Q3 2022 Allot Ltd Earnings Call
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Okay.
Ladies and gentlemen, thank you for standing by and welcome to our third 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 all have all received by now the Companys press release, if you have not received it please contact <unk> Investor Relations team.
E K global Investor Relations at one to one to 3788040.
Or view it in this new sections of the company's website at a look dotcom.
I would now like to hand, the call over to Mr. Kenny Green of E. K Global Investor Relations. Mr. Green would you like to begin please.
Thank you operator.
Welcome to the third quarter 2022 conference calls I would like to welcome all of you to this conference call and I'd like to thank Allots management for hosting this call.
On the line today are Mr. Erez, <unk>, President and CEO and Mr. Ziv Leitman CFO Erez.
We'll provide an opening statements and summarize the key highlights of this quarter. We will then open the call to the question and answer session, where both Erez ends it will be available to answer those questions.
You can always find the financial results and metrics, including those we typically discussed on this conference call in today's earnings press release.
Well, we start I'd like to point out the Safe Harbor 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 a lot cannot guarantee that they will in fact occur a lot does not assume any obligation to update that information.
Actual results or events may differ materially from those projected including as a result of changing market trends late in the launch of services by customers reduced demands and the competitive nature of 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 Arizona Chebbi Erez. 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 revenues reached $25 million, 35% lower than the comparable revenues last year.
In September 2022 hour seek us a R. R was $6 $9 million same as June 2022.
This was a challenging quarter for us and while these are the results we anticipated for the quarter I am not pleased towards them.
As we look into the fourth quarter and into two.
2023, I definitely expect to see significant improvement and I remain optimistic on the fundamentals and the future during today's call I will discuss the challenges we are facing the opportunities, we see and why I am confident in the future.
Yeah.
Before discussing in detail our different product lines I would like to address some corporate news I think are important.
Today, we issued a press release announcing our deal with Verizon business to provide network based security to provide.
Ryzen, SMB small medium businesses and Iot internet of things customers I.
I believe this is the most significant C class contract loss assigned to date and I am very proud that the loss has been chosen by Verizon to be the technology solution behind their intended security service.
And the other press release, which made public today, we announced that a lot of board of directors has decided to nominate Cynthia Paul to serve as a director on our board subject to shareholder approval.
Very pleased that Mr. Paul accepted our board's nomination has.
No one heard over the last few years I believe our capabilities vast experience and business expertise will greatly benefit a lot and I look forward to her joining our board.
Okay.
I would like to also mention a couple of elements affecting us companywide that I believe we should be aware of.
One as anticipated in our previous earnings call in early September we implemented some cost cutting measures that also included reduction of our workforce.
We intend to continue with the policy of tight control of our expenses.
Order to significantly reduce our loss in 2023 and reach profitability in 2024.
To exchange.
Exchange rates have fluctuated significantly during this year.
Significant part of our revenue is in non U S dollars.
And the depreciation compared to the U S dollar had an impact on our revenues as well.
Future fluctuations in exchange rates are of course hard to predict and may have impact on us going forward as well.
And now I would like to move to discuss our different product lines.
Yeah.
I would like to start by discussing our traffic management and analytics business addressed by our allot smart product line.
The main use cases, we see today in Csp's continued to be in traffic management congestion management quality of user experience, especially for video.
Policy and charging control and digital enforcement.
As governments look suffice crime and terrorism, we see a growing interest globally and being 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.
Many csp's today are reexamining the composition of their network.
This may be because they are moving to five G or because they need to replace their end of life products or other reasons.
As they do so we see multiple opportunities globally, where CSP is currently using our competitor's product are considering a change.
We are working closely with quite a few such CSP to win their trust and business, becoming their next choice for DPI.
Most of these processes are through a competitive bidding process and some are potentially negotiated deals.
In addition, we are working on expanding deals that we weren't before.
We are also investing in new ways to help wireless operators manage congestion on their networks and save on their car on their cost of expansions.
I think we have developed some very interesting capabilities in this area with much value for wireless operators.
I will be happy to share with you more details in the future as we progress and as we are prepared to make this published.
In the previous earnings call I discussed several sizable deals that we expected to book and be able to partially delivered in the second and third quarters and that were delayed.
We did not lose any of them and we believe they will close during the coming months, but we cannot be assured of that.
As I mentioned in the previous earnings call given the delay in closing the deals and uncertainty regarding the exact time, when we will close the deal and the exact terms required to recognize revenue which cannot be assured that the revenues we expected from them in 2022 will be recognized this year.
Looking at the DPI market in general.
We see many opportunities and an overall solid DPI market.
Many of the more significant opportunities, we see are either new customers or competitive replacement opportunities.
However, these opportunities are larger than average and make revenues more concentrated and lumpier.
We see that its taking us longer to close DPI deals than it took in the past.
We continue to analyze the reasons for these delays.
In part this may be due to the larger size of the deals. It may also be related to the general economic environment and we do not know if this will be a continuing trend.
Yes.
I am fully aware of the challenges we are facing.
However, it is becoming much clearer to me that our challenges are more on forecasting the timing rather than on the market size or our share of the market.
We have a very strong pipeline of deals expected to close in the coming months, we are competing on or negotiating multiple large deals and forecasting theres timing is challenging.
I am convinced that the DPI market is solid and our competitive position is strong.
Yeah.
I want to turn your attention now.
So what we see in our cyber security business and how the market is developing.
As I've said in previous calls, although it is transforming into a cyber security company and this is where we see most of our future growth coming from.
Okay.
We are engaged worldwide with CSP that are looking to provide their customers with network based C class.
As we look at the market, we see that the direction and momentum of operators interested to launch network based security services continues to be very positive.
The various operators provide services that are on par on speed coverage and reliability.
As they look for differentiation network based security is emerging as an important element.
This is even more important since network security as a service native so the operator's network and is directly coupled to the access network itself.
There are several tier one operators, who have reached a conclusion that providing network based security to their customers is a significant and important to them.
And they are discussing with us how to do so.
As we announced earlier, we recently signed a deal with Verizon.
This deal is intended to place a lot of network secured and the Verizon network and provider in embedded security solution that will include fixed wireless SMB customers and internet of things connections.
As Verizon said their quote.
This offering paves the way for a network based portfolio that will simplify their customer experience and help provide their customers peace of mind.
A lot has been working with Verizon both technically and commercially on this opportunity for quite a while.
Our network secure platform.
He is already has already been installed in horizon labs for quite some time and has been vigorously tested for several use cases.
This contract is the most meaningful meaningful sekos contract a lot has signed to date.
I view Verizon is choice of a lot to provide cyber security protection for their SMB customers as a testimony to the strength of our solution and I am extremely proud to have been selected by Verizon.
Yeah.
A lot was selected to provide our solution only for a very specific subset of horizon customers.
We are of course hopeful that perhaps sometimes in the future. After we have proven ourselves in practice.
There may perhaps be opportunities to address some other segments with our offering but we cannot be assured of that.
In our previous call I mentioned that we have signed deals with three of them.
Awarded and in contract negotiation was to force.
For sake of clarity.
Verizon is this force operator.
Okay.
North America is.
As the largest telecom market globally.
A lot was traditionally much stronger in other regions and the advancements we are making with north American operators represent a significant change for a lot and will be key to generating <unk> revenues in 2023 and beyond.
While the Verizon deal is extremely important on its own.
I am confident that other csp's globally, we'll consider Verizon to decisions when they make their own decisions on providing network based security to their customers.
In addition.
Negotiations with several other operators in North America, Latin America, EMEA and APAC.
We were awarded deals, but have not signed the contracts yet.
These potential additional contracts represent a projected M. A R of dozens of millions of dollars.
On top of that we are also in serious discussions with additional operators, where we have not been awarded yet.
I will remain challenged today.
And our <unk> business is to translate the contracts we signed into revenues.
The first challenge is to launch the service.
This process involves many stakeholders on the CSP side.
Technical operational marketing purchasing and more they are.
I'll have multiple other tasks on priorities.
Offering integration of our products with different internal it systems is required.
During the year, we increased our efforts to assist in those processes and in some cases, we managed to help expedite the process.
As discussed in the previous earnings call.
We unfortunately concluded that while in some cases, we managed to speed up things overall, our ability to positively impact. The launch date is very limited.
As a result, we changed our approach and we will.
And we will focus our future efforts of speeding up launches mainly on few targeted larger opportunities that we believe can contribute significantly to revenues.
I will talk more about this and other changes we are making in our focus and how we run the business.
A bit differently.
During the third quarter, no CSP launched a new <unk> service with our technology.
This is obviously disappointing.
As of September 32022 of the 25 signed customers only 11 launched commercially.
Most of them are relatively small operators in most of them lots of service only to a portion of their subscriber base.
We do however, expect one or two additional launches before the end of 2022.
Our Ccs revenues for the third quarter were $1 7 million and the AAR are at the end of the third quarter was $6 9 million.
While the number of subscribers grew during the third quarter. This revenue growth was offset by negative impact of currency exchange rates, leading to flat quarter over quarter seek us revenues and they are.
In the fourth quarter, we expect continued growth from existing customers and some modest revenues from new networks. Therefore, we expect <unk> revenues to be higher.
Our major challenge we have is the marketing aggressiveness of the CSP when launching the <unk> service.
Aggressive go to market approaches can include among others.
Proactively offering the service in every customer interaction bundling the security offering and the price declines for some or all of the customers et cetera.
The degree to which the CSP will be aggressive in their go to market approach is primarily determined by the perceived value of the service.
Unfortunately, we have learned that merely adding revenues to the CSP is not a strong enough motivation.
CSP has multiple value added services and these typically had low penetration rates, which CSP seem to be content with.
If security is perceived as another value added service the expectations of it will be low.
Targets, given sort of the working level in the CSP will below and the results will below.
This can also result in the CSP not prioritizing the launch of the service.
On the other hand, when an operator sees security as presenting our strategic value the motivation and results change.
What is strategic will change from one operator to another and this can include elements such as the.
Differentiation in the market compared to competitors.
Or motivation to transition customers from <unk> legacy service, two five G service or.
Our overall brand perception of the operator as a quote secure broadband provider unquote.
Or motivation to transition a customer from a low tariff plant to a more expensive one and others.
The willingness of the CSP to commit to an aggressive go to market approach and the contract is to a degree an indication of how strategic this services to them.
These discussions sometimes take time and further delay the launch, but I think they are important to our long term success.
Bringing all the above into account and in line with what we've discussed in the previous earnings call, we changed certain elements of our approach to the market.
One going forward, we are shifting our focus from.
Land grab unquote for market share and number of Csp's two CSP with revenue potential in the next couple of years.
This means we will focus on CSP that have a significant revenue potential even at the expense of market share.
I can share with you that during the third quarter, we decided not to close with a certain CSP.
Where we were awarded because we felt the potential revenues were two small compared to the commitment we needed to make.
Two we will push very hard to have CSP, we engage with contractually commit to an aggressive go to market.
In fact, we are discussing today with multiple csp's, including tier ones. It's the possibility of launching the security service as part of the regular price plans to a whole segment of customers.
Such as all premium plans for example in exchange for a lower <unk>.
Sub price to allot.
Our CSP tried to differentiate themselves and as we understand the importance of network based security we find some of the very receptive to the idea.
If implemented it would mean, many more customers much faster without necessarily reducing the overall future revenue potential of that CSP to adopt.
Of course, we will not always be able to get such a commitment and we remain pragmatic as we may have to agree to a different approach depending on the CSP.
Three <unk>.
CSP is a medium size they will not commit to an aggressive go to market approach and small CSP is regardless of their plan to go to market approach.
Our offer of commercial terms of our revenues are not dependent on their marketing success.
We expect some of these CSP may agree to this and some will not.
I expect these changes will have an impact also on the number of new CSP eventually sign up.
However, it will allow us to focus our resources on a smaller number of csp's that seem more strategic value and the <unk> service and it will ultimately drive our revenues.
As I look at the deals we have done and those that are in the pipeline.
I am convinced that the size of this market remains a huge one.
While I am disappointed with the current pace at which our revenues are materializing I remain very confident in our ability to achieve our long term goals.
Okay.
In the previous call.
Spoke about the challenge of integrating our home secure router AGN and specific routers and our efforts to simplify this process and therefore help expedite launches of whole secure solutions with CSP.
As part of this continuing effort, we announced recently that a lot has joined forces with Tivo, formerly Technicolor to become part of their ecosystem and pre integrate our solution on Vantiv a home in Soho routers.
I think this is an important step forward to make integration and launch is easier for CSP and we are pursuing additional steps to make such integrations even easier.
Okay.
Looking ahead I want to summarize our expectations for 2022.
For the remainder of the year the <unk> revenues and they are are are composed of at this point almost entirely of the projected performance of the 11 networks, we launched plus some projected revenue of new networks, yet to be launched.
We continue to forecast Sekos revenues for the whole of 2022 to be approximately $7 million in our December 2022, <unk> to be approximately $9 million was the main risk being possible exchange rate changes and new launches.
Okay.
Despite the change in our approach to future CCAR deals as I explained before.
We expect to achieve approximately $180 million of new M. A R. In 2022.
It is important to note that while <unk> is a good indicator for long term market opportunity. It is not a good predictor for short term revenue.
I would now like to say a few words on our expectation for the company's overall performance in 2022.
We still expect our full year 2022 revenues of $125 million to $130 million trending towards the lower end.
Our forecast for support and maintenance revenues remains at 41 million to $43 million.
As I stated, we have already implemented some cost cutting measures and as a result, we expect our opex for the year to be between 109 and $111 million.
We continue to expect our loss for the full year of 2022 to be between 23 and $24 million.
Likewise, we believe our net cash reduction for the year. We will also be as previously guided between $35 million to $38 million.
Okay.
Whilst 2023 guidance will be provided in our February 2023 earnings call I do want to give you at this time a peek into the direction. We are looking at.
In 2023, we currently expect growth in both Capex revenues and <unk> revenues.
We currently expect total revenue growth to be close to 10% compared to 2022.
Yeah.
We remain committed to reach profitability for the full year 2024.
This will be achieved by some revenue growth mainly on seacoast business, but also through tight expense control.
Thus, we expect loss in 2023 to be significantly lower than in 2022 I.
I believe we are on track to achieve this.
I am fully aware of the challenges that we face.
I believe our DPI business and solid is solid and will continue as such.
Our Ccs business is where we see are significant future growth.
While our <unk> revenues are happening later than we would like and later than we expected.
I remain convinced of the very large potential of this business and I am confident that we will grow very significantly in the coming years.
I have full faith in our company and our team and our products and I believe the actions. We are taking makes these goals are achievable.
And now I would like to open the call for questions and answers.
Steve and myself will be available to take your questions operator.
Thank you ladies and gentlemen.
At this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment kindly lift the handset before pressing the numbers.
Questions will be pulled in the order they are received.
These standby, while we poll for your questions.
The first question is from Eric Martin you'd see.
Lake Street. Please go ahead.
Hey, congratulations on the great.
Contract Thats definitely a high profile customer wanted to get a feel for their potential impact not necessarily in 2022, but do you have any numbers you can give us for the revenue impact in 2003 or beyond.
Okay.
Unfortunately, not Eric.
As much as I would like to.
But it's a.
It's a significant operator.
And we hope for a floor for <unk>.
A good positive impact, but I can't share any numbers or commit to them.
Okay, and then you did give a little bit of color.
Not.
Sure.
Well, let's just talk about 2023, and the opportunity for a 10% growth there.
2022 is going to be a down year for you as we look to a return to potential double digit growth in 2023, what where's that recovery coming from.
It's coming I think from the from both areas of the business, both the Samsung something from DPI and some from the seed costs. Both I expect both of them to grow next year.
To what degree and so on that's it's premature for me to estimate that.
Okay and then.
Last quarter, the disappointment around the Capex deal delays really took the wind out of 2022, it doesn't sound like any of those delayed transactions have closed.
Do I understand that you don't expect them to close in 2022 or Youre not the current guidance doesn't anticipate them to close in 2022.
Right.
Right now.
No.
I would like to close them this year.
May or may not close this year, but I've been.
As you can.
As you know and understand I've been incorrect and in forecasting when they will close previously since the delay so I'm much more cautious at this point I'm not going to commit that it will close this year.
We know, but I think we see our path to the revenue guidance that we gave that we gave.
Okay. So.
The guidance doesn't anticipate them closing is what youre, saying for 'twenty two.
Some of these things in the guidance.
There are several options that will happen someday will happen some of them well and we take that into account when we built when we build our forecast.
Okay and then last question for me on the operating expense side. You are now talking about a range of 190 to 111 for 2022, where do you expect the operating expenses next year.
I think that I think thats, probably better left for the for a more detailed guidance on 'twenty three when when we discussed it in February but Steve you may want.
Additional comment on that.
Unfortunately, we cannot relate to specific number since we didnt provide guidance for next year, we just said that.
The loss.
This significantly lower than this year.
And the revenues will grow.
Roughly 10%.
So if we say, let's assume that D. C is the revenues will be 125, so it means that the revenues.
Next year would be 137.5.
If I'm not mistaken.
By the calculation.
But I cannot relate to specific.
Number of topics.
But given that you've got at the Opex down and Youre comfortable talking about double digit growth rate.
Can I assume that there is leverage that that growth that we won't be.
Returning to it wouldn't.
Wouldn't be growing opex by the amount of recurring revenue.
No. We just finished.
We say.
By definition, if we say that the loss will be lower.
So it means that.
The expenses should.
Cannot go the same percentage of the revenues.
Eric.
I'd like to.
I agree with what he said of course, but I would like to reemphasize again, we're fully committed.
To becoming profitable full year in 2024.
Okay, now I'm, not saying that each and every quarter, but for the full year of 2024, we will be profitable.
The only practical way to reach that establish significantly lower loss in 2023, So that's what we're going to do.
Understand thanks for taking my questions.
Yeah.
The next question is from Niihau chunky.
Of Northland capital.
Go ahead.
Yes, Thank you and congratulations on a Verizon deal as well.
What are the expectations on Verizon aggressiveness with the go to market.
With their luminous to Verizon SMB customer assistance. This initial committed for.
And.
Unfortunately.
Everything has to do with say Verizon intentions on go to market.
Or is there or is there a timing or anything like that is confidential.
Additive information for Verizon and I cannot relate to any of it.
Okay.
Does this Verizon deal.
<unk> Oh, you would assess that.
Network Security and network revenue ratio of 5% to 8%.
I'm not sure I followed the question could you repeat that please.
Yes, Okay. So I think from your Investor day from like two years ago, you had presented a top down view of your opportunity one of those steps was.
The amount.
Revenue of five 8% intensity of network security and network revenue.
So my question is that given this contract with a large.
Right or.
Has it changed your view on that.
Network Security network revenue ratio with that top down view that you presented a couple of years ago.
I think.
At the top down view it shouldn't change it not necessarily because it's doing better or worse or exactly on that number.
But because again, it's one deal with.
With a single operator for a specific subsegment or subset of their customers. So I.
I don't see this overall does it change my view of the overall market I think not.
Okay very good.
Yes.
Yes.
If I understood. Your question you relate to.
The percentage, it's we said how much.
Customers are willing to pay for the service between 5% to 8% right.
Correct.
So.
It shouldnt be change.
Cause of Verizon.
So on average.
How much according to our experience.
Many customers are much they are willing to pay.
Percentage wise out of the connectivity you charge.
Well out of the current outlook.
Okay. So now I'll say, thank you see you will see I didn't fully appreciate the question.
Let me.
Provide the.
To response, maybe from a slightly different angle.
I talked during this call I think.
So there's quite a few times that we're trying to work with operators, whereas a bundle.
<unk> bundle security as a service as part of their pricing plans and so on.
When something like that happens and I'm, not saying Verizon I'm talking in general Okay sounds like that happens then an operator will be offering a plan that is I don't know X dollars per moths, whatever and including that plan there'll be so many.
As such with such speed, so many gigabytes of data and security and maybe other things.
Now.
There is definitely do such bundling I think it will be it's great I think both for the operator and for US, but there is no distinct line item that says this is how much the customers paying for security.
But I think that.
If you'd like to see the perceived value of the security is around those numbers.
Got it understood. Thanks Zed.
For clarifying my question in a restaurant it further detail there.
So yesterday you did a press release that based on some.
A survey of 1000, SMB customers, especially employees or less.
And.
It's great that 70% of our looking into their network security provider.
Sure sure Communications.
Do you have any visibility as to what the other 30%.
Are looking to do as far as security then.
Okay.
Okay.
Excellent question, there I do not.
It wasn't a part we were focusing on honestly.
In the survey.
Yeah, we we run surveys like this our marketing department won surveys like this.
Four different countries globally for different segments of the market and we published the results from time to time.
Yeah.
We see consistently in all of these services.
Is that a majority percentage wise changing but basically a majority of customers whether their consumers are smbs or saw.
Understand that they need to be.
Secured means they understand that there are threats.
They understand somebody needs to to help them secure.
And at a very very large portion is looking at the operator is the one who will the will secure them.
If you ask me to guess I'm here I'm just guessing.
The other areas either don't think they need security or they think that they can they can take care of themselves or a variety of other things like that.
Okay very good.
And then.
Yes.
Large deals that have gotten delayed.
Is there are they relative to the average size you typically see.
How much <unk> sorry.
On the DPI side.
Large deals that happened yesterday that havent been Moscow, how much.
Are they in your typical average deal size that you're seeing.
Yeah.
There.
They are quite large.
They're definitely in the.
The millions of dollars okay.
I'll put it that way so it's not.
It's not too we have many deals of various sizes. These are these are large.
And typically what's the size of the children outside.
Outside of these large deals.
I know, Steve do you know what the average deal size we have is.
No, but I think the average is.
It's not really significant.
There is large.
Randall deviation.
Relatively wide. So we can have a deal of.
$300000 and we can enter a deal of $3 million and more.
The average will mean really nothing.
Gotcha understood. Okay. So its just simply you have a larger proportion of large deals in the pipeline than usual.
Yes, we're seeing we're seeing that we're seeing today more large deals I think then we saw a couple of years ago.
Understood. Okay, and then a registered here correctly did you give them the incremental bar chocolate for calendar 'twenty three.
Well that was stronger 22 no.
The calendar 'twenty, two not to give anything up 23.
Okay, great. Thank you.
Then the next question is from Marc Silk from Silk investments. Please go ahead.
Thank you for taking my questions Oh I'll add on.
To the group congratulations on the Verizon deal. It just gives you.
Your technology a.
A lot of credibility and hopefully that'll open up more doors to future deals.
So on your previous calls you've talked about on your traffic management and analytics, you've been awarded several deals where you'll be you'll be replacing a direct competitors product in a slowing economy going forward why would they switched from a competitive product as opposed to basically doing.
Nothing.
Good.
It's because they're so they need to do something.
There are several rationales for why why do they need.
Rephrase the question I'll ask your permission why do they have to make any such move at all okay, why or why not stay with what they've got right.
Basically your question and the reason is that Theyre, making other changes that necessitate them to make a decision.
Some of them could be because for example.
Think of a mobile operator that wants to launch a <unk> network and they want to go to a real <unk> network of Standalone <unk> core so need to launch a new core so they need new capable they need to add capabilities that they have to do something that they cant use the forging quarters that they've got.
Another example.
It could be that Dave that they've made a strategic decision as an operator to move from from their own data centers to a tooth.
<unk>, some sort of shared environment, maybe on cloud and so on and again, they will need to deploy new different technologies and what they've got because what they've got doesn't cut it doesn't do that work for them anymore.
I could give you another example, where.
This is a this is realistic.
They have currently a certain product whether its from our competitor and other fields.
And that product has reached end of life and there is no more support for it so they can't get security upgrades et cetera.
Et cetera on it so they have to do something they can't they can't live with the product that has no more support security updates et cetera. So I have to do something all of this all of these reasons open up the issue of Okay. If theyre going to do that now that can make us choice from scratch.
And therefore, the academy and these and there are other probably.
Examples of why they would have to do something and they can't stay with what they've got.
So basically what you're saying the company is that going forward.
A global recession, and there's not going to basically be an option for them to.
And in activity.
It's I can't say that says that's a that's a heart centers for me to say.
One could one could make the argument that okay. So it's going to be a global recession, that's going to be really bad then the company that decided to launch a <unk> network is going to say, okay. We're going to delay for a couple of years. It seems like that could happen right I'm not going to say, there's going to be zero effect.
But the strategic reason to move to make these changes is not tied to okay. They just got tired of this platform and they really have excess money and they want to spend it. They are trying to do something strategically different each and every operator with his own their own rationale and direction and that no.
First it takes new new equipment for them and I think that in general I think that the telecom industry.
While recession will hit if was there is a recession will hit everyone.
I think the telecom industry is a little bit less.
The hit will be a little bit less dramatic just because you know.
Maybe it will change our iPhone less frequently, but we're not going to give up on our connectivity.
So the end of the day I doubt, we will see a huge impact on telecom with telecom operators.
Makes sense.
And your second quarter Conference call, you announced that you signed this FC cast deal with Vodafone to launch security services to fixed broadband customers using a lot home secure products with the intention to deploy in seven different European countries. So my question is is this just limited to customers using me a lot home secure.
Or is there an even bigger opportunity.
This as well.
It's we're providing the alot home secure under this contract we are providing a lot of home security Vodafone when they will install it in fourth.
These seven countries like like I said last time.
Is there a potential to expand that in Vodafone for other things.
First one there has been a longtime customer of north Florida for many things for DPI for network security for free.
Other things and I hope, we'll be able to.
To provide the technology for other things as well, but at this point the contract that we signed is limited to this.
And just to be clear so your original deal with Vodafone, which obviously.
They just paid upfront and that was basically yet. So this is going to be a recurring revenue deal with you and Vodafone.
That's correct the original deal.
For many years ago was for network secure that was that was.
Houston that is being used today to protect their mobile customers they've paid us upfront and of course, they pay us for expansion in support and maintenance and so on an ongoing basis.
This deal is recurring revenue, where they pay us monthly for the number of subscribers that will be using it.
Okay. That's great. So since you always bring up Vodafone is 50% penetration rate.
Are they going to use the same playbook in these seven European countries or every country is going to be different just because again you emphasized how successful they've been.
Implementing your technology.
Even on the network secured deal they were they did different go to market.
<unk> approaches in different countries and I would expect that here as well.
The the different <unk> in different countries.
We'll be using different go to market.
Approaches on the home secure as well.
Can you give us a ballpark of the potential of M. A R F seven.
Countries are in play are its time honestly, we would rather not.
Okay.
My last question is so I just saw.
Dish is seeking $2 billion in financing for network build out in Q1 of 2023 is just kind of a timeline that they have given you as far as when they're going to start or its unrelated or anything you can call you can bring to on the dish deal would be helpful.
Yeah look I mean.
They've announced that they started already providing commercial services.
Months ago.
Alright.
They have some.
They had I think.
Some milestones that they had to regulatory milestones they had to reach and I believe they announced they reached now they still have a very very small number of subscribers I'm not talking about.
Yeah.
Both.
The brand name.
Yes.
And I'm talking about those obviously, but.
But on the on the new network.
They still have very small number of subscribers.
And I'm not sure when when that number will start growing dramatically.
Hope it will be soon but I don't know.
Alright, Thank you for taking my questions and hopefully the Verizon deal is the start of something exciting. Thank you. Thank you very much.
If there are any additional questions. Please press star one if you wish to cancel your request. Please press star two please stand by while we poll for more questions.
The next question is from Tao Liana.
Bank of America Merrill Lynch.
Please go ahead.
Hi, This is Matt on for our call. This morning, just one quick question from me. So it sounds like you have fourth quarter revenues.
That is 10 to 12 million gap from where we are in the third quarter and just sort of another confidence in terms of guiding to that number of races, now maybe guiding a little bit lower for thinking that two other deals or some of them may not materialize next quarter or so.
You know around the confidence and lifestyle isn't that guide. Thank you.
ZIP you want to address that please.
So.
Our guidance for the.
For the year the revenues between.
125 to one therapy.
Boeing.
No.
Hello, Orange, so, let's assume it will be $1 25.
In Q4, we will have revenues of 75 million.
So if you ask me today, we have all the $35 million and so the answer is no usually in our business.
Most of the revenues are coming towards the end of the quarter.
But currently this is our best estimation.
Of the revenues that we will achieve this quarter.
And then just a follow up there with macro deteriorating that still gives you guys. The confidence to say that we think 35 is going to be the right number to guide to.
I guess I'm just worried about the execute carriers you know if we don't see that with materialize in the quarter, what would that Red Robin you know $35 million.
Again, according to our forecast I'll wait to Denver right now.
You've got around 75.
Is what we're expecting.
So we don't have it in <unk>.
You know it can vary.
So this is the right now this is the way to diversify our focus.
And we will work very hard in order to achieve it.
Thank you.
There are no further questions at this time.
Mr Entebbe.
Would you like to make your concluding statement.
Yes.
I want to thank you all for joining us on the call today. Thank you for your question and thank you for your interest and support of a lot and I look forward to seeing you on our next call or sometimes earlier.
You very much.
Thank you. This concludes the third quarter 2022 results conference call.
A recording will be available on our website.
W. W. Dot alert dotcom. Thank you for your participation you May go ahead and disconnect.
Yeah.
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Okay.
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