Allot Ltd. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the supplied filing does not provide a clear set of Q4-only financial results. Financial statements are prepared under U.S. GAAP. All amounts below are U.S. dollars.
Business context
Allot provides network intelligence and security solutions to communication service providers, enterprises, and government customers. Network intelligence represented 77% of FY2022 revenue and security solutions 23%. Allot is emphasizing recurring, revenue-share Security-as-a-Service (SECaaS), while still relying substantially on its network intelligence business.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $122.7 million | $145.6 million |
| Gross profit / margin | $82.9 million / 67.5% | $101.0 million / 69.4% |
| Operating loss | $32.3 million | $13.5 million |
| Net loss | $32.0 million | $15.0 million |
| Net loss per share, diluted | $0.87 | $0.42 |
| Cash used in operating activities | $32.6 million | $8.4 million |
| Capital expenditures | $5.6 million | $7.6 million |
Product revenue fell 31% to $61.0 million, which management attributed mainly to delays in large projects. Service revenue rose 7.7% to $61.8 million, supported by SECaaS and maintenance and support. Product gross margin increased to 65.0% from 64.2%; service gross margin declined to 70.0% from 77.4%, partly due to a one-time write-off. Operating expenses increased to $115.2 million from $114.6 million, while revenue declined.
At year-end, Allot reported $12.3 million cash and cash equivalents, $68.8 million short-term bank deposits, $4.3 million marketable securities, and $1.1 million restricted deposits. Working capital was $91.2 million. Long-term convertible debt had a $39.6 million carrying amount; total shareholders’ equity was $102.0 million. Management said existing cash was expected to fund working capital and capital expenditures for at least 12 months.
Material changes and outlook
- Revenue declined 16% year over year; net loss more than doubled, and operating cash outflow increased substantially.
- Product sales decreased while services became a larger share of revenue: 50.3% in FY2022 versus 39.4% in FY2021.
- Europe generated 34% of FY2022 revenue, down from 40% in FY2021. Management linked the longer-term decline from 2020 to the completion of a large, non-recurring project.
- Management expected approximately $5.3 million of FY2023 capital expenditures, mainly for SECaaS equipment, R&D/customer-success lab equipment, and IT infrastructure. The company said it did not anticipate growth in its DPI segment in FY2023.
- Beginning in late 2022, Allot shifted SECaaS sales toward larger strategic accounts and required assurances or minimum revenue thresholds for smaller deals. Management expected fewer deals, believed sales potential could be maintained, and said the strategy might help reach profitability sooner; it also acknowledged execution and market-share risks.
- Remaining performance obligations were $88 million at year-end, with about $53 million expected to be recognized before December 31, 2023. These amounts are not a guarantee of collection or realization.
Risks, contingencies, and unusual items
- Receivables: Approximately $10.1 million of past-due receivables related to resellers in Africa and Latin America. Management considered them collectible, but acknowledged potential bad-debt write-offs. The filing also reports total past-due receivables of about $15 million.
- SECaaS conversion: As of year-end, only 52% of signed SECaaS sales contracts had generated revenue. Growth depends on operator launches and subscriber adoption.
- Convertible note: Allot issued Lynrock Lake a $40 million senior unsecured convertible note in 2022, maturing February 2025, with options to extend twice. Initial conversion price was $10.30 per share; conversion could dilute shareholders. The note restricts additional borrowed debt without holder consent, subject to a stated $5 million threshold.
- Customer and channel exposure: The two largest customers represented 8% and 7% of FY2022 revenue; approximately 58% of revenue came through channel partners. Network intelligence remained 77% of revenue.
- Market and operating risks: The filing cites lengthy service-provider sales cycles, project delays, competition, encryption and 5G network changes, semiconductor and component supply risks, foreign-exchange exposure, and geopolitical risks including Israel and the Russia-Ukraine conflict.
- Legal matter: A claim by former Netonomy founders and employees was disclosed as uncertain at year-end. On March 6, 2023, the company agreed to pay the two founders $260,000 to settle their claims; proceedings against the other plaintiffs remained ongoing.
- Other items: A 2022 acquisition of Keepers Child Safety Ltd. involved $500,000 cash consideration and estimated contingent consideration of $656,000 at year-end. Allot reported an unqualified audit opinion and effective internal control over financial reporting.
Most important facts for investors to verify
- Whether large-project delays reverse and product revenue stabilizes, and whether the FY2023 DPI outlook remains consistent with management’s expectations.
- Collections on the past-due reseller receivables, related credit-loss provisions, and any subsequent write-offs.
- Progress from signed SECaaS contracts to launched services, paying subscribers, and recurring revenue.
- Cash burn and liquidity against management’s 12-month sufficiency assessment, including the effect of the convertible note and its covenants.
- Timing and realization of the $88 million remaining performance obligations, including the estimated FY2023 portion.
- Developments in the remaining Netonomy litigation and any resulting financial exposure.