Radware Ltd. (RDWR) Q2 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Radware's Q2 2014 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, President and Chief Executive Officer, Roy Zisapel. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Radware's Second Quarter 2014 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 second quarter results. After my comments, we'll open the discussion for Q&A. Meir?

Okay. Thank you, Roy, and welcome, everyone to our second 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 the 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 2014. And now, ladies and gentlemen, for the financials. For the second quarter of 2014, we reported record quarterly revenues of $53.1 million, representing 4% sequential growth and 13.3% year-over-year growth. Non-GAAP gross margin remained at 82%. The non-GAAP net income this quarter has increased to $8.2 million or $0.18 per diluted share compared to a net income of $7.1 million or $0.15 per share in the second quarter last year, and net income of $7.8 million or $0.17 per diluted share in the first quarter of 2014. $1.8 million of stock-based compensation expenses, $400,000 of amortization of intangible assets. $2 million of litigation costs associated with IT litigation and exchange rate expenses in the amount of $90,000, bringing the GAAP net income this quarter to $4 million or $0.08 per diluted share compared to net income of $4.9 million or $0.11 per share in the second quarter of 2013. Non-GAAP operating expenses reached $35.5 million in the second quarter, bringing our non-GAAP operating margin to 15.2%. The headcount for the end of this quarter was 856 employees. During the second quarter of 2014, the company generated cash in the amount of approximately $11.5 million. And after repurchase of shares at approximately $5.6 million, the company's overall cash position, including cash short-term and long-term bank deposits and marketable securities amounted to $309.4 million and we have no debt. Shareholders' equity amounted to $300 million. Guidance for the second -- for the third quarter. We expect revenues to range between $54 million to $55 million, 82% gross margin, OpEx will range between $35.7 million to $36 million, financial income at $1.4 million, 12% to 13% tax rate, share count 46.8 million shares and non-GAAP EPS to range between $0.19 to $0.20. As you can see, ladies and gentlemen, record quarterly revenues, improved results, increase of cash and we expect higher and better results in each of the following quarters of 2014. And now I'd like to turn the call over to Roy.

Thank you, Meir. We are pleased with our second quarter results, demonstrating steady improvement in our international business, with specific strength coming from Asia Pacific. We continue to execute well across the world and saw EMEA growing again in double digits. Having said that, we had several large projects in North America that's slipped to the third quarter. The majority of these orders were already received in July. Hence, we continue to feel confident about our ongoing growth in the Americas. Consistent with prior quarters, our overall growth is well balanced across enterprise customers and specifically in the financial, cloud service providers and carriers segments. Our focus on the data center markets for both application delivery and application security is paying off with these customers. We had several customer win announcements during the quarter, demonstrating the strength we have seen in these segments. Our biggest order came from a global cloud provider that shows our Attack Mitigation System to protect more than a dozen of its data centers around the world. Our Attack Mitigation solution with DefensePro at the core is becoming the gold standard for data center Attack Mitigation. This mean, replacing an incumbent with a strong evidence as there was a specific focus on detecting and protecting against large-scale and complex Distributed Denial of Service Attacks without impacting legitimate traffic to cloud tenants. We're also seeing more and more carriers and service providers, launching advanced services to their enterprise customers based on [indiscernible] solutions. M1, for example, is a leading full-service provider of mobile and fixed communication services to over 2 million customers in Singapore. They recently launched a clean pipe [ph] DDoS mitigation service for their enterprise and government customers based on our AMS solution. Our strength in this market has been amplified by continued innovation. As we discussed on our previous call, our innovation is focused on private and public cloud, fiber security and software-defined network architectures, where we see strong activity and interest from these type of customers, who are technology savvy and early adopters. Speaking on SDN, we're starting to see tangible projects in major customer accounts that are taking advantage of the SDN benefits we provide for application delivery and Attack Mitigation. We've also continued to advance our partnership in the space and at the recent Cisco live event. We demonstrated the integration of Radware application delivery controller and Attack Mitigation Solutions into Cisco application-centric infrastructure. During last quarter, we released a new study titled, State of the Union E-commerce Page Speed & Web Performance spring 2014. The study revealed that's why 75% of the top 100 retail websites, employ a content delivery network, the median home page take a full second longer to become interactive than the medium page that does not use a CDM.[ph] Simply put, there is more to acceleration than just using a CDM. [ph] This outcome demonstrates the importance of our FastView solution that allows our customers to significantly accelerate their dynamic content and web transactions. The solution is even more critical, when web delivery over a mobile network is required. Coupled with FastView, we provide our customers with our application performance monitoring module, that enable users to monitor end-to-end web application response time with the ability to drill down to the application, transaction and user location. We have received strong customer feedback on this comprehensive application performance monitoring and acceleration capabilities. And announced several wins last quarter, utilizing our best-in-class capabilities in this space. For example, JD Williams, a leading internet and catalog home shopping company, achieved a 25% reduction in page load times for its websites by deploying our FastView Solution. Faster response time means higher conversion rates. So JD Williams who has over 6 million customers and operate 28 brand websites over desktop, tablet and mobile devices. Another nice win come from Union Pay. Union pay has become the world's largest cloud brand with 3.5 billion cloud [ph] in circulation. They recently deployed Radware ADC and FastView and gained up to 3x faster response time for their website. To summarize, today we have a leadership position in the market as it relates to our product and solution offerings. We continue to advance our application delivery and security solution. We are starting to see faster growth coming from our international markets. Coupled with ongoing growth in the North America business and as evidenced by our guidance, we are confident in our ability to continue to grow in double digits rate for the remainder of the year. Before concluding, I would like to thank our customers and partners for their continued support and trust. And I would like to thank the hardware team for all their efforts, commitment and success in growing our business. With that, I would like to open the discussion for Q&A.

[Operator Instructions] First we will go to line of Alex Henderson with Needham & Company. Alexander B. Henderson - Needham & Company, LLC, Research Division: I wanted to ask a couple of questions. First, just a simple one. Can you talk a little bit about the exchange rate in the quarter. And what's going on relative to the exchange rate currently, whether that's an impact, how much of an impact it was in the second quarter?

The impact of the second quarter exchange rate was around $150,000 this quarter. Alexander B. Henderson - Needham & Company, LLC, Research Division: Okay. And just given that it had hit a 3-year high at the end of the quarter and it's backed off subsequently. Are you using the end of the quarter rate or are you using the current lower rate now, or what are you assuming there?

Okay. If we are taking it from year-over-year, so what I mentioned, $150,000, it was relatively to Q1. Year-over-year, this is more likely like $700,000 to $800,000. That means, on EPS terms, this is about $0.02 of the EPS. Going forward, right now, we assume and taking into our numbers, this is another strengthening of the Israel shekel that impact about an additional $100,000 on Q3 results. That means our operating expenses are higher about $100,000 only view [ph] versus Q2, only as a result of the exchange rate. Alexander B. Henderson - Needham & Company, LLC, Research Division: Can you just remind me if you do anything on the hedging front on that?

No, we don't. Alexander B. Henderson - Needham & Company, LLC, Research Division: Okay. Second question, can you talk a little bit about the geographic split. I don't know that I caught it on the presentation. Can you just reiterate what the geographic split was and what the conditions are you're seeing in Europe. It looks like the European business has picked up. Is that a function of the change over in the sales organization, is it macro, it's company specific or general?

First of all, the split between regions, this is North America. It was 39% of the revenues. EMEA 25% and Asia Pac was 36% of revenues.

Regarding what we see in EMEA, I think given the changes we've done, and we started to do last year and some of the things we are doing. We are seeing, they are now growing in double digits. We believe they might -- there is a room for even further improvement, but this one is starting [ph] in the last 3 quarters to see them steadily growing. The strength in international business was even no more seen in APAC this quarter, and they did a very nice quarter for us. Alexander B. Henderson - Needham & Company, LLC, Research Division: And so the other question I have for you was just the Cisco ACE replacement environment, and I'll see the floor.

And we continue to see their project. It's like an ongoing rate for the last several years. We still see both carriers and large financial institutions, and some in the general enterprise that are doing these replacements. And I think, we have a very strong solution and track record in these projects with our VADI and virtual ADC architecture. And we continue to do well in that space. I don't think, it's going to the size of the projects or the pace. I don't believe, they are going to pick up. I don't think, we're going to see an acceleration in the market for that. And we're actually seeing other opportunities that are beyond just a Cisco refresh and that we believe are very strong and longer-term ones that we are executing well towards them. I mentioned, the acceleration, for example, I mentioned, the Attack Mitigation, et cetera.

And next, we will go to the line of Jess Lubert with Wells Fargo Securities.

A couple of questions. First, can you provide some additional color as to how much North American revenue slipped out of the quarter. What type of customers drove the slips and when you think these deals are now likely to close?

Every quarter, there are some orders that are slipping. It's the nature of the business. I would say, this quarter, we saw some of the larger projects that we were targeting in our key verticals, carriers, financial services, cloud and some large Fortune 100 companies that we were expecting them to close and being closed by now. I would say, the majority of them, around 80%, have already closed and the rest we're still tracking. So I think from execution and our win rate and market share, et cetera, we think, we are progressing well from the quarterly perspective. We did less than we wanted to do.

And then Roy, last quarter you mentioned, you saw an uptick in the number of large deals. You announced a big cloud win this quarter. So can you update us on what you're seeing with an average deal size. And maybe help us understand, where you are in the process of closing some of these bigger transactions that you talked about last quarter. And as these close, would it be fair to think that growth actually accelerates into the second half of the year?

So we continue to enjoy every quarter larger deals than we've seen in the past, and this quarter we saw it as well. Also some the deals that slipped and by now are closed our substantial in size. So definitely seven-figure deals and multiple of these. So we're definitely seeing a strong trend, especially, in the segments that I've mentioned, financial services, cloud, carriers with online customers. We're definitely seeing large strategic sales that we are doing. And as we close them, especially if there's a concentration, obviously, our revenues will move up. Currently, we gave a guidance that, obviously, takes into account our best view of the current market, but we are very encouraged by these wins. A lot of these wins are new customers for us. And the fact that we are lending more and more Fortune 100 customers and leading carriers and cloud providers globally, for us, is a very good sign also for repeat sales in the coming quarters and coming years.

So Roy, would it be fair to say that visibility is improved. And then, for Meir, bigger deals often come with added expenses, so as the size and complexities of these transactions increase. Can you help us understand what needs to happen from an investment perspective to get these deals closed in Q3 and Q4? And then from a revenue perspective, you've given guidance for Q3. Should we be expecting a fairly strong Q4, a much bigger sequential increase than we've seen in the last couple of quarters. Because it seems like in order to get your 20% operating margin target that would like to happen. Do you still think you can reach that figure by year-end?

Okay. So question by question. And I hope, I will answer all of the ones that you've raised. So first from the large deals and their size and the investments that we need to do to close them. So we are seeing already for several quarters these trends. And I think, we are well equipped in quarter-by-quarter. We are increasing our investments some also to serve these deals. I don't think, you should expect like a step function increase in our expenses. I think all of that is already in the model. And it's just that the trend is that we see more of these deals in the pipeline and more of these deals starting to close and with more and more customers. And so this is the first one. Regarding your question about visibility, I believe that this year we have definitely increased visibility versus last year. And some of it is coming from a stronger pipeline, some of it is coming from on our understanding of the buying patterns of the repeat sales of some of our large customers. Regarding your question about Q4, at this point, as you know, we are providing guidance only to one quarter. So I will -- we will speak about our Q4 guidance in our next quarter release. Regarding the 20% gross margin, I think, Meir also discussed this last quarter, we are very obviously, sensitive to the top line. And with a nice top line increase and a significant impact on the bottom line. You can see it also in previous years, like 2 years ago, when we reached the same. And we can track relatively where we are today, where we were there at the same time, and now we've reached the 20%. I think, it shows not only that it's theoretical, but practically, we can do it. But as I said, we'll give the specific guidance in Q4. Our focus though is on -- yes, one comment, our focus though is not on definitely hitting the 20%, as much as it is on revenue growth. So we are putting more investment to secure growth for the long term because we think there are these opportunities. And as we've seen in the last several quarters, we can accelerate our growth rate and that's our target. And with that, we will hit even, hopefully, higher than 20% gross margin in the future. So we are not -- we are really focused on revenue growth and market share gains at this point.

And next we'll go to the line of Ittai Kidron with Oppenheimer. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: I guess, I just want to go back to the North American, the deal slippage over there. And it seems like it deferred across multiple areas, not one. And so one would be concerned that there's something going on here that's not -- that's a little bit more than just a coincidence. And how much of the delay here would you put on either a change in the market itself, or 2. Just execution hasn't been really what it needed to be for you to close on this?

As I said, I think -- I mentioned that 80% of these deals are already booked. And so I don't think those are major things there. I think, the North America theater is providing us for several years a very, very strong growth rates. And also, if you look at H1, very solid one. So I don't feel a change of the market or a big issue in the execution. And when you deal with large customers and large processors and large legal agreements, et cetera, sometimes, it happens especially when the capital budgets that are needed to be allocated are relatively high. So again, we're very confident in that. And you can see also that our business overall is well-balanced, now also in the international market. So I wanted to highlight that in my remarks just to give you some color, but we do feel very strong about the North American business. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: All right. I guess, you mentioned that 80% of the things that got pushed out, you've already closed on, which is a very good news, of course, but at the same time, then I guess, I would wonder why isn't the guidance then from a top line standpoint for the third quarter higher than what it is. I mean, I would have expected the revenue guide to be what it is without slippage. If there is slippage, I would would've thought that guidance would've been higher. And instead, if these are large customers. You are talking about carriers, cloud, financial, Fortune 100. I would if some things are not small $100,000 deals, these are $0.5 million plus type of deals. Is there a deceleration in some part of your business here, that's kind of offsetting this. I'm just trying to gauge how much of this just being way overly conservative versus again, something going on here under the surface.

I don't think there's deceleration, the growth rates are showing a slight even increase in the guidance in the revenue versus previous guidance that we give. But we need to balance everything together, like last quarter, maybe if you would have asked me about some of these specific deals that slipped -- is it built into the guidance, I might have told you, yes, at that point. So it's not 100% sure always on the sales. So we're giving a complete view. It is accurate that we are entering the quarter in North America with a very good start, that's correct. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: Excellent. And then lastly, Meir, can you give us the split between enterprise and service provider. And also, what was the contribution from Juniper and Check Point in the quarter?

Okay. From enterprise, there was 68% for the quarter and carrier 32%. As for, Juniper and Check Point, we don't split it to the market for several quarters so far.

Next, we'll go to the line of Michael Kim with Imperial Capital.

I'm curious what the initial customer feedback and the progress has been for Attack Mitigation Network. Have you seen a ramp in trial activity and was it a contributor in the quarter?

Attack Mitigation Network is our strategy for the coming years. We started to do the software-defined network pieces of Attack Mitigation Network in trials with several carriers. We just this week won a bank that will be our first financial customer for Attack Mitigation together with SDN. So we are seeing the early adopters definitely embracing the concept, and some of them actually buying very early into the cycle, as you know, as they see huge benefits in this implementation. So it's still early. The components of the SDN are not -- are far from being a major contributor. But customers are looking at AMN as the next phase of building cyber attack mitigation. They have fully understand that one box in the edge of the data center will not be able to cover the complete threat landscape going forward. In a full network of sensors and mitigators on prem and in the cloud is necessary to provide 100% or close to 100% coverage for the data centers. So we do see the advanced customers moving and that's why we are seeing carriers that are starting to deploy our solutions beyond only for VDOs and IPS service also to the complete always-on security what some have been called. So we are seeing movement in this direction. We are seeing a lot of positive signs about it, and we're starting to see deals happening. But I think, this concept of AMN will be our ongoing strategy for the next 2 to 3 years, and we will see more and more product launches. And some of them of appliances, some of them of cloud services, delivering on this vision of the Attack Mitigation Network.

Okay, great. And then some of your competitors, I think, have expanded their security capabilities either through acquisition or some new developments. Are you seeing a bit more competition on the Attack Mitigation System. And is that resulting in a greater frequency of competitive bid activity?

We -- for the last 2 years, there is more competition in the -- what I would call the DDoS market. And we think Attack Mitigation or the threat landscape is broader than that. We are able to demonstrate also to customers the different threats and how they apply to the data centers. So, so far, we don't see a change in the competitive landscape. But obviously, we're looking very carefully on that. And in parallel, continuing to push our innovation forward, and dedicating and increasing the resources that we put on this market.

Next we'll go to the line of Joseph Wolf with Barclays.

Just a couple of questions. If you could go into the geography, specifically, in APAC. Could you give us a little bit more color regionally within APAC, where you are seeing specific strength and the competitive landscape there Japan, China, Singapore, those kinds of geographic breakdowns?

I think we have relatively, a broad-based strength in Asia PAC, maybe with the exception a bit of Japan. But all other countries, I think, performed very well and in line with our expectations. We see a lot of -- we saw a lot of strength in the ADC market there. And all in all, we are quite satisfied from what we are now and seeing and starting, hopefully to trend there.

Okay. And as you think about the new products and you talked about the global cloud win, could you tie that into hiring plans, you talked about 856 employees. And as you think about the selling proposition, how many of your wins right now in Attack are based on a combination of the breadth of the Radware product. And how many -- and how much are you just winning just on the attack side of the business?

Okay. So in terms of investments and so, I think, we're going to see relatively steady, like you've seen in past quarters and years, increase in our investments, and generally, in line with our revenues. And this trend of attracting and winning larger customers is with us for the last 2, 3 years and it's growing steadily. Regarding where are the wins coming from, they are growth. Some customers are either buying into our ADC, for example, acceleration, specifically, or into Attack Mitigation, and some are buying the complete architecture for application delivery and security, which in our case is also integrated to get there and attacks or information about performance is being exchanged between the different players in our solution. So we have, for example, one large financial customer that did a significant seven-figure deal with us across all our solutions. At the same time, I mentioned the cloud provider that did a significant investment in our Attack Mitigation Network, et cetera. So we have different cases, but we see the strengths today across both product lines.

Great. And then finally, I guess, just for Meir, could you just give us an update on the share buyback. You did $5.6 million. Could you tell us what's left, and your thinking on the timing and going to the rest of the share buyback program?

Okay. As we said in that call, we spent $5.6 million of buying about 351,000 [ph] shares. And the total plan is $40 million for 12 months that means another 9 months remain in order to act under this plan. And we do it based on the guidance we get from the board, how and in what terms to act in every and each quarter.

So no plans to accelerate in the short term?

We have a plan. We announced the plan. The plan is $40 million.

No, no, but you are not looking at the current share price and accelerating that plan, it's more of a steady plan.

The amount of the share buyback?

The pace of the share buyback.

The pace I cannot share with you in this stage their guidance from the board. What terms, we are making the buyback.

And next we'll go to the line of Catharine Trebnick with Dougherty. Catharine Anne Trebnick - Dougherty & Company LLC, Research Division: Quick question. Could we go back and discuss your North America opportunities and get more clarity on. Are those deals driven by AD securities [ph], or they driven more by DDoS attacks? And then across the different geographic areas, can you give us an idea of how -- the pace of RP [ph] opportunities for DDoS versus ADC and the virtual ADC?

So in general, we are seeing -- we feel our largest portion of the business is ADC. We are definitely seeing in terms of revenue dollar more opportunities in the ADC market today than in security. In security, what we are seeing is that on specific customers like the carriers or cloud providers that's a very hot issue. Right now, as they need to protect the whole Infrastructure. And so just several hours ago, I made a VP operation of a large cloud provider, and he told me that beyond the issue of attacks and protecting a customer, their key concern is when customer A is attacked, how do they make sure that customer B, C, D and E are not impacted. So it's a core. It's not just sending additional services or additional capabilities to customer A. It's a core business issue and a core business risk for them that other customers will be impacted, and as a result, the whole business model is at risks. So every shared infrastructure of that nature and especially, of a service provider, security is becoming a core business issue and more and more of the customers in these segments are treating it this way. And as a result, we are definitely seeing there good traction with our product. So in the different markets, we do see a bit of a different trend, but all in all, both markets we are seeing now a lot of opportunities, needless to say, carrier LTE, build outs are driving a lot of traffic steering opportunity for our ADC. And a lot of flip [ph] signaling opportunities, IMS core, et cetera. So in both markets, we're seeing very strong drivers that we believe are going to serve us for the long-term and are not just one quarter or 2 quarter phenomena. Catharine Anne Trebnick - Dougherty & Company LLC, Research Division: Okay. And then the follow on to that is, is there a percentage are you looking at the security piece of your business growing at a certain pace versus maybe the ADC market growing at a certain pace. And are you -- is your ADC revenue growing at the total addressable market of the ADC. And do you think your DDoS part of the business, security is growing faster in line with Internet X and IDCs estimate for DDoS, so I can get a hand on your growth for the year?

We are looking on those market research. And I think, currently, we are growing in both markets around the market growth in each one, ADC, and our portion of the security business. We don't have a target percentage for each. We think in both there is significant growth opportunities for other [ph], given our market share and given the market trends we are seeing. And I think, we have a lot of opportunities in both. And in addition, although the market research is treating those separately, we believe that going forward, and we have that vision for a long time, security and application -- is part of application delivery, you cannot deliver an application 24/7 globally without availability, performance and security. And as a result, also it's broken, we are seeing everything that we're doing rather as part of the overall application delivery challenge that our customers experience. And as a result, ADCs are load balancers, the FastView acceleration, the Attack Mitigation solution that we have, all of it is part of our strategy for a comprehensive application delivery. So going forward, I think, in the next generation data centers with everything virtualized, automated, et cetera. Application deliver in the comprehensive manner that I've mentioned is the key service that needs to run there. And we believe that going forward, that's how it would be treated. And as a result, we see both product lines as very, very strategic for us. Catharine Anne Trebnick - Dougherty & Company LLC, Research Division: Okay. And then competitively, who do you see the most in the different verticals. For example, who do you see most and does it change by region?

In the ADC market, we mainly see F5 and in the security market we mainly see Aldor [ph], and it's across the world. It doesn't change by region. Catharine Anne Trebnick - Dougherty & Company LLC, Research Division: And what would you say your win rate is going between F5? You guys aren't going to let me on another call, are you? What would you guys say your win rate is between -- is going forward on with -- against F5 and your competitors?

So in ADC, our win rate currently is very high, but we think, the issue is that we need to get into more opportunities. We want to cover the market better and expand our channel. We think, we have an extremely strong offering, very competitive and superior. We need to get in front of more customers to deliver that message. If we are winning so much in the Fortune 100, Fortune 500, cloud, carrier, we definitely can expand it to the medium-size enterprise as well. In the security, again, we have a very high win rate. I think, it suffers also from the same issue of getting in front of more customers, more deals, and we are working to expand our channels, definitely. For example, the deal we have with Check Point is a good way to expand the channel and other dedicated securities of ours. But we are working also there to expand our footprint in the market. So we can participate more in competitive situation.

[Operator Instructions] And next we'll go to the line of Rohit Chopra with Buckingham.

Meir, I just want to ask you a quick question here, a clarification on the headcount. Did you say that you had 856 for the quarter, is that correct?

Yes, that's correct.

And last quarter, I have that you had 884?

No, 848.

848, okay. I just wanted to double check that. And then, my question is this, is there anything changing with your partners. And I know, Ittai tried to get a sense of maybe the size of the partners, but is there a way that you could quantify or maybe qualitatively talk about the partners? What's happening at IBM? Is Check Point improving, is it steady, flat, what's actually happening there? What's happening at Alcatel? Maybe, Roy, if you can get into that and then I had one more question.

We don't give specific color about for a partner. I think you can direct the question to them. But overall, we see strengthening partnerships, also in the main [ph] that you have mentioned. So we are progressing well in this area. We are getting into, I think, more and more customers and accounts together. We are developing this partnership business well.

The other question I had is, is there any way to quantify the ADC and security wins? Is there an overlap typically between Radware customers? Is there percentage where an ADC customer is taking security products or a security customer is taking Radware ADC products? Is there a way maybe to even quantify new versus existing? Is there anything you can provide?

We, obviously, track these metrics internally and obviously, some customers are customers only of one of the solution lines, can be of more than 1 product in the solution line. But, one of the solution lines. And some customers are customers across the board. And definitely, we are investing resources in cross selling our ADC customers to security and our security customers to ADC. And as I've mentioned, I believe going forward, there's going to be more and more integration and value exchange between them. So those are not like independent decisions. They can actually, if you look at our Attack Mitigation Network concepts or other concepts we've shared, there's significant more value, if you are going to be a Radware customer across all your application delivery needs.

Is there any way to quantify new versus existing at Radware. I mean, are you selling 70% of your business to existing and 30% to new's, or anything that you can provide?

Depends on the quarter, it varies. But I would say, it can vary between mid-60s to mid-80s, depends on the quarter. When I count also service contract, which are always for existing customers. And for existing customers between, I would say, maybe 15% or 20% to 35% going to new customers, depends on the quarter.

And next we will go to the line of Mike Blast, private investor?

Roy and Meir, great quarter and congratulations on the renewed growth of the company. It’s good to see. I have 2 different areas of questions here. One is, you are sitting on $309 million of cash. And just around cash deployment, the stock price has languished the last couple of years, have you guys considered doing an accretive acquisition or possibly like a self-tender purchase of taking maybe $100 million and driving the stock price up for the shareholders?

We are definitely looking on acquisitions. We think that's a very good way to invest the cash for future growth and shareholder value. In the fact is we've done already 5 acquisitions and we do plan to use this also in the future to accelerated growth and increase profitability. So we're definitely looking on that. Beyond that as we've mentioned, we have a share buyback program of currently $40 million. So we are definitely looking on cash deployment and we are definitely seeing. It's not -- we're not looking on it as a problem. The fact that we are generating cash in a strong manner [indiscernible], but we are definitely looking very carefully how to deploy this cash for good shareholder value.

And the second question area is around Check Point, a couple of points in there. It seems like the sales teams aren't working all that great in the field, and there is not as much cross-selling, particularly, in the United States as could be. Have you considered doing some type of cross compensation between both sales organizations? And then the second question would be, Check Point's strategy is around blades and just having the software run on the blades. Are you reporting your software over to the blades and not having the physical DDoS box? It seems like that's a great opportunity that you are currently missing.

I cannot speak -- I cannot share specifically our discussions with Check Point around a road map or compensation for sales force and so on. But in general, we are happy with the relationship. I think, we have very solid relationships there. And I believe the partnership is advancing well. And I heard from my team that we won the largest joint project to date, together with Check Point a couple of days ago. So I think, we're progressing well. I agree there's always more room for improvement, and definitely, given Check Point's footprint in the market, there's probably more opportunities that we can leverage this relationship. And hopefully, we are making the right steps taking it together with Check Point to do it.

And we do have a follow-up from the line of Alex Henderson with Needham. Alexander B. Henderson - Needham & Company, LLC, Research Division: Yes. So I was hoping you could just give us a little bit more clarity on the rate on the growth in the security products. I know, you don't break out the exact revenue associated with it, but could you just give us a little bit more clarity on what the rate of change in that business was?

It varies for the quarter. But this quarter on product sales, the ADC and the security were pretty much the same growth rate. Alexander B. Henderson - Needham & Company, LLC, Research Division: And so that, that does represent a little bit of a slowdown on their growth rate of the security. Is that a function of the projects that were pushed out in the quarter, and we should see it reaccelerate?

I would not read too much to 1 quarter data. Some of the projects were ADC, some of the projects were security. I believe, our security business is gauging very, very well. I'm not tracking just it by 1 quarter rate.

And no one else is in queue with a question.

Okay, thank you very much everybody for joining us today. Have a great day.

And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.