Allot Communications Ltd.
Nov 1, 2016
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Allot Communications Announces Third Quarter 2016 Financial Results

HOD HASHARON, Israel, Nov. 1, 2016 /PRNewswire/ -- Allot Communications Ltd. (NASDAQ: ALLT, TASE: ALLT), a leading global provider of security and monetization solutions that enables service providers to protect and personalize the digital experience, today announced its third quarter 2016 financial results.

 Q3 2016 - Highlights

  • Revenues were $21M;
  • GAAP gross margin was 67%, Non-GAAP gross margin was 70%;
  • GAAP operating loss of $3.2M, Non-GAAP operating loss of $0.3M;
  • Re-organization has lowered ongoing operating expenses to between $15-15.5M per quarter;  and
  • Book-to-bill below one; Revenue guidance updated, expecting $87-90M for 2016.

Q3 2016 Financial results

On a GAAP basis, total revenues for the third quarter of 2016 were $21.0 million compared to $23.0 million of revenue reported for the second quarter of 2016 and $23.5 million of revenue reported for the third quarter of 2015. Net loss for the third quarter of 2016 was $3.4 million, or $0.10 per basic and diluted share. This compares with a net loss of $1.2 million, or $0.04 per basic and diluted share, in the second quarter of 2016 and a net loss of $3.4 million, or $0.10 per basic and diluted share, in the third quarter of 2015.

On a non-GAAP basis, total revenues for the third quarter of 2016 were $21.0 million compared to $23.0 million of revenue reported for the second quarter of 2016 and $23.5 million of revenue reported for the third quarter of 2015. On a non-GAAP basis, net loss for the third quarter of 2016 was $0.5 million, or $0.01 per basic and diluted share. This compares with non-GAAP net profit of $0.4 million, or $0.01 per basic and diluted share, in the second quarter of 2016 and non-GAAP net loss of $0.7 million, or $0.02 per basic and diluted share, in the third quarter of 2015.

Net cash and cash equivalents as of September 30, 2016 totaled $110.9 million. The Company recorded negative operating cash flow of $5.0 million during the quarter.

Management Comment

Andrei Elefant, President & CEO of Allot Communications, commented, "Our core markets remain tough and 2016 continues to be a slower year than we had originally expected.  Our orders to-date have been of a smaller scale and more diversified than we saw in past years. In light of our weaker traditional end-markets, we continue to evolve our strategy towards new growth markets, shifting towards sales of security and monetization solutions. At the same time, we took steps to lower our cost base and we expect that it will enable us to return to profitability in the coming quarters, particularly as we transition to security and monetization solutions." 

"From a strategic standpoint, the third quarter showed a number of important developments, demonstrating that our strategy is on track," continued Mr. Elefant. "We have since launched our Secure Service Gateway. This solution which is focused on web and network security, delivers integrated network visibility, security and control for enterprises in a single, scalable appliance, and we are already beginning to see initial traction for this product. Furthermore, our project with a major European operator continues to gain more subscribers signing on to their mobile security solution, provided by Allot. According to the customer, in the first nine months of 2016 the service blocked 50,000 ransomware attacks to four million subscribers who use the service. Our strategic collaboration with Intel Security, developing the McAfee Unified Security, Powered by Allot solution for consumer and small business markets, is on track and we are progressing as planned. We look forward to maximizing the potential of our relationship in future quarters. Our overall strategic progress as we move through the end of 2016 validates the significant value that we hope to bring as a player in the security as a service domain in 2017 and beyond."

2016 Outlook

The Company has updated its 2016 guidance. Revenues are expected in the range of $87-$90 million for the full year of 2016, both on a GAAP and non-GAAP basis.  

Conference Call & Webcast:

The Allot management team will host a conference call to discuss third quarter 2016 earnings results today, November 1, 2016 at 8:30 AM ET, 2:30 p.m. Israel time. To access the conference call, please dial one of the following numbers:

US: +1-646-254-3367, UK: +44(0)20-3427-1909, Israel: +972-3-721-9510, participant code 1920290.

A recording of the conference call will be available from 12:00PM ET on November 1st, 2016 for 30 days. To access the recording, please dial: +1-347-366-9565; UK: +44(0)20-3427-0598, access code: 1920290.

A live webcast of the conference call can be accessed on the Allot Communications website at: http://www.allot.com.

The webcast will also be archived on the website following the conference call.

About Allot Communications

Allot Communications (NASDAQ: ALLT, TASE: ALLT) is a leading provider of security and monetization solutions that enables service providers to protect and personalize the digital experience. Allot's flexible and highly scalable service delivery framework leverages the intelligence in data networks, enabling service providers to get closer to their customers, safeguard network assets and users, and accelerate time-to-revenue for value-added services. We employ innovative technology, proven know-how and a collaborative approach to provide the right solution for every network environment. Allot solutions are currently deployed at 5 of the top 10 global mobile operators and in thousands of CSP and enterprise networks worldwide. 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.

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

 

 

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,


2016


2015



2016


2015


(Unaudited)



(Unaudited)










Revenues

$      20,985


$      23,461



$     66,882


$     74,585

Cost of revenues

6,880


6,042



20,547


20,242

Gross profit  

14,105


17,419



46,335


54,343










Operating expenses:









Research and development costs, net

5,942


6,446



18,760


19,946

Sales and marketing

8,697


10,532



27,814


33,176

General and administrative

2,635


2,867



7,902


9,492

Total operating expenses

17,274


19,845



54,476


62,614

Operating loss

(3,169)


(2,426)



(8,141)


(8,271)

Financial and other income (loss), net

309


(910)



637


(816)

Loss before income tax expenses

(2,860)


(3,336)



(7,504)


(9,087)










Tax expenses

561


67



1,431


374

Net loss

(3,421)


(3,403)



(8,935)


(9,461)










 Basic net loss per share

$         (0.10)


$        (0.10)



$        (0.27)


$        (0.28)



















 Diluted net loss per share

$         (0.10)


$        (0.10)



$        (0.27)


$        (0.28)










Weighted average number of shares









used in computing basic net









loss per share

33,012,229


33,512,755



33,241,185


33,443,418










Weighted average number of shares









used in computing diluted net









loss per share

33,012,229


33,512,755



33,241,185


33,443,418



















 

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,



2016


2015


2016


2015



(Unaudited)


(Unaudited)










 GAAP Revenues 

$     20,985


$    23,461


$          66,882


$          74,585

 Fair value adjustment for acquired deferred revenues write down 

33


11


134


33

 Non-GAAP Revenues 

$     21,018


$    23,472


$          67,016


$          74,618










GAAP cost of revenue

$       6,880


$      6,042


$          20,547


$          20,242

 Share-based compensation (1) 

(62)


(80)


(236)


(245)

 Amortization of intangible assets (2) 

(326)


(620)


(807)


(1,701)

 Restructuring expenses (4) 

(127)


-


(127)


-

Non-GAAP cost of revenue

$       6,365


$      5,342


$          19,377


$          18,296










 GAAP gross profit 

$     14,105


$    17,419


$          46,335


$          54,343

 Gross profit adjustments 

548


711


1,304


1,979

 Non-GAAP gross profit 

$     14,653


$    18,130


$          47,639


$          56,322










 GAAP operating expenses 

$     17,274


$    19,845


$          54,476


$          62,614

 Share-based compensation (1) 

(1,015)


(1,674)


(3,820)


(5,302)

 Amortization of intangible assets (2) 

(133)


(158)


(403)


(374)

 Expenses related to M&A activities (3) 

-


(101)


-


(678)

 Restructuring expenses (4) 

(1,163)


-


(1,163)


-

 Non-GAAP operating expenses 

$     14,963


$    17,912


$          49,090


$          56,260










 GAAP financial and other income (loss) 

$           309


$       (910)


$                637


$              (816)

 Expenses related to M&A activities (3) 

26


18


169


282

 Non-GAAP Financial and other income (loss) 

$           335


$       (892)


$                806


$              (534)










 GAAP taxes on income 

$           561


$           67


$            1,431


$                374

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

(62)


-


(194)


-

 Non-GAAP taxes on income 

$           499


$           67


$            1,237


$                374










 GAAP Net Loss 

$     (3,421)


$    (3,403)


$          (8,935)


$          (9,461)

 Share-based compensation (1) 

1,077


1,754


4,056


5,547

 Amortization of intangible assets (2) 

459


778


1,210


2,075

 Expenses related to M&A activities (3) 

26


119


169


960

 Restructuring expenses (4) 

1,290


-


1,290


-

 Fair value adjustment for acquired deferred revenues write down 

33


11


134


33

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

62


-


194


-

 Non-GAAP Net Loss 

$         (474)


$       (741)


$          (1,882)


$              (846)










 GAAP Loss per share (diluted) 

$        (0.10)


$      (0.10)


$             (0.27)


$             (0.28)

 Share-based compensation 

0.03


0.05


0.12


0.16

 Amortization of intangible assets 

0.02


0.03


0.03


0.06

 Expenses related to M&A activities 

0.00


-


0.01


0.03

 Restructuring expenses 

0.04


-


0.04


-

 Fair value adjustment for acquired deferred revenues write down 

0.00


-


0.00


-

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

0.00


-


0.01


-

 Non-GAAP Net Loss per share (diluted) 

$        (0.01)


$      (0.02)


$             (0.06)


$             (0.03)










Weighted average number of shares








used in computing GAAP diluted net








loss per share

33,012,229


33,512,755


33,241,185


33,443,418










Weighted average number of shares








used in computing non-GAAP diluted net








loss per share

33,012,229


33,512,755


33,241,185


33,443,418



















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,



2016


2015


2016


2015



(Unaudited)


(Unaudited)










(1) Share-based compensation (*):









Cost of revenues

$             62


$           80


$                236


$                245


Research and development costs, net

273


426


978


1,271


Sales and marketing

333


680


1,422


2,172


General and administrative

409


568


1,420


1,859



$       1,077


$      1,754


$            4,056


$            5,547










 (2) Amortization of intangible assets 









Cost of revenues

$           326


$         620


$                807


$            1,701


Sales and marketing

133


158


403


374



$           459


$         778


$            1,210


$            2,075










 (3) Expenses related to M&A activities 









General and administrative 

$              -


$         101


$                   -


$                452


Research and development costs, net

-


-


-


45


Sales and marketing

-


-


-


181


Financial expenses

26


18


169


282



$             26


$         119


$                169


$                960










 (4) Restructuring expenses 









Cost of revenues

$           127


$            -


$                127


$                   -


Research and development costs, net

370


-


370


-


Sales and marketing

720


-


720


-


General and administrative

73


-


73


-



$       1,290


$            -


$            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,



2016


2015



(Unaudited)


(Audited)

ASSETS





CURRENT ASSETS:





Cash and cash equivalents


$            19,685


$           15,470

Short term deposits


27,319


42,700

Restricted cash


-


203

Marketable securities 


63,853


64,921

Trade receivables, net


26,953


23,874

Other receivables and prepaid expenses


4,210


4,513

Inventories


8,645


10,169

Total current assets


150,665


161,850






LONG-TERM ASSETS:





Severance pay fund


249


282

Deferred taxes


316


501

Other assets 


1,965


2,712

Total long-term assets


2,530


3,495






PROPERTY AND EQUIPMENT, NET


4,588


5,189

GOODWILL AND INTANGIBLE ASSETS, NET


36,471


37,681






Total assets


$          194,254


$        208,215






LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES:





Trade payables


$               2,973


$             7,107

Deferred revenues


13,082


14,066

Other payables and accrued expenses


12,571


13,921

Total current liabilities


28,626


35,094






LONG-TERM LIABILITIES:





Deferred revenues


4,312


4,912

Accrued severance pay


593


651

Other long term liabilities


4,316


4,153

Total long-term liabilities


9,221


9,716






SHAREHOLDERS' EQUITY


156,407


163,405






Total liabilities and shareholders' equity


$          194,254


$        208,215











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,


2016

2015


2016

2015


(Unaudited)


(Unaudited)







Cash flows from operating activities:












Net loss

$       (3,421)

$      (3,403)


$      (8,935)

$      (9,461)

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






Depreciation

570

725


1,765

2,121

Stock-based compensation related to options granted to employees

1,197

1,770


4,176

5,542

Amortization of intangible assets

459

778


1,210

2,075

Capital loss 

-

123


20

138

Decrease (Increase) in accrued severance pay, net

(52)

99


(25)

152

Decrease (Increase) in other assets

375

334


747

(32)

Decease in accrued interest and  amortization of premium on marketable securities 

283

240


1,023

713

Increase (Decrease) in trade receivables

(3,621)

2,150


(3,079)

25

Decrease (Increase) in other receivables and prepaid expenses

251

845


493

(531)

Decrease (Increase) in inventories

1,663

(1,705)


1,524

60

Decrease (Increase) in long-term deferred taxes, net

62

-


185

(140)

Increase (Decrease) in trade payables

(1,229)

(551)


(4,134)

686

Decrease in employees and payroll accruals

(13)

(769)


(610)

(918)

Increase (Decrease) in deferred revenues

(1,520)

1,265


(1,584)

1,648

Increase (Decrease) in other payables and accrued expenses

(34)

1,006


(438)

571







Net cash provided by (used in) operating activities

(5,030)

2,907


(7,662)

2,649







Cash flows from investing activities:












Decrease in restricted deposit

203

-


203

-

Redemption of short-term deposits 

5,648

-


15,381

38,000

Investment in short-term deposit

-

(15,750)


-

(15,750)

Purchase of property and equipment

(448)

(522)


(1,184)

(1,606)

Investment in marketable securities

(4,117)

(2,537)


(21,097)

(20,812)

Proceeds from redemption or sale of marketable securities

3,215

4,792


21,805

16,399

Acquisitions

-

-


-

(10,052)







Net cash provided by (used in) investing activities

4,501

(14,017)


15,108

6,179







Cash flows from financing activities:












Exercise of employee stock options 

69

4


95

104

Purchase of treasury stocks

-

-


(3,326)

-







Net cash provided by (used in) financing activities

69

4


(3,231)

104













Increase (Decrease) in cash and cash equivalents

(460)

(11,106)


4,215

8,932

Cash and cash equivalents at the beginning of the period

20,145

39,218


15,470

19,180







Cash and cash equivalents at the end of the period

$      19,685

$     28,112


$      19,685

$      28,112



















 


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SOURCE Allot Communications Ltd.

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