Q3 2024 Allot Ltd Earnings Call
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Speaker Change: Ladies and gentlemen, thank you for standing by the call will begin at nine o'clock.
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Speaker Change: <unk>.
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Ladies and gentlemen, thank you for standing by welcome to Allo.
Speaker Change: Third quarter 2024 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.
Speaker Change: Reminder, this conference is being recorded.
Speaker Change: You should have all received by now the Companys press release, if you have not received it please contact allots investors relation team.
Speaker Change: Global Investor Relations at one to one to $3 70, 8800, our view it.
Speaker Change: News section of the company's website at Www Dot Dot com.
Now I'd like to hand over the call to Mr. Kenny Green of E.
Speaker Change: Global Investor Relations, Mr. Green would you like to begin please.
Speaker Change: Thank you.
Speaker Change: Thanks to all of you and welcome to last conference call to discuss its financial results for the quarter.
Speaker Change: I would like to thank our loss management for hosting this conference call.
Speaker Change: With me today on the call.
Speaker Change: Oh Harare CEO.
CFO.
Speaker Change: Alright.
Marks: Marks we will open the call for the question and answer session.
Marks: Neil will be available to answer those questions.
Marks: You can all find the highlights of the quarter, including financial highlights and metrics, including those we typically discussed on the conference call in today's earnings release fully thought I'd like to point out the following safe Harbor statement. This conference call may contain projections or other forward looking.
Marks: Statements regarding future events or the future performance of the company.
Marks: These statements are predictions.
Marks: Im not guarantee that they will in fact occur.
Marks: It does.
<unk> does not assume any obligation to update that information actual events or results may differ materially from those projected including as a result of changing market trends.
Marks: And the launch of services by lock customers reduced demands and the competitive nature of the <unk> services industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.
Marks: Also the financial results in this call will be presented on a non-GAAP basis.
Marks: These non-GAAP financial measures.
Marks: Our consistent and comparable measures to help investors understand.
Marks: Operating performance in the quarter.
Marks: All the data please refer to the financial tables published in the results press release issued earlier today, which also include the GAAP to non-GAAP financial reconciliation table.
Speaker Change: With that I would now like to hand the call over.
Ill Harare: Ill Harare CEO of Yelp.
Ill Harare: Please go ahead.
Ill Harare: Thank you Kenny.
Speaker Change: I would like to welcome all of you to our results conference call and thank you for joining us today.
Speaker Change: I am very pleased with the third quarter results, which show the strength focus we have made.
Speaker Change: These results demonstrate the return to financial stability and renewed revenue growth.
Speaker Change: We achieved over the first non-GAAP operating unit.
Speaker Change: We use the positive operating cash flow and importantly, our net distributor has increased for two quarters.
Speaker Change: Building and refining our long term strategy is an ongoing process, which is aimed at leading us into an era of profitable growth for us to come in.
Speaker Change: I will address this in a few minutes.
Speaker Change: We are especially excited about the continued momentum in our growth engine the security business, where we see strong book with Attunity and revenues, which are rapidly expanding to become larger part of the mix as each quarter passes.
Speaker Change: Our third quarter security as a service revenues increased by 69% year over year in line with our expectations.
Speaker Change: This growth is largely driven by our extensive and growing leads to spoke to use customers as well as increased direction of all of the security solution and want the subscriber base of those customers.
I want to highlight a few examples of recent new service launches.
Speaker Change: Just recently, we announced that Vodafone UK expanded its cyber security services to protect fixed broadband customers by launching security net home forward by a lot cheaper solution.
Speaker Change: Vodafone new offering to its customers will be part of their mobile security services enhancing strict protection, because both mobile and broadband networks and close on customer devices on the whole network.
Speaker Change: We also announced this meal, a leading telecommunications service provider in both Google introduced a new cyber security service built on our security solution for the fixed broadband customers.
Speaker Change: Our solution complements the existing mobile cyber security service.
<unk> customers, a unified converged solution for both their mobile and home networks.
Speaker Change: These new security deployments build on our <unk> solution.
Speaker Change: Will allow us to continue to accelerate subscriber growth.
And further bringing gas long term recurring revenue and goals.
Speaker Change: We continue developing our strategic plan aiming to leverage our core strengths in security and network intelligence to drive long term profitable growth.
Speaker Change: We are positioning a lot as a security company <unk>.
Speaker Change: Consolidating our focus around a unified business unit the abuse on our unique security offering.
These strategies designed to maximize synergies between our existing network intelligence assets and that was security offerings, allowing us to deliver a differentiated and fully integrated solution for customers.
Speaker Change: This combination creates a compelling value proposition and only a handful of companies.
Speaker Change: Nuclear position, there's a lot too.
Speaker Change: To offer such an integrated approach.
Speaker Change: We believe it will strengthen our market position and enhance our customer offerings and make us it will age young and innovative company.
Speaker Change: We are reorganizing ourselves to be more customer centric and more efficient organization structured to better support evolving customer needs.
Speaker Change: Our business units will every region and focus on sales and customer success.
Speaker Change: Powering them to function more effectively while enabling a more personalized approach.
Speaker Change: We believe this will allow us to open new opportunities for expansion within our installed base as well as gain new customers.
Speaker Change: We are exploring the potential of our products to provide additional value to customers focused around cloud and five G markets, including enterprise customers.
Speaker Change: In particular, we see the potential demand for our traffic management and cyber security solutions, which can be implemented in the cloud.
Speaker Change: The process of refining and finalizing our strategic plan remains ongoing.
Speaker Change: I look forward to providing more insights and detailed discussion on our strategy and progress Julian go with full year results that we would be both.
Speaker Change: Early next year.
Speaker Change: In summary, although it is entering a new chapter as we approach went to 25.
Speaker Change: We are on a positive trend towards financial stability and renewed growth.
Speaker Change: We are very excited.
Speaker Change: This quarter also profitability and cash position.
Speaker Change: The core security business continued to gain strong momentum.
Speaker Change: Demonstrated by the expansion of our partnership with major telecom providers, like Vodafone and meal, which significantly expand our potential recurring revenue base.
Speaker Change: Looking ahead, we continue to refine our strategy for long term growth and profitability.
I am increasingly optimistic with the direction that a lot is headed and excited about the growing opportunities before us.
Speaker Change: As I have said, our target is a sustainable and profitable growth for the load over the long term.
Speaker Change: And now I would like to Andy it over to always see a fully up in the home for the financial summary.
Please go ahead.
Speaker Change: We reported revenue of $23 2 million in the quarter.
Speaker Change: Presenting a year over year increase of 3% and 5% versus the prior quarter.
Revenue from our Guar Shenzhen CCAR was $4 7 million in the quarter.
Speaker Change: With our expectations.
Speaker Change: 9% year over year, comprising 21% of our revenue in the quarter.
Speaker Change: Because I know a lot of recurring revenue.
Speaker Change: 2024 was $17 2 million.
Speaker Change: As I discussed in our press release, we expect the double digit growth year over year for full year.
Speaker Change: And speakers.
Speaker Change: I will now discuss the non-GAAP financial measures.
Speaker Change: Well all of our financial results, including the GAAP financial measures and the various other breakdowns of our revenue.
Please refer to the table in our press release.
Our non-GAAP gross margin in the quarter was 71, 7%.
The first quarter of last year, our non-GAAP gross margin was 47, 9%.
Speaker Change: Prior quarter it was 17, 6%.
Speaker Change: While the non-GAAP gross margin depends on the specific product mix sold in the quarter.
Speaker Change: Long term targets.
Speaker Change: <unk> margin is expected to be in the range of 70%.
Speaker Change: Every deal expenses considerably over the past year, we did non-GAAP Opex ex 15 6 million.
Speaker Change: After that.
Last quarter and down by over 29% from the first quarter last year.
Speaker Change: 508, full time employees as of September 'twenty 'twenty four.
Speaker Change: It's part of our strategic process of reorganization as a unit.
Speaker Change: By business unit and realign the business around customer success.
Speaker Change: We intend to improve efficiencies and moderate <unk> reduced our headcount in specific areas.
Speaker Change: And then Shelly also recorded in other area.
Speaker Change: We reported non-GAAP operating income of $1 1 million, which is a significant improvement compared with operating loss of $11 1 million in Q3 last year and operating loss of $1 million in the prior quarter. This.
Speaker Change: This is the highest quarterly operating income reported in the past seven years.
Speaker Change: In terms of non-GAAP net profit, we reported $1 3 million in the quarter or a profit of three three cents per diluted share compared with a non-GAAP net loss of 10.8 million or a loss of 28.
Speaker Change: Basic share in the first quarter of last year.
Speaker Change: And compared to a net loss of 0.8 million or a loss.
Speaker Change: 1.7 base.
Speaker Change: Basic share in the previous quarter.
Speaker Change: We posted positive operating cash flow in the first quarter, a flashlight to 9 million.
Speaker Change: Cash.
Speaker Change: And it's partly that.
Speaker Change: Smith.
Speaker Change: 2024.
Speaker Change: This before.
Speaker Change: An increase compared to the $53 million at the end of prior quarter, demonstrating stability and cash levels.
Speaker Change: Cash starts embedded with Barclays.
Speaker Change: As a few in 'twenty, 'twenty, three or $54 8 million.
Speaker Change: In terms of guidance for the fourth quarter 2024, we expect to remain around the breakeven on a non-GAAP operating profit basis.
Speaker Change: And to generate positive operating cash flow contributing to a further improvement in the balance sheet net cash position.
Speaker Change: Management should we eat today double digit growth year over year for for your CCAR revenue and speakers.
That ends my summary.
Speaker Change: Thank you Alan myself would now be set to take your questions.
Speaker Change: 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 your questions will be.
Speaker Change: Pulled in the order. They are received please stand by while we poll for your questions.
Speaker Change: The first question is from the house chalk sheet.
Speaker Change: North Atlanta capital markets.
Speaker Change: Please go ahead.
Speaker Change: Yes, Thank you and congratulations on the strong profitability and results.
Speaker Change: Sure.
Speaker Change: Got it that's a question.
Speaker Change: Let's start with the.
Speaker Change: Our gross by it.
Speaker Change:
The press release.
Speaker Change: Double double.
Speaker Change: Double digit EPS growth.
Speaker Change: I believe that we're seeing.
Speaker Change: Year basis, yes.
Speaker Change: So technically that could mean, achieving Q decline.
Speaker Change: Our mathematically.
Speaker Change: I don't believe that's viewed as a possibility given the IRR was up 62% year here in the September quarter.
Speaker Change: First verify that's not the expectation.
Speaker Change: Do you expect R&D up here with you.
Speaker Change: Thank you, yes, we are definitely excited schlumberger.
Speaker Change: It results in cash.
Speaker Change: First quarter of generating operating profitability for a while and our strong debt.
Speaker Change: Cash increased this quarter.
Speaker Change: As for the secrecy.
Speaker Change: We continue to see growth and we expect to see growth also next quarter.
Speaker Change: And we are still projecting double digit growth on that on the numbers.
Speaker Change: As you can see deep.
Speaker Change: Walter we had.
Speaker Change: Higher it had been.
Speaker Change: And you.
Speaker Change: <unk> told the street that compared to the overall and this is due to catch up in revenue, we had with one of your customers.
Speaker Change: Yes.
Speaker Change: Thanks Savi.
Speaker Change: And.
Speaker Change: And what's the plan for the future. This is why I'm aware of that.
Speaker Change: A bit lower than you had been you get these higher these schools with beauty sketchup.
Speaker Change: We are expecting to further grow.
Speaker Change: Next Walker as we see further increase yields by all of the Houston customers as well as some additional customers in default.
Speaker Change: But we aren't expecting it to be launched over the quarters.
Speaker Change: Okay, Great that's super helpful.
And then.
Speaker Change: Why are you expecting I think flattish to a slight decline in operating profit.
Speaker Change: Q basis I guess.
Speaker Change: Probably is related to the.
Speaker Change: Non recurring.
Speaker Change: Revenue that was recognized in the September quarter.
Speaker Change: Exactly so we are I.
Speaker Change: I think most importantly, right now focused on our strategic plan to drive the company's long term strategic.
Speaker Change: Sustainable profitable growth.
Speaker Change: As you know we are still.
Speaker Change: Hi.
Speaker Change: Capex views and nonrecurring revenue.
Speaker Change: <unk> houses to produce.
Right right.
Speaker Change: Improving and transforming the company into a more recurring model.
Speaker Change: <unk> is becoming more and more dominant part of our revenue.
Speaker Change: Starting to see more stability and more predictability.
Speaker Change: Experienced losses.
Speaker Change: Yeah.
Speaker Change: Next quarter, we are looking to continue with this trend.
Speaker Change: And we are looking at to continue to work.
Speaker Change: Good performance.
Speaker Change: It would be depended and.
Speaker Change: Your views.
Speaker Change: Submit to withstand so this is why we all know that.
Speaker Change: Conservative.
Guidance.
Speaker Change: Okay, Great and then.
Speaker Change: Yes.
Speaker Change: The air Art, because they are yes.
Speaker Change: Increase.
Yes.
Speaker Change: Record amounts on a Q over Q basis.
Speaker Change: What's the driver of that record of knowledge.
Sure.
Speaker Change: They are on.
Speaker Change: So it's a mix.
Speaker Change: We predicted demand.
Speaker Change: New services launched by our existing customers.
Speaker Change: A couple of press releases with Vodafone in the UK and meal in bulk as well.
Speaker Change: And can we see.
Speaker Change: Yeah.
Speaker Change: Thousands <unk> extending the problem as you can.
Speaker Change: Additional.
Speaker Change: Thank you Sir.
Speaker Change: We also continue to see.
Speaker Change: We can get tax rates.
Speaker Change: You can customer base.
Speaker Change: Many of our customers so overall.
Speaker Change: All of this contributes into our <unk>.
Speaker Change: Kris.
Speaker Change: Scott could you potentially parse that.
Speaker Change: To increase between.
Speaker Change: New versus existing customers and about 50 50 or is it more weighted towards new.
Speaker Change: It's not something we we show.
Speaker Change: Okay.
Speaker Change: Good.
Speaker Change:
Speaker Change: Is it fair to say, though that because.
Speaker Change: Over the past.
Speaker Change: Two quarters at least 60 count there are increasing about $1 million each quarter.
Speaker Change: I believe largely due to just some customers and probably most of the display.
If successful a Verizon wireless access within the SMB segment.
Speaker Change: So is it fair to say that at least now.
Speaker Change: Mr Park continues to see.
Speaker Change: Similar.
Speaker Change:
Speaker Change: Again as I said, we see both.
Our speakers today are hobbies.
Speaker Change: We.
Speaker Change: One is increased usage and the higher penetration with the accounts, we already work with.
Then we have additional services new service launch we've seen the customer.
We announced on the.
Speaker Change: For 2000, and Vodafone U K and of course.
Speaker Change: Customers get it done.
Speaker Change: Joining into our installed base.
What we see as overall, we are very happy.
Happy with the progress on those response and we are looking to further invest in order to expand the novel in order to continue these cycles right.
Speaker Change: The yields to come.
Speaker Change: Okay.
Speaker Change: And then last quarter you did talk about.
Speaker Change: <unk>.
Speaker Change: As perpetual license customer.
Speaker Change: The cat model I believe that that's Vodafone ended the Vodafone UK announcements.
Speaker Change: As part of that.
The question here is is that.
Speaker Change: Is it just limited to one region is the.
Speaker Change: Agreement.
Speaker Change: Limited to just one region was that perpetual license customer or is it going to be rolled out to additional regions beyond the U K.
Speaker Change: We are working with all of the customer to deploy in all possible.
Speaker Change: Concrete is we don't provide any more specific details on that.
Speaker Change: Before we have anything we can share leg quarters, we'd be able to.
Speaker Change: Sure.
Okay Alright.
Just a few more questions.
Speaker Change: For gross margin did improve 113 basis points Q2 is that largely due to the nonrecurring true up and speak has revenue.
Speaker Change: Yes can you take that.
Speaker Change: Yes.
Speaker Change: Yes part of it.
Speaker Change: Okay.
Speaker Change: Because the one time catch up demand, but also as.
Speaker Change: Related to that.
Speaker Change: Hi, David that we have in the quarter.
Speaker Change: And also what we can say that yet.
Speaker Change: The gross margin.
Speaker Change: We intend to continue reduce spend as being the range of 70%.
Speaker Change: And make sure that also.
Speaker Change: Yes.
<unk>.
Speaker Change: Got it okay, great and.
Speaker Change: What's the driver behind the improved gross margin upside.
Speaker Change: <unk> revenue is it.
Speaker Change: More benign competitive environment or is it something else.
So overall, we are there.
Speaker Change: A lot of emphasis on that making sure. We are taking the right deals we wanted to make sure we are there.
Speaker Change: Yeah.
Engagement with customers.
Speaker Change: That is making sense.
Speaker Change: And that increase mix of the CCAR that is in general more.
Speaker Change: How does the gross margin.
Speaker Change: This is what drives our Volvo.
Speaker Change: Okay great.
Speaker Change: And then I did notice that the R&D line did come down another $1 million on a Q over Q basis.
Speaker Change: Are there any particular R&D progress that had been cut.
Due to this R&D reduction.
Speaker Change: No. So the R&D compared to last year was to reduce the company was doing some.
Speaker Change: Yeah.
Speaker Change: Optimization about two years ago.
Speaker Change: In the last quarter.
Speaker Change: We didn't see any.
Speaker Change: Chris what you might see some.
Speaker Change: Government support you just seasonal R&D funding.
Speaker Change: These.
Cost will fall in the future.
Speaker Change: Three numbers.
Speaker Change: But overall, we are expecting to see R&D level.
Speaker Change: Thanks.
Speaker Change: Yeah and that government support is that continuing.
Speaker Change: For the foreseeable future or is that just a onetime thing.
Speaker Change: So usually grants that we expect to continue but.
Their use of the season.
Speaker Change: So overall, it's a good estimate to take a similar levels.
Speaker Change: Got it.
We are continuing to invest.
Speaker Change: As we want to create mobilization.
Speaker Change: I highlighted we are now running.
So you get the business units to drive more innovation and home security.
Speaker Change: And we're looking to further enhance our unique offering.
Speaker Change: <unk> customers.
Speaker Change: Innovative software and Drybulk growth essentially this is our long term goals engine and we want to be.
Speaker Change: You can invest it.
Speaker Change: Okay great.
Speaker Change: And then early thoughts on calendar 'twenty fives, especially with respect to non peak revenue.
Speaker Change: Yes.
So it's a bit too early.
Speaker Change: Now are they planning for next year, but overhauls.
Looking to continue to grow.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: And if it could be high double digit goals through this because there is no reason why not to continue we want to have.
Speaker Change: As part of our day.
Speaker Change: Planned.
Speaker Change: Because of significant gross path.
Speaker Change: We will be able to share more information next quarter. Once we show our 2025 plan.
Speaker Change: What would you see as the potential drivers of being able to achieve growth.
Speaker Change: Non <unk> portion of the book.
Speaker Change: Yes.
Speaker Change: And on the <unk> fault.
Speaker Change: How can predict as mentioned this is a nonrecurring revenue we see that the competitive environment is favorable we see.
Speaker Change: Lounge students.
Speaker Change: Nine.
Speaker Change: And influence.
Speaker Change: We believe we have great technology.
Speaker Change: The space that can drive.
Speaker Change: So potential goals.
Speaker Change: Long ago too we.
Speaker Change: <unk> focus on security.
Speaker Change: And we believe we have unique combination.
Speaker Change: Traffic management security offerings.
Speaker Change: So many countries globally can offer and this is where we are in a unique and this is where we believe we can generate growth.
Alright, Thank you for taking all my questions.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: There are no further questions at this time thank.
Speaker Change: Thank you everyone and with that the call is concluded.
[music].