Radware Ltd (RDWR) 2002 Q4 法說會逐字稿

Ladies and gentlemen, good day and thank you for standing by. Welcome to the Radware Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later there will be a question and answer session. Instructions will be given at that time. If you do need assistance during the call please press '0' and then star. An operator will assist you. As a reminder, today's conference call is being recorded. I'll now turn the conference call over to your host, President and CEO Mr. Roy Zisapel. Please go ahead sir.

Thank you. Good morning everyone and welcome to the Radware fourth quarter 2002 Conference Call. Joining me today is Meir Moshe, Chief Financial Officer.

We are pleased to announce a very strong quarter for Radware. In spite of the technology-spending environment Radware exhibited accelerated growth across all business metrics for the fifth sequential quarter.

We are urging our business model to obtain profitability while continually improving our financial results.

Before we discuss the highlights of this quarter Meir will review the financial results. After my comments, we will be open the discussion for Q&A.

Thank you Roy and welcome everyone to our Q4 conference call.

First of all, I would like to give you the safe harbor language.

During the course of this conference call we make projections or other forward-looking statements regarding future events about the future financial performance of the company. We wish to caution you that such statements and such predictions, and actual events from results may differ materially. We refer you to the document the company files from time to time with the Securities and Exchange Commission specifically the company's last file Form 20-F, filed in April 2002.

And now ladies and gentlemen for the financials.

In this quarter we continue to improve all our business parameters including sales, operating results, EPS, inventory levels and cash.

As we announced in the beginning of January, our revenues and earnings exceeded projections.

The fourth quarter is the fifth consecutive quarter of growth in sales. Bringing the company's total sales for 2002 to a record of $44m.

Revenues for the fourth quarter were $12m up from $11m in third quarter and 28% increase over the third and $9.4m we had in fourth quarter of 2001.

This quarter is marked by returning to profitability. The net profit from this quarter was $451,000 which represents an earnings per diluted share of $0.03. $0.03 better than guidance.

We have continued to maintain a high gross margin. Our gross margin for the fourth quarter remains at 82%. Same as in the third quarter of 2002, and about 0.5% above the gross margins we had in the third part of 2002.

Our operating expenses for the fourth quarter of 2002 were approximately $10.5m, the same as in the last five quarters. And then [regarding] the market for 2002, meaning keeping expenses less throughout the year.

The DSOs for the fourth quarter decreased to 67 days from 71 days in the third quarter. By that we have completed improvement of 46 days [indecipherable] in five quarters.

67 days in this quarter compared to 117 days in the third quarter of 2001.

We have continued to have positive operating cash flow. In the fourth quarter the company generated cash of $428,000, and that including our cash position including long-term deposits to $125.3m and we have no debt.

Inventory levels have continued to decrease this quarter. The inventory decreased by $554,000 this quarter, completing a decrease in inventory levels of $1.8m in one year. The inventory this quarter was $3m compared to $4.8m a year ago.

[Net income] for this quarter was 269 employees. Shareholder equity increased to $127.4m.

Guidance - With respect to the first quarter of 2003 we anticipate that the shares will increase to $12.5m and the earnings per diluted share will increase to $0.12.

In 2003 we plan to continue keeping our total operating expenses in the range of $10.5m to $10.6m per quarter, and [indecipherable] any increase in sales we may have.

As you see ladies and gentlemen, in the fourth quarter revenues increased, inventory and receivables are down, cash position is up, operating results improved, we returned to profitability and we're optimistic about the first quarter results.

Now I would like to return you to Roy.

Thank you Meir.

In the fourth quarter of 2002 Radware has accelerated its growth in both revenues and market share. Hoping that full year will reach [indecipherable] profitability [indecipherable] projections.

Other solutions are the [indecipherable] and Enterprise network to guarantee the full availability and optimize performance of commission critical obligations. By delivering immediate ROI and providing tangible operational benefit, our product line has received continuous and growing demand. Despite the tough technology-spending extending environment.

In addition, we further strengthened our global reach, including our market share across whole worldwide territories. As a result of increasing our product adoption and our strengthened worldwide presence, we are confident in our ability to sustain growth in the coming quarters.

Building of this positive business trend we have shown a confident upward growth over the last five quarters. In particular, during this past quarter we gathered new revenues from [indecipherable] business accounts including T-mobile, Hong Kong Immigration Department, SK Telecom, [indecipherable] USA the [indecipherable] of New York and [indecipherable].

We generated repeat business from customers across a broad industrial spectrum including Vanguard, Deutsche Bank, PR Newswire, PGME, United Stationery and Morgan Stanley. Our repeat business indicates high customer satisfaction and the ability of our product line to scale across enterprise operations to deliver end-to-end solutions for network productivity and cost-effective resource utilization.

I would like to focus on the Deutsche Bank account in more detail. [Indecipherable] scope and the benefit of our operational enterprise account. Deutsche Bank employed [17WDND] application switch [indecipherable], our top-of-the-line offering, to ensure the uninterrupted and secure operation of their E-ticketing service across Germany - eliminating failures and guaranteeing successful transaction completion for all customers. Other applications which [indecipherable] performance letting Deutsche Bank handle any volume of users across the regionally distributed network for continued 24/7 operation while affording single-service growth to accommodate their anticipated interest in service adoption. With others, Deutsche Bank online ticketing services are both reliable and scaleable.

Another prime example for the benefit our customers get from deploying our switches is our ability to protect and defend several [indecipherable].

As some of you know, last week many enterprise and general customers were hit by the virus causing major network and application downtimes. Our application switches are the only solutions capable of providing layer 4 to 7 switching and application security [indecipherable].

In Korea alone we installed 12 application switch to them last week. [Indecipherable] dramatically by the [indecipherable] attack [indecipherable] [server] times while protecting and defending them from future threats. These installations include 8 [indecipherable] for Korea telecom main dealer servers, 2 switches for [indecipherable] and 2 for another telephone dealer servers.

These installations serve as another prime example of our advanced application switching technology capable of addressing all aspects of availability, performance and security across all network layers and the immediate ROI our customers experience when they [indecipherable] our switches.

From the marketing front we won additional recognition for our product and [indecipherable] technology, including PC Expert Award [indecipherable] SynApps server architecture.

SynApps is the only software architecture application capable of addressing all application services [indecipherable] requirements. And combined with [indecipherable] redirection, [indecipherable] management and application security.

In addition, generally our FireProof [indecipherable] has won the "Product of the Year" award by the National Computing Agency.

These new awards join a roster of previous awards and industry recognition for our technology received throughout 2002, including [Internet World] New York [indecipherable] as well as [indecipherable] awards for [indecipherable]. [Indecipherable] for financial computing for our FireProof product, internet award LA best show award.

To recap on [indecipherable] strengths and market share [indecipherable] in the application switching market. [Indecipherable] 2002 market share results placing Radware as the second vendor in the overall market share for fixed application switches and first in the [indecipherable] segment of Gigabit switches.

To summarize, Radware Q4 2002 was a solid year with very strong results. Demonstrating consistent accelerated growth across all units and operation parameters.

We believe that in 2003 we will further - we will see further advances in our technological leadership, diversification of our product offering, broadening of our customer base and geographic spread. All of those enabling us to sequentially grow our revenues and market share throughout the year.

With that I would like to open the discussion for Q&A.

Per Radware's request, the Question and Answer portion of the call was not transmitted via audio stream.