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Allot Announces Q2 2023 Financial Results and Cost Reduction Plan

Allot Announces Q2 2023 Financial Results and Cost Reduction Plan

August 31, 2023 at 5:00 AM EDT

HOD HASHARON, Israel , Aug. 31, 2023 /PRNewswire/ -- Allot Ltd. (NASDAQ: ALLT) (TASE: ALLT), a leading global provider of innovative network intelligence and security solutions for service providers and enterprises worldwide, today announced its unaudited financial results for the second quarter ended June 30, 2023.

Allot Logo

Q2 Financial Highlights

  • Second quarter revenues were $25.0 million;
  • SECaaS revenues were $2.4 million; June 2023 SECaaS ARR* was $9.7 million;
  • Second quarter GAAP operating loss was $21.5 million, and non-GAAP operating loss was $18.9 million, including a provision of $14.1 million for credit losses from two customers in Africa;  
  • Q2 GAAP net loss was $20.7 million, and non-GAAP net loss was $18.3 million

As we pre-announced on July 17, 2023, during the quarter, the company booked an allowance for credit losses related to past due receivables previously disclosed by the company arising from sales in two African countries and certain additional sales that occurred in the fourth quarter of 2022 in another African country.  Allot has been assessing the collectability of its accounts receivable on a quarterly basis. In connection with its most recent assessment, the company determined that certain accounts previously disclosed as outstanding will not, with reasonable certainty, be collected, based on recent communications from the contractual counterparties and other factors including the passage of time.

Financial Outlook

Looking ahead, management updates its financial expectations as follows:

  • Full-year 2023 revenues of $95 million to $110 million (of which SECaaS revenues are expected to be approximately $11 million);
  • Full year 2023 operating loss of between $38 million and $44 million (includes a $14.1 million provision for credit losses from two customers in Africa); 
  • Full year 2023 negative cash flow of between $24 million and $44 million;
  • December 2023 total ARR*, including SECaaS ARR* and Support & Maintenance ARR*, is expected to be between $51 million and $55 million;
  • Reiterates expectations to be profitable in 2024;  

Management Comment

Erez Antebi, President & CEO of Allot, commented, "We believe that our strategy of transforming our business towards a recurring SECaaS revenue model will drive sustainable profitable growth and long-term shareholder value. However, the conversion of won SECaaS deals to paying subscribers continues to take longer than expected, and SMART is experiencing lower revenues in light of continued challenging economic conditions. We are committed to our target of reaching profitability in 2024 through the growth of the SECaaS business, combined with tight expense control. As we strive toward our goal of driving profitable growth, we are implementing a cost reduction plan which we expect will reduce our yearly expenses by approximately $15 million. "

Q2 2023 Financial Results Summary

Total revenues for the second quarter of 2023 were $25.0 million, a decrease of 24% compared to $32.8 million in the second quarter of 2022.

Gross profit on a GAAP basis for the second quarter of 2023 was $17.3 million (gross margin of 69.2%), a 23% decline compared with $22.5 million (gross margin of 68.7%) in the second quarter of 2022.

Gross profit on a non-GAAP basis for the second quarter of 2023 was $17.9 million (gross margin of 71.4%), a 22% decline compared with $23 million (gross margin of 70.2%) in the second quarter of 2022. The gross margin level in the current quarter was impacted by a one-time favorable product mix.

Net loss on a GAAP basis for the second quarter of 2023 was $20.7 million, or $0.55 per basic share, compared with a net loss of $6.2 million, or $0.17 per basic share, in the second quarter of 2022. The increase in net loss this quarter is due to the credit loss expense described above.

Net loss on a non-GAAP for the second quarter of 2023 was $18.3 million, or $0.49 per basic share compared with a non-GAAP net loss of $4.2 million, or $0.11 per basic share, in the second quarter of 2022. The increase in net loss this quarter is due to the credit loss expense described above.

Cash, short-term bank deposits and investments as of June 30, 2023, totaled $65.9 million, compared to $86.4 million as of December 31, 2022.

ARR - U.S. dollars in millions (Unaudited)




Dec. 2021 


Dec. 2022


Dec. 2023 target


2022 vs. 2021


2023 (target) vs. 2022 

Support & maintenance ARR *

42.0


42.5


39-41


1 %


(8%) -(4%)













SECaaS ARR **


5.2


9.2


12-14


77 %


30%-52%













Total ARR


47.2


51.7


 51-55


10 %


(1%)-6%













* Support & Maintenance ARR measures the current annual run rate of the support & maintenance revenues, which is calculated
based on these expected revenues in the fourth quarter and multiplied by 4.

** SECaaS ARR measures the current annual run rate of the SECaaS revenues, which is calculated based on these expected
revenues in the month of December and multiplied by 12.

 

Conference Call & Webcast:

The Allot management team will host a conference call to discuss its second quarter 2023 earnings results today, August 31, 2023 at 8:30 am ET, 3:30 pm Israel time. To access the conference call, please dial one of the following numbers:

US:  1-888-642-5032, UK: 0-800-917-5108, Israel: +972-3-918-0610

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

About Allot

Allot Ltd. (NASDAQ: ALLT, TASE: ALLT) is a provider of leading innovative network intelligence and security solutions for service providers and enterprises worldwide, enhancing value to their customers. Our solutions are deployed globally for network and application analytics, traffic control and shaping, network-based security services, and more. Allot's multi-service platforms are deployed by over 500 mobile, fixed and cloud service providers and over 1,000 enterprises. Our industry leading network-based security as a service solution is already used by many millions of subscribers globally. Allot. See. Control. Secure.

For more information, visit www.allot.com

Performance Metrics

* Total ARR - Support & Maintenance ARR (measures the current annual run rate of support & maintenance revenues, which is calculated based on the revenues for the second quarter of 2023 and multiplied by 4) and SECaaS ARR (measures the current annual run rate of the SECaaS revenues), which is calculated based on the revenues in the month of June 2023 and multiplied by 12.

GAAP to Non-GAAP Reconciliation:

Non-GAAP net income is defined as GAAP net income after excluding stock-based compensation expenses, amortization of acquisition-related intangible assets, deferred tax asset adjustment, exchange rate differences related to revaluation of assets and liabilities denominated in non-dollar currencies, other acquisition-related expenses and changes in taxes related items.

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 is 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 accounts receivables, including our ability to collect outstanding accounts and assess their collectability on a quarterly basis; our ability to meet expectations with respect to our financial guidance and outlook; 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 fourth party channel partners for a material portion of our revenues; 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:

EK Global Investor Relations

Ehud Helft

+1 212 378 8040

allot@ekgir.com 

Public Relations Contact:

Seth Greenberg, Allot Ltd.
+972 54 922 2294
sgreenberg@allot.com

 

 

TABLE  - 1

ALLOT LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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











Three Months Ended



Six Months Ended


June 30,



June 30,


2023


2022



2023


2022


(Unaudited)



(Unaudited)










Revenues

$       25,047


$       32,772



$       46,173


$       64,668

Cost of revenues

7,707


10,242



15,358


20,034

Gross profit  

17,340


22,530



30,815


44,634










Operating expenses:









Research and development costs, net

10,752


12,480



21,246


24,510

Sales and marketing

10,522


12,220



21,409


23,909

General and administrative

17,558


4,303



21,518


8,340

Total operating expenses

38,832


29,003



64,173


56,759

Operating loss

(21,492)


(6,473)



(33,358)


(12,125)

Financial and other income, net

985


620



1,779


867

Loss before income tax expenses

(20,507)


(5,853)



(31,579)


(11,258)










Tax expenses

225


380



515


1,102

Net Loss

(20,732)


(6,233)



(32,094)


(12,360)










 Basic net loss per share

$         (0.55)


$         (0.17)



$         (0.85)


$         (0.34)



















 Diluted net loss per share

$         (0.55)


$         (0.17)



$         (0.85)


$         (0.34)










Weighted average number of shares used in 









computing basic net loss per share

37,743,328


36,827,197



37,583,412


36,684,017










Weighted average number of shares used in 









computing diluted net loss per share

37,743,328


36,827,197



37,583,412


36,684,017

 

 

TABLE - 2

ALLOT 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


Six Months Ended



June 30,


June 30,



2023


2022


2023


2022



(Unaudited)


(Unaudited)

GAAP cost of revenues

$          7,707


$        10,242


$       15,358


$       20,034

 Share-based compensation (1) 

(348)


(338)


(879)


(519)

 Amortization of intangible assets (2) 

(194)


(152)


(387)


(304)

Non-GAAP cost of revenues

$          7,165


$          9,752


$       14,092


$       19,211










 GAAP gross profit 

$        17,340


$        22,530


$       30,815


$       44,634

 Gross profit adjustments 

542


490


1,266


823

 Non-GAAP gross profit 

$        17,882


$        23,020


$       32,081


$       45,457










 GAAP operating expenses 

$        38,832


$        29,003


$       64,173


$       56,759

 Share-based compensation (1) 

(2,077)


(1,831)


(5,014)


(4,187)

 Non-GAAP operating expenses 

$        36,755


$        27,172


$       59,159


$       52,572










 GAAP financial and other income 

$             985


$            620


$         1,779


$            867

 Exchange rate differences* 

(238)


(316)


(281)


(389)

 Expenses related to M&A activities (3) 


14


-


28


-

 Non-GAAP Financial and other income 

$             761


$            304


$         1,526


$            478










 GAAP taxes on income 

$             225


$            380


$            515


$         1,102

 Changes in tax related items 

(25)


(50)


(50)


(50)

 Non-GAAP taxes on income 

$             200


$            330


$            465


$         1,052










 GAAP Net Loss 

$       (20,732)


$        (6,233)


$     (32,094)


$     (12,360)

 Share-based compensation (1) 

2,425


2,169


5,893


4,706

 Amortization of intangible assets (2) 

194


152


387


304

 Expenses related to M&A activities (3) 


14


-


28


-

 Exchange rate differences* 

(238)


(316)


(281)


(389)

 Changes in tax related items 


25


50


50


50

 Non-GAAP Net income (loss) 

$       (18,312)


$        (4,178)


$     (26,017)


$       (7,689)










 GAAP Loss per share (diluted) 

$           (0.55)


$          (0.17)


$         (0.85)


$         (0.34)

 Share-based compensation 

0.06


0.06


0.16


0.13

 Amortization of intangible assets 

0.01


0.00


0.01


0.00

 Expenses related to M&A activities 

0.00


-


0.00


-

Changes in taxes and headcount related items


-


-


-


0.00

 Exchange rate differences* 

(0.01)


(0.00)


(0.01)


(0.00)

 Non-GAAP Net income (loss) per share (diluted) 

$           (0.49)


$          (0.11)


$         (0.69)


$         (0.21)



















Weighted average number of shares used in 








computing GAAP diluted net loss per share

37,743,328


36,827,197


37,583,412


36,684,017



















Weighted average number of shares used in 








computing non-GAAP diluted net loss per share

37,743,328


36,827,197


37,583,412


36,684,017










* Financial income or expenses related to exchange rate differences in connection with revaluation of assets and

 liabilities in non-dollar denominated currencies. 

 

 

TABLE  - 2 cont.

ALLOT 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


Six Months Ended



June 30,


June 30,



2023


2022


2023


2022



(Unaudited)


(Unaudited)










(1) Share-based compensation:









Cost of revenues

$             348


$            338


$            879


$            519


Research and development costs, net

754


844


1,956


1,689


Sales and marketing

733


619


1,770


1,532


General and administrative

590


368


1,288


966



$          2,425


$          2,169


$         5,893


$         4,706










 (2) Amortization of intangible assets 









Cost of revenues

$             194


$            152


$            387


$            304



$             194


$            152


$            387


$            304










 (3) Expenses related to M&A activities 









Financial income

$               14


$               -


$              28


$              -



$               14


$               -


$              28


$              -

 

 

TABLE  - 3

ALLOT LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED  BALANCE  SHEETS

(U.S. dollars in thousands)















June 30,



December 31,



2023



2022



(Unaudited)



(Audited)




ASSETS






CURRENT ASSETS:






Cash and cash equivalents

$

15,473


$

12,295

Short-term bank deposits


30,065



68,765

Restricted deposits


1,274



1,050

Available-for-sale marketable securities


19,061



4,293

Trade receivables, net (net of allowance for credit losses of $17,365 and
$2,908 on June 30, 2023 and December 31, 2022, respectively)


29,445



44,167

Other receivables and prepaid expenses


7,023



7,985

Inventories


18,360



13,262

Total current assets


120,701



151,817







LONG-TERM ASSETS:






Severance pay fund


361



371

Operating lease right-of-use assets


3,937



5,387

Trade receivables, net


4,767



4,934

Other assets 


1,058



864

Total long-term assets


10,123



11,556







PROPERTY AND EQUIPMENT, NET


12,149



14,236

GOODWILL AND INTANGIBLE ASSETS, NET


34,791



35,344







Total assets

$

177,764


$

212,953







LIABILITIES AND SHAREHOLDERS' EQUITY






CURRENT LIABILITIES:






Trade payables

$

9,460


$

11,661

Deferred revenues


20,427



20,825

Short-term operating lease liabilities


2,103



2,542

Other payables and accrued expenses


21,173



25,573

Total current liabilities


53,163



60,601







LONG-TERM LIABILITIES:






Deferred revenues


6,384



7,285

Long-term operating lease liabilities


1,475



2,579

Accrued severance pay


1,003



940

Convertible debt


39,673



39,575

Total long-term liabilities


48,535



50,379







SHAREHOLDERS' EQUITY


76,066



101,973







Total liabilities and shareholders' equity

$

177,764


$

212,953

 

 

TABLE  - 4

ALLOT LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(U.S. dollars in thousands)










Three Months Ended


Six Months Ended


June 30,


June 30,


2023


2022


2023


2022


(Unaudited)


(Unaudited)









Cash flows from operating activities:
















Net Loss

$      (20,732)


$      (6,233)


$      (32,094)


$        (12,360)

Adjustments to reconcile net income to net cash used in operating activities:








Depreciation

1,327


1,332


2,647


2,746

Stock-based compensation

2,425


2,169


5,893


4,706

Amortization of intangible assets

277


235


553


470

Increase in accrued severance pay, net

13


26


73


20

Decrease (Increase) in other assets

168


19


(194)


436

Decrease (Increase) in accrued interest and  amortization of premium on marketable securities 

(166)


16


(147)


48

Changes in operating leases, net

290


(191)


(93)


(563)

Decrease (Increase) in trade receivables

10,403


(4,082)


14,889


(4,807)

Decrease (Increase) in other receivables and prepaid expenses

300


141


1,161


(893)

Decrease (Increase) in inventories

(1,645)


591


(5,098)


(1,164)

Decrease in trade payables

(2,941)


(1,433)


(2,202)


(937)

Increase (Decrease) in employees and payroll accruals

(1,042)


523


(2,494)


(1,963)

Increase (Decrease) in deferred revenues

870


287


(1,299)


1,129

Decrease in other payables, accrued expenses and other long term liabilities

(923)


(1,252)


(1,824)


(1,523)

Amortization of issuance costs of Convertible debt

49


49


98


71

Net cash used in operating activities

(11,327)


(7,803)


(20,131)


(14,584)









Cash flows from investing activities:








Decrease (Increase) in restricted deposit

(224)


260


(224)


380

Redemption of (Investment in) short-term deposits

21,700


520


38,700


(25,180)

Purchase of property and equipment

(290)


(1,281)


(560)


(2,556)

Investment in available-for sale marketable securities

(9,584)


-


(18,567)


-

Proceeds from redemption or sale of available-for sale marketable securities

590


2,872


3,960


6,030

Net cash provided by (used in) investing activities

12,192


2,371


23,309


(21,326)









Cash flows from financing activities:








Proceeds from exercise of stock options

-


15


-


250

Issuance of convertible debt

-


-


-


39,404

Net cash provided by financing activities

-


15


-


39,654

















Increase (Decrease) in cash and cash equivalents

865


(5,417)


3,178


3,744

Cash and cash equivalents at the beginning of the period

14,608


20,878


12,295


11,717









Cash and cash equivalents at the end of the period

$        15,473


$     15,461


$        15,473


$          15,461









 

 

Other financial metrics (Unaudited)







U.S. dollars in millions, except number of full time employees, % of top-10 end-customers
out of revenues and number of shares










Q2-2023


YTD 2023


FY 2022


Revenues geographic breakdown








Americas


8.0

32 %

10.4

22 %

21.8

18 %


EMEA


12.7

51 %

26.1

57 %

71.2

58 %


Asia Pacific


4.3

17 %

9.7

21 %

29.7

24 %




25.0

100 %

46.2

100 %

122.7

100 %










Revenue breakdown by type








Products


11.0

44 %

17.8

39 %

61.1

50 %


Professional Services

1.7

7 %

3.6

8 %

11.6

9 %


SECaaS (Security as a Service)

2.4

10 %

4.7

10 %

7.2

6 %


Support & Maintenance

9.9

39 %

20.1

43 %

42.8

35 %




25.0

100 %

46.2

100 %

122.7

100 %










Revenues per customer type








CSP


20.4

82 %

37.5

81 %

98.3

80 %


Enterprise


4.6

18 %

8.7

19 %

24.4

20 %




25.0

100 %

46.2

100 %

122.7

100 %










% of top-10 end-customers out of revenues

54 %


49 %


44 %











Total number of full time employees 

684


684


749


(end of period)

















Non-GAAP Weighted average number of basic shares  (in millions)

37.7


37.7


37.0

















Non-GAAP weighted average number of fully diluted shares  (in millions)

40.1


40.1


39.5




 

 

SECaaS (Security as a Service) revenues- U.S. dollars in millions (Unaudited)



Q2-2023:

2.4









Q1-2023:

2.3









Q4-2022:

2.2









Q3-2022:

1.7









Q2-2022:

1.7



















SECaaS ARR* (annualized recurring revenues)- U.S. dollars in millions (Unaudited)















Jun. 2023:

9.7









Dec. 2022:

9.2









Dec. 2021:

5.2









Dec. 2020:

2.7



















*ARR: annualized recurring SECaaS revenues, calculated based on the monthly revenues multiplied by 12

 

 

Cision View original content:https://www.prnewswire.com/news-releases/allot-announces-q2-2023-financial-results-and-cost-reduction-plan-301914642.html

SOURCE Allot Ltd.