Nehal Chokshi: Okay. Just to be clear, I mean, isn’t there typically within the course of every quarter deal wins against these competitors and also usually some losses, I mean, is that part for course of a quarter?
Erez Antebi: I’m sorry. I’m sorry. I missed the first part of your question. Could you repeat that, please?
Nehal Chokshi: Yes. Aren’t there deal wins against these competitors pretty much every quarter? Isn’t that kind of par for the course there?
Erez Antebi: Not every quarter, no. Of course, every year, yes, but not every quarter. I can tell you that to sometimes we — sometimes there’s a competitive bid where our competitors DPI system is installed and we are unsuccessful in unseating them. It’s a big issue to unseat a competitor from an existing operator. But I don’t remember them unseating us or any of our competitors unseating us for quite a long time. So I think that demonstrates how well we are performing in the competitive environment.
Nehal Chokshi: Got it. That’s very helpful. Okay. And then moving to the SECaaS, you had a very solid incremental ARR of $2.1 million. Can you give me guide up between existing CSPs adding customers and new CSPs being onboard?
Erez Antebi: Ziv, do we have that breakdown? I’m not sure.
Ziv Leitman: Unfortunately, we don’t provide this breakdown.
Nehal Chokshi: I’m sorry. I didn’t hear that.
Ziv Leitman: Unfortunately, we don’t provide this kind of breakdown.
Nehal Chokshi: Okay. All right. I guess what I’m trying to drive that is that once you have a CSP onboard, what kind of expansion rate are you seeing from that CSP in the form of rate at which they’re adding customers? That’s where I’m trying to get it down. Any information you can share with that.
Erez Antebi: I think it depends very much on the operator itself and what their go-to-market is. And once they’ve launched — start working, we obviously before they launch, but even after they launched, we continue to work with them to try and get to new plans of how they go about the market, which channels they use, what sort of pricing plan they have, what sort of incentives they give their sales people and the event that that’s relevant, et cetera, et cetera. And based on that, we measure together with them there if the new ads that they are able to bring to the network are unreasonable or satisfactory in our opinion or not good enough and we need to change further. Now, we’re never happy. We always want it to be higher.
But working with the operators in this way gives us the ability to measure not only what they did — what they’ve achieved so far, but where they should — what they should be able to achieve in the coming six, nine months or whatever. And what they should do potentially in order to increase that. And that’s part of our day in, day out work with these operators.
Nehal Chokshi: Okay. Very good. And then given the range of incremental ARR for calendar 2023, that’s $6 million to $11 million, how do you expect that profile of incremental ARR to layer through calendar 2023 i.e. is it going to be linear $1.5 million per quarter or is it going to be more backend loaded or some other profile? Can you give any process first how that will layer through?
Ziv Leitman: Most of the increase is expected to be in the second half of the — because it depends on the timing of new launches and so on, so most of it would be in the second half of the year.
Nehal Chokshi: Okay. All right. And did I hear it correctly that you’re guiding to 1Q 2023 to $20 million of revenue? Did I hear that correctly?
Ziv Leitman: This is correct.
Nehal Chokshi: 2-0?
Ziv Leitman: This is correct.
Nehal Chokshi: Okay. All right. And are there any seasonal elements that we should be mindful of when we think about our full-year model here?
Ziv Leitman: Not — not something specific.
Nehal Chokshi: Okay. All right. And this $20 million, I mean, that’s a big year-over-year drop. And so it sounds like macro pressures are increasing. Is that a fair statement?
Erez Antebi: I think that’s a fair statement. But it’s — but again, I think they’re contributing more to delays than anything else.
Nehal Chokshi: Yes. Understood. Okay. Thank you.
Operator: The next question is from Matt Dezort of Needham & Co. Please go ahead.
Matt Dezort: Hi guys, this is Matt on for Alex. I guess just following on to that last question; can you talk a little bit more about the canceled contracts, why you decided to remove those and if we should expect further reductions in the future and how we’ll have visibility to that?
Erez Antebi: These were several contracts that were signed a while ago and the operators have not launched the service for a variety of different reasons. So we really went one by one and made an assessment both on our own and talked to senior management with the operators to figure out, okay, are they motivated enough to do this? And what do we expect? And on these specific ones, we came to the conclusion that, that we would have to spend too much energy and push too hard. And at the end of the day, probably gain too little revenue for this to be worthwhile. So we decided basically to walk away from these deals. Like I said, we’re examining a few other deals, small number of other deals that, that the — from my perspective, the jury is still out whether or not we can turn them around into a revenue producing, profitable, worthwhile service or not.
So we will — as we examine them, and if we come to a conclusion that that we decide that we will need to cancel one or two additional of ones, we’ll let you know like we did this — like we did here.
Matt Dezort: Great. And then just going back to unwinding of the MAR calculation, could you just talk a little bit about thought process behind that the shifting focus on sales reps and any friction or opportunities that you may have seen so far from that? Thanks.
Erez Antebi: I’m not sure I fully understood the question. You mean why did we decide to stop using it as a metric for salespeople or —
Matt Dezort: Yes, both internally and externally. My understanding was to — yes, thinking about sales reps that no longer to take.
Erez Antebi: Look, we invented, if you like the MAR metric few years ago because we thought it would present a good metric to measure the long-term revenues or revenues at all, that that could be achieved from a certain operator. It turned out as we discussed several times in previous earnings calls, that while it could be a good indication for long-term potential for the first — I don’t know, for the first few years, it’s not a good indication for the short-term revenue because it doesn’t bring into account the timing of the launch. It does not bring into account how aggressive the launch will be in terms of go-to-market, it does not bring into account how to — into which segments of the operators customer base the service is being launched, et cetera.
So when we looked at it again this year and figured out, okay, where do we want our sales people to focus on? We came to the conclusion irrespective of the MAR right, we came to the conclusion we want them to focus on a relatively smaller number of opportunities that have a higher probability of generating significant revenues. Now, once you do that, then there is no point in just giving them a number to meet like an MAR number or like if they’re selling DPI system, meet a CapEx number, certainly a booking number. But rather we want to pinpoint them and tell them, okay, you’re salesperson in country X, these are the two or three deals that we expect you to go after and we expect you to win one of them. It’s not go after whichever operator you want, then sign them on a contract.
We’re telling you which operators we want you to go after that, that means that the MAR is no longer a relative, a reasonable metric to measure the salespeople by, because we’re giving them much more concrete instructions on which operators to go after. And since we’re not going to measure it internally then there’s no point in measuring it externally as well. Hello?
Operator: The next question is from Marc Silk of Silk Investment Advisors. Please go ahead.
