Allot Ltd. (ALLT) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
SECaaS ARR $25.2 million, up 73% year-over-year. The growth was driven by the strong performance of the SECaaS growth engine and contributions from Verizon Business's new mobile offering, My Biz Plan.
Overall Revenue $24.1 million, up 9% year-over-year. The increase was attributed to improved margins, profitability, and the successful launch of Verizon Business's My Biz Plan.
SECaaS Revenue $6.4 million, up 73% year-over-year, comprising 27% of the total revenue. This growth was in line with expectations and driven by the increasing traction of the SECaaS solution among major telcos.
Non-GAAP Gross Margin 73.4%, compared to 70.6% in the second quarter of last year. The improvement reflects better operational efficiency and cost management.
Non-GAAP Operating Expenses $16.4 million, down 2% from $16.7 million in the second quarter of last year. The reduction was due to cost optimization efforts.
Non-GAAP Operating Income $1.2 million, compared to a non-GAAP operating loss of $1 million in the second quarter of last year. This improvement was driven by revenue growth and cost management.
Non-GAAP Net Profit $1.5 million, or $0.03 per diluted share, compared to a non-GAAP net loss of $0.8 million, or $0.02 per share, in the second quarter of last year. The improvement was due to increased revenue and reduced operating expenses.
Operating Cash Flow $4.4 million, positive in the second quarter. This was attributed to strong operational performance and cash management.
Cash, Bank Deposits, and Investments $72 million as of June 30, 2025, compared to $59 million as of December 31, 2024. The increase was due to a $46 million follow-on share offering and positive operating cash flow.
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Operating Highlights
SECaaS ARR: Increased by 73% year-over-year, reaching $25.2 million. SECaaS contributed over 25% of revenues for the first time.
My Biz Plan: Launched by Verizon Business, includes Allot's cybersecurity protection. Customers are automatically opted in, and Allot is paid per connected account.
OffNet solution: A new product ensuring end-user connectivity and protection even when not under a network.
SG-Tera III platform: A recently launched service gateway offering unparalleled visibility into network traffic for top-tier telco operators.
Verizon Business partnership: Significant growth opportunity with Verizon's My Biz Plan targeting over 30 million subscribers.
Play (Poland): Selected Allot's DNS Secure solution for fixed broadband customers, expanding from mobile customers.
Más Móvil (Panama): Chose Allot NetworkSecure for mobile and fixed customer cybersecurity protection.
Tier 1 Telco in EMEA: Signed a deal worth tens of millions of dollars, marking the largest in 5 years. Includes long-term recurring revenue and expands Allot's footprint in 4G, 5G, and fixed fiber networks.
Revenue growth: Overall revenue grew 9% year-over-year to $24.1 million.
Gross margin: Improved to 73.4% from 70.6% year-over-year.
Operating income: Reported $1.2 million in non-GAAP operating income compared to a $1 million loss last year.
Cash flow: Positive operating cash flow of $4.4 million. Ended the quarter with $72 million in cash and no debt.
SECaaS growth strategy: Focused on increasing CSP partnerships, expanding services to new user segments, and upselling new applications like OffNet.
Equity offering: Raised $46 million, used to repay convertible debt and strengthen the balance sheet.
SG-Tera III adoption: Gaining interest from both existing and new customers, contributing to a strong pipeline.
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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.
Demand Reduction: Reduced demand for security services could negatively affect revenue and growth.
Competitive Pressures: The competitive nature of the security services industry poses challenges to Allot's market position and profitability.
Regulatory Risks: Potential regulatory hurdles could impact operations and strategic execution.
Customer Penetration: Challenges in increasing penetration of cybersecurity protection services among end users could limit growth.
Execution Risks: Risks associated with executing large-scale projects, such as the Tier 1 telco deal, could impact timelines and profitability.
Economic Uncertainties: Broader economic uncertainties could affect customer spending and Allot's financial performance.
Supply Chain Disruptions: Potential supply chain disruptions could impact the delivery of products and services.
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Guidance & Outlook
SECaaS ARR Growth: The company increased its 2025 SECaaS ARR growth expectations to between 55% and 60%, reflecting strong momentum and traction among major telcos.
Revenue Guidance: Allot introduced revenue guidance for 2025, expecting overall revenues of between $98 million to $102 million, positioning the company for a year of profitable growth.
Major Telco Contract: A new contract with a Tier 1 telco operator in EMEA, valued in the range of tens of millions of dollars, will be executed over 2026 and 2027. This includes a long-term recurring revenue tail of maintenance and support revenues.
Pipeline and Backlog: The company reported a strong backlog and broad pipeline, with improved visibility into the second half of 2025.
SG-Tera III Platform: The company sees further interest in its SG-Tera III platform from both existing and new customers, contributing to a strong pipeline.
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Shareholder Return Plan
Share Offering: Towards the end of June, Allot successfully completed a follow-on equity offering, receiving strong support from the capital markets and its largest shareholder, Lynrock Lake. The proceeds were used to pay down convertible debt as well as for general corporate purposes and to strengthen the balance sheet. The offering added multiple new supportive and long-term focused institutional investors to Allot's shareholder base.
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Key Q&A
Q:What has been driving the strong ARR growth metrics and improved gross margin performance?
A:The ARR growth is driven by new customers, new services launched with existing customers, increased adoption within existing services, and upsell of new applications. The gross margin improvement is due to SECaaS becoming a higher percentage of revenue and a favorable revenue mix with more software expansion deals. Gross margin is expected to remain in the range of 71% to 73%.
Q:Can you provide more color on the My Biz opportunity and its potential ramp over time?
A:Verizon launched the My Biz business plan, offering Allot cybersecurity protection as a default add-on for SMB customers. Subscriber fees are earned for new subscribers. It typically takes 2-3 years to reach peak penetration, and growth is expected to continue as more customers adopt the plan.
Q:Can you discuss the large European telecom deal and its components?
A:The deal, worth tens of millions of dollars, involves the Smart product line for a leading CSP in EMEA. It includes traffic management and cybersecurity engines for mobile and fixed networks. This CapEx deal will be executed over the coming years, with most revenue expected in 2026 and 2027, followed by maintenance and support services.
Q:What drove the record incremental ARR in the June quarter?
A:The growth was driven by the full quarter promotion of Verizon's My Biz plan and the Vodafone launch, which migrated to the new SECaaS solution. Both contributed significantly to the ARR growth.
Q:What is the profile of attach rates for Verizon Business mobile and Vodafone?
A:For Vodafone, attach rates are stable as it is a mature customer. For Verizon's My Biz, attach rates are exceptionally high, close to 100%, as the service is included by default in the plan.
Q:Has the pipeline increased despite the landmark deal exiting the pipeline?
A:Yes, the pipeline remains strong with additional multimillion-dollar opportunities, including 8-digit deals, and a good mix of existing and new customers.
Q:How will the landmark deal show up in financial metrics?
A:The deal will be recognized as CapEx during 2026 and 2027, with some deferred revenue and recurring revenue from maintenance and support.
Q:What is the go-to-market strategy for working with providers and converting pipeline?
A:The strategy involves sharing best practices among carriers, supporting their marketing efforts, and leveraging success stories. For new customers, targeted business development and sales teams focus on creating partnerships and expanding the addressable market.
Q:Are there any macro impacts on sales cycles, and how are large deals progressing?
A:There are no macro impacts on sales cycles, which typically range from 12 to 24 months. The demand is driven by the Tera III platform's capabilities, and the pipeline is progressing well with multiple multimillion-dollar opportunities.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact attach rates for Vodafone and Verizon Business mobile, only stating they are high. Additionally, they did not provide precise metrics on the pipeline increase or the financial breakdown of the landmark deal in deferred revenue and recurring revenue.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Allot Verizon
Allot cybersecurity
Biz Plan
CSP
CSPs
LLC Research
Play
Research Division
SG Tera
Tier telco
backlog
balance sheet
capital market
cybersecurity protection
deal week
debt
end user
interest
million dollar
mobile
network intelligence
network solution
offering
perspective
platform
protection service
shareholder
support
telco player
ten million
visibility
win
ALLT Transcript
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Allot Ltd. (ALLT) Q3 2025 Earnings Call Transcript
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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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