Actelis Networks Reports Fiscal Full Year 2023 Results
- None.
- Total revenue decreased to $5.6 million from $8.8 million in the prior year due to delays in customer activities.
- Gross Margin dropped to 34% from 47% in the prior year, offset by an increase in indirect expenses.
- Adjusted EBITDA loss increased to $6.1 million from $4.1 million due to investments in sales and marketing.
- Operating loss increased to $7.4 million from $6.1 million, driven by a decrease in revenues and gross margin.
- Net loss decreased to $6.3 million from $11.0 million, attributed to lower revenues and gross margin.
- Financial expenses (income), net improved to ($1.1) million from $4.9 million, with a decrease in fair value of warrants.
- The company faced delays in realizing expected large new orders and experienced a decline in financial expenses associated with warrants and convertible facilities.
Insights
The reported financial results by Actelis Networks indicate a strategic pivot towards IoT, which is a growing market with substantial opportunities. However, the immediate financial impact of this shift is a reduction in total revenue year-over-year, from $8.8 million to $5.6 million. This decline is noteworthy as it suggests an initial challenge in the transition, potentially impacting investor confidence in the short term. The direct margin decrease, from 47% to 34%, further underscores cost management issues possibly arising from the strategic realignment.
From an investment perspective, the substantial reduction in operating expenses and net loss is a positive signal, reflecting effective cost control measures. However, the increased adjusted EBITDA loss, from $4.1 million to $6.1 million, raises concerns about the company's operational efficiency amidst the transition. The delayed IoT projects, expected to resume in 2024, may provide a future revenue stream, but this also introduces uncertainty regarding the timing and realization of these revenues.
Actelis Networks' focus on IoT is aligned with market trends, as IoT applications are projected to grow significantly. The certification by the US Department of Defense and NIST could give Actelis a competitive edge in cybersecurity, a critical aspect of IoT. The new product launches, such as the GigaLine 800 and 900 series, cater to underserved markets like MDUs, potentially opening new revenue streams.
Strategic partnerships with Netceed and Carahsoft are strategic moves to expand market reach and are likely to support future sales growth. However, the decline in traditional telco revenues and the transition period to IoT sales might require investors to be patient for returns on their investments. The regional revenue decline, particularly in North America and EMEA, may also reflect market saturation or competitive pressures that need to be monitored closely.
The certifications from DoD and NIST are significant achievements for Actelis, positioning it as a trusted provider of cyber-hardened solutions. The emphasis on cybersecurity is a strategic advantage, especially considering the increase in cyber threats and the importance of secure IoT devices. The successful penetration of Actelis' products into the DoDIN APL is a testament to the robustness of their solutions.
While these achievements are promising, the financial implications of R&D and certification processes must be weighed against the potential for increased sales. The certifications could lead to lucrative contracts with defense and government entities, which may justify the initial investments and bolster long-term financial health. It's important for stakeholders to consider both the costs associated with achieving these certifications and the prospective market opportunities they may unlock.
FREMONT, Calif., March 26, 2024 (GLOBE NEWSWIRE) -- Actelis Networks, Inc. (NASDAQ: ASNS) (“Actelis” or the “Company”), a market leader in cyber-hardened, hybrid-fiber rapid deployment networking solutions for wide area IoT applications, today reported financial results for the fiscal full year 2023 ended December 31, 2023.
Key Highlights:
- Strategic shift to IoT sales: Total revenue was
$5.6 million for the full year 2023, compared to$8.8 million in the prior year. The Company nearly completed its strategic shift to IoT, with a proportional increase of IoT sales to77% of annual sales, and further significant decline in Telecom revenue. A significant portion of the decline was a result of delays in on-going customer activities, which are expected to catch up in 2024. - Direct margin increase: Gross Margin was
34% for the full year 2023, compared to47% in the prior year. A consistently healthy direct margin year over year was offset by an increase of indirect expenses as % of revenues. Most indirect expenses are fixed, related to inventory and new product introduction costs, and are represented as a higher % of revenue against the revenue decline. - Substantial improvement in operating expenses: Operating expenses declined by
9% to$9.3 million for the full year 2023. Operating expenses for the fourth quarter on an annualized basis declined to$8 million , or35% from the year-ago quarter, driven by efficiencies created with cost reduction and restructuring measures. We expect this reduction to continue into 2024. - Substantial improvement in net loss: Net Loss dropped by
43% to$6.3 million for the full year 2023 compared to$11 million in the prior year, with the decline of financial expenses associated with warrants and convertible facilities. - Adjusted EBITDA loss trends with shift of Telco to IoT revenues: Adjusted EBITDA loss in 2023 was
$6.1 million compared to$4.1 million in the prior year due to the effects associated with the investments made in sales and marketing, as well as the impact of the shift to the IoT business and associated decline in Telco revenues.
“We are coming close to completing our strategic focus shift to the growing vertical business areas in IoT in 2023 and are driving strongly towards our goal of delivering the world’s best, most secure, hybrid-fiber networking solutions,” said Tuvia Barlev, Chairman and CEO of Actelis. “We remain persistent on our vision of cyber-aware networking and protecting IoT devices surrounding our customers’ networks. Importantly, we successfully passed certification by the US Department of Defense (DoD) and the National Institute of Standards and Technologies (NIST) as the only solution of its kind certified for Cyber security and Interoperability (FIPS). Additionally, we continue to support our loyal Telco customers and continue to serve their needs. In fact, during the last several months we have offered them our newly launched multi-dwelling unit (MDU) solution set for multi-gigabit connectivity at a fraction of the cost and time to connect MDUs compared to a fiber-only solution. We are pleased to report that several of our Telco customers are currently testing our new GigaLine 800 and GigaLine 900 product series for this vast market of Millions of underserved MDUs in the US alone”.
“In our continued efforts to create robust cyber secure and cyber aware networking solutions, we completed our Federal Information Protection Standard (FIPS) and Department of Defense (DoD) interoperability and security certification, while at the same time expanding our network of business and strategic partnerships with resellers and integrators to reach more customers and grow revenue. Additional partnerships will emerge soon, further enhancing our offering and reach of monitoring and response to our customers’ networking and IoT device security threats.”
“Operationally, I am encouraged by the efficiencies we continue to create resulting in operational cost reductions, preparing us well for 2024. While we have seen delays in realizing some expected large new orders, we are ready for the new year with better market coverage such as with the partnerships we have created with Netceed, Carahsoft and Swarco as well as cost of sales, inventory management and operational expenses,” Barlev continued.
Key operational highlights of 2023 to-date:
- After 18 months of development, rigorous testing and certification process, the DoD Information Network (DoDIN) added Actelis’ products in January 2024 to the approved list of products (“APL”) that have met cybersecurity and interoperability certification requirements. Actelis’ hybrid-copper-fiber networking products are the only ones of their kind on this list.
- Achieved National Institute of Standards and Technology (NIST) certification for data cyber security, as well as third-party validation for FIPS 140-2 standard from UL labs.
- Launched the new Multi-Dwelling-Unit (MDU) solution consisting of a last mile hybrid-fiber multi-gigabit broadband solution for buildings and IoT applications (GigaLine 800) and the new ultra-low power in-building gigabit connectivity solution for instant service provisioning (GigaLine 900).
- Launched new line of advanced, software managed, temperature and cyber-hardened, layer 2 and layer 3 fiber optic switching devices, enabling the delivery of a broad selection of solutions for large and small networks, at higher speeds, in support of hybrid fiber-copper networks that contain a larger portion of fiber.
- Signed partnership agreements for distribution and resale of Actelis portfolio of products and services with Netceed, a leading value-added distributor for the telecom, traffic, and digital infrastructure industries in North America and with Carahsoft, the trusted public sector IT solutions provider, supporting federal, state and local government agencies through its “Master Government Aggregator” model for their vendor partners with over 2,000 professionals nationwide. In Asia Pacific, through the hiring of Tzachy Givaty, Vice President of Sales for the region, signed multiple resale agreements with new partners in India, Philippines and Vietnam.
- Continued its service of the multi-year agreement with customer SITA, a worldwide industry leader in infrastructure provision and management for airports. Total orders to-date have reached approximately
$0.9 million . - Multiple customer wins and deployments in the various IoT verticals of Intelligent Traffic Systems (“ITS”), smart cities, railways, and energy such as City of Napa, major North American rail operator, City of Everett, US Naval base, major European natural gas operator, major US Air-Force base, Northern Ireland Railways and many more, extending its hybrid-fiber cyber-hardened IoT networking connectivity and network management software and services.
- Hired and restructured sales and marketing presence and strategy with the hiring of Bret Harrison, Senior Vice President of Sales, Americas, alongside new members covering Latin America and Central Europe.
- The war in Israel has not affected the Company’s operations, we are keeping a close look as the situation evolves and preparing for any necessary adjustments.
Fiscal Full Year 2023 Financial Highlights:
Revenues
Revenues for the year ended December 31, 2023 amounted to
Cost of Revenues
Cost of revenues for the year ended December 31, 2023, amounted to
Research and Development Expenses
Research and development expenses for the year ended December 31, 2023, amounted to
Sales and Marketing Expenses
Sales and marketing expenses for the year ended December 31, 2023, amounted to
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2023, amounted to
Operating Loss
Operating loss for the year ended December 31, 2023, was
Financial Expenses (income), Net
Financial expenses (income), net for the year ended December 31, 2023, was (
Net Loss
Net loss for the year ended December 31, 2023, was
Adjusted EBITDA loss, a non-GAAP measurement of operating performance (reconciled below to Net Loss), for the full year ended December 31, 2023, was
About Actelis Networks, Inc.
Actelis Networks, Inc. (NASDAQ: ASNS) is a market leader in cyber-hardened, rapid-deployment hybrid fiber networking solutions for wide-area IoT applications including federal, state and local government, ITS, military, utility, rail, telecom and campus applications. Actelis’ unique portfolio of hybrid fiber-copper, environmentally hardened aggregation switches, high density Ethernet devices, advanced management software and cyber-protection capabilities, unlocks the hidden value of essential networks, delivering safer connectivity for rapid, cost-effective deployment. For more information, please visit www.actelis.com.
Use of Non-GAAP Financial Information
Non-GAAP Adjusted EBITDA, and backlog of open orders are Non-GAAP financial measures. In addition to reporting financial results in accordance with GAAP, we provide Non-GAAP operating results adjusted for certain items, including: financial expenses, which are interest, financial instrument fair value adjustments, exchange rate differences of assets and liabilities, stock based compensation expenses, depreciation and amortization expense, tax expense, and impact of development expenses ahead of product launch. We adjust for the items listed above and show Non-GAAP financial measures in all periods presented, unless the impact is clearly immaterial to our financial statements. When we calculate the tax effect of the adjustments, we include all current and deferred income tax expense commensurate with the adjusted measure of pre-tax profitability.
Cautionary Statement Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements. Forward-looking statements are not historical facts, and are based upon management’s current expectations, beliefs and projections, many of which, by their nature, are inherently uncertain. Such expectations, beliefs and projections are expressed in good faith. However, there can be no assurance that management’s expectations, beliefs and projections will be achieved, and actual results may differ materially from what is expressed in or indicated by the forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the forward-looking statements. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. Forward-looking statements speak only as of the date the statements are made. The Company assumes no obligation to update forward-looking statements to reflect actual results, subsequent events or circumstances, changes in assumptions or changes in other factors affecting forward-looking information except to the extent required by applicable securities laws. If the Company does update one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect thereto or with respect to other forward-looking statements. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release. Actelis is not responsible for the contents of third-party websites.
Investor Relations Contact:
Kirin Smith
PCG Advisory, Inc.
ksmith@pcgadvisory.com
| ACTELIS NETWORKS, INC. CONSOLIDATED BALANCE SHEETS (U. S. dollars in thousands except for share and per share amounts) | ||||||||||
| December 31 | ||||||||||
| Note | 2023 | 2022 | ||||||||
| Assets | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | 620 | 3,943 | ||||||||
| Restricted cash equivalents | 1,565 | - | ||||||||
| Short-term deposits | 197 | 1,622 | ||||||||
| Restricted bank deposits | - | 451 | ||||||||
| Trade receivables, net of allowance for credit losses of | 664 | 3,034 | ||||||||
| Inventories | 3 | 2,526 | 1,179 | |||||||
| Prepaid expenses and other current assets, net of allowance for doubtful debts of | 4 | 340 | 678 | |||||||
| TOTAL CURRENT ASSETS | 5,912 | 10,907 | ||||||||
| NON-CURRENT ASSETS: | ||||||||||
| Property and equipment, net | 5 | 61 | 80 | |||||||
| Prepaid expenses | 592 | 492 | ||||||||
| Restricted cash and cash equivalents | 3,330 | 336 | ||||||||
| Restricted bank deposits | 94 | 2,027 | ||||||||
| Severance pay fund | 238 | 239 | ||||||||
| Operating lease right of use assets | 6 | 918 | 726 | |||||||
| Long-term deposits | 78 | 12 | ||||||||
| TOTAL NON-CURRENT ASSETS | 5,311 | 3,912 | ||||||||
| TOTAL ASSETS | 11,223 | 14,819 | ||||||||
F-3
ACTELIS NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(U. S. dollars in thousands except for share and per share amounts)
| December 31 | ||||||||||
| Note | 2023 | 2022 | ||||||||
| Liabilities, Mezzanine Equity and shareholders’ equity | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Current maturities of long-term loans | 8 | 1,335 | 553 | |||||||
| Trade payables | 1,769 | 1,781 | ||||||||
| Deferred revenues | 389 | 484 | ||||||||
| Employee and employee-related obligations | 737 | 793 | ||||||||
| Accrued royalties | 11 | 1,062 | 900 | |||||||
| Operating lease liabilities | 6 | 498 | 445 | |||||||
| Other current liabilities | 7 | 1,122 | 1,246 | |||||||
| TOTAL CURRENT LIABILITIES | 6,912 | 6,202 | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||||
| Long-term loan, net of current maturities | 8 | 3,154 | 4,625 | |||||||
| Deferred revenues | 71 | 164 | ||||||||
| Operating lease liabilities | 405 | 237 | ||||||||
| Accrued severance | 270 | 278 | ||||||||
| Other long-term liabilities | 23 | 48 | ||||||||
| TOTAL NON-CURRENT LIABILITIES | 3,923 | 5,352 | ||||||||
| TOTAL LIABILITIES | 10,835 | 11,554 | ||||||||
| COMMITMENTS AND CONTINGENCIES | 11 | |||||||||
| MEZZANINE EQUITY | ||||||||||
| Redeemable Convertible Preferred Stock | - | - | ||||||||
| Warrants to Placement Agent | 14d | 159 | - | |||||||
| SHAREHOLDERS’ EQUITY : (*) | 14 | |||||||||
| Common stock, | 1 | 1 | ||||||||
| Non-voting common stock, | - | - | ||||||||
| Additional paid-in capital | 39,916 | 36,666 | ||||||||
| Accumulated deficit | (39,688 | ) | (33,402 | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | 229 | 3,265 | ||||||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | 11,223 | 14,819 | ||||||||
| * | Adjusted to reflect reverse stock split, see note 2(ff). |
| ACTELIS NETWORKS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (U. S. dollars in thousands except for share and per share amounts) | ||||||||||
| Year ended December 31 | ||||||||||
| Note | 2023 | 2022 | ||||||||
| REVENUES | 17 | 5,606 | 8,831 | |||||||
| COST OF REVENUES | 3,706 | 4,721 | ||||||||
| GROSS PROFIT | 1,900 | 4,110 | ||||||||
| OPERATING EXPENSES: | ||||||||||
| Research and development expenses | 2,702 | 2,766 | ||||||||
| Sales and marketing expenses, net | 3,030 | 3,282 | ||||||||
| General and administrative expenses | 3,531 | 4,163 | ||||||||
| TOTAL OPERATING EXPENSES | 9,263 | 10,211 | ||||||||
| OPERATING LOSS | (7,363 | ) | (6,101 | ) | ||||||
| Interest expenses | (766 | ) | (830 | ) | ||||||
| Other financial income (expenses), net | 18 | 1,843 | (4,051 | ) | ||||||
| NET COMPREHENSIVE LOSS FOR THE YEAR | (6,286 | ) | (10,982 | ) | ||||||
| Net loss per share attributable to common shareholders – basic and diluted | 16 | $ | (*)(2.61 | ) | $ | (*)(9.45 | ) | |||
| Weighted average number of common stocks used in computing net loss per share – basic and diluted | (*)2,412,717 | (*)1,162,124 | ||||||||
| * | Adjusted to reflect reverse stock split, see note 2(ff). |
| ACTELIS NETWORKS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. DOLLARS IN THOUSANDS | ||||||||
| Year ended December 31 | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the year | (6,286 | ) | (10,982 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 27 | 23 | ||||||
| Changes in fair value related to warrants to lenders and investors | (1,658 | ) | 1,049 | |||||
| Warrant issuance costs | 223 | - | ||||||
| Inventory write-downs | 239 | 147 | ||||||
| Exchange rate differences | (460 | ) | (627 | ) | ||||
| Share-based compensation | 377 | 220 | ||||||
| Changes in fair value related to convertible loan | - | 1,648 | ||||||
| Changes in fair value related to convertible note | - | 1,753 | ||||||
| Interest expenses | 295 | 830 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade receivables | 2,370 | (887 | ) | |||||
| Net change in operating lease assets and liabilities | 19 | (44 | ) | |||||
| Inventories | (1,585 | ) | (429 | ) | ||||
| Prepaid expenses and other current assets | 357 | (280 | ) | |||||
| Other long-term assets | (100 | ) | (492 | ) | ||||
| Trade payables | (25 | ) | (139 | ) | ||||
| Deferred revenues | (188 | ) | (25 | ) | ||||
| Other current liabilities | (172 | ) | 508 | |||||
| Other long-term liabilities | (10 | ) | (41 | ) | ||||
| Net cash used in operating activities | (6,577 | ) | (7,768 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Short term deposit, net | 1,418 | (1,622 | ) | |||||
| Long- term deposit | (56 | ) | 66 | |||||
| Proceeds from restricted long term bank deposits | 4,827 | |||||||
| Deposit of restricted long-term bank deposits | (2,810 | ) | (27 | ) | ||||
| Restricted short term bank deposit | 451 | (2,451 | ) | |||||
| Purchase of property and equipment | (9 | ) | - | |||||
| Net cash provided by (used in) investing activities | 3,821 | (4,034 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from exercise of options | - | 5 | ||||||
| Proceeds from initial public offering | - | 18,697 | ||||||
| Proceeds from issuance of common stocks, pre-funded warrants and warrants (see note 14d) | 5,000 | - | ||||||
| Underwriting discounts and commissions and other offering costs | (420 | ) | (2,175 | ) | ||||
| Repurchase of common stock | (50 | ) | ||||||
| Repayment of long-term loan | (769 | ) | (1,241 | ) | ||||
| Net cash provided by financing activities | 3,761 | 15,286 | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 231 | (72 | ) | |||||
| INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 1,236 | 3,484 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | 4,279 | 795 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR | 5,515 | 4,279 | ||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||||||||
| Cash and cash equivalents | 620 | 3,943 | ||||||
| Restricted cash equivalents, current | 1,565 | - | ||||||
| Restricted cash and cash equivalents, non-current | 3,330 | 336 | ||||||
| Total cash, cash equivalents and restricted cash | 5,515 | 4,279 | ||||||
F-7
| ACTELIS NETWORKS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) U.S. DOLLARS IN THOUSANDS | ||||||||
| 2023 | 2022 | |||||||
| SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | 431 | 818 | ||||||
| SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS: | ||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | 702 | 237 | ||||||
| Conversion of convertible loan to common stock upon initial public offering | - | 6,553 | ||||||
| Conversion of convertible note to common stock upon initial public offering | - | 3,600 | ||||||
| Conversion of warrants to common stock upon initial public offering | - | 3,190 | ||||||
| Conversion of convertible redeemable preferred stock to common stock upon initial public offering | - | 5,585 | ||||||
| Repurchase of common stock | - | 15 | ||||||
| Issuance costs of common stock, pre-funded warrants and warrants | 159 | - | ||||||
| Reclassification of warrants from liability to equity upon amendment to private placement agreement (see Note 14(d)) | 314 | - | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Non-GAAP Financial Measures
| (U.S. dollars in thousands) | Year Ended December 31, 2023 | Year Ended December 31, 2022 | ||||||
| Revenues | $ | 5,606 | $ | 8,831 | ||||
| GAAP net loss | (6,286 | ) | (10,982 | ) | ||||
| Interest Expense | 766 | 830 | ||||||
| Other financial expenses (income), net | (1,843 | ) | 4,051 | |||||
| Tax Expense | 78 | 94 | ||||||
| Fixed asset depreciation expense | 27 | 23 | ||||||
| Stock based compensation | 377 | 220 | ||||||
| Research and development, capitalization | 444 | 525 | ||||||
| Other one-time costs and expenses | 371 | 1,174 | ||||||
| Non-GAAP Adjusted EBITDA | (6,066 | ) | (4,065 | ) | ||||
| GAAP net loss margin | (112.14 | )% | (124.36 | )% | ||||
| Adjusted EBITDA margin | (108.20 | )% | (46.03 | )% | ||||
FAQ
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