Allot Ltd. (ALLT) Q1 2026 Earnings Call Transcript
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Overview
The earnings call reveals strong financial performance, including robust SECaaS growth and strategic investments in AI and cybersecurity. The Q&A section highlights management's confidence in sustaining revenue growth and improving profitability, despite challenges. The company is leveraging AI for product differentiation and operational efficiency, with a focus on expanding in the SMB market. While specific guidance on backlog levels and SECaaS ARR was not provided, the overall sentiment is positive due to optimistic guidance, customer wins, and strategic product launches.
Key Financial Performance
Revenue $26.4 million in the quarter, up 14% year-over-year. The increase reflects the successful execution of the cybersecurity-first strategy and growth in SECaaS revenues.
SECaaS Revenue $8.7 million in the quarter, up 71% year-over-year, comprising 33% of total revenue. Growth driven by strong uptake of telco-provided cybersecurity services.
SECaaS Annual Recurring Revenue (ARR) $33.7 million as of March 31, 2026, up 59% year-over-year. Growth attributed to increased adoption of SECaaS services.
Recurring Revenue 67% of total revenue this quarter, reflecting the scaling up of recurring revenue base driven by SECaaS growth.
Non-GAAP Gross Margin 71.3% in the quarter, compared to 70.4% in the first quarter of last year. Improvement due to the high contribution of SECaaS to the overall revenue mix.
Non-GAAP Operating Expenses $16.2 million in the quarter, compared to $15.9 million in the first quarter of last year. Slight increase due to investments in sales, marketing, and R&D.
Non-GAAP Operating Income $2.6 million with an operating margin of 9.9%, compared to $0.4 million or 1.8% in the first quarter of last year. Improvement driven by operating leverage and profitability.
Non-GAAP Net Profit $3.1 million in the quarter, or $0.06 per diluted share, compared to $0.8 million or $0.02 per diluted share in the first quarter of last year. Increase reflects improved profitability.
Operating Cash Flow $10.6 million in the quarter, a record high. Growth driven by robust profitability, strong cash collection, and one-time advance payments from major Smart deals.
Cash and Investments $98 million as of March 31, 2026, compared to $88 million as of December 31, 2025. Increase due to strong cash flow generation and no debt.
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Operating Highlights
Tera III platform: A next-generation ultra-high-capacity multiservice gateway offering deep visibility and control over network traffic. It provides a scalable foundation for advanced cybersecurity and value-added services. A significant multimillion-dollar upgrade deal was secured with an existing Tier 1 customer.
Market expansion through events: Participated in Mobile World Congress and RSA Conference, showcasing cybersecurity and network intelligence offerings. These events helped build a pipeline of opportunities and received positive feedback.
Revenue growth: Achieved a 14% year-over-year revenue increase in Q1 2026, marking the third consecutive quarter of double-digit growth. SECaaS revenue grew by 71% year-over-year, contributing 33% of total revenue.
Recurring revenue: 67% of total revenue is now recurring, providing strong visibility into future quarters.
Profitability and cash flow: Non-GAAP operating income increased to $2.6 million with a 9.9% margin. Generated record operating cash flow of $10.6 million in Q1 2026.
Cybersecurity-first strategy: Focused on growing the SECaaS business, which now represents 33% of total revenue. Investments in R&D and sales/marketing are driving innovation and customer reach.
AI-enabled security: Developing AI-enhanced capabilities to address current and future cybersecurity threats, reinforcing competitive positioning in underserved consumer and SMB segments.
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Risk or Challenges
Market Trends and Delays: Changing market trends and delays in the launch of services by Allot customers could adversely impact the company's performance.
Competitive Pressures: The competitive nature of the security services industry poses a risk to Allot's market position and profitability.
Cybersecurity Threat Landscape: The rapidly evolving cyber threat landscape, including AI-powered threats, increases the complexity and urgency of maintaining effective cybersecurity solutions.
Product Mix and Gross Margin: The company's gross margin is dependent on the specific product mix sold in a quarter, which could lead to variability in profitability.
Investment in R&D and Sales: Increased investments in R&D and sales and marketing could strain financial resources if not managed effectively.
Execution of Multiyear Projects: The execution of large, multiyear Smart projects carries risks related to meeting milestones and customer expectations.
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Guidance & Outlook
Revenue Growth: The company expects to maintain a mid-teens revenue growth rate over the coming year. It has reiterated its 2026 revenue guidance of $130 million to $170 million, with confidence towards the upper end of the range.
SECaaS Revenue Growth: The company predicts 40% or more growth in Security-as-a-Service (SECaaS) revenue for 2026.
Recurring Revenue: 67% of total revenues are recurring, providing strong visibility into future quarters.
Gross Margin: The gross margin expectation for 2026 remains in the range of 70%, with potential for higher margins as SECaaS revenue grows as a percentage of overall revenue.
Operating Expenses: The company plans to increase sales and marketing expenses to support pipeline growth and modestly increase R&D expenses to support product development and innovation.
Profitability: Profitability improvements are expected for 2026, driven by operating leverage inherent in the business model.
Smart Product Line: The multiyear Smart projects provide revenue visibility into 2026, 2027, and beyond. The company is executing multimillion-dollar projects and expects continued demand for its Tera III platform.
Pipeline Growth: The company is expanding its pipeline across all regions, with strong opportunities at multiple stages for both existing and new customers.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What opportunities do you see ahead, particularly with your pipeline commentary, and how do you think about the adoption of AI within your customer bases?
A:The company sees solid improvement in both Smart and SECaaS opportunities. For SECaaS, they are expanding sales efforts to reach more CSPs and build new partnerships. For Smart, there is good demand for the Tera III platform, driven by existing customers upgrading and new customers interested in its advanced capabilities. Regarding AI, the company focuses on consumer and SMBs, noting initial adoption of tools like ChatGPT but highlighting the risks of unprotected usage. They are exploring ways to protect against new AI-related threats, such as fraud and impersonation.
Q:Where do you see the most opportunities to continue investing in sales and R&D?
A:The main R&D focus is on adding more cybersecurity engines to the portfolio, such as network firewall, DDoS protection, and identity protection. Geographically, demand for cybersecurity is maturing in both developed and developing markets. Operational leverage is achieved by upselling and cross-selling to the existing Smart customer base, improving gross margins and profitability.
Q:Is the strong cash from operations a result of outsized bookings in the March quarter?
A:The strong cash flow is due to profitability expansion, new orders in Q1, and milestone payments from orders received in 2025 as projects progress.
Q:Could you describe backlog levels relative to a quarter ago and a year ago?
A:The company does not share quarterly backlog levels but notes good demand for products, increased visibility, and confidence in meeting the higher range of guidance and SECaaS revenue projections.
Q:How should we think about the linearity of incremental ARR for SECaaS in calendar '26?
A:SECaaS revenue is expected to grow sequentially and linearly over the year, driven by organic growth from base customers and supported by new wins and customers towards the end of the year. Most growth comes from higher attach rates and traction for the service.
Q:Can you provide color on progress with new business wins or rollouts during the quarter?
A:The quarter's performance is based on customers won last year, such as Más Móvil in Panama, and Tier 1 customers promoting services. CSPs prioritize cybersecurity services, and the company sees progress in the pipeline with new models like DDoS, network firewall, and identity monitoring.
Q:What informed the updated guidance for 40%+ SECaaS revenue growth compared to last quarter's robust double-digit growth commentary?
A:The updated guidance reflects higher visibility after Q1, with strong ARR growth providing confidence in sustaining 40%+ SECaaS revenue growth. The company aims to provide more accurate estimates based on investor feedback.
Q:Will there be more prepayments related to Smart deals, and how will they affect revenue?
A:High cash flow was generated from onetime advanced payments for Smart deals. Payments are tied to execution milestones and increase deferred revenue, which will materialize over the year.
Q:Why doesn't the company provide formal SECaaS ARR guidance?
A:SECaaS growth depends on CSP customers' launch times, service adoption, and marketing campaigns. ARR provides visibility for revenue growth, and the company focuses on both short-term and long-term growth to sustain high double-digit SECaaS growth.
Q:How do you see product revenue versus services revenue playing out for the rest of the year?
A:Most growth is expected from SECaaS, with Smart providing stability and modest growth. Smart revenue may fluctuate due to project milestones but offers upside potential. The model focuses on leveraging Smart customers for upselling security solutions.
Q:What adoption trends are you seeing for new security capabilities, and how do you balance monetization with subscriber expansion and retention?
A:New capabilities are well-received, with CSPs seeing monetization opportunities through increased revenue, higher attach rates, and competitive retention. Adoption trends vary by customer, but the company has visibility to sustain 40%+ SECaaS revenue growth.
Q:What is the lag before CSPs see an uptick in ARPU from new security capabilities?
A:The lag depends on the go-to-market strategy. Updating prices for existing packages results in faster ARPU growth, while launching new packages for new customers takes more time.
Q:How is the company using AI internally for sales, marketing, and R&D?
A:The company focuses on addressing AI-related cyber threats, accelerating R&D with advanced tools, and improving operational efficiency. AI is used to enhance product differentiation, organizational efficiency, and profitability.
Q:How is the company hedging the U.S. dollar versus the shekel?
A:The company is hedged for 2026, and the impact of shekel strengthening is already factored into profitability improvement expectations.
Q:Review of Unclear Management Responses
A:The management avoided providing specific details on backlog levels, citing a focus on revenues instead. Additionally, they did not provide formal SECaaS ARR guidance, attributing it to reliance on CSP customers' efforts and success.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI cyber
AI risk
Allot Conference
Allot cash
Allot class
Allot model
Allot role
Allot solution
Allot start
Barcelona number
CEO Allot
Conference San
Conference result
Francisco cybersecurity
III customer
III platform
III win
Nahum
RSA
capability
capital allocation
consumer
cyber threat
cybersecurity network
cybersecurity service
dollar project
end user
flow generation
improvement profitability
interest
network intelligence
operator
product service
profitability leverage
project quarter
segment
upgrade Tera
ALLT Transcript
Allot Ltd. (ALLT) Q1 2026 Earnings Call Transcript
Positive5-12
The earnings call reveals strong financial performance, including robust SECaaS growth and strategic investments in AI and cybersecurity. The Q&A section highlights management's confidence in sustaining revenue growth and improving profitability, despite challenges. The company is leveraging AI for product differentiation and operational efficiency, with a focus on expanding in the SMB market. While specific guidance on backlog levels and SECaaS ARR was not provided, the overall sentiment is positive due to optimistic guidance, customer wins, and strategic product launches.
Allot Ltd. (ALLT) Q4 2025 Earnings Call Transcript
Positive2-25
The earnings call summary and Q&A indicate strong financial metrics, raised revenue guidance, and optimistic outlooks for 2025 and 2026. New product launches and AI integration are set to drive growth, despite DRAM shortages. The positive sentiment is reinforced by a strong book-to-bill ratio and the modular cybersecurity approach. However, some uncertainty exists around specific ARR growth figures and DRAM impact. Overall, the sentiment remains positive, likely resulting in a 2%-8% stock price increase.
Allot Ltd. (ALLT) Q3 2025 Earnings Call Transcript
Positive11-20
The earnings call indicates strong financial performance with 14% revenue growth, significant SECaaS revenue increase, and positive cash flow. New contracts and strategic partnerships, including a major telco deal, bolster future prospects. However, management's vague responses on certain topics in the Q&A could raise some concerns. Overall, the positive financial metrics and strategic developments suggest a likely positive stock price movement, despite some uncertainties.
Allot Ltd. (ALLT) Q2 2025 Earnings Call Transcript
Positive8-14
The earnings call highlights strong financial performance, with a 9% revenue increase and a 73% SECaaS revenue growth. Improved margins and positive operating cash flow further support the positive sentiment. The Q&A section reveals high attach rates for Verizon's My Biz plan and a strong pipeline, despite some lack of clarity in management responses. The overall sentiment is positive, driven by strong financial metrics, optimistic guidance, and strategic partnerships.
ALLT Report
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