Allot — Annual Report 2012

Feb 5, 2013

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Allot Communications Reports Non-GAAP Revenues of $28.5 Million for Fourth Quarter of 2012 and $107.1 Million for the Year

-- GAAP revenues were $26.4 million for the fourth quarter, $104.8 million for the year 2012--

Key highlights:

- Fourth quarter non-GAAP revenues increased 29% increase over the fourth quarter of 2011, GAAP revenues increased 20% over same period

- Fourth quarter non-GAAP net income of $4.6 million, EPS of $0.14; on a GAAP basis, including one time charge of early repayment of grants to the Israeli Office of the Chief Scientist (OCS) of $15.9 million, GAAP loss of $15.1 million, loss per share of $0.46

- Cash, cash equivalents and marketable securities totaled $143.1 million

Hod Hasharon, Israel – February 5, 2013 – Allot Communications Ltd. (NASDAQ: ALLT), a leading supplier of service optimization and revenue generation solutions for fixed and mobile broadband service providers worldwide, today announced its fourth quarter and year end 2012 results, with a significant increase in annual revenues.

On a non-GAAP basis, excluding the impact of share-based compensation, settlement of repayment of grants to the OCS, revenue adjustment due to acquisitions, expenses related to M&A activity, deferred tax assets and amortization of certain intangibles, revenues for the fourth quarter of 2012 reached $28.5 million, and non-GAAP net profit for the fourth quarter of 2012 totaled $4.6 million, or $0.14 per basic and diluted share, compared with non-GAAP net profit of $4.2 million, or $0.15 per basic share and $0.14 per diluted share, for the fourth quarter of 2011, and non-GAAP net profit of $5.1 million or $0.16 per basic share and $0.15 per diluted share, for the third quarter of 2012. For the full year 2012, excluding the impact of the factors mentioned above, non-GAAP revenue reached $107.1 million, compared with $77.8 million for the full year 2011, and net profit for the year reached $19.8 million, or $0.62 per basic share and $0.59 per diluted share, compared with nonGAAP net profit of $12.5 million, or $0.50 per basic share and $0.46 per diluted share, for the full year 2011.

The discrepancy between GAAP and non-GAAP revenues is related to the acquisitions made by the Company during the year, and represents revenues adjusted for impact of the fair value adjustment to acquired deferred revenue related to purchase accounting.

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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 that 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 that they are useful to investors in enhancing an understanding of the Company’s operating performance.

Total GAAP revenues for the fourth quarter of 2012 reached $26.4 million, a 20% increase from the $22.0 million of revenues reported for the fourth quarter of 2011, and a decline from the $27.8 million of revenues reported for the third quarter of 2012. On a GAAP basis, net loss for the fourth quarter of 2012 was $15.1 million, or $0.46 per basic and diluted share. This compares with net profit of $3.5 million, or $0.13 per basic share and $0.12 per diluted share, in the fourth quarter of 2011, and net profit of $2.4 million, or $0.07 per basic share and diluted share, in the third quarter of 2012. For the full year 2012, GAAP revenues reached $104.8 million, representing a 35% increase over the $77.8 million of revenues in 2011. On a GAAP basis, net loss for the year 2012 was $6.7 million, or $0.21 per basic and diluted share, as compared with net profit of $8.8 million, or $0.35 per basic share and $0.33 per diluted share, in 2011.

During December 2012, the Company recorded a liability for the early payment of $15.9 million due to settlement with the Israeli Office of Chief Scientist (OCS), representing the full balance of the contingent liability related to grants received, which will be paid during the first quarter of 2013. Upon making this payment, the Company will eliminate all future royalty obligations related to its anticipated revenues and save the associated future interest payments related to such obligations, as well as entitle it to apply to a grant program with the OCS with no repayment obligations. These expenses are included in the cost of goods sold reported for the quarter.

“Allot demonstrated significant revenue growth in 2012 despite a challenging macroeconomic environment, particularly in Europe," commented Rami Hadar, Allot Communications' President and Chief Executive Officer. “With the completion of two acquisitions during the year, we now offer a comprehensive video solution to empower our customers to optimize and monetize on Over the Top (“OTT”) delivery of video based content and applications. We also delivered on our promise to complete initial commercial deployments with two nationwide mobile operators in the US, in addition to our significant and growing customer base throughout the world. As we enter 2013, we believe that we have a significant funnel of worldwide opportunities and that growth in broadband traffic, applications and devices will drive the need for our products.”

Recently, the Company achieved the following significant goals:

• During the quarter, received large orders from 14 service providers, 3 of which represented new customers;

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• 9 of the large orders came from mobile service providers, 2 of which were new customers;

• announced the completion of a deployment project at several affiliates of Millicom International Cellular S.A (Tigo), a global telecommunication group with operations in Latin America and Africa; and

• was named by Strategy Analytics as market leader amongst DPI pure-play vendors.

As of December 31, 2012, cash, cash equivalents, short term deposits and marketable securities totaled $143.1 million, with no debt.

Conference Call & Webcast

The Allot management team will host a conference call to discuss its fourth quarter and year end 2012 earnings results today at 8:30 AM ET, 3:30 PM Israel time.

To access the conference call, please dial one of the following numbers: US: +1 212 444 0412, UK: +44 (0)20 7136 2056, Israel: +972 3763 0147, participant code 1001413.

A replay of the conference call will be available from 12:01 am ET on February 6, 2013 through March 7, 2013 at 17:30 pm ET. To access the replay, please dial: US: +1 347 366 9565, UK: +44 (0)20 3427 0598, access code: 1001413.

A live webcast of the conference call can be accessed on the Allot Communications website at www.allot.com. The webcast will also be archived on the website following the conference call.

About Allot Communications

Allot Communications Ltd. (NASDAQ: ALLT) is a leading provider of intelligent data traffic optimization and monetization solutions for fixed and mobile broadband operators and large enterprises. Allot's scalable, carrier-grade solutions provide the visibility, topology awareness, security, application control and subscriber management that are vital to managing fixed and mobile data, enhancing user experience, containing operating costs, and enabling service providers to generate revenues from their broadband networks. Allot's rich portfolio of solutions leverages dynamic actionable recognition technology (DART) to transform broadband pipes into smart networks that can rapidly and efficiently deploy value added Internet services. For more information, please visit http://www.allot.com .

Safe Harbor Statement

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the Company's plans, objectives and expectations for future operations. These forward-looking

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statements are based upon management's current estimates and projections of future results or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These factors include, but are not limited to: our ability to increase the breadth and functionality of the Service Gateway platform through additional partnerships, changes in general economic and business conditions; the Company’s inability to develop and introduce new technologies, products and applications; loss of market; 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. 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:

Jay Kalish Executive Director Investor Relations International access code +972-54-221-1365 jkalish@allot.com

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TABLE - 1 ALLOT COMMUNICATIONS LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

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

RevenuesCost of revenues	Three Months Ended2012201126,362$ 22,028$ 7,9186,29015,886-2,55815,7386,6483,6929,7077,2682,5601,68918,91512,649(16,357)3,089327238(16,030)3,327(969)(170)(15,061)3,497(0.46)$ 0.13$ (0.46)$ 0.12$ 32,471,65527,709,27132,471,65529,556,655December 31,(Unaudited)	December 31,Year Ended	December 31,Year Ended
		2012	2011
		(Audited)
	26,362$ 7,91815,8862,5586,6489,7072,56018,915(16,357)327(16,030)(969)(15,061)(0.46)$ (0.46)$ 32,471,65532,471,655	104,752$ 31,03715,88657,82922,06034,12710,66466,851(9,022)1,358(7,664)(926)(6,738)(0.21)$ (0.21)$ 31,959,92131,959,921	77,753$ 22,175-
Expense related to settlement of OCS grants
Gross profitOperating expenses:Research and development costs, netSales and marketingGeneral and administrativeTotal operating expensesOperating profit (loss)Financial and other income, netProfit (loss) before income tax benefitTax benefitNet profit (loss)Basic net profit (loss) per shareDiluted net profit (loss) per shareWeighted average number of sharesused in computing basic netearnings per shareWeighted average number of sharesused in computing diluted netearnings per share			55,578
			13,22226,5437,474
			47,2398,339415
			8,754(55)
			8,809
			0.35$
			0.33$
			25,047,771
			27,071,872

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TABLE - 2

ALLOT COMMUNICATIONS LTD. AND ITS SUBSIDIARIES RECONCILATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

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

GAAP net profit (loss) as reportedFair value adjustment for acquired deferred revenues write down ( Revenues)Expense related to settlement of OCS grants (Cost of revenues)Expenses recorded for stock-based compensationCost of revenuesResearch and development costs, netSales and marketingGeneral and administrativeExpenses related to M&A activities and compliance with regulatory matters (*)General and administrative (G&A)Research and development costs, netSales and marketingAdjustment of contingent earnout (G&A)Intangible assets amortization :Cost of revenuesS&MTax benefit (in respect of net deferred tax asset recorded)Total adjustmentsNon- GAAP basic net profit per shareNon-GAAP net profitNon-GAAP adjustments:	Three MonDecemb	ths Endeder 31,	Year EndedDecember 31,	Year EndedDecember 31,
	20122011(15,061)$ 3,497$ 2,109-15,8866835429155709317553179(73)-92-62-(261)-9693026-(877)-19,692 7164,631$ 4,213$ 0.14$ 0.15$ 0.14$ 0.14$ 32,471,65527,709,27133,840,00429,668,381(Unaudited)		20122011(Audited)	2011
	(15,061)$ 2,10915,88668429709553(73)9262(261)96926(877)19,692 4,631$ 0.14$ 0.14$ 32,471,65533,840,004		(6,738)$	8,809$
			2,36715,8862221,1852,0601,3491,992435210(261)1,90343(877)26,514	-1034421,0017101,336---121--
				3,713
			19,776$	12,522$
			0.62$	0.50$
			0.59$	0.46$
Non- GAAP diluted net profit per share
			31,959,921	25,047,771
Weighted average number of sharesused in computing basic netearnings per share
			33,641,115	27,183,472
Weighted average number of sharesused in computing diluted netearnings per share

TABLE - 3

ALLOT COMMUNICATIONS LTD.

AND ITS SUBSIDIARIES

RECONCILATION OF GAAP TO NON-GAAP CONSOLIDATED REVENUES

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

GAAP RevenuesFair value adjustment for acquired deferred revenues write downNon-GAAP Revenues	Three Months Ended2012201126,362$ 22,028$ 2,109$ -28,471$ 22,028$ December 31,(Unaudited)	Year Ended	Year Ended
		December 31,
		2012(Audited)	2011
	26,362$ 2,109$ 28,471$	104,752$ 2,367$ 107,119$	77,753$ -
			77,753$

TABLE - 4

ALLOT COMMUNICATIONS LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

	December 31,	December 31,
	2012	2011
	(Audited)	(Audited)
ASSETSCURRENT ASSETS:Cash and cash equivalentsShort term depositsMarketable securities and restricted cashTrade receivables, netOther receivables and prepaid expensesInventoriesTotal current assetsLONG-TERM ASSETS:Severance pay fundDeferred TaxesOther assetsTotal long-term assetsPROPERTY AND EQUIPMENT, NETGOODWILL AND INTANGIBLE ASSETS, NETTotal assetsLIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Trade payablesDeferred revenuesOther payables and accrued expensesLiability related to settlement of OCS grantsTotal current liabilitiesLONG-TERM LIABILITIES:Deferred revenuesAccrued severance payTotal long-term liabilitiesSHAREHOLDERS' EQUITYTotal liabilities and shareholders' equity	50,026$ 78,04214,98820,2366,8159,963180,0702131,5252391,9776,60933,136221,792$ 4,809$ 13,82913,94715,88648,4713,9452544,199169,122221,792$	116,682$ 24,00018,71811,9265,95010,501
		187,777
		178210146
		534
		5,352
		3,395
		197,058$
		2,684$ 16,6949,462-
		28,840
		5,430219
		5,649
		162,569
		197,058$

TABLE - 5 ALLOT COMMUNICATIONS LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

	Three Mo
	Decem
	2012
Cash flows from operating activities:
Net income (Loss)Adjustments to reconcile net income to net cash provided by operating activities:DepreciationStock-based compensation related to options granted to employeesAmortization of intangible assetsCapital lossDecrease (Increase) in accrued severance pay, netDecrease (Increase) in other assetsDecease in accrued interest and amortization of premium on marketable securitiesIncrease (Decrease) in trade receivables
Decrease (Increase) in other receivables and prepaid expenses
Decrease (Increase) in inventoriesIncrease in long-term deferred taxes, netDecrease in trade payablesIncrease (Decrease) in employees and payroll accrualsIncrease (Decrease) in deferred revenues
Increase (Decrease) in other payables and accrued expensesIncrease in Liability related to settlement of OCS grants
Net cash provided by (used in) operating activitiesCash flows from investing activities:
Increase in restricted depositRedemption of short-term depositsInvestment in short-term depositPurchase of property and equipmentProceeds from sale of property and equipmentInvestment in marketable securitiesProceeds from redemption or sale of marketable securitiesAcquisitionsLoan to purchased Subsidiary
Net cash provided by (used in) investing activitiesCash flows from financing activities:
Issuance of share capital related to secondary offeringExercise of employee stock optionsRedemption of bank loanNet cash provided by financing activities
Increase in cash and cash equivalentsCash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year