Good day, ladies and gentlemen, and welcome to Radware Ltd. Fourth Quarter Results Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Roy Zisapel, President and CEO. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Radware's Fourth Quarter 2011 Earnings Conference Call. Joining me today is Meir Moshe, our Chief Financial Officer. Meir will start the call by reviewing the financial results and afterwards, I'll discuss the business highlights of the fourth quarter. After my comments, we'll open the discussion for Q&A. Meir?

Okay. Thank you, Roy, and welcome, everyone, to our fourth quarter conference call. First, I would like to review the Safe Harbor language. During the course of this conference call, we'll make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are just predictions and that actual events or results may differ materially, including but are not limited to, general business conditions and our ability to address changes in our industry, changes in demand for products, the timing and the amount of orders and other risks detailed from time-to-time in Radware's filings. We refer you to documents the company files from time to time with the Securities and Exchange Commission, specifically the company's last Form 20-F filed in March 2011. And now, ladies and gentlemen, for the financials. We are very pleased to report an additional quarter of record revenues, 20% non-GAAP operating margins and non-GAAP EPS of $0.42. Revenues for the fourth quarter totaled to $45.1 million, 7% sequential growth and 15% year-over-year. Revenues for 2011 totaled to a record amount of $167 million, an increase of 16% compared to revenues of $144 million in 2010. The deferred revenues have increased during this year, totaled to $52.5 million at the end of the year, up from $51.5 million at the end of 2010. The non-GAAP net profit this quarter has increased to $9.5 million or $0.42 per diluted share and represents a dramatic improvement compared to a net profit of $6.6 million or $0.29 per share in the fourth quarter of 2010. The non-GAAP net profit for 2011 amounted to $30.7 million or $1.3 [ph] per diluted share, an increase of more than 50% compared to a net profit of $20 million or $0.92…

Thank you, Meir. Our fourth quarter results reflect another quarter of strong performance. During the quarter, we saw significant traction for our data center virtualization and cloud computing solutions, as well as our attack mitigation system. We believe these solutions are expanding Radware's addressable market from the traditional load balancing and application delivery use cases to become the control plane and a critical component in data center interior infrastructure. Last quarter, we unveiled the second phase of our VADI strategy, VADI 2.0, including new application delivery controller platform, enhanced data center management and orchestrating filter ability, support for all leading hypervisors and new AppShape technology to provide the industry's first application delivery fabric. The Radware application delivery fabric breaks new ground in virtualized application delivery by leveraging the concept of a virtual ADC or vADC resource pool across both single and multiple data centers. The ADC fabric transforms physical application delivery units to services, regardless of the underlying computing resources, for increased agility and simplified operations. A key component of Radware application delivery fabric is our new technology, the Radware AppShape. This technology provides an application perspective for shaping the data center infrastructure to specific application needs. AppShape dramatically accelerates the rollout of new business applications and services, which can be integrated into the virtual data center and cloud ecosystems. In the coming months, we are releasing the AppShape module for leading applications, such as Microsoft SharePoint, Microsoft Exchange, Oracle and SAP, to take application delivery fabric, agility and simplicity to the next level. We continue to see many projects for ADC consolidation and a lot of new projects opening up for VADI solutions as customers recognize the strong ROI and improved IT agility resulting from these solutions. Last but not least, on the application delivery front, we're starting to…

[Operator Instructions] Our first question comes from Mark Sue with RBC.

If I look at the growth rate thus far, it seems to be stabilizing and we're seeing consistent growth on the top line in the mid-teens. As we look at 2012 with all the new applications, the wireless data centers and also new products, any thoughts on how we might be able to replicate the level of growth in 2012 from 2011? Or just maybe, in rank order, where you see the greatest rate of growth by end market. That would be helpful.

So we think that the growth as -- we see that can continue based on the new offerings and we see several areas where growth can be accelerated. And I tried to mention them. Better execution in the VADI projects, where we feel we have a strong lead, can definitely accelerate our revenue growth. Continued growth in the attack mitigation space, where we've seen many, many incidents, growing in number and complexity, that's definitely a strong driver. And as I've mentioned, OEM revenues from the likes of Juniper is a third area that we see potential for accelerated growth.

On Juniper, any updates on maybe the pipeline, the engagements and how that might be trending quarter-to-quarter and possibly the outlook there?

So the first quarter was Q4, basically I think now, end of January, we're 3 months into the product being in GA. We are now running several or better things [ph]. Juniper is running several proof-of-concepts with Tier 1 carriers across the world. There's a significant pipeline. The timing of the close of each of those projects obviously is not dependent on us, but the opportunities are very sizable to our numbers and, we believe, provide us with expanded market reach. Those projects, we were not able to bid on by ourselves and they are solely on carrier network space, so it's completely expanding the addressable market, as well as our win probability.

Got it. And then, Meir, on these financials, you saw a boost in gross margins. How should we think about the sustainability of the improvements in gross margins over the next -- for the foreseeable future? And likewise, operating margins, how should we see the trajectory and maybe what you might be thinking in terms of operating margin for the full year and how we might exit 2012 operating margins?

Okay. About the gross margin, the gross margin is up due to different mix of product, increasing sales of our software-based solutions, start of our BBI [ph]. We expect to maintain these high gross margins because those trends, as I mentioned, will continue in 2012, and you can see it also in the guidance for the Q1 that we say that gross margin is 82%. About the operating margin, we believe that we can continue and increase our operating margin. But as you understand that our operating margin, as well as our EPS, are very sensitive to top line changes. And as a conservative measure, we expect to exit 2012 with 23% operating margin. But again, this is very -- depends on our achievement on the top line.

Got it, 20% exiting the year. And then just maybe qualitatively, Meir, does it feel that your -- I mean, with the higher gross margins trickling down and with the better engagements, do you feel -- do you need to expand spending as hiring this year or with the partners and everything else that you might get more leverage, just qualitatively?

Well, I think we are planning to increase investment in sales and marketing. Definitely we are encouraged with the increased leverage and profitability, and we believe we can turn some of this leverage back to investment in the business for better growth. So we are adding, in select markets and for select initiatives, more headcount.

Our next question comes from Ittai Kidron with Oppenheimer.

Meir, just to clarify, did you say exiting '12 with 20% or 23% operating margin?

That's 23% exiting the year. That's for the full year, of course.

Yes, okay, very good. Roy, with regards to the opportunities you're working on with Juniper on the carrier side, can you talk about applications? Is this IP version 4 to version 6 slowed down seeing -- is it mobile traffic? I mean, could you give us a little bit more color into what sort of implementations are we looking at?

Okay, so the implementations are in [ph] use cases that are using 8 application delivery in the carrier network. So definitely, what's called carrier-grade NAT, which is the IPv6, IPv4 migration, I think Juniper is going strongly on that. A content delivery network, that we see a lot of activities in Tier 1 carriers across the world building CDN for video. That's another use case. Mobile traffic, Juniper obviously has a big initiative there and our solution is also part of supplying value-added services of mobile traffic like acceleration, like traffic redirection based on application, so that's another use case. And then very simple use cases of DNS load-balancing, reduced [ph] DHCP, all the network resources that are positioned in the carrier point of presence. So those are the core stuff. We're also seeing some cases of firewall load-balancing, leveraging the SRX product line, et cetera.

Okay. And how should we think about the evolution of this partnership into the enterprise market as well, not just sort of the carrier side?

So apparently, we're working with Juniper on the MX router. They're positioning MX router mainly for the carrier and to a limited extent, to large enterprise data centers. So obviously, in these areas, we can be part of their enterprise initiative. But for the most part, we're focused on the carrier network space.

Okay, very good. And, Meir, with regards to the financials, can you talk about -- how do we think about OpEx through the year? And also, maybe in this last quarter, which was December quarter, which was very good, is there any color you can give us about how much of the growth came from the security side of the business versus the actual -- the ADC market?

Okay, first of all, about the operating expenses, what I mentioned that we plan to continue as we have done in the last 3 years, to continue to increase our spending now and to invest in the company. That meant that we have more expenses that's related to our sales, marketing; some R&D; and not many, if any at all, for G&A, but this is our strategy. At the same time, we are aware to our commitment to increase margin, so we planned that the top line would run faster than the expenses. This is the most that we can share with you. We don't fully guide the market about the year. So we mentioned that we plan to exit the year with 23% operating margin. We continue to invest in the -- in operating expenses. On top of that, I said and you have to take it into consideration that our margins and EPS are very sensitive to the increase in the top line. So everything is subject to our ability to leverage the investment that we are doing right now. As for the split between on profitability between AMS and ADC, we don't do it. We haven't done it so far so we can't share it with you.

Can you just qualitatively discuss in this past quarter what was growing faster, and on a near-term basis, where you see more of the growth on a sequential basis?

So I think specifically in the past quarter, security was a bit ahead, but it changes every quarter. We believe both markets, the application delivery performance should grow strong and the attack mitigation. The application delivery growth drivers, like the carrier applications we've discussed, like virtualized and cloud migration, are key growth drivers that we feel very strongly with VADI last year.

Our next question comes from Rohit Chopra with Wedbush.

I wanted to come back to gross margin, if you don't mind, Meir. Correct me if I'm wrong, the Juniper product is really a software module, so is there room for gross margin upside as you go throughout the year? That's my first question.

Yes, of course, if we get from Juniper and all the rest are stable, because gross margin is not only a factor of the mix of product, also pricing in the market, et cetera, but if we assume that everything is stable on top of that, you blend some from Juniper so gross margin will go up, yes.

Great. And then could you also talk about the geographic mix, if you can go through the different regions and also the enterprise/service provider split?

Okay. The region split, 27% for the U.S. this quarter, 37% for EMEA and 36% for Asia Pacific. As mix of enterprise and carrier, carrier was 32% this quarter while enterprise, 68%.

Okay. My last question is this. Just on taxes, it looks like they're starting to go up. Is that due to selling your product to Juniper? Does that make sense?

No. All our tax rate, this is -- as we become more profitable, so we have to pay more taxes and therefore, the trend will be up but still in single digit for 2011 -- 2012.

[Operator Instructions] Our next question comes from Liron Rochman with Oscar Gruss.

[indiscernible] in EMEA in this quarter was very strong. Can you elaborate a little bit what's going on there? You don't -- in 2012, do you see any weakness over there?

We've very pleased with our performance in EMEA. We continue to see strength in the market. I think the main reason, given the economic climate, is the fact that we are selling to mission-critical environments. So both on the application delivery and definitely on the security solutions, we're truly targeting very mission-critical environments. And we continue to see both enterprises, carriers and even governments investing even in these times, in these solutions. So obviously, we're cautious about 2012 for EMEA, but so far so good.

Okay. And then regarding Juniper, can you tell us what kind of feedback you get from Juniper clients so far? How they see the product and...

So I think you know when a Tier 1 carrier is doing really proof-of-concept and has a project plan to install, it's obviously because they see clear value in that product. We are seeing a growing pipeline with the largest of the carriers in the world, so the feedback is very good. The key concept here is that it simplifies the network architecture of these carriers because they don't need another layer of application delivery devices. So they improve -- by removing those devices and making them a software on top of the Juniper routers they already have, they remove complexity from the network, they improve availability because there are less components, they simplify the operations because they're teams that are already fully trained on the Juniper router, and they save CapEx and OpEx. So it's a very clear proposition -- value proposition for them, and I think we are very enthusiastic on the potential of this current solution.

Understood. And is that product really -- can completely replace the legacy ADC? Or they still need some hardware in order to get better execution or better product? Can you elaborate about that?

So for the use cases I've mentioned, the Juniper blade is a fully featured application delivery component. It runs our software. So for all the carrier network use cases that we've discussed on the call, you don't need another ADC. We are running in a Juniper router on a dedicated blade or blades -- you can put more than one in a router -- with dedicated hardware that does the application delivery services. So it completely removes the need to have physical devices after the router.

So that means that you won't have any upsells for those clients that will be separately from Juniper?

This is -- for the specific applications I've mentioned, there's no need. But obviously, the whole data center, their cloud project, their IT and so on is a huge upsell opportunity for us, leveraging the installed base of Juniper.

Thank you. I'm showing no further questions at this time. I would now like to turn the conference back over to Mr. Zisapel for closing remarks.

I would like to thank everybody for joining us today, and have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.