Allot Communications Announces Fourth Quarter and Full Year 2017 Financial Results

HOD HASHARON, Israel, Feb. 6, 2018 /PRNewswire/ -- Allot Communications Ltd. (NASDAQ: ALLT) (TASE: ALLT), a global provider of leading innovative network intelligence and security solutions for service providers worldwide, today announced its fourth quarter and year end 2017 financial results.

Q4 2017 - Financial Highlights

    --  Revenues were $23.2 million;
    --  GAAP gross margin was 67%; Non-GAAP gross margin was 68%;
    --  GAAP operating loss of $4.3 million; Non-GAAP operating loss of $1.3
        million;
    --  Book-to-bill above one for the fourth consecutive quarter

2017 - Financial Highlights

    --  Revenues were $82.0 million;
    --  GAAP gross margin was 65%; Non-GAAP gross margin was 68%;
    --  GAAP operating loss of $17.4 million; Non-GAAP operating loss of $8.6
        million;
    --  Security revenues in 2017 grew 42% to $24.2 million compared to 2016;
    --  Backlog grew by $13.3 million compared to year-end 2016

Financial outlook:

    --  Management expects 2018 revenues to grow to between $91-$95 million with
        the second half of the year stronger than the first half, reflecting
        typical seasonality;
    --  2018 Book to Bill expected at above 1;
    --  Security revenues expected to continue to grow year-over-year,
        generating most of the expected growth in 2018

Management Comment

Erez Antebi, President & CEO of Allot Communications, commented:

"In 2017 we made significant progress implementing our strategy to transform Allot into a security company and improve on our execution. I am pleased with the progress we have made this year, as evidenced by the ongoing growth throughout the year as well as the strong increase in security revenues and backlog. Several weeks ago, we acquired Netonomy, a technology company developing Home Router security software, and we are pleased to be adding this important element to the Allot Secure platform. I look forward to continuing the strong growth of the Company as a whole, and more specifically, the security offering in 2018 and beyond."

Q4 2017 Financial Results Summary

Total revenues for the fourth quarter of 2017 were $23.2 million, up 11% compared to $20.9 million in the third quarter of 2017.

Net loss on a GAAP basis for the fourth quarter of 2017 was $4.3 million, or $0.13 per basic share, compared with a net loss of $4.6 million, or $0.14 per basic share, in the prior quarter. During the fourth quarter of 2017, the Company incurred one-time non-cash charges of $1.5 million in connection to changes in tax related items.

Non-GAAP net loss for the fourth quarter of 2017 was $1.5 million, or $0.04 per basic share, compared with a non-GAAP net loss of $1.3 million, or $0.04 per basic share, in the prior quarter.

Cash and investments as of December 31, 2017 totaled $110.0 million. The Company recorded positive operating cash flow of $1.1 million during the fourth quarter of 2017.

2017 Financial Results Summary

Total revenues for the full year of 2017 were $82.0 million, a decrease of 9% compared to $90.4 million in the prior year.

Net loss on a GAAP basis for the full year of 2017 was $18.1 million, or $0.54 per basic share, compared with a net loss of $8.0 million, or $0.24 per basic share, in the prior year. During 2017, the Company incurred a cost of $2.4 million related to its restructuring activities and one-time non-cash charges of $1.5 million in connection to changes in tax related items.

Non-GAAP net loss for the full year of 2017 was $8.7 million, or $0.26 per basic share, compared with a non-GAAP net loss of $0.7 million, or $0.02 per basic share, in the prior year.

The Company recorded a negative operating cash flow of $0.2 million during 2017.

Conference Call & Webcast:

The Allot management team will host a conference call to discuss fourth quarter 2017 earnings results today, February 6, 2018 at 8:30 am ET, 3:30 pm Israel time. To access the conference call, please dial one of the following numbers:

US: +1-888-668-9141, UK: +44(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 Communications website at: http://investors.allot.com/index.cfm

About Allot Communications

Allot Communications Ltd. (NASDAQ, TASE: ALLT) is a provider of leading innovative network intelligence and security solutions for service providers 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 1000 enterprises. Our industry leading network-based security as a service solution has achieved over 50% penetration with some service providers and is already used by over 18 million subscribers in Europe. Allot. See. Control. Secure. For more information, 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, changes in taxes related items 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.


                                                         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                            Year Ended

                                               December 31,                              December 31,
                                               ------------                              ------------

                                                   2017                         2016                         2017          2016
                                                   ----                         ----                         ----          ----

                                           (Unaudited)                 (Unaudited)                 (Unaudited)    (Audited)
                                            ----------                  ----------                  ----------    --------


    Revenues                                    $23,198                      $23,487                      $81,992       $90,369

    Cost of revenues                              7,710                        7,348                       28,530        27,895

    Gross profit                                 15,488                       16,139                       53,462        62,474
                                                 ------                       ------                       ------        ------


    Operating expenses:

    Research and
     development costs,
     net                                          5,753                        5,461                       21,852        24,221

    Sales and marketing                          10,810                        7,476                       38,316        35,290

    General and
     administrative                               3,187                        1,910                       10,696         9,812
                                                  -----                        -----                       ------         -----

    Total operating
     expenses                                    19,750                       14,847                       70,864        69,323

    Operating income
     (loss)                                     (4,262)                       1,292                     (17,402)      (6,849)

    Financial and other
     income, net                                    338                          423                          894         1,059
                                                    ---                          ---                          ---         -----

    Profit (loss)
     before income tax
     expenses                                   (3,924)                       1,715                     (16,508)      (5,790)


    Tax expenses                                    416                          773                        1,564         2,204
                                                    ---                          ---                        -----         -----

    Net income (loss)                           (4,340)                         942                     (18,072)      (7,994)
                                                 ======                          ===                      =======        ======


    Basic net income
     (loss) per share                           $(0.13)                       $0.03                      $(0.54)      $(0.24)
                                                 ======                        =====                       ======        ======


    Diluted net income
     (loss) per share                           $(0.13)                       $0.03                      $(0.54)      $(0.24)
                                                 ======                        =====                       ======        ======



    Weighted average
     number of shares
     used in                                 33,412,701                   33,090,708                   33,253,158    33,202,309

    computing basic net loss per
     share
                                                                                                                         ===



    Weighted average
     number of shares
     used in                                 33,412,701                   33,415,193                   33,253,158    33,202,309

    computing diluted net loss per
     share
                                                                                                                         ===


                                                                                       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                              Year Ended

                                                                               December 31,                                December 31,
                                                                               ------------                                ------------

                                                                                                2017                                         2016       2017       2016
                                                                                                ----                                         ----       ----       ----

                                                                                (Unaudited)                                 (Unaudited)
                                                                                ----------                                  ----------


     GAAP Revenues                                                                           $23,198                                      $23,487    $81,992    $90,369

     Fair value adjustment for acquired                                                            -                                          31         37        165
      deferred revenues write down

     Non-GAAP Revenues                                                                       $23,198                                      $23,518    $82,029    $90,534
                                                                                             -------                                      -------    -------    -------


    GAAP cost of revenues                                                                     $7,710                                       $7,348    $28,530    $27,895

     Share-based compensation (1)                                                               (83)                                       (109)     (362)     (345)

     Amortization of intangible assets (2)                                                     (232)                                       (367)     (938)   (1,173)

     Restructuring expenses (4)                                                                    -                                           -     (887)     (127)

    Changes in taxes related items (5)                                                          (56)                                           -      (56)         -

    Non-GAAP cost of revenues                                                                 $7,339                                       $6,872    $26,287    $26,250
                                                                                              ------                                       ------    -------    -------


     GAAP gross profit                                                                       $15,488                                      $16,139    $53,462    $62,474

     Gross profit adjustments                                                                   $372                                          507      2,280      1,810

     Non-GAAP gross profit                                                                   $15,860                                      $16,646    $55,742    $64,284
                                                                                             -------                                      -------    -------    -------


     GAAP operating expenses                                                                 $19,750                                      $14,847    $70,864    $69,323

     Share-based compensation (1)                                                              (706)                                       (845)   (2,813)   (4,667)

     Amortization of intangible assets (2)                                                     (135)                                       (132)     (539)     (535)

     Expenses related to M&A activities (3)                                                    (178)                                         962      (267)       962

     Restructuring expenses (4)                                                                (200)                                           -   (1,464)   (1,163)

    Changes in taxes related items (5)                                                       (1,416)                                           -   (1,416)         -

     Non-GAAP operating expenses                                                             $17,115                                      $14,832    $64,365    $63,920
                                                                                             -------                                      -------    -------    -------


     GAAP financial and other income                                                            $338                                         $423       $894     $1,059

     Expenses related to M&A activities (3)                                                       84                                        (348)       625      (179)

     Non-GAAP Financial and other income                                                        $422                                          $75     $1,519       $880
                                                                                                ----                                          ---     ------       ----


     GAAP taxes on income                                                                       $416                                         $773     $1,564     $2,204

     Tax expenses (in respect of net                                                             214                                         (36)        17      (230)
      deferred tax asset recorded)

     Non-GAAP taxes on income                                                                   $630                                         $737     $1,581     $1,974
                                                                                                ====                                         ====     ======     ======


     GAAP Net Income (Loss)                                                                 $(4,340)                                        $942  $(18,072)  $(7,994)

     Share-based compensation (1)                                                                789                                          954      3,175      5,012

     Amortization of intangible assets (2)                                                       367                                          499      1,477      1,708

     Expenses (Income) related to M&A activities (3)                                             262                                      (1,310)       892    (1,141)

     Restructuring expenses (4)                                                                  200                                            -     2,351      1,290

    Changes in taxes related items (5)                                                         1,472                                            -     1,472          -

     Fair value adjustment for acquired deferred                                                   -                                          31         37        165
       revenues write down

     Tax income (expenses) in respect of net                                                   (214)                                          36       (17)       230
      deferred tax asset recorded

     Non-GAAP Net income (Loss)                                                             $(1,464)                                      $1,152   $(8,685)    $(730)
                                                                                             =======                                       ======    =======      =====


     GAAP Loss per share (diluted)                                                           $(0.13)                                       $0.03    $(0.54)   $(0.24)

     Share-based compensation                                                                   0.02                                         0.03       0.10       0.15

     Amortization of intangible assets                                                          0.01                                         0.01       0.04       0.05

     Expenses related to M&A activities                                                         0.01                                       (0.04)      0.03     (0.03)

     Restructuring expenses                                                                     0.01                                            -      0.07       0.04

     Changes in taxes and headcount related items                                               0.05                                         0.00       0.04       0.00

     Tax expenses (in respect of net deferred                                                 (0.01)                                        0.00       0.00       0.01
      tax asset recorded)

     Non-GAAP Net loss per share (diluted)                                                   $(0.04)                                       $0.03    $(0.26)   $(0.02)
                                                                                              ======                                        =====     ======     ======



    Weighted average number of shares used in

    computing GAAP diluted net earnings per share                                         33,412,701                                   33,415,193 33,253,158 33,202,309
                                                                                          ==========                                   ========== ========== ==========



    Weighted average number of shares used in

    computing non-GAAP diluted net earnings per share                                     33,412,701                                   33,697,889 33,253,158 33,202,309
                                                                                          ==========                                   ========== ========== ==========



                                                                                                                                                  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                                Year Ended

                                                                                                                                       December 31,                                  December 31,
                                                                                                                                       ------------                                  ------------

                                                                                                                                                      2017                                            2016      2017        2016
                                                                                                                                                      ----                                            ----      ----        ----

                                                                                                                                       (Unaudited)                                    (Unaudited)
                                                                                                                                        ----------                                    ----------


    (1) Share-based compensation (*):

               Cost of revenues                                                                                                                          $83                                            $109      $362        $345

               Research and development costs, net                                                                                                       155                                             244       608       1,223

               Sales and marketing                                                                                                                       307                                             322     1,015       1,745

               General and administrative                                                                                                                244                                             279     1,190       1,699

                                                                                                                                                      $789                                            $954    $3,175      $5,012
                                                                                                                                                      ----                                            ----    ------      ------


    (2) Amortization of intangible assets

               Cost of revenues                                                                                                                         $232                                            $367      $938      $1,173

               Sales and marketing                                                                                                                       135                                             132       539         535

                                                                                                                                                      $367                                            $499    $1,477      $1,708
                                                                                                                                                      ----                                            ----    ------      ------


    (3) Expenses related to M&A activities

               General and administrative                                                                                                               $178                                          $(962)     $267      $(962)

               Research and development costs, net                                                                                                         -                                              -        -          -

               Sales and marketing                                                                                                                         -                                              -        -          -

               Financial expenses (income)                                                                                                                84                                           (348)      625       (179)

                                                                                                                                                      $262                                        $(1,310)     $892    $(1,141)
                                                                                                                                                      ----                                         -------      ----     -------


    (4) Restructuring expenses*

               Cost of revenues                                                                                                                     $      -                                       $      -     $887        $127

               Research and development costs, net                                                                                                         -                                              -      154         370

               Sales and marketing                                                                                                                         -                                              -      976         720

               General and administrative                                                                                                                200                                               -      334          73

                                                                                                                                                      $200                                        $      -   $2,351      $1,290
                                                                                                                                                      ----                                        --------   ------      ------


    (5) Changes in taxes related items

               Research and development costs, net                                                                                                      $201                                        $      -     $201   $       -

               Sales and marketing                                                                                                                     1,045                                               -    1,045           -

               Cost of revenues                                                                                                                           56                                               -       56           -

               General and administrative                                                                                                                170                                               -      170           -

                                                                                                                                                    $1,472                                        $      -   $1,472    $      -
                                                                                                                                                    ------                                        --------   ------    --------


                (*) 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)



                                                                 December 31,           December 31,

                                                                                   2017                  2016
                                                                                   ----                  ----

                                                                  (Unaudited)             (Audited)
                                                                  ----------              --------


                          ASSETS

    CURRENT ASSETS:

    Cash and cash equivalents                                                   $15,342               $23,326

    Short term deposits                                                          31,043                29,821

    Restricted deposit                                                              428                     -

    Marketable securities                                                        63,194                60,507

    Trade receivables, net                                                       22,737                24,158

    Other receivables and prepaid
     expenses                                                                     2,649                 3,879

    Inventories                                                                   7,897                 7,235

    Total current assets                                                        143,290               148,926
                                                                                -------               -------


    LONG-TERM ASSETS:

    Severance pay fund                                                              302                   252

    Deferred taxes                                                                  340                   267

    Other assets                                                                  1,096                 1,136
                                                                                  -----                 -----

    Total long-term assets                                                        1,738                 1,655
                                                                                  -----                 -----


    PROPERTY AND EQUIPMENT, NET                                                   5,002                 4,387
                                                                                  -----                 -----

    GOODWILL AND INTANGIBLE ASSETS, NET                                          34,495                35,972
                                                                                 ------                ------


    Total assets                                                               $184,525              $190,940
                                                                               ========              ========


               LIABILITIES AND SHAREHOLDERS'
                           EQUITY

    CURRENT LIABILITIES:

    Trade payables                                                               $5,857                $3,275

    Deferred revenues                                                            11,370                11,133

    Other payables and accrued expenses                                          14,277                10,538

    Liability related to settlement of OCS grants

    Total current liabilities                                                    31,504                24,946
                                                                                 ------                ------


    LONG-TERM LIABILITIES:

    Deferred revenues                                                             3,878                 3,597

    Accrued severance pay                                                           747                   592

    Other long term liabilities                                                   5,267                 4,502

    Total long-term liabilities                                                   9,892                 8,691
                                                                                  -----                 -----


    SHAREHOLDERS' EQUITY                                                        143,129               157,303
                                                                                -------               -------


    Total liabilities and shareholders'
     equity                                                                    $184,525              $190,940
                                                                               ========              ========


                                                                                                     TABLE  - 4

                                                                                             ALLOT COMMUNICATIONS LTD.

                                                                                                AND ITS SUBSIDIARIES

                                                                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                            (U.S. dollars in thousands)


                                                                                                                              Three Months Ended               Year Ended

                                                                                                                                 December 31,     December 31,
                                                                                                                                 ------------     ------------

                                                                                                                                     2017                 2016                   2017          2016
                                                                                                                                     ----                 ----                   ----          ----

                                                                                                                             (Unaudited)         (Unaudited)           (Unaudited)    (Audited)
                                                                                                                              ----------          ----------            ----------     --------


    Cash flows from operating activities:
    -------------------------------------


    Net Income (Loss)                                                                                                            $(4,340)                $942              $(18,072)     $(7,994)

    Adjustments to reconcile net income  to net cash provided by                                                                        -                                         -
    (used in) operating activities:

    Depreciation                                                                                                                      632                  569                  2,191         2,334

    Stock-based compensation related to options granted to employees                                                                  787                1,005                  3,366         5,141

    Amortization of intangible assets                                                                                                 366                  499                  1,477         1,709

    Capital loss                                                                                                                       13                    4                     27            24

    Decrease (Increase) in accrued severance pay, net                                                                                 (8)                 (4)                   105          (29)

    Decrease (Increase) in other assets                                                                                             (568)                 828                     40         1,576

    Decrease in accrued interest and  amortization of premium on marketable securities                                                319                  215                    913         1,238

    Decrease (Increase) in trade receivables                                                                                         (86)               2,795                  1,421         (284)

    Decrease in other receivables and prepaid expenses                                                                              1,841                  206                  1,350           699

    Decrease (Increase) in inventories                                                                                              1,214                1,410                  (662)        2,934

    Decrease (Increase) in long-term deferred taxes, net                                                                            (272)                  49                   (72)          234

    Increase (Decrease) in trade payables                                                                                           (611)                 302                  2,582       (3,832)

    Increase (Decrease) in employees and payroll accruals                                                                              34                (241)                 1,139         (811)

    Increase (Decrease) in deferred revenues                                                                                        (518)             (2,664)                   518       (4,248)

    Increase (Decrease) in other payables and accrued expenses                                                                      2,287              (1,719)                 3,448       (2,155)


    Net cash provided by (used in) operating activities                                                                             1,090                4,196                  (229)      (3,464)
                                                                                                                                    -----                -----                   ----        ------


    Cash flows from investing activities:
    -------------------------------------


    Decrease (Increase) in restricted deposit                                                                                       (428)                   -                 (428)          203

    Redemption of (Investment in) short-term deposits                                                                             (9,300)             (2,502)               (1,222)       12,879

    Purchase of property and equipment                                                                                              (776)               (398)               (2,833)      (1,582)

    Proceeds from sale of property and equipment                                                                                        -                  26                      -           26

    Investment in marketable securities                                                                                          (10,913)             (7,598)              (30,123)     (29,695)

    Proceeds from redemption or sale of marketable securities                                                                      11,075               10,403                 26,488        33,208


    Net cash provided by (used in) investing activities                                                                          (10,342)                (69)               (8,118)       15,039
                                                                                                                                  -------                  ---                 ------        ------


    Cash flows from financing activities:
    -------------------------------------


    Exercise of employee stock options                                                                                                266                   20                    363           113

    Purchase of treasury stocks                                                                                                         -               (506)                     -      (3,832)


    Net cash provided by (used in) financing activities                                                                               266                (486)                   363       (3,719)
                                                                                                                                      ---                 ----                    ---        ------



    Increase (Decrease) in cash and cash equivalents                                                                              (8,986)               3,641                (7,984)        7,856

    Cash and cash equivalents at the beginning of the period                                                                       24,328               19,685                 23,326        15,470


    Cash and cash equivalents at the end of the period                                                                            $15,342              $23,326                $15,342       $23,326
                                                                                                                                  =======              =======                =======       =======


    Investor Relations Contact: Public Relations Contact:

    GK Investor Relations       Sigalit Orr

    Ehud Helft/Gavriel Frohwein Director Corporate Communications

    +1 646 688 3559             International dialing +972-54-268-1500

    allot@gkir.com              sorr@allot.com

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SOURCE Allot Communications Ltd.