Q3 2020 Allot Ltd Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
[music].
[laughter].
Ladies and gentlemen, thank you for standing by welcome to the Alot third quarter 2020 result conference call.
All participants are present in listen only mode. Following.
Following management's formal presentation instructions will be given for the question answer session.
As a reminder, this conference is being recorded.
<unk> <unk> should have all received by now the company's press release, if you have not received it. Please contact a lot <unk> investor relations team at GK Investor and public relations at 164668835 size nine or view it in the news section of the company's website at www.
Well you got a lot dot com.
I would now like to hand over the call to Mr., Ken Green of GK Investor Relations Mr. Green would you like to begin please thank you.
Welcome to <unk> third quarter 2014 conference call.
Welcome all of you today.
This conference call.
The hosting this call.
With us on the line today and isn't shabby president and CEO.
Lightman CFO.
Eric will begin and summarize the key highlights followed by Steve will review <unk> financial performance of the quarter.
Well then open the call for the question and I'll session.
So I'd like to point out this conference call make projections or other forward looking statements regarding future events.
The future performance of the company.
These statements are predictions animal cannot guarantee that they will in fact occur.
Does not assume any obligation to update them.
Information actual events or results may differ materially from those projected including as a result.
The impact you to the COVID-19 pandemic changing market trends.
Demand.
Does it make securities.
The security systems industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.
And with that I would now like to hand, the call over to Evan and Sammy Aaron. Please go ahead.
Thank you Kenny.
I'd like to welcome all of you to our conference call and thank you for joining us today.
Our third quarter was another quarter of solid growth.
Revenues grew 26% year over year for the third quarter and reached $34.8 million.
This is our 11th straight quarter of double digit revenue growth year over year and I'm very pleased with the results we achieved during the third quarter.
I believe it shows we are on track and successfully executing on our plan.
The number of opportunities. We see continues to grow we continue to close deals when against competition bring more business and grow our revenues.
Our revenue growth in 2020.
Celebrated so far compared to our revenue growth rate in 2019, and we expect this to continue in the fourth quarter as well.
As we see our opportunities grow we increased our investments to capitalize on the significant number of opportunities that we see.
He will provide more details on our financials and forecast later.
In order to allow better focus and faster response to market needs. We recently implemented an internal organizational change instead.
Instead of having a single R&D group for all products and a single product management group for all products. We created two new product business groups, one for a lot of secure products and one for I'm not smart products.
Product business group will have its own R&D and its own product management.
Sales and customer success, we will continue to be global and sort of all product lines as today.
To lead to a lot of secure business group, we are joined by a in Vietnam.
Yeah, and as a cyber and data science expert among.
Among her previous roles.
He was VP security and Cisco and general manager and CTO of Rs say Israel Yeah.
Yeah and holds a Phd in mathematics and statistics.
Karen rule, but then cool who serve very successfully in the past couple of years as our senior VP for customer success will now lead the I look smart business group.
I believe this change together was a new leadership will create a stronger vision for work and will accelerate both product lines success.
I would like to take the opportunity to wish both you and Kevin lots of success in their new roles.
Like most everyone else our way of working has been significantly affected by COVID-19 pandemic I would like to update you on how we and our customers are adapting to the new situation.
Most of our employees worldwide are continuing to work from home.
Well the numbers change from country to country as rules and conditions differ in Israel. For example, approximately 25% of employees work from the office and the rest work from home.
Meetings, even for those in the office are mostly held by video conference to minimize physical content.
We continue to see high productivity across all departments.
During the third quarter R&D released several product releases in both our north smoke and are not secure product lines. They were at least on time was a required content and quality.
Our customer success group continues to deliver install and passive acceptance on new installation many times without being physically on site.
Our global service organization is continuing to solve problems and lowered the number of open from customer trouble tickets.
These achievements to sell deliver and service according to plan or a result of the spirit and dedication of all a lot employees worldwide I want to take this opportunity to sanction for all their efforts on fantastic work.
As I mentioned in the previous call, we do see that the current situation of working from home and lack of physical interaction is stressful for many of our employees.
Attempt to help we maintain a policy, where we fully adhere to all local rules and regulations, but allow our employees personal freedom of choice, whether or not to come to the office, where and when this is allowed.
I would now like to turn our attention to our interactions with our customers worldwide and share with you a for you a few broad observations.
Csps are continuing to provide services to their customers, even though many of their employees are working from home.
Overall operators are adjusting well to the situation and for the most part have managed to handle the changes in traffic patterns.
These changes have for the most part stabilized.
Most csps are continuing not only with the regular business, but with new projects as well.
While delays in processes and decisions continue we do see accelerated efforts by Csps getting back to business as usual despite not physically returning to their offices.
Overall, I think demand depending on the product has either remained as it was for growth.
I believe to a very large degree we are all adjusting well to virtual meetings, replacing physical meetings and saving much travel time and expense in the process.
We are however, losing some of the informal relationship building that is important to establish long term trust.
So far the impact of this on the business is limited.
As we've discussed in the previous earning call the more challenging part is establishing new relationships and generating new leads with operators and people we are not familiar with.
To this end, we modified our sales approach to increase our lead generation by using targeted marketing campaigns.
We started this was a security services campaign.
As a result of this approach looks promising as we have generated quite a few new leads for CSP is interested in promoting security services to their customers.
I will now try to briefly address each of the different market segments. We are active in and provide a bit more granular color on what we see in the market.
I'm not smart traffic management is used to provide operators visibility on their networks and manage their traffic.
We're seeing growing interest by Csps to gain better visibility on the network as well as manage traffic surges and congestion on both mobile and fixed networks.
I believe a lot smarter as well designed to address these needs and this gives us an advantage.
Many fourg and fixed networks already have a DP I system, either from a loan or a competitor.
Usually stickiness with a DPP product is high and the operators do not tend to replace their current provider easily.
During the third quarter. However, we were selected by a large tier one operator in email.
To replace our competitor system.
We are currently involved in several processes with other operators considering to do the same.
While we cannot be assured of success in these processes, we view them as encouraging opportunities. In addition, there are also new RFP for DP ice systems in operators that do not have such systems in place.
As we discussed in the last earnings call. We are seeing a growing need for governments to protect their citizens from malicious or illegal activity.
As a result, we are seeing growth in the number of opportunities for our digital enforcement use case.
The growth we see in this use cases worldwide and we are very encouraged by the growing pipeline we are creating.
In the enterprise market larger enterprises, which are the focus of our business seem to be less affected by the COVID-19 pandemic than smaller businesses.
We see some delays in projects overall, our enterprise business is doing well and we see it growing.
As you may recall during the first quarter, we signed an agreement with Broadcom to provide a look products to enterprise customers currently using the packet cheaper products, which brought comp chose to discontinue.
Since signing the agreement our enterprise pipeline has seen a strong double digit growth as a result of this agreement.
We have signed new distributors that previously worked with a competing product and we close deals to replace our competitors' products.
I'm very optimistic about the growth our enterprise business may enjoy as a result of the Broadcom deal.
While some deals take longer to materialize and it's a bit more challenging to bring new deals into the pipeline. Several of our use cases are showing demand growth. So overall on balance I think the market demand for our north smart product family is similar to or even a bit larger than pre covert 19th.
Matt.
To summarize I believe demand for the a lot smart product line, including congestion management traffic management and.
Ltchs regulatory compliance and enterprise use cases will remain solid for a lot for the remainder of 2020 and the years ahead.
I would now like to turn our attention to the security markets.
We continue to see an increase in cyber attacks, most notably phishing attacks on both consumers and small medium businesses or SMB.
This is giving rise to growing awareness on behalf of consumers and smbs have the need for protection. It is also contributing to a growing awareness on behalf of operators that they should provide a secure broadband connection.
One result of this is that our security business is seeing good traction.
During the quarter, we signed an agreement with a major tier one operator in Asia Pac.
To provide our home secure product to protect the routers and Wi Fi connected devices in customers' homes.
When deployed home secure will protect millions of homes, making this the largest home secure deployment till now.
In addition, since the previous conference call. We were selected by several operators worldwide throughout email APAC and Latin America to provide them with our security products and launch services to their consumer and SMB customers. We are currently in contract negotiations.
With these operators and believe we should be able to sign recurring revenue contracts with most of them before the end of the year.
Additional operators, we previously signed Glus decided to expand the use of allot secure to either additional products and the allot secure family or to expand the service to an additional countries in which they operate.
Since the previous earning call mail.
Male Portugal, and the other European and another European operator, with whom we previously signed recurring security revenue deals launch the service to the public.
While only a short time has passed since launch the penetration rates, we see are very encouraging and consistent with the high penetration rates, we see in other security services that were launched.
We consistently see that customers are willing to pay a premium of 5%, 10% over the access charge to get security services and we see the take up rates are high.
Another European operator, who launched the service to customers physically entering stores recently sees the number of customers signing up for the services grow to a majority of those to whom it is offered.
Yet another operator, who is offering the service to Smbs reached over 30% penetration in a year.
The penetration is continuing to grow months by months.
These numbers are very encouraging and I believe they validate the value security services bring to customers and a willingness to pay for them.
We are continuing to see more projects initiated and new RF piece published for security service for consumers and Smbs into.
Interest by Csps to deliver secure broadband connectivity to their customers looks to be growing worldwide.
We continue to see new opportunities worldwide and our pipeline for recurring security revenue deals is growing and encouraging.
It is worth noting that we see a large growth specifically in the number of opportunities we have to provide security as a service to smbs.
While motivations very I think this is a result of operators viewing smbs as part of the enterprise customers that see both growing cyber attacks and are willing to pay more.
While our pipeline is growing nicely, we are seeing some projects getting delayed as operators are more more focused on delivering existing services rather than new services.
I remind everyone again that working with Csps takes time with sales cycles, typically exceeding 12 months and the time from signature to launch of the service around nine months.
The current COVID-19 pandemic may delay some sales cycles by even a few months more and even to the delays are launch for some of the deals we already signed.
As I discussed in the past a lot is endeavoring to sign security deals in a recurring security revenue deal model.
While not all operators will accept this model we are encouraged to see that more operators do accepted.
Our goal therefore is to build the substantial base of Csps, what sector recurring security services model, which will launch security services to their customers. We will work with them to help a large number of end users sign up for the security services. These are the type of deals that will ensure the law.
Certain growth and success of unlocked.
I would like to address briefly Fiveg networks, and where we fit in.
An increasing number of operators are moving ahead with their fiveg plans and are rolling out Fiveg services.
We expect this trend to continue and we see a very large opportunity for a lot here.
Fiveg networks have significantly higher bandwidth and we'll have a very large number of aiotv devices on them as well as many breakout points connecting to the internet.
This results in higher vulnerability of the network itself to cyber attacks.
As I discussed in our previous call.
A lot has a unique position here to play in securing the user playing in Fiveg networks our.
Our combination of being able to analyze in real time, the full traffic flow ability to mitigate the dos attacks in line very quickly and protect the network from row Aiotv devices.
Puts us in a unique position to help operators secure their fiveg networks.
I looked comes to the Fiveg World was a very strong telco great technology.
Products that scale easily to the fiveg bandwidth requirements and full multi tenancy support to enable differentiated services.
These abilities are key differentiators for us in future Fiveg deployments.
As I mentioned previously we are currently at currently active in several major opportunities, including several tier one carriers.
Some of them, we passed fuel sees successfully and are advancing to commercial discussions.
Overall, we view fiveg as a potentially significant growth engine for adults.
As I mentioned today.
We see significant opportunities in the market across multiple products and use cases.
We believe there is a market opportunity here, we should take advantage of.
Given the stronger opportunities, we see even in the current environment, we remain committed to leveraging our strong cash position to invest for future growth.
As we work with more tier one operators worldwide, we take upon ourselves additional commitments that span product development delivery and customer support.
In order to take advantage of advantage of these opportunities.
We are temporarily increasing our R&D investments this year.
By using subcontractors to help us close product gaps quickly.
Twentytwenty, one we expect R&D expenses to be lower than those in 2020.
I would now like to summarize the overall picture and the key messages.
We are proceeding according to our plan and continuing to grow the business despite seeing delays in several different projects.
And you look smart product line, we see a strong pipeline some use cases, such as digital enforcement congestion management and the enterprise business are growing.
Overall, we see a solid demand for our looks mark at similar or even higher levels to pre COVID-19.
It does and the security area that we see our long term growth.
We are very encouraged by the pipeline growth, we see and by the consumer and SMB take up rates as they sign up for the service.
We signed a significant deal for our home secure product and were selected by several other operators for recurring security revenue deals.
While these deals always takes time to close COVID-19 has pushed the closure of several deals a bit more it.
It is also postponing services commercial launch in a couple of the deals that were already signed.
Overall, the pipeline is robust and I am confident we will meet our goal for recurring security revenue deals this year.
Looking at our backlog the market demand as we see it now and the pipeline of deals that we are working on I would like to reiterate our revenue guidance for 2020 to be between $135 million to $140 million.
I would also like to reiterate our guidance for 2020 of new recurring security revenue contracts signed in 2020 to exceed an M.A.R. of $140 million.
This will be of course in addition to the $85 million in May our deals we signed in 2019.
In addition.
We expect to be profitable during the last quarter of this year.
And now I would like to hand, the call over to Ziv Leitman, our CFO Xu.
Please go ahead.
Before I begin reviewing the financial results for this quarter and.
Unless otherwise noted I will refer entirely to the non-GAAP financial measurements.
When discussing a pervasive.
Asian equities, which.
Which is what we use internally to judge the ongoing performance of.
Our business.
Non-GAAP financial measures.
The failing soap in effect from the generally accepted accounting principles and exclude share based compensation expenses expenses related to M&A activity, a multi generation of certain intangible assets exchanging and defensive.
Changes in deferred tax.
Texas related items.
And now to the financial results.
Revenue for the third quarter of Twentytwenty, well $34.8 million growing by 26%.
Hello.
Those of third quarter of 2019, I would like to give you some more color regarding the revenue breakdown in the investigation.
Geographic breakdown for the quarter was as follows.
Americas was $1.9 million or 6% of revenues you man.
$28 million.
Oh, 80%.
Revenue in Asia Pac was fault.
$12.9 million or 14% of revenues.
The breakdown between products and services.
Quarter of 2020.
For the comparable quarter last year was as follows.
Product revenues were $24.4 million compared to $16.6 million last year.
Professional services.
Revenues were $2.9 million compared to $2.4 million last year.
Support and maintenance revenues were $7.5 million.
To $8.7 million last year.
The portion of communication service providers revenues.
Total revenues in the fourth.
Quota, well, 86% compared to 82% in the comparable quarter last year.
I know that the revenue breakdown may fluctuate from quarter to quarter, depending on specific revenues and deals we recognize.
Specific quarter.
Our top 10 end customer sales made up 76% before revenue in the third quarter of Twentytwenty compounds.
With 64% in the second quarter.
Last year.
Gross margin for the quarter was 69% compared to 70.2% in the.
Third quarter.
29 team.
I would like to mention.
Fourth quarter gross margin is expected to be owned 70%. However, I remind you that the.
Relation between the quarters reflect the product mix of deal mix all in that particular quarter and is not indicative of any specific trend.
Operating expenses for the quarter was $25 million compared to $21.7 million.
For the quarter.
2019.
In particular, I want to I lied to so R&D expenses increased to.
$11.3 million or.
33% before revenues.
$7.5 million or 27% of revenues in the third quarter of last year.
The increase is in line we saw softer.
If you remember last quarter, we discussed.
And imagine opportunities, we see in our target market.
We had intended to accelerate the development plans and increase R&D at a faster rate than originally planned at the start of this year.
We are fortunate.
In debt, our strong cash position, especially in the current market environment enabled us to fuel growth held in advance of our competitiveness and take advantage of opportunities.
Total number.
Time employees or 10, north worldwide as of the end of the quarter well 684.
This is an increase of 10 full time employees compared to.
That's the end of the previous peak.
Yeah quarter, and an increase of 90 since the end of 2019.
Non-GAAP operating loss.
For the quarter was reduced to $1 million compared to two.
$2.2 million in the third quarter of 2019.
Non-GAAP net loss for the quarter was $1.2 million or three cents per share versus $1.9 million or five cents per share.
In the first quarter of 2019.
For the three months ended September Thirtyth.
2020, the weighted average number of basic show.
35.2 million, an increase of 815000 pounds.
Well with the same period last year.
Weighted average number of fully diluted shares.
37.5 million.
Turning to the balance sheet, our cash reserve comprised of cash cash equivalents and investments as of September thirtyth.
20.
One on one and $7.2 million.
Two 1.1 on within $9.2 million on June Filthiest Twentytwenty.
Restricted cash balance was reduced to only $1.7 million.
$24 million in the previous quarter.
The conflict in cash is due to model Jim's acquired fulfil and coffee hedging activities and other collateral.
Our inventories in December quarter.
$15.5 million, which is a reduction.
$1.7 million from the prior year quarter.
$4.9 million above the 11 asset.
At the end of 2019.
This is primarily due to equipment waiting at the customer site.
Revenue recognition terms to be for the future.
Finally in terms of guidance.
Maintain our full year 2020 revenue guidance to be between one of them and so $5 million to 140 minutes.
We continue to maintain our expectation to be profitable in the fourth quarter.
Do you.
Finally, as you know our focus remains decidedly calling security revenues.
Why did the ongoing pandemic delays closure.
Some of the deals.
We believe that by the end of the year.
To achieve our target.
Closing a total EMEA now for at least one on one and $14 million of call. This number even in addition to the 2019 M. now.
The $5 million.
I know that the new deal.
We have signed this year and expect to sign up until the end of the year.
We'll produce little to no recurring revenues.
Twentytwenty, but we'll build the strong foundation for revenue growth in the coming due.
Okay.
Despite a much more challenging environment than when we started the year.
We remain pleased with so overall financial performance.
That concludes my remarks, we would be happy to take your questions operator.
Thank you ladies and gentlemen.
Time will begin the question answer session.
I have a question. Please press star one if you will.
To cancel your request please press star Kim if you are using speaker.
Lift your handset before pressing the numbers your questions will be pulled in order. They are received please stand by while we pull for your questions.
The first question.
Some michelle.
Michelle Waller from Needham and company Shao. Please go ahead.
Thanks, Hi, guys. Thanks for taking the question.
For Alex.
Quick one.
Yes.
For you guys on R&D declining.
2021, just wondering if you guys expect that to be offset by other factors such as travel expenses.
Not coming back into the model that we may have.
Had taken out model digital bench and also on just wondering if you can give us an update on that.
Hedging strategy, there and how FX impacting the quarter and maybe even.
Looking out to wonder if you can.
I have a follow up.
Okay I'll take the for the first four cents.
I I, we don't we don't yet have a a budget for 2021.
So honestly I don't think we can we can address exactly what the various elements of expenses, we expect to have or not have that and so on.
I really think we'll have that.
By the end of the year and then the next conference call, we'll provide guidance on where we see where we share 2021 numbers go.
But I think that's about all we can say right now the zoo.
So regarding the exchange differences.
The second question.
So we didnt have.
A significant effect on the quarterly results.
Oh by the way each.
1% change in the Israeli currency.
The effect is less than $1 million.
Oh.
Not a significant room for a full year.
Yes, all right yeah portfolio.
Portfolio.
So it's not that it's not that significant.
Effect.
On each one for the quarter.
Okay.
Thanks, That's that's helpful and for my follow up you guys had some pretty.
Pretty good traction announcing deals this during the third quarter.
Just looking into next year can you talk a little bit about your pipeline how that looks.
With you guys continuing to win new deals. Despite some delayed launches it seems like your pipeline would be building quite suddenly you kind of mentioned that in your prepared remarks are there any areas, where you see headwinds that you know like a pro.
Prolonged project launch delays on that you know.
That's how we intend to extend more than you previously thought or or areas, where you're you're not seeing as much deal activity. As you would have expected that might be offsetting factors for the.
The pipeline or is it.
And just you know, they're no on negative impacts and pipeline so to speak outside of what you.
That's already mentioned on the prior year or two second quarter call.
And look I think.
Yes.
I tried to help to address it.
And during the call.
I think you know when we look at.
At each market segments separately, we're seeing mostly growing demand okay across the across the various segments.
Now like I mentioned, and we already talked about it Theres you ask over 19 does create some delays in the projects and closing the deals and the signings them and launching them and so on but overall I think the net effect is that we're seeing we're seeing more business.
Yes.
And if I look at the pipeline that we have today.
And I look at what I would expect it to be going into the future I think the pipeline is very robust and I think that's that's particularly true for the security product line, but I think it's also true for the look smart product line, it's not the it's not defined to one segment. So overall I think we see a very healthy pipeline and.
So that looks promising.
Okay.
That's helpful.
And congrats on the quarter again.
Thank you.
The next question from Eric Martinuzzi from Lake Street.
Please go ahead.
Thanks, Mike Congrats on the quarter as well.
Looking at right now I've got a consensus at $39.2 million for Q4, if I back out the nine months from the full year revenue guidance, we'd be talking about $38 million to 43 million. Just clarification is that correct 38 to 43.
Yeah.
If you subtract that correctly.
Correct.
I've got an MD eightys EPS, so I just want to [laughter].
Okay. So.
Look at the backlog exiting 2019, we had.
You talked about $138 million backlog exiting 2019 in that 70% of that would translate into revenue and 2020 is that still correct assumption.
So roughly speaking the correct assumption.
Okay, right and then as we look at these.
The call that impacts the delays here your your expectation of the $140 million in May our.
I really winding up with kind of a log jam here in Q4 because of Cove. It in that in order to hit the $140 million in May are we need to we need to sign a bunch of business or or their transactions, maybe that you havent announced that translate into the $140 million an hour.
I think we can say that a significant portion of the one on one and voltage should be signed in Q4.
Okay.
Be able to announce them or is it a situation where because of the operators preference maybe.
You won't be able to do that.
All fully aware that announced but if or whatever we'll get the pushback from the customer or we will not be able to announce it.
Maybe we will announce it or.
Without mentioning the name but.
But I guess that by the beginning of February.
When we finalize though a usually revolves.
Oh, we don't announce.
I also think that deals are axa is a is a bit tricky because as operators tendency is to agree to make announcements when they actually launched a commercial service for their own reasons. They don't want to alert the market to their local market of customers on their local competition to what they're up to what they plan to do.
And so on so their tendency, it's not always correct, but the but the tendency of many operators is not to not to allow us to announce when they signed the contract with two two announced when they actually launch the the service itself, which as you know those typically say nine months later.
So.
We tried and we don't always succeed.
Yes, I understand and then last question for me.
Like to dive a little bit deeper into the organizational announcement that you open the call with certainly brought on.
Skilled executive there what what should we be looking for giving us.
The bifurcation of R&D into to kind of.
Or maybe product into two different.
Executives as well as them, having their own R&D, but not controlling their own sales force.
Yeah look the reason the rationale behind that is it is pretty simple I think that.
If you know the R&D in the product and the product management was to a large degree segregated previously because you.
You know product manager just for example, a product manager of the home secure product is a different person than the product manager for for the R&D CPI growth. Okay and same of course are Bernardi group. There's a bunch of guys were working on the on undeveloped continuing developing and supporting the DP IPO.
And other people are supporting I know network secure home secure products.
I think the big the as a big difference here is bringing bringing leadership to both of these groups that is focusing on.
On each one of them, but those Kevin on your EPS or focusing on on that is I would call. It more well defined and targeted a use case customer audience a type of sale type type of business I would say and therefore they are in.
Better positioned to a to innovate to find the right vision going forward to find the right value of how we create value not just tomorrow morning, but how do we do this properly and how do we advanced the products.
On the strategy properly to be much more successful a year or two three years down the road and that's why we made the is this a this difference now we didnt do as in sales and support.
Honestly because of scale.
We are you know we don't have we don't have many.
Many people in each different geography.
We have many people spread around the world, but if you want and you know in Australia, we have a very small team in Japan, we have a small team and et cetera et cetera.
Go geography by geography, and how do we segregated them and made a is a lot smaller team for sales and then the look is secure team for sales and for support we would have a number one have to increases significantly our expenses because we wouldn't have to duplicate.
And number two which is even a lot more important we would have lost a lot of leverage on dealing with the operators to whom we are offering both product lines. So at the end, we decided to do it this way and again the proper focus <unk> vision going forward quick response to changing more.
Conditions and so on on the product lines, but keep the sales and customer support.
You globally, a globally and the regionally a targeted as they are today.
I hope that explains it a bit more.
Yes, I appreciate that thank you for taking my questions.
The next question is from Marc Silk.
Silke investments. Please go ahead.
Thanks for taking my questions and congratulations on continued success in your strategy.
So in the last few calls you've said that on the recurring revenue model. Some customers will accept at this wrong. So the two recent deals you mentioned EMEA Oh, and then the tier one hum secure in the APAC with those recurring revenues.
Meal, you towards the recurring revenue.
But the latest the latest deal that we announced in April before the conflict.
Home security deals and also Q.
You ask about films.
Yes.
So because the neo deal was announced I'm, assuming that that has been launched.
Yes. It was launched just recently, but yes okay.
Okay.
So besides the the changes in the R&D structure is there anything because of Cove at 19 that maybe structurally has changed going forward, where you become more efficient leading to more cost reduction.
Uh huh.
I don't think that structurally much will change as a result of covered at least not that I see right now.
As we were working through the our operating plan for 2021 and as.
And as we will see and does we'll see later on you know once once cobot is finally left us at some point I hope it will.
I do expect that some of the some of the practices that we have learned to coping with co goodwill continuous us I believe that long term, we will we will know how to work better with much less travel than before.
Hey.
I believe that that will enable us to save both time and hopefully a expense.
But I don't see any structural change as such the other change that I also mentioned on the call is the way we generate leads if.
If you know before cobot broke out most of our lead generation was operators was done really physically with physical meetings face to face meetings.
Through introductions and so on a like I mentioned, we are we are changing our method of operation there and we're moving to few quality you can call it sort of a sales transformation for lead generation and doing this a lot more with targeted marketing campaigns.
As we're learning how this works right now right now we're still learning it but it looks very promising it looks effective we are generating.
So quite a few new deals new a lead to assess.
So if this continues I would expect that this will be one of the things that we will want to keep even after cobot is gone because it simply good.
So to add on to that so I get emails about your seminars and there's been a few how has that been successful whether it's generating leads or just showing support to your customer base no. No. It's it's been successful and since we're generating leads and we have.
Quite a few new leads are a result of these campaigns and seminars and so on that.
That you know these are companies that were now talking to that we didnt talked to before.
That's great and I see that you have one tomorrow.
On the Oh I'm, a long term player. So on the five g. what would that be maybe a second half 2021 story or more of a 2022 story.
I think it's a it's starting it's starting these days so I don't know if it's a I don't know if it's a first half or second half 2021 for it for initial deals or not but it's definitely starting now we're we're really active in this area right now.
But I think it's going to you know it's going to grow if you look at the if you look at where we are the projections for Fiveg are and how and the number of operators that are expected to launch over the next years and how they expect to grow their networks over the next 567 years whatever.
Then this is going to be a growing market and that means that every year more operators, who will join the existing operators will grow their bandwidth. Those roes are a core network requirements and will they will need more protection. So while I think this business will start for us.
Probably next year.
I think it will from there it should be we should be able to grow it.
That would be exciting to watch yeah.
In the past few.
Yeah. My question that you've had discussions with the U.S. telco is or any of these Ah you talked to any of these companies about a recurring revenue model or something different.
And we are we are talking to them so the U.S. telcos.
We're talking about recurring revenue model.
But we're not at this stage I can say much further on that.
And then you mentioned on the in your press release management continues to expect to close additional recurring security revenue deals in 2020 would you be upset if that's [laughter] less than two.
Greater than three.
Well, you know I'm, a I'm always a upset that it's not one or more than whatever it is we closed.
But it sounded like more than one you had thought you had floral I got asked I'll ask I'll use my imagination.
And last thing you know your stock is down 25% since your last conference call, even though you're guiding to stay the same I think people what kind of scared that some of these deals are being pushed out. So I just want you know management and the board to know a it which it would really supposed to stock. If they showed some confidence and took a few shekels out of their pocket and was able to buy some shares.
Just show a lot of confidence and Andy and good luck going forward and congratulations on continued success.
Thank you Mark.
You're welcome.
Is there any additional questions. Please press star one if you wish to cancel your request. Please press Star Kids. Please.
Please standby, while we pull for more questions.
There are no further questions at this time Mr. Pepe would you like to make your concluding statement.
Yes. Thank you.
So on a on behalf of a of a lot and the management team I'd like to thank you for your interest and long term support in our business.
Hey, we're currently not traveling as you can imagine, but we will be holding virtual meetings with the investors we will preserve be presenting at the at Needham A. on November 17 at and T. ideas Conference on November 18, and beyond without of course, we're open to speaking with investors until the end of the quarter.
And if you want to speak with US please be in touch with our Investor Relations team.
I look forward to talking to the next quarter. Thank you very much for joining us today.
Have a great day and stay healthy thank you.
Thank you. This concludes the Alot third quarter 2020 result conference call. Thank you for your participation you May go ahead.
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