Radware Ltd. (RDWR) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Radware Q1 ‘20 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Anat Earon. Thank you. Please go ahead, Anat.

Thank you, Adam. Good morning everyone and welcome to Radware’s first quarter 2020 earnings conference call. Joining me today are Roy Zisapel, President and Chief Executive Officer and Doron Abramovitch, Chief Financial Officer. A copy of today’s press release and financial statements as well as the investor kit for the first quarter are available in the Investor Relations section of our website. During today’s call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. These forward-looking statements are subject to various risks and uncertainties and actual results could differ materially from Radware’s current forecast and estimate. Factors that could cause or contribute to such differences include, but are not limited to the impact from the COVID-19 pandemic, 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 the documents the company files or furnishes from time to time with the SEC, specifically the company’s last report on Form 20-F as filed on April 2, 2020. We undertake no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date of such statement is made. Please note that in May, management will participate in two virtual conferences, the Oppenheimer Israeli Conference and the Needham Technology and Media Conference. With that, I will turn the call to Roy Zisapel.

Thank you, Anat and thank you all for joining us. The world has changed dramatically since we last met and obviously we, like many others has moved our employees to work from home. In some locations such as Israel, we have now slowly returned to normal based on government instructions. We transitioned to work from smoothly and continue to serve and support our customers globally with no interruption. Doron will cover these aspects in more detail. From a business perspective, we entered the crisis in a strong position. It’s clear to us that our fundamentals are strong. And while in the short term, there might be visibility challenges and other uncertainties, we continue to pursue our long-term goals. First, we’ve been executing on our strategy of focusing on security and cloud solutions and transitioning major parts of our business to subscriptions for a few years now. The major heavy lifting of our business model transition is behind us. We now enjoy better visibility than ever before as a result of our large and growing subscription and recurring business. Our total deferred balance is at $181 million, up 14% from last year, the highest growth in two years. This metric is obviously a leading indicator of the future health of our business. The strong results translated to 65% of our Q1 revenues being derived from recurring revenues. Second, our customer base comprises of mostly large enterprises and carriers. And the enterprise verticals we focus on seem to be more resilient to the current crisis. We have a relatively high exposure to service providers, financial services and technology and SaaS companies and low exposure to the suffering travel and hospitality verticals and to the small and medium business segments. Third, we have a solid balance sheet and a cash generative business model even in these market conditions. This resiliency means we can afford to continue to invest in our business for the long term. We were also more aggressive in buying our shares in the first quarter and plan to continue to do so. Turning now to the first quarter results, we saw several impacts from COVID-19. On one hand, the surge in Internet traffic and the shift to a remote workforce are driving purchases from customers who rely on us to enable and secure these changes. Remote access became the most critical IT resource, the availability of which must be in short. We recently announced a couple of deals that reflect that. A major business information provider invested in additional application delivery solutions to support the rapid increase in traffic due to a combination of a sharp increase in the consumption of data and services that it provides and the transition of 17,000 of its employees to remote work. A leading global bank invested in additional DDoS attack mitigation solutions to protect the increased capacity needed to support a pivot to a remote workforce. On the other hand, the pandemic had significant impact on IT budgets and spending outside the immediate and critical work from home investments. During the first quarter, we saw this phenomenon, mostly in the APAC region and selected European countries. Towards the end of the first quarter, this became evident in the U.S. as well. We are also seeing delays in some deals involving appliances and the continued shift toward subscription and cloud solutions. Coupled together these trends, negatively impact our short-term revenues and increases our deferred revenues. The 14% growth in total deferred revenues year-over-year is $22 million in absolute dollars, while revenues declined roughly $2 million year-over-year in the first quarter. The first quarter and specifically March saw a strong uptick in the number and complexity of attacks. During March, we blocked over 300,000 denial of service attacks and 81 million Web application attacks on the customers we protect for our cloud DDoS in cloud WAF solution. The total DDoS attack volumes we blocked in March has almost quadrupled from February. This data of course does not include the tax that are blocked by thousands of our appliances in our installed base. In addition, attacks have become more sophisticated and we see that very clearly through analysis of both traffic we block. Switching to the OEM side of the business, we had good results from both Check Point and Cisco and see continued traction with them. For example, we have been invited by Cisco to collaborate in the global strategic business continuity campaign and to help protect the customers’ VPN links with Radware cloud-based DDoS and WAF. In a recent online event we hosted, Cisco’s VP of Global security system engineering Shelly Blackburn, explained that Cisco is making this offering as overarching as possible to cover all the challenges and could not do it without Radware in the mix. Looking forward, forecasting and visibility into budget allocations are difficult. We assume that the worldwide economic condition will affect available IT budget, even though our solutions are critical to securing the digital transformation of larger enterprise and carrier. We also believe cloud and subscription projects will get priority over on-premise CapEx projects. As such, we believe our total deferred revenues will continue to increase with some headwind to short-term revenues. With that, I will turn the call to Doron.

Thank you, Roy. Before I review our first quarter results, I would like to say a few words to address the COVID-19 situation here at Radware from operational point of view. Starting with the organization, the health and safety of our employees and communities is our top priority and we adhere to the guidelines of the Health and governmental authorities in all territories in which we operate. Beginning in mid-March, most of our teams started working from home and avoiding unnecessary travel and we are pleased to report that this change had a minimal impact on our work and productivity. From an internal operations perspective, we operate in accordance with a very detailed pre-existing business continuity plan. The impact on customer service and equipment delivery and implementation is also been contained because our customer service is predominantly based on remote access using teams across the globe simultaneously, we can comply with the committed SLAs to our customers with no disruption. In a few of locations delivery were delayed due to airport lockdown and this had some impact on revenue recognition in Q1 results and we continue to monitor the situation closely., Other than that, we have not seen any meaningful negative impact on our supply chain and we believe we are managing well in this front. With that I will turn to the results of the first quarter. Revenues for the quarter were $60 million, 2% below Q1 ‘19 and below our guidance. Revenues from Asia-Pacific region were down 31% from Q1 last year to $12.6 million as this region was the most affected from the Corona virus in Q1. Revenues from EMEA were down 1% year-over-year to $18.2 million, predominantly due to the continued weakness in some selected countries. Revenues from the Americas increased 19% year-over-year to $29.2 million, reflecting successful execution of our various growth initiatives as well as several wins related to project supporting the increased remote access environment. As Roy mentioned, our recurring revenues for the first quarter represented 65% of the total. This is up from Q4 2019’s 63%. The total deferred revenue balance was approximately $181 million as of the end of March, up 14% from $159 million as of the end of March 2019. Out of the total balance, 62% or approximately $113 million is due to for recognition in the next 12 months, up 10% from $103 million that was due for recognition within 12 months from March 2019. I will now discuss expenses and profit all in non-GAAP terms. The differences between the GAAP and non-GAAP results for the quarter are detailed in our press release. Gross margin for the first quarter was 83.1%, slightly up from last year’s 82.8%. Operating expenses in Q1 were below our expectations at $45 million compared with $43.2 million in Q1 2019. Throughout most of the quarter, our activities were in line with our initial plan, including increased investment in our workforce in our cloud infrastructure. The difference from our expectations is reflective of normal activity in January and February, but lower travel expenses and to a certain extent lower marketing expenses as a result of event cancellations in March. We continue to invest in the business for the long term and continued hiring during the quarter. Our emphasis is to strengthening our sales talent, especially in the U.S. where we believe the market opportunities are fundamentally strong despite COVID-19 uncertainties. Headcount at the end of March was 1,112, up 18 people from December 2019. Operating profit and margin in Q1 ‘20 were $4.8 million and 8% respectively. Net income for the first quarter was $6.6 million or $0.14 per diluted share, in line with our guidance, lower travel expenses in this and cost discipline compensated for the small revenue shortfall. Turning to the balance sheet and cash flow items, we have a very strong balance sheet. We ended the quarter with approximately $427 million in cash and financial investments. Most of our cash are invested in U.S. dollar marketable securities and deposits. Net cash provided by operating activities in the quarter were $21 million, driven by another quarter of strong collections. As for the use of capital, during the first quarter, we spent approximately $19 million on repurchasing approximately 880,000 of our own shares. During the quarter, we utilized the April 2019 share repurchase plan almost in full as discussed in our last earnings call. In March, we announced $20 million stock repurchase plan. Today, we announced an additional 1-year $40 million share repurchase plan. So combined, we have $57 million outstanding on our buyback plan. I will now move to our guidance for the second quarter and our outlook for the rest of 2020. Given the level of uncertainty about the length of the COVID-19 impact and the economic recovery attempting to focus especially second half of 2020 is very complicated. We are therefore withdrawing our full year financial guidance for 2020. We believe this is the prudent thing to do until the environment stabilizes, but this no way diminishes our optimism regarding Radware’s bright future. For the second quarter, we expect revenues to be between $57 million and $61 million. We continue to expect gross margin to be approximately 83%. Operating expenses are expected to be slightly lower than in Q1 and between $44 million and $45 million mainly due continued travel restrictions. We continue to support our sales and marketing initiatives through increased digital marketing and digital alternatives to physical meetings and events. We believe we are aligned with the market environment, successfully addressing customer needs and capturing market opportunities. We expect EPS for Q2 to be between $0.12 and $0.14. I will turn the call back to Roy to summarize.

These are indeed unprecedented times, but the fundamentals of our business remain healthy. We have best-in-class portfolio that caters for strong and growing markets. We continue to innovate this portfolio and are excited about the opportunities to expand it. We have a very strong customer base that includes Tier 1 companies in resilient verticals such as service providers, financial services, technology and stuff and we also have strong partnership with Cisco Check Point and others that continue to improve and expect to help us to acquire additional top deal customers. Our recurring revenues are 65% of total revenues and growing. And our total deferred revenues that grew 14% year-over-year in Q1, provide us with stability and visibility. Our cash generation is strong and consistent demonstrated in Q1 and for the last couple of years. All of the above leads us to be very confident in our long-term success. With that, I will open the call for Q&A.

[Operator Instructions] And your first question comes from the line of George Notter with Jefferies.

Hi guys. Thanks very much. I guess I wanted to maybe start out by understanding sort of the dynamics around COVID-19 and how it impacted the business in the quarter. I think you mentioned that there were some airport lockdown down issues and there were some revenue that was delayed or deferred in that. Can you talk about how much that was in the quarter? And then conversely, I’d also be curious about how much incremental business do you think you’ve got as a result of the increased emphasis on work from home traffic and remote access connectivity?

Yes. So I think there were several phenomenon first you can see by regions. You can see that our APAC region a suffered a lot almost 30% year-over-year real decline, EMEA minus 1% and the U.S. is actually up 19%. I think you see very much the correlation to how the COVID-19 spread in the world in Q1. So, we definitely saw an impact from that perspective that’s very much aligned. From a project perspective, on one hand, we feel I think $2 million, $3 million of the work from home directly attached to opportunities that were recognized already in Q1. I think since then we saw some more entering Q2. And at the same time, we did have delays of IT projects that were put on hold because of the uncertainty. In addition to that, there was roughly another $1 million to $2 million of shipments that we could not recognize from airports lockdown around the world, specifically APAC namely that hurt the performance. So that is I would say the overall different parameters we feel.

Got it. And then I am sorry, just to be clear then, if you look at IT projects type of delays, how significant do you think that was in the quarter in terms of the amount of revenue maybe it pushed out into the future for you?

I think several million as well. It’s hard to tell, but $3 million, $4 million definitely. We think we started the quarter very well and actually also this quarter from a booking perspective. I think you can see in the U.S. that performance was quite strong where we I would say, at least in Q1 we are free from the impact of COVID-19.

Got it, okay. And then I guess maybe I wanted to ask also about the hiring effort obviously you guys are focusing on adding the headcount in selling and marketing in the United States. Can you just talk about where you are in that effort? I think 50 hires for the year was sort of the goal and where are you right now. And then how is that translating into the strength in the U.S.?

Yes. So I think we are around 40% in our goal. So around 18, we added another 18, so we’re progressing well and we are going to continue to invest. We see good trends there and by our own activities and through the OEMs. So we continue to hire, according to the plan we have shared with you.

Got it, okay. And then if you look at Q2, I was just thinking again about you have sort of the different dynamics in your different regions, is it fair to say that you’d see a step down in terms of year-on-year compares in the U.S. as the coronavirus impact kind of roll through Q2.

So it’s hard – it’s hard for us to say and that’s why a guided a wide range this time and we were we think conservative in our guide because it’s very fluid, all those projects can be stopped like we saw in the end of Q1 any day. And so it’s very hard, even if the projects are approved, you get all the signatures. It can be blocked by a decision that’s not specific to our effort, our project and it’s driven by other company-wide or industry-wide issue. And so far we started April very strong and our booking, are growing very nicely and we still see strength in the U.S. We are just very concerned whether that strength would continue given the unemployment and the work from home, the budget freezes that we see around the world. So we are hesitant in that, but so far the business performed well.

Okay. Thank you very much.

Thank you.

And your next question comes from the line of Shaul Eyal with Oppenheimer.

Thank you. Good afternoon lady and gentlemen. I had a question. What does that extending payments to some customers. Were you approached by customers that have been asking to extend some payments from your SMB front?

Actually, we were approached by customers to provide some discounts and some extended terms and so on. In general, especially for our long-term customers we are a considerate of the period. It’s generally coming with an extension of the contract. And so I would say short-term easing plus increased commitment and sometimes we just need to give a discount because it’s a long-term customer and they are suffering like – a larger line – we see that they don’t have the business now and we know that when things will improve and they will buy way more from us. So, we are considerate, it’s not something that we see in a huge scale across our business, but it definitely happened from customers, especially in the segments that are hurt more. As I have mentioned, our exposure to this segment is small, we are generally selling to the very large enterprise and the carriers, predominantly financial services, the sections that I’ve mentioned led to the travel, hospitality and so on. And at the same time, you can see that also our collections have been very good. I think last quarter was a record collection quarter. So all in all, it happened and we are very considerate of that. But again, I don’t see that as a major impact for the business, definitely not for the long-term.

Fair enough. And Roy, the current challenging environment no doubt could also yield some longer term opportunity maybe even some benefit and I totally understand that everyone right now is dealing from a near-term perspective, slightly more from a tactical viewpoint. Is there any internal thinking about the longer-term strategy, what that might look like when we will be on the other side of COVID-19 whenever that might be a couple of quarters, few months, more than a year, who know, but is there any internal thinking along these lines?

Yes. So, of course, we are trying. It’s early on in the cycle. But for us, it’s clear that the transition to cloud, public cloud, cloud service would accelerate. It’s clear for us that they need to be able to supply provision manage you know remotely and the services around that that would enable that in scale would increase. And from what we can tell about our portfolio and our investments, we very much aligned, because everything that we’ve done in the last several years with those prisons of cloud and security and I tried to point that also in my prepared comments. I do believe there will be less appliance based on brand business in general and there will be more cloud recurring subscription software business and the impact of that is significant growth. I think in deferred and some headwind, I’m not sure that big, but some headwind to a short-term revenues. All-in-all, we think for our business, it’s a very good long-term phenomena and we are definitely encouraging that. So we were quite pleased overall with the booking of Q1.

Thank you.

Thank you. And your next question comes from the line of Alex Henderson with Needham.

Thanks. Hey guys.

Hi.

A couple of simple questions upfront, I know you guys don’t normally hedge, but obviously the shekel fell out of bed during the last couple of months and then sharply recovered. Did you guys have the opportunity to take advantage of that odd situation and maybe get some lock-in or did you choose not to address forward costs?

Yes. So yes, we did some protection, although you know that we usually don’t. But as you know and understand this is a unique time. So we were quite prepared. We were very active on this one. So we did some nice hedging for Q1 and for Q2 and Q3, and I hope that we will gain a bit, because during Q1, there was some negative impact on the currency, we managed to way to reduce a part of it and I hope that in Q2 and Q3, would also where you get some gain from the current currency.

Super. That’s good smart management, I’m glad to see you did that. Second question I wanted to ask is around the orders in the quarter, obviously 14% is a good growth rate, but to some extent I’m always nervous about those numbers in the first quarter because we get a lot of renewals on the maintenance in the first quarter. Can you parse between how much was just simply renewal strength and how much was actual subscription strength?

Yes. Generally for us, Q4 is the strong quarter for the renewals. Q1 is an OK quarter but nothing of high significance. We do see strength across the board in all these recurring business. We saw it also last year, but as I said it’s accelerated and this figure from this quarter is the best we had in terms of growth rates in two years. So we definitely see here strength.

Great. A little bit more granularity would be helpful in terms of what you’re seeing in terms of deal flow in sense that clearly there is a little bit of a sugar high around the work from home phenomenon in late March and into April. That caused a temporary stall on projects that were in flight. I assume, we’ve been hearing from our field checks that a lot of those in-flight projects, which are a little bit more strategic generally have been closed in April, but then there is a real question coming out of April into May whether the pipeline is there for the rest of the quarter or whether we’ve just finished up the business that was in hand and in flight from work from home and projects in process. Can you talk about whether you’re seeing any pipeline change that might give you some concern about the May and June window?

So we are checking the total pipeline in new pipeline creation per week to see whether the declines in new projects creation versus our statistics and our expectations and so far, all those metrics behave. There is no issue there. And from that point of view, we are optimistic because we are seeing activity and we’re seeing strength in activity and the feedback we are getting from our field is good and continues to be. And as I’ve mentioned, April was strong. So all of that is there, but what we’ve seen in the last week of March is that those projects are not stopped in the regular level and the declines are not in the regular level. So there is an obvious example of a large airport project that we had in Q1 and it was clear to us that it would not close given the airports are shutting down. However, the reseller the large system integrators behind it, the partners, our team, the customer said they will close until the final day when that Airport Authority of that country said, we are not going forward. So while the pipeline is strong and all the indications are good, I think this is a different time window scrutiny on projects budget is going to different levels in the organization and the change of policy can affect us. So while all the indications that I have from the activity from the field pipeline, our partners are very solid, reading the news being the overall forecast makes us very, very worried in line with what you said and I don’t think we can easily forecast it.

Understood. One last question, then I’ll cede the floor. So we’ve been doing a lot of work in understanding the nature of the change in security delivery, particularly around the Kubernetes and containers and the CI/CD pipeline of applications. And as I look at that segment, it seems pretty clear that the ADC functionality and the security functionality are being embedded in multiple layers of the container image including the application layer or the application design at the container at the pod at cluster and also includes gross controller within that. So you don’t seem to have that much penetration into that space. Obviously, that’s why F5 bought and Genex which has a higher percent exposure there, how do you guys take advantage of that and how do you get into that space more aggressively, particularly playing into the coder DevOps world around GitHub and the like. I know you’ve made much more significant inroads than is evident to us at this point. So could you give us some thoughts on that?

Yes. So our view and I’m talking now specifically on Kubernetes, might be a bit different than F5. So in Kubernetes, there is an embedded proxies that’s part of the environment called Envoy and a service mesh called Istio but part the native environment native services, we don’t think that we should replace that with our own Alteon or another open source plus or open source framework by ourselves. We think the community and that’s what we see from adoption rates will stick toward natively there. We think the right approach is to augment that with the right security services that are specialized on one end, but play extremely well with the CI/CD pipeline with the native environment. Then for that, we have announced our Kubernetes swap that sits next to Envoy, plays Istio and Envoy, natively without any change. We think that’s the way for Radware to play. We think it’s a very, very community-oriented and very in line with the Kubernetes community and we very good traction so far from customers because it’s simply plays well with everything they’ve done and invested in and in the future development of this environment. So that’s how we are looking on that. We are investing there in security attached to the integrated and delivered proxy and ADCs in that environment. And we think that’s the right approach.

One last addendum to that question, how does Cisco’s relationship with you pull you into that environment, if you could extend that into the Cisco partnership, how does that look?

Yes, I think it’s a more future point. I’m not sure Cisco currently or the other large security providers we deal with are currently playing in that specific environment. Definitely with Cisco, there is a lot more to gain with our cloud services with our public cloud solutions. I think this Kubernetes development environment CI/CD is not yet our next first next step with Cisco. We’re seeing with them very good progress on the core solutions we have plus our cloud solution. So we have a lot to work with them on that first.

Great. Thank you very much.

And your next question comes from Yi Fu Lee with Oppenheimer.

Thanks for taking my question guys. Just one quick follow-up on the strong cash flow performance during this quarter, I think while you mentioned that you had a record collection, maybe Doron if you could quickly comment or what are the puts and takes that drove the outperformance in the cash flow generation for the quarter and how should we think about the linearity for the next three quarters for the year? Thanks.

Yes. So linearity is quite the challenge in this area. We mentioned that Q4 from our booking perspective usually is higher because of the maintenance and other renewals. So basically, we have some fluctuations between the quarters if you follow you see the decline is quite strong in Q3. And again, it depends on our booking in our performance so linearity is not something that is something that I can now say, but overall we plan the labor side there, which drove the guidance, we plan for a stronger cash flow for 2020, for now we see we started very well. We don’t have almost any collection issues and then other stuff. So we are on our plan in this domain. So, but I don’t focus the next quarter or the rest to deal more than we gave.

Okay. Thanks very much, Doron.

Thanks.

And your next question comes from the line of Andrew King with Dougherty & Company.

Hi, guys. Thanks for taking my question. So first off just looking back at your Analyst Day, you had mentioned that you had doubled your revenue or your bookings number from Cisco in the past year and is expected to double that number, again, obviously you had a good quarter with them, but do you see that you’re still on track with doubling that bookings number from Cisco and how those other OEM partnership coming?

Yes, but so far so good with Cisco. I mentioned also a couple of very large global marketing events with them and I said also the two weeks ago we made there the Cisco win of the week for security with one of the deals that we did together. So that was published on a global level and was explained how the joint solution make the difference in our significant deal obviously for them to become the win of the week. So we are progressing well. The pipeline is getting stronger. We also are seeing recently nice uptick from Check Point and especially in some large accounts of them that we are winning together and I hope with that we will be able also to take this partnership to a higher level, from where it was in recent deals. So all in all, we are seeing good traction in the OEMs, we are seeing them bringing us to new customers for Radware and very large ones and so far so good.

Okay, great. And then just diving into the geographical numbers, you mentioned that a lot of the reason for the decline, APAC was due to the timing of the pandemic and everything. So would you expect then in Q2 for EMEA and the Americas to get hit harder by the impact of the COVID-19?

At a high level, yes, we think there is an impact on budget across the world and as the pandemic is moving also the impact of on different economies in there. As I’ve mentioned, I don’t see it yet in the pipeline I don’t see it yet in April, but I think it will come. That would be the only logical I would say outcome that they see for this situation. So we’re getting prepared, we are focusing our teams on the solution then the segments that should be way more immune and way more critical in different environment. But I do believe we will see that hit into the U.S. economy and the European economy and as a result to us as well.

Thank you.

And your next question comes from the line of Tavy Rosner with Barclays.

Hi, good afternoon. Most of my questions have been asked. If we could talk about the anti-bot solutions that we spoke to be some pure-plays we are seeing some solid growth lately. So I am just wondering looking at Shield, how is it been performing after the past couple of months?

Yes, we did a record in Q1. It actually grew very, very well, obviously the cloud and the subscription solutions. So from a recognition point of view, again very minimal maybe impact to Q1, but good contribution to our total deferred major wins in customers around the world as a stand-alone and on top of our cloud WAF solution and some of those wins also with some of our OEM and global system integration partners. So we’re seeing some of our partners taking that I would say offering and embedding it in their portfolio as well, which is obviously very encouraging for us.

That’s helpful. And then on the maintenance side, I might have missed on your prepared remarks, but did you comment on the increase in subscription revenues and OEM revenue specifically this quarter?

Yes, we don’t break subscription, but we talked about the total deferred being up 14% year-over-year. Regarding OEM, we did say that it was good performance from our OEMs and we named Cisco and Check Point specifically.

Great. Thank you.

And your next question comes from the line of Shaul Eyal with Oppenheimer.

Thank you, guys. I had a quick follow-up. I don’t know whether you disclosed it but how much of your product has already gone virtual and what’s the growth rate of, there was a virtual product and maybe as one final on my end. I want to go back to Alex’s question do you actually see DevOps as the relevant long-term opportunity for Radware?

Yes. Okay. So regarding virtual, we have multiple ways to deliver our solution. So for example on our ADC it can be a virtual instance in public clouds or public cloud image, it can be a virtual instance for VMware KVM and all the other hypervisors. And it can be a virtual instance on top of our own hardware. So it can be our x86 virtual, it can be on our hardware, it can be on the public cloud and for years, obviously these form factors are growing. We have similar capability for our WAF and for our defense, for the DDoS mitigation it was predominantly virtual form factor on top of the Cisco firepower. But we are now taking it in the coming quarters more to public cloud environments, we got requests from key customers especially in gaming and other segments as they move to public cloud, they want to take the DDoS protection with them, but we see good demand for that in that environment. So practically all our solutions have the virtual form factor and obviously we see the growth. Regarding DevOps, we think our stands to it is through security and at some point, security and DevOps would need to come to be together because DevOps needs the agility yet security needs to be part of it. So people are talking about SecDevOps and security operations and DevOps and what we are trying to do is to provide the security teams with best of class security. So they will feel very confident on what’s being deployed and at the same time provide DevOps the ability to deploy these very extensive security frameworks without any change to the DevOps. So no Friction yet, highest security level and we think that’s the right approach to the DevOps security might be a necessary evil, but it doesn’t need to change anything we can continue to work with the tools environments processes CI/CD whatever that it wants to, and at the same time, the security or the SecDevOps or the CI/CD whoever can trust that it really has best-of-breed security deployed across all the applications. So that’s how we are progressing there.

Thank you.

And there are no further questions at this time.

Okay. Thank you very much for attending. Be healthy and have a great day. Thank you.

And this concludes today’s conference call. Thank you for participation. You may now disconnect.