Good day to all of you and welcome to Allot's conference call to discuss its financial results for the quarter. I would like to thank Allot's management for hosting this conference call. All participants are present in this and only mode. Following the 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 received the company's press release, please check the company's website at www.allot.com. With me today on the line are Mr. Eyal Harari, CEO, and Ms. Liat Nahum, CFO. Following Eyal's prepared remarks, we will open the call for the question and answer session. Both Eyal and Liat will be available to answer those questions. You can all find the highlights of the quarter, including the financial highlights and metrics, including those we typically discuss in the conference call, 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 early predictions and Allot cannot guarantee that they will in fact occur. Allot does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of changing market trends, delays in the launch of services by a lot of customers, reduced demand and the competitive nature of the security services industry, as well as other risks identified in the documents filed by the company with the Securities and Exchange Commission. Thank you Kenny. This quarter demonstrated continued excellent execution and showed the strengths of our business model.

Halot is now a sustainably profitable company and we continue to expand our profitability as we deliver growth. We reported a strong third quarter, combining double-digit revenue growth across both our business lines, CCAS and SMART, with improved profitability and solid cash generation. Revenues increased 16% year-over-year to 30.6 million, Our fifth consecutive quarter of double-digit growth. Beyond the growth, we deliver solid profitability with 13% non-GAAP operating margin, a good improvement over the first two quarters of this year, and we had another quarter of strong cash flow generation of 7.4 million, bringing our cash position to 112 million, our highest level in over four years. We are progressing well against the key objectives we established for 2026. Our results demonstrate continued execution of our strategy, profitable growth led by CCAS, supported by a solid contribution from our smart business. CCAS ARR reached 39 million at the end of September, an increase of more than 40% year-over-year. This growth continues to expand our recurring revenue base and enhances our visibility into future revenue. And while we are very pleased with the performance of CCAS, the smart business has also been performing well. During the quarter, we won a number of key expansion orders from existing smart customers. These orders demonstrated continued customers engagement and confidence in our products and services. Satisfied and returned customers are one of the most efficient ways for us to grow. They know us, they trust our technology and they come back to us as their network and their needs grow. This type of growth is also good for our business mix. Expansion orders carry a higher proportion of software and services, which is supportive of gross margins. SICAS continued to perform well and in line with our expectations. During the quarter, we won a new SICAS deal in Southeast Asia, further growing our roster of telco partners, which have turned to us to provide cybersecurity services that protect their customers from growing threats globally. Our pipeline is broad and deep, and we continue to advance with these opportunities. At the same time, our existing CCAS customers continue to grow the traction of our services with their subscribers, and this continues to drive the growth in our ARR. Looking more broadly, the threat environment is changing and expanding fast. Cyber attacks are becoming significantly more sophisticated and more personalized as attackers use AI to pinpoint and target individuals and businesses at scales. The threats are very real. In May 2026, Google Threat Intelligence Group reported that it identified what is assessed to be an AI-developed zero-day exploit intended for mass exploitation. that the threat actors are using AI in vulnerability research on embedded IoT devices, including on router firmware. In this climate, it is becoming less and less acceptable for service providers not to have a solution that protects its end customers. And customers instinctively turn to their operators, providing their gateway to the internet to protect them. Our network native security service We believe this trend will only grow in the coming months, and we believe expected increased demand for our Zika solution We recently announced new capabilities for secure and SIM-enabled IoT devices with Allot Network Secure, giving telcos a network-based way to protect connected devices across 4G and 5G networks of their business customers. As businesses connect cameras, sensors, meters, trackers, industrial equipment, and other IoT devices, Our IoT security technology is designed to help prevent cyber attacks from compromising IoT services. With a lot network secure, Telcos can provide network firewall security services for business IoT communications without depending on security software installed on each protected device. Another development for us during the quarter relates to the emerging quantum compute threats. During the third quarter, we announced that Alot is a founding member and chair of a new post-quantum communication consortium supported by the Israeli Innovation Authority. The consortium brings together leading technology companies, including NVIDIA, along with leading academic institutes, to develop technologies that will secure communication networks and protect data and users against future quantum computing threats. While the threats in the future, quantum computers are one day expected to render money of today's encryption methods vulnerability, and quantum security is fast becoming We are proud to be leading this effort to protect networks and users in the quantum era. In summary, the company is executing very well, having turned the business around to a sustainably profitable company that is increasing its profitability as we continue with our growth. The third quarter was another strong quarter for Allot, which continued double-digit revenue growth in both our CCAS and smart business line. Overall, our strategy is working, and Allot is well positioned to continue its profitable, cash-generating, recurring revenue-led growth into 2027 and beyond. And now, I would like to hand it over to our CFO Liat Nahum for the financial summary. Liat, please go ahead.

Thanks Eyal. We reported revenue of 30.6 million in the quarter, up 16% year-over-year. Revenue from our gross engine, security as a service, were 9.9 million in the quarter, up 37% year-over-year, comprising 33% of our total revenue. Growth was led by Asia Pacific, where revenue nearly doubled year-over-year, together with 13% growth in product and professional services. Our CECAS annual recurring revenue as of September 30th, 2026, were 38.8 million, up 41% year-over-year. 64% 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 other various breakdowns of our revenue, please refer to the table in our result press release. Our non-GAAP gross margin in the quarter was 71.9%, compared with 72.2% in the third quarter of last year, and 71.8% last quarter. This was above our general expectations of around 70% gross margin for 2026, supported by the software and services part of our revenues, including the expansion orders that Eyal mentioned. Non-GAAP operating expenses for the quarter were 18 million, compared with 15.4 million in the third quarter of last year. The increase primarily reflects planned investment in research and development to support our product roadmap as well as increased sales and marketing expenses as we continue to invest in building our pipeline to support our future growth. In addition, we had higher general and administrative expenses reflecting non-recurring professional fee and tax related items relating to prior periods. Despite this increase, operating expenses declined 59% of revenue compared with 62% in the prior quarter, reflecting the operating leverage inherent in our business model. We reported non-GAAP operating income of 3.9 million with an operating margin of 12.9% compared with a non-GAAP operating income of 3.7 million or an operating margin of 14% in the third quarter of last year. Allotted 498 full-time employees as of September 30th, 2026. In terms of non-GAAP net profit, we reported 4.7 million in the quarter or a profit of 9 cents per diluted share compared with a non-GAAP net profit of 4.6 million or a profit of 10 cents per diluted share in the third quarter of last year. We again generated strong operating cash flow of 7.4 million in the third quarter, compared with 4 million in the third quarter of last year. For the first nine months of 2026, operating cash flow totaled 26.4 million. During the quarter, we began executing on our 40 million sherry purchase program and purchased 213,000 allot shares, totaled $1.6 million. Allot is a robust balance sheet with no debt. Cash and cash equivalent, bank deposit, restricted deposit, and investment as of September 30, 2026, totaled $112 million. as compared with $88 million as of December 31, 2025. Our strong balance sheet positions us well to pursue both organic and non-organic growth to execute our long-term strategy. Looking ahead to a reminder of 2026, we are narrowing our full year 2026 revenue guidance to between $116 million to $118 million. representing the upper end of our previously announced range and increasing its midpoint. This implies a Q4 revenue of continued double-digit year-over-year growth. We also expect CECAS revenue growth for 2026 to be above 40%. We expect our growth margin to remain at around its current levels in the coming quarters, with a specific growth margin in any given quarter depending on our product mix. Overall, we continue to expect profitability improvement over the coming quarters. That ends my summary. Eyal and I are now happy to take your questions.

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 leave the answer 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 Jonathan Ho of William Blair. Please go ahead.

Hi, good morning. I wanted to get a little bit of an update in terms of where you stand with your CCAS opportunities both in terms of Some of your larger deployments that are already in place, as well as some of the new services that you've been launching, I think there's some concerns out there over the sustainability of the growth rate in CCAS. So can you just help us understand some of the major drivers that are there supporting your guidance? Thank you.

Thank you, Jonathan. So our CCAS today is going between In the range of 40%, and as we updated this quarter, we are looking to close the year with higher than 40% revenue growth compared to last year. The growth is coming from the mix of new customers, new customer wins, some of them we announced in the last few quarters, that are going to deploy new services. Some of them are coming from existing customers that are adding more capabilities. Some of our new cyber engines, like the identity and off-net services that we launched in the recent year, and some are growing what we call the organic growth of the service by adding more customers. Overall, we see that the secrecy continues to grow, and we are looking to continue and invest in our both on the sales and marketing in order to hunt into new partnerships and new CSPs as well as continue to innovate with our R&D to provide more value to our customers as demonstrated with our recent announcement about IoT security services. So, so far we are comfortable with the growth and we expect this growth to continue in the next quarters.

Got it, got it. And then just as my follow-up, you mentioned IoT security a number of times inside of the call. Can you talk about what that broader opportunity looks like, especially with some of your commentary around the increased breach activity? Are you seeing more sort of pull demand from customers asking their telcos for this solution? Is this something that's maybe going to come a little bit later with increased breach activity? Thank you.

So this new product was designed and envisioned with the support of some of our existing customers that were identifying that they do not have good solutions to protect their IoT services. As a lot unique value proposition is about providing network enabled security, this allow you to protect mass amount of devices without the need to install any specific software on the endpoint. Now this is definitely valuable when you look to protect a mobile phone, but when you look to protect a device that could be a meter or a sensor, you don't really have a choice. and this is why we decided to add this capability to our product, which is making sure those devices are not interrupted. Now while the IoT devices are relatively, might be simple and not necessarily have large amount of volume in terms of network bandwidth, it might be very critical Thank you for watching.

Great, thank you.

The next question is from Matt Kalitri of Needham and Company. Please go ahead.

Hey, team. This is Matt Kalitri over at Needham. Thank you for taking our questions. I'm curious how CCAS performed this quarter compared to your internal expectations. And I guess like building off of that, like was revenue mixed? So overall the performance was about as we expected. We guided earlier in the year that we are looking to grow CCAS in about 40% and when we look on the journey we have, this is

Inbar Charash, Mark Shteiman, Eyal David Harari, Noam Lila, Angel Fernandez, Gili Groner, Liat Nahum, Boaz Grossmann, Eyal David Harari, Noam Lila, Angel Fernandez, Gili Groner, Liat Nahum, Boaz Grossman We had double-digit growth also on the smart side, hence the revenue mix is now a bit stronger on the smart, which is why we were able to grow our total revenue at 16%, which is higher than previous quarters. Overall, we are on track with our plans to close a very strong year in 2026.

Understood. Thank you. And then Liat, are there any guardrails you can provide as we look out to CCAS growth and to calendar year 27? And like particularly thinking about like where penetration levels are with existing vendors?

So we are currently working on 2027 and Of course, we cannot share yet guidelines for 2027. However, as we pointed, we have a very strong ARR which shows the visibility that we have. We have very good visibility for the growth in 2027 and as Eyal mentioned we continue to expect this 40% or above growth and once we will finish Q4 then we will be able to share of course better guidelines for the next year.

Got it. Thanks so much.

The next question is from Jonathan Recover of Cantor Fitzgerald. Please go ahead.

Hey, can you hear me? Yes, Jonathan. Good morning. Hi, good morning. This is Joseph on for Jonathan. Just had a quick question. Since the Q2 call, have you seen any meaningful changes in terms of carrier purchasing behavior, either positive or negative, across North America, APAC, or any other regions? And are operators accelerating decisions, or are sales cycles largely unchanged? Thank you so much.

So overall we see that operators are in CSP environment, they are always tight in CAPEX and OPEX and this is not something we've seen change or accelerating recently. We do see that cybersecurity gets higher priority and we are getting more inbounds about cybersecurity services as carriers understand that it's important to their customers. I believe that AI with the new attack surface and all the news, some of them as I mentioned in the previous answer, are creating a lot of worry to all of us as consumers and this reflects into a demand for the CSP to provide A solution and also understanding of the CSP that this would be an opportunity for them to monetize the service and increase their average revenue per customer. So I would say in general we see it in similar but with increase of awareness and demand for cybersecurity solution in general.

Thank you so much. And then just as a quick follow-up, you highlighted accelerating order momentum and kind of the robust backlog back in Q2. Has that momentum strengthened further in Q3 or kind of remained stable? Thank you so much.

So Q3 overall is continuing our good momentum with executing on our backlog. We see that Our smart product line is still creating a lot of demand and we have, I believe, a larger pipeline compared to where we were last quarter. This is a mix of new opportunities for new customers as well as expansions from existing customers. So overall we feel strong and we expect this to continue in the same trend. On the CCAS, we continue to see growth from our deployed services and we are looking to execute on those implementations of the newly announced expansions so we can start to see them adding to our revenue growth of the CCAS in the next few quarters.

The next question is from Shaul Eyal of TD Cohen. Please go ahead.

Thank you. Hi, good afternoon, guys. Congrats. Two quick questions. Eyal, maybe just to worry about the competitive landscape, and then maybe talk to us about, I know you've mentioned kind of identity and access management. Talk to us about what some of your customers and other partners are talking to you about it and how you can add value from your perspective. Thank you.

So overall our main advantage is a lot is that we are coming from the network security solution. We are leveraging our DNI capabilities to be able to do deep level of protection or traffic of Consumer and Small Businesses, leveraging the relationship with CSP, leveraging the technology we built over the last decades that could be providing protection en masse. On top of this platform, the AASM, the Alot Security platform, we integrated what we call Alot 360. So we are looking to be the leading provider of security for CSPs and their customers. and we are protecting in different locations from the router to the endpoint to the DNS to the network while our core competence is coming from the network which we believe provides a unique proposition very differentiated from the alternatives. Obviously, cybersecurity is a very competitive landscape. There are multiple ways to address protection. Some of them are coming from the endpoint, some of them are coming from the DNS, but we believe we are quite unique in our approach and in the completeness of the solution and our ability to provide Converge security between the mix, the mob and the mobile, provide multiple services like we are doing with many of our customers from FWA to a mobile device through consumer and business customers. So this is something that we believe we want to leverage further. The IoT new application, the IoT security is exactly tackling this A unique value proposition because to protect IoT it doesn't make sense to do in any other way except having a deep network security protection. You cannot install anything on the device. It's not economical. You do not want to have only a DNS outcome protection. It's not enough. And this is another addition that increase our competitive edge in the market.

And a competitive landscape Eyal?

So as I mentioned, the competitive legacy continues to be strong. We are differentiated, but we see that there is more demand for cybersecurity and many solutions that are coming from different directions. We see that both the endpoint companies continue to offer cybersecurity and the DNS providers continue to offer cybersecurity. But overall, we feel comfortable with our position. Thank you so much. Thank you, Shalom.

The next question is from Nihal Chokshi of Northland Capital Markets. Please go ahead.

Hey, thank you. You're a million. Better than last quarter, better than what we were modeling. Wondering if you can give some color as to what was the driver of the increase in the incremental CCAS ARR.

Good morning, Eyal. The increase on the quarter by quarter is mostly by adding more subscribers to the services already deployed. In this case, we had the multiple carriers that already provide our cybersecurity that are adding additional subscribers. The pace of adoption depends on their ability to offer those services to more customers and the total number of end customers we protect. The pace is mentioned multiple times on previous calls. On the short term, it really depends on the marketing efforts of the CSPs and if they are doing promotions and campaigns like any consumer solution. These drives higher adoptions and higher rates. We saw good traction with some of our customers that were doing faster compared to previous quarters. And we are looking to continue to have more campaigns with our customers to continue to drive growth. On the mid-term, the growth is always coming by adding new capabilities. So some of the goals we are starting to see is by customers that are expanding their services. We had a CSP that was offering to mobile customers, now adding into small businesses. We had a carrier that is now offering off-net security, which will allow them to penetrate faster and pay higher fees. And this, on the mid-term, increase our revenue. and of course the winds as we announced a wind in Asia for a new area there that is important for our long term this takes time until we implement the service with them and they come and launch it and this is part of what would drive our 2027 growth and beyond.

Great, fantastic answer and appreciate that you expect to be Profitable and cash-generating turnaround growth into 2027 and beyond. That's great to hear. Consistent with our expectations. What about revenue, though? Any initial thoughts on where revenue is heading for counter-27?

So we are looking to continue to grow our top line for sure. This is driven by strong performance of the CCAS. Already the ARR and the recount revenue in total grew quite significantly this year, which gives us great visibility into 2027. We see growth coming also to the smart. First time after a long while, we showed double-digit growth on the product side, which is by implementing the new Platforms, the TerraStream implementation, the expansion orders we mentioned previously, this is starting to materialize into revenue. If you look on our RPO as shared in our mid-year financials, this was growing quite significantly and we start 27 with a very strong visibility and a very strong backlog. Therefore, we are definitely looking to continue to grow. We are now finalizing the plan and next quarter we will be able to share more in terms of guidance and other KPIs to provide more color of the growth rate. Thank you very much.

There are no further questions at this time. This concludes Allot's third quarter 2026 results conference call. Thank you for your participation. You may go ahead and disconnect.