Allot Communications Announces Second Quarter 2007 Results

HOD HASHARON, Israel, Aug. 8 /PRNewswire-FirstCall/ -- Allot Communications Ltd. (NASDAQ:ALLT), a leader in IP service optimization solutions based on deep packet inspection (DPI) technology, today announced financial results for the second quarter ended June 30, 2007.

Revenues for the second quarter of 2007 totaled $8.6 million, representing a 4% increase over the $8.3 million in revenues reported for the first quarter of 2007 and a 6% increase from the $8.2 million of revenues reported in the second quarter of 2006. On a GAAP basis, the net loss for the second quarter of 2007 was $592 thousand, or $0.03 per share, as compared with a net loss of $434 thousand, or $0.02 per share, for the first quarter of 2007 and net income of $53 thousand, or $0.00 per diluted share, in the second quarter of 2006. For the first six months of 2007, revenues reached $16.9 million, representing a 7% increase over $15.7 million in revenues for the first half of 2006. On a GAAP basis, the net loss for the first six months of 2007 totaled $1.0 million, or $0.05 per share, as compared with net income of $58 thousand, or $0.00 per diluted share, for the first half of 2006.

On a non-GAAP basis, excluding the impact of share-based compensation expense in both periods, and the impact of expenses related to a law suit in the second quarter of 2007, the non-GAAP net loss for the second quarter of 2007 totaled $299 thousand, or $0.01 per share, as compared with a non-GAAP net loss of $112 thousand, or $0.00 per share, for the first quarter of 2007 and non-GAAP net income of $324 thousand, or $0.02 per diluted share, for the second quarter of 2006. For the first six months of 2007, the non-GAAP net loss, excluding the impact of the share-based compensation and the impact of the legal expenses, totaled $411 thousand, or $0.02 per share, as compared with net income of $411 thousand, or $0.03 per diluted share for the first half of 2006.

These non-GAAP measures should be considered in addition to, and not as a substitute for, comparable GAAP measures. Reconciliation between GAAP and non-GAAP measures is provided in the accompanying Table 2 of this press release. Allot provides these non-GAAP financial measures because 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 Allot's operating performance.

"We were pleased to see that channel sales are beginning to improve, particularly in the Americas, during the second quarter," commented Rami Hadar, Allot Communications' President and Chief Executive Officer. "We believe that this initial improvement, along with our focus on the carrier market presents significant growth opportunities for Allot over the middle to long term.

"The announcement of our new Service Gateway has generated significant interest within our current customer base as well as in the carrier markets worldwide. This new carrier class platform, which remains on track for trials in the current quarter and is presently scheduled to be generally available in the fourth quarter of 2007, will offer Allot customers what we believe is the fastest product available in the market, delivering true 10 GB/s full duplex capability, or over 20 GB/s total throughput. The service gateway is based on an open architecture platform which enables carriers to easily expand and deploy additional value added services while leveraging their current infrastructure investments. By utilizing Allot's best-of-breed DPI technology, carriers can offer flexible, personalized subscriber services to generate significant new revenue streams. While the migration from 1GB/s to 10 GB/s interface products may delay purchasing decisions among several of our customers, we believe that the initial demand we are seeing for the new platform will contribute to revenue growth as early as the fourth quarter of this year," concluded Mr. Hadar.

During the second quarter, key highlights included the following achievements:

    -- Allot unveiled the industry's first DPI-based Service Gateway
       supporting more than 20 Gigabits per second (GB/s) of traffic;

    -- Continued demand among Tier 2 service providers; recently announced
       customers include Vodafone Iceland, Telefonica del Sur in Chile, and
       Cablemas in Mexico;

    -- Sales in North and South America reached $2.8 million, a 17% increase
       over the first quarter; and

    -- Allot commenced a second commercial DPI deployment with a major
       wireless operator.

As of June 30, 2007, Allot's cash and cash equivalents, including short and long-term deposits and investments in marketable securities, totaled $78.5 million.

Financial Guidance

With the anticipated general availability and market acceptance of the Service Gateway during the fourth quarter of 2007, the Company maintains its previous guidance for the year 2007, and anticipates that net revenues will total approximately $40 million.

Conference Call & Webcast

The Allot management team will host a live conference call and webcast today at 8:30 AM EDT to discuss the financial results as well as management's outlook for the business.

To access the conference call, please dial one of the following numbers: US: 1-866-966-9446, International: +44-1452-567-098, Israel: 1-809-213-849.

A replay of the conference call will be available from 12:01 am EDT on August 9, 2007 through August 15, 2007, at 11:59 pm EDT.

To access the replay, please dial: US: 1-866-247-4222, International: +44-1452-55-0000. Access code for both: 10403945#.

A live webcast of the conference call can be accessed on the Allot Communications website at http://www.allot.com . The webcast will also be archived for replay on the investor relations section of the Allot corporate website following the conference call.

About Allot Communications

Allot Communications Ltd. (NASDAQ:ALLT) is a leading provider of intelligent IP service optimization solutions. Designed for carriers, service providers and enterprises, Allot solutions apply deep packet inspection (DPI) technology to transform broadband pipes into smart networks. This creates the visibility and control vital to manage applications, services and subscribers, guarantee quality of service (QoS), contain operating costs and maximize revenue. Allot believes in listening to customers and provides them access to its global network of visionaries, innovators and support engineers. 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 Allot's plans, objectives and expectations for future operations, including expected performance characteristics of the Service Gateway platform, the timing of general commercial availability or the level of revenues to be generated therefrom, and are based upon management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. These factors include, but are not limited to, those discussed under the heading "Risk Factors" in Allot'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 we undertake 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       Six Months Ended
                                         June 30,                June 30,
                                     2007        2006        2007        2006
                                       (Unaudited)             (Unaudited)

    Revenues                       $8,601      $8,152     $16,877     $15,723
    Cost of revenues                2,036       1,746       4,010       3,446

    Gross profit                    6,565       6,406      12,867      12,277

    Operating expenses:
    Research and development,
     net                            2,165       1,953       4,618       3,835
    Sales and marketing             4,566       3,749       8,760       7,242
    General and administrative      1,438         710       2,481       1,319
    Total operating expenses        8,169       6,412      15,859      12,396
    Operating loss                 (1,604)         (6)     (2,992)       (119)
    Financial and other income,
     net                              825          62       1,782         183
    Income (loss) before income
     tax expenses (benefit)          (779)         56      (1,210)         64

    Income tax expenses
     (benefit)                       (187)          3        (184)          6
    Net income (loss)               $(592)         53     $(1,026)         58

    Basic net earnings (loss)
     per share                     $(0.03)      $0.00      $(0.05)      $0.00
    Diluted net earnings (loss)
     per share                     $(0.03)      $0.00      $(0.05)      $0.00

    Weighted average number of
     shares used in computing
     basic net earnings (loss)
     per share                 21,253,700  13,286,779  21,131,702  13,036,329

    Weighted average number of
     shares used in computing
     diluted net earnings
     (loss) per share          21,253,700  15,084,192  21,131,702  14,692,920



                                  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     Six Months Ended
                                          June 30,              June 30,
                                       2007      2006        2007      2006
                                        (Unaudited)

    GAAP net income (loss) as
     reported                         $(592)      $53     $(1,026)      $58

    Non-GAAP adjustments
    Expenses recorded for stock-based
     compensation
      Cost of revenues                   12         3          23         3
      Research and development costs,
       net                               46        25          96        39
      Sales and marketing               (10)      157         109       203
      General and administrative        177        86         319       108
    Expenses related to a law suit
      General and administrative         68         -          68         -

    Total adjustments                   293       271         615       353

    Non-GAAP net income (loss)        $(299)     $324       $(411)     $411

    Non-GAAP basic net earnings
     (loss) per share                $(0.01)    $0.02      $(0.02)    $0.03
    Non-GAAP diluted net earnings
     (loss) per share                $(0.01)    $0.02      $(0.02)    $0.03



                                  TABLE - 3
                          ALLOT COMMUNICATIONS LTD.
                             AND ITS SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                         (U.S. dollars in thousands)

                                                   June 30,       December 31,
                                                     2007             2006
                                                 (Unaudited)
    ASSETS
    CURRENT ASSETS:
    Cash and cash equivalents                       $9,930            $7,117
    Marketable securities and short term deposit    64,587            70,423
    Trade receivables                                8,976             5,856
    Other receivables and prepaid expenses           2,998             1,961
    Inventories                                      4,117             3,337
    Total current assets                            90,608            88,694

    LONG-TERM ASSETS:
    Marketable securities                            3,995             5,750
    Severance pay fund                               2,891             2,648
    Other assets                                     1,484             1,054
    Total long-term assets                           8,370             9,452

    PROPERTY AND EQUIPMENT, NET                      4,137             2,939
    GOODWILL                                           211                99

    Total assets                                  $103,326          $101,184

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Short-term bank credit and current
     maturities, net                                    $-                $6
    Trade payables                                   3,470             4,415
    Deferred revenues                                4,806             3,788
    Other payables and accrued expenses              5,722             4,833
    Total current liabilities                       13,998            13,042

    LONG-TERM LIABILITIES:
    Deferred revenues                                1,691             1,578
    Accrued severance pay                            2,728             2,377
    Total long-term liabilities                      4,419             3,955

    SHAREHOLDERS' EQUITY                            84,909            84,187

    Total liabilities and shareholders' equity    $103,326          $101,184

Source: Allot Communications Ltd.

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