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spk09: Ladies and gentlemen, thank you for standing by. Welcome to Alot's first quarter 2022 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 Alot's investor relations team at GK Investors and Public Relations at 1-212-378-2700. or view it in the news section of the company's website at www.alot.com. I would now like to hand over the call to Mr. Kenny Green of GK Investor Relations. Mr. Green, would you like to begin, please?
spk01: Thank you, Operator. Welcome to ALOT's first quarter 2022 conference call. I would like to welcome all of you to the conference call and thank ALOT's management for hosting this call. With us on the call today are Mr. Erez Entebbe, President and CEO, and Mr. Ziv Leitman, CFO. Erez will provide an opening statement and summarize the key highlights of the quarter. We will then open the call for the question and answer session, where both Erez and Ziv will be available to answer those questions. You can all find the financial highlights and metrics, including those we typically discuss in today's earnings press release. Before we start, I'd like to point out St. Papa's Statement. This conference call contains projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only 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 made different materially from those projected, including as a result of the impact due to the COVID-19 pandemic, changing market trends, delays in the launch of services by our customers, reduced demand, and the competitive nature of the security systems industry, as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission. And with that, I would now like to hand the call over to Erez. Erez, please go ahead.
spk04: Thank you, Kenny. I'd like to welcome all of you to our conference call, and thank you for joining us today. Our first quarter revenues were slightly higher than the comparable quarter. revenues grew 2 percent year-over-year for the first quarter and reached $31.9 million. This is our 17th straight quarter of revenue growth year-over-year, and I am pleased with the results we achieved during the first quarter, which met our expectations. In March 22, our CCAS ARR was $5.9 million, and our total ARR, inclusive of maintenance and support, was $48.4 million, up 20% from March 2021. We announced last week the appointment of Rafi Kesten to a local board and a cooperation agreement with our investor, Outer Bridge, and their group. Rafi has over 30 years of senior executive business and management experience in the high-tech and cybersecurity industry from companies such as NDS, Cisco, and Radware. We believe this will be an excellent addition to our board. Rafi will be replacing Rony Keneck, who served on our board for eight years. As you will have seen from our earnings release, despite overall progress and confidence in our long-term vision, we are facing short-term headwinds that have led us to lower our forecasts for this year. I will address these headwinds and their impact in more detail as I discuss our forecast later in the call. I would like to start by discussing our traffic management and analytics business addressed by our Alok Smart product line. Our Alok Smart business remains solid. The main use cases we see today in CSPs are continuing to be in traffic management, congestion management, quality of user experience, especially for video, policy and charging control, and digital enforcement. During the last few months, we were awarded several deals where we will be replacing a direct competitor's product that is installed. We are discussing multiple other opportunities with other CSPs currently using our competitor's product and are working on expanding such deals that we won before. We are continuously increasing the number of CSPs that we work with, either by replacing competition in DPI or by our security offerings. This growth in our CSP customer base creates new opportunities for both a lot secure and a lot smart product line. As governments look to fight crime and terrorism, we see a growing interest globally to be able to block illegal activities such as drug trafficking, child pornography, or terrorism. We are seeing growing interest in our products in this area as well. In addition, we are investing in new ways to help wireless operators manage congestion on their networks and save on their costs of expansions. To summarize, I believe demand for the AlotSmart product line, including congestion management, traffic management, analytics, digital enforcement, and enterprise use cases, will remain healthy. I want to turn our attention now to what we see in our cybersecurity business and how the market has developed it. As I've said in previous calls, Adolphe is transforming into a cybersecurity company, and this is where we see most of our future growth coming from. There is a revolution happening in the consumer cybersecurity market. Responsibility on securing the consumer, the family, the small business lies today with the individual. Each person is responsible to protect himself or herself and their families and small businesses. To do this, they need to find a security app, buy it, download it, and install it on every one of their devices. The problem is that regardless how good or bad a security app is, more than 90% of consumers do not do what I just described and are left unprotected. This means that the current solution with endpoint security apps is not accessible enough to most people. End users, consumers, and SMBs are looking for a simple zero touch quote unquote cybersecurity service. They prefer a simple security service and not have to do anything technical like downloading an app to each device and configuring it. Network-based security is the solution that makes this possible. We are engaged worldwide with CSPs that are looking to provide their customers with such network-based CCAS security. As we look at the market, we clearly see that the direction and momentum are very positive. We see that the number of engagements, the level of engagements, the total addressable market size of our pipeline, a low win rate, the acceptance and scope of service by consumers in SMB, the requests we are getting from customers and vendors to integrate more products to our management platform are all improving and getting stronger. We see evidence of all of these in the rate and size of deals we are awarded and in the networks that have commercially launched. I would like to say a few words on the North American market. As we previously announced, ILOC has already signed CCAS deals with three operators in North America, one of which is DISH. None of these operators have launched yet. I would like to inform you that we have been awarded by a fourth North American operator and selected by a fifth. We are currently in contract negotiations with both of them, and while we cannot assure you the contracts will be signed, we are very optimistic. These potential contracts represent a mark of dozens of millions of dollars. In addition, we are in serious discussions with additional operators. North America is the largest telecom market globally. Aloha was traditionally much stronger in other regions, and the advancement we are making with the North American operators represents a significant change for Aloha and will be key to generating CCAS revenues in 2023 and beyond. We introduced the MAR as a simple metric to allow us to estimate the long-term potential of the deal we sign. As we indicated in previous calls and was already reflected in the second half of 2021 MAR numbers, we apply MAR not to the full subscriber base, but only to our best estimate of the relevant segment that the CSP is going to initially address. Examples of such segments that are not initially addressed may include prepaid customers, governmental corporate lines, or just a CSP strategy to prioritize a specific set of customers. It differs from CSP to CSP, and it may change over time as we are working with the operators to extend that loop. It's important that those are our best estimates at the time when the contract is signed. But from our experience, and on the average, we can say that they represent about 50% of the CSP customer base. It is important to note that while MAR is a good indicator for long-term market opportunity, it is not a good predictor for short-term revenue. As we indicated in previous calls, our main challenge is to translate the contract into revenues. The first challenge is to launch the service. This process involves many stakeholders, technical, operational, marketing, purchasing, and more. Often, this requires integration with our product as well as with many internal IT systems. We have increased our efforts to assist in those processes, and in some cases, we can help. This also gives us more visibility into the actual progress of the launch process. Unfortunately, we have limited control over the final outcome and the process can be subject to many unforeseen delays. Those delays have a material impact on our short-term revenues and we believe it is prudent to adopt more conservative forecasts for services that have not been launched yet. The second stage is the go-to-market strategy. Here again, there are many strategies from bundling price plans, periods of free services, the segment targeting the channels, and the market needs strategy. On that front, we have learned a lot. And in some cases, we are able to influence that strategy. We hope those lessons will improve time for revenue and penetration rates. but those could come into play only after the project has been launched. As of March 31st, 2022, of the 23 signed customers, only nine launched commercially, most of them only to a portion of their subscriber base. In addition, we expect to sign additional deals that have been awarded. We see that the quality and size of the operators is increasing. we have the most extensive array of products in the market, from network-based security to home security, DNS security, and integration with endpoint solutions. But maybe the most important, an integrated management platform that offers a unified policy that is crucial as more operators are moving into converged networks and want a unified solution that they can grow with. A good indication for that approach is that we see growing signs of vendors either requested by the customer or independently asking to integrate with our management platform. The size of the market remains huge. So while we are disappointed with the current pace at which it is materializing, we remain confident in our ability to achieve our long-term goals and continue to invest in it. Looking ahead, I want to summarize our expectations for 2022. A number of factors have changed during the last few months that have led us to modify our outlook for the year. The CCAS revenues and ARR in 2022 are composed of the projected performance of the nine networks we launched, plus the projected revenue of new networks yet to be launched. With nine launched networks, Any change in the timing of an expected new launch or any change on the manner in which it is expected to be launched or marketed would result in a significant impact to the overall CCAS revenue number for the year. As I noted, unfortunately, launch dates are hard for us to predict reliably. In addition, we are seeing launch dates get delayed by the CSPs for a variety of reasons. Since we put together our annual operating plan for 2022, about four to five months ago, our projected launch date for more than 10 CCAS services was delayed anywhere from one to eight months. Some of the reasons for those delays are budget allocation, team resource allocation, and prioritization within the CSP, especially in the IT departments. Two, internal issues between group headquarters and national operating units. Three, request to shift more responsibilities to allot. Four, product maturity and integration issues with our DNS secure and home secure. I would like to note that we still expect to launch numerous CCAS networks during 2022, despite the above delays. But as we are getting closer to year end, and given that usually there are also a few months of free service and ramp time, we do not expect them to have significant contribution to 2022 CCAS revenues. In addition, the war in Europe has had an ongoing negative impact on some of our CCAS services. In Poland, where we launched with play, sales in stores were significantly lower than expected in the last few months due to the stores and salespeople focusing on providing for the millions of refugees entering Poland. In Ukraine, where we were expected to launch a CCAS service, this launch has been understandably suspended. Most of our CCAS revenues are tied to the euro. From January till today, the euro fell about seven to 8% compared to the US dollars. This has a negative effect on our revenues. As a result of all the above, we are modifying our forecast of CCAS revenues for the whole of 2022 to be larger than $7 million and our December 2022 ARR to be larger than $12 million. As explained earlier, despite the more conservative method for calculating the MAR, we still expect to achieve over $180 million of new MAR in 2022. We still believe that a target of 25% penetration rate of the relevant segments three to four years after launch is an achievable target. But we now believe that the average time from contract to initial revenues after a typical initial free period may extend to 18 months, sometimes longer with the larger operators. I would now like to say a few words on our expectation for the overall company performance in 2022. Two of the factors that affect our CCAS business in 2022 also affect our CAPEX business. One, as the war in Europe continues, Some projects of CSPs in Ukraine and in former CIS countries are being delayed or canceled. Two, with most of our lot revenues coming from EMEA, a significant portion of revenues are in euros. The significant change in the euro to USD exchange rate has a significant impact on our total revenues. Bringing into account our reduced guidance on CCAS revenues and the reduction in CAPEX revenues, we are now forecasting total revenues for 2022 to be between $135 to $140 million. Further to the updated revenue guidance, we are expecting that the revenue in the next three quarters of 2022 will be somewhat lower than the revenues in the comparable quarter of 2021. Our forecast for support and maintenance revenues remains at $41 to $43 million. Regarding our expected loss, as security launches are being delayed, we can also delay some of the expenses. We also benefit from the Euro exchange rate, and we're able to adjust other costs and expect our OPEX for the year to be between $119 and $121 million. We believe our loss for the year will remain as previously forecasted between $23 and $25 million. Likewise, we believe our net cash reduction for this year will also be as previously guided between $35 to $38 million, not including the convertible loan. We expect our gross margin for the year to remain about 70%, despite our near-term headwinds and the slow time for revenue. We believe that enough services will be launched during the second half of 22 and during 23 that will allow us to reach profitability during 2024. As we discussed in the previous call, we don't manage our business on separate P&L for CCAS and CAPEX deals, and we don't report this. As we said previously, we estimate in 2022 on a synthetic, fully loaded basis, quote unquote, that the CapEx business has about 10% to 15% operating profit, and the CCAS business is expected to lose tens of millions of dollars. This estimate has not changed. I would now like to summarize the overall picture and the key message. In the Aloft smart product line, we see a healthy pipeline. Multiple use cases such as congestion management, digital enforcement, and the enterprise business are growing. We are successful in winning deals away from our competitors and unseating them in several CSPs where they are the incumbent. Overall, we see a solid demand for Aloft now. The security area is where we see our long-term growth. We are very encouraged by the pipeline growth we see and by the consumer and SMB take-up rates as they sign up for the service. Unfortunately, the war in Europe, CCAS launch delays, and the Euro to US dollar exchange rate are causing us headwinds and negatively affecting our expected results in 2022. We believe the network-based cybersecurity market is emerging as a high-growth market. We are winning most deals and I am confident of our future success in the direction we are pursuing. We are working better with CSPs to achieve high penetration rates, and we remain optimistic on our recurring revenue outlook. And now, I would like to open the call for questions and answers, and Ziba and myself will be available to take your questions. Operator?
spk09: Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Nihal Koshki of Northland Capital Markets. Please go ahead.
spk05: Yeah, thank you. Obviously, a disappointing guidance update, but thank you for the details on the various reasons that are driving this guidance reduction here. Let's first focus on the March Q incremental ARR. That was 0.7 million, roughly consistent with the past four quarters of around 0.6 million per quarter. Can you talk to why there's been no ramp in incremental ARR over the past five quarters?
spk04: I think, I mean, when you see the total ARR, then obviously it's a combination always of, I mean, when you look at the difference between the ARR in one quarter and compared to the ARR previous quarter, It consists of the growth in number of subscribers with the services already launched. There's an addition of whatever new operators were launched, if they affect the revenues at all. Usually, an operator that launched during that quarter will not affect the revenues because of free time periods and so on. If they do, it will be minimum. And, of course, exchange rate differences and so on. So I think what we're seeing is mainly the effect that we haven't launched, and now I don't remember exactly the numbers for every quarter last year, but we've been growing with the existing customer base for the primary customer base for quite a while. If you take the last quarter, we've launched one service which did not contribute anything to the numbers. So the growth was basically in the last quarter on the internal growth of the services already launched and with the headwind of the exchange rate.
spk05: Of the services that have launched and that you're generating incremental ARR from, what does that more represent?
spk04: I don't have that number off the top of my head, and I don't want to give you a wrong number. I'd have to get back to you on that.
spk05: Okay. All right. And then the updated CCAS ARR implies $7 million for calendar 22, which then implies about $2 million per quarter incremental ARR for the remaining three quarters. How do you see the shape of that incremental ARR through those three quarters?
spk04: Let me see if I understand the math you did just so I understand the question. You're comparing the projected December 22 ARR with the March 22 ARR and simply made a linear and divided that by three. That was
spk05: Yeah.
spk04: Okay. So it's 12 months. Okay. I would say it would be because what we're seeing with most operators that have launched, we're seeing a linear growth. With a pace that is, I would say, it's not always exactly the same and so on, but it sort of grows, each one individually grows at the same pace. If there's more growth to the if there is any type of acceleration, it comes from from the new operators that will get launched. That means that the ARR growth should accelerate from quarter to quarter as we launch new services. If we don't launch new services, it will probably not accelerate like I discussed before, but if we do, it should accelerate and grow faster. So I would expect it to grow faster As we go to the fourth quarter, then we will on the second quarter.
spk05: Okay. And right now, do you expect, do you have a high degree of confidence that any new services will indeed launch within the second quarter?
spk04: Look, you know, I've been burned by making projections and not making them. So I'd like to try and I'm trying not to use the word highly confident on my forecast at this point with your permission, but yes, we project that there will be additional services launched in this quarter. That's definitely what it looks like.
spk05: I would prefer to call it no expectations of incremental launches within the second quarter then. And then... No, no. Okay.
spk04: Sorry, maybe I didn't explain myself. I just said that, you know, I... I would rather err on the side of caution, but we do expect additional launches in the second quarter. Yes, we do.
spk05: Okay. All right. I'll see you before. Maybe I'll get back to you. Thank you.
spk09: Thank you. The next question is from Alex Henderson of Needham & Company. Please go ahead.
spk08: Thanks. Can you hear me okay? Yeah. Hi, Alex. Great. My question really is on penetration rates. You know, I get it. If you launched in 21, you're probably not getting a lot of revenues from those launches of $193 million in March in 2021. Okay, that's reasonable. I can even make an argument that, you know, launching in 2020 because of COVID, it's delayed. We have essentially nothing in our forecast for that. But what I'm having trouble with is the $18, $19, $85 million mark, which now in 2022, which is quite a long time, generating only $5 million in revenues or so for the 2022 timeframe, if I assume just to hear from the other two tranches. That suggests to me that your penetration rate between 21 and 22 really hasn't changed at all. It's about 5% in 21 and about 6% or so in 22. And so the slope of that penetration improvement becomes the primary issue in forecasting 23, 24, 25 timeframe. If we were assuming that that slope is as flat as that looks, We've got a real challenge to get the ramp in revenues. Can you explain to me why that tranche has not ramped any further?
spk04: I'll try. Look, it consists of two main reasons. One is that the number of operators is small, right, that have launched. So anything that one operator does has the material effect for better or for worse on the numbers. Unfortunately, in this case, for worse. Now, the operators have launched on a lower base than their entire base, which is exactly what we discussed when we said, okay, the MARS, At the end, it's roughly they're launching on average to probably half your base realistically. And then when you look at the penetration rates, it's a different number. The second point is we had one operator with a relatively large MER, which launched with, I would say, a very weak go-to-market strategy. And it took us close to about a year convince them to change their and they were in which they had virtually no additional customers or very few additional customers in revenue and it took us almost a year to work with them to change their go-to-market to change their marketing strategy and so on and now we're starting to see them pick up so while i fully understand the question this is how we got to the numbers we are today
spk08: Well, but if the case is that the customer didn't launch to the target MAR that you're forecasting, then shouldn't you be adjusting the target MAR down to reflect that smaller base? I mean, you've left the target MARs unchanged for at 85, 192, and 193, yet we don't see a commensurate ramp on that revenue, even with the issues that you're talking about. A year before delay on a 2019 launch still should be more than $5 million in revenues by 2022. And if we're looking at that now, I mean, can I think of that MAR as being able to get to 10% or 15% in 2023? Or do I need to be flattening that to maybe a percentage point or two increase as we go forward? And similarly, of $192 million in 2020, you know, almost no penetration in the revenues in 22, which is two years later, or at least a year and a half later, your 18 months comment, we have virtually no revenues from it. So how do I think about the ramp of that business sequentially into 23 and 24 in terms of its penetration rate? That strikes me as the critical issue of whether this entire business model works.
spk04: Hi, Alex. This is Ziv. As we said before, and I think we mentioned it the first time two quarters ago, now we are calculating the MAR in a more conservative way. We are taking only the applicable market, while in the beginning, in 2019, 2020, and some of 2021, we calculate the MAR on the entire install base. As I said, roughly speaking, the applicable number is about 50% of the total install base. Again, we are talking about a small
spk08: Okay, if that's the case, then do I need to cut the $85 million in half? And do I need to cut the $192 million in half? Because if that's the case, you should not be putting those up as the continued estimation of your prior MAR. You need to restate the MAR if that's the case. Is that the case? Is the $85 and the $192 off by a factor of 50%?
spk04: Yeah, so so purple as we said before, the email is calculated only one. At the time we signed the contract and after that. The CSP might have more subscriber, might have less subscriber. The revenue might go. And it might go down and and and so on. But if you want to. estimate the MAR of 2019 and 2020 according to the new conservative way of just the applicable addressable market. So you should cut it by 50%. It's 50%. And for 2021, I would say maybe it's 75%. So if you take 50% 2019, 50% of 2020, and 75% of 2021, you'll get to an aggregated amount of, let's say, around 280 million, rather than 470 million, which was the MAR at the end of December 2021, if you want to put it on the same scale. Right.
spk08: That's exactly what we were looking for. Thank you.
spk04: By the way, this is the question you asked in the previous quarter, and at that time we didn't have the answer for it.
spk08: I understand. Thank you.
spk09: The next question is from Tal Liani of Bank of America Merrill Lynch. Please go ahead.
spk02: Hi, you have Madeline Brooks on for towel. I'm just going to dig into the revenue by geography breakout. So noticing that America is a significantly down sequentially and then year over year as well. Can you explain why Americas are down so much and what the outlook is?
spk04: Uh, if you recall last, uh, last year, uh, we disclose about the deal, uh, just for an example, a deal with DISH for 5G Net Protect. And we said that we are not expecting major deals this year, but we are expecting new deals. Yeah, I'm talking about CapEx deals. Yeah. 5G Net Protect is always a CapEx deal. And we said that we are expecting for growth with this product line starting next year. So this is one of the reasons why you see reduction year over year in the revenue in the Americas.
spk02: Got it. And just to follow up on that, do you think that is, I guess just looking at the negative growth, do you think that's a reflection on the ability to sell value-added services on 5G in America? I just want to know how we should frame thinking about that.
spk04: No, no, no connection between 5G Net Protect and the SICA. 5G Net Protect is a product to protect the network itself, and as was explained in the previous conference call, It's relevant only to operators that are launching full 5G network, including the core. While most of the operators are starting with the radio equipment and the frequencies, and only in the later stage, they implement the full 5G core. This is why we said that we see big potential from this market, but only starting next year. But it's not connected to CCUS revenues on full geofiber network.
spk02: Got it. Thank you. That's it.
spk09: The next question is from Eric Martazzuni of Lake Street. Please go ahead.
spk07: The launching of new CCAS customers in 2022, I think last quarter you talked about 12 to 18 new CCAS customers in 2022. Did you update that number? Did I miss that?
spk04: No, we said that we are going to launch in 2022 at least 12 new projects.
spk07: Okay. So that's consistent with last quarter. Okay. The cash used in operations this quarter was roughly $7 million. You talked about $35 to $38 million cash burn in 2022. Is that to say that we will be stepping up the cash burn in the out-quarters, or am I mixing cash from ops and pre-cash flow?
spk04: No, we are, as I mentioned, we are still behind the same guidance of cash flow around the $35 to $38 million cash reduction, excluding the CLA. Which means we will end the year around the $19 million, including the CLA.
spk08: Yeah.
spk07: That cuts to the chase. Okay. And then the DPI business, from what I recall, the CapEx business did have some seasonality. You had entered the year saying it may be flat to down slightly. Do we have any seasonal adjustments? In other words, If it's flattened down slightly each quarter, or could we see a recovery maybe in Q4 on seasonal strength?
spk04: It's very hard to predict this on a quarter-by-quarter basis. It's a very lumpy business. We win a project or we do not win a project or a project gets delayed or canceled. It's very hard to look at it that way because each project, you know, We have a single project of $5 million, $8 million. So you can understand that it's a big swing for any quarter. I think overall for the year, we should be roughly where we thought we would be. There's roughly flat with, I think, a few million dollars less. And that's why we're guided that way now, because of the war in Europe and because of the exchange rate and where and the currency in which we get some significant portion of our deals. But the business itself, I think, is roughly flat, as we said, at the beginning of the year.
spk07: Okay, and then maybe I should have started with this, but the revenue, you've reset the revenue midpoint from $150 million down to $138 million, so roughly $12 million down. of the reset, if I put those three issues into, if I put those $12 million into the three buckets, CCAS delays, bucket number one, war in Europe, bucket number two, and then FX headwinds, bucket number three, how do you allocate that $12 million reset?
spk04: So let's start from the easy part, which is the CCAS. The midpoint of the CCAS in the previous guidance was 12.5. Let's assume now it's seven. So 5.5 is coming from the SICA. Then the rest, you can assume a few million dollars from the exchanges and a few million dollars from opportunities that will be postponed or canceled in Eastern Europe.
spk07: Got it. Thank you for taking my question.
spk09: Thank you. The next question is from Mark Silk of Silk Investments. Please go ahead.
spk03: Thanks for taking my questions. Most of the topics have been covered, so the one thing I wanted to just bring up, so do you still feel that the Board of Management is optimistic about your long-term prospects?
spk04: Absolutely.
spk03: Do you want to know what you will look like when you grow up? So having said that, now that your stock's down over 75% from last year, then I think all the shareholders would expect that management and the board kind of step up and have some skin in the game and start buying some stock back, some stock for themselves. Because, again, it's like we're taking all the risk, and we kind of like to see management and the board take some risk as well and plus also show the investment community that you're very optimistic because money talks. So that's just my comment, and hopefully you'll let them know. I know if they can, it's their money, but I think it's the right thing to do, and it'll show confidence to the investment community. So thank you.
spk04: I will definitely convey the message. Thank you. You're welcome.
spk09: The next question is from Rory Wallace of Outerbridge. Please go ahead.
spk06: Hey, Resident Dave. I just wanted to ask on the 5G Net Protect side, it seems like that opportunity is going to be much, much larger than the historical DDoS business has been for you, just thinking about how operators are going to rely less on scrubbing centers with their architectures on 5G. So is there any – I know there's not going to be significant revenue from that this year, but is there any pickup in sales activity around potential Net Protect deals?
spk04: We are talking this year to more operators on 5G networks than we were talking to last year. And now I'm just talking about the CAPEX side, right? We're doing it on the CCAP side as well, but referring to the CAPEX side, and we're talking both about DPI and 5G net protect, which tend to come sort of together. So yes, we are seeing some growth in in the opportunities we're talking to. But like we said at the beginning of the year, we don't expect to have any material new revenues on this full 2022.
spk06: Okay. And how about for even the sort of nation-state type of use cases around secure internet? Are you seeing any demand pulled from the geopolitical landscape around that?
spk04: We're seeing demand pull from countries that want to have some control over the content that's going on the Internet to try and block child pornography, to try and block terrorism and stuff like that. We're seeing both legislation
spk06: a a coming into place in the in various countries and we're seeing more and more requests to see uh you know to discuss what what can we do to uh to help them gain gain some measure of control on that okay and then uh just drilling down into some of the issues you've identified for why these deals are being delayed i think it one one interesting one is just on the the home secure route reintegrations which i think you've mentioned and then the sort of integration issues between national units and group headquarters. I mean, I think it sounds like you could have some pretty large home secure deals that stand to be ramped up at some point, but it sounds like those are being sort of pushed out. Are you confident that those large home secure deals will eventually go into deployment in some reasonable timeframe? Because it seems like those could be pretty big opportunities.
spk04: Actually, we have signed several home secure deals, and we were awarded some others that have not been signed, and we definitely have high hopes for them, and we believe that they will be launched in some reasonable or long, but reasonable for an operator's perspective time frame. But unfortunately, they are being delayed. But once they are launched, I have high hopes for what they will result with.
spk06: Okay. And some of those issues are progressing as far as I think specifically with the router integration and making sure that you have all that groundwork in place?
spk04: Yes. Yes, we're getting more and more routers integrated. I think we went public with the... a while ago with a cooperation agreement with Technicolor. We haven't. But we're working with router integrators. We're working with router manufacturers to be part of their development program so we can integrate Apriori before we need to for a specific operator. We're not doing that with all of them, but we're talking several of them. It's a hard process. It's very, very, you know, it's very specific to many different routers, but we are definitely progressing there.
spk06: Okay. And then when I look at the new guidance for $7 million of CCATS revenue for the year, it seems like if I just linearly plug in kind of adding $100,000 or $200,000 of sequential revenue per quarter, I get to that number and that's kind of what you've been achieving over the last year or so. So is that mostly, it sounds like it's mostly reliant on continued ramp from the existing base of customers with kind of a very limited assumption around the new customers. Is that a fair way of looking at that?
spk04: Yeah, as we said, most of the expected launches should take place in the second half of the year. And if you take into account that most of them will have a free period of three months, it means that new customers, new launches, new projects will generate little revenue this year. So most of the expected revenues are coming from existing customers.
spk06: Got it. And I think it sounded like in the script you talked about having one, two new North American deals, which is pretty positive, in my opinion. So could you elaborate on those at all? I think you said one was already signed and one was still awaiting commercial sign-off. But anything else you're able to share about those?
spk04: So I'll repeat, I think, what I said. I said that we signed already with three. One of which is Dish and the other two we have not announced and that we were awarded by one and selected by another. Now the reason I'm saying awarded and selected, neither of them are signed. OK, neither of these two additional ones are signed and saying awarded by one because there was an RFP process and we were awarded and the other one just selected up without having. We've worked with them for a long time, formal competitive RFP process. But, you know, neither of them was signed. So if you understood that we had signed one and they're working on another, then that's not correct. I agree with you that overall, the way we see the market in North America is very positive. And the prospects there are significant. And we're also talking to other operators. I think we will have, we will have hopefully, can't promise it, but hopefully we'll have even additional deals.
spk06: Okay. Well, congratulations on being awarded and hopefully you can get those contracts signed. And then the OPEX was lower than I think everyone would be modeling for this quarter. So, you know, I think historically, you know, you've seen, you've seen kind of less, you've seen a ramp in leverage over the year as revenues increase. But this year, you're forecasting the opposite. So I guess, are you planning a lot of hiring specifically in the second quarter or, you know, just trying to understand the ramp to get to the OPEX number for the year based off of the Q1 number?
spk04: So we have many open slots that we haven't recorded yet, and we are planning to do it during the year. This is the main reason for the expected increase in OPEX. There are other types of expenses that are correlated to the revenue. So once the first quarter revenues are low, uh the first quarter revenue are low but also the associated expenses are lower like a sales commission agent commission and so on okay great well thanks for taking all those questions i really appreciate it perfect there are no further questions at this time mr antebi would you like to make your concluding statement Yes, on behalf of myself and the management of Alot, I want to thank you for your interest and for taking the time to participate in this call. Thank you for joining us, and I look forward to talking to you in the next quarter and hopefully seeing you sometime soon wherever you are. Thank you very much.
spk09: Thank you. This concludes the Alot first quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.
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