Earnings Call Transcript - ALLT Q2 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to Allot's Second Quarter 2021 Results Conference call. 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 Allot's Investor Relations team at GK Investor & Public Relations at 1 (646) 688-3559 or view it in the News section of the company's website, www.allot.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?

Kenny Green, Investor Relations

Thank you, operator. Welcome to Allot's Second Quarter 2021 Conference Call. I would like to welcome all of you to the conference call and thank Allot management for hosting this call. With us on the call today are Mr. Erez Antebi, President and CEO; and Mr. Ziv Leitman, CFO. Erez will provide a brief opening statement and summarize some of the key highlights of the quarter. We will then open the call for the question-and-answer session, and 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 on the conference call in today's earnings press release. Before we start, I'd like to point out the safe harbor statement. This conference call may contain projections or other forward-looking statements regarding future events and 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 may differ materially from those projected, including as a result of impacts due to the COVID-19 pandemic, changing market trends, 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.

Erez Antebi, CEO

Thank you, Kenny. I'd like to welcome all of you to our conference call and thank you for joining us today. Today, we are slightly changing the format. In the press release, you will be able to find all the numbers and tables that we typically release as well as those that Ziv previously used to share in the conference call. Therefore, after my remarks, we will jump straight into Q&A, and Ziv and I will be available to answer your questions. Our second quarter was another quarter of solid growth. Revenues grew 8% year-over-year for the second quarter and reached $35.3 million. In the second quarter, we also reduced our non-GAAP operating loss by about 40% compared to the second quarter of 2020 and increased our total cash and equivalents to $105.6 million. This is our 14th straight quarter of revenue growth year-over-year, and I am very pleased with the results we achieved during the second quarter. Also during the second quarter, we succeeded in signing several recurring security revenue deals for several of our Allot Secure product lines. I'm very pleased with these results, and I believe it shows we are on track and successfully executing on our plan. Our business is expanding across our product lines and markets, and we are increasing our market share, especially in the cybersecurity business, as I will describe in more detail. As we see our opportunities grow, we continue to invest in order to capitalize on the significant number of opportunities that we are identifying. I want to start by describing what we see in our cybersecurity business and how the market is continuing to change favorably. As I have said in previous calls, Allot is rapidly 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 for securing the consumer, the family, and the small business lies today with the individual. Each person is responsible for protecting themselves 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 of how good or bad a security app is, more than 90% of consumers don't 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 small and medium businesses are looking for a simple, zero-touch cybersecurity service. They prefer a simple security service and do not want to deal with technical aspects like downloading an app to each device and configuring it. While most people are practically left unprotected, threats such as phishing and others are growing. We recently published a report showing that our consumers protected by Allot Secure in Europe, during a period of three months alone, our security software blocked 140 million attack attempts by the Flubot Banking Trojan. This is just one case, but it clearly shows the level of threats people are facing on the internet. The revolution of shifting responsibility from protecting consumers and small businesses from the individual to the CSP is indeed happening. I'd like to use the analogy of water. We buy water from the water utility company and expect it to come to our faucet safe to drink. We don't expect it to come dirty and then have to figure out ourselves how to filter and purify the water so that we can drink it. Much the same, the internet access our CSP provides should be safe for us to use. Currently, we see a growing number of CSPs worldwide that understand that this is no longer a 'nice to have', but rather becoming a 'must provide'. With this growing understanding, so grows our pipeline of security as a service deals. This is evidenced in the deals we signed and those we are working on. Recently, we announced several security as a service deals, including two contracts with CSPs in APAC, one contract with a CSP in Europe, and another contract with a Tier 1 European group with operating entities in Europe and North America. In addition, we have recently been selected by several CSPs in APAC and Europe, with whom we are currently negotiating the contracts. In North America, as I previously discussed, the market change in the past 18 months is very clear. Multiple North American CSPs are considering launching network-based security as a service to their consumer and SMB customer base. They are in discussions with us as well as with others. We see North America as an opportunity and a focus area for Allot. As we previously announced, we intend to sign a security as a service agreement with DISH to protect their mobile and fixed customers on the new 5G network DISH is building. While we cannot be sure that any of the discussions, selections, and awards I mentioned will indeed result in contracts, I am optimistic. I believe the contracts we signed and the awards we got are strong testaments to the positive change in the market and to Allot's strong position in the network-based security market. I would like to remind everyone of the Allot business model in a typical security as a service deal. When we sign such a deal with an operator, Allot takes upon itself to provide all the required hardware, software, and professional services to enable the service. We further assume responsibility for the support and maintenance of what we provided and provide significant marketing support to the operator's marketing team. In return, we ask for a share of the monthly revenue generated by the service or a monthly fixed subscription fee. Operators worldwide can typically charge for network-based security services anywhere from 5% to 8% of the consumer's ARPU and much higher rates for the SMBs ARPU, which can reach even 20%. Allot will typically get anywhere from 20% to 50% of what the operator can charge to consumers or SMBs, depending on various factors. This is the preferred business model that most, but not all operators worldwide accept. While each of the CSPs that decide to work with us may be interested in different parts of Allot Secure product family, we are seeing strong demand for all elements of the Allot Secure enforcement capabilities including NetworkSecure in the core network, HomeSecure in the home router, BusinessSecure in the SMB router, DNS Secure, and also EndpointSecure. Our ability to provide such a wide variety of security enforcement capabilities together with a unifying management layer of Allot Secure Management or ASM, are important differentiators and key to winning many of these CSPs. I am not familiar with other technology companies that provide such a broad, unified experience across access means, devices, and threats. While Allot has different competitors coming from different disciplines for each of its product lines, Allot is the only company that offers a comprehensive solution addressing such a broad range of consumer needs with a single unified management platform and with integrated policies. I would like to say a few words about the penetration levels we are seeing with those security as a service offerings that we have already launched. In CSPs that launched the service, we continue to see growth in the number of consumers and SMBs that sign up for the service. CSPs that accept security as part of their core offering and offer the service in multiple touchpoints show high penetration levels, even when customers sign up for the service separately. For example, in one of the operators when offered in a store, we are seeing around 80% of new customers signing up for the connectivity service, also signing up for the security service. The lifetime value of customers who sign up for the service is also high. In one of the CSPs, we see that even 1.5 years after signing up with the service, approximately 65% of those who signed up for the service stay with it. This is, in my opinion, very strong evidence that the service is valued by the customers. However, CSPs that launch it as 'just another value-added service' with limited sales channels and less aggressive go-to-market plans show lower penetration levels. Allot has set up what I think is a strong marketing support service, where we work together with the marketing departments of the CSPs to show them the value of offering the service in broader sales channels and the right go-to-market plans. As a result, we are seeing CSPs appreciate the experience other operators are having, and some are modifying their go-to-market approaches and significantly improving their results. The number of operators closing deals and planning to launch is growing. COVID, especially with new restrictions imposed with the current outbreak of the Delta variant, is causing delays in launches and various marketing activities. While we are very encouraged by the penetration levels of operators who launch the service, these delays have a short-term impact on our revenues. In addition, we are finding operators who decide to launch the security service with several months of free service, despite our view that 1 month of free service would result in very similar take-up rates. The combination of the delay in launches and prolonged free services has contributed to somewhat reduce the initial recurring revenues for us expected during 2021. We expect our recurring security services in 2021 to be around $5 million. When we look at our recurring security revenue growth plan, we see our revenues growing in three dimensions: one, signing up and launching cybersecurity services with additional CSPs; two, in a CSP that launched the service, having more end users sign up for this security service; and three, CSPs expanding the security offering to the market from an initial market segment such as mobile, to additional segments such as the home or off-net protection or the SMB market. I believe this threefold growth opportunity is what can make our recurring security revenues grow very rapidly. Looking at the existing CSP services growth, as we see it now, the new CSP launches from existing contracts, and the expected launches from deals we were awarded recently, we remain confident that in 2022, our recurring security revenues will be around $25 million. I would like to turn our attention now to 5G networks and our opportunities there. Securing internet access actually consists of two aspects: the first, that I described until now, is securing the end-user access to the internet. But in addition, we also need to secure the operator's network itself, mainly the user plane from DDoS or BOT attacks. As I discussed in previous calls, Allot has a unique position to play in securing the user plane in 5G networks. Our combination of being able to analyze in real-time the full traffic flow, ability to mitigate DDoS attacks quickly and protect the network from rogue IoT devices, puts us in a unique position to help operators secure their 5G networks. Allot comes to the 5G world with a very strong telco-grade technology, products that scale easily to the 5G bandwidth requirements and full multi-tenancy support to enable differentiated services. These abilities are key differentiators for our 5G NetProtect product and future 5G deployments. Working with an operator to protect the growth of the network itself and the access by its customers is a powerful combination. This is what we are planning to do, for example, in the DISH network. Earlier this year, we announced that we signed a contract with the U.S. operator, DISH, to use Allot 5G NetProtect to help secure the user plane of the 5G networks they are building. The DISH design of a 5G cloud-native network is the most advanced we are familiar with. I view the selection of Allot technology to help protect their network as testimony to our technology and implementation capability, which will serve as a great reference for other operators, especially in the North American market. During the second quarter, we announced that we closed another 5G NetProtect deal with a Tier 1 CSP in APAC. I can share with you today that we have been awarded yet another Tier 1 5G network, and we are currently negotiating that contract. I believe the growth of 5G networks worldwide and the need for securing the network itself could become another powerful growth engine for Allot. To summarize, I believe the market for cybersecurity services by CSPs to consumers and SMBs is taking off, and our pipeline is stronger than ever. I believe Allot is uniquely and very well positioned to take advantage of this and grow significantly. New deals with CSPs still take time, usually between 12 and 18 months, and with COVID, some even take 24 months. One sign, it usually takes 9 to 12 months to launch the service and start gradually building a revenue base. Ongoing COVID-19 impact may cause further delays of several months launching the services after the deal is signed. Factoring all this, as I explained earlier, we expect recurring security revenues from security deals in 2022 to be around $25 million and to keep accelerating growth year after year. We also expect that in 2021, we will sign new recurring security revenue deals totaling at least $180 million of MAR. Finally, I would like to turn now to discuss our visibility and control business addressed by our Allot Smart product line. Revenue from this business is continuing to grow well for us in 2021. The main use cases we see today in CSPs are in traffic management, congestion management, quality of user experience, especially for video, policy and charging control and digital enforcement. During the first half of 2021, we were awarded several deals with operators requiring traffic management or visibility. In some of these deals, we will be replacing a direct competitor's product that is installed or we are being added to the network where the CSP had until now used our competitor's product exclusively. 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 last year. 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. Our enterprise business is continuing to grow. During the first half of 2021, our enterprise revenues grew about 70% compared to the first half of 2020. The deal we signed in the beginning of 2020 with Broadcom to position Allot as the replacement for their Packeteer product, which is at End of Life, is contributing a significant portion of this growth. We are signing new distributors for our enterprise products in multiple countries, including North America and Japan. One example is a deal we announced with the North American government agency, which was broadcast by a distributor who previously worked with Broadcom. We expect continued double-digit growth of the enterprise business in the remainder of this year and probably in 2022 as well. To summarize, I believe demand for Allot Smart product line, including congestion management, traffic management, analytics, digital enforcement and enterprise use cases will remain healthy with single-digit growth for Allot in the years ahead. I would now like to summarize the overall picture and the key messages. We are proceeding according to our plan and continuing to grow the business. In the Allot Smart product line, we see a strong pipeline. Multiple use cases such as congestion management, digital enforcement and the enterprise business are growing. Overall, we see a solid demand for Allot Smart. 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. We signed significant deals for our various products. While these deals always take time to close, COVID-19 pushed the close of several deals a bit more. It is also postponing services commercial launch in some of the deals that we already signed. Overall, the number of operators we are closing deals with is growing worldwide, and our pipeline of potential future deals is growing as well. Looking at our backlog, the market demand as we see it now and the pipeline of deals that we are working on, I would like to reiterate our revenue guidance for 2021 between $145 million to $150 million, which includes about $5 million of recurring security revenues. We further expect to sign additional recurring security revenue deals in 2021 with a total MAR exceeding $180 million. And now I would like to open the call for questions and answers, and Ziv and myself will be available to take your questions.

Operator, Operator

Operator Instructions: The first question is from Alex Henderson of Needham & Company.

Alex Henderson, Analyst

So I wanted to focus on the enterprise aspect first. Can you remind me what percentage of the traditional businesses is coming from the enterprise segment?

Ziv Leitman, CFO

Last quarter, it was 20%. Year-to-date, it's 24%. And last year, it was 16%.

Alex Henderson, Analyst

If 24% of your business is growing at 70%, it seems likely that the other portion must be declining to achieve mid-single digits growth. I assume you've performed well with the Broadcom products, but that benefit will lessen over time. Can you describe the nature of that benefit and how it changes? I assume a substantial part of that installed base has already been transitioned.

Erez Antebi, CEO

The growth in the enterprise business is mainly due to the Broadcom deal, but it is taking longer than I anticipated. It takes time to convert the distributors, and though we signed a deal with Broadcom early in 2020, we didn't see much conversion or growth in the enterprise business that year. We are just now beginning to see the effects, which is about 1.5 years after signing the deal. I expect to see significant growth in the enterprise business for the rest of this year. Once we have these channels developed and comfortable with us, I believe they will continue to bring us deals, whether from Broadcom or other areas where they previously engaged with different technologies. To summarize, I think we'll see the most significant impact this year. I don't expect to maintain a 70% growth rate next year, but I do believe there will still be growth. It’s taking longer than I initially expected, but it’s still positive.

Alex Henderson, Analyst

So if I were to look at the traditional business and take out the enterprise piece, is the rest of the service provider piece still growing? Or is that actually declining?

Erez Antebi, CEO

I don't think it's declining. And it really, really changes. It fluctuates from quarter to quarter because enterprise business is sort of ongoing. The CSP, the traditional traffic management for CSP is much more lumpy in nature. So I don't see a decline, at least in what I see the business in general. It could be that in the specific quarter, it may have gone a little bit up or down, depending on revenue recognition with the lumpiness of the deals.

Alex Henderson, Analyst

When you have an installed base with a customer of that technology, does that give you an advantage in doing the security business? Or is there no correlation between who you win on security and the installed base of traditional?

Erez Antebi, CEO

Okay. I assume you're talking about CSPs now.

Alex Henderson, Analyst

Right. On the CSP side, right, clearly.

Erez Antebi, CEO

It gives us some advantage because the customer is familiar with us. We know the network people. They have a reference already in-house for themselves on how we are as a partner, how we are as a technology company and so on. So it definitely gives us some advantage. But many of the operators that we're signing, we're signing now, I don't know off the top of my head to tell you if it's the majority of them or not, but a significant portion of the operators that we're signing up for security are not VPI customers for us.

Alex Henderson, Analyst

I have two quick questions. First, regarding the $5 million profit outlook for the year from security revenue, that doesn't seem to be a significant change. I believe we were previously at $6 million, so it appears to be a minor adjustment. Is that correct? It seems like it's around $1 million or so?

Erez Antebi, CEO

Yes. You're absolutely right.

Alex Henderson, Analyst

Okay. So it's not a significant issue either way and may just be statistical noise. I wanted to discuss the Open RAN wins. We currently lack a clear understanding of this business regarding the potential size of opportunities, the timeline for growth, and the underlying mechanics. Could you elaborate on this? Specifically, when you secure a deal, how large is it? How long does it typically take to start generating revenue? And what is the trajectory of revenue growth after installation?

Erez Antebi, CEO

When you said Open RAN, are you referring to the 5G network?

Alex Henderson, Analyst

The 5G, yes.

Erez Antebi, CEO

It depends. It should be similar to our DPI business. If we consider NetProtect for 5G networks, the process involves getting a contract, installing it, integrating it with other systems, and then achieving acceptance. Depending on the operator's pace and their testing requirements before going operational, it could take anywhere from 6 to 12 months for a typical deal. For 5G, an additional factor is that some networks are not yet operational; for instance, DISH has not launched a commercial 5G network. We have provided them with software and are collaborating with them on its integration into their developing network. Therefore, it could take longer, but I would estimate around 6 to 12 months for a regular DPI deal, plus perhaps another 3 months for a 5G network once it is implemented, which seems reasonable.

Alex Henderson, Analyst

Are these all perpetual?

Erez Antebi, CEO

The 5G NetProtect deals are all perpetual licenses or at least they are CapEx based deals. When we do, and hope to do shortly, a security as a service deal on 5G, those will generate recurring security revenues.

Alex Henderson, Analyst

Okay. One last question. On the MAR calculus for the year, are you ahead of your target? On target? Feeling better about the outlook in line with the outlook, worse than the outlook? Any granularity on terms of where you are on that $180 million plus target?

Ziv Leitman, CFO

Alex, as you remember, also last year, we did say that most of the MAR contracts for the security contracts were signed towards the second half of the year. There is a kind of seasonality or trend in the market that most of it is signed in the second half of the year. And I think this year also will be similar to last year, the same trend. However, we feel confident that we will meet our guidance of $180 million of MAR.

Operator, Operator

The next question is from Eric Martinuzzi of Lake Street.

Eric Martinuzzi, Analyst

I have a question regarding the slight revision in the security revenues for 2021. If I understand correctly, it was partially driven by delays due to COVID and also influenced by marketing choices made by the carriers. I'm curious about the difference between the two factors and which is having a greater impact on the revenue ramp for those contracts in 2021.

Erez Antebi, CEO

The changes are so small that it's difficult for me to distinguish between the two. They are about the same order of magnitude.

Eric Martinuzzi, Analyst

Okay. Focusing on the marketing aspect, you have significant experience in this area globally. As you engage with new customers signing contracts, are you altering how you communicate with their marketing departments so they can leverage your expertise?

Erez Antebi, CEO

We are changing the way we communicate with our clients. The benefit of our experience is available to them before we finalize any agreements. Once we sign a deal, it's in our interest to share our knowledge and help them realize how successful we can be together. We are now dedicating more time than we did previously to showcase both effective and ineffective go-to-market strategies. We also aim to secure commitments from their management for a more aggressive growth and go-to-market plan even before signing the deal, as we believe this is crucial for achieving successful results. For instance, we had an operator who started with a go-to-market plan that we were not comfortable with, and after a few months of poor performance, they acknowledged the issue and sought our advice on how to improve. We consistently guided them on the necessary changes, and now they are making progress. Our preference is for them to commit to doing better from the outset, so we are actively working with these operators to establish ambitious goals from day one, as this drives significant improvements in their go-to-market strategies and overall approach right from the beginning. That’s the main change we are implementing.

Eric Martinuzzi, Analyst

Okay. With the new wins you're achieving, congratulations on that; you're really assembling a series of impressive successes. Were most of these carriers previously using their own product, a competing product, or nothing at all?

Erez Antebi, CEO

Some of these operators were not active, and some were reselling endpoint security applications from various companies like McAfee or F-Secure, among others. None were utilizing their own technology. I am not aware of any operator that offers its own technology for security as a service.

Eric Martinuzzi, Analyst

Okay. All right. And then my last question has to do with the operating expenses going forward. I'm looking at the GAAP OpEx for Q2 of $28.3 million and trying to figure out what's the right number to be using in Q3 and Q4 outside of the variable comp and the sales and marketing. Is this a good run rate to assume? Or are there other things to consider?

Ziv Leitman, CFO

I would say this, the operating expenses in Q3 and Q4 will be higher than in Q2, as we have many open positions that we haven't recorded yet. We hope to include those details in Q3 and Q4.

Eric Martinuzzi, Analyst

And these are engineering or sales?

Ziv Leitman, CFO

Mainly R&D people.

Operator, Operator

The next question is from Marc Silk of Silk Investment Advisers.

Marc Silk, Analyst

So to date, how many recurring revenue deals have you signed? I have a number in my head, but I want to confirm that I have the right figure, focusing on those that are signed and ready to generate future revenue.

Ziv Leitman, CFO

We have signed 15 pickup deals, but less than 50% of them really launched the services.

Marc Silk, Analyst

That's actually more than I thought, so that's great. How many of these do you think will be able to launch a service before the year is over?

Ziv Leitman, CFO

I guess by the beginning of next year, two-thirds of them will launch the service.

Marc Silk, Analyst

Okay. And then out of these 15, how many of these do you think are going to basically have been taking your advice as far as how to market this?

Ziv Leitman, CFO

Yes. We cannot provide an accurate answer because we do not know yet. Consider the few customers that signed the agreement in Q2. We have now started the implementation process, which, as mentioned, might take as long as a year. Part of this process involves the go-to-market strategy, so we do not have a definitive answer for those customers.

Marc Silk, Analyst

Okay. I'll ask that sometime next year. And then on the 5G, after your first few deals with DISH and others, has that maybe increased your exposure as far as basically maybe getting inbound calls or making it easier for your sales team to sell this product?

Erez Antebi, CEO

I'm not familiar with anything that makes it easy to look for the sales team, but it definitely gives them a reference to say, okay, this is – others have tested it and trusted us and so on. So it gives them more credibility when they walk into an account.

Operator, Operator

The next question is from Alex Henderson of Needham & Company.

Alex Henderson, Analyst

Yes, I just wanted to go back to the outlook on the MAR stuff for a second. So as we look at the size of the transactions that are in the pipeline, have you seen any shift in terms of the number of Tier 1s that are engaged versus Tier 2, Tier 3s? What is the scale of the people in the pipeline looks like?

Erez Antebi, CEO

I believe I can intuitively address this even though I don't have the specific breakdown in front of me. However, I do think the number of Tier 1 operators we are engaging with is increasing. The mix remains varied, as we are also communicating with smaller and larger operators, but the growth in Tier 1s is evident.

Alex Henderson, Analyst

And when you answered that question about the number of deals that you've done, did that include both shared deals as whether OpEx deals as well as CapEx deals?

Ziv Leitman, CFO

No. Just OpEx deals. Just the costs starting from 2000, I think the first one will.

Alex Henderson, Analyst

When considering the companies in the pipeline, one important factor is how open they are to accepting your marketing advice. Are you noticing a greater willingness among those in the pipeline to recognize the marketing expertise you have developed? Or is there a decline in their openness? I would expect that the situation is actually improving in terms of quality.

Erez Antebi, CEO

I think it's improving somewhat. It's not where I would want it to be there. We still have a way to go, but I think it's improving.

Alex Henderson, Analyst

Okay. Going back to the sizing of these 5G opportunities, do we consider any connection to the MAR opportunity once a 5G contract is signed? Does that open up a chance for us to offer security as a service to their customers, or is it a separate matter?

Erez Antebi, CEO

It's independent. However, as I mentioned regarding 4G and other DPI deals, once we engage with a client, they start to become more familiar and comfortable with us as a vendor. They observe our technology and our team, making it easier for us to discuss additional products. While this doesn’t guarantee anything, it does provide us an opportunity. With 5G, the situation is even more favorable because we’re usually talking about a brand-new network that hasn’t been established yet. In contrast, with 4G, we often address an existing network where something is already being implemented, and it’s primarily the technical team handling those discussions. Marketing teams generally don’t see the relevance of DPI for 4G. In 5G, however, everyone in the company and the operator is interested in the developments surrounding this new technology: how it will be structured, the timeline for its rollout, safety measures, and differentiators. This offers us a broader range of contacts when we engage with an operator about their 5G network, compared to discussions about securing a 4G network with DPI. So, in that regard, it's somewhat better, although it doesn’t ensure any outcomes.

Alex Henderson, Analyst

And then when you were talking about the security transactions, you'd said that you were seeing a number of competitors in the bids. Can you talk to what kind of products are those people offering? Is that just simply DNS services? Is that the McAfee installation software product type offerings? Is there anybody else doing anything remotely like what you guys are doing? In line security cleaning?

Erez Antebi, CEO

We provide security and filtering across various locations and enforcement points. This includes our NetworkSecure at the core of the network, HomeSecure for home routers, BusinessSecure for SMB routers, and DNS Secure for DNS queries. Additionally, we offer off-network protection through EndpointSecure. Each of these products faces different competitors. For HomeSecure and BusinessSecure, we compete with companies like Kugou and McAfee, along with various others building similar solutions. When it comes to enforcing security in the core network, I’m not aware of any other company doing this. We mostly compete conceptually by either securing the core or the DNS access line, where our main competitors are Akamai and Inforos. However, we uniquely offer a holistic capability that includes multiple enforcement points with a unified management layer, ensuring consistent policies and management across both online and offline environments. While there are different companies challenging us in specific areas, none provide the complete package that we do.

Alex Henderson, Analyst

Do you have an idea of what your success rate should look like, considering that context?

Erez Antebi, CEO

It depends how you count it because at the end, there are operators that decide to go anyway for just reselling endpoint security, in which case, we don’t have it. We’re – that’s not our game. We think that endpoint security could augment network-based security, but the essence has to be network-based security. I think in network-based security, our hit rate is – I would – I think it’s very high.

Operator, Operator

There are no further questions at this time. Mr. Antebi, would you like to make your concluding statement?

Erez Antebi, CEO

Thank you, operator. Yes, I want to thank you all for joining us on this conference call and listening in. We are unfortunately not yet traveling, but we will be happy to hold virtual meetings with investors. So if you’d like to meet with us, please be in touch with our Investor Relations team. Beyond that, I look forward to talking to you in our next quarterly call and stay safe and healthy. Thank you very much.

Operator, Operator

Thank you. This concludes the Allot Second Quarter 2021 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.