ALLT - Earnings call 3 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Allot's Third Quarter 2023 Results Conference Call. [Operator Instructions] I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. to like you would begin? Green,

Kenny Green

thank the Third Welcome President will key on would of call, the statement Conference hosting and to I opening line Erez today Erez and XXXX to to and call. welcome Antebi, highlights us like conference CEO; Allot's CFO. like the all Call. to Mr. provide the for Leitman, Mr. Quarter quarter. an of With management summarize Allot's are and I'd this you Ziv

will Ziv to the Erez questions. We the session, question-and-answer for then call will open and both answer and available be those

You can year. find financial last in call discussed highlights and also the conference on issued the earnings release the [indiscernible]

company of reduced including or the launch customers, trends a the ahead. result in too hand as go the to projected, only statements conference like the services results the industry in by competitive call does projections occur. forward-looking start, to Allot identified And of events market of as the Securities Erez, predictions, filed lot regarding they as other that I'd I by events or a contains services any update please as would now future to will, are statements from we cannot those with with fact, performance differ changing to the call documents the materially actual These and the nature like that, assume company. This and of well following the Exchange Commission. Erez. over future not guarantee risks out security obligation or may demand Before statement. other point or safe harbor

Erez Antebi

you conference us I'd of welcome all for you Kenny. to call. our you, to joining like today. Thank Thank

challenging SECaaS were September our our third slower we $XX.X quarter for be us. X% XXXX. in year. SECaaS XX% than ARR last ARR model be XX% June the than In business into comparable higher and anticipated. XXXX revenue SECaaS The for recurring was than SECaaS continues of XXXX, than million, originally ARR XXXX September million, quarter lower to our transition very to higher $XX.X the revenues proved Our has

core In business macro-related our DPI headwinds. is addition, experiencing

term, economic disappear we While we in continue the near to expect backdrop, challenges the with the of challenging these make to the business can we given progress don't aspects control. that

During million, mostly a for result the major fell focus and $X.X the continues in a of be third of burn operating our cash quarter, payable. accounts area by balance decrease Cash loss to us. as

improve in partially As in in our XXXX, slow effect and we quarter the expect flow. cost-cutting come efforts fourth into to our cash

While our remains in visibility to committed challenged, remain XXXX. profitability reaching we

in was gross due second mix. to Our XX% quarter margin deal our the

consistent continue XXXX, target XX% our historical We gross to with for performance. margins

executive board the an As focus committee driving in work business, challenges has the operating to July, less for for and we sustainable announced and the enhancing identify together facing budget and formed management continue to value. committee our management The improvement recommend of with shareholder and executive profitability opportunities to that plan prepare worked XXXX. given further

also to of reductions. XXXX ensure previous to reduction the up. implemented We plan We the are end XXXX, cash, employee ramp takes as conserve the the while reduced order end call, from towards in headcount cost discussed of quarter. breakeven in in implementing of longer the quarter the end profitability that SECaaS we cost third As and to other XX% a power even our third approximately XXXX from reach of staying we

one-time of a numbers quarter approximately $X.X third Our with include million. cost

you Allot and As two Secure. operates business know, in Allot Allot Smart lines;

activities look remain child globally CSP pornography from terrorism, to as continue as government enterprise Smart Allot block businesses to our and and the see trafficking, On we such interest they front, direct while soft. growing

spending, the the and in While enterprises also developing embrace need our some and as and continue governments of shifting to countries countries recognize we the cloud. resources to developed due cutbacks weakness to focus is

Secure growing Allot front, are the our by while On spending SECaaS CSPs remains steadily. challenging, revenues

different pace slower few not positives successfully had discussing launched deployment, going start number we customer secure. wealth service, with While native business opportunities their launch security expected growth seeing Verizon quite and of like our siding. a customers network the with North which are several is growing, are given The of American The the there network we is who expansion would I incorporates the has well. market. to we Verizon are to segments. are

customer I suit. of success as largest Verizon's adding the our CSPs some signed is Verizon other for While in SECaaS believe follow opportunity Furthermore, see segments, success, we assured believe will be I additional cannot ours.

getting already are launched is better same. operators in understand doing In do they Verizon recently other Tonga. enhanced how and what to we interest another service We might the from SECaaS APAC,

As revised we direction small interested penetration for excited SECaaS opportunities previously remain about security differentiated, a operators to We a this continue have is per regardless as the deal, have solution be we launching network-based and the as CSPs. services, guaranteed a scalable of we explained. revenue in our lot for

expectations Looking our to want for ahead, XXXX. I summarize

SECaaS to for XXXX $XX revenues be expect around to We million $XX.X million.

maintenance, $XX and including SECaaS and million December between expect ARR be million. XXXX We support $XX And to to ARR, $XX for our to and million. between be $XX million total

wide and loss a deal revenue, providing guidance, total to a expansion year. our expect this cash are close operating because of range large flow we we Regarding specific

the between $XX doubtful and for year the year to operating to million to $XX and non-GAAP whole million be expect the million revenues for $XX total reserve We XXXX between be million burn million, between debt cash $XX million. and $XX full be loss $XX and million; our $XX including

stated, committed reaching in to we remain I profitability XXXX. As

revenues be quarter to million to fourth the expect million. We $XX $XX

the same. Our strategy remains

SECaaS we and generation share has growth maintain business we of see are While our frames, the gains, think difficult where we we over believe market forecast the that short a to lumpiness and future our significant of because using makes we DPI business is and SECaaS business our potential business cases DPI's invest limited level use it and cash growth opportunities. time flow in profitability new stable through can revenues to

like our our and we taking, team, the and take I and actions questions. SECaaS And revenues our the open than myself in And for I'm will we of we available would and we questions it significantly company, potential actions to later the now convinced business, coming our our goals recognized than confident answers. expected, have that later in believe of While your to the Operator? a and face grow being large taking are products. I I Ziv are would be make call this liked remain will the full years, are achievable.

Operator

Lake Please Ladies you. at [Operator go first will we session. Thank Max this ahead. Street. Instructions] gentlemen, The from and time, question-and-answer begin is Michaels of question the

Max Michaels

market is you're sense in at first the just seeing visibility in with of the want getting to XXXX question looking be My get XXXX, a I confident what being a fairly out cloudy. to and just guidance.

Erez Antebi

a this XXXX we're guide. point, At giving not

our going to giving we'll of and will The hard to XX. ability, going and is And we towards visibility once best we're our should guide 'XX. stated we expect It the focus year tough. challenge on next turn very provide to for And The guidance are is correct. yes, of call, profitable you to able 'XX. finish guidance We budget I AOP be earnings the be end this to on be year. the

Max Michaels

margin. on in is a downtick And then QX. A bit gross little my question next here of just here

going adjusted I what and level think confidence caused QX What's the can up XX%. in you to to margin this X% gross maybe then get around giving guys down is back QX. that to you that

Ziv Leitman

expecting were we XX% around said call, this gross as Max, in previous we around conference quarter. our margin

So, margin. same range. a XX% is the the few reason with was in deals low very And growth a

we maintenance can we take first we get deals and very in When we expansion the with support future amount also when As we larger for years. the a it's future low it than gross replacement. deal deal because it's a that mind a includes margin for that and explained lower expect bear also much is us competitor to total deal sometimes, strategic when quarter in recognized decided

support maintenance, will higher of and at recognized later amount the which about care be we man. So, a

QX believe we And in margin of XX%, gross the XX half until of XX% low second the last around margin half also back was to able gross do spite first next will the XXXX. gross be of XXXX, the in Now in years, for that to margin we year. our the come

Operator

next Chokshi question from of The Nehal is Northland Markets. Capital

Nehal Chokshi

how It changed B; visibility, guiding sounds limited the changed? that if like it that correct? as have buildup given you're you so, A how of is has

Erez Antebi

sure I followed sorry. I'm the now, not question

Nehal Chokshi

Yes, clarify. to let me try

guidance and So where semi some your your example, consist looking rate. close in may quarters, bottoms-up pipeline at basis for you're of prior

that parameters process? that or that forward, Going the you changed process have you utilize change

Erez Antebi

No.

we to And, see. we Phase a results probability I timing still on the over forecast accurately ability And internally, to do years, of think a past from the it's what our of do going detailed to what very deals building follow-up and II closing forecast that are process bottom-up true diminished. we and that the bottom-up weekly. has couple a that in trying we're we're be,

accurate, process nail for correctly. It us simply harder forecast the our So, has to numbers becomes but has become the less itself changed. not

Ziv Leitman

in much a that backlog. ago, Nehal, larger years, two please previous like had we till remember years

the So, it quarterly forecast was to revenues. easier

when are the same quarter is depending bookings. we on the backlog much lower, Now,

the degree revenues So, [indiscernible]. high challenge forecast to we have a with a of

Nehal Chokshi

visibility, be that are clear, rather. for given using mean, to just And and limited you helpful. lower probabilities probabilities I visibility compensate around the lower commentary of closing to That's

Ziv Leitman

iterate. is assuming harder But it's are aggressive. We lower and realistic and the your yes, it it's To things and think then because forecast. We we're south forecast question, to it's directly answer believe not achievable. conservative, realistic becomes not probabilities

Nehal Chokshi

want that drive sounds drive then DPI, the maintain business. like it OpEx I And between of you're is that the main overall mentioned Okay. minimal amount the And your some driver is while investment continue of profitability the on version to and And you're the going portion? to there SECaaS to the profitability. most OpEx looking strategically to SECaaS rightsize you of commingled that to think

Erez Antebi

maintain I word our and We the limit it SECaaS we investment what know will don't amount portion we is on will balance if the profitability. drive to between invest. maintain And minimal right, to our the we're definitely -- reach able will that a the

less year this doubt, definitely had we the we'll invested before. in year than be no investing we than and So, less

to over expect drive be significant to have are few we reach last our SECaaS control. consistently look at of profitability correct again, I part a revenues been is continues we showing top line, expense growing. a that and Because the quite has when like You would quarter

to us. would to But next into the I which very them numbers not continue themselves absolute year, grow high. expect are will So, help

is count still with area, we much Smart budgets. the remain trying revenues, DPI reductions for which by can to on spending that headwinds affected or on we relies heavily So, operators' see Allot forecast in how significant operator and cost and segment

while numbers, I the we segment. I are here. a curve the growth stating bottom can any without reached significant Allot or on we I DPI So, think the don't in think rely think roughly around roughly general our sense Smart of we've

that the the reducing us by and we leads so is which So, been to combination reach far. doing profitability of what have OpEx,

Nehal Chokshi

be if clear, OpEx you to PPA here? needed believe to you you does further your would Just be that able cut not indicate stabilize to

Ziv Leitman

We didn't our prepare yet. budget 'XX

So, we revenues, next we the a will as our OpEx, year. and be to the of think will which combination I said, And don't and be right breakeven be know. level goal between keep achievable it we

Nehal Chokshi

for me. question Last

for announced then options Chairman is still Does and new commercial you explore mentioned, the you that new had what the Chairman. founder expect Chairman a subsequently, you the bring? from that And And So special that ongoing? you as of conclusion position Allot. to your a do Or represent announced retiring committee? committee

Erez Antebi

improvement improvement couple a identify work value. to things. driving is the opportunities was see with focus and The for I the executive said recommend formed reiterate and with further is of and management on a So management. One committee between sustained committee profitability work and what shareholder that formed enhancing to for committee

like continues, in that management that and quarter for of cutting we expense right figure August. work during said and that this late out operating OpEx that reduction results levels, was with the fast the together One was XXXX. third budget I And implemented to in call, what plan goals continues is to earlier work the and

do Chairman Now nothing form. not to derivative reasons, a was own committee to Yigal, way, he's executive decided who in any the shape that our has of we his for and resign or with recently,

Nehal Chokshi

to bring Chairman And do you a expect new different here? anything

Erez Antebi

I vast think believe the ask new fresh can industry feel what that's think operational But And and value yourself think him I them company, different bring has Chairman, the and anybody has, a to are new Chairman, produce. anybody experience. significant when if definitely, and I meet free I advice that with you they to they that the them. brings perspective, load,

Operator

The Silk from next question Silk is from Advisers. Investment Marc

Marc Silk

the years SECaaS commitment. with a So basically earlier capital on in your would few deals out the process ago, lay no you

So, can forward customers. you going you going going in to obtaining It's clarify spend going you risk-reward that's a get before to commitment to to regards to penny more your hit explain be? if how you Like #X, trying in SECaaS are just spending you're benchmarks.

Erez Antebi

Okay.

So, I'll detailed give you a answer bit more maybe.

right that in we that's how were the You're network our product past. with what doing security

at about the ago, so or again first it years Now, when we X.X we factor. still look table

it's and go ramp long from a to getting outlaying to a launch, commitment firm time revenue not a and may time up take so to and without We forward. are way operators, they take capital the and generate a good that long

most for a capital services, any are commitment and hardware, ones, commitment the like revenue things or deals just capital upon is for the professional deploy we the So, for for on. not take looking hardware, definitely And that. we No investment to right? network firm before new smaller ourselves invest so

itself, was they us right upfront think the revenue proven that make to equal. Now commitment think don't and tell this willing them, revenues. are us. has I launch I you, give operators I even it's to any But to and was an horizon upfront with sign opportunity minimum all it's not firm secret for team us didn't though commitment of created a can not

could the we strive would there but with fragmented, such ones expect with the them be operators, we I need ones that with other will to the home future, we and operators strive small but the other in XXX% [indiscernible]. medium-sized will be to may in more So, get large

Operator

to LLC. Wallace his next The Outerbridge asking from from question. Todd Rory Management, is not XX question continue LLC of Management, Capital is The Felte questioner We'll

Rory Donald Wallace

would on potentially they're expanding I to wonderful at deal. offering since was strategy if to expand footprint? real other the larger wondering view be that is it in expand you solution them And a of is this maybe strategic the order ways for very opportunity how would Verizon magnitude they you to that's launch or at an viewing their outside of could there a how outside terms the is all additive both about revenue do that something Verizon, in cybersecurity, think elaborate churn around would the deal. that lot, FWA give to impetus the thinking Obviously,

Erez Antebi

trend Okay. I'll try likely. to respond and our

are rising the of there Verizon, all, is at many, I people but with at First and corporate. could very, Verizon, interaction try be. I from general people my many many large I'll what believe believe what very And state consensus

good. are customers perceive be launch is well. find the is services all, it's of salespeople going selling believe comfortable that in very I when seems perceived the the to that to it something their First customers security value because and launch it that value

the a from is things devices of It's on. the doing network. which that network the the network. end-user their It's a say going, we the value overall operator sentences here revenues network the range add Verizon. nice is more are the an happy value network, yes, I in grip technically wide And with people says commercially. they of not would from which it's also I but as for way on different and think different devices, are more I that Verizon would And like so they, Verizon, itself and that, as It's from people it's that we in a on things understand bring price. Second, losing is okay, are that, to showing that services connective. just is hearing definitely

few well and Verizon So, different considered valued network. is with where can And this segments can value many it's and fits discussing of that. very Verizon quite with are this It's to we're take in that along customers, a the to people something either because to the that enjoy. inherent by options Verizon inherent be there that further

the getting we other large, serious though guarantee And think are will in think there said this potential. are we details, eventually a it's big call, expand in it. that I segments like without cannot the too discussions I but So, much I to into on opportunities they

Rory Donald Wallace

answer yes. EasTone, approaching one I announced the which probably be the But so think they acquiring telecom think do a elsewhere continue telecom Far carrier. curve subs, with within FET? as where they're an with grow opportunity another XXX,XXX XX% really you postpaid another how can to taking is within year. them of It hit they've to rate at it they've next? that like or there's they're see Are And base a with they're as you great take growth. Do their carrier rapid doing know future anything replicated seems far service? I merging of Or unique Taiwanese launches? that

Erez Antebi

of different say, FET, their is that Taiwan, initiative viewed is, FET are as the I is be think to management. took on who most she I what who wants CEO, make the the this of that which operator took person other executive The considered market, attitude was secure from course. decided FET would operators should in our the as she and

by very be go-to aggressive. market she to doing to decided then Now has their that,

uptake certainly Can end, And replicated? what point, So, I'll cost the explores almost with the that's they the what would selling say, every customers, cetera, and be every touch point, is they generates sales creates I which at security the think so. I service. advertisement, in every it the are cautiously hope touch this on it's et pushing touch at whether have point, results. the almost

in it calls. previous discussed we think I

cetera, of just interest, color they their initiated operator, doing, where our several forth. with should But put with so other it that, that time, various when rephrase ago, them. in interest internally somebody marketing things we we between had which to I the market that is initiated mentioned it last compare each or this, some an that go exactly weeks and operators drives the our people conference port way what the think and on the and product do, how something as give marketing drives aligned and operators to strategic they're a the marketing of else alignment actually better, strategic what on they meet put security to many the information using with in security has the on that their them Europe, operator we they do adoption what from so when on and and there et doing this few revenue with ago, weeks best a then that are been sharing That's possible a as a role takeaways doing we other department directly. platform each is

come I that. just to idea. think operators away walked few in encouraging. housing that we And very quite operator doing on is we us that's got and We're the think a a saying, okay, we a other was value. We who learned good this not this

going and it those. can drive revenues in implement our higher we adoption and a So to have quite we're of how we see And few market.

get trying we're to that definitely So happen. to

Rory Donald Wallace

CCS clearly positive. into it about thinking And grow. going Yes, year, next revenue sounds to it's going the

Verizon I you what they've can't would you decent growth, all control model to adoption been curve, going I incremental just next think say, year if and should doing. is generate almost out FET then the be but

to become you with the next when on So think consider year? important it's rate if in that year. Verizon a reach your it might new SECaaS, that And what generative And it's why grow wouldn't would I evolving level, business And winning it if next see expanding or there, it change, really when take get taking over obviously, that a operators? anything think but and deal do cash does a to to several side it's business how rapid the scale should the flip at we to is opinion? profitable there subject next about

Erez Antebi

to are to for you're plan building I be after think that budgeted more bit questions numbers those we give on confident the as I have answers And the prefer more I address feel budget cautious, that. in detail next asking more I more ourselves answer those to year. to a and And questions. I and our and our you think plan need year, we like for more would next detail right we're

Rory Donald Wallace

the couple revenue. had product year, of or probably looks questions One like I That's And product it's these it is of revenue had know have much fair. your was has miss spending execution in some confirmed on And might by years then Everyone be the will very gut is model. revenues feel year, what the you've on coming expectations frankly, how that macro? issues contributed the a outside versus versus or just of driven This you it that lowest about bad of you guess, into carrier coming to We XX the more. backdrop. the lower? a even issues, in secular

Erez Antebi

one; the macro. do analysis went were everything by We a think it working with in year. deals still we has I did did process. materialize one and this during that of the on not not into is loss majority the We to

because haven't say the the -- things operator did cuts of macro-related that. expense not like We close close business of did budget or issues, issues, not most on

was macro. And saying they made most of always of materially I strong. problems execution-related don't, they our a number this it on execution, put year think but is have we would positioning think results. think it the I I'm I But don't not do competitive exist. different

Rory Donald Wallace

the release. looking that then million the wasn't sure you And at with in show it. Got structure, mentioned risk. up the related does expenses? there's operating $X.X OpEx expense to of Where I

Ziv Leitman

rig. the people were This of one-time stance to it OpEx they is part the because relates the the that of

Rory Donald Wallace

I'm the on sure? that Is press not shown release,

Ziv Leitman

instance, If people there R&D, is who read from relevant expenses were is if so R&D. people onetime SG&A. have the are for [indiscernible] So in

shown same we book the be In the in G&A. salary. will it So place,

out it break didn't we software. So, on

Rory Donald Wallace

Yes. $X.X million.

Ziv Leitman

embedded R&D, separate the costs, No, and in $X.X the in so It's million on. not line. is SG&A

Rory Donald Wallace

flow under confirm. QX. then And for then me adjust wanted That's should OpEx gets $XX separately. $X.X in shown wasn't it million base million, $XX And at or a million $X a the the that million quarter. if reasonable model expense just we to P&L million where expenses that what a little Understood. way a reduce roughly expenses it should of little by there's which of the should And that $XX coming through a I I Is the and over looking recurring around Understood. land? will shy quarters, of expect reduction

Ziv Leitman

I'm in will our those not sure but sell it's February like only the number, guidance. ready right would numbers we we the finalize after to to we budget process, be and XXXX

Rory Donald Wallace

And you it. in with one question. last question. my Got Thank

So the going was drive deal? QX. Or you deal mentioned variance a that a of shifts and is a a with flow revenue large potentially outside revenue that to cash that the the in prepayment Is booking quarter? in

Ziv Leitman

either could that well. would it I say go

tends So wide range. at to be that a

we see Let's close goes. it's it, [indiscernible] where are how if we it

Operator

[Operator time. to Instructions] like further no make are There concluding questions Mr. your at would this statements? you Antebi,

Erez Antebi

times. joining for us you the call to your support these everyone Thank today. nontrivial for want thank on during I Yes.

in those For at latest Thanksgiving much. Thank you like perhaps our you weekend, not U.S., I'd of happy that, next either and and you you look to I in call in a person. the before seeing very forward if to wish

Operator

Thank your Conference concludes XXXX Thank Third Quarter participation. Call. Allot This you you. the Results for

and You disconnect. ahead may go

Allot (ALLT) 22 Nov 232023 Q3 Earnings call transcript