Allot Ltd. (ALLT) Q4 2025 Earnings Call Transcript
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Overview
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.
Key Financial Performance
Revenue for Q4 2025 $28.4 million, up 14% year-over-year. Growth attributed to strong performance in Cybersecurity as a Service.
Cybersecurity as a Service Revenue for Q4 2025 $8.1 million, up 70% year-over-year. Growth driven by increased adoption and traction of the service.
Cybersecurity as a Service ARR as of December 2025 $30.8 million, up 69% year-over-year. Reflects strong traction and recurring revenue growth.
Total Revenue for 2025 $102 million, up 11% from $92.2 million in 2024. Growth driven by Cybersecurity as a Service and recurring revenue.
Recurring Revenue for 2025 More than 60% of total revenue, significantly enhancing revenue visibility.
Non-GAAP Gross Margin for Q4 2025 71.9%, compared to 69.7% in Q4 2024. Improvement due to better product mix.
Non-GAAP Gross Margin for Full Year 2025 72%, compared to 70.6% in 2024. Improvement attributed to operational efficiencies.
Non-GAAP Operating Income for Q4 2025 $3.6 million, up 101% from $1.8 million in Q4 2024. Reflects improved profitability.
Non-GAAP Operating Income for Full Year 2025 $8.9 million, up significantly from $0.6 million in 2024. Indicates strong operational performance.
Non-GAAP Net Income for Q4 2025 $4.1 million or $0.08 per diluted share, up 105% from $2 million or $0.05 per diluted share in Q4 2024. Reflects improved profitability.
Non-GAAP Net Income for Full Year 2025 $10.9 million or $0.23 per diluted share, up from $1.6 million or $0.04 per diluted share in 2024. Indicates strong financial performance.
Operating Cash Flow for Q4 2025 $8.1 million, demonstrating strong cash generation.
Operating Cash Flow for Full Year 2025 $17.8 million, significantly improving liquidity position.
Cash, Bank Deposits, and Investments as of December 31, 2025 $88 million, up from $59 million as of December 31, 2024. Reflects improved financial health.
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Operating Highlights
Cybersecurity as a Service (SECaaS): Continued to scale rapidly, driving quality and predictability of revenue. ARR grew 69% year-over-year to $30.8 million. Recurring revenue increased to 28% of Q4 revenues and 62% of total 2025 revenue. New product 'OffNetSecure' launched, enabling protection even when users are off-network.
AI-enabled cybersecurity products: Developing new AI-enabled products to address emerging threats and enhance competitiveness. Focus on proactive, seamless, and embedded security solutions.
Smart product: Unified cybersecurity-first platform with strong demand. Includes SG Tera platform, which saw significant deployments and upgrades.
Expansion with CSPs and telcos: Partnership with Compax Venture to provide cybersecurity for MVNO customers, expanding addressable market.
Geographic expansion: Won a multiyear deal with a Tier 1 telecom provider in Asia worth high single-digit millions and a tens of millions of dollar agreement with a Tier 1 operator in EMEA.
Revenue growth: Achieved double-digit revenue growth of 11% year-over-year, reaching $102 million in 2025.
Profitability and cash flow: Reported highest profit and cash flow in over a decade. Non-GAAP operating income for 2025 was $8.9 million, up from $0.6 million in 2024. Positive operating cash flow of $17.8 million for 2025.
Recurring revenue: Increased to 62% of total revenue in 2025, enhancing revenue visibility.
Cybersecurity-first strategy: Focused on integrating cybersecurity and network intelligence. Targeting underserved consumer and SMB markets with advanced solutions.
AI-driven security vision: Aiming to provide 360-degree protection of digital life, including identity protection and scam prevention.
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Risk or Challenges
Delays in service launches: Delays in the launch of services by Allot customers could negatively impact revenue and growth projections.
Competitive pressures: The competitive nature of the security services industry poses a risk to maintaining market share and profitability.
Supply chain constraints: Sharp increase in demand and supply constraints for key components such as memory and servers could lead to cost pressures and operational challenges.
Foreign exchange fluctuations: The weakening of the U.S. dollar versus the Israeli shekel could negatively impact operating expenses and profitability.
Cost of goods pressure: Rising costs of hardware components due to industry-wide trends could affect gross margins.
Increased operating expenses: Planned increases in sales, marketing, and R&D expenses could strain profitability if revenue growth does not meet expectations.
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Guidance & Outlook
Revenue Growth: The company expects double-digit revenue growth in 2026, with revenues projected to be between $113 million and $117 million.
Cybersecurity as a Service (SECaaS) Growth: SECaaS is expected to continue delivering strong double-digit ARR growth, increasing its contribution to total revenue and driving overall revenue growth in 2026.
Profitability: Continued profitability improvements are anticipated in 2026, despite challenges such as FX effects and cost pressures from hardware components.
Gross Margin: Non-GAAP gross margin is expected to remain in the range of 70% in 2026, consistent with previous years.
Operating Expenses: Sales and marketing expenses are expected to increase as the company invests in building its pipeline for the next three years. R&D expenses will also see a modest increase to support product development.
AI and Cybersecurity: The company plans to leverage AI to enhance its cybersecurity solutions, addressing current risks and anticipating emerging AI-powered threats. This includes developing AI-enabled products to strengthen competitiveness and differentiation.
SMB Market Focus: The company aims to deliver more competitive end-to-end security solutions for the underserved small and midsized business market, including new offerings like OffNetSecure, Firewall as a Service, and DDoS protection.
New Product Launches: The company plans to launch new AI-enabled cybersecurity products and participate in major industry events to showcase its offerings and generate customer traction.
Customer Wins and Pipeline: The company has a strong pipeline of opportunities, including recent multimillion-dollar project wins with Tier 1 telecom providers in Asia and EMEA, which are expected to contribute to revenue in 2026 and 2027.
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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 drove the strength in the SECaaS business this quarter and what are the expectations for ARR growth in 2026?
A:The strength in the SECaaS ARR was driven by high adoption rates of security services launched with customers, including wins with Verizon, Vodafone, and MasMovil in Panama. The expanded addressable market and strong traction for security services contributed to increased ARR and revenue. For 2026, robust double-digit ARR growth is expected, significantly higher than the company's overall revenue growth of 13%-14%. While no exact numbers were shared, SECaaS ARR is expected to be a major growth driver.
Q:What is the opportunity with MVNOs and how does it impact revenue and bookings?
A:The MVNO market offers a unique value proposition for cybersecurity as an add-on, targeting MVNOs looking for differentiation. Partnerships, such as with Compax, embed security in MVNO infrastructure, making it easier to launch services. Two new MVNOs are expected to launch in Q2 with embedded cybersecurity. While the impact depends on the success of these MVNOs, they are targeting millions of new subscribers, which could be significant over time. However, it is not expected to influence revenue in the next couple of quarters.
Q:Is the wording around SECaaS ARR growth intentionally more positive than a year ago?
A:Management stated that they see good demand for the solution and are providing visibility based on current conditions. Growth is dependent on new customer wins, service launches, and marketing campaigns, which are not always in their control. A significant part of growth comes from services already launched, and they expect strong growth to continue.
Q:What are the initial thoughts on the sequencing of incremental ARR through 2026?
A:Incremental ARR growth is expected to be strong and in line with previous quarters. Growth in the first quarter will rely on already launched services, while additional service launches will drive growth in the second half of the year. The company is confident in the SECaaS opportunity for the year.
Q:What is the new SKU mentioned in the prepared remarks and its impact?
A:The new SKU is the OffNet product, which provides security even when users are not on their home network. This enhances the value of the security package and generates additional revenue. Additional new products are being launched to increase cybersecurity protections and drive growth through upsell and cross-sell opportunities.
Q:How is AI impacting the cybersecurity market and Allot's business?
A:AI is increasing awareness of cybersecurity threats, particularly among consumers and SMBs who are typically less protected. This heightened awareness is driving demand for Allot's network-embedded cybersecurity solutions, which provide always-on protection. AI also creates opportunities for Allot to enhance its offerings, such as fraud detection and identity protection.
Q:What is the progress with Verizon and potential upsell opportunities?
A:Working with CSPs like Verizon involves long sales cycles, but once established, upsell opportunities are quicker. For example, Verizon expanded from protecting fixed wireless access to mobile business customers. New products like OffNet and other cybersecurity engines create additional upsell opportunities with existing customers.
Q:What is the opportunity with Sandvine and how does AI impact the Smart product line?
A:Management did not comment on competition with Sandvine but emphasized that the Smart product line is performing well, with new agreements contributing to revenue growth. AI-driven network traffic increases demand for traffic intelligence, and the Smart product line is being enhanced to address these needs.
Q:What are the new capabilities being developed on the cybersecurity side and their timing?
A:New capabilities include identity protection, fraud detection, and enhanced phishing protection. These are being developed to address AI-driven threats and will be launched during 2026, with some contributing to revenue in 2026 and others in 2027.
Q:What are end users experiencing with AI-generated fraud attempts and how is Allot addressing these?
A:End users are encountering more sophisticated and frequent AI-generated fraud attempts, such as phishing and impersonation. Allot leverages its network visibility to identify new patterns and provide faster, more accurate fraud detection and protection.
Q:Are CSPs accelerating their pipeline progression due to security concerns?
A:Yes, CSPs are increasingly aware of cybersecurity risks and are looking to offer security services. Events like cybersecurity breaches have heightened awareness, leading to more CSPs adopting security offerings to meet customer demand.
Q:What is the book-to-bill ratio in the Smart business for 2025 and its impact on 2026 guidance?
A:The book-to-bill ratio is well over 1, with multiple new multimillion-dollar agreements contributing to a strong backlog. This provides good visibility for 2026, supporting continued double-digit revenue growth.
Q:How does Allot's modular approach to cybersecurity products benefit its position in the market?
A:Allot's modular approach allows it to offer a comprehensive suite of cybersecurity products, making it attractive to new customers and enabling upsell opportunities with existing customers. This approach supports growth in both new and existing markets.
Q:How does Allot plan to extend its capabilities beyond data protection to digital lifecycle protection?
A:Allot aims to leverage its network visibility to provide broader protection, including identity theft and fraud prevention. This strategy addresses increasing customer concerns and creates upsell opportunities.
Q:What is the impact of DRAM shortages on margins and profitability?
A:DRAM shortages have created cost constraints, but the impact on margins is mitigated by the growing contribution of high-margin SECaaS revenue. Management expects profitability to continue improving despite these challenges.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical guidance for SECaaS ARR growth in 2026, citing dependency on customer wins, service launches, and marketing campaigns. They also did not provide detailed financial impacts of DRAM shortages, only stating that profitability would improve overall.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI threat
Allot conference
CSPs telco
Cybersecurity Service
RSA
SG Tera
SMB
Service offering
application
approach
balance sheet
capability
consumer
cybersecurity landscape
cybersecurity network
cybersecurity solution
degree protection
end user
enterprise
identity
improvement
intelligence solution
level
million
network intelligence
partner
pillar
product cybersecurity
profitability cash
protection network
security solution
segment
service provider
step
transition model
ALLT Transcript
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.
Allot Ltd. (NASDAQ:ALLT) Q1 2025 Earnings Call Transcript
Positive5-13
The earnings call shows strong financial performance with a 6% revenue increase and significant growth in SECaaS revenue and ARR. The partnership expansion with Verizon and new product launches are positive indicators, along with a robust pipeline of agreements. Despite some uncertainties in guidance, the overall outlook is optimistic. The lack of a shareholder return plan is a minor negative, but the positive cash flow and improved margins are encouraging. The Q&A highlights potential future growth, especially with Verizon as a key partner. Overall, the sentiment is positive, expecting a 2-8% stock price increase.
ALLT Report
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