Q1 2022 Allot Ltd Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
Okay.
[music].
Ladies and gentlemen, thank you for standing by and welcome to our lot first quarter 2022 results conference call. All participants are at present in listen only mode. Following management's formal presentation instructions will be given for the question and answer session. As a reminder, this conference is being recorded you should have all received by now the company's press release.
You have not received it please contact <unk> Investor Relations team GK Investor and public relations at one to one to 3788040 or view it in the news section of the company's website at Www Dot a lot dot com I would now like to hand over the call to Mr. Kenny Green of GK Investor.
Relations Mr. Green would you like to begin please.
Thank you operator.
Welcome.
Third quarter 2022 conference call I would like to welcome all of you to the conference call and thank a lot management for hosting this.
Cool.
With us on the call today are Mr. Erez <unk> President and.
I missed the dip Blackburn CFO .
Eric will provide an opening statement and summarize the key highlights of the quarter well then open the call for question and answer session.
It won't be available to answer those questions.
You can look at the financial highlights and metrics and closing those we typically discussed in today's press release.
I always thought I'd like to point out a public statement.
This conference call contains projections or other forward looking statements regarding future events or the future performance of the company.
These statements are only predictions and the lock cannot guarantee that they will in fact occur.
Hello.
Do you have any obligation to update that information actual events or results may differ materially from those projected including as a result of the impact due to the COVID-19 pandemic changing market trends and the launch of services by our customers reduced demand and the competitive nature of the security systems industry as well as other.
Identified in the documents filed by the company with the Securities and Exchange Commission.
With that I would now like to hand, the call over to Aaron Aaron. Please go ahead.
Thank you Kenny.
Hey, I'd like to welcome all of you to our conference call and thank you for joining us today.
Our first quarter revenues were slightly higher than the comparable quarter revenues grew 2% year over year.
For the first quarter and reached $31 $9 million.
This is our 17th straight quarter of revenue growth year over year and I am pleased with the results we achieved during the first quarter, which met our expectations.
In March 22, our CCAR a R R.
$5 $9 million and our total E. R. R inclusive of maintenance and support was $48 4 million up 20% from March 2021.
We announced last week the appointment of lots of testing.
Ward I'm, a cooperation agreement with our Investor Outerbridge Enel group.
He has over 30 years of senior executive business and management experience in the high Tech and cyber security industry from companies, such as NDS, Cisco and glad where we believe this will be an excellent addition to our board.
<unk> will be replacing worn Mckenna, who served on our board for eight years.
As you will have seen from our earnings release, despite the overall confidence in our long term vision. We are facing short term headwinds that have led us to lower our forecast for this year I will address these headwinds and their impact in more detail as I discuss our forecast later in the call.
Yeah.
I would like to start by discussing our traffic management and analytics business addressed by our allot smart product line.
There are lots of them smart business remains solid the main use cases, we see today and CSP are continuing to be in traffic management congestion management quality of user experience, especially for video policy and charging control digital enforcement.
During the last few months, we were awarded several deals where we will be replacing a competitor's product that is installed.
We are discussing multiple other opportunities with other csp's currently using our competitors' products.
Working on expanding such deal that we won before.
We are continuously increasing the number of CSP that we work with.
Either by replacing competition in DPI or by our security offerings.
This growth in our CSP customer base creates new opportunities for both allot secure and smart product line.
Our governments look to fight climate terrorism, we see it.
Growing interest globally to be able to block illegal activities, such as drug trafficking child pornography or terrorism.
We are seeing growing interest in our products in this area as well.
In addition, we are investing in new ways to help wireless operators manage congestion on their networks and stay on their cost of expansions.
To summarize I believe demand for lot smart product line, including congestion management traffic management analytics digital enforcement.
<unk> use cases will remain healthy.
I want to turn our attention now what we see in our cyber security business and how the market is developing.
As I've said in previous calls I love is transforming into a cyber security company and this is where we see most of our future growth coming from.
There is a real evolution happening in the consumer cyber security market.
Responsibility on securing the consumers a family the small business life.
<unk> today will be individual each person is responsible to protect himself or herself and their families and small businesses.
To do this they need to find the security up by it downloaded and installed it on every one of their devices.
The problem is that regardless of how good or bad security App is more than 90% of consumers do not do what I just described and are less protected.
This means that the current solution with end point security ops is not accessible to most people.
And users consumers and Smbs are looking for a simple zero touch quote unquote cyber security service.
They prefer a simple security service and not have to do anything technical like downloading an app to each device and configuring it.
Network based security is the solution that makes this possible.
We are engaged worldwide with PSP that are looking to provide their customers with substance with such network. They seek.
<unk> security.
As we look at the market, we clearly see that the direction and momentum are very positive.
We see that the number of engagements the level of engagement the total addressable market size of our pipeline.
I look win rate.
We accept that the scope of services by consumers and Smbs.
The requests we're getting from customers and vendors to integrate more products to our management platform.
Are all improving and getting stronger.
We see evidence of all of these in the race and size of deals we are awarded and the networks that have commercially launched.
I would like to say a few words on the North American market.
As we previously announced.
<unk> already signed deals.
Deals with three operators in North America, one of which is dish.
None of these operators have launched yet.
I would like to inform you that we have been awarded by our core North American operator, and selected bias there.
We are currently in contract negotiations with both of them and while we cannot assure you the contracts will be signed we are very optimistic.
These potential contracts represent the mark of dozens of millions of dollars.
In addition, we are in serious discussions with additional operators.
North America is the largest telecom market globally.
The law, where traditionally much stronger in other regions and the advanced.
We are making with the north American operators represents a significant change for our law and will be key to generating C test revenues in 2023 and beyond.
We introduced the M a R or more as a simple metric to allow us to estimate the long term potential of the deal we sign.
As we indicated in previous calls and was already reflected in the second half of 'twenty 'twenty. One M. A R numbers, we apply and they are not to the full subscriber base, but only to our best estimate of the relevant segment.
CST is going to initially address.
Examples of such segment that are not initially address may include prepaid customers government or a corporate line or just the CSP strategy to prioritize a specific set of customers.
It differs from CSP CSP and it may change over time.
We are working with the operators to extend that reach.
It's important but those are our best estimates at this time when the contract is signed.
But from our experience and on average we can say that they represent about 50% of the CSP customer base.
It is important to note that while M. A R is a good indicator for long term market opportunity. It is not as good predictor for short term revenue.
As we indicated in previous calls our main challenge is to translate the contract into revenues.
First challenges to launch the service.
This process involves many stakeholders.
Clinical operational marketing purchasing and more.
Often it requires integration with our products as well as with many internal IP system.
We have increased our efforts to assist in those processes and in some cases, we can help.
This also gives us more visibility into the actual progress of the launch process.
Unfortunately, we have limited control over the final outcome and the process can be subject to many unforeseen delays.
Those delays have a material impact on our short term revenues.
And we believe it is prudent to adopt a more conservative forecast or services that have not been launched yet.
The second stage as the go to market strategy.
Here again, there are many strategies from bundling price plan.
He is a free services.
The segment's targeted they're targeting.
Targeting the channels.
And the market lease strategy.
On that front, we have learned a lot and in some cases, we are able to influence that strategy.
We hope those lessons will improve time to revenue and penetration rates.
But those could come into play.
After the project has been launched.
As of March 31st 2022.
Of the 23 signed customers only nine launched commercially most.
Most of them only to a portion of their subscriber base.
In addition, we expect to sign additional deals that haven't been awarded.
We see that the quality and size of the operators is increasing.
We have the most extensive array of products in the market from network based security home security DNS security and integration with endpoint solution.
But maybe the most important and integrated management platform that offers a unified policy that is crucial as more operators are moving into converged networks and want a unified solution that they can grow with.
A good indication for that approach is that we see growing signs of vendors either requested by the customer or independently asking them to integrate with our management platform.
The size of the market remains a huge so while we are this appeal disappointed with the pace at which it is materializing, we remain confident in our ability to achieve our long term goals and continue to invest in it.
Looking ahead I want to summarize our expectations for 2022.
A number of factors have changed during the last few months that have led us to modify our outlook for the year.
The C class revenues and they are in 2022 are composed of the projected performance of the nine networks, we launched.
Plus the projected revenue of new networks, yet to be launched.
With nine launched networks any change in the timing of an expected you launch or any change on the manner in which it is expected to be launched or marketed would result in a significant impact to the overall seacoast revenue number for the year.
As I noted unfortunately launch dates are hard for us to predict reliably.
In addition, we are seeing lots of ways to get delayed by the CSP for a variety of reasons.
Since we put together our annual operating plan for 2022.
Four to five months ago.
Our projected launch date for more than 10, CCAR services was delayed anywhere from one to eight months.
Some of the reasons for those delays are.
Budget allocation team resource allocation and prioritization within the CSP.
Specially in the I T Department.
Two internal issues between group headquarters and National operating units.
Three requests to ship more responsibilities to a law.
Okay.
Product maturity and integration issues with our DNS secure and home secure.
I would like to note that we still expect to launch numerous CCAR networks during 2022, despite the about delays.
But as we are getting closer to year end and given that usually there are also a few months of free service and ramp things we do.
Do not expect them to have significant contribution to 2020 to seek us revenues.
Yeah.
In addition, the war in Europe , we've had an ongoing negative impact on some of our services.
In Poland, where we lost was plate sales.
Sales in stores with significantly lower than expected in the last few months due to the spores and salespeople focusing on providing for the millions of refugees entering poll.
And Ukraine, where we were expected to launch a secret service.
This launch has been understandably suspended.
Most of our <unk> revenues are tied to the euro.
From January till today.
Phil.
About 7% to 8% compared to the U S dollars.
This has a negative effect on our revenues.
As a result of all the above we are modifying our forecast, let's see cash revenues was a whole lot of 2022.
To be larger than $7 million.
And our December 2022, a R R could be larger than $12 million.
As explained earlier the.
Despite the more conservative method for calculating the M. A R E.
Still expect to achieve over $180 million of new M. A R. In 2022.
We still believe that a target of 25% penetration rate of the relevant segments three to four years. After launch is an achievable target.
But we now believe that the average time from contract to initial revenues.
After a typical initial free period may extend to 18 months.
Sometimes longer with the larger operators.
I would now like to say a few words on our expectation for the overall company performance in 2022.
Two of the factors that affect our CCAR business in 2022 also affect our Capex business.
One is the war in Europe continues.
Some projects because she is eastern Ukraine, and informers T I S countries.
Being delayed or canceled.
Two.
With most of our lost revenues coming from you know a significant portion of revenues are in euros.
Significant change in the Europe USD exchange rate has a significant impact on our total revenues.
Bringing into accounts, our reduced guidance on <unk> revenues and the reduction in Capex revenues. We are now forecasting total revenues for 2022 to be between $135 million to $140 million.
Further to the updated revenue guidance, we are expecting that the revenue in the next three quarters of 2022 will be somewhat lower than the revenues in the comparable quarter of 2021.
Our forecast for support and maintenance revenues remained at $41 million to $43 million.
Regarding our expected loss.
As security launches are being delayed.
We can also do raise some of the expenses.
We also benefit from the Euro exchange rate and we're able to adjust other costs and expect our opex for the year to be between 119 and $121 million.
We believe our loss for the year will remain as previously forecasted between 23 and $25 million.
Likewise, we believe our net cash reduction for this year will also be as previously guided between $35 million to $38 million not including the convertible loan.
We expect our gross margin for the year to remain about 70%.
Despite our near term headwinds and the slow time for revenue.
We believe that enough services will be launched during the second half of 'twenty two 'twenty three that will allow us to reach profitability during 2024.
As we discussed in previous call, we don't manage our business on a separate P&L or the cost and Capex deals and we don't report this.
As we said previously we estimate in 2022.
On a synthetic fully loaded basis quote unquote.
The Catholics business has about 10% to 15% operating profit.
And the <unk> business is expected to lose tens of millions of dollars.
This estimate does not.
<unk> changed.
I would now like to summarize the overall picture and the key message.
And the Allot smart product line, we see a healthy pipeline multiple use cases, such as congestion management digital enforcement in the enterprise business are growing well.
We are successful in winning deals away from our competitors and unseating zone and several CSP, whereas they are they are.
Are the incumbent.
Overall, we see a solid demand for a little small.
The security area is what do we see our long term growth.
We are very encouraged by the pipeline growth, we see by the consumer and SMB take up rates as they sign up for the service.
Unfortunately, the warm Europe hiccups, along the way.
Europe to U S dollar exchange rate are causing us headwinds negatively affecting our expected results in quantity quantity.
We believe the network based cyber security market is emerging as a high growth market.
We are winning most deal and I am confident of our future success in the direction we are pursuing.
We are working better with PSP to achieve a high penetration rates.
And we remain optimistic on our recurring revenue outlook.
And now I would like to open the call for questions and answers.
And myself will be available to take your questions.
Operator.
Thank you ladies and gentlemen at this time, we will begin the question answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two.
You are using speaker equipment kind of lift the handset before pressing the numbers here a question will be pulled in the order they are received.
Standby, while we poll for your questions.
My first question is from the Holocaust key of North at Northland Capital markets. Please go ahead.
Yes. Thank you.
It's really just a blank a guidance update.
Further details on.
There's various reasons are driving this.
I'm sorry.
Production here.
Let's first focus on the mark to incremental air or that was quite 7 million.
Roughly consistent with the past four quarters of around 6 million per quarter.
Can you talk to why there has been no ramp incremental air are over the past five quarters.
Hey, I think I mean, when you're supposed to totally are and then obviously.
It's a combination always oh.
And you wouldn't look at the difference between the air.
Oh, that's cool.
One quarter in comparison.
Previous quarter.
It's consistent.
The number of subscribers.
Services all of them.
Yes.
If there's an addition of whatever new.
Operators were lost.
That's a weapon that all we use them and somebody the monopolies without longitude, but lost during that quarter will not affect the revenue because of it.
Pre tax periods and so on.
And of course exchange rate differences and so on.
So I think what we're seeing is mainly the effect that we havent launched and I don't remember exactly the numbers for every quarter last year, but we've been we've been growing with the existing customer base.
The primary customer base for quite a while.
The last quarter.
We've watched one service, which did not contribute anything in the numbers. So the growth was basically the end of last quarter on the <unk>.
Arnold growth all of these other services already launched.
With the headwinds of the.
Hum.
All of the exchange rate.
This services.
And that you're generating.
Incremental are awesome.
Does that represent.
Yeah.
Has that number off the top of my head and I don't want to give you a wrong number.
Oh I'd.
I'd have to get back to you on that.
Okay Alright.
And then.
Can you update us because era are.
Implies 7 million for calendar 'twenty two.
Which then implies about $2 million per quarter of incremental anyhow for the remaining three quarters. How do you see the shape of that incremental air are through those three quarters.
Let me see if I understand I understand the math you did just so I understand the question you are comparing the comparing the Oh projected December climbed two or are with the March 'twenty two.
Simply made the linear.
And then you put a pool and divided that by three.
Yeah.
Effectively yes, yeah, okay. So 12 months okay.
I would say it would be because look with what we're seeing with with most operators have launch we're seeing a linear growth.
With a pace that is I.
I would say, it's not always exactly the same in some but it's sort of grown each one individually grows with a phone call.
So if there is more and more.
Yeah.
There is any type of acceleration pumpkins.
New off label.
We'll get launch that means that the.
Yeah, our growth should accelerate from quarter to quarter as we launch new services, we don't launch new services that will probably not accelerate like we discussed before but if we do it could accelerate and go faster. So I would expect us to grow faster.
As we go through the fourth quarter than we will on the second floor.
Okay and right now do you expect do you have a high degree of confidence of any new services will indeed launch.
For the quarter.
Look clearly you know.
I've been burned by project.
Making projections and not on us.
So I'd like to try them.
Why not use the word highly comfortable on my forecast at this point.
But yeah, we project that there will be additional services launched in this quarter.
That's probably what it looks like.
I would prefer to call it.
No expectations of an incremental launches.
In the second quarter then.
Okay.
Okay.
Sorry, maybe I didn't acquaint myself.
Yeah.
I would rather I'm on the side of caution, but we do expect additional launches in the second quarter, yes.
Yes.
Okay, Alright, I'll see the floor.
I'll get back with you. Thank you.
Thank you.
Our next question is from Alex I understand out of Needham and company. Please go ahead.
Thanks can you hear me okay.
Yeah.
Great.
So.
My question really is on penetration rates.
You know I get it.
Launched in 'twenty, one you're probably not getting a lot of revenues from those launches a $193 million in March and in 2020 one.
Okay.
Reasonable I can even make an argument that launched in 2020 because of Covid. It delayed we have essentially nothing in our forecast for that.
Having trouble with is the 18 19 85 million Mark which now in 2022, which is.
Quite a long time generating only 5 million in revenues.
Sure so for the 'twenty two time frame fashion just to hear from the other two tranches.
That suggests to me that your penetration rate.
Between them.
21, and 'twenty, two really hasn't changed at all it's about 5% in 'twenty, one and about 6% or so in 'twenty, two and so the slope of that penetration improvement.
Becomes the primary issue in podcasting 'twenty three 'twenty four 'twenty five timeframe.
If we were assuming that that slope is flat is that looks.
Isn't that a real challenge to get the ramp.
In in revenues can.
Can you explain to me why that launch has not ramped any further.
Okay.
And I I.
Look the.
To my two main reasons one is that the.
The number of operators. This small liked to have lunch. So so anything that one operator dog caused a material effect for better for worse on the numbers.
Unfortunately in this case for <unk>.
Now the operator of launch.
On a lower base than their entire base, which is exactly what we discussed when we said okay tomorrow.
It's roughly they're watching on average to probably have more realistically.
And then when you look at the graduation rates, it's a different number the second point is we had one off quicker with the relatively larger.
Which launched with.
I'd say, a very weak go to market strategy and it took us close to about a year to convince them to change that.
They have virtually no additional customer support.
A few additional customers and revenue and it took us almost a year to work with them to change their go to market changed their marketing strategy and so on and now we're starting to see them pick up so while I fully understand the question. This is how we got to the numbers we are today.
Well.
But the cases that the customer didnt launch to the target model that you are forecasting then shouldn't you be adjusting your target bar down to reflect that smaller base I mean, you've left the target Mars unchanged for at $85 92 and 193.
We don't see a major ramp on that revenue, even with the issues that you're talking about a year.
<unk> on our 2019 launch.
So it should be more than 5 million revenues by 2022.
And it's something we're looking at that now I mean, it can I think of that more as being able to get to 10, or 15% and 23 or do I need to be flattening that maybe a percentage point or two increase.
As we go forward and similarly at the 192 million in 2020, yeah.
Almost no penetration in the revenues in 'twenty, two which is two years later.
Or at least a year and a half late or your 18 months a comment.
Virtually no revenues from it.
So how do I think about the ramp of that business sequentially into 'twenty three 'twenty four in terms of its penetration rate that strikes me as decrease critical issue whether this entire business model works.
Hi, Alex.
Hum.
We said before and I think we mentioned into the first time two quarters ago.
No.
We are calculating the ml and the more conservative way.
Ah well, taking only the applicable market while in the beginning of the.
In the beginning in 2019 2020 in summer 2020, 'twenty, one we cut them to collect the M out when the entire installed base.
It says that.
Roughly speaking the applicable number it's about 50%.
Total installed base.
Again, we are talking about the small.
Okay.
If that's the case, then do I need to cut the 85 million in apps.
Yeah, a couple of hundred and $92 million in half because if that's the case you should not be putting those up is the continued estimation of your prior Maher.
Need to restate tomorrow. If that's the case is that the case is the 85 and 192 off by a factor of 50%.
Yeah. So.
That's what we said before.
And the only one.
At the time, we signed the contract and after that.
The CSB you might have.
Subscribers, who might have less subscribers.
The revenue might go.
Up might go down and so on.
But if you want to.
We estimate the MBA out of 2019.
In 2020.
Adding to the new conservative way jumped the applicable.
Addressable market.
So this is Scott.
By 50%, 50% and post 'twenty, one do you want.
Would say may be 75% sweep.
So if you take.
3%.
2019, 50% booked.
2020, and 75% of 2021, you'll get to an aggregated model, let's say around longer than $80 million.
Rather than go longer than seven 2 million, which was the M. B all at the end of December 2021.
If you want to put it on the same scale.
Right.
That's exactly what we were looking for thank you.
By the way. This is the question you asked in previous quarter.
But we didn't have that.
So corey.
Understand thank you.
The next question is from Polyone of Bank of America Merrill Lynch. Please go ahead.
Hi, yes, not Olympic songs that out just so we can take to the revenue by geography breakout. So noticing that Americans are significantly down sequentially and then year over year as well can you explain why Americans are down so much and what the outlook is.
If you'll recall.
Laughter last year.
We disclose about the deal.
That's an example.
Bill too with dish.
Four five do you need to go back.
And we said that we're not expecting.
A major deal D C U.
But we are expecting.
New views on this topic.
I'm talking about cup of coffee.
Yeah.
Quite a few units protect before with a cup of coffee.
And we said that we are expecting Oh.
With these product line starting next year.
So this is the one of the reasons why you see reduction year over year.
In the revenue in the Americas.
Okay.
Got it and just a follow up on that do you think that is.
Hey, I guess just looking at the negative growth do you think that's a reflection on the ability to sell value added services on five key in America is what do you know, how we should frame thinking about that.
No no no no connection between five units per pack.
The CCAR five gain it back with the product.
Then the network itself and that's what explained.
Previously.
Hmm in the previous conference call.
Thriller bonds only to operate though that's launching.
Poorer five G M network, including the call.
While most of the operable Gulf topping.
Read your equipment and the frequency that normally in the later stage.
The Poland five G.
Cool.
It's why we said that you'd be potential from this market, but only starting next.
Next year.
It's not connected to pick us revenue.
Hum.
Paul.
That's all.
Got it thank you.
That's it.
Yeah.
The next question is from Eric <unk> of.
Of Lake Street. Please go ahead.
The launching of new <unk> customers in 2022 I think last quarter, you talked about 12 to 18, new <unk> customers. In 2022 did you update that number did I Miss that.
No we said that's it.
We are going to launch in 'twenty to 'twenty, two at least 12 new.
New projects.
Okay.
So that's.
That's consistent with last quarter okay.
The cash used in operations. This quarter. It was roughly $7 million, you talked about $35 million to $38 million cash burn in 2022 is that to say that we will be stepping up.
Cash burn in the out quarters or am I mixing cash from ops and free cash flow.
No we are Oh.
As mentioned we will see.
Behind the same guidance of cash flow.
On the $35 million to $38 million.
Cash reduction excluding the ceiling.
Which means we will end the year around the $90 million.
Including this.
Yeah.
That cuts to the chase.
Okay.
And then the DPI business.
From what I recall, the Capex business did have some seasonality.
<unk> entered the year, saying it may be flat to down slightly.
Do we have any seasonal adjustments in other words, if it's flat to down slightly each quarter or could we see a recovery maybe in Q4 on seasonal strength.
It's very hard to predict.
On a quarter by quarter basis.
It's a very lumpy business.
We went to projects, where we do not win the project or projects get delayed or canceled.
It's very hard to look at it that way, it's a huge project.
No single project of $5 million. So you can understand that.
The big swings up but quarter to quarter I think overall for the year, we should be roughly where we where we thought we would be.
Roughly what.
With I think a few million dollars less on that.
We've guided that way now because of the war in Europe .
Great.
The Oh.
Currency in which we are we've got some significant portion of our deals so.
But the business itself I think is roughly flat.
We said at the beginning of the year.
Okay, and then maybe I should have started with this but the revenue you've reset the revenue midpoint from $150 million down to 138 million, so roughly $12 million.
The reset if I put those three issues into if I put those $12 million into the three buckets.
Cash delays bucket number one or in Europe bucket number two and then FX headwinds Okay number three how do you allocate that $12 million reset.
So let's start from the easy part, which is the CCAR the midpoint of this hiccup in the previous guidance was 12 five.
A few of them now at 755 is coming from the Zika.
Then the rest.
You can assume few million dollars from the center.
And doing all of them.
Opportunities that would be booked bongo.
All countries in eastern Europe .
Got it thank you for taking my question.
Thank you.
The next question is from Marc Silk with Silk investments. Please go ahead.
Thanks for taking my questions most of the topics have been covered so the one thing I wanted to just bring up so do you still feel that the board of management is optimistic about your long term prospects.
Absolutely.
Hum.
So having said that now that your stock's down over 75% from last year than I think all the shareholders would expect that management and the board kind of step up and have some skin in the game and start buying some stock back some stocks for themselves because again, we have it's like we're taking all the risk and we kind of like to see management and the board.
Take some risk as well and plus also show the investment community that you're very optimistic because money talks. So that's just my comment and hopefully ill, let them know I know if they can if they have their money, but I think it's the right thing to do and it'll show a confidence to the investment community. So thank you.
I will definitely convey the message.
Thank you.
Youre welcome.
The next question is from Rory Wallace of Outerbridge. Please go ahead.
Hey, I just wanted to ask on the <unk>.
Five gene that protect side it seems like that opportunity is going to be much much larger.
And the historical Ddos business has been for you just thinking about how operators are going to rely less on scrubbing.
Scrubbing centers with their architectures on five G. So is there any I know theres not going to be significant revenue from that this year, but is there any pickup in sales activity around potential net protect deals.
And we are awesome. This year more operators on fiber networks that we were talking to a lot.
And now I'm talking about the the Catholic side, as well and Oh.
With millions of them seek outside as well, but the Catholic side, and we're not even both about D. C. I am.
Quite a few months.
Tend to come together, so yes, we are seeing some growth.
And the opportunities and the opportunities that we're talking to but like we said at the beginning of the year, we don't expect to have.
Any material new revenue as a whole.
Quite a claim.
Okay, and how about for for even the just sort of nation state type of use cases around secure internet are you seeing any any demand pull from them.
The geopolitical landscape around that.
It was slow demand pool.
Countries that want to have some control over the content that's going on the internet.
Try and block child pornography to try and block block terrorism and stuff like that we're seeing both.
Legislation.
<unk> is coming into place and put in various countries and we're seeing more and more requests to see Oh can you discuss what more can we do to help them getting some measure of control on that.
Okay, and then just drilling down into some of the issues you did that for why these deals are being delayed I think at.
One interesting one is just on the home secure router integration, which I think he mentioned and then.
Sort of integration issues between National units in group headquarters I mean, I think it sounds like you could have some pretty large home secured deals that scan to be ramped up at some point, but it sounds like those are being sort of pushed out are you confident that those large home security yield.
Eventually go into.
In the deployment in some reasonable timeframe because it seems like this could be a pretty big opportunity.
Okay.
We have signed several home secured deal.
We were awarded some others that have not been signed.
And we definitely have a high hope we work with them and we believe that they will be launched.
Some reasonable or long.
Reasonable for operator perspective, the time quit.
But unfortunately, they are being delayed.
But once they are launched so I have high hopes for what they will be resolved.
Okay and do some of those issues are progressing as far as I think there is specifically with the router integration.
And getting making sure that you have.
All of that groundwork in place.
Yes, yes.
Yes, we're getting more and more around those integrated.
I think we went public with.
A while ago cooperates.
Cooperation agreement.
Technicolor.
We haven't.
Well, we're working with the router and cause labor, we're working with other manufacturers.
Who are you.
The part of there.
<unk> program. So we are we.
We can integrate up real well.
We need to close specific off with it we're not doing that with all of them, but we're talking several of them.
Hearth process very very well.
It's very specific many different routers, but we are definitely progressing.
Okay, and then when I look at the new guidance four 7 million.
<unk> revenue for the year. It seems like if I, just linearly plug in and kind of adding 100 or 200000 of sequential revenue per quarter I get to that number and that's kind of what you've been achieving over the last year or so so is that mostly it sounds like it's mostly reliance on Q2.
<unk> ramp from the existing base.
These are customers with with you know kind of a very limited assumption around the new customers is that a fair way of looking at that.
Okay.
Yeah.
Absolutely.
Most of the expected launches.
Take place late in the second half of year.
And if you take into account that most of them and we'll have a period of three months means new customers new launches of new projects.
We generate a little revenue this year.
So most of it.
Revenue coming from existing customer.
Customer.
Got it and I think it sounded like in the script you talked about having one two new North American deals, which which is pretty positive in my opinion. So could you elaborate on those at all I think you said one was already signed one would still awaiting commercial sign off but anything else you're able to.
Sure investors.
So oh.
I think what I said, I said that we sign already with Sweden.
One of which of course the other two we have not at all.
We were awarded by one in selected.
But on the other.
No.
The reason I'm, saying awarded in selected neither of them are signs okay. Neither of these two additional ones that aside.
I'm, saying awarded by one because there was an RFP process and we were awarded and the other ones are selected up without having we've worked with them for a long time, but there was no hormone competitive RFP process.
But neither of them with science. So you understood that we will find one and are now working on 11 of them.
That's not correct.
Yeah, I agree with you that overall.
The way, we see the market in North America, all very possible on the Clos are significant.
And we're also talking to other operators. So I think we'll we will have.
We will have hopefully and Columbus, but hopefully we will have even additional tools.
Okay, well congratulations on being awarded there hopefully.
You can get those contracts signed and then.
The Opex was lower than I think.
We wanted to be modeling for this quarter. So you know I think historically you know you've seen.
You've seen kind of less you've seen a ramp and leverage over the year as revenues increase but this year you're forecasting the opposite so.
I guess are you are you planning a lot of hiring specifically in the second quarter or.
Just trying to understand the ramp to get to the Opex number for the year based off of the Q1 number.
So we.
We have many open floor.
Uh huh.
We havent quoted yet and we are planning to do it are doing do you.
The main region reason.
Oh, the expected increase in Opex.
Hum.
There are other types of expenses that are correlated to the revenue.
So once the third quarter, our revenue was Oh no.
The first quarter revenue overall also the associated expenses.
Sure.
Like I said the Commission agent Commission and so on.
Okay.
Great well, thanks for taking all those questions I really appreciate it.
Perfect.
There are no further questions at this time, let's turn tabby, what do you like to make your concluding statement.
Yes.
On behalf of myself and the management of a lot I want to thank you for your interest and we're taking the time to participate on this call.
Yeah.
Thank you for joining us and I look forward to talking to you in the next quarter and hopefully seeing you sometime soon wherever you are.
Thank you very much.
Thank you. This concludes the allot first quarter 2022 results conference call. Thank you for your participation you May go ahead and disconnect.
Yes.
Okay.
Sure.
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