Allot Ltd.
Q4 2013 Earnings Call Transcript

Published: 11 Feb 2014

[Operator:]

Good day ladies and gentlemen, and welcome to today’s Q4 2013 earnings conference call Allot Communications. Today's call is being recorded. At this time, I would like to turn the call over to Rami Rozen. Please go ahead.

[Rami Rozen:]

Thank you very much, and thank you all for joining us on our fourth 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 fourth 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 fourth 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. Allot ClearSee and WebSafe are trademarks of Allot Communications. All other trademarks are the property of their respective owners. With that, I would like to turn the call over to Rami Hadar.

[Rami Hadar:]

Thank you, Rami, and thank you all for joining us today. In today’s call, I will highlight Allot’s results and achievements for the fourth quarter of fiscal year 2013. I will also discuss recent industry trends that will influence our business in the medium to long term. Then I will hand over the call to our CFO Nachum Falek for a short review of our financial performance for the fourth quarter of fiscal year 2013. Our fourth quarter results came in at $27.3 million, up $13.3 million. Sequentially, for the fourth consecutive time, book-to-bill was above 1. The strong booking momentum is mainly attributed to our expanding VAS product offering relating to security and TV applications. These offerings improved our differentiation, stickiness, and allow us greater upsell revenues. We expect that the strength of our business momentum we are currently experiencing would translate into growth in revenues during 2014. Summarizing 2013, the weakness in revenues during the first half of the year was a result of the booking weakness we felt during the second half of 2012. At the same time, we sensed strong bookings environment and achieved the book-to-bill ratio of above 1 in each and every quarter throughout the year. The improvement in bookings is already impacting our quarterly performance and we expect it to support our growth during 2014. Our backlog at the end of 2013 is much stronger than 12 months ago at the end of 2012. During the fourth quarter, value added services represented 36% of our bookings and 32% during 2013. VAS bookings during 2013 has more than doubled compared to 2012. We are pleased with our performance in this segment. We expect VAS to continue to be key growth catalyst for Allot. Upselling value added services to existing clients is a fulfilment of our Service Gateway vision, and is a key differentiator that enhances our gross margin. During the quarter, we received large orders from 18 service providers, one of which is a new customer. 12 of these orders were from mobile operators and 6 was from fixed line operators. This quarter, we had two 10% customers, and three 10% customers on an annual basis during the entire year. All of them are tier 1 service providers. This year the number of large multi-million dollar deals has increased compared to prior year. This reflects the successful implementation of our direct touch, go-to-market strategy and our expanded VAS offering that allows us to increase the number of new deals and follow on orders with tier 1 service providers. Moving forward, we believe that our expanded portfolio and growing installed base of tier 1 referenceable accounts is a good foundation to continue our direct strategy of winning and supporting Tier 1 mobile operators. Nevertheless, we cannot rule out future lumpiness due to the unpredictable timing of these large deals. During 2013, we launched ClearSee , our advanced analytics platform, and during the fourth quarter, we announced two new large deals with the new analytics platform. We believe that our vantage point in the carrier network where all internet-bound traffic flows through our Service Gateway, our ability to extract real-time analytics from terabits of wirespeak data in a scalable way and coupled with our unique application awareness puts our analytics tool in a very advantageous position versus fragmented and limited solutions that exist today. From the service provider point of view, having the best-in-class networking subscriber analytics tool is a must for any marketing product development team within the carrier that plans to develop new monetization product and strategies. Moving forward, we expect ClearSee, our analytics product will be critical and instrumental in our VAS upsell strategy. In addition to ClearSee, we have introduced WebSafe Personal, a network based malware and parental control solution. It is fully integrated with Allot Service Gateway. The solution includes upsell services and self-customization that generates revenues while increasing customer satisfaction and protection. Both products have already been deployed by leading mobile operators in multiple regions across the globe. We expect both product platforms to have a positive impact over our VAS booking growth going forward. The positive feedback we received from our new VAS offering goes hand in hand with growing demand from our customers for monetization services. In fact, the demand for monetization-based services is growing nicely fueled by the competition between service providers and our collective ambition to become digital lifestyle providers rather than dump-I providers. These operators seek new ways to improve customer loyalty differentiation that increases their declining ARPU. We expect this market trend to accelerate as well during 2014. A great example of our monetization strategy is application based charging, ABC. For the past four years, we have been talking about application based charging and re-arranging [ph] program as a simple example of that. In fact, two years ago we released our mobile trends showing the gradual move by mobile service providers from flat rate plan to volume based plans, i.e. value caps, they are sold to value based plans. With recent industry announcement, we are pleased to see that the vision is gradually gaining acceptance. Two great examples are

[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, and amortization of certain intangibles. Full reconciliation of the pro forma results discussed in 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 fourth quarter, on a non-GAAP basis, were $27.3 million, up 13% versus the third quarter of 2013. As a percentage of our revenues, sales in America accounted for 12%, EMEA 32%, and Asia-Pacific 56%. During the quarter, we had two 10% customers. Out of total revenues during the quarter, products were 74% and services 26%. Gross margin for the fourth quarter was 76%. Our operating expenses were $17.7 million versus $17.5 million in the third quarter and in line with our expectations. For the quarter, we reported earnings per share of $0.09 as OpEx stayed almost flat versus the third quarter; the increasing revenues affected the bottom line, keeping the gross margin at the level of 76%. On the balance sheet side, cash balances were $121 million. Thanks to our cash flow, we were cash positive, and during the fourth quarter we generated $7 million from operating activities. Our DSOs went down to 59 days versus 89 days we had in the third quarter. Deferred revenues went up by $2 million during the quarter mainly due to prepaid invoices which were not recognized yet. That concludes my remarks, and we will now open the call for questions.

[Operator:]

(Operator Instructions) We will now take our first question from Matt Robison of Wunderlich Securities.

[Matt Robison:]

Hey congrats on a sequential improvement in earnings, a big drop in DSOs, and significant improvement in cash, cash flow. Also, it looks like you tied a prior record for service provider orders in the quarter, but non-GAAP gross margin was up year over year a little bit and within what I would expect, but I hope that you can comment on why it was down sequentially. Also given the drop in DSO, would be good to know about the linearity and tone of activity so far this quarter. Also, can you say if you have made any progress in decreasing the sales cycle? And Nachum, if you could repeat the regional breakdown in sales, that would be helpful.

[Rami Hadar:]

Sure, Matt, I think, best is I start from the end –

[Nachum Falek:]

Answering the geographic split, so Americas accounted for 12%, EMEA 32%, and Asia-Pacific 56% . That was the last quarter. Looking at the DSOs, DSO went down. You can see it from both accounts receivable, DSO, and the cash flow, positive, very strong positive cash flow we had during the quarter. Basically, it’s a cash flow issue, I don’t think we’ll be able to maintain such a low DSO level, and I think that we will be closer to what we had in the last year. It was a very good quarter in terms of collection. But other than that, I don’t believe we will be able to maintain such a low level in terms of our DSOs. In terms of the gross margin, so we are keeping the level of 76%, 77% in the last couple of quarters, since the repayment of the Chief Scientist that we did, but basically I think that we talked about a level of 75% to 76%, 77%, and that’s the level that we are trying to keep. Obviously, it depends really on the mix of products, whether it’s more total value-added services versus hardware, et cetera. So no major change during the quarter.

[Matt Robison:]

Regarding the mix – shifted more towards the platform technologies in the fourth quarter from the third quarter?

[Nachum Falek:]

Little bit yes. But again, I mean gross margins were very similar to the second quarter. So there wasn’t any major change in trend or in general, the level of 75% to 77% that was what we have seen in the last 12 months.

[Matt Robison:]

So linear -- was the quarter particularly front end loaded or was it all just about collections?

[Rami Hadar:]

Mostly, I would say getting the ATPs on time and collection.

[Matt Robison:]

What the tone of the March quarter been so far and can you comment about the sales cycle, which has stretched significantly during ’13 with the change in mix towards value added?

[Rami Hadar:]

Sorry Matt, no comments on Q1, the market dynamics in the last two, three quarters remained the same. And so, our sales cycle – our operational goal is obviously to have a diversified and upsell funnel, so certain deals can take longer than others, they come in to support the quarter. So no fundamental change in market condition.

[Operator:]

We will now take our next question from Ittai Kidron of Oppenheimer.

[Ittai Kidron:]

Rami, I wanted to talk to you about your new customer additions. It sounds that from your prepared remarks that you are doing a very good job in upselling products into your existing customer base, which is great. At the same time though, I am looking at your new customer additions and that number has been declining on a consistent basis for two years now, if not longer with only one in this quarter. So I am trying to understand, are we getting to a point where you’re pretty much doing all that you can with your existing portfolio, I am a little bit confused as to why with all the good commentary you have about the market, we are not seeing an acceleration in new customer additions. Why has that number continued to decline on a year-over-year basis for multiple quarters now?

[Rami Hadar:]

Yes, I wouldn’t read too much on the new additions that come in. I think that as we focus on more on larger customers versus smaller ones, when you’re chasing a very small tier 3 customer that maybe you can get a couple of them every quarter ,but if you chase the medium and the large ones, obviously the decision cycles, the trials and so on, take longer. That’s the only fundamental element that I can imagine. Also, keep in mind that when we count these 18 service provider deals, we count only deals which are above a quarter million dollars, and in fact we used to quote them anything above $200,000, so that’s also the testimonial of our focus on greater and larger customers. So I wouldn’t read too much into that in terms of our competition position and market dynamics of our focus. On the other hand, realize that from operational efficiency and leveraging the business, upselling to customer is the most profitable thing we can take both from the sale cycle, the probability of closing the deal, and eventually given that many of these upsell deals tend to be licensed, the contribution to gross margins, so we like that and we certainly direct the sales team to upsell while going out and chasing new customers as well. But I think you should expect moving forward that we certainly do not plan to stay in one large new win per quarter.

[Ittai Kidron:]

Right. If you don’t think it’s a good metric, if OREO [ph] would stop giving it, maybe you should think about giving revenue – just absolute dollars, what percent is coming from new customers versus existing, maybe that’s going to be a better indicator going forward. But going back on the latter part of your comments right now, you have done an excellent job from an OpEx standpoint this quarter, keeping again almost completely flat on a quarter over quarter basis. So I know you are not commenting on revenue into 2014 timeframe I guess but maybe can you talk about your OpEx plans, your hiring plans, how do we think about OpEx movement through the year?

[Rami Hadar:]

So without pulling any forward guidance here, if you remember our strategy during 2010, ‘11 and ’12 where OpEx grows only when revenue grows, and even then some of that flows to the bottom line. So more or less you can say that OpEx grows if only revenue outpaces that growth or vice versa.

[Operator:]

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

[Unidentified Analyst:]

It’s Prabhu [ph] in for Mark Sue. Just a quick one on value added services, continued traction is being there. Is there – is this more of the existing customers or is this something that you are seeing more of – some of the newer customers and sort of, is the value added services, is it potentially driving demand for some of your other products? And has anything changed competitively in this segment –

[Rami Hadar:]

First, regarding value added services, and certainly the profile of the quarter, value added services were dominant with the existing customers. Usually in the first penetration phase into new customer, they would adopt the fundamentals of our Service Gateway, maybe adopt a wireless to value added services day one but will come back to us to buy more after the initial deployment is done. So certainly I don’t have the exact breakdown, but perhaps turns to be more into existing customers. In terms of competition, I won’t comment specifically on our competitors but I will say that these two additions that we came to market was under value added service side, let’s say the customer with the parental control and anti-malware, the rate analytics that we have now enhanced our competitive positioning for the better, and we certainly expect a more good products to come down the road. So definite improvement in product offering and competitive positioning.

[Unidentified Analyst:]

I apologize if I missed this but could you maybe provide some details on the – and recognizing the lumpiness of the business, but can you provide some details in dip in the Americas business please?

[Rami Hadar:]

Can you repeat that question again?

[Unidentified Analyst:]

I just wanted to sort of check whether – if you could provide some details on the dip in Americas business recognizing the lumpy nature of the business?

[Rami Hadar:]

So I have problems hearing the question. You asked about lumpiness in --?

[Unidentified Analyst:]

If you could just provide some details on the dip in the Americas business?

[Rami Hadar:]

Yes, I would say, in analyzing geographies, we should analyze them on an annual basis. If you look at 2013 versus 2012, EMEA was 48% in 2012 and it was 42% in 2013, so slightly down. We mentioned the weakness in bookings back in 2012 and therefore the revenue in ’13 was primarily due to Western Europe weakness. The APAC was up primarily due to one tier 1 customer who is a 10% customer, APAC went up from 21% to 31%. Americas is slightly down on a year to year basis from 31% to 27%. So not major changes between the two. The big gainer is APAC, both EMEA and Americas slightly down. I don’t see any fundamental business environment impact. In fact, Americas in ’12, they almost doubled versus 2011. So they trimmed significant growth as we penetrated a tier 1 mobile account in Americas but we have seen in the past small fluctuations.

[Operator:]

We will now take our next question from Kiera Kilkowski of Bank of America.

[Kiera Kilkowski:]

Sort of just follow up on what you were just saying about initial signs of improvement that you have been seeing in EMEA region. Could you maybe just provide a little bit of additional color on that? And then in Q3, you spoke about a large win with a cloud provider in the U.S. And I was wondering if you could talk about that as a potential expansion opportunity for you in 2014, that vertical in general?

[Rami Hadar:]

First one, EMEA, what we have seen, actually the improvements in EMEA took place already in 2013. The weakness we felt was primarily in the booking in the latter part of 2012, the second half of 2012, which affected our revenues in the first half of 2013. We have seen improvements back in 2012, some major mobile operators in EMEA were downsizing CapEx budgets and even OpEx and letting go some of the staff, so pretty tough, EMEA pretty tough environment, and that improvement started in 2013. I am not sure we are out of the woods yet and [indiscernible] the improvements will continue. But certainly the environment in ’13 was better than in 2012 and we hope that it continues so in 2014. Regarding cloud, yes, we spoke about it at lengths in the last quarter, we see a cloud phenomena in enterprise moving applications to the cloud is also positive to Allot. It increases the one traffic which is good for us. We see more investments in big data centers, certainly with our sales or service provider customers that are building data centers and cloud offering to their enterprise customers. You are right, you mentioned one example in Q3, but actually one of the – we had another fairly large deal with a service provider in APAC, also a data center deal as well. So tier 2 to be a serious part of our revenue but we continue to see the growth as we are certainly investing to improve our offering there and certain ways, large data centers are also big service providers and we think that sale of our value added services are relevant to data center environment as well.

[Operator:]

Our next question comes from Alex Henderson of Needham.

[Alex Henderson:]

I was just wondering if you could just give VAS percentage and the product services percentage again. I had a little bit of a static on the line when you gave those numbers?

[Rami Hadar:]

Sure Alex. The products were 74% during the quarter and services 26%. Regarding VAS, value added services being 36% in the quarter and 32% over all of 2013.

[Alex Henderson:]

So you said 36% in the quarter?

[Rami Hadar:]

Yes, of bookings. This is a booking stats.

[Alex Henderson:]

Question – I have been hearing some of the large systems vendors are starting to do more with Linux based switching technologies. And doing – enabling what I would describe as DPI functionality on those boxes, and also, you’re seeing a big push towards NFV, can you talk a little bit about whether you’re seeing any of those trends impacting your business positively, negatively or whether it’s causing any delays or acceleration in the spending of service providers?

[Rami Hadar:]

Yes, so large systems players have always been offered some form of light DPI as you say, ever since I have been on board in Allot in the past eight years, so no significant change in that, we still operate that, we still see that as a competition. If a service provider goes out and issue them a specific RFP, then usually a few player DPI provider will win the day because of the breadth and scalability of the feature. Yes, when these system integrators close a huge MD [ph], sometimes they can get away with giving their light DPI for free initially but again menus then come back and realize they need a few and more elaborate solution. So nothing change in that dynamic, we are still fighting that trend and really that’s where our growth will come from, converting operators from doing nothing or doing like DPI versus taking architecture from our competition. I believe there is growth for all three companies in our space. Regarding NFV, not related to the prior acquisition. I think it’s still early days wherein there is initial trials going on. We are playing in them as well. But at the end of the day, NFV is more around CapEx and OpEx efficiency. The fundamental and value propositions don’t change and that’s what we focus on. So if we manage to keep from source functionality point of view our distance from these like DPI solutions, we should be okay, whether we provide the solution on an ATCA platform or on an NFV platform.

[Alex Henderson:]

If I could go back to the question that was asked earlier on the cloud market, you kind of left it hanging a little bit. I mean clearly, the data center traffic is growing; I don’t think anybody would doubt that. But the question is really is, do you see additional non-conventional service providers such as the infrastructure as a service players, such as the web 2.0 players becoming additional customers to you guys over the course of 2014, beyond the one that you’ve already announced? Is that a potential for a new customer category to develop in a meaningful way or do you think the contract win that you had is a one-off type of event?

[Rami Hadar:]

It’s certainly not a one off and the two trends let me reiterate, one is simply traffic growth – for a traffic management and therefore a net positive for us. Those investments in infrastructure, you need to handle traffic in a more smarter and efficient way then it’s net positive for solutions like ours. The second phenomenon which is close to home is that we are seeing service providers invest in building out data centers. And given that we have relationships with some of them, that’s a natural way for us to penetrate that segment of the market, which has not been a natural marketing ground for us. So these are the two trends which get us closer to the data center market.

[Alex Henderson:]

Great. And one last question, any change in the pricing environment and then I’ll cede the floor? Thanks.

[Rami Hadar:]

No, I think the best indicator of the pricing environment is really our gross margin. As long as we can keep that in the 75-76% range, then we can assume that the overall mix of products is a good one and in fact I mentioned that on average, day one deals tend to be below the average and follow on orders tend to be above the average. And the overall result is where we are today, which has been stable for the past many years.

[Alex Henderson:]

Thank you.

[Rami Hadar:]

Thank you Alex.

[Operator:]

Thank you. Our next question comes from Joseph Wolf of Barclays. Please go ahead.

[Joseph Wolf:]

Hi, thanks. I have another question on the value-added services portion of the business. Given the size and the bookings and the contracts that you’re seeing, what do you think the underlying growth rate is for Allot or what was it in 2013 for the core DPI product? Or perhaps, have you already shifted your thinking about what the core Allot revenue mix and base is as you move into 2014 and what do you think happened in terms of market share in 2013?

[Rami Hadar:]

So in terms of the value-added services, obviously, we would like to see both value-added services and the core basic Policy Control & Charging functions of our business grow. In 2013, from revenue point of view, given that it was down year versus 2012 in overall, I would say that while Policy Control & Charging went down, value-added services did go up. I would say probably this is true also on the booking front. As I mentioned in the past, we feel that DPI for a traffic shaping is becoming a more stable state market and really the focus is monetization in value-added services. In terms of market shares, I don’t have the numbers in front of me but I’m on absolute levels, I think one of our competitors went down, the other one recovered from a slowdown and went up. So overall, we probably should be more or less in the same, give or take, in the same market share numbers.

[Joseph Wolf:]

Okay, that’s helpful. And then I guess, I think you touched on this briefly with the parental control and the analytics, but of that 36% of the bookings, what percentage of those or how many value-added services are you selling and are the top two or the top three products in that category 50 or 60 or 70% of the value-added service bookings?

[Rami Hadar:]

We deliberately don’t break that down. Obviously, two factors, one is we don’t want to tip our hand and share with our market and competition which value-added services are hot and which are less. And also, but I can say that all of them are active and successful, in some quarters we get a big deal and denial of service attacks is very strong and the next quarter, it could be anti-malware and parental control or video caching deal. All of them are active, all of them are selling, it’s still early days and it’s yet to call out a trend. But again, I’m not sure that we will share the detail of these trends openly.

[Joseph Wolf:]

I guess just one other way, are there different trends geographically with the VAS product?

[Rami Hadar:]

Too early Joseph. That element, we can probably discuss openly when it’s there, but I think it’s a little bit too early and would be misleading to break it down.

[Joseph Wolf:]

All right, thanks guys.

[Rami Hadar:]

Thank you Joseph.

[Operator:]

Thank you. We will now take our next question from Catharine Trebnick of Dougherty Markets. Please go ahead.

[Catharine Anne Trebnick:]

Nice quarter. quick question, Rami, could you go back and discuss if you are seeing or what are the key value-added services that you’re seeing in Europe versus North America versus Asia Pac to give us a little bit of idea of which countries might be driving towards increased ARPU and are more attractive to your value-added services? Thanks.

[Rami Hadar:]

Yeah, Catharine, like Joseph, I mentioned that it’s still early days to discuss the breakdown of value-added services over geographies. But just to give you little bit of sense to second question, I can say that the large deal that we had in APAC actually denial of service was – in security, was the big value-added service in that deal. I can say also obviously that the type of solutions that we sell in the U.S. for example are nothing to touch on probably so you can deduct from there or try to guesstimate what it is. In Europe, it’s pretty much all over. Maybe caching is less interesting in Europe and advanced countries as backhaul data is less expensive and caching is more successful in developing markets like Asia, Africa, Latin America would be let’s say the most obvious phenomenon.

[Catharine Anne Trebnick:]

Okay, thanks. I’ll take some other questions with you offline. Appreciate it.

[Rami Hadar:]

Okay, thank you Catharine.

[Operator:]

Thank you. We will now take our next question from Sanjit Singh. Please go ahead.

[Sanjit Singh:]

Thanks for taking my questions. I wanted to see if you could describe how the competitive environment progressed throughout the year and into Q4, if you saw any changes whether it was the number of competitors and RFPs or pricing, discounting or any sense of the competitive environment.

[Rami Hadar:]

No fundamental changes and kind of looking from the sidelines and our two other competitors. As I mentioned before, we have seen one in doing nice recovery, while other went down. As I mentioned in the past and also on this call, we focus our efforts really obviously on winning our feet but also on converting customers who have not decided to deploy any solution whether it’s because – realize the need or has got some kind of light DPI solutions from existing vendor and we need to convert them. Certainly our expanding value added service offering is improving our competitive position. We play through that, we have seen some of our competitors rush to team externally with other solution. But we believe that teaming which is absent, but nevertheless it provides a very cumbersome – integrated solution to the customer and therefore we believe that providing a combined solution and being one focus to the Service Gateway – a competitive edge to our pure play solution and also as I mentioned up-sell opportunity once within the account. This is also very relevant to existing router vendors who offer light DPI. They are certainly not able to offer a VAS offering or value added services on top of the router. So the strategy differentiates us not only from the pure play but from the system integrator.

[Sanjit Singh:]

And then as it relates to net neutrality [indiscernible] or if you don’t want to answer that way, have you had any initial discussions post the announcement with some of your mobile operators in North America? Has there been any type of initial discussion on how things potentially –

[Rami Hadar:]

Yes, we are obviously – we have been talking about potentially considering services, which application we are in the – but highlighting these discussions since the announcement. Having said that as I mentioned on the case – these large service providers move slowly and cautiously. This is not only about the SEC but also how end users and public opinion will proceed the new offerings. Having said so, our best case, we hope that the underlying decision is a signal to market that let’s say competitors – environment take its course and there is no need to intervene with relation, totally in the mobile market, there is plenty of competition and if the customer doesn’t like to – any offering, then they can move across the suits of business ones. So best case scenario that, due to this and that we will take the sidelines and let the market play out – there is any threat of monopoly of one – content providers where they consider interfering again. This will allow the service providers to gradually make plans, successful orders and move forward. Certainly over the world, outside the west, that has been the case and I hope that U.S. will take this fast as they were. So best case scenario, U.S. to realign with the rest of the world. Again that might take some time.

[Sanjit Singh:]

As you start a new fiscal year, and given that the business has basically been recovering in terms of revenue and booking, how do we think about seasonality in 2014? Is it kind of the typical seasonality that we experienced before, recovery in bookings before the downturn in the second half of 2012, we saw maybe some seasonality in Q3, potentially Q1 as well, or is that the seasonality still difficult to take around?

[Rami Hadar:]

Let’s look this way. The dynamics that cold seasonality in general telco space has not changed for the better and for worse in the past quarter.

[Operator:]

Thank you. Ladies and gentlemen, as we have no further question on today’s call, we would like to end Q4 2013 earnings conference call. We thank you very much for your participation and hope you enjoy the rest of the day. You may disconnect at this time.