Greetings, and welcome to the Check Point Software Technologies First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to, Mr. Kip Meintzer, Head of Global Investor Relations for Check Point Software Technologies. Thank you, Mr. Meintzer. You may now begin.

Thank you, Mannie. Good morning, everyone. I’d like to thank you all for joining us today to discuss Check Point’s 2015 first quarter financial results. Joining me today on the call are Gil Shwed, Founder, Chairman and CEO, along with our Chief Financial Officer, Tal Payne. As a reminder, this call is being webcast live on our website and is being recorded for replay. To access the live webcast and replay information, please visit the company’s website at checkpoint.com. For your convenience, the conference call replay will be available through April 27. If you’d like to reach us after the call, please contact Investor Relations by emailing me at kip@checkpoint.com or by phone at +1-650-628-2040. Before we begin with management’s presentation, I’d like to highlight the following. During the course of this presentation, Check Point representatives may make certain forward-looking statements. These certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 include, but are not limited to, statements related to Check Point’s expectations regarding business, financial performance, customers and products, including its expectations for product introductions and enhancements and the integration of our recently acquired technologies. Our expectations regarding the integration of recently acquired companies and technologies and the future expenses related to those recent acquisitions. Our expectations regarding the introduction of new products, programs and the success of those products and programs, our expectations regarding the expanded investments and hiring across the organization including the expectation of continued head count growth in the development sales and marketing teams in 2015, our expectations regarding capital expenditures in future periods as well as the shareholder repurchase program, and our expectations regarding our business and financial outlook including our guidance for Q2 2015 and the full-year. Because these statements pertain to future events, they are subject to various risks and uncertainties. Actual results could differ materially from Check Point’s current expectations and beliefs. Factors that could cause or contribute to such differences are contained in Check Point’s earnings release issued on April 20, 2015, which is available on our website. And other factors and risks including those discussed in Check Point’s Annual Report on Form 20-F for the year ended December 31, 2013, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations or believes except as required by law. In our press release, which is posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results, as well as the reasons for our presentation of non-GAAP information. Now, I’d like to turn the call over to Check Point’s Chief Financial Officer, Tal Payne for a review of the financial results.

Thank you, Kip. Good morning and good afternoon to everyone joining us on the call today. I’m very pleased to begin the review of another great quarter. Q1 provided a good start for the year with revenue growth of 9% year-over-year reaching $373 million towards the high-end of our guidance, while non-GAAP EPS exceeded our guidance with an increase of 14% to $0.95. Before I proceed further into the numbers, let me remind you that our 2015 first quarter GAAP financial results include stock-based compensation charges, amortization of acquired intangible assets, and acquisitions related expenses and the related tax effects. Keep in mind that non-GAAP information is presented excluding these items. Now let’s take a look at the financial highlights for the quarter. In the first quarter, our revenues reached $373 million, an increase of 9% compared to the same quarter a year ago. Total revenues from products and software blades grew by 11% year-over-year. We have success in many areas including the small, mid, and Data Center Appliances. In addition, the Management Appliances that we launched mid last year showed a very strong growth, a testimony of the strength of our management architecture. The growth in total revenues was also driven by the continued success of our software blades, which grew by 20% year-over-year. This growth led mainly by our next generation threat prevention packages. Our software updates and maintenance revenues reached $184 million, representing 7% growth year-over-year. Deferred revenues were strong at $772 million, an increase of $112 million or 17% over March 31, 2014. The deferred revenues decreased from 2014 year end as expected seasonally. The revenue growth was across all of our regions during the quarter. In particular, Asia did very well with double-digit growth. Revenue distribution by geography for the quarter was as follows. The…

Thank you, Tal, and good morning to all of you joining us on the call today. We started 2015 with handful results and with many initiatives aimed at capitalizing on the expanding security market opportunity. We executed on our accelerated recruiting plan in our development, sales and marketing departments, and added more than 200 people in the first quarter. On the technology front, we are putting strong focus on two key areas, mobility and threat prevention. In the first quarter, we demonstrated this focus with the release of our Threat Extraction technology. APT or Advanced Persistent Threats, are the source for many zero day attacks. These are generally documents that are being sent or downloaded by users. They look innocent but high dangerous malware. Our Threat Extraction technology, we construct these files and in the process, eliminates the potential threat and delivers clean files to the user. So far, we’ve seen a 100% threat removal rate, the fraction of the time that it takes other technologies to emulate files and produce much lower cache rate. We’ve also completed two important technology acquisitions in this phases. In February, we’ve acquired Hyperwise, a self-mode start of that developing a unique technology of CPU-level threat detection. CPU level threat detection stops zero day malware at the moment the malware attempts to use an exploit, and before the malware is able to install or create any damage. Due to the special feature of the hardware CPU and therefore is external to the operating system, and no longer software layer, making it more effective and harder to see [indiscernible]. While most Threat Emulation technologies wait for the malware to install itself and cause damage, the CPU level threat prevention detects the attack earlier, making it more effective for a large group of exploits. With Hyperwise…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question is from Brad Zelnick of Jefferies. Please go ahead.

Hi. This is [ph] A.J. Lubich on for Brad. It’s nice to see that not only are billion strong, but current billions are even stronger, growing 10.5% by our calculation. Can you talk about trends in customer desire to do longer-term deals and how we should think about modeling that?

I think if you’re asking – you’re right, deferred revenues increased nicely and when you calculate your implied booking, it shows that also the booking was the nice growth. A long-term contract, it can vary between quarter-to-quarter, obviously if the customers would like to sign long-term then we are – we like it and they’re welcome, but it’s not something we’re pushing for. And as you can see, it can fluctuate easily. But if you look at the short-term deferred revenues, also the short-term increase nicely. So I can’t give you a model just because it’s not something that you can model.

Okay. Thank you.

Thank you. The next question is from Walter Pritchard with Citi. Please go ahead.

Hi. Thanks. Tal, I’m wondering if you could just give us a sense of this – the impact of the weaker Shekel on your operating expenses for the quarter. I’d imagine that had a meaningful impact and then had a follow-up on a financial question as well.

Sure. So, remember that start of the guidance that we provided, we knew that the dollar is already quite high, so it’s incorporated in our guidance. The effect versus last year was about probably around $0.04 or so. Year-over-year, it’s about $0.04.

Okay, great. And then just a broader question on business, I think we’ve talked to you a little bit about this during the quarter. You’re pricing dollars, the dollar strengthened, you didn’t sound like when you start – when you give guidance last quarter that you’re expecting that the strengthening dollar would have an impact on customer purchasing behavior, but just curious how that ended up in the quarter, if you saw any deferrals of deals or so forth as your product became more expensive in other areas that they’re translated?

I think it’s very hard to tell, as you know, because when other companies sell in local currencies, it’s very easy to calculate through an Excel file what was the effect, right? Just like we can do on the expenses. On the revenues, on the booking, it’s very hard to know what happened. I can tell you that in Europe, we saw some countries they did great and let’s say East Europe was less great, because of the effects of the currencies there was significantly stronger.

Yeah. But remember Russia had a major crisis last quarter and we do see that effect, but the more – the effect is more the Russian economy is in trouble rather than the U.S. dollar strengths.

Yeah. So, I think it’s much harder...

Okay, great. Thank you.

Thank you. The next question is from Gregg Moskowitz of Cowen & Company. Please go ahead.

Hi. Thank you very much. Just a couple of questions, I guess, first off, it sounded though you’re not expecting to have any revenue this year from Hyperwise and Lacoon, just wondering from a high level, what sort of contribution should we be looking for from those two areas in 2016?

I don’t know if we can calculate specifically or separate them, because we do want to incorporate them into our existing offerings. So in the Hyperwise it will be fully incorporated into our threat prevention, threat prevention and threat emulation services and software blades. And in the case of a Lacoon, it will be part of our Capsule mobile suite. And I think because the Capsule is in its early days and Lacoon is in the early days, I think we will look at them as a single line of products and we’ll measure them together. Yeah.

Okay. Thanks, Gil. And then I know you hired over 200 people in total for the quarter. Just wondering, if you could comment on the quantity and quality of sales hiring specifically, you just had and so far relative to your expectation? Thanks.

I think, first we hired many more than 200 people. We grew the head count by 200 people and I think overall, we found – we feel that we found good people and in the same quality that we’ve been hiring before.

Okay. Thank you.

Thank you. The next question is from Karl Keirstead of Deutsche Bank. Please go ahead.

Thank you. Gil, my question is to you about the announcement this morning about the threat intelligence partnership with FireEye. I’m wondering if you could describe that a little bit for us. What’s the motivation to tie-up with ostensibly one of your competitors and practically how does it work? Is this really a product integration announcement or might the partnership go a little bit deeper than that? Thank you.

I think we’ve talked to you last year about the need for more intelligence to a high threat. We’ve open the IntelliStore which provided the first platform for integration of security intelligence to the benefit of the customer. And that’s also was behind our efforts with FireEye, I think in both ways. We have a lot of threat intelligence with our sensors and our system find every day. FireEye, I’m sure finds a lot of information in that space and I think we want to allow the customers that have a both systems to utilize that system and to exchange information between both systems. So that’s the interoperability that will happen. I think it’s a very good thing for customers and that has been our focus and I think openness and customer focus is I think some of the key values that I’m trying to work in Check Point for the past 20 years and that’s what we continue with.

Okay. That’s helpful and just a follow up on that Gil if the partnership is really beneficial to customers that have both FireEye and Check Point appliances. Do you have any broad sense for what the overlap is in your customer base? What portion of Check Point customers also have FireEye appliances and could take advantage of this data sharing?

I don’t have any numbers. I think it’s fairly small. Our installed base is very large. I think FireEye’s installed base is a little smaller. So I think the overall is quite small.

Okay. Thank you very much.

Thank you. The next question is from Subu – Subrahmanyan of the Juda Group. Please go ahead.

Thank you. I have two questions. First on the full year guidance that you provided in the past, it sounds like you’re maintaining it and the expectation of 10% kind of growth exiting the year, do some of these acquisitions help with that, as you exit the year and can you talk about how the overall market has been within – for software blades, what particular areas have been strong?

I think we’re maintaining the same guidance in both these cases of the acquisition, the revenue from the acquired companies is even non-exist or very small. So it shouldn’t matter much and we hope that we’ll be able to contain the expenses in the range we’ve provided earlier. I think the overall environment was good stable in the first quarter. And I don’t know, what was the last part of the question?

The 10% growth rate exiting the year going into next year, how do you think about that?

We give a range, we don’t give a specific rate. So, if you look at the range we gave for our guidance, you can decide.

I can recall the range. The range was $1.06 billion to $1.650 billion. So, in the higher end it’s faster and the lower end it’s slower.

Thank you.

Thank you. The next question is from the Shebly Seyrafi of FBN Securities. Please go ahead.

Yes. Can you talk about how your new Threat Extraction technology enhances your threat detection capabilities? You already have the Threat Emulation blade. How would the enhanced capability compete against FireEye, now there is an APT market?

I think the Threat Extraction technology surprisingly is the much simpler and much more effective technology than many of the Threat Emulation technology, especially when it appeals to APTs that are hidden inside any type of document. What the Threat Emulation technology including ours trying to do is to run the – is to let the suspicious file running sent box environment and trying to watch the behavior and predict whether it’s a good or bad behavior. That doesn’t have a 100% success rate so far. Ours is quite high. We’ve had benchmark that chose that we had the highest industry level, but it still doesn’t provide a 100% detection rate. In contrast, the Threat Extraction technology doesn’t try then to see if the file is malware or not, it just takes the file, tears it apart and rebuild it. And in the process of rebuilding it, the malware is usually either using certain objects that are eliminated for the file or the malwares must use very, very specific structure of the file. And once you build it – rebuild the file in a slightly different format, that’s a small things that create a malware go away. So, our tests so far on Threat Extraction technology showed 100% elimination rate of the malware, which is much, much higher than any other technology. It runs much faster. When you run Threat Emulation, you need to take the file, start an operating system around it, run the emulation for a few minutes to see the file behavior over several minutes, it’s something even more. Threat extraction is like printing a document. You take the file, you rebuild it, and you send it over so it runs in fractions of seconds. And at the end, it delivers the clean document to the end users. So, I think the Threat Extraction is a very fresh and innovative approach to giving the end, the end user the clean file without the potential threat, and that’s why I think I think it’s going to be very important technology to our customers and it’s right now unique from Check Point, nobody else has something similar.

Okay. And also, what were the key drivers of your – greater than $1 million deals last quarter, that were up 19%?

I think it’s – I always say those number of deals can fluctuate easily within a nice increase in Asia, we’ve seen some also nice increases in Europe. It’s coming across from different geographies. It was from a few verticals. So, there’s nothing that I can pinpoint, none of them was huge transaction. So, it’s quite nice flow for the larger customers that purchased total more than $1 billion this quarter.

Yeah. I think I mentioned in my script, it was all over, I mean it was from financial, the insurance, telecommunication, shipping, retail, government, these are some not even all the industries that the large dealers came from.

Thank you.

Thank you. The next question is from Shaul Eyal of Oppenheimer. Please go ahead.

Thank you. Hi, guys. Good quarter. Two quick questions on my end, specifically on Asia with a good performance. Any view of what’s going on behind it or just prior fruition, prior investments seen from fruition?

I think in the last year we’ve invested a lot in building our restructuring in Asia and I think its bearing fruit this quarter. So, I’m very pleased with it. I don’t think it’s attributed to any specific macroeconomics or industry thing. I think it’s more all the internal things that we did over a long period of time.

Got it. From a blades perspective for prior quarter’s performance, still IPS, App Control Threat Emulation, any change in that ranking?

But it’s mainly – you’re right. It’s mainly the next generation threat prevention package, which include all of the above. Right, the Threat Emulation – the threat – the IPS, no it’s not the [ph] antibody actually, the Threat Emulation, it’s the threat prevention and the antivirus, anti-spam URL filtering the IPS, the app control and so on. So, it’s the majority of the threat prevention blades.

Got it. Okay. Thank you very much.

Thank you. The next question is from Daniel Ives of FBR. Please go ahead.

Yeah. Thanks. Gil, what’s your view as more enterprise move to the cloud in terms of security and where Check Point fits in there and then would you see a surge at spending as we’re seeing now more enterprise move to the cloud and maybe you can speak to how you’re positioned from a product perspective versus competitors? Thanks.

I think when you look at the cloud, if you speak about private cloud, I think it’s a company’s needs to use sometimes the same security measures that were used before and sometimes slightly extended one that they have the virtualization effect in them. And I think we’re pretty good in that even though there’s not too much customer interest in it, there’s was not too much – the purchasing level is not very high of these virtualization technologies. When you were talking about cloud for SaaS application, then the challenge of – the security challenges become bigger because you trust the security on the vendor that you’re buying it from. It doesn’t change much the buying behavior of the customer because that environment is not managed and not controlled by the customer. We have few innovative ideas of how to make it slightly more secure when customers are using the cloud and we’re even using some internally here, but let’s say – again let’s say relatively niche part of the market.

And just on M&A, as you guys have gone down that path now a few small acquisitions, is anything surprised you on the M&A market, I mean, in terms of good or bad or just anecdotal?

No. We haven’t seen too much M&A, now direct market space around us, nothing major that I saw.

Okay. Thanks for taking [indiscernible].

Thank you very much.

Thank you. The next question is from Philip Winslow of Credit Suisse. Please go ahead.

Hi. Thanks guys. Most of my questions have been answered. But I just wanted focus on endpoint security. Gil, there has been a lot of talk about just next generation endpoint and sort of how it’s best performed and lot of people have sort of different flavors on how the things for next gen endpoint should be done, obviously you guys have made some acquisitions here. I wonder if you could kind of just compare and contrast what you do versus what some other folks out there do, and why you think this is sort of the most successful or the appropriate way to do so? Thanks.

I think, in terms of – first most of our focus is not on the endpoint but it’s on the gateway and the network and we’re trying to emulate something – the endpoint environment on our threat prevention appliances or in our cloud and that’s what we do in our Threat Emulation service. On the mobility space, I think that’s a big part of if you call it the endpoint space, it does reside, it does require completely different approach because these – our mobile phones behave very differently from PCs and they are – and they have very different capabilities in what they can or cannot do. And I think what we’re doing there with Lacoon is a very refreshing you and very, very affecting you. There aren’t many companies doing that. There is maybe one or two other companies that are doing similar things in that space, I believe that we chose the best technology and the best company for that. And let me tell you, when you see how easy it is to even don’t we think with our mobile devices are secure, and it’s very hard to infiltrate some of the operating systems with the [indiscernible] and viruses, it’s shocking to see how easy it is to get inside our phone. And it’s even more shocking to see that in a two minutes we can show you demo which shows how somebody makes your – no matter which brand phone becomes a tapping device, take a picture of the environment around you, and record your conversation, and everything goes to the cloud without you knowing so, somebody remotely there. So I think that eventually when this technology becomes effective and out and when companies realize that they’ll see the big potential and the big need that’s – that is needed in protecting our mobile devices.

Great. Thanks.

Thank you. The next question is from Matt Niknam of Goldman Sachs. Please go ahead.

Hey guys, thank you for taking the question. Just two if I could. One on expenses, maybe if you can give us a little more color on the timing of new hires during the quarter, how we should think about some of that expense ramp you’ve previously discussed to hit margins over the course of the year? And then just secondly on M&A, post the acquisitions for Lacoon and Hyperwise, maybe if you could just give us your updated thoughts on any incremental M&A activity from here, specifically just the latest you’re seeing in terms of M&A opportunities with the run up in private company valuations? Thanks.

Sure. So I’ll take the recruiting and maybe Gil can relate to the future M&A activity, but on the expenses, the best assumption is typically mid of the quarter, right. So you’ve sometimes slightly before, slightly after, but if you want to do it in your calculation, it’s probably like half a quarter effect. So next quarter you’re going to get the full effect of the recruiting of this over 200 people. Now when you take into account the next quarter, we’re also going to recruit, so also probably it’s going to be on average in the mid of the quarter, which means that in Q3, you’re going to get the full effect of the Q2 and so on. And that’s why I say it to make it clear that the effect of the recruiting in Q1 will be fully felt in Q2, plus in Q2 you’re going to have half the quarter of the recruiting of Q2, meaning the full effect of those two quarters you’ll have in Q3, and that’s why in my guidance also in the beginning of the year. So bear in mind that their margin will drop throughout the year and then hopefully increase in Q4.

In terms of the M&A environment, I think we keep looking for more technologies and more opportunities. I think that the biggest efforts today in the two different resources in the company, but our big focus will be to integrate what we’ve acquired and to be – and to generate meaningful attraction in the mobility space and to make the threat prevention space which is already quite significant in our business even bigger and even more successful. So that will be our two main focus areas. On the same time our busy people keep looking around, keep running around and if we’ll find good any technologies like the two that we just acquired, we won’t be shying of doing another deal.

Okay. Thank you very much, very helpful.

Thank you. The next question is from Aaron Schwartz of Macquarie. Please go ahead.

Thank you very much. I just had a follow up question on end point in mobility. I understand this has been a small part of your business for some time, but you also have talked quite positively about the product footprint here. With the acquisition, what do you have to do from a reinvestment side to start to move the needle a little bit on revenue? Are they going to be different sales structures or following reinvestment with Lacoon with additional sales people. Can you just kind of walk through the strategy to get end point mobility to be a larger part of the business?

We are creating vertical sales forces for mobility that will be overlay sales force. I mean we want to utilize our existing sales force. We want to utilize the leverage that we have in the account contacts and the same time we want to create focus around that. In all the geographies, we’re going to have dedicated groups of people for mobility. They will work with the local field both to ensure that there is enough opportunities, and to support these opportunities and give them all the professional help that they needed. We’ve already started putting that in place but there is still few more positions in – in this group that we still need to fill in, and that we’re looking to fill in the future.

Great. And just a quick clarification question, can you just reiterate or clarify that the acquisitions will have no impact on the full year non-GAAP EPS? Thank you.

Okay. Sure. So you see in my – when I described, as I said that the effect on the non-GAAP is around $0.04 for the rest of the year. But what Gil said that we believe we can observe it inside the guidance that we provided in the beginning of the year, and therefore, we don’t change our non-GAAP guidance. On the GAAP basis, we said that we will be $0.35 less, and now we updated that we’re going to be $0.45 less.

Great. Thank you very much.

We just [ph] declared we won’t change our guidance for the full year basically.

Thank you. The next question is from Michael Turits of Raymond James. Please go ahead.

Hey, Tal and Gil. Obviously a strong quarter on margin upside there, short of EPS speed, some benefits in revenue, but OpEx also came in below what I would have expected. So was in fact some of that from push out of spending with a less spending in this quarter, and I just wanted to be clear Tal, was the weaker shekel any more of a benefit than you would have expected when you gave guidance?

Yes. It was about $0.02 to $0.03 higher.

$0.02 to $0.03 benefit from what you would have expected from...

Yes.

...shekel when you gave guidance. Okay. And also was...

Sorry, that just relating to the comments why we don’t update the guidance, because we know that in Q1 we benefited $0.02 or so – or $0.02 or $0.03 from the dollar effect on the one hand, but we know that going forward, we have the increase in the expenses as the result of the acquisition and the recruiting that we have accelerated, recruiting rate which will be fully felt in Q2 and in Q3.

Okay. And was there any push out of these hiring or was it on target?

No, no, it was on target – our report...

Okay, great. Great, perfect. Thanks.

Thank you. The next question is from Sterling Auty of JPMorgan. Please go ahead.

Yeah. Thanks. On the hiring on sales and marketing, can you give us a sense how many of those people are becoming channel managers versus systems engineers, in other words what positions are you hiring people these into and maybe a sense of how they’re being deployed geographically?

I don’t have the specific statistics, but it’s all the field professions, the sales engineer, account manager, channel management, all the major field areas of the field are being recruited...

And in all geographies.

In all geographies and in similar proportions to what we have right now.

And you already have probably the largest channel when it comes to the security vendor. So, I’m curious what the additional productivity, how they drive the productivity, are they getting more dollars per reseller through the channel or are you actually looking to expand even to more resellers?

I think we’re going to do both. But I think it’s actually in the channel space specifically, I think we felt this year that we did it to really – give more resources to support the channel. I think in last year’s, we gave – we’ve shifted resources toward the account management, that always work with the channel, but doesn’t focus specifically on the need of the channel. So now we’ve actually created especially in the U.S. a more specific units that work to support the channel and work with the channel and slightly changed the way we work with channel. We’ve also created a new channel program called the Stars Program that we launched at the beginning of the year. And the overall productivity of sale people, I think we are going to – we expected to actually go down, so we can target more customers and get to customers that are not always easy to penetrate and so on. So we are not modeling an increased productivity for our sales force quite the opposite.

Okay. Thank you.

Thank you. The next question is from Brent Thill of UBS. Please go ahead.

Thanks. Tal, just from a unit shipment perspective, could you just give us a sense of what you’re seeing? And for Gil, just on the endpoint, when do you expect the two acquisitions that come together on a actual shipping product, I just knew you were pretty clear that you don’t expect revenue this year, but just when do you expect actual GA for those two smaller acquisitions?

I think it will take a couple of quarters until we integrate them. Keep in mind, on is in the mobile space that the Lacoon, the other one is in the network side, not in the endpoint side. Hyperwise technology is in our Threat Emulation service and Threat Emulation...

Blades.

Blades.

Okay. Tal, just on the unit shipment side, did you see any particular areas of strengths?

So, we don’t report on the units back and tell you in general we saw a nice increase in the units, we saw small going up, mid going up, data center going up, but then you can see it shift between quarters, sometimes the large is doing better, sometimes the data center, this quarter it was almost across the border of the appliances.

Great. Thank you.

Thank you. The next question is from Keith Eric Weiss of Morgan Stanley. Please go ahead

Excellent. Thank you guys and nice quarter. Maybe somewhat related to Brent’s question. Can you give us a sense or give us an update on the subscription content and given deals that you guys are doing, is that starting to level out? And at some point, can you remind us when we’ll see product revenues start to sort of normalize in line with total revenues, is that ever happened, or is it always going to be under pacing that the total revenue growth?

I’m not sure, I understood the first part of the question. Can you repeat it?

I guess, just the – I guess when you think about subscription attached through appliances, how many subscriptions are coming on an average appliance versus efficient content of the appliance. Can you give us an update on how that’s been tracking for you guys, how many subscriptions on average attached to you for given the appliance, and how that’s been changing?

We actually don’t look at it that way, but I can tell you in general that we have default packages that’s called next generation firewall or next generation threat prevention, and I told you that actually the growth is coming from the increase of the packages of the next generation threat prevention. And in this package, if I recall you have annuity blade it’s probably over five, maybe even six. So that will be the average for the customers that’s buying a new appliance, right, that include that package and ensures this package. When you asked about the growth rate, they’re naturally as the numbers are increasing, and right now it’s already 20% of our total revenues, not only the growth, but also the proportion out of our revenues software blades that reach 20%, so this number becoming higher, so is my expectation that there will be over time deceleration in the number and you see it when we started, we had 50%, 40%, now we around 20%. So, the numbers are getting bigger and I expect to see over time deceleration in the growth of the software blade.

Got it. Thank you very much.

Thank you. The next question is from Gray Powell of Wells Fargo. Please go ahead.

Great. Thanks a lot. Maybe just kind of follow-up on that topic. I mean, broadly speaking penetration industry wide of next generation firewall platforms is in sort of the 25% range. Where do you think that goes longer term and then how do you view the growth potential of your more mature subscriptions like IPS?

So, I think naturally when you talk about blades the older they are then you start to see slowdown in the growth and you hope and you work on seeing accelerated growth on the new blades. So, naturally you will see slowdown in the IPS and over time in the application control and you would like to see growth. Obviously right now you already see, the growth that we see in Anti-Bot or in threaten relation is in hundreds of percentage, but the numbers are small. So, the time those numbers will be bigger, but the growth rates are faster than the old ones. So, new ones you will see higher growth rates and old one you see slower growth rates and on average you would like to continue to seeing in the growth in the software blade is a total.

Okay. And that was curious like more broadly speaking, like these next-generation firewall platforms are in sort of the 25% penetration range for the industry as a whole like what kind of number do you think that goes to longer term as you consolidate point solutions, is that like 50%, 80%, I’d just be curious. So your broader thoughts there?

I think just the term next generation firewall it means different things in different companies, right. So for us the next generation firewall includes many, many additional blades and technologies for the use of the customer. So the more customers would like to buy more technologies, the more you will see it penetrating. I think historically it was called UTM and its included antivirus, anti-spam, the URL filtering and now you call it next generation firewall or software blades and you add these technologies into your – the platform that you are selling and we’re offering our customers many, many options and many software blades that they can acquire and we expect more and more customers to use more technologies on their gateways. Where will it stop and which numbers? I have no idea. But I think it’s going to be quite high.

Okay. Fair enough. Thank you very much.

Thank you. The next question is from Matt Hedberg of RBC Capital Markets. Please go ahead.

Yeah. It’s [ph] Dan Bergs for Matt. Thanks. Revenue growth has been accelerating quarter-over-quarter for eight quarters now which is really quite impressive. Can you talk about what’s driving it, is it simply just function of blades hitting 20% of revenue as you’ve kind of talked about and answers to the last several questions? Thanks.

I think it’s part of our investment in new technologies and in the better threat prevention technology, part of our investment in the field and in the sales which were accelerating this year in a significant way. And I think not that I want to create any higher expectation, but I think the potential is still, I think still there is lot of potential in providing more of these technologies to the marketplace and we have several more years until we reach fruition of those markets. So, still most of the work is still ahead of us.

Thank you.

Thank you. And our final question is from Sterling Auty of JPMorgan. Please go ahead.

Yeah. Just two quick follow-ups. Tal, I didn’t catch up what you said about what was the renewal rates for the software blades in the quarter?

I didn’t say it, maybe that’s why you didn’t catch it. We don’t report renewal rates, but it’s pretty much steady. Remember, we said, we don’t report it, because the number is an absolute number means nothing, because people can move between different packages. So – but in general, the environment is the same.

Okay. And then, you made comment in the prepared remarks and in one of the answers about strength in the data center. Can you give us some color on whether that’s enterprise data center or Telco data center, and perhaps maybe which geographies you’re seeing that strengthened?

Enterprise data center, and all over the geography.

Great. Thank you.

You know, this is quite consistent for a few quarters. Data center is doing very well. The 13,000 family and upward is doing well, and we see it in enterprises mainly and across region, as Gil said.

Got it. Thanks.

All right, guys. Thank you very much. See you at RSA this week. I know that’s where all of you are right now and we’ll see you during the quarter. Thank you and look forward to catching you up. Bye-bye.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time.

Thank you.