Allot Communications Ltd. (ALLT)

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Allot Communications, Ltd. (ALLT)

Q3 2012 Earnings Call

October 30, 2012 8:30 AM ET


Maya Lustig – Director, Corporation Communications

Rami Hadar – President and CEO

Nachum Falek – CFO


Ittai Kidron – Oppenheimer

Matt Robison – Wunderlich Securities

Daniel Meron – RBC Capital Markets

Catharine Trebnick – Northland Securities

Alex Henderson – Needham

Sanjit Singh – Wedbush Securities

Doug Rosenberg – KEL



Good day, and welcome to the Allot Communications, Ltd., 2012 Q3 Results Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Ms. Maya Lustig, Director of Corporate Communications. Please go ahead.

Maya Lustig

Thank you very much. And thank you all for joining us today on our third quarter 2012 conference call. I will be replacing Jay on the call today and he is in New York with communication challenges. Joining me today are Allot’s President and CEO, Rami Hadar, as well as our Chief Financial Officer, Nachum Falek.

The press release announcing our third quarter results is available on the Investor Relations section of our website at All results and expectations we review on the call are on non-GAAP basis unless otherwise described as GAAP.

Non-GAAP net income and non-GAAP net income per share excludes stock based compensation, expenses, as well as amortization of intangible assets, and certain onetime charges incurred related to M&A. Please note that all earnings per share amounts are on a fully diluted basis.

Before we begin, let me – let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflect management’s best judgments, based on currently available information. I direct your attention to the risk factors contained in today’s press release and in the Annual Report on Form 20-F, filed by Allot with the U.S. Securities and Exchange.

With that, I would now like to turn the call over to Rami.

Rami Hadar

Thank you, Maya and thank you all for joining us today. I’m pleased to report another strong quarter in which we recorded our 14 straight quarter of revenue growth. For the quarter, non-GAAP revenues grew 40% over last year, and 6% over the second quarter and reached $28 million. Non-GAAP net profit was $5.1 million or $0.15 per share for the quarter and cash flow remains positive.

We achieved this while we began integrating Oversi in total with acquisition closing on September 4th. During the quarter we received large orders from 12 service providers, eight of these orders were from mobile operators, two of these represented new mobile customers’ volume.

Here in the quarter we recognized revenue from the Tier 1 U.S. mobile carrier, as I expected earlier this year, and represents a greater than 10% customer for the quarter. This is our second large mobile carrier in the U.S. which we see as a market with potential upside in the mid-term. This is the first deployment for specific value-added service and we look to up the mobile related services over more territories going forward.

I believe this also demonstrate that despite the advanced regulatory environment in the U.S., Allot now offers a long list of value-added services which are attractive to U.S. service providers and are consistent with the current regulatory rules. Large orders made up 40% of revenues during the quarter, demonstrating how we continue to penetrate deeper into our customers’ network and how we are increasingly being deployed by larger service providers worldwide.

Book-to-bill ratio was below one for the quarter, but it was 20% higher than what it was in Q3 over last year, while we saw the effects of seasonality. That said, at this point the market fundamentals, primarily the growth in data traffic, remain strong and our funnel of growth opportunities throughout the globe remains healthy and it continues to grow both in wireless and wireline.

Our post-merger integration program has been progressing steadily. We closed the Oversi acquisition in the beginning or last month and early out of the gate we are very pleased with the sales fund.

We believe this is a very unique nature of video caching. While many balances optimization solutions basically shifts for optimization from one subscriber to another, based on previous settlement set of rules local cash and it’s really a win-win situation.

While the subscriber feels an increase in his or her products of experience, the solution does not decrease bandwidth to a different user; rather it saves bandwidth by locally caching the in-demand most popular video. Here is the case of few games, no compromise resulting any single subscriber while the video-experience is improved.

As we announced, we already received a larger order from this product from one of our current large fixed line DSL customer. This win is position of our addition of our service gateway strategy as well as our M&A strategy with cost selling additional important value-added services overall a large comp installed based.

So, Ortiva co-promotion integration continued according to plan in deployment in new trials of progressing with same customers initials. We continue to believe this video would be one with more compelling value-added services going forward.

Moreover, we are in a unique position in our market today with our combined offering of traffic management and video-related value-added services that are offered, to its ever increasing customers through a single vendor, single platform strategy.

Beyond the growth of sheer value, if I look at the Ortiva market, our growth and success is being driven also by the dramatic rise in penetration of increasingly sophisticated mobile devices.

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