VZ - Allot: Verizon Expansion And Strong Results Make For A Buying Opportunity

2025-03-05 13:31:01 ET

Summary

• Allot's Q4 results highlight a continued turnaround with positive free cash flow, profitability, and significant SECaaS revenue growth, despite flattish overall revenues.
• The Verizon BMIS confirmation significantly expands Allot's addressable market, potentially scaling their security service to millions of Verizon business mobile subscribers at accretive pricing.
• Recent stock price correction is likely due to technical factors, profit-taking, and investor anxiety, however Allot's fundamentals continue to strengthen.
• Allot's partnerships with Verizon and Vodafone, along with a robust pipeline of business, position it for substantial SECaaS and DNI revenue growth in 2025 and beyond.
• Coming out of Q4, we raised our long-term operating income projections and have high confidence that 2025 will be a year of material revenue and profitability growth.

Allot's Q4 Marked A Continuation Of The Turnaround

Allot's solid Q4 results attested to the continued turnaround of the business, with quarterly EPS of $.05, positive free cash flow of $4 million, and approximately 50% SECaaS revenue growth. Allot has now generated positive free cash flow for three consecutive quarters, and reached profitability in the last two quarters. Notably, Allot achieved this in 2024 despite virtually flat year over year revenues, highlighting the significant operating leverage that exists in the business after the company's 2023 restructuring. SECaaS continued its strong growth trajectory in Q4, while DNI revenue registered a 4% YoY decline. For the full year 2024, SECaaS revenue grew 55% to reach $16.7 million and ARR grew 43% to reach $18.3 million; DNI revenue declined 8% to $75.6 million:

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