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Allot Communications Announces Third Quarter 2017 Financial Results

HOD HASHARON, Israel, Nov. 7, 2017 /PRNewswire/ -- Allot Communications Ltd. (NASDAQ: ALLT; TASE: ALLT), a leading global provider of innovative network intelligence and security solutions for service providers worldwide, today announced its third quarter 2017 financial results, ended September 30, 2017.

Q3 2017 – Financial Highlights

  • Revenues were $20.9 million, up 7% from the previous quarter;
  • GAAP gross margin was 62%, Non-GAAP gross margin was 68%;
  • GAAP operating loss of $4.4 million, Non-GAAP operating loss of $1.3 million;
  • Book-to-bill above one for the third consecutive quarter;

Management Comment

Erez Antebi, President & CEO of Allot Communications, commented, "I am particularly encouraged by the fact that in Q3 we continued to see an increase in revenues compared to all previous quarters this year, and it was the third consecutive quarter with a Book-to-Bill ratio above 1. We also focused our effort during the quarter on the reorganization of our Customer Facing Units and other internal areas to better serve our customers and align our efforts to our business strategy. Looking ahead into Q4, we see significant interest in the market for our offerings and our pipeline continues to strengthen. I expect continued growth as we approach the end of the current year and I believe we are now well positioned as a company for next year. I see Allot with much growth potential and I believe Allot will establish itself as an important player in the security market over the coming years."

Financial Results Summary

Total revenues for the third quarter of 2017 were $20.9 million, up 7% compared to $19.5 million in the second quarter of 2017.

Net loss on a GAAP basis for the third quarter of 2017 was $4.6 million, or $0.14 per basic and diluted share, compared with a net loss of $4.0 million, or $0.12 per basic and diluted share, in the prior quarter. During the third quarter of 2017 the Company incurred a one-time cost related to its restructuring activities of $2.2 million.

On a non-GAAP basis, net loss for the third quarter of 2017 was $1.3 million, or $0.04 per basic and diluted share, a reduction from a non-GAAP net loss of $2.3 million, or $0.07 per basic and diluted share, in the prior quarter.

Cash and investments as of September 30, 2017 totaled $109.9 million. The Company recorded a negative operating cash flow of $1.0 million during the third quarter of 2017.

2017 Outlook

Management reiterates its guidance for full year revenue issued earlier in the year. Expectations remain for revenues to come in between $80 - $84 million and better fourth quarter revenues compared with the third quarter of 2017.

The book to bill ratio for the year is expected to be above 1.

Conference Call & Webcast:

The Allot management team will host a conference call to discuss third quarter 2017 earnings results today, November 7, 2017 at 8:30 AM ET, 3:30 p.m. Israel time. To access the conference call, please dial one of the following numbers:

US: +1-888-668-9141, UK: +44(0) 800-917-5108, Israel: +972-3-918-0609.

A live webcast and following the end of the call, an archive of the conference call, will be accessible on the Allot Communications website at: http://investors.allot.com/index.cfm

About Allot Communications

Allot Communications Ltd. (NASDAQ: ALLT, TASE: ALLT) is a leading global provider of innovative network intelligence and security solutions for service providers worldwide, enhancing value to their customers. For more information, please visit www.allot.com.

GAAP to Non-GAAP Reconciliation:

The difference between GAAP and non-GAAP revenues is related to the acquisitions made by the Company and represents revenues adjusted for the impact of the fair value adjustment to acquired deferred revenue related to purchase accounting. Non-GAAP net income is defined as GAAP net income after including deferred revenues related to the fair value adjustment resulting from purchase accounting and excluding stock-based compensation expenses, amortization of acquisition-related intangible assets, deferred tax asset adjustment, restructuring expenses and other acquisition-related expenses.

These non-GAAP measures should be considered in addition to, and not as a substitute for, comparable GAAP measures. The non-GAAP results and a full reconciliation between GAAP and non-GAAP results are provided in the accompanying Table 2. The Company provides these non-GAAP financial measures because it believes they present a better measure of the Company's core business and management uses the non-GAAP measures internally to evaluate the Company's ongoing performance. Accordingly, the Company believes they are useful to investors in enhancing an understanding of the Company's operating performance.

Safe Harbor Statement

This release contains forward-looking statements, which express the current beliefs and expectations of Company management. Such statements involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements set forth in such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: our ability to compete successfully with other companies offering competing technologies; the loss of one or more significant customers; consolidation of, and strategic alliances by, our competitors, government regulation; the timing of completion of key project milestones which impact the timing of our revenue recognition; lower demand for key value-added services; our ability to keep pace with advances in technology and to add new features and value-added services; managing lengthy sales cycles; operational risks associated with large projects; our dependence on third party channel partners for a material portion of our revenues; court approval of the Company's proposed share buy-back program; and other factors discussed under the heading "Risk Factors" in the Company's annual report on Form 20-F filed with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

TABLE - 1

ALLOT COMMUNICATIONS LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)











Three Months Ended



Nine Months Ended


September 30,



September 30,


2017


2016



2017


2016


(Unaudited)



(Unaudited)










Revenues

$ 20,857


$ 20,985



$ 58,794


$ 66,882

Cost of revenues

7,840


6,880



20,820


20,547

Gross profit

13,017


14,105



37,974


46,335










Operating expenses:









Research and development costs, net

5,202


5,942



16,099


18,760

Sales and marketing

9,779


8,697



27,506


27,814

General and administrative

2,449


2,635



7,509


7,902

Total operating expenses

17,430


17,274



51,114


54,476

Operating loss

(4,413)


(3,169)



(13,140)


(8,141)

Financial and other income, net

82


309



556


637

Loss before income tax expenses

(4,331)


(2,860)



(12,584)


(7,504)










Tax expenses

294


561



1,148


1,431

Net loss

(4,625)


(3,421)



(13,732)


(8,935)










Basic net loss per share

$ (0.14)


$ (0.10)



$ (0.41)


$ (0.27)



















Diluted net loss per share

$ (0.14)


$ (0.10)



$ (0.41)


$ (0.27)










Weighted average number of shares used in









computing basic net loss per share

33,303,744


33,012,229



33,199,633


33,241,185










Weighted average number of shares used in









computing diluted net loss per share

33,303,744


33,012,229



33,199,633


33,241,185










TABLE - 2

ALLOT COMMUNICATIONS LTD.

AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except per share data)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2017


2016


2017


2016



(Unaudited)


(Unaudited)










GAAP Revenues

$ 20,857


$ 20,985


$ 58,794


$ 66,882

Fair value adjustment for acquired deferred revenues write down

-


33


37


134

Non-GAAP Revenues

$ 20,857


$ 21,018


$ 58,831


$ 67,016










GAAP cost of revenues

$ 7,840


$ 6,880


$ 20,820


$ 20,547

Share-based compensation (1)

(87)


(62)


(279)


(236)

Amortization of intangible assets (2)

(232)


(326)


(706)


(807)

Restructuring expenses (4)

(887)


(127)


(887)


(127)

Non-GAAP cost of revenues

$ 6,634


$ 6,365


$ 18,948


$ 19,377










GAAP gross profit

$ 13,017


$ 14,105


$ 37,974


$ 46,335

Gross profit adjustments

1,206


548


1,908


1,304

Non-GAAP gross profit

$ 14,223


$ 14,653


$ 39,882


$ 47,639










GAAP operating expenses

$ 17,430


$ 17,274


$ 51,114


$ 54,476

Share-based compensation (1)

(489)


(1,015)


(2,107)


(3,820)

Amortization of intangible assets (2)

(135)


(133)


(404)


(403)

Expenses related to M&A activities (3)

-


-


(89)


-

Restructuring expenses (4)

(1,264)


(1,163)


(1,264)


(1,163)

Non-GAAP operating expenses

$ 15,542


$ 14,963


$ 47,250


$ 49,090










GAAP financial and other income

$ 82


$ 309


$ 556


$ 637

Expenses related to M&A activities (3)

162


26


541


169

Non-GAAP Financial and other income

$ 244


$ 335


$ 1,097


$ 806










GAAP taxes on income

$ 294


$ 561


$ 1,148


$ 1,431

Tax expenses (in respect of net deferred tax asset recorded)

(67)


(62)


(197)


(194)

Non-GAAP taxes on income

$ 227


$ 499


$ 951


$ 1,237










GAAP Net Loss

$ (4,625)


$ (3,421)


$ (13,732)


$ (8,935)

Share-based compensation (1)

576


1,077


2,386


4,056

Amortization of intangible assets (2)

367


459


1,110


1,210

Expenses related to M&A activities (3)

162


26


630


169

Restructuring expenses (4)

2,151


1,290


2,151


1,290

Fair value adjustment for acquired deferred revenues write down

-


33


37


134

Tax expenses (in respect of net deferred tax asset recorded)

67


62


197


194

Non-GAAP Net income (Loss)

$ (1,302)


$ (474)


$ (7,221)


$ (1,882)










GAAP Loss per share (diluted)

$ (0.14)


$ (0.10)


$ (0.41)


$ (0.27)

Share-based compensation

0.02


0.03


0.07


0.12

Amortization of intangible assets

0.01


0.02


0.03


0.03

Expenses related to M&A activities

0.01


0.00


0.02


0.01

Restructuring expenses

0.06


0.04


0.06


0.04

Fair value adjustment for acquired deferred revenues write down

-


0.00


0.00


0.00

Tax expenses (in respect of net deferred tax asset recorded)

0.00


0.00


0.01


0.01

Non-GAAP Net loss per share (diluted)

$ (0.04)


$ (0.01)


$ (0.22)


$ (0.06)



















Weighted average number of shares used in








computing GAAP diluted net earnings per share

33,303,744


33,012,229


33,199,633


33,241,185



















Weighted average number of shares used in








computing non-GAAP diluted net earnings per share

33,303,744


33,012,229


33,199,633


33,241,185



















TABLE - 2 cont.

ALLOT COMMUNICATIONS LTD.

AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except per share data)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2017


2016


2017


2016



(Unaudited)


(Unaudited)










(1) Share-based compensation (*):









Cost of revenues

$ 87


$ 62


$ 279


$ 236


Research and development costs, net

7


273


453


978


Sales and marketing

221


333


708


1,422


General and administrative

261


409


946


1,420



$ 576


$ 1,077


$ 2,386


$ 4,056










(2) Amortization of intangible assets









Cost of revenues

$ 232


$ 326


$ 706


$ 807


Sales and marketing

135


133


404


403



$ 367


$ 459


$ 1,110


$ 1,210










(3) Expenses related to M&A activities









General and administrative

$ -


$ -


$ 89


$ -


Financial expensees

162


26


541


169



$ 162


$ 26


$ 630


$ 169










(4) Restructuring expenses









Cost of revenues

$ 887


$ 127


$ 887


$ 127


Research and development costs, net

154


370


154


370


Sales and marketing

976


720


976


720


General and administrative

134


73


134


73



$ 2,151


$ 1,290


$ 2,151


$ 1,290




















(*) Excluding share-based compensation related to the restructuring plan, which was already included under restructuring expenses.

TABLE - 3

ALLOT COMMUNICATIONS LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)








September 30,


December 31,



2017


2016



(Unaudited)


(Audited)




ASSETS





CURRENT ASSETS:





Cash and cash equivalents


$ 24,328


$ 23,326

Short term deposits


21,743


29,821

Marketable securities


63,851


60,507

Trade receivables, net


22,651


24,158

Other receivables and prepaid expenses


4,432


3,879

Inventories


9,111


7,235

Total current assets


146,116


148,926






LONG-TERM ASSETS:





Severance pay fund


290


252

Deferred taxes


67


267

Other assets


528


1,136

Total long-term assets


885


1,655






PROPERTY AND EQUIPMENT, NET


4,870


4,387

GOODWILL AND INTANGIBLE ASSETS, NET


34,862


35,972






Total assets


$ 186,733


$ 190,940






LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES:





Trade payables


$ 6,468


$ 3,275

Deferred revenues


12,116


11,133

Other payables and accrued expenses


12,247


10,538

Total current liabilities


30,831


24,946






LONG-TERM LIABILITIES:





Deferred revenues


3,650


3,597

Accrued severance pay


743


592

Other long term liabilities


5,045


4,502

Total long-term liabilities


9,438


8,691






SHAREHOLDERS' EQUITY


146,464


157,303






Total liabilities and shareholders' equity


$ 186,733


$ 190,940






TABLE - 4

ALLOT COMMUNICATIONS LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)










Three Months Ended


Nine Months Ended


September 30,

September 30,


2017


2016


2017


2016


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)









Cash flows from operating activities:
















Net Loss

$ (4,625)


$ (3,421)


$ (13,732)


$ (8,935)

Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation

494


570


1,559


1,765

Stock-based compensation related to options granted to employees

770


1,197


2,579


4,176

Amortization of intangible assets

367


459


1,110


1,210

Capital loss

7


-


14


20

Decrease (Increase) in accrued severance pay, net

29


(52)


113


(25)

Decrease in other assets

42


375


608


747

Decrease in accrued interest and amortization of premium on marketable securities

92


283


594


1,023

Decrease (Increase) in trade receivables

1,716


(3,621)


1,507


(3,079)

Decrease (Increase) in other receivables and prepaid expenses

(897)


251


(491)


493

Decrease (Increase) in inventories

973


1,663


(1,876)


1,524

Decrease in long-term deferred taxes, net

67


62


201


185

Increase (Decrease) in trade payables

(2,943)


(1,229)


3,193


(4,134)

Increase (Decrease) in employees and payroll accruals

489


(13)


1,105


(610)

Increase (Decrease) in deferred revenues

1,997


(1,520)


1,036


(1,584)

Increase (Decrease) in other payables and accrued expenses

401


(34)


1,161


(438)

Net cash used in operating activities

(1,021)


(5,030)


(1,319)


(7,662)









Cash flows from investing activities:








Decrease in restricted cash

-


203


-


203

Redemption of short-term deposits

2,800


5,648


8,078


15,381

Purchase of property and equipment

(297)


(448)


(2,057)


(1,184)

Investment in marketable securities

(3,672)


(4,117)


(19,210)


(21,097)

Proceeds from redemption or sale of marketable securities

3,002


3,215


15,413


21,805

Net cash provided by investing activities

1,833


4,501


2,224


15,108









Cash flows from financing activities:








Exercise of employee stock options

56


69


97


95

Purchase of treasury stocks

-


-


-


(3,326)

Net cash provided by (used in) financing activities

56


69


97


(3,231)









Increase (Decrease) in cash and cash equivalents

868


(460)


1,002


4,215

Cash and cash equivalents at the beginning of the period

23,460


20,145


23,326


15,470

Cash and cash equivalents at the end of the period

$ 24,328


$ 19,685


$ 24,328


$ 19,685










Investor Relations Contact:

GK Investor Relations

Ehud Helft/Gavriel Frohwein

+1 646 688 3559

allot@gkir.com

Public Relations Contact:

Sigalit Orr

Director Corporate Communications

International dialing +972-54-268-1500

sorr@allot.com

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SOURCE Allot Communications Ltd.