Allot Ltd. (NASDAQ:ALLT) Q3 2025 Earnings Call Transcript

Allot Ltd. (NASDAQ:ALLT) Q3 2025 Earnings Call Transcript November 20, 2025

Allot Ltd. beats earnings expectations. Reported EPS is $0.1, expectations were $0.04.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Allot’s third quarter 2025 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. If you have not received it, please contact Allot Investors Relations team at EK Global Investor Relations at +1 212378040 or view it in the News section of the company’s site at www.allot.com. I would like now to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin please?

Kenny Green: Good day to all of you, welcome to Allot’s conference call to discuss its financial results for the quarter. I would like to thank Allot’s management for hosting this conference call. All participants are present. Following the formal presentation, instructions will be given for the question and answer session. As a reminder, this conference call is being recorded. If you have not received the company’s press release, please check the company’s website at www.allot.com. With me today on the line are Eyal Harari, CEO, and Liat Nahum, CFO. Following Eyal’s prepared remarks, we will open the call for the question and answer session. Both Eyal and Liat will be available to answer those questions. You can all find the highlights of the quarter, including the financial highlights and metrics, in today’s earnings press release.

Before we start, I’d like to point out the following safe harbor statement. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the company. Those statements are early predictions, and Allot cannot guarantee that they will, in fact, occur. Allot 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, delays in the launch of services by Allot’s customers, reduced demand, and the competitive nature of the security services industry, as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission.

Also, the financial results in this call will be presented mainly on a non-GAAP basis. Allot believes that these non-GAAP financial measures provide more consistent and comparable measures to help investors understand Allot’s operating performance. For 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 reconciliation tables. And with that, I would now like to hand the call over to Eyal Harari, CEO of Allot. Eyal, please go ahead.

Eyal Harari: Thank you, Ken. We are pleased with our excellent third quarter 2025 results. We reported double-digit year-over-year revenue growth for the first time in multiple years. Continued strong CCaaS momentum and our highest level of operating profitability in over a decade. We saw strength across all parts of our business, both in cybersecurity as well as network intelligence solutions. Revenue for the quarter was $26.4 million, up 14% year over year. Our profitability has likewise expanded strongly, and we reported solid operating profit in the quarter versus a loss last year. Our Cybersecurity as a Service growth engine continued with its excellent performance. As of September 2025, our CCaaS ARR was up 60% year over year, which demonstrates very strong traction for our service among end customers.

As each quarter passes, CCaaS is becoming an ever more important part of the revenue pie, and it made up 28% of our revenues for the quarter. We ended the quarter with over $80 million in cash and no debt. Allot is back to a very strong financial position with the resources to further execute on our growth strategy. Overall, our results demonstrate that we are executing exceptionally well on our cybersecurity-first strategy and renewed go-to-market focus. Looking at some of the trends within the business, I first want to discuss our biggest growth engine. We are seeing increased traction among major telcos for cybersecurity as a service solutions. As we progress, we are starting to see the fruits of our long-term investments in this solution.

The recent customer launches of our cybersecurity service are going very well. We are actively supporting our customer launches and offering gaining traction with their end customers, driving our strong sales momentum. During the quarter, we gained our first customer for our newly released Ofnet Secure solution. Ofnet Secure will allow the extending of network-based cybersecurity protection beyond the operator’s infrastructure to subscribers using any network or Wi-Fi connection. It allows operators to better seamless always-on security experience that travels with the user without requiring complex installations or device-level configuration. For the operator, Ofnet Secure strengthens their customer loyalty, increases subscription-based revenue opportunities, and reinforces the role as a trusted provider of digital security backed by Allot Technology.

The pipeline of new potential business continues to increase. Our CCaaS offering is gaining traction not only with new CSPs and telcos but also among the end customers of our existing partners. The positive momentum is allowing us to show accelerated growth and is providing us with strong forward visibility. As you can see, we are working hard to successfully bring new CCaaS customers to Allot. Our smart product network intelligence continued to perform well and was also a contributor to our growth in the quarter. We are winning new customers, which are driving higher revenues, stronger backlog, improved visibility, and we have a robust pipeline. Today, our smart product is being sold as part of our Unified Cybersecurity First platform. This integrated solution, with best-in-class technology and innovation, is enabling us to generate increased demand.

We are actively executing on the various projects we have recently won, including new Terra three deployments and upgrades, where we are working closely with the customers to roll out the platform. We are investing to bring new capabilities and functionality to maintain our technology leadership, and our recent enhancement around visibility is creating new opportunities for us. Overall, our efforts to grow the business and product line continue to progress well, and the backlog that we have built over the past few months provides us with solid visibility heading into next year. In summary, we are very pleased with our third quarter 2025 results, driven by strong performance across all parts of our business, namely accelerating CCaaS traction and increased Network Intelligence solution sales.

Looking ahead, we have good visibility. Our backlog is strong, and our pipeline continues to be broad with many opportunities. I am increasingly optimistic about our long-term future, and I am excited to continue progressing on our cybersecurity-first strategy. Given the continued accelerated CCaaS growth, our solid visibility, and high level of backlog, we are increasing our guidance. We expect 2025 year-end CCaaS ARR to show an exceptionally strong year-over-year growth surpassing 60%. We are also raising our full-year 2025 revenue guidance to between $100 and $103 million. As we move into 2026, Allot is exceptionally well-positioned for the year ahead, and we see ourselves at the inflection point of a longer-term trend of ongoing profitable growth.

And now I would like to hand it over to our CFO, Liat Nahum, for the financial summary. Liat, please go ahead.

Liat Nahum: Thanks, Eyal. Revenue in the third quarter was $26.4 million, up 14% year over year. Revenue from our growth engine CCaaS was $7.3 million in the quarter, up 60% year over year and comprising 28% of our revenue in the quarter. Our CCaaS annual recurring revenue, ARR, as of September 2025 was $27.6 million. Our revenue increase was driven by growth in both our CCaaS and our Smart products. From a geographic perspective, I want to point out that in the third quarter, we had an increased level of Americas sales, in line with our strategy to increase business in this region. Specifically, we recognized revenue on a relatively large smart order, and on the CCaaS front, we experienced a growing contribution from the U.S. Finally, I want to point out that recurring revenue continued to grow as a percentage of our overall revenues, standing at 63% in Q3 2025 versus 58% in Q3 2024.

I will now discuss the non-GAAP financial measures. For all our financial results, including the GAAP financial measures, and the various other breakdowns of our revenues, please refer to the table in our results press release. Non-GAAP gross margin in the quarter was 72.2% compared with 71.7% in the third quarter of last year. Non-GAAP operating expenses were $15.4 million compared with $15.6 million in the third quarter of last year. During the quarter, we received a grant of approximately $1 million for research and development funding. This grant was also received in the third quarter of last year. We reported non-GAAP operating income of $3.7 million compared with $1.1 million in Q3 2024. The growth in revenue and improved gross margin on a similar operating expense base led to significant growth in our operating income.

Allot had 497 full-time employees as of 09/30/2025. In terms of non-GAAP net income, we reported $4.6 million in the quarter, or a profit of $0.1 per diluted share, as compared with $1.3 million or $0.03 per diluted share in the third quarter of last year. During the quarter, we completed a $46 million follow-on share offering, of which $40 million in gross proceeds were received during the second quarter and the remaining $6 million in gross proceeds received this quarter. Our shares issued and outstanding as of September were 48.4 million shares. We reported $4 million positive operating cash flow in the third quarter, representing the third quarter in a row that we are generating positive operating cash flow. We added over $10 million to our cash balance, and we are well-positioned to drive profitable growth.

Cash, bank deposits, and investments as of September 30, 2025, totaled $81 million versus $59 million as of 12/31/2024. Allot has no debt. That ends my summary. Eyal and I are now happy to take your questions.

Q&A Session

Operator: Thank you, ladies and gentlemen. At this time, we will begin the question and answer session. If you have a question, please press 1. If you wish to cancel your request, please press 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Nihal Chokshi from Northland Capital Markets. Please go ahead.

Nihal Chokshi: Good morning. Congratulations on a good quarter. You mentioned that you are seeing increased traction with the major telecom customer. Can you outline whether or not that’s coming from higher attach rates or is that coming from more bundles potentially now bundled at the default base premium bundle here?

Eyal Harari: Thank you, Nihal. So overall, we are seeing good progress with all of our new customer launches. I think we are seeing positive trends both on attach rates as well as we have good progress with the new services we launched with our customers. This quarter, we updated on a mass mobile in Panama that launched our CCaaS service and expanded our customer base. Overall, we are seeing good results with all of our customers that drove this very significant growth on both CCaaS revenue and ARR and supported our highest revenue growth for the company in a while.

Nihal Chokshi: Okay. Great. You also mentioned that you secured your first customer for Ofnet Secure. Can you give a little bit more detail on what is the customer profile of this first customer here?

Eyal Harari: So we have Ofnet Secure as a product we launched a few quarters ago with an aim to enhance our security protection for our end customers not only when they are connected to the operational network but also when they are leaving the network and using other ways to connect to their services. With the new product starting to build pipeline, we are in multiple sales opportunities with both new and existing customers that are looking to enhance their service with this option. I do not want to go too much into the specifics of this first launch, but I would say that the main value for these specific customers is that they really want their customers to be protected 24/7, and they wanted to combine our unique network security with the off-net so no matter where the customer is connected, they are always using our cybersecurity services, and they do not have to mitigate the risk or minimize the risk of being under security threats.

Nihal Chokshi: Is it fair to say that this is a customer of materiality to Allot?

Eyal Harari: We appreciate the customer and its event for that. I do not want to go into specifics. As I said, it is the first customer that we already had this service, but we have additional multiple opportunities with both new and existing customers that are looking to further enhance our cybersecurity service with Ofnet.

Nihal Chokshi: Okay. Great. My final question is that in the past quarters, you have commented on a strong smart pipeline. Do you continue to see that?

Eyal Harari: Yes. We announced earlier in the year that we won several multimillion-dollar deals as well as very large deals we announced, I believe, in July or August. We still see a strong pipeline with opportunities both with existing customers looking to further expand their platforms. We see good demand for the Terra three new product, which is a very high-capacity service gateway solution. We have a good mix of new and existing customers in the pipeline. So overall, as commented earlier by Liat, we see in this quarter strong results not only from the CCaaS but also from the smart product line. We are hoping for this trend to continue.

Nihal Chokshi: Great. Thank you very much.

Operator: Thank you, Nihal. The next question is from Jonathan Ho from William Blair. Please go ahead.

Jonathan Ho: Hi, good morning and congratulations on the strong results. Starting with CCaaS, can you maybe unpack for us a little bit more what the drivers of the growth were? How much of this growth is maybe coming from newer contracts that are now coming online versus adoption and growth in existing contracts?

Eyal Harari: Thank you, Jonathan. So our main growth is coming from the last year’s contracts we announced in the last few quarters that onboarded, launched our service, and continue to onboard new and additional customers. Overall, we are very pleased with the results of most of our strategic accounts that are continuing to add new subscriptions and supporting the service. We announced this quarter about one new launch, mass mobile in Panama. Some of the new projects and activities are going to support our longer-term growth. But when we look at short-term quarterly changes, this is mainly by new customers joining on the services we already launched.

Jonathan Ho: Got it. And in terms of your network intelligence offerings, can you talk a little bit about the competitive landscape and pricing environment? It looks like this has inflected back to growth, but I just wanted to understand sort of the sustainability of that growth opportunity.

Eyal Harari: Our networking technologies are part of our core assets. We have a very large and significant installed base of customers. Overall, the competitive landscape is less, I would say, easier these days due to some of the changes in the dynamics. We see that overall telco CapEx spend is still tight, and the telecom industry is still challenging, but we believe we have unique technology, and with the Terra three product that is very unique, we are able to get the best price performance in the market and by that get a really competitive edge. I believe that in the next few quarters, there is definitely a potential to continue to grow well with this product. This still continues to be a significant part of our plans. While in parallel, as you could also see, the CCaaS starts to be very meaningful.

We passed more than 25% of our business from the cybersecurity, and if we continue with this pace, we are going to about 30% of our business with the cybersecurity CCaaS service. This positions us very well to continue the growth next year.

Jonathan Ho: Got it. And maybe one last one for me. Can you talk a little bit about the drivers of growth in some of your larger CCaaS contracts and whether some of the ad campaigns that were launched that were pretty public have had an impact in terms of adoption? Any way to measure that or anything that you’ve taken away from a learning perspective? Thank you.

Eyal Harari: So, Jonathan, we are seeing four drivers for our CCaaS growth. One is obviously when we have new customers that are expanding our TAM into new subscriber bases. This is what we are busy with our expanded go-to-market team that is going after new accounts. On accounts that we already work with, usually we start with certain services. But we are continuing with our customer success teams to further offer additional services. For example, start with a mobile network, we are offering the fixed security. In some areas, we are doing the business customers. We are looking into the consumer and vice versa. So every account definitely does not stop once. It has a lot of potential to do more. So the services that are already launched, we are working closely with our marketing team and our consultants that bring best practices on what is the best way to go to market for our partners to reach their customers.

We are trying to help them with marketing materials, marketing campaigns, and really more on a consultancy supporting mode. We are really relying on their go-to-market efforts. Typically, new services once launched are peaking between after two to three years. We see strong double-digit attach rates in many of our customers. This is why this growth is usually sustainable along this time. Lastly, we are looking to further upsell and cross-sell some new innovations, new products. We are very pleased that our latest release of the off-net is now part of the portfolio. This is helping us to get more revenue from the same customers that are already attached to the cybersecurity service. We are continuing to work on additional innovations and bring more value to our customers to further help them to protect their customers.

So all of those are working together. Some are more longer-term growth, some of them are more shorter-term growth. Because we are investing in all those in parallel, we are seeing very good results in the 60% range year over year, which we are very pleased with.

Jonathan Ho: Excellent. Thank you.

Eyal Harari: Thank you, Jonathan.

Operator: The next question is from Matthew Ryan Calitri of Needham and Company. Please go ahead.

Matthew Ryan Calitri: Hey guys, this is Matt Calitri over at Needham. Thanks for taking our questions. On the CCaaS side, how is Verizon-like penetration trending versus expectations? Are you seeing fairly linear scaling here, or is it more of an exponential path?

Eyal Harari: So we cannot refer to specific customers. But as commented before, we are overall very pleased with our progress with all of our customer base. We see the results in the quarterly numbers. As you saw, we raised our expectations to surpass 60% on a yearly level. Overall, we are very happy with the progress.

Matthew Ryan Calitri: Okay. That makes sense. And then a cleanup here. When you said CCaaS revenue going to about 30% of the business, was that expectation like by the end of the year?

Liat Nahum: Yes. So if we continue the current trend, then as we gave already guidelines for the remaining of the year to reach 60% and above year over year, then this is indeed the expectation. Yes.

Matthew Ryan Calitri: Okay, great. And then last one for me. On the product revenue strength you are seeing, how is Terra three playing a role in customer conversations? And what kind of color can you give there as far as new opportunities that’s opening up and how other segments are changing there? Thank you.

Eyal Harari: So we do see a good mix in our pipeline of new opportunities as well as discussions with our existing customers. Overall, we are putting a lot of focus on our customer success and making sure we are helping to support our customers’ business goals. A lot of the growth and a lot of the potential we see is already within a very impressive installed base. We have some of the best carriers in the world that are working with us both on the smart and secure product lines. We are trying to continue and improve and delight our customers to maximize the business value they get from our solution. Overall, in the telco industry, this is the best way to provide longer-term sustainable growth. We also see every quarter additional new customers that are adding to the potential.

As we mentioned in the previous comments, we saw part of the quarters new logos joining in both product lines, and we are trying to keep the investment on hunting and going after new accounts. We are maintaining a healthy mix in our pipeline between the two.

Matthew Ryan Calitri: Great. Thank you.

Eyal Harari: Thank you, Matt.

Operator: There are no further questions at this time. So that ends our question and answer session. In the next few hours, this call will be made available on Allot’s IR website. I would like to thank everyone for joining this call today and especially to Allot’s management for hosting this call. And with that, we end our call. Have a good day.