Allot Ltd (ALLT) 2011 Q3 法說會逐字稿

Good day and welcome to the Allot Communications 2011 Q3 results conference call.

Today's conference is being recorded.

At this time I would like to turn the conference over to Jay Kalish, Executive Director of Investor Relations.

Please go ahead, sir.

Thank you, Pauline, and thank you all for joining us on our third-quarter 2011 conference call today.

Joining me 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 expenses as well as amortization of intangible assets and certain one-time expenses.

Please note that all earnings per share amounts are on a fully diluted basis.

Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflect management's best judgments based on currently available information.

I direct your attention to the risk factors contained in today's press release and in the annual report on Form 20-F filed by Allot with the US Securities and Exchange Commission on June 9, 2011.

On the marketing side, I am attending the Needham conference today in New York and will be marketing in the US next week.

Management is also planning to market during the third week of November, as well as in early December.

Please be in touch with me if you would like to schedule a meeting.

With that I now turn the call over to Rami.

Thank you, Jay, and thank you all for joining us today.

It was a great quarter for Allot with continued growth on our top and bottom line.

We reached a new milestone as revenues crossed the $20 million level, a 37% increase over last year and 9% over the second quarter.

Net profits reached $3.4 million or $0.13 per share.

Our operating income continued to grow and we reached $3.2 million on a non-GAAP basis and we increased our operating margin to 16%.

As I have stated repeatedly during this year, we still plan to continue leveraging our financial models during 2011 by taking a portion of increased revenues down to the bottom line while investing in the business to meet the ever-increasing opportunities.

Due to timing issues with the $9.5 million initial order we received from an Asian Tier 1 fixed line operator, an order we had split from September to October, the book-t-bill ratio for the quarter was below 1.

However, if we take this order into account, our book-to-bill would have been over 1 for the third quarter as well.

Overall with this caveat, the book-to-bill ratio has been over 1 for more than two years, which has allowed us to build a healthy and growing backlog and demonstrate the momentum we are seeing in the market.

During the quarter we received large orders from nine large service providers, three of which were from mobile customer.

Five of the orders were from new service provider customers, two of which were for mobile.

On the operational side, we had one 10% customer during the quarter.

We continue to execute in all of our major markets.

In addition to the $9.5 million order on the wireline side, we are maintaining our leadership in the mobile space.

During the quarter we completed our first major LTE deployment with one of the European Tier 1 operators where they rolled out 4G over at the 3G network.

This is proof of our value proposition for 4G LTE network in the face of dramatically increasing data expected over the next three years.

On the geographical level we continue to see growing opportunities throughout the world.

In the US, we are saying initial RFP activity despite the uncertainty in the regulatory environment.

Allot is quite visible in the US, working closely with mobile operators and fully engaged in this market.

In addition, we have seen an increasing number of new opportunities in APac, which we hope will begin to materialize next year.

We have all heard about the macro environment in Europe and the concerns that several of you have expressed to me about our business in the territory.

At this time, we have not seen any slowdown in activity nor real delays and/or project cancellations because all of our target markets, our customers, and potential customers are telling me that in addition to optimizing networks to meet a lot data, particularly video, their major concern today is how to drive new revenues over their network.

Allot has been a pioneer in the monetization concept.

By enabling small charging and enabling an entire increased range of value-added services, all on a single Service Gateway platform, we offer service providers the most robust solution in the market.

We help service providers generate revenues and save on operating expenses while offering an attractive ROI within several months of deployment.

We continued to increase in debt overall at the fixed networks and the growth in bandwidth consuming mobile handsets and applications are driving our top-line growth.

As long as these trends are not affected by the macro conditions, and they have not been affected to date, we anticipate continued upside to our business.

These are some of the reasons that we have seen consistent growth.

To sum up, it was a great quarter followed with the continued increase in revenue and profitability.

The partner opportunities continues to increase.

We are not seeing any slowdown in European markets and we see a number of opportunities in the US and APac for 2012.

Our Service Gateways offer service providers a comprehensive, expandable, and upgradable solution which address the domain concern how to generate revenues over the network.

It's short and significant ROI is another major reason that we are seeing growth in our target markets.

I will now turn the call over to Nachum for a short financial review.

Nachum, please go ahead.

Thanks, Rami, and good morning, everyone.

Let me take a few minutes to review the results we published earlier today.

I will be discussing non-GAAP numbers, which excludes stock-based compensation, amortization expenses, and certain expenses we incurred during the quarter related to the public offering which we pulled in the beginning of August.

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 increased to $20.1 million, up 37% over the third quarter of 2010 and 9% over the second quarter of 2011.

As a percentage of our revenues, [service] in America accounted for 21%, EMEA 60%, and Asia Pacific 19%.

Out of total revenues during the quarter products were 73% and services 27%.

Gross margins for the third quarter came in at 71.7%, slightly better than the 71.6% we had on the second quarter of 2011.

Our operating expenses increased to $11.1 million and in line with our expectation.

During the quarter we recruited 18 new employees, mainly to the R&D and sales and marketing department.

For the quarter we were happy to report earnings per share of $0.13 as compared to $0.10 in the second quarter.

As a percentage of sales, total OpEx went down from 56% in the second quarter of 2011 to 55% in the third quarter.

As a result, the operating margin continued to improve, increasing to 16% from 15% in the second quarter.

This further demonstrates the strategy we discussed for this year, to leverage a portion of the top-line growth to the bottom line while continuing to reinvest in the business in order to meet the increasing opportunities we are seeing in the market.

Cash balance has increased to $66.7 million compared to $63.5 million in the second quarter of 2011.

During the third quarter we generated $3.4 million in cash from operating activities.

Our DSO went up to 59 days from DSO level of 55 days we had in the second quarter of 2011.

Inventory was similar to the second-quarter level at $9 million versus $9.7 million in the previous quarter.

Deferred revenues were at $14.2 million versus $15.8 million in the second quarter of 2011.

The major reason for the decline was that we recognized revenues from several projects of which accept and testing was completed during the quarter.

For us deferred revenues related to payments we received for orders which have not yet been recognized due to terms and conditions of specific orders.

That concludes my remarks and we will now open the call for questions.

(Operator Instructions) Ittai Kidron, Oppenheimer.

Thanks and congrats, gentlemen, on a great quarter.

I have three questions, Nachum, starting with you on the large deal that you have announced with the carrier in Asia.

Is this something that will be recognized over a quarter two or do you see a multiple quarter type of deployment for this project?

Sure, Ittai, good question.

So it's true -- obviously it's a little bit too early.

We just received the order during October, but it looks like we won't be able to recognize this order on one quarter and it will probably be a multiple quarter in terms of recognition.

Again, it's too early.

We still need to evaluate the best way to do it according to the accounting rules obviously.

Great.

Second, clearly fourth quarter is typically a seasonally solid quarter for your business, but how should I think about also your March quarter's seasonality?

In the past you have managed to grow in those quarters.

Given the environment, should we think about a more typical seasonal carrier-related type of business, maybe flattish, slightly down potentially in the March quarter?

So, again, you are right.

In telecom in general we do see that first quarter is kind of a little bit slower due to seasonality.

Looking at the lot and the growth we showed in the past we continued to grow also on the first quarter.

It's a little bit too early for us to really focus the first quarter and you know that we are not giving guidance, but I think that in general, as you said, you are correct.

First quarter is a little bit, I would say, slower on loan growth if I were comparing to the fourth one.

Very good.

And, Rami, you had a nice 10% sequential increase in R&D.

Can you give us a little bit more color as to where are you putting your R&D dollars right now, or just sort of the next things?

I know you can't disclose products before they arrive, but maybe conceptually how do we think about the investment there?

The growth in R&D and actually it's reflected on, let's say, the two main ongoing activities in a typical R&D in a growing company.

On one hand, we have the majority of the R&D team executing on a long-term roadmap alongside our vision and market demand.

And that obviously goes on as usual.

But what we are facing in terms of need to grow is, as we get into these very large ideas and into our very large and greater Tier 1 service providers, many of them come with really great ideas on new functions and features that we have not thought about at the beginning of the year.

These are not (inaudible) specific features which will going to different category, but really almost like accelerating the need of our roadmap.

And this is where if we sometimes find ourselves under pressure to execute quickly on certain features and functions to guarantee wins.

That portion is growing as we sign up larger and larger customers.

Okay.

And lastly, on the Americas revenue, a great performance there.

In the first three months of the year you did more this year than you did in all of last year in that region.

Can you -- you talk about US as a great opportunity for you in 2012.

Can you give us a little bit more color as to what US carriers are doing?

What can they do, what are they doing, and how do you think the regulatory environment could either change or ease somewhat to accelerate that?

So you observed right, Ittai, and we did get nice bump ups in revenues in a couple of large deals, both in South America and North America.

Right now it's a little bit too early to talk about a trend and, therefore, right now I can't give you more color.

But you do observe right and Americas is -- the anticipated growth in America is hopefully starting to happen.

I would like to wait a little bit to see a trend before we talk about specifics.

The regulatory environment is certainly better than it was last year, given that the clarification that came out of FCC codes the latter part of last year, but I would really want to see a little bit more clarity in the [terministic] guidance from the FCC on what is allowed and what is not allowed to make this trend into a real growth engine.

Very good.

Good luck, guys.

Thank you very much, Ittai.

Thank you.

Matt Robison, Wunderlich.

Good morning and congrats from here as well.

Can you start with a little bit of the regional flavor for the new customers?

And, Nachum, maybe if you could give us your sense of where we should expect deferred revenue to go in the current quarter and I guess also where you think the regional strength will be in the current quarter.

Good morning, Matt, and again thank you very much.

I would say this, one is there is obviously an over the 10% customer that is mainly European, [although] not but mainly European.

And that is all well-known and I would put that aside.

Besides that the distribution of new large deals with Tier 1 operators, the multimillion dollar deals, are actually coming from all over.

I am not sure we have a big enough statistical basis to discuss one region over another.

But if I kind of quickly go back and look at the first three quarters of the year, the large deals came from all three major markets.

Asia Pacific, certainly this very large PO received during October; some from EMEA; and actually two very nice deals, one in South America and one in North America.

So right now it's kind of parting all over the place.

The fundamental demand for the functionality we provide, both on optimization and monetization doesn't have any geography dependency, except the fact that obviously one needs to see 3G and above mobile networks in order to deal with data functionality.

And, Matt, on your comment on the deferred, so the large deal that Rami mentioned and we had a press release last week about, so we got part of this PO.

We have got the cash in advance already.

So talking about this PO alone it's obviously that either the DSO will be lower, because if we will recognize something we already got the cash, or meaning that the deferred revenues would increase due to that total during the fourth, end of the fourth quarter.

So if we -- it looks like, after all these mini periods of really strong book-to-bill, you have got customers now putting the equipment to work and you are recognizing revenue.

So even though this big deal that you announced last week is going to be multi-quarter in recognition, you could have an offset with a lot of the bookings you have achieved in recent periods of recognition that might net it to kind of a neutral deferred revenue quarter?

Exactly.

Okay.

And at some point in the call can you come back to us with operating cash flow, CapEx, and depreciation?

Sure.

Okay, and I will come back with further questions later.

Thanks a lot.

Daniel Meron, RBC Capital Markets.

Thank you.

Congrats, Rami and Nachum, on the very strong execution.

Nice job, as usual.

Just wanted to get a little bit perspective on the competitive dynamics or the overall strategic options that a carrier has right now in managing this traffic, either on the wireline or wireless side.

A lot of people are talking about the move to LTE and how it's going to impact the architecture.

Some vendors are trying to introduce some DPI solutions into their gear and obviously you do have that -- some direct competitors.

How should we look around those direct competitors on the one hand, and then the potential changes in the architecture of how -- or how the architecture changes may change how carriers address the network traffic management?

Okay.

So I guess it's -- although there is some relation between the two elements you talk about, they are really separate.

First, thank you for giving me the opportunity to boast about our LTE deployment.

For us it's a very significant milestone.

One is that we are proving to our customer, our current customer base and potential one, that Allot is LTE compliant, not only in theory but actually in practice.

We are talking about a very large mobile operator in Europe who has deployed that commercially in their LTE rollouts.

From a product positioning point of view, we continue to prove our leadership in the mobile space with great execution by the team on this LTE rollout.

From a marketing point of view, I am actually happy.

This is a service provider who rolled out LTE in the past six to nine months and already they see the need for our Service Gateway with its DPI functionality.

And this gives me greater confidence that LTE could be a growth engine for us as we continue to see serious deployments into 2012 and 2013.

In all of my marketing presentations I have always stated that although LTE will provide some relief in capacity, given the phenomenal growth in data rates, that it's going to be too little too late and the demand for our equipment will remain healthy.

On the competition side, there is no new news there.

We do see -- we continue to see two types of competitors.

One is the stand-alone usual suspects.

There is two or three of us in this game.

All companies, by the way, are growing, which is a nice sign for the market as a whole.

In terms of -- we haven't seen any new entrants to our market.

I have always spoken about the huge barrier to entry to develop a DPI engine with the hundreds of signatures and protocols and applications that one need to identify in order to really have a top-notch DPI device.

So the stand-alone market stays the same and no new entrants.

In terms of indirect, primarily -- whether there are GGSN in 3G or PGW in 4G, the concept is the same.

Some of these vendors are trying to claim DPI functions in their Gateway, in their GGSN.

Right now we haven't seen anything functional and scalable compared to what we have to offer.

But in general these are very strong companies and I always consider them as a mid- to long-term threat if one of them continues to improve their function.

But right now, when a service provider decides to issue an RFP it really means that they have made a decision that the integrated approach was not good enough and the RFP typically calls for a stand-alone, best-of-breed solution.

Thank you.

I guess some of the recent wins are a testament to that.

On that note, given the win that you had with the fixed line operator in Asia, can you -- is that the beginning of a trend where we see the fixed line operators come back to the table?

I think they were a very big part of your growth probably five years ago and then the mobile operators kind of took the lead.

Are we expected to see some of those operators come back to the table in coming years?

Is there a way to quantify that there is going to be the same rate of growth as we have seen from mobile operators?

Good question, Daniel.

We have been asking ourselves the same question.

I have said in the past that while mobile is where we have seen the most, the highest rates of growth and mobile came from nowhere and [sat at] 5% three years ago and today we are somewhere in the 50% range.

Fixed didn't go away and it even actually on an absolute level continued to grow from a dollar point of view.

But it's obviously at a much slower rate than mobile.

Right now I am ready to say that fixed remains an important part of our -- in our business and the need there is true and is there.

But nevertheless, to declare that I expect similar type of growth rates from fixed, probably too early right now.

Mobile is really the fast-growing category.

Thank you, Rami.

Then the last question from me.

As you look into the area that your Service Gateway needs to ramp up and I think that we have seen the OpEx growth this quarter, what areas of investment do you see in your internal R&D or partnerships or potentially some technology acquisitions that you may need to do down the line?

Well, from an organic point of view I would say that -- there was several areas but just to give you one example.

We all talk about the phenomenal growth in a data over mobile, but that is an everyday basis really an interesting execution challenge.

To give you a feeling, one of our quantifiable metrics is our ability to deal with the amount of data sessions that are established through -- over the mobile network and flowing obviously through our Service Gateway.

I can tell you that in the past 24 months we had to scale an order of magnitude of 10 times in something like 18 months in order to catch up with this phenomenal growth.

This is way beyond any (inaudible) and descriptions or anything but I have seen in telecom.

To be able to grow a telecom devise in order of magnitude in less than 18 months, which is much less than a platform or a product cycle, requires a lot of very fast engineering while obviously maintaining very high quality and Tier 1 reliability and so on.

So this is one example.

But we are constantly improving our value-added services, our reporting capabilities, offering more and more insightful reports to our customers.

So the [issue] is on all fronts, and as I said before, some of that acceleration is really driven by the fact that we are executing ahead of plan on revenues.

With these very large deals there comes the need to accelerate roadmap requirements.

Okay, very good.

Thank you.

Dan Cummins, ThinkEquity.

Thank you.

I had a couple questions.

I wonder if you could talk about the sales funnel with respect to use cases, to the extent that you could describe requirements in the funnel, customer requirements around either reporting, traffic management, on to service creation.

Would be curious if service creation is approaching parity yet with the other two.

Then in terms of fourth-quarter seasonality, I wondered if you would be able to tell us what book-to-bill was in fourth quarter of 2010, just to maybe give us a sense of historical pattern and expectations for how you are doing.

Thanks.

I will start with the latter question, it's the easiest.

We have been reporting book-to-bill of over 1 for the past two years so our fourth-quarter 2010 book-to-bill was over 1 as well.

In terms of your first question, Dan, use cases; it's a pretty elaborate topic but in general you have described this in the right way.

The fundamental offering is really a very insightful [layers-driven] type of reporting, whether it's based on subscribers, applications, service class, (inaudible).

Many types of various reports -- short and long-term, real-time -- I will offer, but I can tell you very quickly that in 95% of our deals reporting is not enough.

All of the deals, by reporting plus another level of functionality.

In terms of the next level traffic management, obviously that has been a fundamental use case for us for the past couple of years.

Now you can take traffic management into two directions, one which was the most classical one, traffic management for optimization or saving.

By, for example, differentiating priority between real-time applications and non-real-time applications you can drive efficiency out of the network or [into CapEx and shaping].

That is the traditional one, but you can also take traffic shaping to generate service creation by offering tiered services.

We see that as a growing segment because now we are talking about increasing ARPU and top line.

That, which is relatively the new element of our offering, probably has reached parity, almost parity with the first two propositions, reporting and optimization.

So most of our customers today do all three -- great reporting, network intelligence, optimization by prioritizing traffic, and then offering tiered services to improve top-line growth.

The next level, which we introduced earlier this year, really speaks about charging.

Charging in an indirect way is also service creation, because if you offer a -- if you move from flat rate to usage based you haven't done anything in terms of that traffic-shaping, but you certainly have invented a new class of service and you certainly affected in a positive way your revenue per subscriber.

We have dramatically improved our charging capabilities over the past year and I would say that by now -- again how to quantify -- but maybe 10% or 20% of our service provider deals and more on the mobile side are buying in to our unique charging function.

Thank you.

That is terrific.

One follow-up.

If you had to guess right now for the full year, full calendar 2011, how many different 10% customers do you think you will have?

Thanks.

So I think on an annual basis obviously we will probably have one at least.

On a quarterly basis I would say three to four.

Okay, thank you.

Jay Srivatsa, Chardan Capital Markets.

Thanks for taking the question.

Rami, can you talk to me a little bit about the smart charging solution and your recent partnership with Openet?

When do you expect that to really start to play out in terms of additional service provider revenues?

So Openet really talks then to the revenue creation part of our offering or the monetization.

Certainly in the category of smart charging being able to move, again, from flat rate to usage-based charging -- and not even simply with usage-based charging but also more sophisticated base on different ratings for different applications for example and so on -- Openet provides a complementary product.

While they have a software suite called a PCRF, which is really a middleware that is part of the suite, the standard that really sends out policy commands on one hand and gets from us certain reports and status real-time from the network, they are also known for their online charging software that gets rating information from us.

So to give you an example, we would be the one who would count the [resend] traffic coming from a specific user and a specific application, report to their software when this user reaches a certain threshold.

So the products are very complementary, but very different.

Theirs is a software platform product; we are a real-time networking element.

We have announced several partnerships in this category because there is obviously complementary products.

In the past we have talked about a similar partnership with HP and certainly Nokia Siemens has some products in this area.

The most recent addition is Openet and we already have at least one that I am aware of joint deployment in the EMEA market.

And I do expect that the joint announcement will drive more joint wins.

All right.

You have talked about LTE in Europe, but it looks like China is only now really moving into 3G.

Is there any opportunity there for DPI, and specifically your products, over in China as they shift over to 3G?

Can you share with us some of the conversations you have had over there?

Yes, actually portions of China are even moving now to 4G with their unique variations of that.

So there is -- we have seen deployments in China for the past years.

We actually have some strategic penetrations there, I would say, but I haven't spoken about that from something financially strategic so far.

To be very blunt about it, somethings you can penetrate a very large customer but on very tactical level it's a sub-$1 million deal.

In that case I usually do not discuss it on a specific basis until I have seen the penetration is really strategic and meaningful also from revenue.

What we have done so far, we have penetrated in a tactical way several very interesting operators there, but I am not ready yet to talk up before we achieve a strategic one.

The need is there.

Again, in China, like many other geographies, mobile operators there have similar issues dealing with congestion, optimization, and coming up with revenue streams.

The market there is open; there are several competitors.

And in my point of view in mobile, a large mobile operator in China has the same issues like a large mobile operator in Europe.

The only difference is that obviously winning deals in China requires also a lot of commercial savviness and presence.

We have a presence in China; they are part of our business but yet to be strategic.

Thank you very much.

Catharine Trebnick, Northland Securities.

Congratulations on the quarter.

My question is you only announced four orders from expansion sales.

Could you give a little color to why it was down from the 18?

Bumpiness in quarter, Catharine.

These are deals that are not so seasonal, but these are large telecom deals that usually takes six to 12 months to close internally.

Our customers they go through our many levels of signatures and approvals and trials and whatever, and so the rate of closure and the timing is very hard to control.

We have said in the past that we are still aggressively on small-cap companies and there is always lumpiness in the business.

You are seeing it right now with certain quarters are -- for some reason or another a lot of deals get closed and certain quarters may be small.

Nothing of a trend.

Maybe the one element is that in Q3, given the August month, many of the people in the signature process might be out and that might slow down a little bit getting signers and seeing appeals.

But all-in-all, just natural lumpiness in timing of closing of deals.

Okay, thank you.

Then my other question really has to do with the five new customers.

I wanted to know if you could tell me predominately if any of the five had one particular lead use case.

The reason that I am asking the question is charging was a big discussion on the last earnings call and I am trying to understand what percentage of the revenues would be attributed to your value-added services and how we can look at that going forward.

Thank you.

Trying here to think in real-time on the deals and applications.

I would say that the place to check if our new propositions are effective in taking ground is not sometimes in the new deals, but actually in the existing ones.

The reason is when we win a new mobile customer in all of the cases our ability in small charging has a major influence.

In all cases and then in high importance.

Having said so, in most of these cases a mobile or even a fixed operator, when they go about deploying us, they want to -- the charging is really kind of the top of the pyramid in terms of our deliverables and integration into new customers and typically comes several months into the deployment.

It won't get deployed and operated day one.

There is amount of interoperability with companies like Openet, as Jay previously pointed out.

So when you evaluate the effectiveness and how these new features are catching up, I actually go back to the extension deals.

There I see customers that we have won in the past one or two years coming back and saying, okay, now I am ready to buy from you these new charging functions or this new value-added service.

To give you specific statistics on that, I did discuss some of that on the first six months of the year and I hope that the next quarter when we have the full-year statistics I will be able to provide quantifiable numbers.

Okay, thank you very much.

Appreciate all the additional color.

Sanjit Singh, Wedbush Securities.

I had a couple questions.

First, on book-to-bill below 1 I know that was from the deal slipping from Q2 to Q3.

Could you give us any color on why the deal slipped?

Additionally, if you are seeing no macro slowdown or no slowdown in the business, I just want to reconcile your commentary about longer times for signatures.

So I can't point to any strategic reasons, simply two more signatures in the process and the PO and the contract that you expect to get down into the last month of the quarter slips by two weeks.

Simple as that.

The only real element is our August month obviously is to slow pushing deals through our internal processes with our very large Tier 1 companies.

The second part of your question was, please remind me?

That gets to it.

Does your current pipeline, your current pipeline of opportunities, would that allow you to get to book-to-bill above 1 next quarter?

If you just look at your current pipeline.

We have our policy not to provide any forward -- any quantitative forward guidance, but I think I was very clear from my talk that we are seeing a good further opportunity is actually a growing one.

And if my observations are correct, we should be able to grow into Q4 and hopefully get back to a book-to-bill over 1.

Great.

My final question is were there any wins where you displaced a competitor?

And what was headcount in the quarter?

Displaced -- because of our products are a very sticky nature, once you win an account the amount of the deployments, both into the network and then integration with other equipment surrounding us, is a pretty elaborate process.

There is a lot of stickiness in the deal, both for us and for our competitors.

Very rarely -- it happens -- but very rarely if you win a Tier 1 deal and you have done a good job deploying, you could be subject to a displacement.

Having said so, we have seen one of our competitors, and I don't want to name any names, that has -- we are noticing has been getting weaker in the past year or two where deployments which are less than two years got displaced.

So in one of them the answer would be yes.

I appreciate that.

And headcount in the quarter?

307?

Thank you.

3-0-7.

Matt Robison, Wunderlich.

I found the other page to your PR so no need to belabor the cash flow questions, except I will ask you on the DSO of the receivables did you -- do we view that as a linearity function?

And if so, how was the linearity?

I think it was a typical quarter, Matt.

It a little bit depends on when we recognized the [others] that we got.

Some of them we got prepaid and some of them are not, so it's simply when we actually got -- in general, this quarter was linear as most of the quarter.

I think bottom line is the cash flow, and as you can see, we generate more than $3 million only on the third quarter.

Rami, I apologize if you already said this, but can you comment on the percentage from enterprise and education versus service providers?

Matt, allow me to take this offline.

I don't have the number in my hand.

My high-level observation is that it's not very different than our prior quarters.

Roughly enterprise as a whole is somewhere in the sub-20% category and service providers was the whole, is the rest of the 80%.

So my guess is that -- have not done any bottoms up, but my guess is this quarter has not been any different.

Your North American business, did it involve any revenue recognition from -- outside of enterprise in the quarter?

Nachum?

Without getting into specific, most of it was enterprise and none --

So the deal that you talked about was service provider --

Still in booking.

-- going forward?

Okay.

Thanks.

As there are no further questions in the queue that will conclude today's question-and-answer session.

I would now like to turn the call back to your host for any additional or closing remarks.

Thank you again for joining us.

We reviewed today a very successful quarter.

Look forward to meeting with you over the next few months and we welcome you at our next call for Q4 of this year.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect your lines.