Ladies and gentlemen, thank you for standing by. Welcome to Allot's Conference Call to discuss today's announcement Allot's 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, please check the company's website at www.allot.com or call EK Global Investor Relations. I would now hand over the call to Allot Investor Relations Officer, Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin?

Thank you, operator. Good day to all of you and welcome to Allot's conference call to discuss the results of the first quarter 2024. I would like to thank Allot's management for hosting this conference call. With us on the call today are Mr. Eyal Harari, CEO; and Mr. Ziv Leitman, CFO. Following Eyal's prepared remarks, we will then open the call to the question-and-answer session, and both Eyal and Ziv will be available to answer your questions. You can also find the highlights in the quarter, including the financial results and metrics, including those we typically discuss on the conference call in today's earnings press release. Before we start, I would like to point out the following Safe Harbor statement. This conference call 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's customers, reduced demand and the competitive nature of security services industry as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission. 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 first quarter 2024 call, and I would like to thank you for joining us today. I joined Allot as the CEO a few weeks ago and I am super excited to work with the Board and the entire leadership team to drive a lot to success. I'm devoting my time to learning, listening and planning the best strategy for the company to achieve long-term profitable growth. I bring over 20 years of experience working with top tier telco customers, most recently as CEO of Radcom and enhanced the company, a leader in automated service assurance solution for telecom operators running 5G and 4G networks. Already in my first few weeks, I see an amazing organization with great potential, with professional people, who are highly experienced and motivated. I see a company with a long tradition of innovation and excellence with fantastic technologies and a base of top tier leading customers. In addition, we have a growth engine, which has already shown strong double-digit revenue growth and I believe it has significant long-term potential. Over the coming months, I will be focused on learning about the business and the opportunities as well as meeting our key customers and partners. I intend to work with the Board, the leadership team and employees to ensure that we fully capitalize on the opportunities that will drive the company to achieve long-term sustainable profitable growth. I decided to join Allot as I see a bright future ahead. I believe strongly in Allot's potential. While I joined only after the first quarter was already over, I will provide a short summary of the first quarter results. Allot made progress in the quarter towards reaching the breakeven level in terms of operating profit and…

[Operator Instructions]. The first question is from Nehal Chokshi of Northland Capital Markets. Please go ahead.

Thank you for taking my questions. Eyal, you talked about how you want to focus more on existing SECaaS customers. Can you delve deeper on to why you're wanting to choose to focus more on existing SECaaS customers?

Good morning. So as the company already updated as of last year, the decision is to be very focused and selective on the SECaaS business we are pursuing. So, we identify a key strategic account that we want to work with. Some of them are, of course, our key Tier 1 existing customers and selected new additional customers we are pursuing, in order to be very focused and build a relationship with those customers, we see the highest potential for long-term success. So, in this respect, this is not new, and we are continuing 2024 with the same strategy.

Got it. Understood. Okay. And new CEO and CFO, what changes, if any, do you expect to bring to the table?

So, I joined Allot a bit more than two weeks ago, and I'm in this stage mainly busy on learning and listening to the employees, customers, partners and establishing my plan moving forward. I came from the -- I have a lot of experience in the telco industry, and I worked over 20 years with many Tier 1s globally. And I'm looking to say where we need to focus and adjust in order to make a lot as successful as possible. And as mentioned already in previous calls, we are looking this year to be a turnaround year and get the company to a breakeven point, allowing us to stabilize the business and align moving forward to a strategic focus that we are now analyzing to make sure that we are using all the potential of the company. So, in this stage, I have nothing yet to share, give you some time to continue learning, analyzing and suggesting, and I'm sure that within a few quarters, I will be able to give you some more color about the new directions and the adjustments.

Okay. Great. And then on the core DPI business. What are the -- you talked about that there's still market declines. I think there was Sandvine a credit downgrade implying that they're also seeing significant declines as well. What are you seeing in terms of market share trajectory and what appears to still be a declining market?

So, the Smart product line is based on very advanced deep technology that was invested along the many years and hundreds of R&D venues, and it's very unique and advanced in the market. We are -- we feel that the technology we have is advanced and very competitive, while in parallel we see that the CSPs, the operators are now under pressure to cut cost and reduce CapEx due to the macro economy and the overall delays with the 5G network adoption. I'm confident that we -- the unique technology we have, we can capitalize on our assets. We are looking to find the right differentiators and use cases that will provide us the advantage over our competitors, and eventually provide the most value to our customers. And eventually, when you provide the right value, business will follow. So, we continue to invest in this very important business line and making sure we have the right solutions for the customer demand.

Okay. And then you mentioned -- yes?

And Nehal, if I may add, in our strategy, let me remind all of you, is that we assume that the DPI market is stable, and our strategy for profitable growth will come from the increase in the SECaaS business. And for instance, this quarter, the SECaaS revenues are 50% higher than the comparable quarter. And this was also the growth rate in previous years. So, we cannot promise the same growth rate for the future. It can be higher, it can be lower. But no doubt that this is the growth engine of the company and the profit and growth will come from the SECaaS business, while the Smart business will remain stable.

Got it. And your SECaaS ARR was up $1 million Q-over-Q, a little less than 10%. What was the driver of that sequential increase in your SECaaS ARR?

So, eventually, we see incremental increase with most of our customers as they are continuing with their marketing plans and onboard additional subscribers to our services. This trend is expected to continue as we had more customers, small operators that use our services, and they do their marketing efforts to onboard additional subscribers to their services. And this is why we are seeing so far double-digit growth, and we are expecting to continue to see that with the addition of subscriber in the next quarters.

Okay. And then you mentioned that Verizon is your largest opportunity. Are they also the largest SECaaS ARR contributor?

Yes. In general, definitely, our biggest opportunity as Verizon is a very large CSP with a potential to expand into many services in many areas. We don't detail per customer ARR, but they're definitely a very important and strategic customer.

There are no further questions at this time. Before I hand back the call to Allot, I would like to remind you that a recording of this call will be available from Allot's website at investors.allot.com within the coming hours. And now I would like to hand back the call to Mr. Kenny Green, Allot's Investor Relations, to make his concluding statement.

Thank you, operator. So, over the coming months, we will be organizing calls and meetings for Allot's new management with all our investors. If you are interested in meeting or speaking with us, please feel free to reach out to me or anyone in the Allot's Investor Relations team. On behalf of Allot, I'd like to thank all of you for joining this call and your interest in Allot. And I would like to thank Eyal and Ziv for hosting this call, and wish Ziv the best of luck in his future endeavors. And with that, we end our call and look forward to speaking with you next quarter. Have a good day.