Allot Ltd (ALLT) 2012 Q1 法說會逐字稿

Thank you, Sandy, and thank you all for joining us on our first-quarter 2012 conference call.

Joining me today are Allot's President and CEO, Rami Hadar, as well as our Chief Financial Officer, Nachum Falek.

We issued two press releases this morning, first announcing the acquisition of Ortiva Wireless, as well as our first-quarter results, plus -- and both press releases are now available on our website at www.Allot.com.

Our 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 exclude stock-based compensation expense, as well as amortization of intangible assets and certain one-time charges incurred related M&A activities and compliance with regulatory matters.

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 last year.

With that, I would now like to turn the call over to Rami.

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

In the first quarter we continued our steady growth on both the top and bottom lines.

For the first quarter revenues grew 41% over last year, and 10% over the fourth quarter and reached $24.2 million.

Net profits reached $5 million or $0.15 per share for the quarter.

Our operating profit for the first quarter continued to grow and reached $4.6 million on a non-GAAP basis, and we increased our operating margin to 19%.

The book-to-bill ratio was over 1 for the quarter as backlog continues to grow.

During the quarter we received large orders from 17 large service providers, five of which were from new customers.

Seven of these orders are from mobile operators.

On the operational side we had two 10% customers during the quarter.

During the quarter we announced an initial $4 million order from a Tier 1 Latin American fixed mobile operator which we hope to expand going forward.

This was a very competitive process and also demonstrates that fixed operators are (technical difficulty) significant opportunity for Allot.

As we say that [SG] represents another area of expansion for us, and we demonstrated further success here with a follow-on order from an Asian Tier 1 mobile operator to support an [AMC] network rollout.

Let me take a few minutes to discuss some of the additional trends I am currently seeing in the market.

So for a while we have spoken about over-the-top services threats to service providers.

This has now become a reality.

For example, [WebSafe] in similar applications are severely impacting service providers' revenue from text messaging and subscribers now as a way to send free text rather than have to pay on a per-message basis.

However, as technology (inaudible) consultancy calculated in a report released in February that operators lost $13.9 billion in SMS revenues last year.

It is looking more and more likely that voice services will be up next under over-the-top threats (technical difficulty).

The real question is what will next generation voice services due to voice minutes and revenues?

However you look at it, OTT services are a threat to (inaudible).

As a result, service orders are becoming increasingly aware that they need the networking intelligence platform to either introduce intelligent quotas to manage the increasing OTT traffic volume, or introduce revenue sharing plans.

Either outcome represents an opportunity for Allot.

We are starting to see movement in the US market, and as I indicated previously, during the quarter we recognized initial revenues from a large US mobile service provider for initial commercial deployment.

Due to our agreement with the customer I am not allowed to disclose any names, but we are encouraged by this order, and I believe that the market realities in the US will lead to increased activity over the mid to long term.

We see another recurring business in addition to the inflow of new customers.

When we introduced the service gateway platform almost five years ago, our goal as a company was to increase the number of customers as well as deepen penetration into our customers' network.

I firmly believe that we are meeting these goals.

Now, I would like to take a few minutes to discuss today's announcement regarding the position of Ortiva Wireless.

This acquisition adds another important piece of the Service Gateway strategy and allows us to offer customers a leading video optimization solution and join other value-added services such as WebSafe, ServiceProtector, or MediaSwift and CellWise.

We have said it repeatedly that video is a growing concern for our customers both in the near and long term.

The acquisition touches into video over mobile broadband networks.

We are now uniquely positioned to offer service providers a comprehensive video suite which includes both video caching and video optimization.

Why did we choose Ortiva?

I believe that we acquired the best pure play video optimization solution on the market today.

The technology, which came out of UCSB, has several major technological advantages.

Ortiva's solution has been optimized for wireless networks and while design and the same [ATC] architecture as our Service Gateway.

The technology is highly scalable and is unique in that it dynamically optimizes for (technical difficulty) conditions and for each mobile connection.

This means that each individual subscriber is assured the highest quality of experience possible, even if network and terrain conditions are changing.

By leveraging the Service Gateway application and network (technical difficulty) capabilities, we are redirecting only congested video traffic to the video optimization function, therefore making the solution much more cost effective.

In summary we are pleased to report another great quarter with another steady rise in top and bottom lines as well as in all financial metrics.

The market demand for our solutions remains strong in data traffic such as bandwidth-intensive OTT services are forcing carriers to take both a defensive and offensive stance to stabilize and increase revenues.

The addition of Ortiva video optimization is another piece in the Service Gateway strategy of offering the most comprehensive intelligent platform in the market.

We believe that this puts even more further distance between our leading Service Gateway platform and the integrated router solution.

I will now hand 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 exclude stock-based compensation, amortization expenses and certain one-time charges incurred related to M&A activities in compliance with regulatory matters.

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 first quarter increased to $24.2 million, up 41% over the first quarter of 2011 and 10% over the fourth quarter of 2011.

As a percentage of our revenue, sales in America accounted for 14%, EMEA 73%, and Asia-Pacific 13%.

We had two 10% customers during the quarter.

We are seeing increased momentum in the Americas, both with the North American mobile operator, which Rami mentioned, as well as with a Tier 1 operator in Latin America.

As an indicator, 36% of bookings in the first quarter came from the Americas.

Out of total revenue during the quarter, products were 76% and services 24%.

Gross margins for the first quarter were 71.8%, similar to the fourth-quarter level.

Our operating expenses increased to $12.8 million, and in line with our expectations.

During the quarter we recruited 80 new employees, many into the R&D and sales and marketing departments.

For the quarter we were happy to report earnings per share of $0.15 as compared to $0.14 in the fourth quarter.

Keep in mind that we closed the secondary offering on November 15, so that EPS reflects an additional increase of 3.2 million shares in the weighted average for this quarter.

This now fully reflects the total number of new shares issued during the offering, including the [green show].

As a percentage of sales, total OpEx went down from 54% in the fourth of 2011 to 53% in the first quarter.

As a result, the operating margin continued to improve, increasing to 19% from 17% in the fourth quarter.

On the balance sheet side, cash balances increased to $165 million.

During the first quarter we generated $4.4 million in cash from operating activities.

Our DSO went up to 62 days from DSO level of 50 days we had in the fourth quarter of 2011.

Inventory was $10.7 million, similar to the level in the fourth quarter.

Deferred revenues went up by $1.2 million during the quarter, reaching $23 million at quarter end.

With regards to the Ortiva acquisition we announced today, here are a few financial aspects of the deal.

On a non-GAAP basis, we currently expect that the transaction will be accretive on a quarterly basis by the end of 2012 and we generate between $3 million to $5 million in revenues for the second half of 2012.

Gross margins should be similar to Allots' current levels, and operating expenses are estimated at approximately $2.5 million per quarter during 2012.

In terms of headcount, currently Ortiva we have 41 employees.

We reconsolidated Ortiva's financial results starting from the date of the closing.

The acquisition has been approved by the Board of Directors of Allot and Ortiva and the stockholders of Ortiva and is expected to close by the end of the second quarter after the satisfaction of customary closing conditions.

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

(Operator Instructions).

Ittai Kidron, Oppenheimer.

Thanks, and Rami and Nachum, congratulations on great numbers.

I had a few questions on Ortiva.

I think you've talked about video optimization for some time, so congratulations on finally achieving this.

And I guess the question is when you look at that market, can you give us a little bit more color on what you think is the addressable market for this, and second, have you been working with other video optimization vendors that you think could potentially now stop working with you because of this?

I'm trying to understand if there are some conflicts that we should be aware of because of this acquisition.

And for Nachum, you haven't disclosed how much you paid for this deal or your book-to-bill; if you could give us a little bit of color around that that would be appreciated.

Sure.

It's Nachum, so I'll start and then Rami will follow up on your question.

the terms of the acquisition were not disclosed, but if you're asking about whether it was an affiliate transaction I can say that Allot will pay Ortiva stockholders a cash payment at closing, which is less than 10% of our current total cash position.

So that's on the size of the deal.

Regarding the total addressable market, I sincerely believe that pretty much any mobile operator deploying at 3G and above technology would be interested in deploying video optimization solutions.

Obviously we've seen early deployments of such technologies in the past say 12 to 18 months, so there is some deployments out there but it's very initial.

Obviously, we believe that given that this product is deployed right next to our servicing gateway, decision-makers, the same team, with same customers that is highly complementary product to ours.

And together we have a more complete holistic solution and increases outcome altogether.

Regarding other vendors, in the past we cooperated on an opportunistic basis with other video optimization solutions, but it was quite clear in the market that we see the technology as being part of Allot.

So none of these deals ever generated any revenue and, therefore, there's no negative impact from loss of partnerships.

Very good.

And Nachum, can you follow up on the book-to-bill as well; what was it in the quarter?

Book-to-bill in the quarter was about 1.

Thank you.

Very good.

Congratulations, guys.

Good luck.

Matt Robison, Wunderlich Securities.

Good morning, let me add my congratulations.

A couple of questions.

So it sounds like, if I heard you right, you've got two mobile operators in the US now; is that right?

No, I didn't mention a number.

What I did say that this revenue we recognize meaningful revenue from a large US mobile operator, as I indicated in the past.

Oh, okay.

And what I'm -- last year and the year before, you guys spent -- about 12% of your cost of goods sold were for services, that you reported on an annual basis, not a quarterly basis; it was a little less than that in 2011.

Do you expect a meaningful increase in that expense category as you do more business in the US?

Matt, I would say that right now (technical difficulty) on the ground.

So I would say that in general, OpEx and the part of (inaudible) which is part of the call should be with the growth that we experienced in the past, we've got [70] people in the US; with Ortiva, we've got more than 70, so I don't see any meaningful change with all the comments that Rami mentioned.

What's your total headcount now before Ortiva?

In America we have roughly 30 individuals, mostly are customer facing either say managers or technical sales.

Obviously, that number will grow as we add Ortiva.

So we feel the Americas team is the right size for the opportunity.

Obviously we increase the revenues and moving to execution we might need to add some headcount on the process side, but that will come as incremental revenues and profits come in.

And, Matt, again, with Ortiva, right now, we've got 375 employees in Allot -- altogether, yes.

Have you worked with Ortiva up to now?

I know a couple of your competitors have done some business with them and some adjacent companies.

Can you kind of comment on what your experience has been and how many customers you might have served with them already?

Yes, we have cooperated with Ortiva on one specific mobile opportunity in Latin America.

That opportunity is still open, so it hasn't converted into revenues.

Besides that to the best of our knowledge although Ortiva has some cooperation with some of our competitors, all of their current sales are only direct sales.

And what was the mix like?

You had pretty strong commentary.

It looks like you've gone from reporting on large service providers kind of in the -- with those kind of numbers you used to report on all service providers you do business with, so it's kind of a nice trend there.

But can you talk about your mix between mobile and fixed and how much enterprise contributed?

In terms of (inaudible) I can mention that on the booking side, it was more or less a typical quarter, around 80% for enterprise so sub-20, but 42, 40 plus for a mobile and around 40 minus for fixed.

So typical in quarter (technical difficulty).

Thank you.

And congratulations again.

I'll let somebody else ask a question.

(Operator Instructions).

Daniel Meron, RBC Capital Markets.

Thank you.

Congrats on the solid execution that continues here.

I have a question first of all on where or what additional avenues or technologies you would like to add to your capabilities.

It seems like you have already acquired this video optimization tool.

So maybe it's too early just after an acquisition, but just trying to understand what additional opportunities do you see in the marketplace right now?

So first, we will probably spend the next few months busy integrating the Ortiva operations into ours.

Having said that, our strategy hasn't been changed.

We see the Service Gateway product is a central element to providing intelligent (technical difficulty) functions into our mobile and fixed packet cores.

Is that -- the Service Gateway is the natural point to launch these services, so anything that is intelligent, Layer 4 and above solution that makes sense to deploy right next to our Service Gateway with its redirection and load-balancing capabilities, and function as an extension of our core product would be of interest for us.

We have a couple of ideas in mind, but it's a little bit premature to right now be more specific than what I just said.

Okay.

That's fair.

And then on the -- it seems like you guys are having pretty good success so far in various regions.

Is there a way to quantify where you are with the penetration with various customers?

I mean how much -- how many barriers already have some DPI solutions in a way that matches yours?

What's the opportunity that you have there to extend beyond that level?

And is there -- and what are the additional growth engines?

Is it around data growth, is it around subscribers or applications that may drive further growth from your perspective?

You're asking penetration of Ortiva specifically or video optimization in general?

No; I'm actually talking about deep pack inspection, metro traffic management in general.

And obviously Ortiva is a big -- could be a part of that.

But I'm talking about the DPI penetration traction so far, and how much more we can expect from here.

Okay, well I see.

I guess the answer would not be homogeneous depending on geographies.

I can say that Europe is nicely penetrated and certainly much of the penetration is with Service Gateway solutions and given our (inaudible) Tier 1's there.

So Europe could be maybe -- I don't know, 40% to 50% penetrated, at least Western Europe.

I think Eastern Europe is much less than that.

US is almost not penetrated totally on the mobile side.

Latin America, there is some penetration but very spotty, so my guesstimate would be 20% to 30% penetrated.

Asia-Pacific, all over the place, again, very positioned market, but I think very early I would say A-Pac is maybe 20%, 30%, more like 20% penetrated.

So that's DPI.

Given that video optimization is a fairly new solution and technology and has started commercially being penetrated maybe the last 18 months, I would advise the numbers I just gave you by two to three to the same video optimization penetration.

That's helpful.

And maybe just as a follow-up, you guys are not talking a lot about the enterprise segment; it sounds like you guys maintain pretty much the same penetration there.

So what's the opportunity there?

How do you feel about that market growth?

Maybe it's less than the carrier business, but it seems like it's holding onto its own.

So what are the trends there, and what kind of growth can it grow from here?

So first, we are -- our strategy was always -- given that our roadmap is 100% optimized for service providers, that we always say was successful in the high end of the enterprise play -- data center, managed services, large -- very large entities, which are almost like private ISPs, (inaudible) universities or government.

So that's kind of steady sailing.

I think (inaudible) with enterprise manage to keep at a percentage basis at around 20%, which means it actually grew an absolute level -- actually because of the cloud data center phenomena, which had kept it growing on an absolute level, we have, in certain cases, leveraged our service provider relationship, and some of our Tier 1 service providers are actually reselling our equipment as part of a managed services or resell -- simple resell relationship.

We announced a deal with Korea Telecom in the past and Telefonica Brasil.

So these operators act as resellers to their enterprise customers, or even in [bio equipment] and the start of managed services in those data centers.

Okay.

Very helpful.

Thank you, Rami, and good luck.

Kiera Kilkowski, Bank of America.

This is Kiera on behalf of Tal Liani.

Just a couple of quick questions for you.

The strong growth in EMEA this quarter -- is that primarily from existing customers or new customers?

And then to the extent that you can, can you provide any color on the regions for the 10% the customers are located?

And then just a third one, in terms of the Value Added Services, did you guys disclose a number as a percent of sales this quarter?

Thanks.

Okay, so regarding EMEA, total EMEA was a very strong quarter.

Remember that usually revenue recognition comes several months, even sometimes several quarters after we actually get the orders.

I want to say in this quarter is that in terms of the business, the traditional in place of 60% EMEA and then 20% and 20% on Europe and Americas (technical difficulty) A-Pac.

The fundamentals of the business are more or less in these ratios.

What we see here in terms of revenues is just a seasonal recognition of some large projects in Europe.

And that's why you're seeing the jump in Europe.

To balance that, and Nachum made a point, we typically don't discuss booking, but we did make a point that this quarter our bookings for the Americas were actually 36% of revenues.

So you can see how our percentage could fluctuate between when we recognize revenues and when we actually get bookings.

What I can say is that two 10% customers this quarter actually come from EMEA.

And that's one of the reasons you're seeing this very large -- in EMEA as a percentage basis.

Value Added Services, we didn't mention that, but very roughly, from a bookings point of view, [that] so bookings were about 12% of total bookings in the quarter.

Thanks.

Good luck.

Dan Cummins, ThinkEquity.

Thank you very much, and congratulations on a great result.

Just amazing execution.

Let's see, I guess I'll try this one first.

Were there any 20% revenue customers for Q1?

We usually don't -- we only discuss about 10%.

I think as Rami mentioned two above 10%.

Maybe I can add and say that we had a third one which was actually above 9% and below 10%.

So, you know --

That's fine.

That's helpful.

So let's just talk about Ortiva, and I apologize if you covered some of this earlier in the call; I was not on it.

Can you just describe the revenue model for Ortiva and whether or not you think that this represents an opportunity for Allot to perhaps grow its recurring revenue base faster or somehow differently?

And I was curious if this solution -- I don't know why it wouldn't be -- but this solution for video optimization would be as well-suited to all screened cable operators as well as dedicated mobile carriers.

Is that correct?

Potential -- so let's start from the last question, could it potentially be applicable for a fixed/cable operators?

Yes, but given that the big think points are really in the mobile.

And given that video transition really requires very intensive [complication] of power right now it can meet the traffic speeds of mobile and network.

So it's not just ready in terms of scalability for fixed.

Our strategy for the next at least one or two years is to make it an offering and mainly on the mobile side of our sales force.

Regarding up sell, are recurring, definitely yes.

We see that the low hanging fruit for these opportunities is actually to introduce them as an up sell to our existing deployed base.

And vice versa, on a small scale they have penetrated two Tier 1 mobile operators, and we hope that they can pull in our service gateway solution.

So the products are highly complementary as I stated before.

Nachum, any quantitative indications?

No, I think only as we mentioned, if we are looking at the second half of this year, Ortiva should contribute between $3 million to $5 million into our top line.

Okay.

And Nachum, I'm sorry, did you give the product revenue for Q1?

Yes.

For what product revenue for Q1 was 76%, and services, 24%.

Okay.

Very good.

Thank you so much.

Catharine Trebnick, Northland Securities.

Congratulations on the quarter.

So my question, two questions.

One, are you seeing a difference in deal size this quarter over last year, or even fourth quarter?

And the second question is, can you disclose how many service providers Ortiva had, and then the geographic split if they are more Europe or North America or Asia-Pac.

Thank you.

Thank you.

So deal size, the answer is definitely yes.

In fact, (inaudible) reported amount of large deals with service providers.

We used to classify that on deals which were over $100,000.

And this quarter we upped this ratio to $0.25 million.

So that's one indication that this size constantly goes up.

And in fact if (inaudible) maybe one or two (technical difficulty) million dollar customers which we consider strategic right now we have about a half a dozen of these and growing very rapidly.

A great indication is this quarter when we have two 10% customers and one a 9% customer in one single quarter.

So the answer is definitely yes, on deal size.

Your second question was relating to -- I forgot?

Ortiva.

I'm just trying to understand geographically where you will benefit, if obviously you will because you did say there were two Tier 1 North America customers.

But how many customers do they have in total?

And then what roughly is the split between the geographies?

Okay.

So I think there is a little bit of a misconception.

Ortiva did penetrate two Tier 1 mobile customers -- one in the US and one in Europe.

The one in Europe is actually a property of a very large multi opco mobile service provider.

All right.

Thank you very much.

Sanjit Singh, Wedbush Securities.

I had two questions.

The first one, is there any way to describe how the use cases for North America differ by maybe Europe or the rest of the world?

And then the second question is you mentioned 2% -- two 10% customers in Europe.

Is one of them your legacy deployment that's been going on for the past several years?

Can you again explain your second question?

Yes.

On the two 10% EMEA customers, was one of the 10% customers your legacy deployment that's been going on for the past several years?

And how is that deployment trending?

I see.

Yes, so out of the two 10% customers, one of them is -- I wouldn't call it legacy but I would call it our top large Tier 1 mobile operator in Europe is totally one of the two 10%.

And then on the use cases for North America, are the use cases in that region different?

Is the motivation behind purchasing the solutions different than --

Yes, definitely yes.

I can't go into exact specifics.

What I can say is the use cases are defined to be very careful and go around net neutrality issues.

That's the only thing I can say right now.

So part of our strategy to expand our offering with Value Added Services and whatnot, are an offering that some of them are -- do not read even remotely on net neutrality.

Thank you.

Brent Bracelin, Pacific Crest.

Thank you for taking my question.

A couple questions here if I could.

Really wanted to go back to kind of the Q1 results and dive into kind of the demand drivers that drove momentum here.

Revenue growth at 41% looks like it's the highest in a couple years.

If I look at the product revenue growth, it looks like it's closing in on about 50% growth.

So as you look at the contributing factors to Q1 here, how much of it is just seasonal patterns in EMEA versus the timing of revenue recognition?

Or are you seeing some sort of change in the underlying kind of demand for kind of DPI specifically?

So I wouldn't say that it -- we are seeing a hockey stick or anything.

This is -- we are experiencing a steady growth, enjoying for two or three years now the momentum in the mobile space and now reinforced by seeing how the fixed space starts to grow as well.

So I think this is what here is the end result of all of that.

Again, I remind you that the revenue that we are recognizing today, totally from the service provider side of the house, are the result of bookings that came one, two, three quarters ago.

As we go about implementing and achieving recognition revenue -- recognition.

So we are experiencing steady growth.

Certainly we are pleased with a bit of accelerated growth this quarter, and we hope to continue this pace if the market fundamentals allow us to do so.

Okay, fair enough.

And then my second question really is tied to what looks like to be a material change in bookings.

30% of the bookings were driven by Americas.

Is that also just kind of one large deal kind of driven that's influencing that?

Or do you think we are at the beginning of a change in the demand profile for DPI in the Americas region specifically?

And that change in mix could be sustainable going forward?

So first it was actually even higher.

It was 36% of bookings were from Americas.

Again we mentioned specifically this number, so no one will read too much into the fact that the Americas were only 14% on the revenue recognition side.

Which was -- there was an element of one large deal in that 36% but there was also several other medium and small sized deals that conceived the same number.

I hope that this is beginning of a trend.

We are seeing some promising trends already in the first month of Q2.

But still, two points -- two quarters still don't make a trend, so I'm cautiously encouraged by the trend, but it's not yet an official trend.

Okay.

Very helpful.

Thank you.

Jay Srivatsa, Chardan Capital Markets.

Thanks for taking my question.

Rami, can you give us a sense of what's happening in the competitive landscape?

It looks like a least one of your customers appears to be gaining traction not only in the US, but also outside the US.

Give us a sense of where things are relative to where it was a quarter ago.

Yes, I am not seeing any drastic change.

We have three major pure plays in the market.

We are now in the second quarter where we are -- we have number one market share in our space.

All in all the space is good.

I believe that all three players are really players, and if executed right, can enjoy the [up-roading] trend with products related to DPI technology.

So wish them best of luck.

We continue to be most hopeful on differentiating ourselves when it comes on the mobile side versus those [GB centers] who claim they can do integrated GB sense.

I'm less worried about the pure plays.

Not because we discount them; just because there's plenty to go around for three pure plays.

And the main target is to take -- to continue winning properties and opcos away from those who deployed integrated solutions.

All right.

Nachum, a question for you.

You seem to have incurred $1 million charge in M&A activities that you've taken out on some GAAP to non-GAAP reconciliation.

Given that the size of your deal was less than $2.5 million, it appears -- can you give us a little bit more color on why -- what made up the $1 million there?

Jay, what do you mean by $2.5 million deal type?

You said something about $2.5 million?

I thought you had said that the deal size was less than 10% of your cash position, which --

Total cash position, you know, like -- so I mentioned less than 10% of the $165 million that we had, but I have to say that when we said the one-time this part -- I mean there were two parts of it; the part that relates to M&A, it doesn't relate to Ortiva.

It relates to other M&A activities that didn't conclude in the first quarter.

So it's not part of the Ortiva M&A.

That's the portion of M&A which relates to the one-time charges.

Okay, thank you.

(Operator Instructions).

Matt Robison, Wunderlich Securities.

Just you might have touched on this a little bit, but I think last year at this time you had two 10% customers, one which was fixed in Europe.

Just wanted to know if it was a similar kind of a situation or if perhaps they're both mobile.

And the other thing is you had mentioned regulatory compliance.

Was that related to this dust up over a distributor in Scandinavia?

So to answer your first question, Matt, no it's not the same.

Obviously, the Tier 1 mobile customer is, but the other one is different than the one from last year.

Okay?

I think that answers your first question.

And your second question is, yes, part of the $1 million as we said went to tightening up our regulatory compliance program with analog.

Thanks.

As there are no further questions in the queue, that will conclude today's Q&A session.

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

We thank you all for joining us today and for your interest in Allot.

We look forward to meeting with many of you during the next quarter and hope to see you again on the call with -- in the next quarter.

Thank you very much.