Allot Ltd. Q1 FY2025 earnings call

• Eyal Harari stated the company reported strong first quarter 2025 results with top and bottom line growth, and SECaaS as the primary revenue contributor. SECaaS ARR was $21.2 million, up 55% year-over-year.
• Positive operating cash flow of $1.7 million in the quarter, with cash position at quarter end over $60 million.
• Partnerships with Verizon: New agreement to make SECaaS solution available to Verizon Business' mobile customer base of over 30 million subscribers. Verizon became the largest contributor to SECaaS revenues in Q1.
• Launched OffNetSecure solution at RSA, allowing operators to protect customers off-network.
• New service gateway Tera III multi-service platform launched, generating interest and a strong pipeline of opportunities.
• Smart product signed several multi-million dollar agreements with new customers, with a pipeline including multi-million and eight-figure deals.

The primary contributor to revenue increase was the Security as a Service (SECaaS) solution. First quarter revenues increased year-over-year by 6%, with SECaaS contributing over a fifth of revenues. SECaaS ARR was $21.2 million, up 55% year-over-year. The smart product is a significant part of the business, with several multi-million dollar agreements signed with new customers in 2025, and a strong pipeline including multi-million and eight-figure opportunities.

• Expect SECaaS revenues and ARR to achieve strong year-over-year increase at around 50% or more in 2025.
• Non-GAAP gross margin expected to be in the range of 70% in 2025 as SECaaS revenue grows.
• Expect to gradually increase full-time employees to 500 by year-end 2025.

• Forward-looking statements may not materialize due to changing market trends, delays in customer service launches, reduced demand, competitive nature of the industry, and other risks identified in SEC filings.

Q: Congratulations. Fantastic results here. You probably said this in your prepared remarks, Eyal, but just to be clear, Verizon, business, mobile, Internet security actually contribute to your 1Q SECaaS ARR results?

A: Thank you, first of all, for the congratulations. As mentioned in the prepared remark, the official launch of the service happened only in mid-April. We have very minimal contribution for the Q1 and Q2 numbers for this service, only from the pre-launch. Most of it would come in the current quarter, Q2, and it will accelerate as we proceed as Q2 also was only a partial quarter. And we are seeing good growth and good traction for the service. We expect this to be significant contributing to our SECaaS over the year.

Q: Got it. So then what was the big driver for, I believe, your biggest SECaaS ARR -- incremental SECaaS ARR quarter ever by a far margin?

A: So we start to see the new agreement, the new service launches that announced last quarter and the quarter before, starts to kick in and contribute to our revenue. Part of them are related to the Vodafone agreements, part of them to the MEO, to the O2 Czech, all the announcements we had in previous quarters. They are starting to go in the numbers, some of them are still not in full effect, and we are expecting to have further growth for those that count into the year. And this is why we feel comfortable that our yearly SECaaS revenue in ARR are going to be around 50% growth year-over-year, as indicated in our press release.

Q: Hi, thanks for taking my questions. I was wondering on the decision by Verizon to include a lot of the base security feature in its flagship business mobile plan, do you think this is something that will cause other operators to consider following the same playbook as far as bundling and including a lot as more of a default option and security as a core service?

A: So we see that Verizon are taking cybersecurity very seriously. I think they show a lot of vote of confidence with their FWA service, the fixed wireless service cybersecurity launch in the last 15 months that show good result and good customer feedback. That they want to make it pivotal to their newly launched My Biz new service plan for their business customers. Definitely, once carrier is introducing services as part of their offering, it's a very competitive and small market and I'm sure that Verizon competitors are considering the most. And in general, Telco is a small village and operator are looking what's successful for others around the globe and trying to imitate it. So, I would believe that people are aware of what we are doing and what Verizon are doing and their success will be probably something that others will want to replicate.

Q: Thanks and then with the smart product line, very encouraging commentary around the pipeline and recent deal flow. Did I hear correct that you called out several eight-figure deals in the pipeline because I think that's the first time in several years that level of business has been visible as a potential upside for the company and if you could just talk a little bit more about are those large deals related to expansion opportunities with existing customers or are these actually green field or government projects? Any more color you can share on that?

A: So I think first and foremost is that we are investing and increasing our go-to-market efforts out of the changes we did for the company. We organized our sales team into regional organization and we start to see the value of having our teams closer to the customers and more focused offer all of our product lines. This helps us drive more pipeline both for our SECaaS as we are offering it now with larger teams into more carriers as well as we have more focus into our smart products. What we see as mentioned as opposed to what we saw before is increasing some of the pipeline for the smart and this is driven by stable and good demand from existing customers but some new projects as mentioned in our press release earlier today part of the good result this quarter was with wins of multiple multi-million dollar deals that already secured. Some of them contributed into our Q1 numbers, some of them are and most of them are going to contribute into our visibility towards 2025. We still have some additional multi-million opportunities in the pipeline. Some of them are as mentioned eight figures, a mix of existing and new projects. So overall we are seeing good demand and it's driven a lot by our new platform by the Tera III that we see customers existing and new looking to leverage this technology as networks are becoming very sizable and they are looking for a high-end scalable solution to fully support their growing network. So overall it's definitely a positive indication that the pipeline is there but of course it's a lot about execution. We need our sales team to be focused on their opportunities and translate them into new business and hopefully we will continue to execute well in the remainder of the year and start to see the result and able to translate the pipeline into orders.