Allot Announces Third Quarter 2022 Financial Results

HOD HASHARON, Israel, Nov. 15, 2022 /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 third quarter 2022 financial results.

 Third Quarter 2022 Financial Highlights

• Third quarter revenues were $25.0 million compared with $38.2 million in the third quarter of last year;
• Gross margin on a non-GAAP basis was 67%;
• GAAP operating loss was $13.1 million and non-GAAP operating loss was $10.8 million;
• GAAP net loss was $12.9 million and non-GAAP net loss was $10.6 million.

Financial Outlook

For the fourth quarter and full year of 2022, management reiterates its guidance expectations as follows:

• Maintaining guidance for full year revenues of $125 million to $130 million, with expectations that full year revenues will trend toward the lower end of the range;
• Additional recurring security deals to be executed, providing incremental MAR** of approximately $180 million for the full year;
• Continues to expect additional recurring security deals to be executed, providing incremental MAR** of more than $180 million for the full year;
• Continues to expect December 2022 total ARR* including SECaaS ARR* and Support & Maintenance ARR* to be between $50-52 million,
• Continues to expect December 2022 SECaaS ARR* to be approximately $9 million;
• Continues to expect recurring security revenue to be approximately $7 million for 2022.

Management Comment

Erez Antebi, President & CEO of Allot, commented, "While our third quarter ended as we had expected, we are obviously striving to achieve much more in the future.  I am very proud that Verizon selected Allot to enable network-based security services for their SMB customers.   I believe that this decision by Verizon proves that network-based security is becoming a significant part of the offering for operators."

Continued Mr. Antebi, "We remain committed to reach profitability for the full year 2024.  This will be achieved via revenue growth, mainly through the SECaaS business, but also through tight expense control. We also expect our loss in 2023 to be significantly lower than in 2022. I continue to strongly believe in the potential for our SECaaS solution for protecting consumers as well as its ability to bring Allot into a new era of growth and profitability."

Q3 2022 Financial Results Summary

Total revenues for the third quarter of 2022 were $25.0 million, a decrease of 34% compared to $38.2 million in the third quarter of 2021.

Gross profit on a GAAP basis for the third quarter of 2022 was $16.4 million (gross margin of 65.4%), a 38% decline compared with $26.5 million (gross margin of 69.5%) in the third quarter of 2021.

Gross profit on a non-GAAP basis for the third quarter of 2022 was $16.8 million (gross margin of 67.2%), a 37% decline compared with $26.8 million (gross margin of 70.4%) in the third quarter of 2021. The lower level of revenue in the third quarter was impacted the gross margin level.

Net loss on a GAAP basis for the third quarter of 2022 was $12.9 million, or $0.35 per basic share, compared with a net loss of $3.1 million, or $0.08 per basic share, in the third quarter of 2021.

Net loss on a non-GAAP for the third quarter of 2022 was $10.6 million, or $0.28 per basic share compared with a non-GAAP net loss of $0.2 million, or $0.00 per basic share, in the third quarter of 2021.

Cash, short-term bank deposits and investments as of September 30, 2022 totaled $98.1 million, compared to $85.7 million as of December 31, 2021.

Conference Call & Webcast:

The Allot management team will host a conference call to discuss its third quarter 2022 earnings results today, November 15, 2022 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: [phone]

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 over 20 million subscribers in Europe. 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 these expected revenues in the fourth quarter and multiplied by 4) and 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).

** MAR (maximum annual revenue potential of concluded transactions) was estimated by Allot upon transaction signature and constitutes an approximation of the theoretical annual revenues Allot would receive if 100% of the applicable customer segments only subscribers, as estimated by Allot, signed up for the service.

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 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 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; 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: EK Global Investor Relations Ehud Helft [phone] [e-mail]

Public Relations Contact: Seth Greenberg, Allot Ltd. [phone] [e-mail]

 

 

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					Nine Months Ended
	September 30,					September 30,
	2022		2021			2022		2021
	(Unaudited)					(Unaudited)
Revenues	$       25,040		$       38,155			$       89,708		$     104,626
Cost of revenues	8,663		11,624			28,697		32,037
Gross profit	16,377		26,531			61,011		72,589
Operating expenses:
Research and development costs, net	12,919		12,148			37,429		34,088
Sales and marketing	12,603		12,901			36,512		37,312
General and administrative	3,939		3,720			12,279		11,000
Total operating expenses	29,461		28,769			86,220		82,400
Operating loss	(13,084)		(2,238)			(25,209)		(9,811)
Financial and other income, net	471		(146)			1,338		163
Loss before income tax expenses	(12,613)		(2,384)			(23,871)		(9,648)
Tax expenses	319		689			1,421		1,362
Net Loss	(12,932)		(3,073)			(25,292)		(11,010)
Basic net loss per share	$         (0.35)		$         (0.08)			$         (0.69)		$         (0.31)
Diluted net loss per share	$         (0.35)		$         (0.08)			$         (0.69)		$         (0.31)
Weighted average number of shares used in
computing basic net loss per share	37,198,187		36,286,436			36,702,045		35,923,853
Weighted average number of shares used in
computing diluted net loss per share	37,198,187		36,286,436			36,702,045		35,923,853

 

 

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				Nine Months Ended
		September 30,				September 30,
		2022		2021		2022		2021
		(Unaudited)				(Unaudited)
GAAP cost of revenues		$          8,663		$        11,624		$       28,697		$       32,037
Share-based compensation (1)		(291)		(161)		(810)		(444)
Amortization of intangible assets (2)		(152)		(152)		(456)		(456)
Non-GAAP cost of revenues		$          8,220		$        11,311		$       27,431		$       31,137
GAAP gross profit		$        16,377		$        26,531		$       61,011		$       72,589
Gross profit adjustments		443		313		1,266		900
Non-GAAP gross profit		$        16,820		$        26,844		$       62,277		$       73,489
GAAP operating expenses		$        29,461		$        28,769		$       86,220		$       82,400
Share-based compensation (1)		(1,879)		(2,248)		(6,066)		(5,670)
Non-GAAP operating expenses		$        27,582		$        26,521		$       80,154		$       76,730
GAAP financial and other income		$             471		$           (146)		$         1,338		$            163
Exchange rate differences*		32		352		(357)		442
Non-GAAP Financial and other income		$             503		$            206		$            981		$            605
GAAP taxes on income		$             319		$            689		$         1,421		$         1,362
Tax expenses in respect of net deferred tax asset recorded		-		5		-		(164)
Changes in tax related items		(25)		-		(75)		-
Non-GAAP taxes on income		$             294		$            694		$         1,346		$         1,198
GAAP Net Loss		$       (12,932)		$        (3,073)		$      (25,292)		$      (11,010)
Share-based compensation (1)		2,170		2,409		6,876		6,114
Amortization of intangible assets (2)		152		152		456		456
Exchange rate differences*		32		352		(357)		442
Tax expenses in respect of net deferred tax asset recorded		-		(5)		-		164
Changes in tax related items		25		-		75		-
Non-GAAP Net income (loss)		$       (10,553)		$           (165)		$      (18,242)		$        (3,834)
GAAP Loss per share (diluted)		$           (0.35)		$          (0.08)		$         (0.69)		$         (0.31)
Share-based compensation		0.06		0.07		0.19		0.17
Amortization of intangible assets		0.01		0.00		0.01		0.02
Exchange rate differences*		(0.0)		0.01		(0.00)		0.01
Tax expense in respect of net deferred tax asset recorded		-		(0.00)		-		-
Non-GAAP Net income (loss) per share (diluted)		$           (0.28)		$          (0.00)		$         (0.49)		$         (0.11)
Weighted average number of shares used in
computing GAAP diluted net loss per share		37,198,187		36,286,436		36,702,045		35,923,853
Weighted average number of shares used in
computing non-GAAP diluted net loss per share		37,198,187		36,286,436		36,702,045		35,923,853
* 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				Nine Months Ended
		September 30,				September 30,
		2022		2021		2022		2021
		(Unaudited)				(Unaudited)
(1) Share-based compensation:
	Cost of revenues	$             291		$            161		$            810		$            444
	Research and development costs, net	704		759		2,393		1,853
	Sales and marketing	727		960		2,259		2,472
	General and administrative	448		529		1,414		1,345
		$          2,170		$          2,409		$         6,876		$         6,114
(2) Amortization of intangible assets
	Cost of revenues	$             152		$            152		$            456		$            456
		$             152		$            152		$            456		$            456

 

 

TABLE  - 3
ALLOT LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED  BALANCE  SHEETS
(U.S. dollars in thousands)
		September 30,		December 31,
		2022		2021
		(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$                     8,587		$                11,717
Short-term bank deposits		84,115		60,720
Restricted deposits		1,100		1,480
Available-for-sale marketable securities		4,261		11,531
Trade receivables, net		34,688		30,829
Other receivables and prepaid expenses		7,592		8,490
Inventories		12,676		11,092
Total current assets		153,019		135,859
LONG-TERM ASSETS:
Long-term bank deposits		-		215
Severance pay fund		359		407
Operating lease right-of-use assets		6,368		8,513
Trade receivables, net		7,224		6,643
Other assets		1,060		1,639
Total long-term assets		15,011		17,417
PROPERTY AND EQUIPMENT, NET		15,016		15,000
GOODWILL AND INTANGIBLE ASSETS, NET		34,433		35,138
Total assets		$                 217,479		$              203,414
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables		$                     6,053		$                  3,940
Deferred revenues		25,551		22,138
Short-term operating lease liabilities		2,502		2,785
Other payables and accrued expenses		26,503		26,250
Total current liabilities		60,609		55,113
LONG-TERM LIABILITIES:
Deferred revenues		9,374		15,942
Long-term operating lease liabilities		2,621		5,467
Accrued severance pay		871		884
Convertible debt		39,525		-
Total long-term liabilities		52,391		22,293
SHAREHOLDERS' EQUITY		104,479		126,008
Total liabilities and shareholders' equity		$                 217,479		$              203,414

 

 

TABLE  - 4
ALLOT LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net Loss	$      (12,932)		$      (3,073)		$      (25,292)		$        (11,010)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	1,373		1,151		4,119		3,380
Stock-based compensation	2,171		2,409		6,877		6,114
Amortization of intangible assets	235		235		705		706
Increase (Decrease) in accrued severance pay, net	15		16		35		(44)
Decrease in other assets	143		103		579		1,144
Decrease in accrued interest and  amortization of premium on marketable securities	36		58		84		165
Changes in operating leases, net	(421)		344		(984)		(367)
Decrease (Increase) in trade receivables	367		(281)		(4,440)		(10,537)
Decrease in other receivables and prepaid expenses	1,176		183		283		3,705
Decrease (Increase) in inventories	(420)		399		(1,584)		3,688
Decrease (Increase) in long-term deferred taxes, net	-		(10)		-		165
Increase (Decrease) in trade payables	3,050		(168)		2,113		(704)
Decrease in employees and payroll accruals	(295)		(1,450)		(2,258)		(2,073)
Decrease in deferred revenues	(4,284)		(5,288)		(3,155)		11,324
Increase (Decrease) in other payables, accrued expenses and other long term liabilities	1,441		(133)		(82)		(3,497)
Amortization of issuance costs of Convertible debt	50		-		121		-
Net cash provided by (used in) operating activities	(8,295)		(5,505)		(22,879)		2,159
Cash flows from investing activities:
Decrease (Increase) in restricted deposit	-		2,474		380		(400)
Redemption of (Investment in) short-term deposits	2,000		(3,500)		(23,180)		(27,700)
Purchase of property and equipment	(1,579)		(962)		(4,135)		(4,591)
Proceeds from redemption or sale of available-for sale marketable securities	1,000		2,353		7,030		9,932
Net cash provided by (used in) investing activities	1,421		365		(19,905)		(22,759)
Cash flows from financing activities:
Proceeds from exercise of stock options	-		193		250		2,660
Issuance of convertible debt	-		-		39,404		-
Net cash provided by financing activities	-		193		39,654		2,660
Decrease in cash and cash equivalents	(6,874)		(4,947)		(3,130)		(17,940)
Cash and cash equivalents at the beginning of the period	15,461		10,606		11,717		23,599
Cash and cash equivalents at the end of the period	$          8,587		$       5,659		$          8,587		$            5,659

 

 

	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
				Q3-2022		YTD 2022		FY 2021
	Revenues geographic breakdown
		Americas		3.1	12 %	16.2	18 %	19.4	14 %
		EMEA		15.3	61 %	50.0	56 %	82.0	56 %
		Asia Pacific		6.6	27 %	23.5	26 %	44.2	30 %
				25.0	100 %	89.7	100 %	145.6	100 %
	Revenue breakdown by type
		Products		10.1	40 %	44.0	49 %	88.1	60 %
		Professional Services		2.6	10 %	8.6	10 %	15.2	11 %
		SECaaS (Security as a Service)		1.7	7 %	4.9	5 %	4.1	3 %
		Support & Maintenance		10.6	43 %	32.2	36 %	38.2	26 %
				25.0	100 %	89.7	100 %	145.6	100 %
	Revenues per customer type
		CSP		19.4	78 %	71.3	80 %	116.9	80 %
		Enterprise		5.6	22 %	18.4	20 %	28.7	20 %
				25.0	100 %	89.7	100 %	145.6	100 %
	% of top-10 end-customers out of revenues			41 %		47 %		51 %
	Total number of full time employees			770		770		741
	(end of period)
	Non-GAAP Weighted average number of basic shares  (in millions)			37.2		36.7		36.1
	Non-GAAP weighted average number of fully diluted shares  (in millions)			39.3		39.1		38.4

 

 

	SECaaS (Security as a Service) revenues- U.S. dollars in millions (Unaudited)
	Q3-2022:	1.7
	Q2-2022:	1.7
	Q1-2022:	1.5
	Q4-2021:	1.3
	SECaaS ARR* (annualized recurring revenues)- U.S. dollars in millions (Unaudited)
	Sep. 2022:	6.9
	Dec. 2021:	5.2
	Dec. 2020:	2.7
	Dec. 2019:	0.5
	*ARR: annualized recurring SECaaS revenues, calculated based on the monthly revenues multiplied by 12

 

 

	ARR - U.S. dollars in millions (Unaudited)
				Dec. 2020		Dec. 2021		Dec. 2022 target		2021 vs. 2020		2022 (target) vs. 2021
	Support & maintenance ARR *			31.2		42.0		41-43		35 %		(2%) -2%
	SECaaS ARR **			2.7		5.2		9		93 %		73 %
	Total ARR			33.9		47.2		50-52		39 %		6%-10%
	* 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.

 

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