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Allot
Quarterly Report • Aug 16, 2022
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Quarterly Report
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Allot Announces Second Quarter 2022 Financial Results
Hod Hasharon, Israel – August 16, 2022 - 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 second quarter 2022 financial results.
Second Quarter 2022 Financial Highlights
- Second quarter revenues were \$32.8 million compared with \$35.3 million in the second quarter of last year;
- Gross margin on a non-GAAP basis was 70%;
- GAAP operating loss was \$6.5 million and non-GAAP operating loss was \$4.2 million;
- GAAP net loss was \$6.2 million and non-GAAP net loss was \$4.2 million.
Financial Outlook
For 2022, management adjusts its previously announced guidance as follows:
- Revenues to be between \$125 130 million; (the third quarter of 2022 is expected to be approximately \$25 million);
- Additional recurring security deals to be executed, providing incremental MAR** of more than \$180 million for the full year 2022;
- December 2022 total ARR* including SECaas ARR* and Support & Maintenance ARR* to be between \$50-52 million, representing approximately 15% year-over-year growth versus 2021 at the midpoint;
- December 2022 SECaas ARR* to be approximately \$9 million;
- Recurring security revenue to be approximately \$7 million.
Management Comment
Erez Antebi, President & CEO of Allot, commented, "Several sizeable CAPEX deals that we expected to conclude and be able to at least partially deliver in the second and third quarters, are now not expected to close before the fourth quarter. As a result, we are modifying our revenue forecast for the remainder of this year."
Continued Mr. Antebi, "Looking at the DPI market in general, we continue to see many opportunities and an overall solid DPI market. In the SECaas business, we closed several new deals this quarter and 2 additional operators launched the security service."
"We are fully aware of the challenges we face. We have set a goal to be profitable in 2024 by growing our SECaas revenues and closely controlling our expenses. We have full faith in our company, our team, our products and in our ability to meet these goals, " concluded Antebi.
Q2 2022 Financial Results Summary
Total revenues for the second quarter of 2022 were \$32.8 million, a decrease of 7% compared to \$35.3 million in the second quarter of 2021.
Gross profit on a GAAP basis for the second quarter of 2022 was \$22.5 million (gross margin of 68.7%), an 8% decline compared with \$24.5 million (gross margin of 69.3%) in the second quarter of 2021.
Gross profit on a non-GAAP basis for the second quarter of 2022 was \$23.0 million (gross margin of 70.2%), a 7% decline compared with \$24.8 million (gross margin of 70.2%) in the second quarter of 2021.
Net loss on a GAAP basis for the second quarter of 2022 was \$6.2 million, or \$0.17 per basic share, compared with a net loss of \$4.0 million, or \$0.11 per basic share, in the second quarter of 2021.
Net loss on a non-GAAP for the second quarter of 2022 was \$4.2 million, or \$0.11 per basic share compared with a non-GAAP net loss of \$1.5 million, or \$0.04 per basic share, in the second quarter of 2021.
Cash and investments as of June 30,2022 totaled \$108.0 million, compared to \$85.7 million as of December 31, 2021.
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Conference Call & Webcast:
The Allot management team will host a conference call to discuss its second quarter 2022 earnings results today, August 16, 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: +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 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 networkbased 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 current 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 forwardlooking 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 [email protected]
Public Relations Contact: Seth Greenberg, Allot Ltd. +972 54 922 2294 [email protected]
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 June 30, |
Six Months Ended June 30, |
|||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 (Unaudited) |
|||
| (Unaudited) | ||||||
| Revenues | \$ 32,772 |
\$ 35,288 |
\$ 64,668 |
\$ 66,471 |
||
| Cost of revenues | 10,242 | 10,822 | 20,034 | 20,413 | ||
| Gross profit | 22,530 | 24,466 | 44,634 | 46,058 | ||
| Operating expenses: | ||||||
| Research and development costs, net | 12,480 | 11,373 | 24,510 | 21,940 | ||
| Sales and marketing | 12,220 | 12,818 | 23,909 | 24,411 | ||
| General and administrative | 4,303 | 4,080 | 8,340 | 7,280 | ||
| Total operating expenses | 29,003 | 28,271 | 56,759 | 53,631 | ||
| Operating loss | (6,473) | (3,805) | (12,125) | (7,573) | ||
| Financial and other income, net | 620 | 194 | 867 | 309 | ||
| Loss before income tax expenses | (5,853) | (3,611) | (11,258) | (7,264) | ||
| Tax expenses | 380 | 368 | 1,102 | 673 | ||
| Net Loss | (6,233) | (3,979) | (12,360) | (7,937) | ||
| Basic net loss per share | \$ (0.17) |
\$ (0.11) ₪ - |
\$ (0.34) |
\$ (0.22) |
||
| Diluted net loss per share | \$ (0.17) |
\$ (0.11) |
\$ (0.34) |
\$ (0.22) |
||
| Weighted average number of shares used in computing basic net loss per share |
36,827,197 | 35,941,378 | 36,684,017 | 35,739,556 | ||
| Weighted average number of shares used in computing diluted net loss per share |
36,827,197 | 35,941,378 | 36,684,017 | 35,739,556 |
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, | ||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||
| (Unaudited) | (Unaudited) | ||||||||
| GAAP cost of revenues | \$ | 10,242 | \$ | 10,822 | \$ 20,034 | \$ 20,413 | |||
| Share-based compensation (1) | (338) | (164) | (519) | (283) | |||||
| Amortization of intangible assets (2) | (152) | (152) | (304) | (304) | |||||
| Non-GAAP cost of revenues | \$ | 9,752 | \$ | 10,506 | \$ 19,211 | \$ 19,826 | |||
| GAAP gross profit | \$ | 22,530 | \$ | 24,466 | \$ 44,634 | \$ 46,058 | |||
| Gross profit adjustments | 490 | 316 | 823 | 587 | |||||
| Non-GAAP gross profit | \$ | 23,020 | \$ | 24,782 | \$ 45,457 | \$ 46,645 | |||
| GAAP operating expenses | \$ | 29,003 | \$ | 28,271 | \$ 56,759 | \$ 53,631 | |||
| Share-based compensation (1) | (1,831) | (2,097) | (4,187) | (3,422) | |||||
| Non-GAAP operating expenses | \$ | 27,172 | \$ | 26,174 | \$ 52,572 | \$ 50,209 | |||
| GAAP financial and other income | \$ | 620 | \$ | 194 | \$ | 867 | \$ | 309 | |
| Exchange rate differences* | (316) | 14 | (389) | 90 | |||||
| Non-GAAP Financial and other income | \$ | 304 | \$ | 208 | \$ | 478 | \$ | 399 | |
| GAAP taxes on income | \$ | 380 | \$ | 368 | \$ | 1,102 | \$ | 673 | |
| Tax expenses in respect of net deferred tax asset recorded | - | (102) | - | (169) | |||||
| Changes in tax related items | (50) | - | (50) | - | |||||
| Non-GAAP taxes on income | \$ | 330 | \$ | 266 | \$ | 1,052 | \$ | 504 | |
| GAAP Net Loss | \$ | (6,233) | \$ | (3,979) | \$ (12,360) | \$ | (7,937) | ||
| Share-based compensation (1) | 2,169 | 2,261 | 4,706 | 3,705 | |||||
| Amortization of intangible assets (2) | 152 | 152 | 304 | 304 | |||||
| Exchange rate differences* | (316) | 14 | (389) | 90 | |||||
| Tax expenses in respect of net deferred tax asset recorded | - | 102 | - | 169 | |||||
| Changes in tax related items | 50 | - | 50 | - | |||||
| Non-GAAP Net income (loss) | \$ | (4,178) | \$ | (1,450) | \$ | (7,689) | \$ | (3,669) | |
| GAAP Loss per share (diluted) | \$ | (0.17) | \$ | (0.11) | \$ | (0.34) | \$ | (0.22) | |
| Share-based compensation | 0.06 | 0.06 | 0.13 | 0.10 | |||||
| Amortization of intangible assets | 0.0 | 0.01 | 0.00 | 0.02 | |||||
| Exchange rate differences* | (0.0) | 0.00 | (0.00) | - | |||||
| Tax expense in respect of net deferred tax asset recorded | - | 0.00 | - | - | |||||
| Non-GAAP Net income (loss) per share (diluted) | \$ | (0.11) | \$ | (0.04) | \$ | (0.21) | \$ | (0.10) | |
| Weighted average number of shares used in | |||||||||
| computing GAAP diluted net loss per share | 36,827,197 | 35,941,378 | 36,684,017 | 35,739,556 | |||||
| Weighted average number of shares used in | |||||||||
| computing non-GAAP diluted net loss per share | 36,827,197 | 35,941,378 | 36,684,017 | 35,739,556 |
* Financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies.
ALLOT LTD. TABLE - 2 cont. 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 June 30, |
Six Months Ended June 30, |
|||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| (Unaudited) | (Unaudited) | |||||||
| (1) Share-based compensation: | ||||||||
| Cost of revenues | \$ | 338 | \$ | 164 | \$ | 519 | \$ | 283 |
| Research and development costs, net | 844 | 699 | 1,689 | 1,094 | ||||
| Sales and marketing | 619 | 930 | 1,532 | 1,512 | ||||
| General and administrative | 368 | 468 | 966 | 816 | ||||
| \$ | 2,169 | \$ | 2,261 | \$ | 4,706 | \$ | 3,705 | |
| (2) Amortization of intangible assets | ||||||||
| Cost of revenues | \$ | 152 | \$ | 152 | \$ | 304 | \$ | 304 |
| \$ | 152 | \$ | 152 | \$ | 304 | \$ | 304 |
TABLE - 3 ALLOT LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
| June 30, 2022 |
December 31, 2021 |
||||
|---|---|---|---|---|---|
| (Unaudited) | (Audited) | ||||
| ASSETS | |||||
| CURRENT ASSETS: |
|||||
| Cash and cash equivalents |
\$ 15,461 |
\$ | 11,717 | ||
| Short-term bank deposits |
85,900 | 60,720 | |||
| Restricted deposits |
1,100 | 1,480 | |||
| Available-for-sale marketable securities |
5,319 | 11,531 | |||
| Trade receivables, net |
36,288 | 30,829 | |||
| Other receivables and prepaid expenses |
8,629 | 8,490 | |||
| Inventories | 12,256 | 11,092 | |||
| Total current assets | 164,953 | 135,859 | |||
| LONG-TERM ASSETS: |
|||||
| Long-term bank deposits |
215 | 215 | |||
| Severance pay fund |
369 | 407 | |||
| Operating lease right-of-use assets |
7,134 | 8,513 | |||
| Trade receivables, net |
5,991 | 6,643 | |||
| Other assets | 1,203 | 1,639 | |||
| Total long-term assets |
14,912 | 17,417 | |||
| PROPERTY AND EQUIPMENT, NET |
14,809 | 15,000 | |||
| GOODWILL AND INTANGIBLE ASSETS, NET |
34,668 | 35,138 | |||
| Total assets | \$ 229,342 |
\$ | 203,414 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||
| CURRENT LIABILITIES: |
|||||
| Trade payables |
\$ 3,003 |
\$ | 3,940 | ||
| Deferred revenues |
26,765 | 22,138 | |||
| Short-term operating lease liabilities |
2,722 | 2,785 | |||
| Other payables and accrued expenses |
26,073 | 26,250 | |||
| Total current liabilities | 58,563 | 55,113 | |||
| LONG-TERM LIABILITIES: |
|||||
| Deferred revenues |
12,444 | 15,942 | |||
| Long-term operating lease liabilities |
3,588 | 5,467 | |||
| Accrued severance pay |
866 | 884 | |||
| Convertible debt |
39,475 | - | |||
| Total long-term liabilities |
56,373 | 22,293 | |||
| SHAREHOLDERS' EQUITY | 114,406 | 126,008 | |||
| Total liabilities and shareholders' equity |
\$ 229,342 |
\$ | 203,414 |
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, | |||||||
| 2022 2021 (Unaudited) |
2022 | 2021 | ||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net Loss | \$ | (6,233) | \$ (3,979) | \$ (12,360) | \$ | (7,937) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation | 1,332 | 1,141 | 2,746 | 2,229 | ||||
| Stock-based compensation | 2,169 | 2,261 | 4,706 | 3,705 | ||||
| Amortization of intangible assets | 235 | 234 | 470 | 471 | ||||
| Increase (Decrease) in accrued severance pay, net | 26 | 12 | 20 | (60) | ||||
| Decrease (Increase) in other assets | 19 | (458) | 436 | 1,041 | ||||
| Decrease in accrued interest and amortization of premium on marketable securities |
16 | 32 | 48 | 107 | ||||
| Changes in operating leases, net | (191) | (479) | (563) | (711) | ||||
| Increase in trade receivables | (4,082) | (3,113) | (4,807) | (10,256) | ||||
| Decrease (Increase) in other receivables and prepaid expenses | 141 | 3,094 | (893) | 3,522 | ||||
| Decrease (Increase) in inventories | 591 | 4,246 | (1,164) | 3,289 | ||||
| Decrease in long-term deferred taxes, net |
- | 103 | - | 175 | ||||
| Increase (Decrease) in trade payables | (1,433) | 334 | (937) | (536) | ||||
| Increase (Decrease) in employees and payroll accruals | 523 | 1,286 | (1,963) | (623) | ||||
| Increase in deferred revenues | 287 | 1,640 | 1,129 | 16,612 | ||||
| Decrease in other payables, accrued expenses and other long term liabilities |
(1,252) | (2,761) | (1,523) | (3,364) | ||||
| Amortization of issuance costs of Convertible debt | 49 | - | 71 | - | ||||
| Net cash provided by (used in) operating activities | (7,803) | 3,593 | (14,584) | 7,664 | ||||
| Cash flows from investing activities: |
||||||||
| Decrease (Increase) in restricted deposit | 260 | (2,440) | 380 | (2,874) | ||||
| Redemption of (Investment in) short-term deposits |
520 | 100 | (25,180) | (24,200) | ||||
| Purchase of property and equipment | (1,281) | (1,934) | (2,556) | (3,629) | ||||
| Proceeds from redemption or sale of available-for sale marketable securities |
2,872 | 3,231 | 6,030 | 7,579 | ||||
| Net cash provided by (used in) investing activities | 2,371 | (1,043) | (21,326) | (23,124) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of stock options |
15 | 908 | 250 | 2,467 | ||||
| Issuance of convertible debt | - | - | 39,404 | - | ||||
| Net cash provided by financing activities | 15 | 908 | 39,654 | 2,467 | ||||
| Increase (Decrease) in cash and cash equivalents | (5,417) | 3,458 | 3,744 | (12,993) | ||||
| Cash and cash equivalents at the beginning of the period | 20,878 | 7,148 | 11,717 | 23,599 | ||||
| Cash and cash equivalents at the end of the period | \$ | 15,461 | \$ 10,606 | \$ | 15,461 | \$ | 10,606 |
Other financial metrics (Unaudited) Q2-2022 YTD 2022 FY 2021 Revenues geographic breakdown Americas 9.4 29% 13.1 20% 19.4 14% EMEA 16.0 49% 34.7 54% 82.0 56% Asia Pacific 7.4 22% 16.9 26% 44.2 30% 32.8 100% 64.7 100% 145.6 100% Products 17.0 52% 34.2 53% 88.1 60% Professional Services 3.1 10% 5.7 9% 15.2 11% SECaaS (Security as a Service) 1.7 5% 3.2 5% 4.1 3% Support & Maintenance 11.0 33% 21.6 33% 38.2 26% 32.8 100% 64.7 100% 145.6 100% Revenues per customer type CSP 26.1 79% 51.9 80% 116.9 80% Enterprise 6.7 21% 12.8 20% 28.7 20% 32.8 100% 64.7 100% 145.6 100% % of top-10 end-customers out of revenues 59% 54% 51% Total number of full time employees 749 749 741 (end of period) 36.8 36.7 36.1 38.9 39.2 38.4 Non-GAAP weighted average number of fully diluted shares (in millions) Revenue breakdown by type U.S. dollars in millions, except number of full time employees, % of top-10 endcustomers out of revenues and number ofshares Non-GAAP Weighted average number of basic shares (in millions)
SECaaS (Security as a Service) revenues- U.S. dollars in millions (Unaudited)
Q2-2022: 1.7 Q1-2022: 1.5 Q4-2021: 1.3 Q3-2021: 1.2
SECaaS ARR* (annualized recurring revenues)- U.S. dollars in millions (Unaudited)
Jun. 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. 2022 | |||||
| Dec. 2020 Dec. 2021 | 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 current month of December and multiplied by 12.