Ladies and gentlemen, thank you for standing by. Welcome to Allot's Fourth Quarter 2024 Results Conference Call. All participants are 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's investor relations team at EK Global Investor Relations at 1-212-378-8040 or view it in the news section of the company's website at www.allot.com. I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin, please? I'd like to welcome all of you to Allot's Fourth Quarter and Full Year 2024 Results Conference Call. I would like to thank Allot's management for hosting this conference call. With me today on the call are Mr. Eyal Harari, CEO, and Ms. Liat Nahum, CFO. Following Eyal's prepared remarks, we will open the call for the question-and-answer session, and both Eyal and Liat will be available to answer those questions. You can all find the highlights of the quarter, including financial highlights and metrics, including those we typically discuss on the conference call, in today's earnings release. Before we start, I'd like to point out the following safe harbor statements. This conference call mainly contains 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 customers, reduced demands, and the competitive nature of the securities 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 in the quarter. 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 financial reconciliation tables, and with that, I would now like to hand the call over to Eyal Harari, CEO. Eyal, please go ahead. Thank you, Kenny. I would like to welcome all of you to our results conference call and thank you for joining us today. We are very pleased to report strong fourth quarter and full year 2024 results, demonstrating that Allot is at a key inflection point in its turnaround. Our fourth quarter revenues increased both year- over- year and sequentially, representing a return to revenue growth. For the full year of 2024, we reported revenues at a similar level to those of last year. A strong contributor to revenues was our growth engine, the security-as-a-service solution, SECaaS, consistently growing sequentially year- over- year. For the full year, SECaaS contributed revenues of $16.5 million, up 56% over the previous year, and the ARR run rate was $18.2 million, up 43% year- over- year. We brought the gross margins back to Allot's long-term range of around 70%, a significant recovery from around 57% in 2023. Our results showed a return to profitability with a non-GAAP net income of $5.6 million for the year versus a loss of $53 million last year. Importantly, we reported positive cash flow generation for the first time in several years, generating $4.8 million in 2024. As a result, our year-end cash position increased to $59 million, a positive trend that we expect to continue going forward. I would very much like to thank the fantastic team at Allot for their hard work through the past year, supporting and bringing about this successful turnaround. I admire their determination and dedication, which was key in achieving the strong results of 2024. I'm incredibly proud of what we have accomplished together, and I look forward to building on this momentum in the years ahead. Our security-first strategy and renewed go-to-market focus are gaining strong traction and momentum. A recent highlight was securing significant new contracts, which included major telecom operators in key markets. I'm especially excited with our recent win with Verizon, which I will elaborate on in a few minutes. Allot continues to gain strong traction among telcos and CSPs as we work closely with them to market our cybersecurity solution and help their end customers adopt our solutions. The continued success of SECaaS demonstrates that consumers and small businesses appreciate the importance of being seamlessly and fully protected by their service provider. As we move through 2025 and continue to successfully advance our security-first strategy, Allot is well positioned and very much at an inflection point of a new long-term trend of growth and profitability. Today, our Smart product line is sold as part of our unified security-first business structure. It is a solid product built on Allot's excellent technology and years of innovation, and it continues to provide significant revenue to Allot. Looking ahead, we expect a stable level of revenue from our Smart product line during the coming year. While this product line's long-term visibility is less predictable than our SECaaS product line, we have a solid pipeline into 2025, and we believe there is potential for upside. Now, moving over to our growth engine, our SECaaS offering. Our SECaaS revenue continues to grow, contributing an increasing share of our business as each quarter passes. Looking ahead to 2025, we expect another year of strong double-digit SECaaS revenue and ARR growth and improved profitability. Growth will be driven largely by our extensive and growing list of top-tier customers launching our solution, as well as the increased traction of our security solution among the subscriber bases of those customers. We have a strong pipeline of opportunities that we are working on, some of which we hope to convert to new contracts in the coming quarters. To demonstrate our growing momentum and strong traction, I want to highlight a few examples of recent service provider launches in our SECaaS business. We were very happy to announce the signing of a new agreement between Allot and Verizon Business, in which Allot will support them with cybersecurity solutions for their mobile phone business customers. We are proud to partner with Verizon, one of the largest and most prestigious wireless providers in the United States and the world. Since late 2022, we have partnered with Verizon to provide our network-based cybersecurity protection to Verizon Business Fixed Wireless Access customers, giving 1.5 million subscribers the option to use our service. This service has experienced strong adoption over the past year and continues to grow among the Verizon Business customer base. This new agreement makes our solution potentially available to the extended Verizon Business mobile customer base. As of 2024 year-end, Verizon Business reported over 30 million subscribers, representing a significant targeted addressable market and long-term growth opportunity for Allot. Our NetworkSecure product will support Verizon Business's enhanced security capabilities, offering their customers zero-touch protection from a wide range of cyber threats. We have built a solid, strong working relationship with Verizon Business, and we hope to extend our collaboration with them further over the coming years. In November, we announced a new contract with Vodafone UK, and our relationship with them continues to grow. Together, we launched a protection service for fixed broadband customers, complementing the cybersecurity protection they already provide their mobile customers, all built on Allot services. Our solution enhances threat protection across both Vodafone UK mobile and broadband networks and across all customer devices on the home network. In only a few months since launch, our solution has gained strong traction and notably increased customer satisfaction at Vodafone UK. Last month, O2 Czech Republic, part of PPF Group, launched a cybersecurity solution for both mobile and fixed broadband customers, powered by Allot DNS Secure. O2 is now the fifth operator of PPF Group to deploy our security solution, further strengthening our footprint within the group. Last quarter, I discussed Allot's new organizational structure and strategy for renewed growth. I will recap our strategy, especially for our new investors. Allot is becoming a security-first company, operating under one unified business unit. Our foundation is deep expertise and proven capabilities, combining two key areas: cybersecurity and network intelligence. We have been working hard to leverage synergies between our existing network intelligence assets and our security offering, including an integrated cloud-based solution focused on network visibility, traffic management, and cybersecurity for the 5G era. The combination creates a compelling value proposition, enabling us to deliver a highly differentiated, fully integrated solution, one that only a handful of companies worldwide can match. For example, we see strong value in offering CSP customers, traditionally network intelligence customers, a combined offering that enhances their ability to protect networks while maintaining deep visibility into traffic. Cyber threats are constantly expanding and finding new ways to take advantage of the consumer. We are looking to stay ahead of those threats by broadening our security offering to offer a 360-degree cybersecurity protection both on and off-net. Today, telco customers can seamlessly provide cybersecurity to end users while connected to their networks. Our vision is that our customers will be able to provide consumers with the protection at all times, whatever network they choose to use. Our product and R&D teams are constantly working to broaden our security-as-a-service offering, looking to add ever-growing value to our customers to ensure our solution maintains its unique value proposition. With our strong market presence, expanding portfolio of innovative solutions, and agility in meeting customer needs, we are well positioned to win new customers while also continuing to expand within our existing customer base. This brings me to our customer-centric go-to-market approach. We have structured the organization to better support evolving customer demands. Our marketing and sales team now have a regional focus on sales and customer success, empowering them to function more effectively while enabling a more personalized approach. We believe this new structure is already creating opportunities for us, expanding our install base, and attracting new customers. In summary, we are pleased with our performance in 2024, culminating in a strong fourth quarter with double-digit SECaaS revenue and ARR growth, and positive profits and cash flow. It is clear that Allot is at a key inflection point of profitable growth, following our first profitable year on an on-going basis in a very long time. Our security offering continues to gain momentum, as is demonstrated by recent new contract wins and service launches at leading customers. Our unified security-first strategy, integrating cybersecurity and network intelligence, differentiates us in the market, delivering a fully integrated solution that widely enhances value for both existing and new customers. Looking ahead to 2025, we remain focused on advancing our strategy and executing on another year of double-digit SECaaS revenue and ARR growth and improved profitability. I'm increasingly optimistic about the expanding opportunities ahead. And now, I would like to hand it over to our CFO, Liat Nahum, for the financial summary. Liat, please go ahead. Thanks, Eyal. We reported revenue of $24.9 million in the quarter, up 2% year-over-year. For 2024, we reported revenues of $92.2 million, just 1% below those of 2023. Revenue from our growth engine, SECaaS, was $4.8 million in the quarter, in line with our expectations, and up 49% year-over-year, comprising 19% of our revenue in the quarter. Our SECaaS annual recurring revenues as of December 2024 were $18.2 million. 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 revenue, please refer to the table in our results press release. Our non-GAAP gross margin in the quarter was 69.7%, a significant improvement from 51.7% in the fourth quarter of last year. For the full year, gross margin dramatically improved to 70.6% versus 59.6% last year. While the non-GAAP gross margin depends on the specific product mix sold in the quarter, our expectation for gross margin in the coming year is in the range of 70%. We reduced expenses considerably over the past year, with the non-GAAP OpEx at $15.6 million, 47% below those of the fourth quarter of last year. Full year 2024 OpEx was $64.4 million versus $111 million in 2023. Allot had 504 full-time employees as of December 2024. We reported a non-GAAP operating income of $1.8 million, which is a significant improvement compared with the non-GAAP operating loss of $17 million in Q4 last year. For 2024, we reported a non-GAAP operating income of $0.6 million versus $55 million non-GAAP operating loss in 2023. In terms of non-GAAP net profit, we reported $2 million in the quarter, or a profit of $0.05 per diluted share, as compared with the non-GAAP net loss of $16.5 million, or a loss of $0.43 per basic share in the fourth quarter of last year. For 2024, we reported a non-GAAP net income of $1.6 million, or $0.04 per diluted share, versus a non-GAAP net loss of $53.3 million, or a loss of $1.41 per share in 2023. We reported positive operating cash flow in the fourth quarter of $4.1 million and a positive operating cash flow of $4.8 million in 2024. Cash, short-term bank deposits, and investment as of December 31st, 2024, totaled $58.8 million versus $54.8 million as of year-end 2023. That ends my summary. Eyal and myself would now be happy to take your questions. 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 polled in the order they are received. Please stand by while we poll for your questions. The first question is from Nehal Chokshi of Northland Capital Markets. Please go ahead. All right. Thank you. Hey, congrats on a strong free cash flow generation for the quarter. What would you say is the driver of that? Thank you, Nehal. We did see continuous growth on the SECaaS, and it's mainly based on our growth with the existing SECaaS customer base, as well as the new announcement on new services launch that we mentioned with customers like Vodafone, MEO, and O2. Obviously, one of the most exciting announcements about Verizon is something that will contribute more revenue and SECaaS growth in the future, but is not yet contributing to this quarter's numbers. So we see that the growth engine is producing the growth we expect, as both winning new accounts, winning new services within the existing accounts, and expanding the adoption of the end customers within the existing services at the existing accounts. So all of them are working towards additional growth, and this will yield overall very nice growth this year. Okay. So I did notice that within the revenue segmentation provided, support and maintenance was up almost $4 million QoQ. That's one of the biggest amounts, I think, in a long time. What was the driver of that increase? Was this basically the new customers that were being onboarded? So support and maintenance is mainly based on our Smart product line, as the SECaaS is a SaaS model, and it does not provide any support and maintenance revenue. The reason is due to Q4 catch-up on support and maintenance agreement. Typically, end of the year, we have strong results there, and this is a similar level to what we had last year. I see. Okay. And... That's for renewals of agreement that we managed to do, leveraging the end of the year to win that. I see. So in terms of this catch-up, it was actually a positive cash flow contributor, though. It wasn't just simply an accounting reflection. No, no. It's orders that we received that increased our business on support and maintenance, both cash and revenue. Got it. Okay. And then product revenue, that was down 55% year-over-year. Why is that? Can you repeat the question? Product revenue was $4.8 million for the December quarter. I believe that was down 55% year-over-year. Why is it down so much? Liat, can you take it? Yes, sure. As we stated also in previous quarters, our product revenue, which is mainly the DPI-based, can fluctuate between quarters, and it really depends on specific deals in each quarter. In general, we can say that, of course, as you can see, each quarter, the SECaaS revenue percentage out of the total is increasing, and therefore, it impacts the rest of the percentages. But overall, it really depends on the specific quarter, the seasonality, and if we have specific DPI large deals. Okay. All right. Could we be looking at the December quarter year-over-year trajectory as an indicator as how things are going to go for calendar 2025 in terms of the product revenue, or is that more a reflection of the lumpiness? How would you suggest thinking about product revenue trending in calendar 2025 then? I believe that, as I mentioned in my previous prepared remarks, the smart product line, as you know, it's harder to predict, and it can fluctuate between quarters. I think that the current quarter is a good baseline. What we see is where we are more consistent and growing is around the SECaaS. This should continue to grow in high double-digit rates, and we expect a similar level of smart business to continue with less visibility, which means that there could be an upside due to some growth pipeline deals we have. On a quarterly level, this could still fluctuate if this is non-recurring revenue. Yep. Understood. And then when you say SECaaS continues to grow in high double-digit rates, I mean, does high double-digit mean 11%, or do you mean more like 30+%, like what you have been doing? This year, we were doing 40%, 50%, and our goal is to maintain this success. It's a lot depends on the adoption of the service around those new wins we had and continue to execute well and win new accounts. If we look on the announcement we made around Verizon earlier, this could be an amazing opportunity for us to really scale our security service offering to millions of customers. The pace is very hard to predict, as it always depends not only on us but on the service provider as a channel. But definitely, with all the recent wins, we are very well positioned to keep similar growth rates, and we are targeting to continue to work and execute well to maintain it in the next years to come. Got it. And then when you talk about this Verizon Business Mobile Internet Security offering and that there's a base of 30 million customers, A, is that base there growing? And then B, do you have a sense as to what are the growth odds for that portion of Verizon business versus their fixed wireless access that I believe has been feeding largely your 1 million per quarter incremental ARR and SECaaS? Yeah. So the mobile industry as a whole doesn't grow much as opposed to the FWA, which is a niche service that is growing. I believe we can look at this as a stable installed base, but then 30 million customers now have the option to join our cyber protection services. I think this is definitely a very significant opportunity for us. We just announced this new service. We don't have statistics yet on the attach rates, and of course, a lot depends on how Verizon will market it to their customers. They are working on different go-to-market strategies. Fixed wireless access today is only 1.5 million lines, and here we are talking about 30 million devices. I think it's not only about this new service. It's also very important that it cements our relationship with Verizon and shows their satisfaction with the solution that they want to expand our cyber protection to more of their customers. We are going to work closely with them to assure their delight from our solution, and hopefully, we have more services we can potentially tap and protect more of their customers and more of their services. This is really an exciting opportunity for us. Okay. Do you have a sense as far as what is the rate of growth as for that 30 million base? I mean, there's a churn rate, and so with a stable base, there's usually some churn out. I think it's good for the sake of exercise. You can assume 30 million is a fair estimate, and Verizon shares information on their financials that you can view, but it's quite a stable base. The question is now how to market this new add-on service to their customer, and not necessarily just on assuming growth within this base or replacement within this base. Okay. All right. And then your incremental ARR for the December quarter was $1 million versus the September quarter being $2.6 million. And I realize that the September quarter was a record quarter, unusual quarter, but can you just go over the drivers of that dip-down in the incremental ARR? So as I mentioned, incremental ARR comes by winning new accounts and launching new services and adoption within the services. It's not linear growth because once we introduce new service, that creates some higher growth. And for example, last quarter, we announced on Vodafone, and this creates sometimes accelerated growth for a quarter. So nothing specific more than that I can share. We don't expect to see steady growth. We still work with large channels, telcos as a channel, and opportunities are relatively big. So in some quarters, we could see accelerated growth and in some more modest. But overall, we are looking to keep strong double-digit growth rate. And just to be clear, that means then that the December quarter did not have any material new customer launches or segments launched within those customers? Some launches happen, and they will contribute only in Q1, for example. There is always the timing, as when you launch the service, there are no customers, then you need to add the customers. Now, it all depends on campaigns. If the customer is offering different campaigns to increase the attach rate, it increases uptake. So there are a lot of moving parts here. And because we are working with large channels, sometimes if you have a promotion with a significant customer, it creates smarter, faster increase in the quarter. And it's not that you can expect it to be stable growth quarter- over- quarter. Okay. All right. I realize I've asked a lot of questions, sir. I do have more questions, but I want to give others a chance to ask questions. So I'll just get back in the queue here. Thank you. Thank you, Nehal. The next question is a follow-up question from Chokshi, Nehal, please go ahead. All right, guys. Thanks. So just a few more cleanups here. So gross margin did tick down 200 basis points Q2 to 69.7%. I presume that that's product revenue-driven. Is that correct? Yes, correct. Our gross margin is dependent on the product mix and is driven from the product they sell in the quarter. Okay. And what gives you confidence that it was product mix as opposed to potentially some new element of pricing pressure on the product? No, I think that you saw the improvement year- over- year. We had a tremendous turnaround, and we got to the 70% range. It can still change slightly between the quarters, but this is, on a yearly level, the numbers that we are expecting to be in the 70-ish. And long term, we expect this to further improve with scale and with more customer, more revenue portion coming from the SECaaS that, in general, it's higher gross margin by nature because this is a service as opposed to the Smart product line that sometimes has higher cost components. So I would say that on a yearly level, we expect to see similar gross margin with some improvement over time with growth and move of revenue between the product revenues into the SECaaS revenue. Okay. So are you seeing Sandvine coming back into the market? What are you seeing on the competitor front from the Smart product line then? We don't care to comment on competition. Obviously, we believe we have good product, and we have strong pipeline for our products. We continue to work with multiple existing and new customers and potential expansions. We are not trying to go into low margin deals or price wars as we are focusing on the high-tier customers and customers that can be additive to our business. Sandvine has a good solution, and I wish them the best. We are continuing to make our most focus on the security-first strategy, which is anyhow, we are facing new competitors and new markets, and this is where most of our efforts are. Okay. Great. Then OpEx for the quarter, $15.6 million on a non-GAAP basis, flat Qo Q. Does it make sense for Allot to start to now invest in OpEx as the Security-as-a-Service is driving the growth here? Actually, this is an important question as I believe what we did this year is mainly focused on the internal transformation. I believe now we have the good fundamental model to allow us to be well positioned for the next year's growth. We changed, we focused on some area, and we are looking to further grow over time. The growth is going to be mainly in driving more investment towards our growth engines, both on the go-to-market side and R&D. On the coming few quarters, I believe you can still see some of the savings in parallel to some of the new investments. So I would say that overall, on the numbers, it should be flattish with some increase towards the last part of the year. Okay. Great. I think that's everything I wanted, oh, actually, no. One other thing. Eyal, you mentioned that you're looking to broaden your security offering. Can you detail a little bit more on how you're going to do that? So we are working and investing R&D around innovative ideas. I mentioned in my previous comment, one of the most important parts for us is to see how we can make sure that the customer is always secured. As providing security from the network side, we are providing excellent protection for the customer while he's on its network. What we identified is that some of the operators are looking to see how they can extend their security reach also to when the customer is off the network. And this is an area we are trying to bring new innovation. This is an area we envision that we can provide more value. How we can still connect the customer to the network for security protection while the customer is now on his Wi-Fi or other network that is not the service provider wants. This is critical for the CSPs to improve their customer retention and satisfaction. We are working on some ideas in this direction, which we will share later this year once we are getting closer to product launch. Got it. To be clear, at this point in time, the telecom customers provide the off-network security protection through a third-party security product that is not necessarily as well integrated as what you're basically envisioning here? Yes. Got it. Okay. Very good. Thank you very much. Thank you, Nehal. The next question is from David Kanen of Kanen Wealth Management. Please go ahead. Hi guys. Thanks for taking my questions and congratulations. I know that in the last segment, you were asked about attachment, and you kind of took a pass on that. But could you address it a different way, possibly with Verizon? Based on turning on other carriers in the past, what kind of attachment did you get? And then is this done primarily at the point of activation when somebody upgrades their phone or they subscribe for new service and they are turning it on or activating it? Is that typically when they would update for security? Thank you. Thank you, David. So it really depends on the go-to-market of the CSP, and there are many considerations. It depends if they offer it as an opt-in or opt-out. Obviously, it definitely affects the attach rate. Different operators choose different ways. Some of them are trying to combine it with the selling of new service. Typically, you do need a compelling event to make the customer join new services, either if he's changing his plan or his device or joining the service. I would say that based on past experience with operator, we see that at peak, we get close to 50% attach rates. Typically, if the operator is doing a decent job and takes it strategically, 15%-20% are definitely our average attachments of customers. And it's then mainly based on how they are positioned. If it's a paid add-on in an opt-in, it's usually a slower update. If it's an opt-out, it's much faster. If it's bundled with a package, then we go with the package that it is attached, and so on and so on. Different methods to see, but some of the statistics we shared in the past is we see that peak attachments get close to 50%, and average, I believe, is around 15%, 20%, 25%, very reachable goal. Okay. Thank you for explaining that. And then if I could ask a question about your DPI legacy business with the troubles that Sandvine has experienced as of late, and then you have some upgrades and integration with your new offering. Do you expect for 2025 that this is a business that could actually start growing, albeit modestly, or is something that will continue to contract? Oh, in my prepared remark, I mentioned we are looking to best estimate is to have similar level. If you ask me whether there could be an upside, definitely there could be an upside. It really depends on winning new projects and the timing of the revenue. We do see more opportunities in the pipeline based on our engagement with different customers. We do invest in part of the change to move into regional structure. They gave us more market focus and more engagement with customers that we see that generate us some nice opportunities in the pipeline. But this being said, predictability of this business is much lower, and visibility is different because it's non-recurring business, and it really depends if we win the project or not. So currently, we estimate similar level, but there could be an upside based on some customer success. And it depends on the scale of the projects we win. I hope this answers your question. Yeah. That's helpful the way you answered it. And then last question is, in your prepared remarks, you said something like, "We have a strong pipeline that we expect to convert," and I believe you were referring to SECaaS. So are you indicating that you have a strong pipeline of prospective SECaaS customers similar to MEO and Verizon and the large Japanese carrier you recently landed? Is this incremental, and could you give us a little more color on that and quantify it and maybe what the TAM is there? So the comment was generic, and we have a mix of opportunities both on the SECaaS for new services within our existing customers. We have new SECaaS potential customers. We have also new smart potential customers. And I think we are starting the year very well positioned, strong to address those opportunities. And nothing more that I can add at this point. Okay. Thank you. We wish you well, and look forward to chatting next quarter. Thank you, David. Thank you. Thank you, David. There are no further questions at this time. This concludes the question and answer session. Thank you for joining us. The recording will be available on the website. You may go ahead and disconnect.