Hello, everyone and welcome to the Allot Investor Day 2021. It’s a big day for us. Today, we are going to share a lot about our company and where we are headed and we are very excited about the future. I am Barry Spielman, Director of Product Marketing for Cybersecurity. And you are going to hear quite a bit about Cybersecurity over the next couple of hours and how it’s becoming a central pillar in the company’s growth strategy. In that context, this virtual Investor Day and the information we will be sharing marks an important milestone on this journey and we are thrilled to have you with us for the ride. Today, I am joined by Allot’s senior management, our Chief Executive Officer, Erez Antebi; our Senior Vice President for Cybersecurity and Head of the Cybersecurity Business Unit, Dr. Yael Villa; and Allot’s Chief Financial Officer, Ziv Leitman. And before we begin our presentations, I would like to remind everyone of our Safe Harbor disclaimer. Certain statements in today’s presentation and responses to various questions may constitute forward-looking statements that represent our outlook and current expectations. We caution you that other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. We recommend that you refer to the risk factors contained in our most recent Annual Report on Form 20-F and subsequent filings with the U.S. Securities and Exchange Commission. In addition, on this call, we will make reference to certain non-GAAP financial measures, including non-GAAP gross profit and non-GAAP net income. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the appendix to the investor presentation and in the company’s first quarter 2021 earnings release, which is posted on the company’s Investor Relations website. I want to point out that a recording of today’s session will be available on the Investors section of the Allot website as well. Now, to get things rolling, I’d like to kick off the day with a short video clip about Allot Cybersecurity business, setting the stage for today’s sessions, which will demonstrate to you, we believe, why Allot is literally revolutionizing consumer cybersecurity. [Video Presentation]

Before I turn over the microphone, I want to quickly go through the agenda and what we have planned for you today. We will start with a briefing by our CEO, Erez Antebi, who will show you how Allot is revolutionizing consumer cybersecurity. He will describe the huge business opportunity for both CSPs and for Allot. We will then share with you a discussion our CEO recently had with Marc Rouanne, Executive Vice President and Chief Network Officer at DISH. Allot recently signed a deal with DISH to provide end-to-end user plane protection against DDos and botnet attacks on DISH’s cloud-native OpenRAN-based 5G network as well as to provide cybersecurity threat protection for DISH consumer, MVNO and SMB customers. We will then move on to Dr. Yael Villa, our SVP for Cybersecurity, who will give an overview on the technology, that makes it all happen. Following Yael’s presentation, we will share a couple of additional short testimonials from our customers, who will discuss how Allot Solutions help them achieve significant growth. And finally, Ziv Leitman, our CFO, will discuss Allot’s revenue sharing business model. We will have plenty of time to answer your questions during the Q&A session. If you have any questions, feel free to send them via the questions tab on the platform at any time and we will answer them during the Q&A. Okay. I think we are ready to get started. I am pleased to hand it over to our CEO, Erez Antebi. Erez?

Thank you, Barry. Good day, everyone. Welcome to Allot Investor Day. Thank you very much for joining us. I want to talk today about Allot and how we are revolutionizing consumer cybersecurity. So Allot, in general, as a company, we are a software company and we are selling software to communication service providers or CSPs globally. We have hundreds of customers, operators around the world. Many of them are Tier 1 operators. Allot has been growing nicely. We have been growing with a CAGR of 18% during the last few years and last year, $23 million out of our $136 million of revenue were cybersecurity revenues. We have a strong management team with proven experience in the areas of both service providers and cybersecurity. Later today, you will hear from Ziv Leitman, who is our CFO and from Yael Villa, who is our Senior Vice President for Cybersecurity. The technology that Allot uses, the heritage of the company, if you will, is extremely mature. Our technology is deployed with operators around the world, with Vodafone in Europe, Telefónica in both Europe and Latin America, with Rakuten in Japan, with Jio in India, Optus in Australia and many, many others. We have – as a company we have a telco grade software. This is different than enterprise software. This technology heritage coming from the telco world is an extremely significant barrier to entry for many competitors from around the enterprise software world. Because we come from the telco world, our software is capable of handling extremely high throughputs, multi-tenancy having millions of customers that can each have different profiles, different logics, joining the service coming off of the service and with extremely high quality. We operate in 5G networks, we operate in a cloud-native environment, and we are based to a…

Thank you, Erez. Now, let’s join a conversation Erez recently had with Marc Rouanne, Executive Vice President and Chief Network Officer at DISH, following the announcement of the recent deal between our two companies. [Vide Presentation]

We are pleased to share with you now a few of our customer testimonials. [Vide Presentation]

I want to now introduce Dr. Yael Villa, our Senior Vice President for Cybersecurity. Yael also heads the company’s Cybersecurity Business Unit. Yael?

Thank you, Barry. Hi, everyone. My name is Yael Villa. I joined Allot 6 months ago to lead the Cybersecurity BU. Today, I would like to share with you a deep dive into the technological backdrop of Allot’s consumer cybersecurity offering. We will start with an overview of our consumer security concept, which is unique in the market. Next, we will briefly describe our security assets and how are we prepared for tomorrow’s challenges. The cyber world is very dynamic and sophisticated and we need always to be ahead of the bad guys. The main difference between existing solutions, mainly for enterprises and financial institutes and Allot solutions is that existing solutions are extremely hard to manage. Different alert systems coming from different applications, very long logs and basically, enterprises and financial institutes have a CSO to manage the security within the organization. In the consumer world, this is not happening and nobody is expecting the consumer to be it’s own CSO. Therefore, the solution should be seamless and easy to use. Otherwise, it will simply not work. Consumers actually don’t know anything about security vulnerabilities they just want to be protected. Some of you can ask, if Allot can have a comprehensive solution, why can’t the big cyber companies, if they are willing to, do the same in no time? Well, it’s not that easy and we will discuss why. Finally, we will talk a little about the road ahead. What do we need to start thinking today to be always ahead of our competitors and constantly bringing value to our customers? Allot solution is based on the 360-degree security concept. What is 360-degree protection? Consumers are looking to have a complete end-to-end protection anywhere, at their network, at their home, at their offices, at the coffee bar, at…

Thank you, Yael. We are pleased to share with you now a few of our customer testimonials. [Video Presentation] At this time, I would like to hand it over to Ziv Leitman. Allot’s Chief Financial Officer, to discuss the revenue sharing business model, which has created a win-win situation for both CSPs and Allot and a significant opportunity. Ziv?

Thank you, Barry. Hi, everybody. Thank you for attending our event. I would like to share with you a few slides, which will better explain our business model. Security is already an integral part of our offerings, and we have security revenues from our current installed base. In 2020, the total security revenues were $23 million which were 17% out of total revenues, $2 million out of these were SECaaS revenues. The balance of $21 million came from 3 sources; security CapEx deals, security and maintenance of CapEx deals from previous years, and CapEx deals of distributed denial of service or DDoS for short, which is a security product for protecting the CSP network itself. Our 2025 goal is that more than 50% of Allot’s total revenue will be derived from security and our Op is that almost all the security revenues will come from SECaaS type deals. In the coming slides, I will walk you through an example of how we are going after this very large total addressable market, which we presented before, so we can understand the process and the time it will take to build and ramp up the revenues. For internal and external purposes, we use a metric by the name of MAR, which stand for maximum annual revenues. The MAR represent total potential revenues from security as a service or SECaaS, under the assumption, of the 100% and customer penetration rate, which, of course, will never likely happen. Based on our past experience, the penetration rate after few years can vary form anything from single-digit percentages to more than 50%. And we find that this mainly depends on the go-to-market strategy executed by the CSP. In order to make sure that everybody understands the MAR mechanism I will use a simple example. Let’s assume…

Thank you, Ziv. So now we move on to the final part of our program, the Q&A session. We already have a few questions that were sent in. [Operator Instructions]

Thank you, Barry. Thank you, everyone. [Operator Instructions] Okay. We have a few questions already. I’ll read the questions out loud, and then we will try to answer. What caused the big rise in deferred revenue this quarter. Ziv?

The deferred revenue this quarter, it was $51 million compared to $36 million. In the previous quarter. The increase is due to payments that we got from customers. For deals which were not recognized yet. Traditionally, in the past few years, the deferred revenues were between $30 million to $40 million. So the current level is rather high, and we expect that in the future, it will be a little bit lower as it was in the previous years.

Okay. Does your mobile security product, screen robo calls? No, it does not. The product we provide, like Yael explained, his is doing anti malware, anti-phishing antivirus but it does not provide at this stage at least. We do not provide anti-robocall. Okay. Can you elaborate on the impact of COVID to Allot business and has it changed in the last few months? Yes, I can. There has been – as you know, there is been the last few months, there has been a rise in COVID in the COVID, I would say, crisis actually throughout Europe. Asia Pacific and Latin America. Israel is in a really good situation from COVID and the United States is gladly getting there. But there were many lockdowns in the rest of the world during the last few months. So to some extent, it’s also delaying some of the launches that were planned by a bit more. And probably as a result of that, we may have some impact, but we still believe we will make our $6 million of recurring security revenue for 2021, like Ziv explained earlier. Okay. Was the Colonial pipeline hack? Is there an opportunity for you to partner with another cybersecurity provider to capture this market? Yael, do you want to take this?

So definitely, we are partnering with customers. We don’t believe in having an organic solution for every type of malicious activity. And this is not something that we are considering right now, but we are going to consider in the future.

Okay. Thank you. Before developing the SaaS model, you did perpetual software license deals with some large carriers, are they eventually candidates for the SaaS model? I think by and large, the answer is no. There may be some exceptions, but customers who have bought perpetual license really have very little incentive to move to another model where they would actually pay us more money. I think the fundamental of the SaaS model is that we, as a look, take a very significant part of the risk upfront. And therefore, the operator does not have to take any risk score. It takes a very, very low risk. And therefore, if the service succeeds, we get paid a lot more and over time. Those who have bought perpetual licenses have already taken that risk. So the switch between those is not I do not expect that there may be specific cases, but in general, I do not expect that to happen. When will the DISH deal start to hit your revenue line? Look, DISH is planning to launch their 5G network this year. And I do not expect them to have too many customers this year. So I don’t expect there to be too much of that during 2021. But it’s yet to be seen. We will see how the launch goes, we will see the exact timing, and this will depend on that. Since signing the deal with DISH, has there been more interest in your 5 G business? And if so, can you enlighten us? Well, I’m glad to say that there has been there is ongoing interest in our 5G business. That started before we signed the deal with DISH and it’s continuing and actually growing after that. I think there are several accounts that we are currently…

I think – yes, I feel from almost non-secured to our – basically doesn’t perceive any latency issues do.

Who do you compete with on 5G net protect? In protecting the network itself the 5G network itself, we’re competing, I think, with the companies that are providing DDoS protection for the 4G networks. These would be companies like Arbor, for example, a Radware, etcetera. I would expect to find them, what you expect. I am finding them as the competitors in this area. There may end up having more competitors in the future, but those are the main ones. Can you discuss any progress you are making with the Broadcom relationship? What are your future expectations for these products? I’ll remind everyone that the Broadcom relationship, it’s a deal that we signed approximately 1 year ago with Broadcom, where Broadcom had a product line, Packeteer, which is a DPI traffic management product line for enterprises. And we were in our DPI business. We were competing with them with our DPI product. And we signed a deal a year ago with Broadcom, where they – where Broadcom basically did end-of-life for the Packeteer platform and agreed to steer customers, distributors and so on. That are – we are interested in continuing with the onsite traffic management like Packeteer and Allot, to bring them to Allot and – or sorry, refer them to Allot. And recommend that they buy the Allot product. I can say that it’s going very well. We are signing up more and more value-added resellers and distributors. That were formally distributing Broadcom product. We are gaining market share, and we are growing our bookings and revenues in that business. And I believe that this year, we should be growing significantly the enterprise – the enterprise portion of our business to a very large extent due to the Broadcom deal that we did. Okay, a bit of a…

So in the last few years, the average gross margin was around 70%. Specifically, in the first quarter of last year, there was an extraordinary one-time favorable mix of products, but it was something unusual. So we can expect that the average would be around 70% as it was in this quarter.

Is DISH, your other U.S. providers seriously looking at your recurring revenue technology? The answer is, absolutely yes. And I think I answered a similar question. Yes. There is a lot of interest today in the North American market for this. And it’s very different than what we saw previously. So I think I’m positive – I have a positive outlook on what I expect to happen in North America on this. Security as a service seems like a no-brainer for any operator. Why don’t all operators launch this service immediately, okay? We would like them too. They are taking their time. Look, I think it’s for a few reasons. First of all, let’s face it, communication service providers, operators, are relatively, I would call it, slow-moving entities. They have large networks to take care of. They have many millions of customers they are concerned of disrupting the current business that they have. So things take time with operators. And I think anybody who’s worked with operators can appreciate it. That’s why it takes between 1 to 2 years to close a deal of the implementation, testing, integration, etcetera, etcetera, would take between 9 to 12 months easily until the service is actually launched. Even though technically, we could launch it much, much faster. There – it’s not that much work, but there is a lot of testing, making sure and so it’s going into. I think that one of the things that operators are looking at today is that they have launched over the years many different value-added services. And when you talk to operators worldwide, they typically think that the value-added service is something that is – that will provide a 2%, 3%, 4% penetration, just like security apps that they are selling, right? That’s about what the…

So we have an enforcement point exactly for that use case in which there is no mobile connection of the CPE connection, but Wi-Fi connection, our endpoint secure solution is taking care of that.

And it’s under the same umbrella?

Under the same umbrella, same look and feel, same management system, everything the same.

I would add to that just a comment that while we have the capability, most people, even when they buy a combined package of network-based security and endpoint security, most people don’t download the endpoint. For the same reasons we talked about today. They just don’t bother to do it. So it’s there, technically. We provide a full suite solution, but the same inhibitor to actually downloading exist here as well. What do you guys lose sleep over? Okay. Personally, I try to sleep well. It helps me work the next day. I think – look, I think the – I think we explained what we’re going up, right? We want to sign up more operators. We want these operators to go aggressively into the market and sign up and get more and more customers using the network. By not sure losing sleep is the right phrase to use. But if you ask, what we are focusing our efforts on, it’s that. Ziv?

Think we have, as was presented we have a huge addressable market. There is a need to flow for our product, for our solution. And the challenge is, the execution and the execution is the long sales cycle, the long implementation cycle. And this is our challenges. That’s we are focusing. But we are very optimistic that we will overcome those challenges.

You mentioned your hope is that future revenues in security would be largely SECaaS, will 5G UPP, user claim protection, CapEx deals fall in DPI or security revenues and given your view of a multi-hundred million dollar TAM in 5G. Could this represent upside to growth in non-SECaaS. CapEx deals, UPP is a security product. So we count it as security revenues. And yes, this is an upside to growth in our non-SECaaS security revenues. Is the revenue model for the deal with DISH recurring also is for? Again, two deals with DISH, one that we signed and closed, which is NetProtect to protect the network itself, user plane protection. That’s a CapEx deal. Not recurring revenue, that is signed and done. We have another deal pending with DISH that we’ve both announced together that we fully expect to sign it, for – but we have not signed it yet for recurring revenue – sorry, for security as a service for their consumers and SMBs that will be a recurring revenue deal for us. When will your company be sustainably EBITDA positive? How much cost investment do you need going forward? Ziv?

So according to our guidance this year, we will have a negative EBITDA of a few millions of dollars. Currently, our main priority is to focus on growth. But we know that growth, it’s just a mean in order to provide profitability because the – our goal to provide profitability and positive EBITDA and positive cash flow. But the mean is to grow the company. So we didn’t provide guidance for next year. But definitely, in the next few years, we will have – will be EBITDA positive.

I think I’m going through the questions here. I think many of them are repeating questions we already answered. Okay, okay. Thank you – I want to thank everyone for participating on this day. I really appreciate the time, and I appreciate everyone who stayed we stayed on until now. It’s not trivial. And it’s not taken for granted. So thank you for your interest in Allot. And I really, really hope to meet with you definitely in the next earnings call, but hopefully, with some of you before that and hopefully even face-to-face. Thank you very much.