Ladies and gentlemen, we'd like to thank you for standing by, and welcome to the Q4 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call will be recorded. I would now like to turn the conference over to our host and facilitator, as well as your President and CEO, Mr. Roy Zisapel. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Radware's fourth quarter 2013 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 results. 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 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 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 2013. And now, ladies and gentlemen, for the financials. We are very pleased to report an additional record quarter and an additional record year of revenues. Revenues for the fourth quarter totaled to a record of $53 million, representing 10.4% sequential growth and 6.4% year-over-year. Revenues for 2013 totaled to a record of $193 million, an increase of 2% compared to revenues of $189 million in 2012. In addition, the sales revenues increased in 2013 by $6 million. Non-GAAP gross margin remained at 82% in the fourth quarter, as well as for the whole 2013. The non-GAAP net income this quarter was $10.1 million or $0.22 per diluted share compared to net income of $11.2 million or $0.24 per share in the fourth quarter last year. The non-GAAP net income for 2013 was $32 million or $0.69 per diluted share compared to a net income of $40.5 million or $0.87 per share in 2012. Stock-based compensation expenses in the amount of $1.6 million, amortization of…

Thank you, Meir. We are very pleased with the results of our fourth quarter, boasting record revenues and coming in above our expectations. The North American market continued to grow significantly for us. Given the market data, it's obvious that we are gaining substantial market share in the U.S. In addition, we witnessed good recovery in EMEA. We are optimistic about our progress in this geography and believe we are now positioned to grow revenues again in this market. Regarding the overall market situation, we continue to see significant application delivery activity worldwide in private and hybrid cloud data centers, data center consolidation projects and Cisco ACE replacements. In the past quarter, we saw very strong year-over-year growth in ADC bookings, the strongest we had in a couple of years. In addition, there was significant increase in demand and pipeline for our cyber security solutions given the ongoing waves of attacks on financial institutes, government agencies and online businesses. We believe these 2 growth solutions are expanding other addressable market from traditional load balancing and application delivery use cases to becoming the control plane and a critical component in enterprise data centers and carrier infrastructures. Adding to that, with new opportunities in SDN and NFV, we are confident in our ability to accelerate growth of our business and to become a strategic player in carrier and enterprise IT transformation. As part of our increased involvement in SDN, we joined the Open Networking Foundation Northbound Interface Working Group. Chartered in October, the NBI Working Group was created to standardize the API between applications and SDN controllers and help application developers actively seek an open API to develop code for the SDN framework. It will enable acceleration of SDN innovation by allowing necessary application portability across SDN controllers, both open source and…

[Operator Instructions] Our first question will come from the line of Mark Sue of RBC Capital Markets. [Technical Difficulty]

Our next question will come from the line of Alex Henderson of Needham. Alexander B. Henderson - Needham & Company, LLC, Research Division: Couldn't hear the geographic split. Could you give us that?

Okay, the geographic -- okay, the geographic split for Q4. It Was U.S. 36%, EMEA 35% and Asia Pac 29%. Alexander B. Henderson - Needham & Company, LLC, Research Division: Second question. I heard in doing our field work that the orders in the field had actually accelerated over the course of the quarter. We are seeing a linearity that's a little bit discontinuitous [ph] with historical patterns, i.e., very strong orders in the last month. Is that an accurate read of what you guys saw?

It's not different for us. We did see growth -- we did see a strong booking in the last month of the quarter, but it was -- it's the general trend in Radware that the last month is anywhere between 50% to sometimes 60% of total revenues. So I don't think we've witnessed something special. Actually, we were quite pleased with the linearity. Alexander B. Henderson - Needham & Company, LLC, Research Division: And then can you talk a little bit about what you think is going to happen with respect to pricing? I know that last year, due to the pricing structure of the 5 products when they launched them back in, well, late in the fourth quarter of '12 and into the first quarter, that, that put pricing pressure on the category in '13. What do you think that looks like as we go into '14? Are we going to see a more mundane pricing environment? Or do you think there's another catalyst to move prices lower?

I don't think there's a catalyst to move it lower. I think, as we discussed in the last several calls, we believe that the -- it's more of a step function than a continuous price reduction, and we don't see pricing changes. And as a result, we believe some of the comps for the category going into the first half of next year will probably be easier, and then the market will see again ADC growth in the total market size also.

Our next question will come from the line of Michael Kim of Imperial Capital.

Let's talk a little bit about attack mitigation. Are you continuing to see, I mean, an increasing adoption by larger enterprises for the hybrid cloud infrastructure? And maybe you could comment on recurring revenue in bookings growth.

Okay. So absolutely, we do see continuous penetration in the high end. Overall, the year was very strong in attack mitigation. And regarding the hybrid solution, we do see a growth -- an obvious growth in deferred billing. So contracts that are multiyear, those are billed anywhere from monthly to yearly. And as they are getting billed, we are recognizing them. But on the bookings side, we absolutely see growth in the hybrid cloud business.

And can you also provide an update on DefenseFlow? I think, last quarter, you talked about some initial orders with a Tier 1 carrier in the U.S. Are you starting to see a wider adoption for DefenseFlow?

We're starting to see. We see also a lot of partnerships around it. This week in Cisco Live in Milan, we are again presenting that together with Cisco. So obviously, we're seeing that's the first and only, to date, SDN application in the market, and we see a lot of interest. SDN deployments are still in very early stage. They're mainly in labs and user trials in a limited fashion. But we do believe it gets us designed into next-generation networks and deployments. And so that's the importance of DefenseFlow. In addition to that, it obviously carries a lot of our other products with it, especially DefensePro, but sometimes also the rest of our portfolio.

And then lastly, just on a geographic basis, are you seeing the level of activity and security in the EMEA region starting to converge with the type of the level of activity you've seen in North America, especially with, say, larger enterprises and carriers?

Well, not yet to the same extent. But I think in the last 2 quarters, we do see a pickup in the amount of projects in attack mitigation in EMEA mainly around carriers and large enterprises, as you've mentioned, and quite a good openness and adoption of hybrid cloud. So I think we're still there in early days. If it will pick up like it picked up in the Americas, it's obviously a major growth driver for us, but I think it's a bit too early to tell you.

Our next question will come from the line of Joseph Wolf of Barclays.

This is Tavy Rosner on behalf of Joseph. I was wondering if you could give us the mix of product versus services for the quarter.

Usually, what we do, we give it on a -- for the year, and we'll announce it while announcing the annual report scheduled for March.

And I was wondering, could you comment on the -- and for new products and bundling, meaning what percentage of customer are actually buying multiple products?

We don't have this statistic handy now for the call. But in general, with Alteon NG and the complete attack mitigation solution, which is multiple products, it encompasses the DefensePro for blocking the network and application DDoS, it includes the AppWall for the Web layer attacks and Alteon for the SSL attacks. We do see more and more customers in dramatically higher numbers that we've seen before purchasing more than one product line as part of our complete solution. We are also trying to cross-sell the solution, meaning, ADC solution and AMS solution, and we believe that Alteon NG, where one of the key capabilities is its ability to signal the attack to our hybrid cloud. So whenever we detect an attack to the -- in the server farm, the signal can go all the way to the defense point, the edge of the data center or to the cloud to mitigate the attack. We believe that these capabilities that bring together the different solutions we have will increase that cross-selling even further.

Understood. And maybe one last one for me. Can you share with us your hiring plans for next year maybe by either region or end markets?

So our plan is to continue to increase our investments. The investments are primarily growing -- going to regions that are growing. So through additional sales teams. And so obviously, in the Americas, but we believe, given recent results, also for EMEA. And in R&D, we continue to ramp up investments in the solutions we have. And especially cyber security, cloud application delivery are the core investment areas for us.

Our next question will come from the line of Jess Lubert of Wells Fargo Securities.

I've got a couple of questions here actually. And maybe first off, I was hoping you could talk a little bit about the demand trends in Asia. It looks like the business was fairly weak there in the quarter. Can you talk about what you're seeing just from a regional demand perspective and to what degree you're expecting any improvement in Asia in the upcoming year?

Okay. So last quarter, you're absolutely right, Asia Pac was our least-performing region. We are doing some adjustments there to our sales management in the region, especially on the country -- on some of the specific countries' level. The main weakness we saw, I think, came from China in some large projects we were not able to bring in. Our expectation is to see growth in APAC this year. But given the latest performance, we will be more conservative on that. In general, I'm not sure it's an overall market issue. I think we need to improve our execution. And we've seen that in other regions, that we can achieve that in relatively short time.

Okay. And have you made some of these changes? Are the new people in place? Or are there reasons to think that we could see a similar result in Asia as to what we saw in Europe in 2014? And would it be right to think that the return to growth is more of a second half phenomenon in 2014?

But to be conservative, we will take it as second half. But some of the new people are already in place.

And then it seems like operating margins are going to dip down in Q1 and you're going to be investing in sales and marketing and R&D in the upcoming year. I think on the last call, you talked about possibly getting to a 20% operating margin by the end of the year. Is that still a realistic objective that you think you can hit? Is it a stretch goal? And any kind of input there?

Yes, you can see the difference from Q3 to Q4 this year, that in 1 quarter, actually we increased the operating margin more than 3%, more than 3 -- full 3 points. So we are very sensitive to the top line if all what we discussed in this call is going to happen. So I don't see not reaching the 20% in Q4. But again, it's due to the fact that we will be able to achieve the growth that we are expecting. At the same time, take into consideration that we also increased investment. So we are so very sensitive to the top line. We would like to achieve that one. But depends on the -- our ability to achieve growth in the year, specifically in the second half.

Okay. And just last one from me. Did the company buy any stock in the quarter? And can you update us where you are with respect to the buyback?

Yes, actually we bought back shares, $8 million, 537,000 shares for $8 million. We are still on the plan, $32 million.

Our next question will come from the line of Rohit Chopra of Wedbush.

Three questions here. Roy, can you just talk about partner revenue, your OEM partner revenue? Is that -- where do you see that going? Is that increasing this past quarter? And where do you see it going for the upcoming year? Meir, can you also give us the enterprise service provider split? And can you talk about deal sizes, how those are trending as well?

Our OEM revenues went up. Some of our key partners were in a -- and specifically Check Point, were in a record result for us. And we do forecast that, that will increase also in 2014. So all in all, we were quite satisfied with our OEM revenue.

Okay. About the split between enterprise and carriers, carriers this quarter were 32% of our overall business, 68% was the enterprise. At the same time, we see an increase in our average deal to -- from $120,000 last quarter to about $130,000 this quarter.

And just to follow up on what Meir mentioned, the increase is coming as we're seeing customers taking -- in the carriers side, our bigger solutions, bigger platforms, namely the 6420 that we've released in Q3. It's becoming a very popular platform. And on the security side, we're seeing them taking a complete attack mitigation solution, including the cloud, which increases deal sizes by around 50%, including the web application tier and the SSL tier. So this cross-selling, together with the move to higher -- by performing higher bandwidth platforms, is driving average deal sizes up.

Roy, can I ask you a quick follow-up on service provider? Is what you saw in Q4 more of a budget flush end-of-year spending by service providers? Or are you seeing follow-through as we sort of move into 2014?

I think it's continuous. Actually, some of our -- I think, a couple of our 12 service providers already purchased additional projects from us in January. So I don't think we've seen -- at least as it relates to our business, we didn't see a budget flush. We're seeing strategic projects like cloud, like cyber security, continue to be rolled out and installed.

Is this more U.S. or Europe? Or is it both?

It's both.

And our next question is a follow-up from the line of Alex Henderson of Needham. Alexander B. Henderson - Needham & Company, LLC, Research Division: So I just wanted to go back to the virtualization piece for a second. Can you talk a little bit about what portion of your business is being driven by the virtualized elements or your ADC line, what the licensing looks like in the installed base and in current shipments as a percentage of ADCs?

Okay. So today, every ADC appliance we ship, meaning only the software ADCs, are not shipped with virtualization built in. And software ADCs, they've got -- our customers just buy by the instance. So every project that we're doing is based on these virtualized ADC concept where each application has its own instance, each business unit has its own instance supporting consolidation and virtualization. We've seen in Q4 a record revenue from virtual licenses. So beyond the fact that we shipped the devices with built-in virtualization capabilities, we've seen the most licenses and instances being bought, very strong result for us. And then we clearly believe that with the Alteon NG launch, it will strengthen this trend. Alexander B. Henderson - Needham & Company, LLC, Research Division: Well, can you give us any quantification around that? I mean, the licenses grew faster than overall revenues, the licenses relative to the units shipped. Can you give us what portion actually turned on additional licenses as opposed to just using the existing 2 licenses? Any metrics along those lines?

Yes, so it's 2 licenses on the low end, and we've increased the licenses on the high end to 5 in the base platforms. I don't have the quantified number, but it grew faster than the sales, obviously. And if you go back to my comments, we had a very, very strong ADC booking result this quarter. There is growth bigger than everything we've experienced in the past 2 years. So -- and that's due mainly to the virtualization, the VADI concept and all these multiple instances, multitenancy deployments. Alexander B. Henderson - Needham & Company, LLC, Research Division: Going back to the enterprise piece of your business, the split that you've provided, 68%-32%, implies that the year-over-year change in the enterprise is essentially flat. Obviously, that's better than down 4% last quarter and improving. But can you give us some thoughts on how you think that, that is going to change over time and whether there was some pent-up demand or -- in that? How do we think about that? Is there any differences in geographies on there? Give us a little bit more color around that.

I think the -- some of this weakness is, to some extent, correlated to Asia Pacific weakness. And I think overall, I do believe that enterprise will improve in 2014 as the ADC market also, in terms of growth, is accelerating. In security, we have a more balance between carrier and enterprise than in ADC. So I think you're seeing here the Asia Pacific plus the fact that the ADC had a tough year in 2013. Alexander B. Henderson - Needham & Company, LLC, Research Division: And on the security side, can you provide us at least with the growth rate? Even though you don't talk about the actual size of it, can you give us a growth rate on the security portion?

I think we can, but we are not providing the split on the call, and I apologize, Alex. And there's a reason for that. In the ADC, also in terms of our competition, none of the market players today are splitting security and ADC, and there's more and more overlap also between the ADC functionality and the security functionality. So I believe for our competitors it's even a single product line. And for us, I think we want to keep it as is.

And our next question is also a follow-up from the line of Jess Lubert of Wells Fargo Securities.

I just had a question, a follow-up question on the balance sheet for Meir. The deferred revenue and other payables looks like it actually declined sequentially. I guess I was just hoping you could tell us what the trend was just in deferred on its own and if that was down sequentially. And if so, what drove that? Or were the deferred trends on a stand-alone basis actually a little bit better?

No, actually, the deferred revenues, you -- we have 2 lines for that, on the current liabilities and the long-term liabilities. You have to read them together. On the long-term liabilities, the deferred revenues increased by $4 million. On the current liabilities, it was increased over $2 million. So altogether, deferred revenues, as I mentioned in my discussion, went up this year over $6 million.

Yes, but on a sequential basis, can you share with us how they trended?

Yes. On the -- we don't split it on a quarterly basis. But also, on the quarter, it went up. Quarter-over-quarter, it also went up.

And there are no further questions in the queue at this time.

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

Ladies and gentlemen, that does conclude our conference call for today. On behalf of today's panel, I'd like to thank you for your participation, and thank you for using AT&T. Have a wonderful day. You may now disconnect.