Allot Ltd. Q3 FY2024 earnings call

• Strong third quarter results showing return to financial stability and renewed revenue growth, including first non-GAAP operating net profit in three years, positive operating cash flow, and increased net cash level.
• SECaaS revenues increased by 69% year-over-year, driven by top-tier customers and new service launches like Vodafone UK and MEO Portugal security deployments.
• Strategic focus on being a security-first company, consolidating around a unified business unit to leverage security and network intelligence synergies.
• Reorganizing to be more customer-centric and efficient with regional sales and customer success focus.
• Exploring potential of products in cloud and 5G markets, particularly traffic management and cybersecurity solutions.

Total revenue for the quarter was $23.2 million, a year-over-year increase of 3% and up 5% versus the prior quarter. Revenue from SECaaS (Security as a Service) was $4.7 million, up 69% year-over-year, comprising 20.1% of total revenue. SECaaS annual recurring revenue as of September 2024 was $17.2 million.

• Fourth quarter 2024 expected to be around breakeven on a non-GAAP operating profit basis and generate positive operating cash flow.
• Full-year SECaaS revenue and SECaaS ARR expected to grow double-digit.

• Changing market trends.
• Delays in the launch of services by Allot customers.
• Reduced demand and competitive nature of the securities services industry.
• Other risks identified in SEC filings.

Q: Regarding SECaaS ARR growth guidance, is there expectation of Q-over-Q growth?

A: Yes, expect growth next quarter with further increase in yields from existing customers and additional customers in the forecast.

Q: Why expecting flattish to slight decline in operating profit Q-over-Q?

A: Due to reliance on CapEx deals and nonrecurring revenue, but moving towards more recurring model with SECaaS growth.

Q: Driver of record Q-over-Q increase in SECaaS ARR?

A: Mix of new services launched by existing customers, expanding partnerships like Vodafone and MEO, and increasing customer base.

Q: R&D reduction, any particular programs cut?

A: No specific programs cut, R&D reduced due to prior optimization, with some government R&D support factored in.

Q: Early thoughts on calendar '25 non-SECaaS revenue?

A: Too early to specify, but focus on security and unique combination of traffic management with security offering for potential growth.