Allot Reports Q2 2026 Results: Full Earnings Call Transcript

On Wednesday, Allot (NASDAQ: ALLT ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. 7 million, driven by a 47% growth in cybersecurity-as-a-service (C-SaaS) revenue.

North American revenue surged, making up 31% of total revenue, largely due to strong product sales, particularly the Tera 3 platform, and consistent C-SaaS demand. The company secured multiple new C-SaaS deals, including an upsell in Europe and new partner agreements in EMEA and Africa, showcasing a successful 'land-and-expand' strategy. Allot's Smart product line, including the Tera 3 platform, experienced high demand, especially in North America, contributing to a strong backlog and future revenue visibility.

The Board approved a $40 million share repurchase program, reflecting confidence in the company's financial strength, backed by over $100 million in cash and no debt. Allot raised its 2026 revenue guidance to $115-$118 million, up from $113-$117 million, citing strong performance in North America and continued growth in C-SaaS. 9% operating margin, and operating cash flow was robust at $8 million, demonstrating strong profitability and cash collections. Full Transcript OPERATOR Good day to all of you and welcome to Allot's conference call to discuss its financial results for the second quarter 2026.

I would like to thank Allot management for hosting this 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 call is being recorded.

If you have not yet received the Company's press release, please check the company website at With me today on the call are Mr. Eyal Harari, CEO, and Ms. Liat Nahum, CFO. Following the prepared remarks, we will open the call for the question-and-answer session.

All the highlights of the quarter are in today's earnings press release. Before we start, I'd like to point out the following safe harbor statement. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the Company. Those 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 may differ materially from those projected, including as a result of changing market trends, delays in the launch of services by our customers, reduced demand, and the competitive nature of the security service 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 reconciliation tables. And with that, I would now like to hand over the call to Eyal Harari, Allot CEO. Eyal, please go ahead.

Eyal Harari, Chief Executive Officer Thank you. We are pleased to report another strong quarter with growth in revenue, profitability and cash flow. Our fourth consecutive quarter of double-digit year-over-year growth is an acceleration over recent quarters. We were particularly pleased with North America, where strong execution drove a solid increase in sales and backlog, underpinning our confidence in the growth we expect in the second half.

Our cybersecurity-as-a-service business, C-SaaS, continues to power our growth, with C-SaaS revenue growing 47% year over year to account for over a third of our revenues and C-SaaS ARR up 44%. This continues to scale our recurring revenue base, which represented two thirds of total revenue in the quarter, giving us greater visibility into the quarters ahead and improving the predictability of our revenues. Overall, our business is executing well and performing ahead of our expectations. Let me focus on North America, one of the highlights of the quarter.

The region made up 31% of the revenues versus 17% in the second quarter of last year and 14% last quarter. This was driven by very solid product sales, with particularly strong interest in our new Tera 3 platform, and by continued demand for our Smart product line, reflecting the value operators see in the network visibility and control our platform delivers. S. C-SaaS customer continues to perform very well in line with our strong expectations.

Beyond that, we entered the second half with a strong backlog and healthy demand, giving us added confidence for the rest of the year. North America is a strategic priority for us, and it is very encouraging to see that focus translating into revenue, backlog and pipeline. Turning to our cybersecurity-as-a-service business, this continues to perform strongly and in line with our expectations. We had several wins during the quarter, each demonstrating a different way in which we are growing the business, and all classic examples of our land-and-expand strategy.

We secured four new C-SaaS deals in the quarter, all of them in the EMEA region. First, we won an upsell deal in Europe, selling a new service to an existing C-SaaS customer: the first sale of our Identity Monitoring service. This telco will be offering our Identity Monitoring service to its SMB customers. This is a domain-level identity theft monitoring service.

It continuously monitors for exposure of the business's digital identities, and it's designed to alert the customers when credentials or other identity data have been compromised so that they can act before that exposure is exploited, and it is designed to do so for every user across the organization. It is a good example of how we are extending our SMB security suite beyond the network, alongside off-net secure firewall as a service and DDoS protection. Second, we won an expansion to the SMB segment within an existing European-based customer. Third, we secured a new win within one of our large global telco groups, adding our HomeSecure service in another country.

The HomeSecure solution enhances threat protection across the telco's mobile and broadband networks. It integrates into the existing home router and provides zero-touch home network visibility, cybersecurity and parental controls. Finally, we won a new C-SaaS deal in Africa with a telco that is already a Smart customer. Together, these wins reflect the breadth of our C-SaaS growth—new customers, geographies, end-user segments and applications—all on the same platform.

We expect these deals to contribute to our future C-SaaS revenue growth in 2027. Our Smart product line remains a highly complementary part of our unified cybersecurity-first platform and is built on decades of Allot innovation and delivering best-in-class network intelligence. We continue to execute well on the multimillion-dollar projects won in recent quarters, including deployments and upgrades of our Tera 3 platform with Tier 1 operators. As a reminder, Tera 3 is our next-generation ultra-high-capacity multi-service gateway.

It is among the highest-capacity platforms of its kind in the market, and it consolidates deep network visibility, traffic management and cybersecurity services onto a single platform. Customer feedback has been excellent. Operators are running both cybersecurity and traffic intelligence workloads on the same gateways, and they value its carrier-grade stability and reliability, and its ability to scale cost efficiently with 5G and fiber traffic growth without expanding their footprint. We also provide a smooth upgrade path from our earlier service gateway generations, which protects the investment that they have already made.

This quarter, demand for our Smart product was particularly strong in North America. As part of the Smart product innovation, we recently ran a case study with a Tier 1 operator to demonstrate Allot's new zero-rating fraud detection and mitigation service. Zero-rated applications and app-based charging plans create value for subscribers, but they also open the door to fraud. Attackers are increasingly exploiting vulnerabilities to bypass charging systems and consume data without payment.

Our solution helps CSPs identify fraud, and a case study showed that we reduced fraud and fraudulent traffic by 87%. This shows how operators can recover lost revenue while protecting the integrity of their zero-rating offers. We are already building our backlog for 2027, with an additional win of an important Tera 3 upgrade project with a customer for a new site expansion. Our pipeline remains healthy, with existing customers planning their Tera platform upgrades and new engagements advancing through our sales process, and these multiyear projects are expected to provide good revenue visibility into 2027 and beyond.

During the second quarter, we presented and met customers at a number of key industry conferences. This included DTW in Copenhagen, FutureNet World in London, Interop in Tokyo, Network X Americas in Dallas, and CommsDay in Sydney. Feedback was very positive, with customers and prospects continuing to respond well to our converged cybersecurity and network intelligence positioning. Events like these continue to build our pipeline, and it is clear that our cybersecurity-first strategy resonates well with operators globally.

At the end of the second quarter, our Board of Directors approved a share purchase program of up to $40 million. This reflects our confidence in Allot's strategy and financial strength. With more than $100 million in cash and no debt, we are well positioned to increase value to shareholders while continuing to invest in the long-term growth of the business. In summary, we are very pleased with our second quarter performance—our fourth consecutive quarter of solid improvement with accelerating growth, continued momentum in C-SaaS, standout performance in North America, and further gains in margin, profitability and cash flow.

As we are performing ahead of our expectations, we are raising and narrowing our 2026 revenue guidance to between $115 million and $118 million, from the previous range of $113 million to $117 million, with ongoing improvement in profitability. This is driven by accelerating order momentum from our North American customers, our backlog, and the continued high growth of C-SaaS. Allot is in its strongest position in over a decade, and it is well positioned to build on its profitable, cash-generation, recurring revenue-led growth in the quarters and years ahead. And now I would like to hand it over to our CFO, Liat Nahum, for the financial summary.

Liat, please go ahead. Liat Nahum, Chief Financial Officer Thanks, Eyal. 7 million in the quarter, up 15% year over year. 4 million in the quarter, up 47% year over year, comprising 34% of our total revenue.

1 million, up 44% year over year. Deferred revenue, which includes recurring maintenance and support, continued to grow both year over year and quarter over quarter, increasing the strong visibility we have into remaining 2026 and 2027 revenue. Sixty-seven percent of our overall revenue this quarter was recurring in nature. I will now discuss the non-GAAP financial measures.

For all our financial results, including the GAAP financial measures and the various breakdowns of our revenue, please refer to the table in our results press release. 4% in the second quarter of last year. The year-over-year decline mainly reflects the product mix in the quarter. That said, gross margin remains strong and consistent with our expectation of around 70% for 2026.

4 million in the second quarter of last year. The increase reflects our continued investment in sales and marketing to support our pipeline build. General and administrative expenses in the quarter increased compared with the second quarter of last year, mainly due to one-time costs associated with the modification of one of our office lease agreements following changes we made in this office. While making these selective investments in sales and marketing, we remain disciplined and operationally efficient, with operating expenses as a percentage of revenue declining to 62% from 68% a year ago.

2 million, or an operating margin of 5%, in the second quarter of last year. Allot had 501 full-time employees as of June 30, 2026. 03 per diluted share, in the second quarter of last year. 04 per diluted share, in the second quarter of last year.

2 million financial gain related to our office lease modification, reflecting the remeasurement of our lease liability. We do not expect this to reoccur. 0 million in the second quarter, compared with 4 million in the second quarter of last year, reflecting robust profitability and strong cash collections. On June 23, our Board of Directors approved a share repurchase program of up to 40 million, which we will execute in line with market conditions.

Repurchases may be made at management’s discretion in the open market. The timing and the amount of the repurchase will depend on market conditions, share price, liquidity, and other factors. According to the company regulation in Israel, we are obliged to give 30 days’ notice during which any creditor may object to the buyback. The 30 days have now passed and there were no objections.

Allot has a robust balance sheet with no debt; cash and cash equivalents, bank deposits, restricted deposits, and investments as of June 30, 2026 totaled 107 million versus 88 million as of December 31, 2025. Looking ahead to the rest of 2026, given our performance in the first half of the year and the strength of our backlog, as Eyal mentioned, we are raising our full-year 2026 revenue guidance to between 115 to 118 million for the full year. We expect security as a service revenue growth of 40% or more. Our gross margin expectation for the full year remains in the range of 70%, with the specific gross margin in any given quarter depending on our product mix.

On the operating expense side, we expect to continue at a similar run rate to the current quarter, excluding the one-time expense. Overall, we continue to expect profitability improvement over the coming quarters of 2026. That ends my summary. Eyal and I are now happy to take your questions.

OPERATOR Thank you, ladies and gentlemen. At this time we will 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 polled in the order they are received. Please stand by while we poll for your question. The first question is from Shaul Eyal.

Shaul Eyal, Analyst Thank you. Thank you. Good morning, good afternoon, everybody. Congrats on yet another very solid set of results and guidance.

Liat, actually I want to start with you and ask about operating cash flow. Still more than doubling year over year this quarter, but slightly below last quarter, which, if I recall correctly, had some cash advancements. So just asking if there were any—if there are any unusual items this quarter we should be mindful of? And I have a follow-up.

Liat Nahum, Chief Financial Officer Yes. So as we shared last quarter, we had a very strong operating cash flow in Q1 related to the major deal that we reported a year ago, and we started collecting. And last quarter indeed it was a one-time event. We continue to see a very positive momentum in our cash flow.

5 million, and I think this represents also our business model and our, let's say, our future expectations around the deals that we are signing. Overall, no major one-time event this quarter on the operating cash flow—just continuing the momentum around our business model of the security as a service, which is generating a very good cash flow. Shaul Eyal, Analyst Understood. Understood.

Thank you for this color. Eyal or Liat, I know you don't disclose backlog or RPO metrics on a quarterly basis, but given your improved profitability and visibility, what kind of qualitative commentary can you offer us as we think about backlog or RPO? Is it fair to assume it's pretty much at all-time highs right now? Eyal Harari, Chief Executive Officer So we reported in our yearly report RPO, and as you could see—it was, I believe, end of March—it is really in a very high level of backlog.

We are going to issue media reports as we do every year, and the KPI will be available there.