Ladies and gentlemen, thank you for standing by. Welcome to Allot'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 Allot's investor relations team at GK Investor & Public Relations at 212-378-8040, or view it in the news section of the company's website at 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, please?
Thank you, operator. Welcome to Allot first quarter 2022 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 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 safe harbor 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 that 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 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. With that, I would now like to hand the call over to Erez. Erez, please go ahead.
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 revenue was slightly higher than the comparable quarter. Revenues grew 2% 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 2022, our CCaaS 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 Teston to Allot's board and a cooperation agreement with our investor, Outerbridge, and their view.
Rafi has over 30 years of senior executive business and management experience in the high-tech and cybersecurity industry from companies such as MBS, Cisco and Radware. We believe this will be an excellent addition to our board. Rafi will be replacing Rami Hadar, who served on our board for 8 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 forecasts later in the call. I would like to start by discussing our traffic management and analytics business addressed by our Allot Smart product line. Our Allot Smart business remains solid.
The main use cases we see today in CSP 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 UPI or by our security offerings. This growth in our CSP customer base creates new opportunities for both Allot Secure and Allot Smart product lines.
As governments seek to fight crime and terrorism, we see a growing interest globally to be able to block illegal activity 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 cost of expansion. To summarize, I believe demand for the Allot Smart 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 is developing. As I said in previous calls, Allot 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 security app is, more than 90% of consumers do not do what I just described, and they're 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 SECaaS 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 engagement, the total addressable market size of our pipeline, Allot win rate, the acceptance and scope of service by consumers and 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, Allot has already signed CCaaS 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 contract will be signed, we are very optimistic. These potential contracts will present a MAR of $ dozens of millions. In addition, we are in serious discussions with additional operators. North America is the largest telecom market globally. Allot was traditionally much stronger in other regions, and the advancement we are making with the North American operators will present a significant change for Allot, and will be key to generating CCaaS revenues in 2023 and beyond.
We introduced the MAR, or MAR, as a simple metric to allow us to estimate the long-term potential of a deal we signed. 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, government or 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 reach. It's important that those are our best estimates at the time when the contract is signed.
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 revenue, 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 targeted, targeting the channels, and the marketing 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 to revenue and penetration rates. Those could come into play only after the project has been launched. As of March 31, 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. 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 CCaaS 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 will result in a significant impact to the overall CCaaS 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 CSP for a variety of reasons.
Since we put together our annual operating plan for 2022 about 45 months ago, our projected launch date for more than 10 CCaaS 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 department. 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 HomeSecure. I would like to note that we still expect to launch numerous CCaaS networks during 2022 despite the above delays. 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 CCaaS revenues.
In addition, the war in Europe has had an ongoing negative impact on some of our CCaaS 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 sales people focusing on providing for the millions of refugees entering Poland. In Ukraine, where we were expected to launch a CCaaS service, this launch has been understandably suspended. Most of our CCaaS revenues are tied to the euro. From January till today, the euro fell about 7%-8% compared to the U.S. dollars. This has a negative effect on our revenues. As a result of all of the above, we are modifying our forecast of CCaaS revenue 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 revenue 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 CCaaS business in 2022 also affect our CapEx business. One, as the war in Europe continues, some projects for CSPs in Ukraine and in former CIS countries are being delayed or canceled.
Two, with most of Allot's 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 CCaaS revenue and the reduction in CapEx revenues, we are now forecasting total revenues for 2022 to be between $135 million-$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 million-$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 million and $121 million. We believe our loss for the year will remain as previously forecasted, between $23 million and $25 million. Likewise, we believe our net cash reduction for this year will also be as previously guided, between 35 to 38 million dollars, 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 times for revenue. We believe that enough services will be launched during the second half of 2022 and during 2023 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 CCaaS 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%-15% operating profit, and the CCaaS business is expected to lose $ tens of millions. This estimate has not changed. I would now like to summarize the overall picture and the key message. In the Allot 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 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. Unfortunately, the war in Europe, CCaaS launch delays, and the euro to U.S. 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 more deals, and I am confident of our future success and 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. Now, I would like to open the call for questions and answers, and Ziv Leitman and myself will be available to take your questions. Operator?
Thank you. Ladies and gentlemen, at this time we'll begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. 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 Nehal Chokshi of Northland Capital Markets. Please go ahead.
Yeah, thank you. Obviously 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?
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 of the previous quarter, it consists of, you know, the growing 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 has been launched during that quarter will not affect the revenues because the free time period has been gone. Here it was minimum. Of course, exchange rate difference as you saw.
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, the primary customer base for quite a while. To take the last quarter, you know, we launched one service which did not contribute anything to the numbers. 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.
Of the services that have launched and that you're generating incremental ARR from, what does that MAR represent?
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.
The updated CCaaS ARR implies $7 million for calendar 2022, which implies about $2 million per quarter of incremental ARR for the remaining three quarters. How do you see the shape of that incremental ARR through those three quarters?
Let me see if I understand the math you did, if I understand the question. You're comparing the projected December 2022 ARR with the March 2022 ARR and simply made a linear factor and divided that by 3? Or was-
Effectively, yes.
It's 12 months. Okay. I would say it would be. Because look, 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 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 as I discussed before. If we do, it should accelerate and grow faster.
I would expect it to grow faster overall as we go through the fourth quarter than we will in the second quarter.
Okay. Right now, do you expect, do you have a high degree of confidence that any new services will indeed launch within the second quarter?
Look, you know, I've been burned by making projections and not meeting them. I'd like to try and not be the word highly confident on my forecast at this point, as you also mentioned. Yes, we project that there will be additional services launched in this quarter. That's definitely what it looks like.
I would prefer to call no expectations of incremental launches within the second quarter then.
No, no.
Okay.
Sorry, maybe I didn't explain myself. I just said that, you know, I would rather err on the side of caution, but we do expect additional launches in the second quarter. Yes, we do.
Okay. All right. I'll see you before . Maybe I'll get back with you. Thank you.
Thank you.
The next question is from Alex Henderson of Needham & Company. Please go ahead.
Thanks. Can you hear me okay?
Yeah.
Great. My question really is on penetration rates. You know, I get it that if you launched in 2021, you're probably not getting a lot of revenues from those launches, about $193 million in MAR in 2021. Okay. That's reasonable. I can even make an argument that, you know, launching in 2020 because of COVID-19, it's delayed. We have essentially nothing in our forecast for that. What I'm having trouble with is the 2018, 2019 $85 million MAR, which now in 2022, which is, you know, quite a long time, generating only $5 million in revenues, or so for the 2022 timeframe, if I assume just a hair from the other two tranches. That suggests to me that the penetration rate between 2021 and 2022 really hasn't changed at all.
It's about 5% in 2021 and about 6% or so in 2022. The slope of that penetration improvement becomes the primary issue in forecasting 2023, 2024, 2025 timeframe. If we're 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?
I'll try. I'm... Look, there. It consists of two main reasons. One is that the number of operators is small, right, that have launched. Anything that one operator does has a 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 MAR at the end is roughly they're launching on average to probably half their base realistically, which, you know, and then when you look at the penetration rates, it's a different number. The second time period, we had one operator with a relatively large MAR, which launched with, I would say, a very weak go-to-market strategy, and it took us close to about a year to convince them to change the, and during which they had virtually no additional customers or very few additional customers and revenue. 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.
While I fully understand the question, this is how we got to the numbers we are today.
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? You've left the target MARs unchanged for $85, $192 and $193, yet we don't see a measure ramp on that revenue. Even with the issues that you're talking about, a year delay on a 2019 launch, still should be more than $5 million in revenues by 2022. 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?
Similarly, of $192 million in 2020, you know, almost no penetration in the revenues in 2022, 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. How do I think about the ramp of that business sequentially into 2023 and 2024 in terms of its penetration rate? That strikes me as a deeply critical issue of whether this entire business model works.
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 calculated the MAR on the entire installed base. As I said, roughly speaking, the applicable number is about 50% of the total installed base. Again, we're talking about a small number of
Ziv, if that's the case, then do I need to cut the $85 million in half?
Yeah. Yeah.
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?
Yeah.
Is the 85 and the 192 off by a factor of 50%?
Yeah. First of all, as we said before, the MAR is calculated only once at the time we sign the contract. After that, the CSP might have more subscribers, might have less subscribers, the revenue might go up, it might go down, and so on. If you want to estimate the MAR of 2019 and 2020 according to the new conservative way of just the applicable addressable market, you should cut it by 50%. It's 50%. For 2021, I would say maybe to 75%.
If you take 50% of 2019, 50% of 2020, and 75% of 2021, you get to an aggregated MAR 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. That's exactly what we were looking for. Thank you.
By the way, this is the question you asked in previous quarter, and that time we didn't have the answer for it.
Understand. Thank you.
The next question is from Tal Liani of Bank of America Merrill Lynch. Please go ahead.
Hi. You have Madeline Brooks on for Tal. Just wanted to dig into the revenue by geography breakout. Noticing that Americas is significantly down sequentially and then year-over-year as well, can you explain why Americas are down so much and what the outlook is?
If you recall, last year we disclosed about a deal, just for an example, a deal with DISH for 5G NetProtect. We said that we are not expecting major deals this year, but we are expecting a new deal.
Maybe capacity.
I'm talking about capacity. 5G NetProtect, it's only a couple of years. We said that we are expecting for growth of this product line starting next year. This is one of the reasons why you see reduction year-over-year in the revenue in the Americas.
Got it. Just to follow up on that, 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 wanna know how we should frame thinking about that.
No connection between 5G NetProtect and the . 5G NetProtect is a product to protect the network itself, and that 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 at the later stage they implement the full 5G core. Which is why we said that we see good potential from this market, but only starting next year. It's not connected to SECaaS revenue on whole year of 5G network.
Got it. Thank you. That's it.
The next question is from Eric Martinuzzi of Lake Street. Please go ahead.
The launching of new SECaaS customers in 2022, I think last quarter you talked about 12-18 new SECaaS customers in 2022. Did you update that number? Did I miss that?
No. We said that we are going to launch in 2022 at least 12 new projects.
Okay. That's consistent with last quarter. Okay. The cash used in operations this quarter was roughly $7 million. You talked about $35 million-$38 million cash burn in 2022. Is this to say that we will be stepping up the cash burn in the outer quarters, or am I mixing cash from ops and free cash flow?
No. We are, as mentioned, we are still behind the same guidance of cash flow around $35-$38 million dollar cash reduction, excluding the PPA. Which mean we will end the year around $90 million dollar, including the split.
Yeah. That cuts to the chase. Okay. 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 flat to down slightly each quarter, or could we see a recovery maybe in Q4 on seasonal strength?
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, a single project of $5-$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, roughly flat with I think $a few million less.
That's why we guide it that way now because of the war in Europe and because of the exchange rate 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.
Okay. 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 of the reset. If I put those $12 million into the three buckets, CCaaS 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?
Let's start from the easy part, which is the SECaaS. The midpoint of the SECaaS in the previous guidance was 12.5, and let's assume now it's 7. 5.5 is coming from the SECaaS. The rest, you can assume $ a few million from exchange rates and $ a few million from opportunities that will be postponed or canceled in Eastern Europe.
Got it. Thank you for taking my question.
Thank you.
The next question is from Marc Silk of Silk Investments. Please go ahead.
Thanks for taking my questions. Most of the topics have been covered, so the one thing I wanted to just bring up, do you still feel that the board and management is optimistic about your long-term prospects?
Absolutely.
Um.
I will-
Having said that, now that your stock's down over 75% from last year, 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. It's like we're taking all the risk and we'd kinda 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. That's just my comment, and hopefully you'll let them know. I know 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. Thank you.
I will definitely send out the message. Thank you.
You're welcome.
The next question is from Rory Wallace of Outerbridge. Please go ahead.
Hey, Erez Antebi. I just wanted to ask on the 5G NetProtect side, it seems like that opportunity is gonna be much, much larger than the historical DDoS business has been for you, just thinking about how operators are gonna rely less on scrubbing centers with their architectures on 5G. I know there's not gonna be significant revenue from that this year, but is there any pickup in sales activity around potential NetProtect deals?
We are talking this year to more operators on 5G networks than we were talking to last year. Now I'm just talking about the CaaS side, right? That's we go on CSP side as well, but going to the CaaS side and we're having both of our DPI and 5G NetProtect, which tend to come sort of together. Yes, we are seeing some growth in the opportunity we're talking to. Like we said at the beginning of the year, we don't expect to have any material new revenues on this for 2020.
Okay. How about for even the sort of nation-state type of use cases around secure internet, are you seeing any demand pull from the geopolitical landscape around that?
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 coming into place in various countries, and we're seeing more and more requests, you know, to discuss what we can do to help them gain some measure of control on that.
Okay. Just drilling down into some of the issues you've identified for why these deals are being delayed. I think it—One interesting one is just on the home secure router integrations, which I think you'd 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 HomeSecure 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 HomeSecure deals will eventually go into into deployment in some you know reasonable timeframe? Because it seems like those could be pretty big opportunities.
I think we have signed several HomeSecure deals, and we were awarded some others that have not been signed. We definitely have high hopes for that, for them, and we believe that they will be launched in some reasonable timeframe from operators' perspective. Unfortunately, they are being delayed. Once they are launched, I have high hopes for what they will result in.
Some of those issues are progressing, as far as I think, specifically with the router integrations and getting making sure that you have all that groundwork in place.
Yes. Yes. We're getting more and more routers integrated. I think we went public a while ago with a cooperation agreement with Technicolor. We haven't? My fault. We're working with router integrators and working with router manufacturers to be part of their development program so we can integrate API before we need to for a specific operator. We're not doing that with all of them, but we're talking to several of them. It's a hard process. It's very, you know, it's very specific to many different routers, but we are definitely progressing there.
Okay. Then when I look at the new guidance for $7 million of CCaaS revenue for the year, it seems like if I just linearly plug in, kind of adding $100 thousand or $200 thousand of sequential revenue per quarter, I get to that number. That's kind of what you've been achieved over the last year or so. Is that mostly reliant on continued ramp from the existing base of customers with, you know, kind of a very limited assumption around the new customers. Is that a fair way of looking at that?
Yeah. As you said, most of the expected launches should take place in second half of the year. If you take into account that most of them will have a free period of three months, it means that new customer, new launches, new projects will generate little revenue this year. Most of the expected revenues are coming from existing customers.
Got it. 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. Could you elaborate on those at all? I think you said 1 was already signed and 1 was still awaiting commercial sign-off. Is anything else you're able to share about those?
I'll repeat what I said. I said that we signed already with three, one of which is DISH, and the other two we are not allowed, and that we were awarded by one and selected by another. The reason I'm saying awarded and selected, neither of them are signed. Okay. Neither of these two additional ones are signed. Saying awarded by one because there was an RFP process and we were awarded, and the other one just selected us without, you know, having. We've worked with them for a long time, but there was no formal competitive or RFP process. But, you know, neither of them were signed, so if you understood that we have signed one and are 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. We're also talking to other operators, so I think we will have hopefully, can't promise it, but hopefully we will have even additional deals.
Okay. Well, congratulations on being awarded and hopefully you can get those contracts signed. The OpEx was lower than I think everyone had been modeling for this quarter. You know, I think historically, you know, you've seen a ramp in leverage every year as revenues increase. This year you're forecasting the opposite. 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.
We have many open slots that we haven't recorded yet, and we are planning to do it during the year, which is the main reason for the expected increase in OpEx. There are other types of expenses that are correlated to the revenue. Once the first quarter revenues are low, also the associated expenses are lower, like sales commission, agent commission and so on.
Okay. Great. Well, thanks for taking all those questions. I really appreciate it.
Welcome.
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 Allot, I want to thank you for your interest and for taking the time to participate in this call. Thanks for joining us, and I look forward to talking to you the next quarter and hopefully seeing you sometime soon wherever you are. Thank you very much.
Thank you. This concludes the Allot first quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.