Allot Ltd.
Q3 2013 Earnings Call Transcript

Published: 29 Oct 2013

[Operator:]

Good day, and welcome to the Allot Communications 2013 Q3 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Rami Rozen. Please go ahead, sir.

[Rami Rozen:]

Thank you very much, and thank you all, for joining us on our third quarter 2013 conference call. My name is Rami Rozen and joining me today are Allot's President and CEO, Rami Hadar; as well as our Chief Financial Officer, Nachum Falek. The press release announcing our third quarter results is available on the Investor Relations section of our website at www.allot.com. All results and expectations we review on the call are on a non-GAAP basis unless otherwise described as GAAP. Non-GAAP net income and non-GAAP net income per share excludes stock-based compensation expense, revenue adjustments due to acquisitions, expenses related to M&A activity, deferred tax assets and amortization of certain intangibles. Please note that all earnings per share amounts are on a fully diluted basis. A reconciliation of each non-GAAP measure to its nearest GAAP equivalent is available in the press release containing our third quarter results. Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflects management's best judgment based on currently available information. I refer specifically to the discussion of our expectations and beliefs regarding our pipeline and funnel of potential future business. Our actual results may differ materially from those projected in these forward-looking statements. I direct your attention to the risk factors contained in the annual report on Form 20-F filed by Allot with the U.S. Securities and Exchange Commission and those referenced in today's press release, both of which detail factors which could cause our actual results to be materially different from those projected in the forward-looking statements. With that, I would now like to turn the call over to Rami Hadar.

[Rami Hadar:]

Thank you, Rami, and thank you, all, for joining us today. Our third quarter revenue totaled $24.1 million, up 12% sequentially. Book-to-bill was once again above 1; highlighted was the fact that bookings strength was achieved despite difficult third quarter seasonality. We know that this is the third consecutive quarter of book-to-bill above 1. We expect the positive business momentum we are experiencing will be translated into sequential revenue growth during the fourth quarter. Our Value-Added Services business segment continues to play a meaningful role in our overall growth trajectory. During the third quarter, Value-Added Services represented 28% of our bookings and 30.6% year-to-date. Up-selling Value-Added Services solutions was also the main contributor to the increase of our gross margin numbers to 77%. During the quarter, we receive large orders from 14 service providers, 2 of which were from new customers. Four of these orders were from mobile operator. This quarter, we had two 10% customers, both of them Tier 1 service provider. This quarter is a good example of our strategy to generate recurring business from existing service provider customer. We believe that our ability to maintain long-term customer loyalship is the key enabler to up-selling new Value-Added Services and create stickiness, which is fundamental to our growth and high gross margin. We announced today that we have won a $12 million expansion order from a major APAC Tier 1 fixed-line operator. This new project includes our Service Gateway Sigma platform, intelligence steering function in 2 of our Value-Added Service solution. We are extremely pleased with this deal which represents a record size for a single transaction. It's also demonstrate continuous execution in our Service Gateway strategy. We note that we received this order during the third quarter, but please keep in mind that as we do more high-profile deals with Tier 1 service providers, the conversion time from booking to revenue lasts between 1 to 3 quarter on average. During the quarter, we announced a multimillion order from a major U.S.-based cloud provider. The Allot Service Gateway help in prioritizing mission-critical application, guarantees SLAs and ensures that data service will flow smoothly between the customer premises and the data center, thus preventing congestion and ensuring quality of service. We see strong relevance of our DPI technology to cloud solutions as mission-critical application require application-based prioritization of solution. As an example, hospitals prioritize those Telemedicine application versus visitors doing web surfing over a local Wi-Fi network, or data centers serving multiple enterprises would need to allocate capacity fairly between different users. We continue to execute on our strategy to expand our Value-Added Service portfolio by recently introducing 2 very exciting new offering. During the quarter, we introduced Allot WebSafe Personal, the surf solution in our suite of network-based security products. This solution has 2 main functions

[Nachum Falek:]

Thanks, Rami, and welcome, everyone. Let me take a few minutes to review the results we published earlier today. I will be discussing non-GAAP numbers, which exclude the impact of share-based compensation, revenue adjustment due to acquisition, expenses related to M&A activity, deferred tax assets, amortization of certain intangibles and early [ph] payment of grants to the Israeli Office of the Chief Scientist. Full reconciliation of the pro forma results discussed on this call to GAAP results is currently available for review on our website and in the press release issued today. Now let me walk you through the results for the quarter. Revenues for the third quarter, on a non-GAAP basis, were $24.1 million, up 12% versus the second quarter of 2013. As a percentage of our revenues, sales in America accounted for 34%, EMEA 35% and Asia-Pacific 31%. During the quarter, we had two 10% customers. Out of total revenues during the quarter, products were 65% and services 35%. Gross margin for the third quarter were 77%. Our operating expenses were $17.5 million versus $17.4 million in the second quarter and in line with our expectation. Our total headcount is now 448 employees. For the quarter, we reported earnings per share of $0.03 as OpEx stayed flat versus the second quarter; the increasing revenue affected the bottom line, keeping the gross margin at the level of 77%. On the balance sheet side, cash balances were $115 million. We had a negative cash flow from operations during the quarter mainly due to the repayment of the Chief Scientist debt. Our DSO were 89 days versus 96 days we had last quarter. Deferred revenues went down by $600,000, mainly due to the recognition of prepaid support and maintenance, along with some product deal recognition. That concludes my remarks. And we will now open the call for questions.

[Operator:]

[Operator Instructions] We'll take our first question from Matt Robison of Wunderlich Securities.

[Matthew S. Robison:]

So I guess with regard to the bookings, were they up year-over-year?

[Rami Hadar:]

Yes. You mean, between this quarter and Q3 of last quarter?

[Matthew S. Robison:]

Yes.

[Rami Hadar:]

Yes.

[Matthew S. Robison:]

And your 10% customers, what kind of customers were they?

[Rami Hadar:]

One mobile, one fixed.

[Matthew S. Robison:]

And you're getting -- looks like you've expanded significantly into the fixed base. What kind of product features are driving this?

[Rami Hadar:]

You're right. This is an interesting quarter where we're kind of seeing some of a comeback on the fixed side. I can't say it's a trend. So too early to look at strategies or themes out here. But as we noted in the past, traffic on fixed network is growing as well, maybe not as fast as mobile; but I do believe it's in the 20% or 30% year-over-year, driven by, of course, video application. And what we are seeing is anything from adopting to value-added -- to certain Value-added Services, tier services, keeping peer-to-peer, very classical lifecycle of application. On the bookings there, we do have a deal that is not into revenues yet, but we do have a deal that actually the customer will be doing application-based charging as part of deploying our solution.

[Matthew S. Robison:]

How many of your customers are using the DDoS prevention?

[Rami Hadar:]

I don't have the numbers out of my hand, but I would say that, let's say, we have roughly maybe 100 mobile service providers may be 20%, 20% of them have adopted our DDoS solution as an add-on. It's much harder to give you statistics on fixed, Matt.

[Matthew S. Robison:]

Okay. Nachum, on the inventory, you've had quite a bit of growth there. Can you give us a flavor of how that -- what's causing that and how we might see that mapped in the revenue?

[Nachum Falek:]

Yes. So Matt, you're absolutely correct. Inventory did increase a little bit during the quarter. But I have to say that most of it is related to logistic inventory, which means it is backed by orders or equipment that we already shipped and didn't recognize the revenues. And therefore, the equipment still sits on our inventory.

[Matthew S. Robison:]

Did you -- were you able to close the order that slipped out of the first -- of the second quarter?

[Nachum Falek:]

Yes. Part of it, we already recognized during the third quarter. And as we said, it's a second half revenues for Allot.

[Matthew S. Robison:]

So you've got some more to recognize in the current quarter?

[Rami Hadar:]

Yes.

[Nachum Falek:]

Yes.

[Matthew S. Robison:]

And the book-to-bill being up, a bit of a surprise, being better than 1. I don't think you've seen that in the third quarter since 2010 when the denominator in the calculation was a lot smaller. Do you feel like you've consumed a lot of your pipeline for the fourth quarter in achieving this strong book-to-bill?

[Rami Hadar:]

No. And I think the picture is [indiscernible], as we said in the past, as we said, our orders patterns are lumpy. This quarter actually we fell on the positive side of lumpiness. The big $12 million purchase order certainly put our booking this quarter at a surely [ph] high number.

[Operator:]

We will take our next question from Mark Sue of RBC Capital Markets.

[Mark Sue:]

Just a question on Value-Added Services and the traction you're getting -- gaining there. Is that mostly with existing customers? Or are you having active dialogue with new customers where you're starting to see new customers thinking about Value-Added Services as a lead into the other applications that you provide? And then, competitively, if you could just give us a sense if anything has changed out there?

[Rami Hadar:]

So, let's say we sell Value-Added Services in maybe 3 scenarios. The most common scenario is up-selling to existing customers, as I mentioned on the call. They already have the Service Gateway. So very easy and cost-effective solution to adopt 1 or more of our value-added solution. So that's the majority of the cases. We are seeing that as we educate our market about Service Gateway rather than DPI that [indiscernible] new deals come ready day 1 with at least 1 requirements for Value-Added Services, but this is a beginning and growing a trend. Very rarely, but it has happened once or twice, that we get deployed not for a, let's say, policy, control and traffic shaping but rather just for certain Value-Added Service. And that's the main proposition of this new deployments. That happens, but it's rare. So the majority of the cases, it's up-selling to existing customers.

[Mark Sue:]

And then if I were to look at the competition, clearly as far as an assets here and then want to move deeper into this market and look at it as an integration for their overall platform. How do you see that changing how you go-to-market and whether you need other partnerships or other things that you might do technically because of the evolving competitive environment?

[Rami Hadar:]

Mark, you're referring to larger routing vendor trying to add DPI into their routers?

[Mark Sue:]

That, and also application delivery controller companies that are trying to add it as well.

[Rami Hadar:]

Okay, so on the first one, we've been watching the large router vendor trying to add DPI as a function on the routers. It's been going on for -- ever since I joined Allot, for the past 7-plus years. Some of them have gotten a little bit better in recent years. But at the end of the day, they are offering what we call a thin-layer DPI that can recognize some applications but misses on many others. Some service providers, they might settle for that in day 0 when they deploy networks. But as they get more congestion and as they have more aspirations to do monetization things, like application-based charging, they run into limitation and decide to go standalone. So when we do see an RFP, the amount of features and functions there, it always ends up being a standalone solution. Regarding application delivery controllers, I'm assuming you're mainly referring to a [indiscernible]. It's interesting to note that there is some commonality and functions between an application, delivery controller and an enterprise versus a Service Gateway in a carrier network. In both cases, both of these functions are doing many layer of server intelligence and functions. Recently, [indiscernible] added some DPI capabilities I believe from third parties to their device. On the other hand, we've added load balancing and steering capabilities to our Service Gateway. I believe that even though some of the functions are similar there's still a long way to go between ADC for an enterprise or data center versus a carrier class, the scalability, the protocols that's supported, interfaces to third-parties, things like NIBS that -- and obviously support infrastructure that -- I'm not saying this is an impossible road, but quite lengthy and long road. We have not seen, in our [indiscernible] we participated, we haven't seen any ADC vendor reach the shortlist,. But I want to be careful, we're not seeing 100% of the deals.

[Operator:]

[Operator Instructions] We will now take our next question from Catharine Trebnick of Northland Securities.

[Catharine Anne Trebnick:]

I have a question. Earlier this month, one of your competitors announced the deal with Skyfire, also does mobile optimization. Can you give us some color on to how the 2 acquisitions are working and participating in the Value-Added Services piece of the revenue and the demand for that?

[Rami Hadar:]

Yes, so first, not being flip, but it's nice to see that [indiscernible] leadership is once again proven and other players are rushing to team up and catch up to our initiative. Right now, video caching is doing well and selling around the globe, winning deal either standalone or as part of our Service Gateway, [indiscernible] offering sometimes a differentiator, sometimes as a standalone solution, going back to Mark's original question. Video optimization has contributed some amount, quite small, but is now participating in about half a dozen trials, some of them are very promising, and I expect them to start contributing revenues and early part of next year.

[Catharine Anne Trebnick:]

Okay. And just for clarity, video caching and video optimization role into Value-Added Services and the Value-Added Services, Nachum, are they part of products or services. Can you just remind me of that?

[Nachum Falek:]

Value-Added Services are products. It's either additional blade server and primarily software on top of our classical Service Gateway and DPI function.

[Catharine Anne Trebnick:]

Okay, great.

[Operator:]

We'll now take our next question from Kiera Kilkowski of Merrill Lynch.

[Kiera Kilkowski:]

I just have a few quick questions for you today. With the growth that we've seen in Value-Added Services the last few quarters and gross margin at the highest that we've seen it, could you maybe talk about some of the puts and takes in gross margin? And then secondly, you mentioned a lot of the new functions that you're introducing are more on the monetization side. Is there any color that you could give us on how many of your customers are doing pure optimization versus using the more advanced monetization function?

[Nachum Falek:]

Kiera. It's Nachum. So I'll take the gross margin question and then Rami will follow up on the monetization. I think that basically, of course, we are seeing improvement in the gross margin. Some of it is mainly due to the mix of products. As Rami mentioned, when Value-Added Services, which are based mostly on software, have usually better margins than the company average. And that's why we are seeing the improvement in the last couple of quarters. Another reason is obviously the repayment we did for the Chief Scientist, and we do not include the royalties anymore in our gross profit. So I think that if you look at Allot a year ago, we were 70% to 72%. And right now, we are 75% to 77%. Very hard to forecast where exactly we will be simply because it depends mainly on the mix of products, hardware versus software, et cetera. But so far, we are enjoying the improvement.

[Rami Hadar:]

And how many customers are doing monetization with us. Let me split monetization into 2 main categories. One, in the general area of a policy and control and charging in the PCC space. At least about half of our customers they have been doing use cases that touch on the revenues. So some use our DPI capabilities just to optimize the network, traffic shaping optimization between applications, that's saving. But many of them have used us to do tier services, charge premium plan, sourcing plans that have quality of experience and applications other than that. And that's in the PCC part of the world, before we talk about Value-Added Services, about half did at least 1 use case that is relevant to revenue generation. In terms of the half a dozen Value-Added Services that we introduced into the market in the past 2 years, here we are a little bit early in the process. I would say that maybe 10% or 20% of our customers have adopted any value-added service, and about half of them are using it for monetization. For example, the most exciting new element, which is kind of a crossover Israeli application-based charging. Allot was very instrumental in writing the 3GPP standards for application-based charging. We are now promoting it heavily, and there is a lot of interest out there. But I would say that maybe only 5% to 10% of our customers actually deployed these kind of use cases. But it certainly is the growing segment of our business, and we expect that eventually all operators will move away from flat rate to just a bandwidth cap to more sophisticated charging plan.

[Operator:]

We will move to our next question from Sanjit Singh of Wedbush.

[Sanjit Singh:]

Regarding your funnel and your bookings activity, was the $12 million order that you announced this morning, the cloud service provider order and the $5 million order that slipped last quarter, how much of that is booked in revenue, maybe a certain fraction, is the majority of the opportunity still ahead of us over the next 1 to 2 to 3 quarters? Can you give us any type of clarity on how much of these large deals have been recognized so far?

[Rami Hadar:]

Yes, Sanjit. So it's -- I think one, it changes from one order to another. Obviously, the new projects versus old projects or follow-on orders, which are usually quickly or quicker to recognize the revenues. In general, I would say, it takes us between 1 to 3 quarters to recognize revenues, specifically to the orders that you mentioned. So the $12 million order that we got during the first quarter, we didn't recognize any revenues out of it during the third quarter, and it's definitely fourth quarter and next year and 2014 revenues.

[Sanjit Singh:]

Can we get an update on your product strategy, maybe in terms of what we should expect going into calendar year '14, in terms of your NFV strategy? What you're planning to do with the Service Gateway platform? Any potential product refresh coming up in the next couple quarters?

[Rami Hadar:]

Yes, so we apologize, Sanjit. But obviously, I'll be happy to talk about our recent announcement, but we want to use this call to preannounce any roadmap announcements into the coming quarters. But we do plan to be aggressive and bring to market -- continue to bring to market exciting both platforms and add-ons to the current one. Having said so, regarding NFV, as I mentioned on the call, most of our Value-Added Services are ready offered in an NFV format. So the carrier can decide either to deploy them integrated into our Service Gateway in the core of the network or more in their carrier cloud in a virtualized environment. The same thing is true for all of our analytics, reporting and management tool, which are offered in both options as well. At some point in 2014, we'll probably offer a virtualized version of the Service Gateway as well. And then basically, our strategy will be to let service providers either optimize on performance and go with the Service Gateway or optimize for OpEx and easy implementation and go in a virtualized way.

[Sanjit Singh:]

Perfect. And my last question is, can you give us your -- the team's updated view on the U.S. mobile market? Didn't mention any particular with this quarter. But given some of the discussion on net neutrality, how do you see the U.S. mobile market, the state of affairs, as you see it right now?

[Rami Hadar:]

So, no changes from let's say the last 2 or 3 quarters. For years, we've been going after this market; net neutrality has slowed us down. We've changed strategy instead of going after policy control and charging use cases, we started positioning our Value-Added Services. We got 2 of the top 5 mobile operators as customers. One as a full-blown A platform and another adopted one of our Value-Added Services. Obviously, we are now leveraging the momentum and hope to get more from existing and new ones now that we have very good references. So that's pretty much the current strategy, no strategic movement, let's say, on the U.S. front. As we are touching on net neutrality, the EU issued their draft on net neutrality, which I believe is very favorable to our proposition, including the enablement of application-based charging and revenue share. I hope that the U.S. takes a similar approach.

[Operator:]

We will take our next question from Joseph Wolf of Barclays.

[Joseph Wolf:]

My first question is, if we look at the book-to-bill being greater than 1 and a couple of a pretty large contracts that seem to have been booked in the third quarter, can you talk about the breadth of the bookings? Put the book-to-bill greater than 1 or maybe -- I don't know if you've made a whole percentage, but how big the 2 big announcements were in terms of putting the book-to-bill greater than 1?

[Rami Hadar:]

Joseph, I'm sorry, but we want -- obviously there is a lot of thought about what we share in terms of booking, and I remind you that booking is not a strictly defined financial number. So what we like to share is the trajectories and momentum. This is why we share our book-to-bill ratio, which I believe can be a good indicator of things to follow. All I can say is that the book-to-bill over 1 -- it was book-to-bill over 1 in this quarter. And obviously, the $12 million order was a big part of it.

[Joseph Wolf:]

Okay, great. I want to focus for a minute on the cloud win. Just curious whether that included the DDoS? And then when you think about that cloud services win, how scalable is the announcement that you made both within that customer in a specific location and across a network? And then how many engagements are out there for this kind of win, because it seems like a fairly exciting opportunity?

[Rami Hadar:]

Yes, it is. Even though it's kind of early days and early team for us, DDoS is deployed in some of our cloud solutions, but not in the specific one we announced. We certainly hope to [indiscernible] down the road, but not in this specific one. But we certainly have sold DDoS functions into other data center deals that we have won this quarter and in the past. In terms of scalability, I believe we do have a relevant product technology and value proposition for data centers. And the main challenge there is actually build -- putting some of our focus on building channels to these markets. In the past, we mentioned that we had some success with reselling and selling through our service provider customers into their data centers. So we hope to invest in this team and grow it, and what we need to execute, really, is more on the sales and marketing front rather than technology.

[Joseph Wolf:]

Okay. And then just as a sideline to the DDoS. This is developed in-house or is it something that you buy? And what is the real value in investing heavily in DDoS because it's such a dynamic portion of attack mitigation right now?

[Rami Hadar:]

This is an in-house technology well integrated into our Service Gateway. Pure software function. So when a service provider decides that he wants to buy for license fee, we simply turn it on. So it's in-house. And you're right. In the past 2 years, we've seen a nice uptick in selling DDoS. I believe that this quarter DDoS was a big part of the VAS offering.

[Operator:]

We will now go to our next question. This is from Peter Misek of Jefferies.

[Jason North:]

This is Jason North for Peter. I had a follow-up on the cloud provider opportunity. What size of cloud provider does it need to be in order to necessitate the carrier class equipment like Allot. If you're selling it through service providers, I think it'll be more on the enterprise level. Or is it more of the big, kind of, call it, Amazon, Rackspace type of providers?

[Rami Hadar:]

So right now, most of our success has been more into, how would I say, come in data centers catering to our enterprises, hospitals, enterprises, managed services as part of service provider, managed service deals less if any to the likes of Amazon. Not because of scalability. We believe that what's good for the core of Tier 1 network is scalable also for a large end cloud solution. But in terms of go-to-market in our existing channels and our relationships with service provider, that has lead more to, say, private cloud and geared toward enterprise and managed services

[Jason North:]

Do you see the bigger cloud providers as a further opportunity in the future? Or are you going to be main focus more on building up that channel to the enterprise and the private clouds?

[Rami Hadar:]

How to predict future here, obviously, we will first go to where we have our comfort zone and in existing relationships. So will we go after these public ones? At some point, yes, but not in the near future.

[Operator:]

[Operator Instructions] We will now move to our next question from Michael Saloio of Oppenheimer.

[Michael Saloio:]

I was wondering if you could talk about just general RFP activity. It seems like some of the activity that you've been talking about over the past several quarters is starting to close. But would you still characterize the level of RFP activity as being healthily up year-over-year?

[Rami Hadar:]

It is up year-over-year. The activity is healthy. I wouldn't say that it's, let's say, quarter-over-quarter, it's how to fine tune subjective quantification of RFP. But it's certainly up year-over-year. We are now exposed to more RFPs as we have solutions that read also on things like video caching and so on. Some of this growth in RFPs is subjective to us as our solutions grow. So definitely, year-over-year, and some of it is because of our new offering.

[Michael Saloio:]

Okay. And then on top of that, how would you characterize the RFP activity right now in North America?

[Rami Hadar:]

Let's put it this way. Because of what we discussed before, net neutrality is still there with uncertainty. The amount of RFPs in North America are disproportionately low, given that you would expect that North America would be what, 20%, 30% plus of worldwide RFPs. It's not there.

[Michael Saloio:]

Okay, that's helpful. And then just lastly, there's just the number of Value-Added Services right now that you're offering. I was wondering if you could just kind of -- just I guess prioritize or maybe just tell us which ones are gaining the most traction or if they're all gaining the same amount of traction? I'm just trying to figure out kind of which Value-Added Services are the bigger piece of your revenue pie? And then going forward, how it should look also?

[Rami Hadar:]

I'm sorry, Mike, but due to competitive reasons, we don't want to be too specific on what's hot and what's cold. I can tell you also that it might be -- all of them are interesting, all of them are selling. Obviously, video optimization is a little bit behind given what we've talked before. But general, sometimes it could vary between quarter-to-quarter. For example, this quarter DDoS was very strong. Last we had quarters where analytics was strong. So it varies, and we plan not to be too specific about which ones are the most successful one because of competitive reasons.

[Operator:]

We will now move to our next question from Dov Rozenberg.

[Dov Rozenberg:]

I was wondering do you see any change in sort of the environment of the visibility, the opportunities, the RFP? Also, if you can refer sort of per-geography? I mean, you referred to North America, but is Europe coming back in any way? Or is it more the opportunity is more -- RFPs are more in the Asia-Pacific?

[Rami Hadar:]

So to the first part, regarding your visibility. I mean, basically visibility really means RFP so we discussed that. Visibility is better than last year. So over year, obviously growing. Quarter-over-quarter, it's very hard to quantify in that kind of resolution. In terms of geography, so obviously getting every [ph] nice order out of APAC. You can expect that in the coming quarters, as we recognize this order, APAC will go up. I think we will see Western Europe stabilize even maybe moving to slight growth. We are seeing interesting activities at least with one of our very large mobile operators in Europe, and we expect to see that translate into revenues again in the next few quarters. So Europe is certainly not getting any worse, maybe starting to get better.

[Dov Rozenberg:]

Okay, the activity you mentioned with European operator, you mean more of a follow-on of Value-Added Services or more DPI or...

[Rami Hadar:]

All of the above. I mean it's the economy, it's micro-economy reasons, and slowdown decisions, deployment of budgets. Once they come back, they come back with the same fundamentals. As I mentioned in the past 2 quarters and also on the script, we're now seeing more interest on the monetization side. And this is why you're seeing some of our new Value-Added Services geared towards that. Some of the operators said, we've done laying off and cost-cutting, that you can do that so much. Now we want to find differentiations and ways to increase revenues.

[Dov Rozenberg:]

And in APAC, are the opportunities more fixed line like this big deal or it's scattered also, mobile, fixed, Value-Added Services?

[Rami Hadar:]

A combination of all. Let say, New York we are definitely oriented towards mobile. In APAC, it's more balanced. I think it's not because there's less interest in mobile in APAC, there certainly is. But actually, we've talked about this in the past. In Europe, fixed-line operators have expressed less interest in massively deploying PCC, policy control and charging solution. In Asia, that's not the case. Fixed operators are also interested in classical DPI-based PCC solution. This very big announcement is one example, but there is other. Beyond that, APAC is certainly a geography. But it's really spread into very different countries. Each country totally different universe than the next country. Over, Japan is not China, it's not Thailand and definitely not India. These are different universe just sharing the same continent.

[Dov Rozenberg:]

It's very helpful. One last question for me. Just with all the opportunities in cloud and et cetera, and sort of a move on to these -- into new territories, do you expect -- do you see enterprise growing beyond 15%, 20% revenues annually? Probably not on the quarter-over-quarter basis but more annually?

[Nachum Falek:]

Yes, and hopefully not at the expense of our other businesses, but in absolute terms. But yes we -- by doing this press release, we are signaling the markets and customers that we want to play in this space and enhance enterprise not by going after small, medium-sized enterprise deals but rather going after data centers. I want to be cautious. It's early days. We got a nice win with a nice partner. We hope to achieve more of the same.

[Operator:]

As there are no further questions in the queue, that will conclude today's Q&A session. And that will also complete -- conclude today's conference call. We thank you for your participation, ladies and gentlemen. You may now disconnect.