Allot Ltd. Q4 FY2024 earnings call

• Allot Ltd. reported fourth quarter revenue growth, return to profitability with non-GAAP net income of $5.6 million for the year, and positive cash flow generation of $4.8 million in 2024.
• CCaaS is a strong growth driver, with recent wins including Verizon and Vodafone. For example, Allot Ltd. will support Verizon Business with a cybersecurity solution for their mobile phone business customers, and launched a protection service to Vodafone UK fixed broadband customers.
• The company is adopting a unified security-first strategy integrating cybersecurity and network intelligence, creating a differentiated solution. The customer-centric go-to-market approach with regional focus on sales and customer success is expanding the installed base.

In the fourth quarter, CCaaS revenue was $4.8 million, up 49% year over year, comprising 19% of Q4 revenue. For the full year 2024, CCaaS contributed revenues of $16.5 million, up 56% over the previous year, with ARR at $18.2 million, up 43% year over year. The smart product line also contributed revenue, though its long-term visibility is less predictable but has a solid pipeline in 2025 with potential upside.

• Expect double-digit CCaaS revenue and ARR growth in 2025, along with improved profitability.
• Gross margin expected to be in the range of 70% in 2025.
• Strong pipeline of opportunities for CCaaS, with potential upside from the smart product line's solid pipeline in 2025.

• Market trends, delays in customer service launches by customers, reduced demand, and competitive nature of the securities services industry.
• Unpredictability in revenue from the smart product line due to its less predictable long-term visibility.

Q: Congrats on the strong free cash flow generation for the quarter. What would you say is the driver of that?

A: Continuous growth on the CCaaS, based on goals with existing customer base and new service launches like with Vodafone, Mio, and O2. Verizon announcement is an exciting opportunity but not yet contributing to Q4 numbers.

Q: Within the revenue segmentation, support and maintenance was up almost $4 million quarter over quarter. What was the driver?

A: Support and maintenance is mainly from the smart product line as CCaaS is a SaaS model. It was due to catch up on supported maintenance agreements typically ending at year-end, contributing positively to cash flow.

Q: Product revenue was down 55% year over year. Why?

A: Product revenue, mainly VTI base, can fluctuate by quarter depending on specific deals. CCaaS revenue percentage is increasing, affecting the overall product revenue breakdown.

Q: Can you address attachment with Verizon based on turning on other carriers in the past?

A: Attachment depends on CSP go-to-market, with opt-in/opt-out and bundling considerations. Past experience shows peak attachment rates close to 50% and average around 15-25%.

Q: About DPI legacy business, do you expect growth in 2025?

A: Expect similar level, with potential upside based on winning new projects and pipeline opportunities, though predictability is lower.