (2)
.................................................................................................................................
*
*
Israel Mazin (2)
.................................................................................................................................
*
*
Alex Pinchev (2)
.................................................................................................................................
*
*
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)
.................................................................................................................................
3,083,401
7.13 %
* Reflects ownership of less than 1%.
** The percentages shown are based on 42,686,534 ordinary shares issued and outstanding as of March 21, 2025. This
figure of outstanding ordinary shares excludes (i) 14,500 RSUs and (ii) employee share options to purchase an
aggregate of 564,592 ordinary shares at a weighted average exercise price of approximately $24.50 per share, with the
latest expiration date of these options being in March 2029 (of which, options to purchase 544,592 of our ordinary
shares were exercisable as of March 21, 2025).
(1) Consists of 2,102,292 shares and 59,952 options at an exercise price of $16.68 per share, which expire in March
2029. For the sake of clarity, as noted in Item 7.A, the ordinary shares reported as beneficially owned by Roy Zisapel
exclude the Neurim Shares held by Neurim, and Mr. Zisapel disclaims beneficial ownership of such securities, except
to the extent of his pecuniary interest therein.
84
(2) Owns less than 1% of our outstanding ordinary shares (including options held by each such individual, which are
vested or shall become vested within 60 days of March 21, 2025) and have therefore not been separately disclosed.
(3) Excludes 1,892,288 Ordinary Shares beneficially owned by Fortissimo Capital Fund (Israel – D. P), LP., an Israeli-
based private equity fund. Yuval Cohen a member of our board of directors and a managing partner in Fortissimo
Capital, may be deemed to have shared voting and dispositive power with respect to the shares held by Fortissimo but
disclaims beneficial ownership over such shares except to the extent of his pecuniary interest therein.
(4) Consists of 2,504,309 shares, 14,500 RSUs and 564,592 options to purchase ordinary shares. The options consist
of (i) 20,000 options at an exercise price of $15.12 per share, which expire in January 2029, (ii) 40,000 options at an
exercise price of $16.19 per share, which expire in December 2028, (iii) 59,952 options at an exercise price of $16.68
per share, which expire in March 2029, (iv) 2,500 options at an exercise price of $22.5 per share, which expire in
January 2026, (v) 20,000 options at an exercise price of $23.31 per share, which expire in July 2027, (vi) 60,000
options at an exercise price of $23.46 per share, which expire in July 2025, (vii) 30,000 options at an exercise price of
$23.59 per share, which expire in September 2025, (viii) 60,000 options at an exercise price of $24.32 per share, which
expire in November 2025, (ix) 16,500 options at an exercise price of $24.67 per share, which expire in September
2025, (x) 60,000 options at an exercise price of $24.74 per share, which expire in November 2025, (xi) 35,640 options
at an exercise price of $24.89 per share, which expire in September 2025, (xii) 60,000 options at an exercise price of
$28.91 per share, which expire in July 2027, and (xiii) 100,000 options at an exercise price of $32.71 per share, which
expire in February 2027.
Key Employee Share Incentive Plan
In August 1997, we adopted our Key Employee Share Incentive Plan (1997), as amended, or the Share Incentive
Plan. Under the plan, share options as well as restricted share units, or RSUs, may be granted to employees employed by
us or by our affiliates.
The Share Incentive Plan is administered by the Compensation Committee subject to the provisions of the
Companies Law. Pursuant to the plan, the Compensation Committee has the authority to determine (subject to applicable
law), or advise the Board of Directors, in its discretion:
•
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.
In addition, the Share Incentive Plan provides that, unless determined otherwise by our Board of Directors (or a
committee thereof), in the event of a “Hostile Takeover,” which is defined to include, among others, an unsolicited
acquisition of more than 20% of our outstanding shares (other than a purchase by Roy Zisapel (together with his affiliates)),
the vesting of all or a portion of our outstanding equity awards will accelerate. As a result, an acquisition of our Company
that triggers the said acceleration will be more costly to a potential acquirer.
Options granted pursuant to the Share Incentive Plan are typically granted for a term of 62 months from the date
of the grant of the option. As of December 31, 2024, 37,612,967 ordinary shares have been reserved for equity grants under
the plan, of which we have (i) granted options to purchase 27,608,943 ordinary shares at a weighted average exercise price
of $8.62 per ordinary share and (ii) issued 7,925,902 RSUs.
The Share Incentive Plan allows the allocation of short-term options to grantees who are not residents of Israel or
the United States, with a grant price of 90% of the closing sales price for the shares on the Nasdaq on the date of grant of
a respective option award. As of December 31, 2024, 1,000,000 ordinary shares have been reserved for option grants under
this arrangement, of which we have granted options to purchase 236,694 ordinary shares at a weighted average exercise
price of $7.09 per ordinary share. This arrangement does not affect the possibility of issuing options under the Share
Incentive Plan as detailed above. However, any person who participates in the ESPP (as defined below) shall not be an
eligible grantee for purposes of such arrangement.
85
Directors and Consultants Option Plan
In February 2000, we adopted a Directors and Consultants Option Plan, which is administered by our
Compensation Committee. Options granted pursuant to our Directors and Consultants Options Plan are for a term of 62
months from the date of the grant of the option. The terms of the Directors and Consultants Option Plan are similar to the
terms of the Share Incentive Plan. The Directors and Consultants Option Plan relies on the 37,612,967 ordinary shares
reserved for option grants shares under the Share Incentive Plan which can be rolled over between such plans. The
Compensation Committee may not grant options to members of the Committee or to a shareholder of over 10% of our
issued and outstanding shares.
Employee Share Purchase Plan
In February 2010, our Board of Directors adopted the 2010 Employee Share Purchase Plan (ESPP), which provides
for the issuance of a maximum of 2,000,000 ordinary shares. Pursuant to the ESPP, eligible employees (including only
Israeli and United States residents) could have up to 10% of their net income withheld, up to certain maximums, to be used
to purchase our ordinary shares. The ESPP is implemented with overlapping one-year offering periods, each consisting of
two purchases, once in every six-month period. The price of each ordinary share purchased under the ESPP is equal to 90%
of the closing price for the shares on the respective offering date. As of December 31, 2024, a total of 255,560 shares had
been purchased under the ESPP. During 2024, no shares were purchased under the ESPP.
Option Plans of Our Subsidiary
In April 2022, the board of directors of SkyHawk Security established the Skyhawk (CNP) Security Ltd. 2022
Share Incentive Plan (the “SkyHawk Plan”). Under the SkyHawk Plan, options may be granted to officers, directors,
employees and consultants of SkyHawk Security. The exercise price per share under the SkyHawk Plan was generally not
less than the fair value of an ordinary share at the date of grant. The options vest primarily over four years. Each option is
exercisable for one ordinary share. Any options, which are forfeited or not exercised before expiration, become available
for future grants. See Note 12(e) to our consolidated financial statements.
F.
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
During and after the last completed fiscal year ended December 31, 2024, we were not required to prepare an
accounting restatement, or any accounting restatement that required recovery of erroneously awarded compensation
pursuant to our compensation recovery policy required by the Nasdaq listing rules, and there was no outstanding balance
as of the end of the last completed fiscal year of erroneously awarded compensation to be recovered from the application
of the policy to any prior restatement.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
The following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of
March 21, 2025, by each person or entity known to own beneficially more than 5% of our outstanding ordinary shares
based on information provided to us by the holders or disclosed in public filings with the SEC. The voting rights of all
major shareholders are the same as for all other shareholders.
Name
Number of
ordinary
shares*
Percentage of
outstanding
ordinary
shares**
Senvest Management, LLC (1)
................................................................................................................................
4,115,597
9.64%
Nava Zisapel (2)
................................................................................................................................
2,897,926
6.79%
Morgan Stanley (3)
................................................................................................................................
2,481,276
5.81%
Artisan Partners (4)
................................................................................................................................
2,360,703
5.53%
Legal & General Group Plc (5)
................................................................................................................................
2,235,702
5.24%
86
Roy Zisapel (6)
................................................................................................................................
2,162,244
5.06%
* Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Ordinary shares relating to options or RSUs currently exercisable or
exercisable (vested in the case of RSUs) within 60 days of the date of this table are deemed outstanding for computing
the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of
any other person. Except as indicated by footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with respect to all shares shown as
beneficially owned by them.
** The percentages shown are based on 42,686,534 ordinary shares issued and outstanding as of March 21, 2025. This
figure of outstanding ordinary shares excludes (i) 14,500 RSUs and (ii) employee share options to purchase an
aggregate of 564,592 ordinary shares at a weighted average exercise price of approximately $24.50 per share, with the
latest expiration date of these options being in March 2029 (of which, options to purchase 544,592 of our ordinary
shares were exercisable as of March 21, 2025).
(1) Shares are beneficially owned by Senvest Management, LLC and Richard Mashaal (collectively, “Senvest”). This
information is based on information provided in Amendment No. 19 to the Statement on Schedule 13G filed with the
SEC by Senvest on February 9, 2024. The business address of Senvest is 540 Madison Avenue, 32nd Floor, New York,
New York 10022.
(2) Of the ordinary shares beneficially owned by Nava Zisapel, (i) 2,467,843 shares are held directly, (ii) 267,833
shares are held of record by Carm-AD Ltd., an Israeli company owned 100% by Nava Zisapel, and (iii) 324,500
shares (the “Neurim Shares”) are held of record by Neurim Pharmaceuticals (1991) Ltd., an Israeli company
(“Neurim”), 50% of which is held by Nava Zisapel and 50% is held in three equal parts by Roy Zisapel and his siblings.
(3) Shares are beneficially owned by Morgan Stanley and Morgan Stanley Capital Services LLC (collectively,
“Morgan Stanley”). This information is based on information provided in Amendment No. 2 to the Statement on
Schedule 13G filed with the SEC by Morgan Stanley on February 3, 2025. The business address of Morgan Stanley is
1585 Broadway, New York, New York 10036.
(4) Shares are beneficially owned by Artisan Partners Limited Partnership, Artisan Investments GP LLC, Artisan
Partners Holdings LP and Artisan Partners Asset Management Inc. (collectively, “Artisan Partners”). This information
is based on information provided in Amendment No. 3 to the Statement on Schedule 13G filed with the SEC by Artisan
Partners on February 12, 2024. The business address of Artisan Partners is 875 East Wisconsin Avenue, Suite 800,
Milwaukee, WI 53202.
(5) This information is based on information provided in the Statement on Schedule 13G filed with the SEC by Legal
& General Group Plc (“LG”), Legal & General Investment Management Ltd (“LGIM”), LGIM Managers (Europe)
Limited (“LGIME”), Legal & General UCITS ETF Plc (“UCITS”) and Legal & General Investment Management
America Inc (“LGIMA,” together with LG, LGIM, LGIME, UCITS, the “LG Group”) on February 13, 2025. The
business address of each of LG and LGIM is One Coleman Street, London, England, EC2R 5AA, UK, the business
address of each of LGIME and UCITS is 70 Sir John Rogersons Quay, Dublin 2, Ireland, and the business address of
LGIMA is 71 South Wacker Drive, Suite 800, Chicago, IL 60606.
(6) Of the ordinary shares beneficially owned by Roy Zisapel, (i) 2,102,292 shares are held directly, and (ii) 59,952
options at an exercise price of $16.68 per share, which expire in March 2029. For the sake of clarity, the ordinary
shares reported as beneficially owned by Roy Zisapel exclude the Neurim Shares held by Neurim, and Mr. Zisapel
disclaims beneficial ownership of such securities, except to the extent of his pecuniary interest therein.
To our knowledge, the Company is not directly nor indirectly owned or controlled by another corporation, by any
foreign government or by any other natural or legal person severally or jointly. There are no arrangements, known to the
Company, the operation of which may at a subsequent date result in a change in control of the Company.
Significant Changes in the Ownership of Major Shareholders
During the past three years, the significant changes in the percentage ownership of our major shareholders were
as follows:
87
•
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 a previous amendment to the Schedule
13G filed with the SEC by Senvest, Senvest beneficially owned as of December 31, 2022, 4,044,695 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 a previous amendment
to the Schedule 13G filed with the SEC by Artisan Partners, Artisan Partners beneficially owned as of December
31, 2022, 2,925,957 of our outstanding ordinary shares.
•
Based on the Schedule 13G filed with the SEC by LG, LGIM, LGIME, UCITS and LGIMA (collectively, “LG
Group”) on February 13, 2025, the LG Group beneficially owned 2,235,702 of our outstanding ordinary shares.
Based on previous amendments to the Schedule 13G filed with the SEC by the LG Group, they beneficially owned
(i) as of September 30, 2024, 1,941,651 of our outstanding ordinary shares, (ii) as of December 31, 2023,
2,115,897 of our outstanding ordinary shares, and (iii) as of December 31, 2022, 2,570,026 of our outstanding
ordinary shares.
•
Based on the Schedule 13G filed with the SEC by Morgan Stanley on February 3, 2025, Morgan Stanley
beneficially owned 2,481,276 of our outstanding ordinary shares. Based on a Schedule 13G filed with the SEC by
Morgan Stanley, they beneficially owned, as of December 31, 2023, 3,534,162 of our outstanding ordinary shares.
•
Based on Amendment No. 2 to the Schedule 13G filed with the SEC by First Trust Portfolios L.P., First Trust
Advisors L.P., and The Charger Corporation (collectively, “First Trust Portfolio”) on July 8, 2024, First Trust
Portfolio beneficially owned 839,027 of our outstanding ordinary shares. Based on a previous amendment to the
Schedule 13G and a Schedule 13G filed with the SEC by First Trust Portfolio, they beneficially owned, (i) as of
March 31, 2024, 4,218,597 of our outstanding ordinary shares and (ii) as of December 31, 2023, 2,446,925 of our
outstanding ordinary shares.
Major Shareholders Voting Rights
Our major shareholders do not have different voting rights from those of other shareholders.
Record Holders
Based on a review of the information provided to us by our transfer agent, as of March 21, 2025, there were 27
holders of record of our ordinary shares, of which 16 record holders, holding approximately 8.44% of our ordinary shares,
had registered addresses in Israel, and of which eight record holders, holding approximately 91.55% of our ordinary shares,
had registered addresses in the United States. These numbers are not representative of the number of beneficial holders of
our ordinary shares nor are they representative of where such beneficial holders reside, since many of these ordinary shares
were held of record by brokers or other nominees (including one U.S. nominee company, CEDE & Co., which held
approximately 91.55% of our outstanding ordinary shares as of said date).
B.
Related Party Transactions
Overview
We have in the past entered into, and in the future we may enter into, transactions with related parties, such as our
directors and senior management or their respective affiliates, which transactions are generally subject to the prior approval
of our audit or compensation committee and board of directors.
Transactions with Rad-Bynet Group
We have entered into a number of agreements with certain companies that form part of the RAD-Bynet Group, of
which either the heirs of the late Yehuda Zisapel, the heirs of his late brother, Zohar Zisapel, and Nava Zisapel (or all of
them together) were co-founders, and are directors and/or shareholders. Roy Zisapel also serves as a director of RAD Data
Communications Ltd., Bynet Electronics Ltd., AB-NET Communications Ltd. (and its wholly owned subsidiary, ABNET
Cloud Services Ltd.), Bynet Data Centers Ltd., Bynet Data Communications Ltd. (and its wholly owned subsidiary RAD
Negev Ltd.), RADWIN Ltd., Packetlight Networks Ltd. and other companies in the RAD-Bynet Group.
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Under these agreements, we lease property and purchase certain products and services from certain member
entities of the RAD-Bynet Group. In addition, in February 2022, we acquired the technology and operations of
SecurityDAM (now called DC Protection Ltd.) to which we sometimes refer as the SecurityDAM Acquisition.
The RAD-Bynet Group consists of manufacturers of communications solutions comprised of hardware and/or
software and communications solution providers, distributors and integrators as well as service providers. The RAD-Bynet
Group includes companies dealing in advanced communication technology, networks, and integration. Companies within
the RAD-Bynet Group provide a variety of solutions and services to their customers, including engineering, purchasing
and sub-contracting, production and final testing, planning and control, and support for end users. The RAD-Bynet Group
also includes a few companies that provide services that support the activities of the other RAD-Bynet Group members,
such as real estate leasing and administrative services. Some of the products of members of the RAD-Bynet Group are
complementary to, and may be used in connection with, our products and services. Each company in the RAD-Bynet Group
is independent from the others. The ownership and Board of Directors structure of each RAD-Bynet Group member is
different and certain of the RAD-Bynet Group members are publicly traded companies. See Item 4.C “Organizational
Structure” for additional details about the group.
We believe that our transactions and arrangements with affiliated parties, including members of the RAD-Bynet
Group, are in the ordinary course of our business (other than the SecurityDAM Acquisition) and are not unusual in their
nature or conditions. However, in accordance with the Companies Law, they generally require the approval of our Audit
Committee and our Board of Directors and may, in certain circumstances, such as to the extent they relate to compensation
terms of our directors, require approval by our shareholders. In this respect, as permitted by the Companies Law, our Audit
Committee established internal policies with certain criteria and procedures designed to ensure that the terms of the
transactions to which we enter into with companies within the RAD-Bynet Group are made on market terms and, at the
same time, where such transactions are immaterial or negligible, both from a qualitative and quantitative perspective (and/or
are otherwise believed to be routine), would not require the pre-approval of our Audit Committee and Board of Directors.
Our management is required to examine whether transactions with the RAD-Bynet Group comply with such criteria, and
transactions that do not meet the criteria require pre-approval of our Audit Committee and such other corporate approvals
prescribed by the Companies Law.
We believe that the terms of the transactions to which we have entered into with member entities of the RAD-
Bynet Group are not different in any material respect from terms we could obtain from unaffiliated third parties and are
beneficial to us and no less favorable to us than terms that might be available to us from unaffiliated third parties. The
pricing of the transactions was based on negotiations between the parties, and members of our management reviewed the
pricing of these agreements, as well as, in some cases, used a third-party consulting firm, and confirmed that they were not
different in any material respect from that which could have been obtained from unaffiliated third parties.
In the event that we cease to be a member of the RAD-Bynet Group, we may not be able to obtain the current rates
for such services. We believe, however, that due to the affiliation between us and the RAD-Bynet Group, we have greater
flexibility in obtaining certain terms and conditions that may not be available from unaffiliated third parties on similar
products and services.
Lease of Property
We lease the office space for our headquarters and principal R&D, administrative, finance and marketing and sales
operations from private companies within the RAD-Bynet Group that are owned by the heirs of the late Zohar Zisapel,
Nava Zisapel, and the heirs of the late Yehuda Zisapel:
•
One lease is a five-story building in Tel Aviv, Israel, consisting of approximately 40,000 square feet, plus storage
and parking space. This 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 $702,000.
•
A second lease consists of five floors in the Or Tower in Tel Aviv, Israel with approximately 68,000 square feet,
plus parking spaces. This lease expires in June 2030. The annual rent amounts to approximately $1,800,000. 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 heirs of the late Yehuda Zisapel and Nava Zisapel. This lease expires in July
2025. The annual rent amounts to approximately $97,000. We intend to extend this lease.
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•
In addition, we lease approximately 15,000 square feet of space in Jerusalem, Israel, for manufacturing facilities
from an affiliated company owned by the heirs of the late Yehuda Zisapel, Nava Zisapel, and the heirs of the late
Zohar Zisapel. This lease expires in August 2028. The annual rent amounts to approximately $240,000.
•
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 heirs of
the late Yehuda Zisapel, Nava, Zisapel and the heirs of the late Zohar Zisapel. The annual rent amounts to
approximately $195,000. The lease expires in December 2025. We intend to extend this lease.
Distribution Agreement
Bynet Data Communications Ltd. (Bynet), a member of the RAD-Bynet Group, distributes our products in Israel
on a non-exclusive basis. We have a written distributor agreement with Bynet under which we provide Bynet with
discounts on our solutions similar to the discounts provided to third-party distributors in the region in the ordinary course
of business. The total sales to Bynet (and other companies in the RAD-Bynet Group) under such distributor agreement
amounted to approximately $5.7 million in 2024, compared to $3.3 million in 2023 and $2.3 million in 2022.
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Additional RAD-Bynet Group Equipment and Services
We purchase the following additional equipment services from members of the RAD-Bynet Group: network
management, IT and communication services, equipment testing and repair, inventory, cloud hosting services, electricity
charges, parking and building maintenance, reception and security services, vehicles and human resource administration
and marketing services.
A portion of the above services, such as electricity charges, are “pass through” services for which we are charged
on a “back-to-back” basis according to our actual usage (i.e., we are charged pro rata based on the actual charge of the
third-party electricity company) due to the fact that we lease part of our facilities from a number of other RAD-Bynet Group
members. Other services mentioned above, such as vehicles and human resource administration, are performed by one of
the RAD-Bynet Group companies and are provided to all members of the RAD-Bynet Group, in order to achieve lower
prices for these services based on economies of scale. In addition, since the RAD-Bynet Group is comprised of a number
of companies that are engaged in our industry, the RAD-Bynet Group companies initiate marketing events from time to
time, which we participate in, to promote the RAD-Bynet Group members’ products. The charges for these services are
based on actual costs incurred and are allocated to the Company according to its relative part in such services (e.g., vehicles
administration – according to the number of the Company’s vehicles out of the total vehicles of the RAD-Bynet Group;
marketing events – according to the number of participants who are our customers out of the total number of participants
in the events).
Following is a summary of the general purchases of products and services from the RAD-Bynet Group companies
(excluding leases, distribution and the services previously provided by SecurityDAM, which are described above) during
2024:
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
The total cost of our purchases from the RAD-Bynet Group entities referenced in the table above amounted to
approximately $3.4 million in 2024, compared to $3.1 million in 2023 and $4.45 million in 2022.
Compensation of President and Chief Executive Officer
See discussion in Item 6.B “Compensation.”
C.
Interests of Experts and Counsel
Not applicable.
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ITEM 8.
FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial Information
Financial Statements
See Item 18 “Financial Statements.”
Export Sales
For the year ended December 31, 2024, the amount of our export sales (i.e., sales outside Israel) was approximately
$254.2 million, which represents 92.5% of our total sales in 2024.
Legal Proceedings
We are, or may be, from time to time named as a defendant in certain routine litigation incidental to our business.
However, we are currently not, and have not been in the recent past, a party to any legal proceedings which may have or
have had in the recent past significant effects on our financial condition or profitability.
Dividend Distribution Policy
We have never paid and do not intend to pay cash dividends on our ordinary shares in the foreseeable future. In
recent years and specifically in the past eight consecutive years, our Board of Directors has approved repurchase programs
of our ordinary shares, which we implement based on market conditions, share price, trading volume and other factors (see
Item 16.E “Purchases of Equity Securities by the Issuer and Affiliated Purchasers”). Otherwise, our policy is to retain
earnings and other cash resources to continue the development and expansion of our business. Any future dividend policy
will be determined by our Board of Directors and will be based upon conditions then existing, including our results of
operations, financial condition, current and anticipated cash needs, contractual restrictions and other conditions. See also
Exhibit 2.1 to this annual report under the heading “Dividend, Liquidation Rights and Rights to Shares in Profits.”
B.
Significant Changes
Except as otherwise disclosed in this annual report, we are not aware of any significant changes that have occurred
since December 31, 2024.
ITEM 9.
THE OFFER AND LISTING
A.
Offer and Listing Details
Our ordinary shares have been listed for quotation on the Nasdaq Global Select Market since September 30, 1999
under the symbol “RDWR.”
B.
Plan of Distribution
Not applicable.
C.
Markets
Our ordinary shares are listed for quotation on the Nasdaq Global Select Market under the symbol “RDWR.”
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
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ITEM 10.
ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
Copies of our Memorandum of Association and our Articles of Association are filed as Exhibits 1.1 and 1.2 to this
annual report. A description of each class of securities registered under Section 12 of the Securities Exchange Act of 1934
is included in Exhibit 2.1 to this annual report.
C.
Material Contracts
See the summary of the terms of the Lease Agreements for the Company’s Headquarters in Item 7.B “Related
Party Transactions—Lease of Property.” Except as disclosed therein, we are not currently, nor have we been for the two
years immediately preceding the date of this annual report, party to any material contract, other than contracts entered into
in the ordinary course of business.
D.
Exchange Controls
There are currently no Israeli currency control restrictions on payments of dividends or other distributions with
respect to our ordinary shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to
file reports with the Bank of Israel regarding certain transactions or shareholders who are subjects of countries that are,
have been, or will be, in a state of war with Israel. However, legislation remains in effect pursuant to which currency
controls can be imposed by administrative action at any time.
E.
Taxation
Holders of our ordinary shares should consult their tax advisors as to the United States, Israeli or other tax
consequences of the purchase, ownership and disposition of our ordinary shares, including, in particular, the effect
of any foreign, state or local taxes.
Israeli Tax Considerations
The following is a summary of the material current tax structure applicable to companies incorporated in Israel
and some Israeli Government programs benefiting us, with special reference to its effect on us. The following also contains
a discussion of the material Israeli tax consequences to purchasers of our ordinary shares and Israeli government programs
benefiting us. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or
administrative interpretation, we cannot assure you that the views expressed in the discussion will be accepted by the Israel
Tax Authority or courts. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular
investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment
under Israeli law. Examples of this kind of investor include traders in securities or persons that own, directly or indirectly,
10% or more of our outstanding voting capital, all of whom are subject to special tax regimes not covered in this discussion.
Some parts of this discussion are based on new tax legislation which has not been subject to judicial or administrative
interpretation. The discussion is not intended, and should not be construed, as legal or professional tax advice and is not
exhaustive of all possible tax considerations.
General Corporate Tax Structure
Generally, Israeli companies are subject to “Corporate Tax” on their taxable income. The corporate tax rate is
23% for 2024 and 2023. However, the effective tax rate payable by a company that qualifies as an Industrial Company that
derives income from a Preferred Technology Enterprise (as discussed below), like us, may be considerably less. Capital
gains derived by an Israeli company are subject to the prevailing corporate tax rate.
Tax Benefits Under the Law for the Encouragement of Capital Investments, 1959
The Law for the Encouragement of Capital Investments, 5719-1959 (the “Investment Law”) provides certain
incentives for capital investment in a production facility (or other eligible assets). Generally, an investment program that is
implemented in accordance with the provisions of the Investment Law, which may be either an “Approved Enterprise”, a
“Beneficiary Enterprise”, a “Preferred Enterprise”, a “Special Preferred Enterprise”, a “Preferred Technology Enterprise”
or “Special Preferred Technology Enterprise”, is entitled to benefits. These benefits may include cash grants from the Israeli
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government and tax benefits, based upon, among other things, the geographic location in Israel of the facility in which the
investment is made. In order to qualify for these incentives, an Approved Enterprise, a Beneficiary Enterprise, a Preferred
Enterprise, a Special Preferred Enterprise, a Preferred Technology Enterprise or Special Preferred Technology Enterprise,
is required to comply with the requirements of the Investment Law.
The Investment Law has been amended several times over the years, with the most significant changes effective
as of January 1, 2011 (the “2011 Amendment”), and as of January 1, 2017 (the “2017 Amendment”). The 2011 Amendment
introduced new benefits instead of the benefits granted in accordance with the provisions of the Investment Law prior to
the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect up to January 1, 2011
were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead,
irrevocably, to forego such benefits and elect the benefits of the 2011 Amendment. The 2017 Amendment introduces new
benefits for Technological Enterprises, alongside the existing tax benefits.
Tax Benefits under the 2017 Amendment
The 2017 Amendment was enacted as part of the Economic Efficiency Law (Legislative Amendments for
Applying the Economic Policy for the 2017 and 2018 Budget Years), that was published on December 29, 2016, and is
effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises,”
as described below, and is in addition to the other existing tax beneficial programs under the Investments Law.
The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a
“Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as
“Preferred Technology Income,” as defined in the Investments Law. The tax rate is further reduced to 7.5% for a Preferred
Technology Enterprise located in development Zone A. In addition, a Preferred Technology Enterprise will enjoy a reduced
corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the
Investments Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company
on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the National Authority
for Technological Innovation, or NATI.
The 2017 Amendment further provides that a technology company satisfying certain conditions will qualify as a
“Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred
Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred
Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain
“Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by
an Israeli company or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval
from NATI. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company
for more than NIS 500 million will be eligible for these benefits for at least 10 years, subject to certain approvals as specified
in the Investments Law.
Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid
out of Preferred Technology Income, are generally subject to withholding tax at source 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, the
aforesaid will apply). If such dividends are distributed to a foreign company that holds solely or together with other foreign
companies 90% or more of the Israeli company and other conditions are met, the withholding tax rate will be 4%, or such
lower rate as may be provided in an applicable tax treaty.
We have examined the impact of the 2017 Amendment and the degree to which we will qualify as a Preferred
Technology Enterprise and have elected to adopt it as of 2018 onwards.
Tax Benefits Under the Law for the Encouragement of Industry (Taxes), 1969
Under the Law for the Encouragement of Industry (Taxes), 1969 (the “Industry Encouragement Law”), Industrial
Companies are entitled to the following preferred corporate tax benefits, among others:
•
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
94
•
Deductions over a three-year period of expenses involved with the issuance and listing of shares on a recognized
stock market.
Eligibility for benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any
governmental authority. Under the Industry Encouragement Law, an “Industrial Company” is defined as a company
resident in Israel, at least 90% of the income of which, in any tax year, exclusive of income from government loans, is
derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise, located in Israel,
owned by an Industrial Company, whose major activity in a given tax year is industrial production activity.
We believe that we currently qualify as an Industrial Company within the definition of the Industry Encouragement
Law. No assurance can be given that we will continue to qualify as an Industrial Company or that the benefits described
above will be available in the future.
Tax benefits and grants for research and development
Israeli tax law allows, under certain conditions, a tax deduction for expenditures related to scientific research and
development projects, including capital expenditures, in the year in which they are incurred. Expenditures are deemed
related to scientific research and development projects if:
•
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.
The amount of such deductible expenses is reduced by the sum of any funds received through government grants
for the finance of such scientific research and development projects. Under these research and development deduction rules,
no deduction is allowed for any expense invested in an asset depreciable under the general depreciation rules of the Israeli
Income Tax Ordinance (New Version), 5721-1961. Expenditures that do not qualify for this special deduction are
deductible in equal amounts over three years.
From time to time, we may apply to the IIA for approval to allow a tax deduction for all research and development
expenses during the year incurred. There can be no assurance that such request will be granted.
Capital Gains Tax on Sales of Our Ordinary Shares
Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined
for Israeli tax purposes, and on the sale of assets located in Israel, including shares in Israeli companies, by non-residents
of Israel, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country of
residence provides otherwise. The law distinguishes between real gain and inflationary surplus. The inflationary surplus
is a portion of the total capital gain which is equivalent to the increase of the relevant asset’s purchase price which is
attributable to the increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange
rate, between the date of purchase and the date of sale. The real gain is the excess of the total capital gain over the
inflationary surplus.
Generally, the tax rate applicable to capital gains derived from the sale of shares, whether listed on a stock market
or not, is 25% for individuals, unless such shareholder claims a deduction for financing expenses in connection with such
shares, in which case the gain will generally be taxed at a rate of 30%. Additionally, if such shareholder is considered a
“significant shareholder” at any time during the 12-month period preceding such sale, i.e., such shareholder holds directly
or indirectly, including with others, at least 10% of any means of control in the company, the tax rate shall be 30%. “Means
of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets
upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such
right. However, the foregoing tax rates do not apply to: (i) dealers in securities; and (ii) shareholders who acquired their
shares prior to an initial public offering (that may be subject to a different tax arrangement). Companies are subject to the
Corporate Tax rate on capital gains derived from the sale of listed shares.
Non-Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale of
shares of Israeli companies publicly traded on a recognized stock exchange or regulated market outside of Israel, provided
that such capital gains are not derived from a permanent establishment in Israel and such shareholders did not acquire their
shares prior to an initial public offering. However, non-Israeli corporations will not be entitled to such exemption if Israeli
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residents (i) have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the beneficiaries or are
entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In some instances where our shareholders may be liable to Israeli tax on the sale of their ordinary shares, the
payment of the consideration may be subject to the withholding of Israeli tax at the source, and holders of our ordinary
shares may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at
source at the time of sale. Specifically, the Israel Tax Authority may require shareholders who are not liable for Israeli
capital gains tax on such a sale to sign declarations on forms specified by the Israel Tax Authority, provide documents
(including, for example, a certificate of residency) or obtain a specific exemption from the Israel Tax Authority to confirm
their status as non-Israeli residents (and, in the absence of such declarations or exemptions, the Israel Tax Authority may
require the purchaser of the shares to withhold tax at source).
Pursuant to the Convention Between the Government of the United States of America and the Government of the
State of Israel with Respect to Taxes on Income, as amended (the “U.S.-Israel Tax Treaty”), the sale, exchange or
disposition of ordinary shares by a person who (i) holds the ordinary shares as a capital asset, (ii) qualifies as a resident of
the United States within the meaning of the U.S.-Israel Tax Treaty and (iii) is entitled to claim the benefits afforded to such
person by the U.S.-Israel Tax Treaty, generally, will not be subject to the Israeli capital gains tax. Such exemption will not
apply if (i) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of our voting power
during any part of the 12-month period preceding such sale, exchange or disposition, subject to certain conditions, (ii) the
capital gains from such sale, exchange or disposition can be allocated to a permanent establishment in Israel, or (iii) such
Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. In
such case, the sale, exchange or disposition of ordinary shares would be subject to Israeli tax, to the extent applicable;
however, under the U.S.-Israel Tax Treaty, such Treaty U.S. Resident would be permitted to claim a credit for such taxes
against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations in
U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to U.S. state or local taxes.
Taxation of Dividends paid to Non-Israeli Resident Holders of Shares
Non-residents of Israel are subject to income tax on income accrued or derived from sources in Israel. Such
sources of income include passive income such as dividends. On distributions of dividends other than bonus shares, or
stock dividends, income tax is applicable at the rate of 25%, or 30% for a shareholder that is considered a “significant
shareholder” at any time during the 12-month period preceding such distribution, unless a different rate is provided in a
treaty between Israel and the shareholder’s country of residence. Such dividends are generally subject to Israeli withholding
tax at a rate of 25%, so long as the shares are registered with a nominee company (whether the recipient is a substantial
shareholder or not). The portion of dividends paid out of income attributed to a Preferred Enterprise or Preferred
Technology Enterprise is subject to withholding tax at the rate of 20%, unless a different rate is provided in a treaty between
Israel and the shareholder’s country of residence.
Under the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of ordinary shares who is a
Treaty U.S. Resident is 25%. However, if the income out of which the dividend is paid is not generated by a Preferred
Enterprise or a Preferred Technology Enterprise, and not more than 25% of our gross income consists of interest or
dividends, dividends paid to a U.S. corporation holding at least 10% of our issued voting power during the part of the tax
year that precedes the date of payment of the dividend and during the whole of its prior tax year are generally taxed at a
rate of 12.5%. Dividends generated by a Preferred Enterprise or Preferred Technology Enterprise are generally taxed at a
rate of 15% under the U.S.-Israel Tax Treaty if the foregoing conditions are met. If the dividend is attributable partly to
income derived from a Preferred Enterprise or a Preferred Technology Enterprise, and partly to other sources of income,
the withholding rate will be a blended rate reflecting the relative portions of the two types of income. The aforementioned
rates under the U.S.-Israel Tax Treaty will not apply if the dividend income was derived through or attributed to a permanent
establishment of the Treaty U.S. Resident in Israel. Application for this reduced tax rate requires appropriate documentation
presented to and specific instruction received from the Israel Tax Authority. We cannot assure you that we will designate
the profits that we may distribute in a way that will reduce shareholders’ tax liability.
Surtax
Subject to the provisions of any applicable tax treaty, individuals who are subject to tax in Israel (whether or not
any such individual is an Israeli resident) are also subject to a surtax at the rate of 3% on annual income (including, but not
limited to, dividends, interest and capital gains) exceeding NIS 721,560 for 2025, which amount is linked to the annual
change in the Israeli consumer price index. According to the Economic Efficiency Law (Legislative Amendments to
Achieve the Budget Targets for the 2025 Budget Year) (Freezing of Tax Updates and Surtax), 5785-2024 (the “Economic
Efficiency Law”), during the years 2025-2027, the aforementioned amount will not be adjusted in accordance with the
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Israeli consumer price index. In addition, according to the Economic Efficiency Law, an individual whose taxable income
from “Capital Sources” in the tax year exceeds the aforesaid amount shall be subject to an additional tax on the portion of
their taxable income from Capital Sources that exceeds the aforesaid amount at a rate of 2%. For this purpose, Capital
Source means any source of income (including, among other things, capital gain, dividend and interest) other than income
from business, employment and personal exertion.
United States Federal Income Tax Considerations
Subject to the limitations described herein, the following discussion summarizes certain United States federal
income tax considerations to a U.S. Holder of the acquisition, ownership and disposition of our ordinary shares. A “U.S.
Holder” means a holder of our ordinary shares who is:
•
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.
This discussion addresses only U.S. Holders that will own their ordinary shares as capital assets (generally, for
investment) and does not purport to be a comprehensive description of all of the tax considerations that may be relevant to
each person’s decision to acquire our ordinary shares. Certain aspects of U.S. federal income taxation relevant to a holder
of our ordinary shares that is not a U.S. Holder and not a partnership or other pass-through entity or arrangement (a “Non-
U.S. Holder”) are also discussed below.
This discussion is based on current provisions of the Code, current and proposed U.S. Treasury Regulations
promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change,
possibly on a retroactive basis. This discussion does not address all aspects of U.S. federal income taxation that may be
relevant to any particular U.S. Holder in light of such holder’s individual circumstances. In particular, this discussion does
not address the potential application of any alternative minimum tax or U.S. federal income tax considerations to U.S.
Holders that are subject to special treatment, including, without limitation:
•
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;
97
•
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.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our ordinary shares,
the tax treatment of the partnership and a partner in such partnership will generally depend on the status of the partner and
the activities of the partnership. Such a partner or partnership should consult its tax advisor as to its tax consequences.
In addition, this discussion does not address any aspect of state, local or non-United States tax laws or the possible
application of United States federal gift or estate taxes, nor does it address the Medicare contribution tax on net investment
income.
Each holder of our ordinary shares is advised to consult such holder’s tax advisor with respect to the specific
tax consequences to such holder of acquiring, holding or disposing of our ordinary shares, including the applicability
and effect of federal, state, local and foreign laws and possible changes in the tax laws in such holder’s particular
circumstances.
Taxation of Dividends Paid on Ordinary Shares. Subject to the discussion below under “Passive Foreign
Investment Company Status,” a U.S. Holder will be required to include in gross income as dividend income the amount of
any distribution paid on our ordinary shares (other than certain distributions, if any, of our ordinary shares distributed pro
rata to all our shareholders) on the date on which the dividends are actually or constructively received, including any non-
U.S. taxes withheld from the amount paid, to the extent the distribution is paid out of our current or accumulated earnings
and profits as determined for U.S. federal income tax purposes. Distributions in excess of such earnings and profits will be
applied against and will reduce the U.S. Holder’s adjusted basis in our ordinary shares and, to the extent in excess of such
basis, will be treated as capital gain from the deemed sale or exchange of our ordinary shares. However, we do not maintain
calculations of our earnings and profits under United States federal income tax principles. Therefore, U.S. Holders should
expect that the entire amount of any distribution generally will be reported as dividend income to a U.S. Holder. The
dividend portion of such distributions generally will not qualify for the dividends received deduction available to
corporations and thus will be subject to tax at the rate applicable to their taxable income.
Dividends that are received by non-corporate U.S. Holders will generally be taxed at the preferential rates
applicable to “qualified dividend income” (currently a maximum rate of 20%), provided certain holding period
requirements are met, we are not a “passive foreign investment company” (as discussed below) and our ordinary shares are
readily tradable on an established securities market in the United States or we are eligible for the benefits of the U.S.-Israel
Tax Treaty. Our ordinary shares are generally readily tradable on the Nasdaq Global Select Market, an established securities
market. Dividends that fail to meet such requirements, and dividends received by corporate U.S. Holders, are taxed at
ordinary income rates. No dividend received by a U.S. Holder will be a qualified dividend (1) if the U.S. Holder held the
ordinary share with respect to which the dividend was paid for less than 61 days during the 121-day period beginning on
the date that is 60 days before the ex-dividend date with respect to such dividend, excluding for this purpose, under the
rules of Code Section 246(c), any period during which the U.S. Holder has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a deep-in-the-money or otherwise nonqualified option to
buy, or has otherwise diminished its risk of loss by holding other positions with respect to, such ordinary share (or
substantially identical securities); or (2) to the extent that the U.S. Holder is under an obligation (pursuant to a short sale or
otherwise) to make related payments with respect to positions in property substantially similar or related to the ordinary
share with respect to which the dividend is paid. If we were to be a “passive foreign investment company” (as such term
is defined in the Code) for any year, dividends paid on our ordinary shares in such year or in the following year would not
be qualified dividends. In addition, a non-corporate U.S. Holder will be able to take a qualified dividend into account in
determining its deductible investment interest (which is generally limited to its net investment income) only if it elects to
do so; in such case the dividend will be taxed at ordinary income rates.
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Distributions of current or accumulated earnings and profits paid in foreign currency to a U.S. Holder (including
any non-U.S. taxes withheld therefrom) will generally be includible in the income of a U.S. Holder in a U.S. dollar amount
calculated by reference to the exchange rate on the date the distribution is received regardless of whether the foreign
currency is converted into U.S. dollars at the time. A U.S. Holder that receives a foreign currency distribution and converts
the foreign currency into U.S. dollars after the date of receipt may have foreign exchange gain or loss based on any
appreciation or depreciation in the value of the foreign currency against the U.S. dollar, which will generally be U.S. source
ordinary income or loss.
U.S. Holders may have the option of claiming the amount of any non-U.S. income taxes withheld on a dividend
distribution either as a deduction from gross income, provided a deduction is claimed for all of the foreign income taxes
the U.S. Holder pays or accrues in the particular year or as a dollar-for-dollar credit against their U.S. federal income tax
liability. Individuals who do not claim itemized deductions, but instead utilize the standard deduction, may not claim a
deduction for the amount of the non-U.S. income taxes withheld, but such amount may be claimed as a credit against the
individual’s U.S. federal income tax liability. The deduction, however, is not subject to the limitations applicable to foreign
tax credits, but may be subject to other limitations and each U.S. Holder is urged to consult its tax advisor. The amount of
non-U.S. income taxes which may be claimed as a credit in any year is subject to complex limitations and restrictions,
which must be determined on an individual basis by each U.S. Holder. These limitations include, among others, rules which
limit foreign tax credits allowable with respect to specific classes of income to the U.S. federal income taxes otherwise
payable with respect to each such class of income. Distributions of current or accumulated earnings and profits generally
will be “passive category income” for U.S. foreign tax credit purposes. The total amount of allowable foreign tax credits
in any year generally cannot exceed the pre-credit U.S. tax liability for the year attributed to non-U.S. source taxable
income. A U.S. Holder will be denied a foreign tax credit with respect to non-U.S. income tax withheld from a dividend
received on the ordinary shares if such U.S. Holder has not held the ordinary shares for at least 16 days of the 31-day period
beginning on the date which is 15 days before the ex-dividend date with respect to such dividend, or to the extent such U.S.
Holder is under an obligation to make related payments with respect to positions in substantially similar or related property.
Any days during which a U.S. Holder has substantially diminished its risk of loss on the ordinary shares are not counted
toward meeting the required 16-day holding period. Pursuant to applicable United States Treasury regulations, however,
if a U.S. Holder is not eligible for the benefits of an applicable income tax treaty or does not elect to apply such treaty, then
such holder may not be able to claim a foreign tax credit arising from any foreign tax imposed on a distribution on the
ordinary shares, depending on the nature of such foreign tax, although the IRS has provided temporary relief from the
application of certain aspects of these regulations until new guidance or regulations are issued. The rules governing the
treatment of foreign taxes imposed on a U.S. Holder and foreign tax credits are complex, and U.S. Holders should consult
their tax advisors about the impact of these rules in their particular situations, including their eligibility for benefits under
an applicable income tax treaty and the potential impact of the applicable United States Treasury regulations.
Taxation of the Disposition of Ordinary Shares. Subject to the discussion below under “Passive Foreign
Investment Company Status,” upon the sale, exchange or other disposition of our ordinary shares (other than with respect
to certain non-recognition transactions), a U.S. Holder will recognize capital gain or loss in an amount equal to the
difference between such U.S. Holder’s adjusted basis in such ordinary shares, which is usually the cost of such shares, and
the amount realized on the disposition. A U.S. Holder that uses the cash method of accounting calculates the U.S. dollar
value of the proceeds received on the sale as of the date that the sale settles, while a U.S. Holder that uses the accrual
method of accounting is required to calculate the value of the proceeds of the sale as of the “trade date,” unless such U.S.
Holder has made a special election (which must be applied consistently from year to year and cannot be changed without
the consent of the IRS) to use the settlement date to determine its proceeds of sale. Capital gain from the sale, exchange or
other taxable disposition of our ordinary shares held more than one year will be long-term capital gain, and may be eligible
for a reduced rate of taxation for individuals, estates or trusts (currently taxable at a maximum rate of 20%). U.S. Holders
should consult their tax advisors regarding the availability of the reduced rate of U.S. federal income tax on long-term
capital gains in light of their own particular circumstances.
Gains or losses recognized by a U.S. Holder on a sale, exchange or other disposition of our ordinary shares
generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Because a U.S. Holder may use foreign
tax credits against only the portion of United States federal income tax liability that is attributed to foreign source income
in the same category, a U.S. Holder’s ability to utilize a foreign tax credit with respect to the non-U.S. tax imposed on any
such sale or other taxable disposition, if any, may be significantly limited. In addition, pursuant to applicable United States
Treasury regulations, if a U.S. Holder is not eligible for the benefits of an applicable income tax treaty or does not elect to
apply such treaty, then the U.S. Holder may not be able to claim a foreign tax credit arising from any foreign tax imposed
on the disposition of our ordinary shares, depending on the nature of such foreign tax, although the IRS has provided
temporary relief from the application of certain aspects of these regulations until new guidance or regulations are issued.
The rules governing the treatment of foreign taxes imposed on a United States Holder and foreign tax credits are complex,
99
and U.S. Holders should consult their tax advisors as to whether the non-U.S. tax on gains may be creditable or deductible
in light of their particular circumstances, including their eligibility for benefits under an applicable treaty and the potential
impact of applicable United States Treasury regulations and the temporary IRS relief.
The deductibility of a capital loss recognized on the sale, exchange or other disposition of our ordinary shares may
be subject to limitations. A U.S. Holder that receives foreign currency upon disposition of our ordinary shares and
subsequently converts the foreign currency into U.S. dollars or disposes of such foreign currency, may have foreign
exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar,
which will generally be U.S. source ordinary income or loss. If a U.S. Holder used foreign currency to purchase ordinary
shares, the cost of such ordinary shares will be the U.S. dollar value of the foreign currency purchase price on the date of
purchase, translated at the spot rate of exchange on that date. If our ordinary shares are treated as traded on an established
securities market for U.S. federal income tax purposes and the relevant U.S. Holder is either a cash basis taxpayer or an
accrual basis taxpayer who has made the special election described above, the U.S. Holder will determine the U.S. dollar
value of the cost of such ordinary shares by translating the amount paid at the spot rate of exchange on the settlement date
of the purchase.
Passive Foreign Investment Company Status. We will be a “passive foreign investment company” (a “PFIC”) if
(taking into account certain “look-through” rules with respect to the income and assets of our subsidiaries) either (i) 75%
or more of our gross income in a taxable year is passive income or (ii) the average percentage of our total assets (by value,
determined on a quarterly basis) which produce, or are held for the production of, passive income during the taxable year
is at least 50%. Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from
commodities and securities transactions. The Code does not specify how a corporation must determine the fair market value
of its assets for this purpose, and the issue has not been definitively determined by the IRS or the courts. The market
capitalization approach has generally been used to determine the fair market value of the assets of a publicly traded
corporation. The IRS and the courts, however, have accepted other valuation methods besides the market capitalization
approach in certain other valuation contexts.
For our taxable year ended December 31, 2024, we do not believe that we should be classified as a PFIC. There
can be no assurance, however, that the IRS will not challenge this treatment, and it is possible that the IRS could attempt
to treat us as a PFIC for 2024 and prior taxable years. The tests for determining PFIC status require a factual determination
that depends on, among other things, the composition of our income, assets and activities in each taxable year, and can only
be made annually after the close of each taxable year. Furthermore, the aggregate value of our gross assets is likely to be
determined in part by reference to the trading price of our ordinary shares, which could fluctuate significantly. We have a
substantial balance of cash and other liquid investments, which are passive assets for purposes of the PFIC determination.
Accordingly, if our market capitalization declines significantly, it may make our classification as a PFIC more likely for
the current or future taxable years. Accordingly, there can be no assurance that we will not become a PFIC in future taxable
years.
If we were a PFIC, each U.S. Holder would (unless it made one of the elections discussed below on a timely basis)
be taxed on gain recognized from the disposition of our ordinary shares (including gain deemed recognized if the ordinary
shares are used as security for a loan) and upon receipt of certain excess distributions with respect to our ordinary shares
as if such income had been recognized ratably over the U.S. Holder’s holding period for the ordinary shares. The U.S.
Holder’s income for the current taxable year would include (as ordinary income) amounts allocated to the current year and
to any period prior to the first day of the first taxable year for which we were a PFIC. Tax would also be computed at the
highest ordinary income tax rate in effect for each other period to which income is allocated, and an interest charge on the
tax as so computed would also apply. The tax liability with respect to the amount allocated to the taxable year prior to the
taxable year of the distribution or disposition cannot be offset by any net operating losses. Further, if we are a PFIC during
any year in which a U.S. Holder owns our ordinary shares, each U.S. Holder generally will be required to file an annual
report with the IRS on Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or
Qualified Electing Fund) with respect to us (regardless of whether a QEF or mark-to-market election (described below) is
made). If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our ordinary shares, we will
continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder
owns our ordinary shares, regardless of whether we continue to meet the tests described above unless such U.S. Holder
elects to apply the QEF or the mark-to-market election (described below) and certain conditions are met.
Under certain attribution rules, if we are considered a PFIC, U.S. Holders may be deemed to own their
proportionate share of equity in any PFIC owned by us (if any), such entities referred to as “lower-tier PFICs,” and will be
subject to U.S. federal income tax in the manner discussed above on (1) a distribution to us on the shares of a “lower-tier
100
PFIC” and (2) a disposition by us of shares of a “lower-tier PFIC,” both as if the holder directly held the shares of such
“lower-tier PFIC.”
As an alternative to the tax treatment described above, a U.S. Holder could elect to treat us as a “qualified electing
fund” (QEF), in which case the U.S. Holder would be required to include in income, for each taxable year that we are a
PFIC, its pro rata share of our ordinary earnings as ordinary income and its pro rata share of our net capital gain as capital
gain, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge. Any income
inclusion will be required whether or not such U.S. Holder owns our ordinary shares for an entire taxable year or at the end
of our taxable year. The amount so includable will be determined without regard to our prior year losses or the amount of
cash distributions, if any, received from us. Special rules apply if a U.S. Holder makes a QEF election after the first year
in its holding period in which we are a PFIC. We will supply U.S. Holders with the information needed to report income
and gain under a QEF election if we are a PFIC. A U.S. Holder’s basis in its ordinary shares will increase by any amount
included in income and decrease by any amounts not included in income when distributed because such amounts were
previously taxed under the QEF rules. So long as a U.S. Holder’s QEF election is in effect beginning with the first taxable
year in which we were a PFIC during the U.S. Holder’s holding period for its ordinary shares, any gain or loss realized by
such holder on the disposition of its ordinary shares held as a capital asset ordinarily would be capital gain or loss. Such
capital gain or loss ordinarily would be long-term if such U.S. Holder had held such ordinary shares for more than one year
at the time of the disposition and would be eligible for a reduced rate of taxation for certain non-corporate U.S. holders.
The QEF election is made on a shareholder-by-shareholder basis, applies to all ordinary shares held or subsequently
acquired by an electing U.S. Holder and can be revoked only with the consent of the IRS.
As an alternative to making a QEF election, a U.S. Holder of PFIC stock which is “marketable stock” (e.g.,
“regularly traded” on a “qualified exchange”) may in certain circumstances avoid certain of the tax consequences generally
applicable to holders of stock in a PFIC by electing to mark the stock to market as of the beginning of such U.S. Holder’s
holding period for the ordinary shares. The Nasdaq Global Select Market, on which our ordinary shares are traded, is
considered a “qualified exchange” for this purpose. As a result of such election, in any taxable year that we are a PFIC, a
U.S. Holder would generally be required to report gain or loss to the extent of the difference between the fair market value
of the ordinary shares at the end of the taxable year and such U.S. Holder’s tax basis in its ordinary shares at that time. Any
gain under this computation, and any gain on an actual disposition of the ordinary shares in a taxable year in which we are
a PFIC, would be treated as ordinary income. Any loss under this computation, and any loss on an actual disposition of
the ordinary shares in a taxable year in which we are a PFIC, generally would be treated as ordinary loss to the extent of
the cumulative net-mark-to-market gain previously included. Any remaining loss from marking ordinary shares to market
will not be allowed, and any remaining loss from an actual disposition of ordinary shares generally would be capital loss. A
U.S. Holder’s tax basis in its ordinary shares is adjusted annually for any gain or loss recognized under the mark-to-market
election. There can be no assurances that there will be sufficient trading volume with respect to our ordinary shares for the
ordinary shares to be considered “regularly traded” or that our ordinary shares will continue to trade on the Nasdaq Global
Select Market. Accordingly, there are no assurances that the ordinary shares will be marketable stock for these
purposes. As with a QEF election, a mark-to-market election is made on a shareholder-by-shareholder basis, applies to all
ordinary shares held or subsequently acquired by an electing U.S. Holder and can only be revoked with the consent of the
IRS to the extent the ordinary shares no longer constitute marketable stock.
U.S. Holders are urged to consult their tax advisors about the PFIC rules, including eligibility for and the
manner and advisability of making, the QEF election or the mark-to-market election.
Tax Consequences for Non-U.S. Holders of Ordinary Shares
Except as described in “Information Reporting and Backup Withholding” below, a Non-U.S. Holder of ordinary
shares will not be subject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from
the sale, exchange or other taxable disposition of, ordinary shares, unless, for U.S. federal income tax purposes:
•
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.
Information Reporting and Backup Withholding
101
U.S. Holders (other than certain exempt recipients, such as corporations) generally are subject to information
reporting requirements with respect to dividends paid in the United States on ordinary shares and proceeds received from
the sale, exchange, redemption or other disposition of ordinary shares. Under the Code, a U.S. Holder may be subject,
under certain circumstances, to backup withholding with respect to dividends paid on our ordinary shares and proceeds
received from the sale, exchange, redemption or other disposition of ordinary shares unless such holder provides proof of
an applicable exemption or correct taxpayer identification number and otherwise complies with applicable requirements of
the backup withholding rules.
Any U.S. Holders required to establish their exempt status generally must provide a properly executed IRS Form
W-9 (Request for Taxpayer Identification Number and Certification).
Amounts withheld under the backup withholding rules are not an additional tax and may be refunded or credited
against the U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the
IRS.
Non-U.S. Holders generally are not subject to information reporting or backup withholding with respect to
dividends paid on, or the proceeds from the disposition of, ordinary shares, provided that such Non-U.S. Holder certifies
to its foreign status, or otherwise establishes an exemption.
Certain U.S. Holders who are individuals or certain other non-corporate entities (and to the extent provided in IRS
guidance, certain Non-U.S. Holders) who hold interests in “specified foreign financial assets” (as defined in Section 6038D
of the Code) are generally required to file an IRS Form 8938 as part of their U.S. federal income tax returns to report their
ownership of such specified foreign financial assets, which may include our ordinary shares, if the total value of those
assets exceeds certain thresholds. Substantial penalties may apply to any failure to timely file IRS Form 8938. In addition,
in the event a holder that is required to file IRS Form 8938 does not file such form, the statute of limitations on the
assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three
years after the date that the required information is filed. Holders should consult their tax advisors regarding their tax
reporting obligations.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
We are subject to the informational requirements of the Exchange Act, as applicable to “foreign private issuers”
(as defined in Rule 3b-4 under the Exchange Act), and fulfill the obligations with respect to such requirements by filing
reports and other information with the SEC.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and
content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and “short-
swing” profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the
Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies
whose securities are registered under the Exchange Act.
Notwithstanding the foregoing, we furnish reports with the SEC on Form 6-K containing unaudited financial
information for the first three quarters of each fiscal year, we file reports with the SEC on Form 20-F containing audited
financial information for each fiscal year, and we solicit proxies and furnish proxy statements for all meetings of
shareholders, a copy of which proxy statement is furnished promptly thereafter with the SEC under the cover of a Current
Report on Form 6-K. This annual report and the exhibits thereto and any other document we file pursuant to the Exchange
Act are available on the SEC website (http://www.sec.gov) and on our website www.radware.com. However, the content
of our website is not incorporated by reference into this annual report.
The documents concerning our Company that are referred to in this annual report may also be inspected at our
offices located at 22 Raoul Wallenberg Street, Tel Aviv 6971917, Israel.
I.
Subsidiary Information
102
Not applicable.
J.
Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
We are exposed to market risk, including fluctuations in interest rates and foreign currency exchange rates. Our
primary market risk exposure occurs because we generate a portion of our revenues in foreign currencies, mainly in euros
and incur a portion of our expenses in foreign currencies, mainly in NIS, but also in euros and other foreign currencies. As
more fully described below, commencing in 2022, we engaged in currency-hedging transactions intended to reduce the
effect of fluctuations in foreign currency exchange rates on our financial condition and results of operations. However,
there can be no assurance that any such hedging transactions will materially reduce the effect of fluctuations in foreign
currency exchange rates on such results.
In addition, as of December 31, 2024, we had cash and cash equivalents, including short-term bank deposits and
short- and long-term marketable securities, of $419.7 million. As of that date, approximately 82% of our cash, cash
equivalents, bank deposits and marketable securities are held by Radware Ltd. in Israeli or U.S. financial institutions.
The majority of our cash and cash equivalents, and short- and long-term bank deposits are invested in banks in
Israel and, to a smaller extent, in banks in the United States. The Israeli bank deposits are not insured, while the deposits
made in the United States in excess of insured limits are not otherwise insured. If one or more of these financial institutions
were to become insolvent, the loss of these investments would have a material adverse effect on our financial condition.
Exposure to Interest Rate Fluctuations
As of December 31, 2024, approximately 24% of our cash throughout the world was invested in fixed-income
securities which are affected by changes in interest rates. Interest rates are highly sensitive to many factors, including
governmental monetary policies and domestic and international economic and political conditions. These securities are
readily available for sale and are treated as such in our financial statements.
Consequently, our investments are exposed to risks relating to a fluctuation in interest rates, which may affect our
interest income and the fair market value of our investments. This is because an increase in market interest rates could have
an adverse effect on the value of our investment portfolio, for example, by decreasing the fair values of the fixed income
securities that comprise a substantial majority of our investment portfolio. Similarly, in a declining interest rate
environment, borrowers may seek to refinance their borrowings at lower rates and, accordingly, prepay or redeem securities
held earlier than initially expected. This action may cause us to reinvest the redeemed proceeds in lower yielding
investments.
Our investments portfolio consists primarily of investments in foreign banks and government debentures,
corporate debentures, U.S. government and bank deposits. As of December 31, 2024, approximately 23% of our portfolio
was invested in corporate debentures, 1% in U.S. government debentures, 0.4% in foreign banks and government
debentures and the rest of the funds were invested in bank deposits and money market funds. Although we believe that we
generally adhere to conservative investment guidelines, the continuing turmoil in the financial markets may result in
impairments of the carrying value of our investment assets. Realized losses in our investments portfolio may adversely
affect our financial condition and results.
Any significant decline in our investment income or the value of our investments as a result of falling interest
rates, deterioration in the credit of the securities in which we have invested, or general market conditions could have an
adverse effect on our results of operations and financial condition.
We currently have no debt.
Exposure to Currency Fluctuations
Approximately 87% of our sales in 2024 were denominated in dollars or are dollar-linked, and we incur most of
our expenses in dollars, NIS, and euros. We believe that the dollar is the primary currency of the economic environment in
which we operate. Thus, our functional and reporting currency is the dollar, and monetary accounts maintained in currencies
other than the dollar are re-measured into U.S. dollars in accordance with ASC 830 “Foreign Currency Matters.” Changes
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in currency exchange rates between our functional currency and the currency in which a transaction is denominated are
included in our results of operations as financial income (expense) in the period in which the currency exchange rates
change.
We monitor our foreign currency exposure and, from time to time, we use currency forward contracts in order to
protect against the increase in value of forecasted non-dollar currency cash flows and to hedge future anticipated payments.
As of December 31, 2024, we had outstanding currency forward contracts in the total amount of approximately $47.9
million to hedge portions of our forecasted expenses denominated in NIS. These forward contracts expire on various dates
until September 30, 2025. However, we cannot guarantee that such measures will effectively protect us from adverse effects
due to the impact of change in currency exchange rates.
Our revenues and expenses may be affected by fluctuations in the value of the dollar as it relates to foreign
currencies, mainly the NIS and Euro. For example, if there were no changes in the average exchange rates of the dollar
relative to the NIS and Euro in 2024 compared to the average exchange rates in 2023, our revenues would have been higher
in an amount of $0.1 million, and our expenses would have been higher by an amount of $5.0 million. Assuming our
revenues and expenses in 2024 remain at the same level and with the same currency mix as in 2024, a 10% weakening in
the value of the dollar relative to all currencies in which we operate would result in an increase in revenues of approximately
$3.3 million and an increase in our expenses of $12.8 million.
The following table presents information about the changes in the exchange rates of the U.S. dollar relative to the
NIS and Euro:
U.S. dollar against:
Year ended December 31,
NIS
Euro
2020 ....................................................................................
(7.0)%
(8.5)%
2021 ....................................................................................
(3.3)%
8.4%
2022 ....................................................................................
13.2%
6.1%
2023 ....................................................................................
3.1%
(3.6)%
2024 ....................................................................................
0.6%
6.3%
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
Debt Securities
Not applicable.
B.
Warrants and Rights
Not applicable.
C.
Other Securities
Not applicable.
D.
American Depositary Shares
The Company does not have any outstanding American Depositary Shares or American Depositary Receipts.
104
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
Not applicable.
ITEM 15.
CONTROLS AND PROCEDURES
•
Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act), as of December 31, 2024. Based on this evaluation, our President and Chief Executive Officer and
Chief Financial Officer concluded that, as of December 31, 2024, our disclosure controls and procedures were effective to
ensure that: (1) information required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms; and (2) such information is accumulated and communicated to our management, including our President and Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
•
Management’s Annual Report on Internal Control Over Financial Reporting
Our management, under the supervision of our President and Chief Executive Officer and Chief Financial Officer,
is responsible for establishing and maintaining adequate internal control over financial reporting for us. Our internal control
over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial
reporting includes those policies and procedures that:
•
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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In conducting its
assessment of internal control over financial reporting, our management based its evaluation on the framework in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Our management has concluded, based on its assessment, that our internal control over financial
reporting was effective as of December 31, 2024 based on these criteria.
•
Attestation Report of the Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 2024, has been audited by
Kost, Forer, Gabbay & Kasierer (a Member of Ernst & Young Global), an independent registered public accounting firm
who audited and reported on the consolidated financial statements of the company for the year ended December 31, 2024.
105
This annual report includes an attestation report of our independent registered public accounting firm regarding
management’s assessment of internal control over financial reporting on page F-4 of our audited consolidated financial
statements set forth in Item 18 “Financial Statements.”
•
Changes in Internal Control Over Financial Reporting
During the year ended December 31, 2024, no changes in our internal control over financial reporting have
occurred that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Although some of our workforce is or was working remotely during 2024, there were no material changes to our
existing internal control over financial reporting as a result of this.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Naama Zeldis, the Chairperson of our Audit Committee, is an “audit
committee financial expert” as defined in the applicable regulations and has the requisite financial experience as defined
by the Nasdaq listing standards. Our Board of Directors has determined that each member of our Audit Committee is
“independent” as such term is defined in the Nasdaq listing standards. The education and experience of the Audit
Committee financial expert is presented in Item 6.A “Directors and Senior Management.”
ITEM 16B. CODE OF ETHICS
We have adopted a Code of Conduct and Ethics that applies to all directors, officers and other employees of the
Company, including our President and Chief Executive Officer, Chief Financial Officer, Director of Finance and Corporate
Controller.
Our
Code
of
Conduct
and
Ethics
has
been
posted
on
our
Internet
website,
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). The Company will
promptly disclose to our shareholders, if required by applicable laws or stock exchange requirements, any amendments to
or waivers from the Code of Conduct and Ethics applicable to our directors or officers by posting such information on our
website. No waivers were requested or given during 2024.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Paid to Independent Public Accountants
In the annual meeting held in October 2024, our shareholders approved the reappointment of Kost, Forer, Gabbay
& Kasierer, a member of Ernst & Young Global (Ernst & Young), to serve as our independent auditors until the next annual
meeting.
The following table sets forth, for each of the years indicated, the aggregate fees billed by Ernst & Young and the
percentage of each of the fees out of the total amount paid to them classified by category:
Year Ended December 31,
2024*
2023*
(US$ in thousands)
Audit Fees (1)
.................................................................
507
72%
480
70%
Audit-Related Fees (2)
.................................................................
-
0%
-
0%
Tax Fees (3)
.................................................................
134
19%
126
18%
All Other Fees (4)
.................................................................
63
9%
84
12%
Total
.................................................................
704
100%
690
100%
* All of the services in the above table were approved by the Audit Committee.
(1) Audit Fees include fees associated with the annual audit, including the audit of internal control over financial
reporting, the reviews of the Company’s quarterly financial statements, statutory audits required internationally, acquisition
106
audit procedures and Critical Audit Matters assessment, consents and assistance with, and review of, documents filed with
the SEC.
(2) Audit-Related Fees include assurance and related services that traditionally are performed by the independent
accountant, including due diligence services related to mergers and acquisitions, internal control reviews, attest services
related to financial reporting that are not required by statute or regulation and consultation concerning financial accounting
and reporting standards (not classified as audit fees).
(3) Tax Fees include tax compliance, including the preparation of tax returns, tax planning and tax advice,
including assistance with tax audits and appeals, advice related to acquisitions, transfer pricing and assistance with respect
to requests for rulings from tax authorities.
(4) Other Fees include fees for consultation with Company management about accounting or disclosure treatment
of transactions or events and consulting services such as obtaining grants from the Government of Israel for approved
research and development projects.
Audit Committee’s pre-approval policies and procedures
Our Audit Committee oversees our independent auditors. See also the description in Item 6.C “Board Practices.”
Our Audit Committee has adopted a policy requiring management to obtain the Committee’s approval before
engaging our independent auditors to provide any other audit or permitted non-audit services to us or our subsidiaries.
Pursuant to this policy, which is designed to assure you that such engagements do not impair the independence of our
auditors, and which is discussed and approved at the end of each calendar year, the Audit Committee pre-approves annually
a catalog of specific audit and non-audit services in the categories Audit Service, Audit-Related Service, and Tax
Consulting Services that may be performed by our auditors. In addition, the Audit Committee limited the aggregate amount
in fees our auditors may receive during fiscal year for non-audit services in certain categories, unless pre-approved. Our
Director of Finance reviews all individual management requests to engage our independent auditors as a service provider
in accordance with this catalog and, if the requested services are permitted pursuant to the catalog, approve the request
accordingly. We inform the Audit Committee about these approvals on a quarterly basis. Services that are not included in
the catalog require pre-approval by the Audit Committee on a case-by-case basis. Our Audit Committee is not permitted
to approve any engagement of our auditors if the services to be performed either fall into a category of services that are not
permitted by applicable law or the services would be inconsistent with maintaining the auditors’ independence.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
During 2024, we repurchased 52,688 of our ordinary shares for consideration of $0.8 million under publicly announced
share repurchase plans, as follows:
Period
Total Number
of Shares
Purchased
Average Price
Paid per Share
(in US$)
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)
January 1 through 31 ......................................
52,688
15.88
52,688 $
65,641,955
February 1 through August 31 ........................
0
0
0 $
65,641,955
September 1 through December 31 .................
0
0
0 $
80,000,000
(1) In August 2023, the Company’s Board of Directors authorized a new plan for the repurchase of up to an aggregate of
$80 million of the Company’s ordinary shares in the open market, subject to normal trading restrictions, or in privately
negotiated transactions (the “2024 Plan”). The 2024 plan became effective on November 1, 2023 and expired on August
31, 2024.
107
(2) In August 2024, the Company’s Board of Directors authorized a new plan for the repurchase of up to an aggregate of
$80 million of the Company’s ordinary shares in the open market, subject to normal trading restrictions, or in privately
negotiated transactions (the “2025 Plan”). The 2025 plan came into effect upon the expiration of the 2024 Plan and will
expire on February 13, 2026.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
ITEM 16G. CORPORATE GOVERNANCE
We are a foreign private issuer whose ordinary shares are listed on the Nasdaq Global Select Market. As such,
we are required to comply with U.S. federal securities laws, including the Sarbanes-Oxley Act, and the Nasdaq rules,
including the Nasdaq corporate governance requirements. The Nasdaq rules provide that foreign private issuers may follow
home country practice in lieu of certain qualitative listing requirements subject to certain exceptions and except to the
extent that such exemptions would be contrary to U.S. federal securities laws, so long as the foreign issuer discloses that it
does not follow such listing requirement and describes the home country practice followed in its reports filed with the
SEC. Below is a concise summary of the significant ways in which our corporate governance practices differ from the
corporate governance requirements of Nasdaq applicable to domestic U.S. listed companies:
•
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.
Although we may rely on certain home country corporate governance practices, we must comply with Nasdaq
Rule 5625 Notification of Noncompliance and Rule 5640 Voting Rights. Further, we must have an audit committee charter
that satisfies Rule 5605(c)(3), which addresses audit committee responsibilities and authority, and that consists of
committee members that meet the independence requirements of Rule 5605(c)(2)(A).
To the extent permitted by Nasdaq rules, we may in the future elect to follow Israel corporate governance practices
in lieu of Nasdaq corporate governance rules with regard to other matters.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
108
ITEM 16J. INSIDER TRADING POLICIES
We have adopted an insider trading policy governing the purchase, sale, and other dispositions of our securities
by directors, senior management and employees that are reasonably designed to promote compliance with applicable insider
trading laws, rules and regulations, and any listing standards applicable to us. A copy of the insider trading policy is attached
as Exhibit 11.1 to this annual report.
ITEM 16K. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program intended to protect the
confidentiality, integrity, and availability of our critical systems, information, and our customers’ data. Our cybersecurity
policies, standards, processes, and practices are part of our information security management program, which is aligned to
ISO 27001, an international standard to manage information security. This does not imply that we meet any particular
technical standards, specifications, or requirements, only that we use ISO 27001 as a framework to help us identify, assess,
and manage cybersecurity risks relevant to our business.
Our cybersecurity risk management program includes a secure software development program intended to reduce
the introduction of risks into our software, a software vulnerability and patch management program, and cybersecurity
incident detection, response, and recovery programs, among others. Our cybersecurity risk team aims to integrate
cybersecurity risks into our overall company’s risk management system and processes on an ongoing basis.
Key elements of our cybersecurity risk management program include, but are not limited to the following:
•
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.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity
incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial
condition.
Cybersecurity risks and threats continuously evolve, and we face risks from cybersecurity threats that, if realized,
are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial
condition. See “Risk Factor—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,” “Risk Factor—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,” and “Risk Factor—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.”
Cybersecurity Governance
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to the
Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees
management’s implementation of our cybersecurity risk management program.
Additionally, our risk monitoring systems, including our cybersecurity monitoring systems, are regularly audited
by our internal auditors as well as cybersecurity audit companies. We consider the results of external and internal audits of
our risk detection and monitoring systems and implement modifications as necessary.
109
The Audit Committee receives reports from management and the internal auditor on our cybersecurity risks. In
addition, management updates the Audit Committee and Board of Directors, as necessary, regarding significant
cybersecurity incidents. In addition, the Audit Committee regularly receives reports from management on such topic.
Our cybersecurity management team, including our CEO, Chief Financial Officer, Chief Operating Officer, Chief
Marketing Officer, Chief Information Officer, Chief Information Security Officer (CISO) and General Counsel, is
responsible for assessing and managing our material risks from cybersecurity threats. The team is primarily responsible for
our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our
retained external cybersecurity consultants. By the nature of our business, our management team gained expertise in
cybersecurity, each member bringing years of experience and strategic leadership in cybersecurity. Our CISO, who holds
a B.S. in Computer Science, and has over 30 years of cybersecurity experience, actively participates in formal courses and
conferences to stay current with evolving threats.
Our cybersecurity management team is informed about and monitors the prevention, detection, mitigation, and
remediation of cybersecurity risks and incidents through various means, which may include briefings from internal security
personnel; threat intelligence and other information obtained from governmental, public or private sources, including
external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
110
PART III
ITEM 17. FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of this item.
ITEM 18. FINANCIAL STATEMENTS
The Financial Statements required by this item are found at the end of this annual report, beginning on page F-1.
ITEM 19. EXHIBITS
The exhibits filed with or incorporated into this annual report are listed on the index of exhibits below.
Exhibit
No.
Exhibit
1.1¶
Memorandum of Association (A)
1.2
Amended and Restated Articles of Association (B)
2.1
Description of the Rights of Each Class of Securities Registered under Section 12 of the
Securities Exchange Act of 1934 (C)
4.1
Form of Directors and Officers Indemnity Deed (D)
4.2
Summary of Material Terms of the Lease Agreements for the Company’s Headquarters (E)
4.3*
1997 Key Employee Share Incentive Plan, as amended and restated
4.4
1997 Key Employee Share Incentive Plan—2010 Addendum (for international grantees) (F)
4.5
Radware Ltd. – 2010 Employee Share Purchase Plan (G)
4.6
Amended and Restated Compensation Policy for Executive Officers and Directors (H)
4.7#
Asset Purchase Agreement, dated as of February 16, 2022, by and between Radware Ltd. and
SecurityDAM Ltd. (I)
8.1*
List of Subsidiaries
11*
Insider Trading Policy
12.1*
Certification of the President and Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
12.2*
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
13.1**
Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*
Consent of Independent Registered Public Accounting Firm
97.1
Compensation Recovery Policy (J)
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (embedded within the inline XBRL document).
¶Translated from Hebrew
# Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit.
* Filed herewith.
** Furnished herewith.
111
IMPORTANT NOTE: Certain agreements filed as exhibits to this annual report contain representations, warranties and
covenants that the parties thereto made to each other. These representations, warranties and covenants have been made
solely for the purposes of such agreements and as of specific dates, were made solely for the benefit of the other parties to
such agreements, and may have been qualified by certain information that has been disclosed to the other parties to such
agreements and that may not be reflected in the text of such agreements and may apply standards of materiality in a way
that is different from what may be viewed as material by shareholders of, or other investors in, the Company. In addition,
these representations, warranties and covenants may be intended as a way of allocating risks among parties if the statements
contained therein prove to be incorrect, rather than as actual statements of fact. Moreover, information concerning the
subject matter of any such representations, warranties and covenants may have changed since the date of such agreements.
Accordingly, there can be no reliance on any such representations, warranties and covenants as characterizations of the
actual state of facts.
(A) Incorporated by reference to Exhibit 1.1 to the Annual Report on Form 20-F for the year ended December 31, 2019,
filed with the SEC on April 2, 2020.
(B) Incorporated by reference to Exhibit 1.2 to the Annual Report on Form 20-F for the year ended December 31, 2020,
filed with the SEC on April 20, 2021.
(C) Incorporated by reference to Exhibit 2.1 to the Annual Report on Form 20-F for the year ended December 31, 2023,
filed with the SEC on March 25, 2024.
(D) Incorporated by reference to Appendix B to the Proxy Statement filed as Exhibit 1.2 to Report of Foreign Private Issuer
on Form 6-K submitted to the SEC on July 28, 2011.
(E) Incorporated by reference to Exhibit 4.2 to the Annual Report on Form 20-F for the year ended December 31, 2020,
filed with the SEC on April 20, 2021.
(F) Incorporated by reference to Exhibit 4.8 to the Annual Report on Form 20-F for the year ended December 31, 2009,
filed with the SEC on April 29, 2010.
(G) Incorporated by reference to Exhibit 4.9 to the Annual Report on Form 20-F for the year ended December 31, 2009,
filed with the SEC on April 29, 2010.
(H) Incorporated by reference to Appendix A of the Proxy Statement submitted as Exhibit 99.2 to the current report as
Form 6-K, submitted to the SEC on June 23, 2022.
(I) Incorporated by reference to Exhibit 4.7 to the Annual Report on Form 20-F for the year ended December 31, 2021,
filed with the SEC on April 11, 2022.
(J) Incorporated by reference to Exhibit 97.1 to the Annual Report on Form 20-F for the year ended December 31, 2023,
filed with the SEC on March 25, 2024.
112
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.
RADWARE LTD.
By: /s/ Roy Zisapel
Name: Roy Zisapel
Title: President and Chief Executive Officer
Date: March 28, 2025
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024
U.S. DOLLARS IN THOUSANDS
INDEX
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID:1281)
..............................................................................................................................................................
F2 – F4
Consolidated Balance Sheets
..............................................................................................................................................................
F5 – F6
Consolidated Statements of Income (Loss)
..............................................................................................................................................................
F8
Consolidated Statements of Comprehensive Income (Loss)
..............................................................................................................................................................
F10
Statements of Changes in Shareholders’ Equity
..............................................................................................................................................................
F12
Consolidated Statements of Cash Flows
..............................................................................................................................................................
F13 – F11
Notes to Consolidated Financial Statements
..............................................................................................................................................................
F15 – F50
F - 2
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Radware Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Radware Ltd. and its subsidiaries (the
Company) as of December 31, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income
(loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated March 28, 2025, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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
F - 3
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. We also
evaluated and tested the Company’s disclosures included in Note 2 to the consolidated financial
statements.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
We have served as the Company’s auditor since 2002.
Tel-Aviv, Israel
March 28, 2025
F - 4
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Radware Ltd.
Opinion on Internal Control Over Financial Reporting
We have audited Radware Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Radware Ltd. and
subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets as of December 31, 2024 and 2023, the related consolidated
statements of income (loss), comprehensive income (loss), shareholders’ equity and cash flows for each of the three years
in the period ended December 31, 2024, and the related notes and our report dated March 28, 2025 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
Tel-Aviv, Israel
March 28, 2025
F - 5
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31,
2024
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
............................................................................................................................... $
98,714 $
70,538
Marketable securities
...............................................................................................................................
72,994
86,372
Short-term bank deposits
...............................................................................................................................
104,073
173,678
Trade receivables, net
...............................................................................................................................
16,823
20,267
Other current assets and prepaid expenses
...............................................................................................................................
14,242
9,529
Inventories
...............................................................................................................................
14,030
15,544
Total current assets
..................................................................................................................................
320,876
375,928
LONG-TERM INVESTMENTS:
Marketable securities
...............................................................................................................................
29,523
33,131
Long-term bank deposits
...............................................................................................................................
114,354
-
Other assets
...............................................................................................................................
2,171
2,166
Total long-term investments
..................................................................................................................................
146,048
35,297
Property and equipment, net
..................................................................................................................................
15,632
18,221
Operating lease right-of-use assets
..................................................................................................................................
18,456
20,777
Intangible assets, net
..................................................................................................................................
11,750
15,718
Goodwill
..................................................................................................................................
68,008
68,008
Other long-term assets
..................................................................................................................................
37,906
37,967
Total assets
.................................................................................................................................. $
618,676 $
571,916
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
December 31,
2024
2023
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
............................................................................................................................ $
5,581 $
4,298
Deferred revenues
............................................................................................................................
106,303
105,012
Operating lease liabilities
............................................................................................................................
4,750
4,684
Employees and payroll accruals
............................................................................................................................
32,023
27,448
Other payables and accrued expenses
............................................................................................................................
19,813
13,573
Total current liabilities
...............................................................................................................................
168,470
155,015
LONG-TERM LIABILITIES:
Deferred revenues
............................................................................................................................
64,708
60,499
Operating lease liabilities
............................................................................................................................
13,519
16,020
Other long-term liabilities
............................................................................................................................
14,904
17,108
Total long-term liabilities
...............................................................................................................................
93,131
93,627
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, 2024 and 2023;
Issued: 63,008,264 and 62,099,850 shares at December 31, 2024 and 2023,
respectively; Outstanding: 42,554,602 and 41,698,876 shares at December 31,
2024 and 2023, respectively
............................................................................................................................
754
742
Additional paid-in capital
............................................................................................................................
555,154
529,209
Treasury shares 20,453,662 and 20,400,974 of ordinary shares at December 31,
2024 and 2023, respectively
............................................................................................................................
(366,588)
(365,749)
Accumulated other comprehensive income
............................................................................................................................
1,103
77
F - 7
Retained earnings
............................................................................................................................
125,850
119,812
Total Radware Ltd. shareholders’ equity
...............................................................................................................................
316,273
284,091
Non-controlling interest
...............................................................................................................................
40,802
39,183
Total shareholders’ equity
...............................................................................................................................
357,075
323,274
Total liabilities and shareholders’ equity
............................................................................................................................... $
618,676 $
571,916
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
U.S. dollars in thousands, except share and per share data
Year ended
December 31,
2024
2023
2022
Revenues:
Products
.............................................................................................................. $
155,437 $
145,541 $
172,161
Services
..............................................................................................................
119,443
115,751
121,265
Total revenues
.................................................................................................................
274,880
261,292
293,426
Cost of revenues:
Products
..............................................................................................................
42,178
41,450
43,014
Services
..............................................................................................................
11,074
10,260
10,870
Total cost of revenues
53,252
51,710
53,884
Gross profit
.................................................................................................................
221,628
209,582
239,542
Operating expenses, net:
Research and development, net
..............................................................................................................
74,723
82,617
86,562
Sales and marketing
..............................................................................................................
122,450
126,237
126,533
General and administrative
..............................................................................................................
28,342
32,408
29,786
Total operating expenses, net
.................................................................................................................
225,515
241,262
242,881
Operating loss
.................................................................................................................
(3,887)
(31,680 )
(3,339)
Financial income, net
.................................................................................................................
16,552
13,927
8,052
Income (loss) before taxes on income
.................................................................................................................
12,665
(17,753 )
4,713
Taxes on income
.................................................................................................................
6,627
3,837
4,879
Net income (loss) attributable to Radware Ltd.’s shareholders
................................................................................................................. $
6,038 $
(21,590 ) $
(166)
Basic net earnings (loss) per share
................................................................................................................. $
0.14 $
(0.50 ) $
(0.00)
F - 9
Diluted net earnings (loss) per share
................................................................................................................. $
0.14 $
(0.50 ) $
(0.00)
Weighted-average shares used to compute net income (loss) per share:
Basic
................................................................................................................. 41,982,851 42,871,770 44,943,168
Diluted
................................................................................................................. 43,362,906 42,871,770 44,943,168
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S. dollars in thousands
Year ended
December 31,
2024
2023
2022
Net income (loss)
.................................................................................................. $
6,038 $
(21,590 ) $
(166 )
Other comprehensive income (loss) before tax:
Unrealized gains (losses) on marketable securities:
Changes in unrealized gains (losses)
...........................................................................................
...........................................................................................
1,389
4,526
(5,046 )
Less: reclassification adjustments for gains (losses) included in
net income (loss)
...........................................................................................
...........................................................................................
-
(243 )
68
Cash flow hedging activities adjustments:
Changes in unrealized gains (losses)
...........................................................................................
...........................................................................................
485
(2,955 )
(3,427 )
Less: reclassification adjustments for gains (losses) included in
net income (loss)
...........................................................................................
...........................................................................................
(534 )
4,799
2,795
Other comprehensive income (loss) before tax
..................................................................................................
..................................................................................................
1,340
6,127
(5,610 )
Unrealized gains (losses) on marketable securities:
Income tax benefits (income tax expenses) related to
components of other comprehensive income (loss)
...........................................................................................
...........................................................................................
(320 )
(985 )
1,145
Cash flow hedging activities adjustments:
Income tax benefits (income tax expenses) related to
components of other comprehensive income (loss)
...........................................................................................
...........................................................................................
6
(221 )
76
Income tax benefits (income tax expenses) related to components
of other comprehensive income (loss)
..................................................................................................
..................................................................................................
(314 )
(1,206 )
1,221
Other comprehensive income (loss), net of tax
..................................................................................................
..................................................................................................
1,026
4,921
(4,389 )
Comprehensive income (loss) attributable to Radware Ltd.’s
shareholders
..................................................................................................
.................................................................................................. $
7,064 $
(16,669 ) $
(4,555 )
F - 11
The accompanying notes are an integral part of the consolidated financial statements.
F - 12
RADWARE LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
U.S. dollars in thousands, except share and per share data
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, 2022
............................................
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
Repurchase of ordinary shares
............................................
(52,688 )
-
-
(839)
-
-
(839)
-
(839)
Issuance of shares upon
exercise of share options
and vesting of restricted
shares
units
............................................
908,414
12
(9)
-
-
-
3
-
3
Share-based
compensation
............................................
-
-
25,954
-
-
-
25,954
1,619
27,573
Other comprehensive income,
net of tax
............................................
-
-
-
-
1,026
-
1,026
-
1,026
Net income
............................................
-
-
-
-
-
6,038
6,038
-
6,038
Balance as of December 31,
2024
............................................
42,554,602 $
754 $
555,154 $
(366,588) $
1,103 $
125,850 $
316,273 $
40,802 $
357,075
The accompanying notes are an integral part of the consolidated financial statements.
F - 13
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended
December 31,
2024
2023
2022
Cash flows from operating activities:
Net income (loss) .....................................................................
$
6,038 $
(21,590 ) $
(166)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization ...............................................
11,836
12,244
11,692
Share-based compensation .....................................................
26,027
34,022
27,353
Loss (gain) on sale of marketable securities ...........................
-
243
(68)
Amortization of premiums, accretion of discounts and
accrued interest on marketable securities, net......................
(417 )
1,754
2,345
Changes in accrued interest on bank deposits .........................
3,366
(3,265 )
(2,480)
Increase (decrease) in accrued severance pay, net ...................
(45 )
(299 )
219
Decrease (increase) in trade receivables, net ...........................
3,444
(2,515 )
(4,561)
Changes in deferred income taxes, net ...................................
(1,084 )
(551 )
(1,986)
Decrease (increase) in other assets and prepaid expenses ........
987
246
(374)
Decrease (increase) in inventories ..........................................
1,514
(4,116 )
152
Increase (decrease) in trade payables......................................
1,283
(2,166 )
2,154
Increase (decrease) in deferred revenues ................................
5,500
(14,951 )
13,475
Increase (decrease) in other payables and accrued expenses....
13,274
(1,415 )
(14,054)
Operating lease right-of-use assets .........................................
4,203
3,934
6,033
Operating lease liabilities.......................................................
(4,317 )
(5,075 )
(7,586)
Net cash provided by (used in) operating activities ........................
71,609
(3,500 )
32,148
Cash flows from investing activities:
Purchase of property and equipment .........................................
(5,279 )
(5,429 )
(8,814)
Proceeds from other long-term assets ........................................
81
66
35
Investment in other deposits .....................................................
(5,000 )
-
-
Proceeds from (investing in) bank deposits ...............................
(48,115 )
81,031
(13,377)
Purchase of marketable securities .............................................
(110,125 )
(33,274 )
(49,217)
Proceeds from maturity of marketable securities .......................
124,968
46,177
34,589
Proceeds from sale of marketable securities ..............................
3,950
4,208
10,766
Payment for the business acquisition of SecurityDAM Ltd.
(“SecurityDAM”) ..................................................................
-
-
(30,000)
Net cash (used in) provided by investing activities ........................
(39,520 )
92,779
(56,018)
The accompanying notes are an integral part of the consolidated financial statements.
F - 14
RADWARE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended
December 31,
2024
2023
2022
Cash flows from financing activities:
Proceeds from exercise of share options
.............................................................................................................
3
371
2,034
Payment of contingent consideration related to acquisition
.............................................................................................................
(3,077 )
(2,063)
-
Proceeds from issuance of Preferred A shares in subsidiary
.............................................................................................................
-
-
35,000
Repurchase of ordinary shares
.............................................................................................................
(839 )
(63,234)
(59,492)
Net cash used in financing activities
.................................................................................................................
(3,913 )
(64,926)
(22,458)
Increase (decrease) in cash and cash equivalents
.................................................................................................................
28,176
24,353
(46,328)
Cash and cash equivalents at the beginning of the year
.................................................................................................................
70,538
46,185
92,513
Cash and cash equivalents at the end of the year
.................................................................................................................
$
98,714
$
70,538 $
46,185
Supplemental disclosure of cash flow information:
Cash paid during the year for taxes on income
.................................................................................................................
$
921
$
4,000 $
18,069
Non-cash investing activities:
Right-of-use assets recognized with corresponding lease liabilities
.................................................................................................................
$
1,882
$
1,633 $
4,282
The accompanying notes are an integral part of the consolidated financial statements.
F - 15
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
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 - 16
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States (“U.S. GAAP”).
a.
Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates, judgments and assumptions. The Company’s management believes that
the estimates, judgments and assumptions used are reasonable based upon information available at the
time they are made. These estimates, judgments and assumptions can affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial
statements, and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
b. Financial statements in United States dollars:
A majority of the Group’s revenues are denominated in United States dollars (“dollars” or “U.S. dollars”).
In addition, a substantial portion of the Company’s and certain of its subsidiaries’ costs are denominated
in dollars. The Company’s management believes that the dollar is the primary currency of the economic
environment in which the Group operates. Thus, the functional and reporting currency of the Group is
the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are re-measured
into dollars in accordance with Accounting Standards Codification (“ASC”) No. 830 “Foreign Currency
Matters.” All transaction gains and losses from the re-measured monetary balance sheet items are
reflected in the consolidated statements of income (loss) as financial income or expenses, as appropriate.
c.
Principles of consolidation:
The consolidated financial statements include accounts of the Company’s wholly-owned subsidiaries as
well as Skyhawk in which the Company controls the majority voting rights. All intercompany
transactions and balances have been eliminated upon consolidation.
Non-controlling interests of subsidiaries represent the amount of funds received in exchange for the non-
controlling interests in Skyhawk and share-based compensation expenses for equity awards of certain
subsidiaries granted to employees of those subsidiaries. The non-controlling interests are presented in
equity separately from the equity attributable to the equity holders of the Company. For additional details,
see also Note 2z.
d. Cash equivalents:
Cash equivalents are short-term highly-liquid investments that are readily convertible to cash with
original maturities of three months or less, at acquisition.
e.
Bank deposits:
Bank deposits with maturities of more than three months but less than one year are included in short-
term bank deposits. Such short-term bank deposits are stated at cost, which approximates market values.
Bank deposits with maturities of more than one year are included in long-term bank deposits. Long-term
bank deposits are stated at cost, which approximates market values.
F - 17
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f.
Investment in marketable securities:
The Company accounts for investments in marketable debt securities in accordance with ASC No. 320,
“Investments - Debt Securities.” Management determines the appropriate classification of its investments
at the time of purchase and reevaluates such determinations at each balance sheet date.
The Company classifies its marketable securities as either short-term or long-term based on each
instrument’s underlying contractual maturity date and the entity’s expectations of sales and redemptions
in the following year.
The Company classified all of its securities as available-for-sale marketable securities. Debt securities
are carried at fair value, with the unrealized gains and losses reported in “Accumulated other
comprehensive income (loss)” in shareholders’ equity, except for changes in allowance for expected
credit losses, which is recorded in financial income, net. Realized gains and losses on sales of investments
are included in financial income, net and are derived using the specific identification method for
determining the cost of securities.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization together with interest on securities are included in financial income, net
in the Company’s consolidated statements of income (loss).
The Company periodically evaluates its available-for-sale debt securities for impairment. If the amortized
cost of an individual security exceeds its fair value, the Company considers its intent to sell the security
or whether it is more likely than not that it will be required to sell the security before recovery of its
amortized basis. If either of these criteria are met, the Company writes down the security to its fair value
and records the impairment charge in financial income, net in the Company’s consolidated statements of
income (loss). If neither of these criteria are met, the Company determines whether credit loss exists.
Credit loss is estimated by considering changes to the rating of the security by a rating agency, any
adverse conditions specifically related to the security, as well as other factors.
g. Inventories:
Inventories are stated at the lower of cost or net realizable value. Inventory write-off is provided to cover
risks arising from slow-moving items, technological obsolescence, excess inventories and discontinued
products. Inventory write-offs totaled $952, $1,201 and $397 in 2024, 2023 and 2022, respectively, and
have been included in cost of revenues of products in the Company’s consolidated statements of income
(loss).
Cost is determined as follows:
Raw materials and components - using the “first-in, first-out” method.
Work-in-progress and finished products - raw materials as above with the addition of subcontracting
costs, calculated on the basis of direct subcontractors’ costs and with direct overhead costs.
The Company assesses the carrying value of its inventory for each reporting period to ensure inventory
is reported at the lower of cost or net realizable value in accordance with ASC No. 330-10-35,
“Inventory.” Charges for obsolete and slow-moving inventories are recorded based upon an analysis of
specific identification of obsolete inventory items and quantification of slow-moving inventory items. In
cases when there is evidence that the anticipated utility of goods, in their disposal in the ordinary course
of business, will be less than the historical cost of the inventory, the Company recognizes the difference
as a current period charge to earnings and carries the inventory at the reduced cost basis until it is sold or
disposed of.
F - 18
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
h. Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets at the following annual rates:
%
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
During 2024, the Company retired fully depreciated assets that were no longer in use. As a result, $21.7
million of cost and accumulated depreciation was removed from the accounts. No gain or loss was
recognized.
i.
Cloud computing arrangement:
The Company follows ASC 350-40 to account for development costs incurred for cloud computing
software implementations. ASC 350-40 requires such costs to be capitalized once certain criteria are met.
Costs are primarily comprised of contracted labor and related expenses. ASC 350-40 includes specific
guidance on costs not to be capitalized, such as overhead, general and administrative, and training costs.
Costs are capitalized once the project is defined, funding is committed, and it is confirmed the software
will be used for its intended use. Capitalization of these costs concludes once the project is substantially
complete and the software is ready for its intended purpose. Post-configuration training and maintenance
costs are expensed as incurred.
Commencing August 2023, the Company started a process of implementing a new, cloud-based, global
enterprise resource planning (“ERP”) system, which replaced its previous ERP system in January 2025.
The Company incurs costs to implement cloud computing arrangements (“CCA”) that are hosted by
third-party vendors. Implementation costs associated with CCA are capitalized when incurred during the
application development phase until the software is ready for its intended use. The costs are then
amortized on a straight-line basis over the contractual term of the cloud computing arrangement and are
recognized within the consolidated statements of income (loss).
As of December 31, 2024 and 2023, the Company had capitalized implementation costs related to the
new ERP implementation project in the amounts of $2,350 and $200, respectively, presented under other
current assets and prepaid expenses and other long-term assets in the consolidated balance sheet.
j.
Impairment of long-lived assets and intangible assets subject to amortization:
Property and equipment, right-of-use asset for leases and intangible assets subject to depreciation and
amortization are reviewed for impairment in accordance with ASC No. 360, “Accounting for the
Impairment or Disposal of Long-Lived Assets,” whenever events or changes in circumstances indicate
that the carrying amount of an asset (asset group) may not be recoverable. Recoverability of assets (asset
group) to be held and used is measured by a comparison of the carrying amount of an asset (asset group)
to the future undiscounted cash flows expected to be generated by the assets (asset group). If such assets
(asset group) are considered to be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets (asset group) exceeds the fair value of the assets (asset group).
F - 19
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Intangible assets acquired in a business combination are recorded at fair value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization and
any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite
or indefinite.
Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated
useful lives, which range from 6 to 9 years. All intangible assets are amortized over their estimated useful
lives on a straight-line basis. Each period, the Company evaluates the estimated remaining useful lives
of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining
period of amortization. During each of the years 2024, 2023 and 2022, no impairment losses were
recorded.
k. Goodwill:
Goodwill represents the excess of the purchase price in a business combination over the fair value of the
net tangible and intangible assets acquired. Under ASC No. 350 “Intangibles – Goodwill and Other”
(“ASC 350”), goodwill is not amortized, but rather is subject to an annual impairment test. ASC 350
requires goodwill to be tested for impairment at least annually or between annual tests in certain
circumstances and written down when impaired. Goodwill is tested for impairment by comparing the fair
value of each reporting unit with its carrying value.
ASC 350 allows a company to first assess qualitative factors to determine whether it is necessary to
perform the quantitative goodwill impairment test. If the qualitative assessment does not result in a more
likely than not indication of impairment, no further impairment testing is required. If the Company elects
not to use this option, or if the Company determines that it is more likely than not that the fair value of a
reporting unit is less than its carrying value, then the Company prepares a quantitative analysis to
determine whether the carrying value of a reporting unit exceeds its estimated fair value. If the carrying
value of a reporting unit exceeds its estimated fair value, the Company recognizes an impairment of
goodwill for the amount of this excess. The Company conducts its annual test of impairment for goodwill
on December 31 of each year, or more frequently if impairment indicators are present.
l.
Leases:
The Company determines if an arrangement is a lease at inception. The Company did not have any
finance leases as of December 31, 2024. The Company elected to not recognize a lease liability and a
right-of-use (“ROU”) asset for leases with a term of 12 months or less.
ROU assets and lease liabilities are recognized at the commencement date based on the present value of
future lease payments over the lease term. ROU assets are initially measured at amounts, which represents
the discounted present value of the lease payments over the lease, plus any initial direct costs incurred.
The lease liability is initially measured based on the discounted present value of remaining lease
payments over the lease term.
For this purpose, the Company considers only payments that are fixed and determinable at the time of
commencement.
The implicit rate within the operating leases is generally not determinable; therefore, the Company uses
the Incremental Borrowing Rate (“IBR”) based on the information available at the commencement date
in determining the present value of lease payments. The Company’s IBR is estimated to approximate the
interest rate for collateralized borrowing with similar terms and payments and in economic environments
where the leased asset is located.
F - 20
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Many of the Company’s lease agreements provide one or more options to renew. When determining lease
terms, the Company uses the non-cancellable period of the leases and does not assume renewals unless
it is reasonably certain that the Company will exercise that option.
m. Contingencies:
The Company is currently involved in various claims and legal proceedings. The Company reviews the
status of each matter and assesses its potential financial exposure. If the potential loss from any claim or
legal proceeding is considered probable and the amount can be reasonably estimated, the Company
accrues a liability for the estimated loss (see Note 11).
n. Revenue recognition:
The Group’s revenues are derived from sales of its products, services and subscriptions:
•
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, as the services have a consistent continuous pattern of transfer to a customer
during the contractual subscription term.
•
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.
The Company’s solutions are sold primarily through distributors and resellers, all of which are considered
end-users.
The Company recognizes revenues in accordance with ASC No. 606, “Revenue from Contracts with
Customers.” As such, the Company identifies a contract with a customer, identifies the performance
obligations in the contract, determines the transaction price, allocates the transaction price to each
performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a
performance obligation.
The transaction price is determined based on the consideration which the Company is expected to be
entitled to in exchange for transferring the promised goods or services to the customer. This transaction
price is exclusive of amounts collected on behalf of third parties, such as sales tax and value-added tax.
Payment terms and conditions vary by contract type, although terms generally include a requirement to
pay within less than a year.
The Company’s arrangements typically contain various combinations of its products, subscriptions and
PCS, which are distinct and are accounted for as separate performance obligations. The Company
allocates the transaction price to each performance obligation based on its relative standalone selling
price (“SSP”). If the SSP is not observable, the Company estimates the SSP taking into account available
information such as geographic specific factors, customer grouping and internally approved historical
pricing guidelines related to the performance obligation. For PCS and subscriptions, the Company
determines the standalone selling price based on observable renewals prices or standalone subscription
transactions.
F - 21
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Deferred revenues represent mainly the unrecognized revenue collected for subscriptions and for PCS.
Such revenues are recognized ratably over the term of the related agreement. Out of the gross deferred
revenues balance at the beginning of the year ended December 31, 2024, an amount of $129,692
(approximately 64%) was recognized as revenues during the year ended December 31, 2024. Out of the
gross deferred revenues balance at the beginning of the year ended December 31, 2023, an amount of
$127,917 (approximately 59%) was recognized as revenues during the year ended December 31, 2023.
As of December 31, 2024, the aggregate amount of remaining performance obligations from contracts
with customers was $352,465. The Company expects to recognize approximately 54% of its remaining
performance obligations as revenue over the next 12 months, with the remaining recognized up to five
years.
Remaining performance obligations represent the amount of the transaction price under contracts with
customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the
reporting date. This consists of future committed revenue for monthly, quarterly or annual periods within
current contracts with customers, as well as deferred revenue arising from consideration invoiced in prior
periods for which the related performance obligations have not been satisfied.
The following table provides information about disaggregated revenues by major product line:
Year ended December 31,
2024
2023
Products
...........................................................................
$ 46,275
$ 50,703
Services
...........................................................................
100,355
95,816
Subscriptions
...........................................................................
128,250
114,773
$ 274,880
$ 261,292
For information regarding disaggregated revenues by geographical market, please see Note 16.
The Company records a provision for estimated sale returns, credits and stock rotation granted to
customers on products in the same period the related revenues are recorded. These estimates are based
on historical sales returns and other known factors. Such provisions amounted to $5,275 and $3,345 as
of December 31, 2024 and 2023, respectively. The provision for estimated sale returns and credits as of
December 31, 2024 and 2023, is included in other payables and accrued expenses in the consolidated
balance sheets.
In instances of contracts where revenue recognition differs from the timing of invoicing, the Company
has generally determined that those contracts do not include a significant financing component. The
Company uses the practical expedient and does not assess the existence of a significant financing
component when the difference between payment and revenue recognition is a year or less.
F - 22
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Costs to obtain contracts:
Sales commissions earned by the Company’s sales force are considered incremental and recoverable
costs of obtaining a contract with a customer. Commission costs related to long-term service contracts
and performance obligations satisfied over time are deferred and recognized on a systematic basis that is
consistent with the transfer of the products or services to which the asset relates. Sales commissions paid
for new contracts, which are not commensurate with sales commissions paid for renewal contracts, are
capitalized and amortized proportionately to revenue over an expected period of benefit and are included
in sales and marketing expenses in the accompanying consolidated statements of income (loss). The
Company applies judgment in estimating the amortization period, by taking into consideration its product
life term, history of renewals, and expected length of customer relationship, as well as the useful life of
the underlying technology and products. As of December 31, 2024, the Company has determined the
expected period of benefit to be approximately 3.21 years. Deferred commission costs capitalized are
periodically reviewed for impairment.
As of December 31, 2024 and 2023, the amount of deferred commission was $20,228 and $23,008,
respectively, and is included in other long-term assets on the consolidated balance sheets.
During the year ended December 31, 2024 and 2023, the Company recorded amortization expenses in
connection with deferred commissions in the amounts of $12,754 and $13,729, respectively.
o. Shipping and handling fees and costs:
Shipping and handling fees charged to the Company’s customers are recognized as product revenue in
the period shipped and the related costs for providing these services are recorded as a product cost of
revenues in the consolidated statements of income (loss).
p. Cost of revenues:
Cost of products is comprised of cost of software and hardware production, hosting, manuals, packaging,
license fees paid to third parties, subcontractor fees, inventory write-offs and amortization of acquired
technology.
Cost of services is comprised of cost of post-sale customer support and hosting services.
q. Accounts receivable, net:
Accounts receivable are recorded at the invoiced amount, net of allowance for credit losses, which
amounted to $53 and $174 as of December 31, 2024 and 2023, respectively. The allowance for credit
losses is based on the Company’s assessment of the collectability of accounts. The Company regularly
assesses credit losses based on a combination of factors, including an assessment of the current
customer’s aging balance, the nature and size of the customer, and the financial condition of the customer.
Accounts receivable deemed uncollectible are charged against the allowance for credit losses when
identified. The allowance of credit losses was not material for the periods presented.
The Company generally provides a one-year warranty for all of its products. A provision is recorded for
estimated warranty costs at the time revenues are recognized based on the Company’s historical
experience.
F - 23
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.
Research and development expenses, net:
Research and development costs are charged to the consolidated statements of income (loss) as incurred.
ASC No. 985-20, “Software - Costs of Software to Be Sold, Leased, or Marketed,” requires capitalization
of certain software development costs subsequent to the establishment of technological feasibility.
Based on the Company’s product development process, technological feasibility is established upon
completion of a working model. Costs incurred by the Company between completion of the working
models and the point at which the products are ready for general release, have been insignificant.
Therefore, all research and development costs are expensed as incurred.
s.
Government grants:
The Company received non-royalty-bearing grants from the Israel Innovation Authority (“IIA”) for
approved research and development projects. In addition, during 2021, an Israeli subsidiary of the
Company received royalty-bearing grants from the IIA for approved research and development projects.
These grants are recognized at the time the Company is entitled to such grants on the basis of the costs
incurred as provided by the relevant agreement and included as a deduction from research and
development expenses, net.
Research and development grants deducted from research and development expenses, net amounted to
$42, $430 and $1,354 for the years ended December 31, 2024, 2023 and 2022, respectively.
t.
Accounting for share-based compensation:
The Company accounts for share-based compensation in accordance with ASC No. 718, “Compensation-
Stock Compensation” (“ASC 718”). ASC 718 requires companies to estimate the fair value of equity-
based payment awards on the date of grant using an option-pricing model. The value of the portion of the
award that is ultimately expected to vest is recognized as an expense over the requisite service periods in
the Company’s consolidated statements of income (loss).
Some of the Company’s subsidiaries have share option plans pursuant to which qualified directors and
employees may be granted options for the purchase of securities of the subsidiaries. Share-based
compensation expenses recorded on the subsidiaries’ level are presented in non-controlling interests.
The Company recognizes compensation expenses for the value of its awards based on the accelerated
attribution method over the requisite service period of each of the awards, net of estimated forfeitures.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting
forfeitures.
The Company selected the Black-Scholes-Merton option pricing model to account for the fair value of
its share option awards with only service conditions and whereas the fair value of the restricted share
units awards (“RSUs”) is based on the market value of the underlying shares at the date of grant.
F - 24
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
During 2020, the Board of Directors of the Company approved a market-condition based RSUs equity
grant to the Chief Executive Officer of the Company. The vesting of the market-condition based RSUs
granted during 2020 is dependent upon the Company’s share performance over the requisite service
period.
On July 28, 2022, the Board of Directors of the Company approved an equity grant to the Chief Executive
Officer of the Company, which is comprised of RSUs, market-condition based RSUs and market-
condition based share options. The equity grant includes grants for the years 2022, 2023 and 2024 that
are derived from fixed monetary amounts ($7,725, $5,000 and $5,000, respectively).
Market-condition based RSUs’ vesting is dependent upon the fulfillment of certain market conditions
and will vest, or partially vest, depending on the Company’s share performance compared to other
companies that are listed on the NASDAQ CTA Cybersecurity Index over the requisite service period,
which is up to three years.
Market-based condition share options’ vesting is dependent upon the fulfillment of certain market
conditions and will vest depending on the Company’s share performance over the requisite service
period, which is up to three years.
The fair value of the market-condition based awards was determined using a Monte Carlo simulation
methodology.
The fair value of each market-condition based RSU and market-condition based share-options award is
estimated on the date of grant using the Monte Carlo model that uses the assumptions noted in the
following table:
Year ended December 31,
2024
2023
2022
Risk free interest rate
.............................................
3.88%-4.02%
4.06%-4.16%
2.74%-2.75%
Dividend yields
.............................................
0%
0%
0%
Expected volatility
.............................................
32.02%- 35.35%
29.83%- 35.23%
27.54%- 32.88%
Weighted-average expected
term from grant date (in
years)
.............................................
3-5.16
3-5.16
2.43-5.17
The option-pricing models require a number of assumptions, of which the most significant are the
expected stock price volatility and the expected option term. Expected volatility was calculated based
upon actual historical share price movements over an historical period equivalent to the option’s expected
term.
The expected option term represents the period of time that options are expected to be outstanding based
on historical experience. The risk-free interest rate is based on the yield from U.S. treasury bonds with
an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay
dividends.
F - 25
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The fair value of the Company’s share options granted to employees and directors for the years ended
December 31, 2024, 2023 and 2022 was estimated using the following weighted-average assumptions:
Employees’ share option plan:
Year ended December 31,
2024
2023
2022
Risk free interest rate
...............................................................................................
3.89%
4.87%
2.72%
Dividend yields
...............................................................................................
0%
0%
0%
Expected volatility
...............................................................................................
37%
34%
31%
Weighted-average expected term from grant date(in years)
...............................................................................................
3.41
3.39
3.41
u. Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes” (“ASC
740”). This statement prescribes the use of the liability method whereby deferred tax assets and liability
account balances are determined based on differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce
deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of
the deferred tax assets will not be realized.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax
positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by
determining if the weight of available evidence indicates that it is more likely than not that, on an
evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any
related appeals or litigation processes.
The second step is only addressed if the first step has been satisfied (i.e., the position is more likely than
not to be sustained); otherwise, a full liability in respect of a tax position not meeting the more likely than
not criteria is recognized.
The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be
realized upon ultimate settlement. The Company accrues interest and penalty, if any, related to
unrecognized tax benefits in its taxes on income in the consolidated statements of income (loss).
v. Concentrations of credit risks:
Financial instruments that potentially subject the Group to concentrations of credit risk consist principally
of cash and cash equivalents, bank deposits, marketable securities and trade receivables, net.
The majority of the Group’s cash, cash equivalents, marketable securities and bank deposits are invested
in high-quality financial institutions mainly in the U.S. and Israel, and the Group regularly monitors their
composition and maturities. The Company’s derivatives expose it to credit risk to the extent that the
counterparties may be unable to meet the terms of the agreement. The Company seeks to mitigate such
risk by limiting its counterparties to major financial institutions and by spreading the risk across a number
of major financial institutions. In addition, the potential risk of loss with any one counterparty resulting
from this type of credit risk is monitored on an ongoing basis. The Company grants credit to its customers
in the normal course of business.
F - 26
For each of the years ended December 2024, 2023 and 2022, credit loss expenses were immaterial.
As of each of December 31, 2024 and 2023, no single customer represented 10% or more of accounts
receivable. No single customer accounted for more than 10% of total revenue for the periods presented.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Israeli bank deposits are not insured, while the deposits made in the United States are in excess of
insured limits and are not otherwise insured. Generally, these cash equivalents may be redeemed upon
demand and, therefore management believes that it bears a lower risk. The short-term and long-term bank
deposits are held in financial institutions which management believes are institutions with high credit
standing, and accordingly, minimal credit risk from geographic or credit concentration exists with respect
to these bank deposits. As of December 31, 2024, all of our short- and long-term bank deposits were
deposited in Israel with major Israeli banks, which are all rated AAA, as determined by the Israeli affiliate
of Standard & Poor’s (“S&P”).
As of December 31, 2024, the maximal contractual duration of any of the Company’s bank deposits was
3 years, the weighted-average duration of the Company’s deposits was 1.44 years, and the weighted-
average time to maturity was 1.12 years.
From a geographic perspective, 87% of the Company’s debt marketable securities portfolio was invested
in debt securities of U.S. issuers, 4% was invested in debt securities of European issuers and 9% was
invested in debt securities of other geographic-located issuers. As of December 31, 2024, 90% of the
Company’s debt marketable securities portfolio was rated A- or higher, as determined by S&P, and 10%
was rated BBB or BBB+.
w. Derivative and hedging activities:
The Company’s risk management strategy includes the use of derivative financial instruments to reduce
the volatility of earnings and cash flows associated with changes in foreign currency exchange rates.
ASC 815, “Derivatives and Hedging” (“ASC 815”), requires the Company to recognize all of its
derivative instruments as either assets or liabilities on the balance sheet at fair value. The accounting for
changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.
For those derivative instruments that are designated and qualify as hedging instruments, an entity must
designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow
hedge or a hedge of a net investment in a foreign operation.
Gains and losses on derivative instruments that are designated and qualify as a cash flow hedge (i.e.,
hedging the exposure to variability in expected future cash flows that are attributable to a particular risk),
are recorded in accumulated other comprehensive income (loss) and reclassified into consolidated
statements of income (loss) in the same accounting period in which the designated forecasted transaction
or hedged item affects earnings.
During 2024 and 2023, the Company entered into forward contracts to hedge a portion of anticipated NIS
payroll and benefit payment. These derivative instruments are designated as cash flow hedges, as defined
by ASC 815, and accordingly are measured in fair value. These transactions are effective and, as a result,
gain or loss on the derivative instruments are reported as a component of accumulated other
comprehensive income (loss) and reclassified as payroll expenses at the time that the hedged income or
expense is recorded.
As of December 31, 2024, we had outstanding currency forward contracts in the total amount of
approximately $47,858 to hedge portions of its forecasted expenses denominated in NIS. These forwards
contracts expire on various dates until September 30, 2025.
F - 27
As of December 31, 2024, the Company recorded an asset in other receivables and prepaid expenses in
the amount of $1,163. As of December 31, 2023, the Company recorded an asset in other receivables and
prepaid expenses in the amount of $1,213.
F - 28
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
For the year ended December 31, 2024, the Company recorded hedging profits of $86 deducted from cost
of revenues, and hedging profits of $449 deducted from operating expenses related to its hedging forward
contracts. For the years ended December 31, 2023 and 2022, the Company recorded hedging expenses
of $584 and $318, respectively, in cost of revenues and hedging expenses of $4,215 and $2,477,
respectively, in operating expenses, related to its hedging forward contracts.
The Company currently hedges its exposure to the variability in future cash flows for a maximum period
of one year. As of December 31, 2024, the Company expects to reclassify all of its unrealized gains from
accumulated other comprehensive income to earnings during the next 12 months.
x. Employee related benefits:
Israeli Severance pay:
Effective April 1, 2007, the Company’s agreements with employees in Israel are under Section 14 of the
Israeli Severance Pay Law, 1963. The Company’s contributions for severance pay have extinguished its
severance obligation. Upon contribution of the full amount based on the employee’s monthly salary for
each year of service, no additional obligation exists regarding the matter of severance pay and no
additional payments is made by the Company to the employee. Further, the related obligation and
amounts deposited on behalf of the employee for such obligation are not stated on the balance sheets, as
the Company is legally released from the obligation to pay severance amounts to employees once the
required deposit amounts have been fully paid.
For the Company’s employees in Israel who are not subject to Section 14, the Company calculated the
liability for severance pay pursuant to the Severance Pay Law based on the most recent salary of these
employees multiplied by the number of years of employment as of the balance sheet date. The Company’s
liability for these employees is fully provided for via monthly deposits with severance pay funds,
insurance policies and accruals. The value of these deposits is recorded as an asset on the Company’s
balance sheet under other assets.
Severance pay expenses, related to our Israeli employees, for the years ended December 31, 2024, 2023
and 2022 amounted to approximately $4,925, $5,108 and $5,067, respectively. Accrued severance pay is
included in other long-term liabilities in the consolidated balance sheets.
Employee Benefit Plans:
The Company has a defined-contribution plan in the U.S. intended to qualify under Section 401 of the
Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers substantially all employees who meet
minimum age and service requirements and allows participants to defer a portion of their annual
compensation on a pre-tax basis. The Company matches 33% of participating employee contributions to
the plan up to 6% of the employee’s eligible compensation.
During the years ended December 31, 2024, 2023, and 2022, the Company recorded $260, $285 and
$322, respectively, of expenses related to the 401(k) plan. The Company also has other liabilities for
severance pay in other jurisdictions.
y. Fair value of financial instruments:
The Company measures its cash equivalents, bank deposits, contingent consideration, derivative
instruments and marketable securities at fair value. Fair value is an exit price, representing the amount
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants. As such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or a liability.
F - 29
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs
used in the valuation methodologies in measuring fair value:
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.
The carrying amounts of cash equivalents, trade receivables, trade payables, short- and long-term bank
deposits, other current assets and prepaid expenses and other payables and accrued expenses,
approximate at fair value because of their generally short maturities.
In accordance with ASC No. 820, the Company measures its money market funds, marketable securities
and foreign currency derivative contracts at fair value. Money market funds and marketable securities
are classified within Level 1 or Level 2. This is because these assets are valued using quoted market
prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency
derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and
market observable data of similar instruments.
z.
Non-controlling interests:
Non-controlling interests of subsidiaries represents the amount of funds received in exchange for the
minority rights in Skyhawk and share-based compensation expenses for equity awards of certain
subsidiaries granted to employees of those subsidiaries. The non-controlling interests are presented in
equity separately from the equity attributable to the equity holders of the Company.
On January 18, 2022, the Company established Skyhawk and transferred to Skyhawk all of the intangible
assets related to the Cloud Native Protector. On April 29, 2022, Skyhawk entered into the Agreement.
According to the Agreement, as amended, Skyhawk issued a total of 31,210,708 Preferred A Shares, NIS
0.001 par value each (“Preferred Shares”), for a total consideration of $35,000 representing a price per
share of $1.12.
Preferred Shares of Skyhawk are convertible into ordinary shares and confer upon the holders’ various
rights, including the right to receive notice to participate and vote in general meetings of Skyhawk and
the right to receive dividends, if declared, in accordance with Articles of Association (“Skyhawk AoA”)
of Skyhawk.
The Preferred Shares shall confer upon the holders’ liquidation and distribution preference and anti-
dilution protection in accordance with the Skyhawk AoA as well as certain other rights as set forth in the
investors’ rights agreement. Under the Skyhawk AoA, the Preferred Shares shall be entitled to receive
the original issue price of the respective Preferred Share upon liquidation and deemed liquidation. The
Company has evaluated the terms of the Preferred Shares and classifies the non-controlling interest
represented by such shares as shareholders’ equity in the accompanying consolidated balance sheets.
Also, since the Preferred Shares do not represent a residual equity interest, net losses of the Company are
not allocated to the Preferred Shares.
F - 30
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The non-controlling interests presented in the Company’s consolidated balance sheets as of December
31, 2024, comprise of $35,000 of funds received in exchange for the non-controlling interests in Skyhawk
and $5,802 accumulated share-based compensation expenses for equity awards of certain other
subsidiaries granted to employees of those subsidiaries.
aa. Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC No. 220,
“Comprehensive Income.” This statement establishes standards for the reporting and display of
comprehensive income (loss) and its components in a full set of general purpose financial statements.
Comprehensive income (loss) generally represents all changes in shareholders’ equity during the period
except those resulting from investments by, or distributions to, shareholders.
ab. Treasury shares:
The Company repurchases its ordinary shares from time to time on the open market and holds such shares
as treasury shares. The Company presents the cost to repurchase treasury shares as a reduction of
shareholders’ equity. The voting rights attached to treasury shares are revoked.
ac. Basic and diluted net income (loss) per share:
Basic net income (loss) per share is computed based on the weighted-average number of ordinary shares
outstanding during each period.
Diluted net income (loss) per share is computed based on the weighted-average number of ordinary shares
outstanding during each period, plus potential dilutive ordinary shares considered outstanding during the
period, if any, in accordance with ASC No. 260, “Earnings Per Share.”
The total number of ordinary shares related to outstanding share options excluded from the calculation
of diluted income (loss) per share as they would have been anti-dilutive was 893,089, 2,003,939 and
4,341,401 for the years ended December 31, 2024, 2023 and 2022, respectively.
ad. ASC 280, “Segment Reporting”‘ establishes standards for reporting information about operating
segments. Operating segments are defined as components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in
deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief
Executive Officer.
The Company reports segment information based on a management approach. The management approach
designates the internal reporting used by management for making decisions and assessing performance
as the source of the Company’s reportable segments (see Note 15).
ae. Business combinations:
The Company accounted for business combinations in accordance with ASC No. 805, “Business
Combinations” (“ASC 805”). Under ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying
the Definition of a Business” (“2017-01”), the Company first determines whether substantially all of the
fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar
identifiable assets. If this threshold is met, the single asset or group of assets, as applicable, is not a
business.
The Company applies the provisions of ASC 805 and allocates the fair value of purchase consideration
to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated
fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable
assets and liabilities is recorded as goodwill.
F - 31
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The allocation of the purchase price requires management to make significant estimates in determining
the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. The
Company uses the Discounted Cash Flow Method to assign fair values to acquired identifiable intangible
assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to
generate in the future, forecasted future revenue, forecasted operating results, discount rates and the
appropriate weighted-average cost of capital. These estimates are inherently uncertain and unpredictable.
These models are based on reasonable estimates and assumptions given available facts and
circumstances, including industry estimates and averages, as of the acquisition dates and are consistent
with the plans and estimates of management.
During the measurement period, which may be up to one year from the acquisition date, adjustments to
the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded,
with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded to the Company’s consolidated statements of income (loss).
af. New accounting pronouncements not yet effective:
In December 2023, the FASB issued ASU No. 2023-09, ”Income Taxes (Topic 740): Improvements to
Income Tax Disclosures” (“ASU 2023-09”), which requires public entities, on an annual basis, to provide
disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid
disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15,
2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU
2023-09.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement — Reporting
Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of
Income (loss) Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires disaggregation of certain
costs and expenses included in each relevant expense caption on the Company’s consolidated statements
of income (loss) in a separate note to the financial statements at each interim and annual reporting period,
including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset
amortization. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim
reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption
permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.
ag. Recently issued and adopted pronouncements:
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures” (“ASU 2023-07”). Additional segment reporting information
required by ASU 2023-07 includes: disclosing the title and position of the individual or the name of the
group or committee identified as the CODM, providing in interim periods all disclosures about a
reportable segment’s profit or loss and assets that are currently required annually, and providing
additional disclosures regarding significant segment expenses. Effective December 31, 2024, the
Company has adopted this standard retroactively. The adoption of ASU 2023-07 only affects disclosures,
with no impacts to the Company’s financial condition and results of operations (see Note 15).
F - 32
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 3:-
ACQUISITIONS
On February 17, 2022 (the “Closing Date”), the Company acquired all of the technology and other intangible
assets from SecurityDAM, which was a related party and was 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 post
acquisition. The contingent consideration was measured at fair value at the closing date and recorded as a
liability in other long-term liabilities on the consolidated balance sheets in the amount of $9,525.
The acquisition was accounted for as a business combination and the purchase consideration was allocated to
assets acquired and liabilities assumed based on their estimated fair values, as presented in the following
table:
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
The estimated useful life of the technology is approximately 6 years.
Goodwill generated from this business combination is primarily attributable to synergies between the
Company’s and SecurityDAM’s respective products and services. The goodwill is deductible for income tax
purposes. The fair value of the contingent consideration related to the investment in SecurityDAM was
$3,866 as of December 31, 2024, refer to Note 5 for more information. Changes in the contingent
consideration are recorded in the consolidated statements of income (loss) in operating expenses, net under
general and administrative expenses.
F - 33
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 4:-
MARKETABLE SECURITIES
Debt securities with contractual maturities of less than one year are as follows:
December 31,
2024
2023
Amortize
d
Gross
unrealize
d
Gross
unrealize
d
Market
Amortize
d
Gross
unrealize
d
Gross
unrealize
d
Market
cost
losses
gains
value
cost
losses
gains
value
Foreign banks and
government
debentures
.............................. $
- $
- $
- $
- $
36,891 $
(312 ) $
45 $36,624
US government
..............................
3,780
-
2 3,782
-
-
-
-
Corporate debentures
..............................
68,962
(72)
322 69,212
50,419
(672 )
1 49,748
Total marketable
securities
.............................. $
72,742 $
(72) $
324 $72,994 $
87,310 $
(984 ) $
46 $86,372
Debt securities with contractual maturities from one to three years are as follows:
December 31,
2024
2023
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
................................ $
1,888 $
(8) $
7 $ 1,887 $
16,883 $
(132) $
38 $16,789
US government
................................
-
-
-
-
-
-
-
-
Corporate debentures
................................
27,784
(165)
17 27,636
16,308
(264)
12 16,056
Total marketable
securities
................................ $
29,672 $
(173) $
24 $29,523 $
33,191 $
(396) $
50 $32,845
Debt securities with contractual maturities of more than three years are as follows:
December 31,
2024
2023
Amo
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
US government
.............................
-
-
-
-
-
-
-
-
F - 34
Corporate
debentures
.........................
-
-
-
-
-
-
-
-
Total marketable
securities
......................... $
- $
- $
- $
- $
288 $
(2) $
- $
286
F - 35
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 4:-
MARKETABLE SECURITIES (Cont.)
Debt securities with continuous unrealized losses for less than 12 months and 12 months or greater and their
related fair values as of December 31, 2024 are as follows:
December 31, 2024
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
..................... $
1,591 $
(7) $
- $
- $
1,591 $
(7)
US
government
.....................
-
-
-
-
-
-
Corporate
debentures
.....................
32,873
(190)
18,610
(48)
51,483
(238)
Total available-
for-sale
marketable
securities
..................... $
34,464 $
(197) $
18,610 $
(48) $
53,074 $
(245)
Debt securities with continuous unrealized losses for less than 12 months and 12 months or greater and their
related fair values as of December 31, 2023 are as follows:
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
$
13,603 $
(46) $
83,750 $
(1,336) $
97,353 $
(1,382)
F - 36
securities
.....................
As of December 31, 2024 and 2023, interest receivable amounted to $1,038 and $837, respectively, and is
included within marketable securities in the consolidated balance sheets.
F - 37
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 5:-
FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities measured at fair value on a recurring basis, including interest
receivable components consisted of the following types of instruments as of December 31, 2024 and 2023:
December 31, 2024
Fair value measurements using input type
Level 1 Level 2 Level 3
Total
Assets
Cash equivalents:
Money market funds
.............................................. $
3,069 $
- $
- $
3,069
Other receivables and
prepaid expenses:
Derivative instruments
..............................................
-
1,163
-
1,163
Marketable securities:
Foreign banks and
government debentures
..........................................
-
1,887
-
1,887
US government
..............................................
-
3,782
-
3,782
Corporate debentures
..............................................
-
96,848
-
96,848
Total financial assets
.............................................. $
3,069 $
103,680 $
- $
106,749
Liabilities
Contingent consideration
.............................................. $
- $
- $
3,866 $
3,866
Total financial liabilities
.............................................. $
- $
- $
3,866 $
3,866
F - 38
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 5:- FAIR VALUE MEASUREMENTS (Cont.)
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
The table below presents the changes in Level 3 contingent consideration obligation measured on a recurring
basis and related to the SecurityDAM acquisition:
Year ended
December 31,
2024
2023
Fair value at the beginning of the year
............................................................................................. $
6,332 $
8,281
Changes in the fair value of contingent consideration in
SecurityDAM
.............................................................................................
701
1,128
Reclassification of payable related to contingent consideration
to other payables and accrued expenses (see Note 10)
.............................................................................................
(3,167 )
(3,077 )
F - 39
Fair value at the end of the year
............................................................................................. $
3,866 $
6,332
The fair value of the contingent consideration related to the acquisition of SecurityDAM was $3,866 as of
December 31, 2024. The Company estimated the fair value of the contingent consideration using a
predetermined percentage (as detailed in the agreement) out of expected revenues with a discount rate of
between 9.86-10.04%.
F - 40
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 6:-
INVENTORIES
Inventories are comprised of the following:
December 31,
2024
2023
Raw materials and components
..................................................................................... $
2,182
$
1,991
Work-in-progress
.....................................................................................
658
119
Finished products
.....................................................................................
11,190
13,434
$
14,030
$
15,544
NOTE 7:-
PROPERTY AND EQUIPMENT, NET
December 31,
2024
2023
Cost:
Computer, peripheral equipment and software
................................................................................. $
97,450
$ 112,320
Office furniture and equipment
.................................................................................
12,244
14,187
Leasehold improvements
.................................................................................
7,695
8,268
117,389
134,775
Accumulated depreciation:
Computer, peripheral equipment and software
.................................................................................
85,213
98,199
Office furniture and equipment
.................................................................................
10,350
11,993
Leasehold improvements
.................................................................................
6,194
6,362
101,757
116,554
Property and equipment, net
..................................................................................... $
15,632
$
18,221
Depreciation expenses for the years ended December 31, 2024, 2023 and 2022 were $7,868, $8,276 and
$7,986, respectively.
During 2024, the Company retired and fully depreciated assets that were no longer in use. As a result, $21.7
million of cost and related accumulated depreciation was removed from the accounts. No gain or loss was
recognized.
F - 41
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 8:-
INTANGIBLE ASSETS, NET
Intangible assets:
December 31,
2024
2023
Cost:
Acquired technology .......................................................
$ 45,607 $ 45,607
Customer relationships and brand name ..........................
9,817
9,817
55,424
55,424
Accumulated amortization:
Acquired technology ...................................................
33,857
29,889
Customer relationships and brand name .......................
9,817
9,817
43,674
39,706
Intangible assets, net .......................................................
$ 11,750 $ 15,718
Amortization expenses for the years ended December 31, 2024, 2023 and 2022 were $3,968, $3,968 and
$3,706, respectively.
Future estimated amortization expenses for the years ending:
December 31,
2025
...................................................................................................
$
3,968
2026
...................................................................................................
3,725
2027
...................................................................................................
3,662
2028
...................................................................................................
395
Total
...................................................................................................
$
11,750
F - 42
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 9:-
LEASES
The Company has various operating leases for office space, vehicles and warehouse space that expire on
different dates through 2030. Its lease agreements generally do not contain any material residual value
guarantees or material restrictive covenants. The Company provided several security deposits mainly to
secure various operating lease agreements in connection with its office space.
Aggregate lease payments for the right of use assets over the remaining lease period as of December 31, 2024,
are as follows:
2025
..............................................................................................
$
5,029
2026
..............................................................................................
4,194
2027
..............................................................................................
3,364
2028
..............................................................................................
3,048
2029
..............................................................................................
2,642
2030
..............................................................................................
1,263
Total undiscounted lease payments
$
19,540
Less: adjustment to discounted lease payments
(1,271)
Total discounted lease payments
$
18,269
The weighted-average remaining lease terms and discount rates for all of operating leases were as follows as
of December 31, 2024:
Weighted-average remaining lease term (years):
..............................................................................................
4.70
Weighted-average discount rate:
..............................................................................................
3.17 %
The weighted-average remaining lease terms and discount rates for all of operating leases were as follows as
of December 31, 2023:
Weighted-average remaining lease term (years):
..............................................................................................
5.49
Weighted-average discount rate:
..............................................................................................
2.84 %
Total rent expenses for the years ended December 31, 2024, 2023 and 2022 were $5,542, $6,052 and $6,856,
respectively (see also Note 18b).
NOTE 10:- OTHER PAYABLES AND ACCRUED EXPENSES
December 31,
2024
2023
F - 43
Accrued expenses and other payables
............................................................................ $
9,458 $
5,083
Subcontractors accrual
............................................................................
1,114
2,267
Accrued taxes
............................................................................
6,074
3,146
Contingent consideration related to acquisition
............................................................................
3,167
3,077
$
19,813 $
13,573
F - 44
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 11:- COMMITMENTS AND CONTINGENT LIABILITIES
a.
Litigation:
From time to time, the Company is party to 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 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, 2024, the remaining contingent obligation
of the Israeli subsidiary in connection with such payment of royalties amounted to $434.
NOTE 12:- SHAREHOLDERS’ EQUITY
The Company’s shares are listed for trade on the NASDAQ Global Select Market under the symbol “RDWR.”
a.
Rights of shares:
Ordinary Shares:
The ordinary shares confer upon the holders the right to receive notice to participate and vote in
shareholders meetings of the Company and to receive dividends, if declared.
b. Treasury shares:
In August 2023, the Company’s Board of Directors authorized a new plan for the repurchase of up to an
aggregate of $80 million of the Company’s ordinary shares in the open market, subject to normal trading
restrictions, or in privately negotiated transactions (the “2024 Plan”). The 2024 plan became effective on
November 1, 2023 and expired on August 31, 2024.
In August 2024, the Company’s Board of Directors authorized a new plan for the repurchase of up to an
aggregate of $80 million of the Company’s ordinary shares in the open market, subject to normal trading
restrictions, or in privately negotiated transactions (the “2025 Plan”). The 2025 plan came into effect
upon the expiration of the 2024 Plan and will expire on February 13, 2026.
c.
Dividends:
Dividends, if any, will be paid in NIS. Dividends paid to shareholders outside Israel may be converted to
U.S. dollars on the basis of the exchange rate prevailing at the date of the conversion. The Company does
not intend to pay cash dividends in the foreseeable future.
d. Radware Ltd. Share Option Plans:
The Company has two share option plans, the Company’s Key Employee Share Incentive Plan (1997) as
amended and restated (the “1997 Plan”) and the Directors and Consultants Option Plan (the “DC Plan”
and together with the 1997 Plan, the “Share Option Plans”). Under the Share Option Plans, options may
be granted to officers, directors, employees and consultants of the Group. The exercise price per share
under the Share Option Plans was generally not less than the market price of an ordinary share at the date
of grant. The options vest primarily over four years. Each option is exercisable for one ordinary share.
Any options, which are forfeited or not exercised before expiration, become available for future grants.
Pursuant to the Share Option Plans, the Company reserved for issuance 37,612,967 ordinary shares as of
December 31, 2024.
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F - 45
U.S. dollars in thousands, exept share and per share data
NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
RSUs:
In addition to granting share options, since 2013, the Company started to routinely grant RSUs under the
1997 Plan. RSUs vest primarily over a four-year period of employment. RSUs that are cancelled or
forfeited become available for future grants.
The number of “Reserved and Authorized Shares” under the Share Option Plans shall equal the sum of
(i) the number of ordinary shares reserved and authorized under the Share Option Plans, and other awards
granted under the Share Option Plans as of such date, and (ii) the number of ordinary shares reserved.
As of December 31, 2024, the number of Reserved and Authorized Shares under the Share Option Plans
is as detailed below:
2024
Share options exercised and outstanding
...................................................................................................................
27,608,943
RSUs vested and outstanding
...................................................................................................................
7,925,902
Ordinary shares available for issuance under the Share Option Plans
...................................................................................................................
2,078,122
Total reserved and authorized shares as of December 31, 2024
...................................................................................................................
37,612,967
A summary of employees’ and directors’ options activity under the Company’s Share Option Plans as of
December 31, 2024 is as follows:
Number of
options
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
Outstanding at January 1,
2024
.......................................... 2,003,939 $
23.70
2.77 $
152
Granted
..........................................
299,856
19.04
Exercised
..........................................
(9,054 )
22.65
Expired
..........................................
(626,377 )
24.15
Forfeited
..........................................
(28,467 )
30.54
Outstanding at December 31,
2024
.......................................... 1,639,897 $
22.56
2.39 $
2,928
Exercisable at December 31,
2024
..........................................
884,267 $
24.71
1.28 $
495
F - 46
Vested and expected to vest
at December 31, 2024
.......................................... 1,631,574 $
22.56
2.38 $
2,907
The weighted-average grant-date fair value of options granted during the years ended December 31,
2024, 2023 and 2022 was $6.11, $5.48 and $6.77, respectively.
F - 47
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, exept share and per share data
NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
As of December 31, 2024, there was approximately $1,691 of total unrecognized compensation costs
related to non-vested share-based compensation arrangements granted under the Company’s Share
Option Plans. That cost is expected to be recognized over a weighted-average period of 0.67 years.
The total intrinsic value of options exercised during the years 2024, 2023 and 2022 was $11, $9 and
$1,894, respectively.
The aggregate intrinsic value of the outstanding share options at December 31, 2024 and 2023, represents
the intrinsic value of 746,808 and 180,000, respectively, outstanding options that are in-the-money as of
such dates. 893,089 outstanding options were out-of-the-money as of December 31, 2024.
The options outstanding under the Company’s Share Option Plans as of December 31, 2024 have been
separated into ranges of exercise price as follows:
December 31, 2024
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
511,755
3.81 $
17.29
60,000 $
15.83
$
22.5-24.89
870,520
1.71 $
23.28
601,820 $
23.42
$
26.52-29.1
129,000
1.49 $
27.99
103,563 $
27.78
$ 32.71-35.43
128,622
2.11 $
33.18
118,884 $
33.07
1,639,897
884,267
The following table summarizes information relating to the number of RSUs, as well as changes to such
awards during 2024:
Year ended
December 31,
2024
Outstanding at January 1, 2024
.......................................................................................................................
3,361,035
Granted
.......................................................................................................................
1,517,180
Vested
.......................................................................................................................
(899,360 )
Forfeited
.......................................................................................................................
(523,717 )
Outstanding as of December 31, 2024
.......................................................................................................................
3,455,138
As of December 31, 2024, there was approximately $43,081 of total unrecognized compensation costs
related to non-vested RSUs granted under the Company’s Share Option Plans. That cost is expected to
be recognized over a weighted-average period of 2.74 years.
F - 48
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, exept share and per share data
NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2024,
2023 and 2022 were $21.49, $15.82 and $21.31, respectively.
The weighted-average grant date fair value of RSUs vested during the years ended December 31, 2024,
2023 and 2022 were $26.67, $29.01 and $23.65, respectively.
The weighted-average grant date fair value of RSUs forfeited during the years ended December 31, 2024,
2023 and 2022 were $21.74, $27.16 and $22.88, respectively.
Share-based compensation was recorded in the following items within the consolidated statements of
income (loss):
Year ended
December 31,
2024
2023
2022
Cost
of
revenues
..................................................................... $
366 $
515 $
399
Research
and
development,
net
.....................................................................
5,423
7,709
7,215
Sales
and
marketing
..................................................................... 10,663 12,395
11,196
General
and
administrative
.....................................................................
7,956 10,531
7,286
Total
expenses
..................................................................... $ 24,408 $ 31,150 $
26,096
e.
Skyhawk (CNP) Security Ltd. Share Option Plans:
On April 12, 2022, the board of directors of Skyhawk established the Skyhawk (CNP) Security Ltd. 2022
Share Incentive Plan (the “Skyhawk Plan”). Under the Skyhawk Plan, options may be granted to officers,
directors, employees and consultants of Skyhawk Security. The exercise price per share under the
Skyhawk Plan was generally not less than the fair value of an ordinary share at the date of grant. The
options vest primarily over four years. Each option is exercisable for one ordinary share. Any options,
which are forfeited or not exercised before expiration, become available for future grants.
As of December 31, 2024, there were approximately $697 of total unrecognized compensation costs
related to non-vested share-based compensation arrangements granted under the Skyhawk Plan. That cost
is expected to be recognized over a weighted-average period of 1.20 years.
F - 49
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, exept share and per share data
NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
Share-based compensation was recorded in the following items within the consolidated statements of
income (loss):
Year ended
December 31,
2024
2023
Cost
of
revenues
...................................................................................................... $
- $
-
Research
and
development,
net
......................................................................................................
670
796
Sales
and
marketing
......................................................................................................
217
159
General
and
administrative
......................................................................................................
712
1,917
Total
expenses
...................................................................................................... $
1,599 $
2,872
A summary of employees’ and directors’ options activity under the Skyhawk Option Plan as of December
31, 2024 is as follows:
Number of
options
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term
(in years)
Aggregate
intrinsic
value
Outstanding at January 1, 2024
..................................................... 18,676,305 $
0.32
5.74 3,017,612
Granted
..................................................... 1,601,000
0.48
-
-
Exercised
.....................................................
-
-
-
-
Expired
.....................................................
-
-
-
-
Forfeited
..................................................... (2,445,000 )
0.48
-
-
Outstanding at December 31, 2024
..................................................... 17,832,305 $
0.31
4.74 3,017,612
Exercisable at December 31, 2024
..................................................... 2,140,151 $
0.01
4.69 2,011,742
Vested and expected to vest at
December 31, 2024
..................................................... 17,832,305 $
0.31
4.74 3,017,612
F - 50
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, exept share and per share data
NOTE 13:- EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted net earnings (loss) per share:
Year ended
December 31,
2024
2023
2022
Numerator for basic and diluted net
earnings (loss) per share:
Net income (loss)
.......................................................... $
6,038 $
(21,590) $
(166)
Weighted-average shares outstanding,
net of treasury shares:
Denominator for basic net earnings
(loss) per share
.......................................................... 41,982,851 42,871,770 44,943,168
Effect of dilutive securities:
Employee share options and RSUs
...................................................... 1,380,055
-
-
Denominator for diluted net earnings
(loss) per share
.......................................................... 43,362,906 42,871,770 44,943,168
Basic net earnings (loss) per share
.......................................................... $
0.14 $
(0.50) $
(0.00)
Diluted net earnings (loss) per share
.......................................................... $
0.14 $
(0.50) $
(0.00)
F - 51
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- TAXES ON INCOME
a.
General:
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2024
2023
Beginning balance
................................................................................................ $
6,189 $
7,434
Decrease related to expired tax years
................................................................................................
-
(424)
Additions for prior year tax positions
................................................................................................
326
125
Decrease for prior year tax positions
................................................................................................
(378)
(1,879)
Additions for current year tax positions
................................................................................................
557
933
Ending balance
................................................................................................ $
6,694 $
6,189
The Company adjusts the unrecognized tax benefit liability and income tax expense in the period in which
the uncertain tax position is effectively settled, the statute of limitations expires or when new information
is available.
During the years ended December 31, 2024, 2023 and 2022, net amounts of $278, $225 and $236,
respectively, were added to the unrecognized tax benefits derived from interest and exchange rate
differences expenses related to prior years’ uncertain tax positions. As of December 31, 2024 and 2023,
the Company had accrued interest liability related to uncertain tax positions in the amounts of $889 and
$611, respectively, which is included within other long-term liabilities on the consolidated balance
sheets.
Exchange rate differences are recorded within financial income, net, while interest is recorded within
taxes on income in the consolidated statements of income (loss).
The Company’s U.S subsidiary files income tax returns in the U.S federal jurisdiction. As of December
31, 2024, the 2021 through 2024 tax years are open and may be subject to potential examinations in the
U.S.
The Company is currently undergoing a tax audit for the years 2019 through 2022.
The Company believes that it has adequately provided for any reasonably foreseeable outcome related to
tax audits and settlement. The final tax outcome of its tax audits could be different from that which is
reflected in the Company’s income tax provisions and accruals. Such differences could have a material
effect on the Company’s income tax provision and net income (loss) in the period in which such
determination is made.
F - 52
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:
Commencing in taxable year 2003, the Company has elected to measure its taxable income and file
its tax return under the Israeli Income Tax Regulations. Under the Foreign Exchange Regulations,
an Israeli company calculates its tax liability in U.S. dollars according to certain orders. The tax
liability, as calculated in U.S. dollars is translated into NIS according to the exchange rate as of
December 31st of each year.
2. Tax rates:
The Israeli corporate tax rate in 2024, 2023 and 2022 was 23%. A company is taxable on its real
capital gains at the corporate tax rate in the year of sale. Non-Israeli subsidiaries are taxed according
to the tax laws in their jurisdictions.
3. Tax benefits under the Law for the Encouragement of Industry (Taxation), 1969:
Management believes that the Company currently qualifies as an “industrial company” under the
above law and, as such, is entitled to certain tax benefits, including accelerated depreciation,
deduction of public offering expenses in three equal annual installments and amortization of other
intangible property rights for tax purposes.
4. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Law”):
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the
Economic Policy for the 2017 and 2018 Budget Years), which includes Amendment 73 to the Law
(“Amendment 73”) was published. According to Amendment 73, a preferred enterprise located in
development area A will be subject to a tax rate of 7.5% instead of 9%, effective from January 1,
2017 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains
at 16%).
Amendment 73 also prescribes special tax tracks for technological enterprises, and the new tax tracks
under the amendment are as follows:
Technological preferred enterprise – an enterprise whose total consolidated revenues (parent
company and all subsidiaries) is less than NIS 10 billion. Technological Preferred Enterprise, as
defined in the law, which is not located in development area A, is subject to tax at a rate of 12% on
profits deriving from intellectual property (in development area A, the tax rate is 7.5%), subject to
satisfaction of a number of conditions, including compliance with a minimal amount or ratio of
annual Research and development expenditure and Research and development employees, as well
as having at least 25% of annual income derived from exports.
The Company believes it meets the Technological preferred enterprise conditions.
Income not eligible for Preferred Technological Enterprise benefits is taxed at a regular rate, 23%
from 2018 onwards.
F - 53
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- TAXES ON INCOME (Cont.)
On November 2, 2021, the Israeli Parliament approved a final bill regarding repatriations of trapped
earnings out of Approved/Privileged Enterprises. The temporary provisions have come into effect as
of November 15, 2021. The Israeli government agreed to grant relief on the amount of tax which
should have been paid on distributable earnings in order to encourage companies to pay the reduced
taxes during the next 12 months (the “temporary order”). The temporary order provides partial relief
from previous Approved/Privileged Enterprise tax rates as defined in the Law for companies which
opt to enjoy the privilege. The new temporary order does not require the actual distribution of the
retained earnings, nor does it provide any relief from the 15% dividend withholding tax.
As part of the temporary order, the Company opted to implement the provisions included in the
temporary order and completed the taxes on all of its trapped tax-exempt earnings. As a result, the
Company paid Nil and Nil during 2024 and 2023, respectively.
c.
Taxes on income are comprised as follows:
Year ended
December 31,
2024
2023
2022
Current taxes
........................................................................... $
6,188 $
3,255 $
6,865
Deferred taxes
...........................................................................
439
582
(1,986 )
$
6,627 $
3,837 $
4,879
Domestic
........................................................................... $
3,651 $
1,079 $
2,820
Foreign
...........................................................................
2,976
2,758
2,059
$
6,627 $
3,837 $
4,879
Year ended
December 31,
2024
2023
2022
Domestic taxes:
Current taxes
........................................................................... $
4,777 $
488 $
2,967
Deferred taxes
...........................................................................
(1,126)
591
(147 )
3,651
1,079
2,820
Foreign taxes:
Current taxes
...........................................................................
1,411
2,767
3,898
Deferred taxes
...........................................................................
1,565
(9)
(1,839 )
F - 54
2,976
2,758
2,059
$
6,627 $
3,837 $
4,879
F - 55
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:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company and its subsidiaries’ deferred tax liabilities and assets are as
follows:
December 31,
2024
2023
Carryforward losses and tax credit
............................................................................................... $
16,862 $
12,249
Deferred revenues
...............................................................................................
4,976
6,237
Unrealized loss on marketable securities
...............................................................................................
-
296
ROU assets
...............................................................................................
1,886
2,234
Temporary differences
...............................................................................................
10,694
9,566
Deferred tax assets before valuation allowance
...............................................................................................
34,418
30,582
Valuation allowance
...............................................................................................
(11,930)
(8,434)
Net deferred tax assets
...............................................................................................
22,488
22,148
Intangible assets, including goodwill
...............................................................................................
(4,656)
(4,547)
Operating lease liabilities
...............................................................................................
(1,909)
(2,242)
Depreciable assets
...............................................................................................
(837)
(1,043)
Deferred tax liability
...............................................................................................
(7,402)
(7,832)
Net deferred tax assets
............................................................................................... $
15,086 $
14,316
e.
Foreign:
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act, which among other provisions,
reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. Apportioned income is
also subject to tax in various states.
Through December 31, 2024, the U.S. subsidiary had a U.S. federal loss carryforward of $2,880, which
can be carried forward and offset against taxable income up to 20 years, expiring between fiscal 2027 and
fiscal 2038.
F - 56
Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change
in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses before utilization.
All non-Israeli subsidiaries are taxed according to the tax laws in their jurisdictions.
f.
Income taxes of non-Israeli subsidiaries:
Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.
The Company does not provide deferred tax liabilities when it intends to reinvest earnings of foreign
subsidiaries indefinitely.
F - 57
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,
2024
2023
2022
Income (loss) before taxes, as reported in the
consolidated statements of income (loss)
........................................................................ $ 12,665 $ (17,753) $
4,713
Statutory tax rate
.....................................................................
23%
23%
23%
Theoretical tax expense (benefit) on the above
amount at the Israeli statutory tax rate
........................................................................ $
2,913 $
(4,083) $
1,084
Tax adjustment in respect of different tax rate
of foreign subsidiary
........................................................................
(141)
(57)
48
Non-deductible expenses and other permanent
differences
........................................................................
820
536
197
Deferred taxes on losses for which valuation
allowance was provided, net
........................................................................
3,498
2,635
2,402
Foreign withholding taxes
.....................................................................
637
637
3,138
Share compensation relating to share options
per ASC No. 718
........................................................................
158
3,716
1,517
Income taxes in respect of prior years
.....................................................................
671
1,246
(1,388)
Change of tax rate
.....................................................................
-
-
(505)
Approved, Privileged and Preferred enterprise
loss (benefits) (*)
........................................................................
(2,170)
(1,086)
(1,457)
Other
.....................................................................
241
293
(157)
Actual tax expense
..................................................................... $
6,627 $
3,837 $
4,879
(*) Basic earnings per share amounts of the
benefit resulting from the “Approved,
Privileged and Preferred Enterprise” status
........................................................................ $
0.05 $
0.03 $
0.03
F - 58
Diluted earnings per share amounts of the
benefit resulting from the “Approved,
Privileged and Preferred Enterprise” status
........................................................................ $
0.05 $
0.03 $
0.03
F - 59
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,
2024
2023
2022
Domestic
............................................................................. $
10,656 $ (33,444) $ (1,105 )
Foreign
.............................................................................
2,009
15,691
5,818
Income (loss) before taxes on income
............................................................................. $
12,665 $ (17,753) $
4,713
NOTE 15:- SEGMENTS REPORTING
The Company reports segment information based on a management approach. The management approach
designates the internal reporting used by management for making decisions and assessing performance as the
source of the Company’s reportable segments. The chief operating decision maker (“The CODM”) is our
Chief Executive officer (CEO). The CODM assesses the performance of each operating segment using
information about revenue and segment operating income that is defined as operating income generated at the
segment level, excluding unallocated corporate income or expense.
Commencing January 1, 2023, management has determined that the Company operates in two reportable
segments.
The Company’s reportable segments are:
•
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.
While the Company transitioned into two reportable segments, it remains focused on the consolidated results
as an important measure of performance, particularly given the high level of cooperation among these two
segments.
The Company’s CODM does not regularly review assets and liabilities information by reportable segments.
Therefore, the Company does not report assets and liabilities information by segment.
F - 60
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 15:- SEGMENTS REPORTING (Cont.)
The following tables present information about the Company’s reported segment revenues and operating
income (loss) for the periods indicated:
Year ended
December 31, 2024
Radware
Core
Hawks
Total
Revenues .................................................................. $ 274,384 $
496 $ 274,880
Other segment items * ..............................................
264,635
14,132 278,767
Operating income (loss) ............................................ $
9,749 $ (13,636 ) $
(3,887)
Financial income, net ................................................
$
16,552
Income before taxes on income .................................
$
12,665
Year ended
December 31, 2023
Radware
Core
Hawks
Total
Revenues .................................................................. $ 260,322 $
970 $ 261,292
Other segment items * .............................................. 277,124
15,848 292,972
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
Other segment items * .............................................. 281,992
14,773 296,765
Operating income (loss) ............................................ $
8,416 $ (11,755) $
(3,339)
Financial income, net ................................................
$
8,052
Income before taxes on income .................................
$
4,713
* Radware Core consists of cost of revenues, G&A, S&M, and R&D, with the Hawks primarily consisting of
R&D.
Depreciation expenses of the Hawks’ business segment for the years ended December 31, 2024, 2023 and
2022 were $97, $85 and $45, respectively.
Depreciation expenses of Radware’s core business segment for the years ended December 31, 2024, 2023
and 2022 were $7,771, $8,191 and $7,941, respectively.
F - 61
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 16:- GEOGRAPHIC INFORMATION
Summary information about geographic areas:
The total revenues are attributed to geographic areas based on the location of the end-users.
The following table presents total revenues for the years ended December 31, 2024, 2023 and 2022 from a
geographical perspective:
Year ended December 31,
2024
2023
2022
Revenues from sales to customers located at:
The United States
........................................................................ $
83,429 $ 72,963 $
94,014
America - other
........................................................................
34,311
30,472
29,933
EMEA*
........................................................................
94,075
96,488
104,219
Asia Pacific
........................................................................
63,065
61,369
65,260
$ 274,880 $ 261,292 $
293,426
*
Europe, the Middle East and Africa.
The following table presents long-lived assets and ROU assets as of December 31, 2024 and 2023 from a
geographical perspective:
December 31,
2024
2023
Long-lived assets by geographic region:
America (principally the United States) .................................. $
1,905 $
1,905
Israel ......................................................................................
29,344
34,888
EMEA - other.........................................................................
556
753
Asia Pacific ............................................................................
2,283
1,452
$ 34,088 $
38,998
NOTE 17:- SELECTED CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA
Year ended
December 31,
2024
2023
2022
Financial income, net:
Interest on bank deposits and other ................... $
13,122 $
11,377 $
5,137
Amortization of premiums, accretion of
discounts and interest on debt marketable
securities, net ................................................
4,903
2,787
1,754
Gain (loss) on sale of marketable securities .......
-
(243 )
68
Bank charges ....................................................
(236)
(197 )
(207)
Foreign currency differences, net ......................
(1,237)
203
1,300
F - 62
$
16,552 $
13,927 $
8,052
F - 63
RADWARE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 18:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Represents transactions and balances with other entities in which certain members of the Company’s Board
of Directors, management or shareholders have interest:
a.
The following related party balances are included in the consolidated balance sheets:
December 31,
2024
2023
Trade receivables and prepaid expenses
..................................................................................................... $
2,888 $ 1,562
Trade payables and accrued expenses
..................................................................................................... $
2,415 $
707
b. The following related party transactions are included in the consolidated statements of income (loss):
Year ended
December 31,
2024
2023
2022
Revenues (1)
................................................................................. $
5,730 $
3,298 $ 2,327
Cost of revenues (2)
................................................................................. $
- $
- $ 2,822
Operating expenses, net - primarily lease,
subcontractors and communications (3)
............................................................................. $
8,085 $
7,707 $ 8,018
Purchase of property and equipment
................................................................................. $
9 $
194 $ 1,175
(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.