Nice Ltd (NICE) 2014 Q3 法說會逐字稿

Welcome to the NICE Systems' conference call discussing third quarter 2014 results, and thank you all for holding. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded on November the 5th, 2014.

I'd now like to turn this call over to Mr. Marty Cohen, VP Investor Relations at NICE. Please go ahead.

Thank you, operator. With me on the call today are Barak Eilam, Chief Executive Officer; Dafna Gruber, Chief Financial Officer; and Eran Liron, Executive Vice President, Marketing and Corporate Development.

Before we start, I would like to point out that some of the statements made on this call will constitute forward-looking statements in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please be advised that the Company's actual results could differ materially from these forward-looking statements.

Additional information regarding the factors that could cause actual results or performance of the Company to differ materially is contained in the section entitled Risk Factors in Item 3 of the Company's 2013 annual report on Form 20-F as filed with the Securities and Exchange Commission on March 26th, 2014.

During today's call we will present a more detailed discussion of third quarter 2014 results and the Company's guidance for the fourth quarter and full year 2014. Following our comments, there will be an opportunity for questions.

Let me remind you that unless otherwise noted on this call we will be commenting on our adjusted results of operations, which differ in certain respects from generally accepted accounting principles, as reflected mainly in accounting for acquisition-related revenue and expenses, amortization of intangible assets, and accounting for stock-based compensation. The difference between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release.

I'll now turn it over to Barak.

Thank you, Marty, and welcome, everyone. I'm glad to be on the call with you today.

I'm happy to report a strong performance for the third quarter. Revenues were $250 million for the third quarter, which came in above our guidance and represented 9% organic growth compared to Q3 last year.

Earnings were also strong at $0.70 per share, which was also above our guidance, and represented 13% growth compared to the third quarter last year.

These results reflect the initial impact of the plan we began to execute in the second quarter of this year. This plan focuses on improving execution, streamlining the business, and increasing profitability. Some of the measures we have taken so far include optimizing our go-to-market, eliminating nonproductive activities, and disciplined expense management.

We had another strong quarter of bookings, and the pipeline is robust as we head into the final quarter of the year. As we previously mentioned and as you can see from Q3 results, our year continues to be second half weighted.

Analytics are the driving force of growth across our businesses. We continue to develop additional use cases for analytics, which is generating demand from customers and increasing our addressable markets.

Furthermore, our analytics are creating a significant competitive advantage for NICE, which is leading to further penetration within our customer base as well as gaining new customers.

A few examples of these use cases can be found in the recent products we have released to the market. NICE Engage, which we announced earlier in July, is building momentum, and we have already signed deals with a number of leading companies.

We have now added more capabilities integrated into NICE Engage with the introduction of Insight Amplifier, which is our next generation interaction analytics. Later on I'll talk about additional analytics capabilities we have successfully introduced recently, such as Suspect Search for security and our customer risk assessment solution for financial crime and compliance.

As I mentioned, analytics are the driving force of growth across our businesses, and the key demand drivers for our analytics are to improve customer experience, enhance compliance regulation, and increase security.

When it comes to improving customer experience, we are providing cutting edge technology and solutions for our customers to help them to meet the strong demand to gain insights from Big Data and cross channel sources, and to better understand the customer journey.

One of our breakthrough innovations is our unique market leading Customer Engagement Analytics platform, and in Q3, we signed another eight-digit deal with a major telco company.

This major telco, an existing customer of NICE, recognized the strategic value of our cross channel Customer Engagement Analytics to help them operationalize all of their customer data. Now this telco customer can get a true multichannel view of their customers beyond the contact center to help them better compete in an aggressive market that requires a differentiated customer experience.

In another large telco deal, the customer bought our solutions to help them improve customer experience. This major European telco wants to better understand the volume of the calls, why people call, and why customers call back, all so they can improve customer service and be more efficient.

Telco's today have more customer data than ever before, and need to find better ways to harvest that data to improve customer experience and better differentiate themselves in a very competitive market.

These two large telco deals demonstrate the value of NICE's unique approach to cross channel analytics on a large scale, and our deeper penetration into the telco sector.

Our customer base, coupled with the demand to improve customer experience, represents a big addressable market for NICE. Our success in expanding within our customer base is proof of the strong return of investment that organizations are getting from our solutions.

In one such example, a very large banking customer did a major expansion in its branches with our Interaction Analytics to better understand the reasons behind people contacting the bank after they visited the branch.

In another deal, a large Latin American bank purchased our Real-Time Authentication solution to improve customer experience and to prevent fraud.

And this brings me to compliance and regulation, another key demand driver for our analytics. Demand for our solution around compliance regulation is solid as a result of the expanding regulatory landscape worldwide and demand from customers for analytics to derive insights from all the unstructured data to help them comply.

We do compliance much differently than others. The unique combined technology from our Customer Interactions and Financial Crime and Compliance businesses enables us to merge interaction and financial transaction data to provide a holistic approach to compliance. It is truly a distinct competitive advantage, as others lack the collective technology that enables it.

This holistic approach was demonstrated in a significant deal we signed in Q3 with one of the world's largest sovereign wealth funds that manages over $100 billion in assets. They purchased our Holistic Surveillance solution, which allows them to view and manage insights generated by communication and trade surveillance elements.

We continue to strengthen our leadership in compliance and regulation with new products and partnerships. In fact, we recently announced an alliance with Alacra to integrate its market leading Reference Data Platform into NICE's Actimize anti-money laundering solution. This creates a powerful and innovative customer risk assessment tool in the marketplace today.

Anti-money laundering continues to perform well due to upgrades of our new platform, regulation, and strong market dynamics. Our continued innovation, domain expertise, and large customer base reflect our leadership in this area.

We had several seven-digit deals in AML including a competitive replacement at a large retail bank in France. With our AML solution, the bank will become fully compliant with their financial regulator. We won this deal on the strength of our valuable position and the confidence that our solution gave the bank in its ability to meet the regulator's expectations.

In the past, I have spoken about the opportunities in the alternative payments markets. It is an expanding market for us, as consumers continue to seek different methods of payment outside of the normal channels.

In Q3, we signed another deal in this growing market with one of the world's largest tech companies, which will be using our Enterprise Risk Case Manager. The solution will provide them the tools to check suspicious transactions.

The third key demand driver for our analytics is around increasing security. We continue to demonstrate leadership and innovation with disruptive technologies like Suspect Search.

It is a new analytic solution that can search from multiple video sources to find a specific person among large crowds very quickly. The solution is gathering momentum and already won multiple industry leading awards.

During the quarter, we signed a deal over $5 million with a major US utility company. Our solutions will support their critical infrastructure, including protection of their substations and control centers.

The deal, which included NICE Analytics, demonstrates how NICE security products can be used as an integrated solution to provide video surveillance, intrusion detection, and centralized monitoring and response to cover the full life cycle of risk.

In summary, I am pleased with our execution in the third quarter and the good progress we have made so far. Organic growth is accelerating, profitability is improving, and analytics, which are the growth driver of our business, are performing well.

We are in the right markets at the right time, as demand around customer experience, compliance regulation, and security is strong from organizations worldwide. Based on demand and a solid pipeline, we are well positioned for a strong finish to the year.

I will now turn the call over to Dafna.

Thank you, Barak. I am pleased to provide you with an analysis of our financial results and business performance for the third quarter of 2014 and our outlook for the fourth quarter and full year.

Revenues for the third quarter were $250 million, up 9% organically, from $230 million in Q3 last year. Customer interaction revenues were $150 million in the quarter, up 7% from Q3 last year.

Financial crime and compliance reached $42 million, up 6% from Q3 2013, which was then a very strong quarter with 33% percent year-over-year growth. Security revenue grew 17% year-over-year to $58 million.

Moving to the regional breakdown, third quarter revenues in the Americas were $164 million, up 15% from Q3 2013. Revenues in EMEA increased 9% from last year to $60 million. Revenues for Asia-Pacific region were $26 million.

For the quarter, the Americas accounted for 66% of total revenues, EMEA 24%, and APAC 10%.

Looking at revenues by business line, product revenue accounted for 37% of total revenue in Q3. Maintenance revenues accounted for 40%. And professional services, including cloud, accounted for the remaining 23% of revenues.

As we mentioned last quarter, we have been focusing on our operational model to identify areas for operational efficiencies in both the short and long term. During the past six months and in planning for 2015, we are looking carefully at our spending. We are optimizing our operations and prioritizing activities.

We can already see the results in this quarter's improved operating margin. Sequentially, while our revenue grew, we kept our operating costs relatively flat, bringing sequential leverage to 24%. We continue to focus on our long term plan to improve our operating margin and leverage.

During September, we closed the tax audit in Israel at an amount lower than anticipated. This led to, on one hand, additional tax payments, and on the other hand the release of tax provisions, bringing the Q3 tax rate down to 11.5%.

We also had a tax expense adjustment related to a one-time tax expense from Q3 last year. We are not changing our long term tax rate to a range between 17% to 18%.

Earnings per share increased 13% to $0.70 in Q3 compared to $0.62 in Q3 last year.

Cash flow from operations in the third quarter was strong was $34 million. Total cash and financial investments were approximately $449 million at the end of September 2014.

During the third quarter, we bought back 755,000 shares for total consideration of approximately $30 million as part of our share repurchase plan. We have purchased a total of $73 million of our shares so far as part of our $100 million buyback program we announced earlier this year.

During Q3, we paid a quarterly dividend of $9.4 million. In our dividend plan, NICE's Board of Directors approved a dividend for Q3 2014 of $0.16 per share. The record date is November 17th, and the payment date is December 2nd, 2014.

Turning to guidance, we expect fourth quarter 2014 total revenue to be in the range of $285 million to $300 million, and fully diluted earnings per share to be in the range of $0.89 to $1.01.

We expect total revenues for the full year 2014 to be in a range of $1.003 billion to $1.018 billion, and fully diluted earnings per share to be in a range of $2.73 to $2.85.

That concludes my comments. I will now turn the call over to the operator for questions.

Thank you. (Operator instructions.) Shyam Patil, Wedbush Securities.

Hi, guys. Congrats on a great quarter. First question, the organic growth rate up nicely to 9% year-over-year. Should we think of that as sort of the new baseline going forward, particular as we look out to 2015? And Barak, what's your sense as to when growth can reaccelerate organically back into the double digit range?

Hi, Shyam. Thanks for the questions. So, yes, we saw a much better organic growth this quarter. And as I mentioned before, the pipeline is strong and the business is healthy. It's a trend we started to see already last quarter, and we believe that the future is bright.

Whether this is a sustained mode or not, it's too early to say. We are not providing right now guidance for 2015. We will provide them obviously at the end of the year with the results of the next quarter, and then I will be able to provide this information.

Great, and then a follow up. In the past, you've talked about M&A being an important component of the strategy going forward. Just wondering if you could provide an update on your thoughts there and what you're seeing for valuations right now across the different business segments and geographies.

So, we are active on both fronts. Obviously, we are acting, as you saw from the results, on improving our operation and boosting the organic growth. And this is the focus on one hand.

On the other hand, we are active on the M&A front. We are building a pipeline for the right assets that fall into alignment with the strategic model of the company. As I always said, you need two for a tango, and obviously for the right valuation and it needs to make sense.

So, both fronts are relevant for us. We'll continue to improve the company operation and the organic growth. And at some point, I believe that on the M&A front some of the opportunities will materialize.

Great. Thank you. Congrats again.

Thank you.

Shaul Eyal.

Thank you, operator. Hey, good afternoon, guys. Congrats on a very strong result and upped outlook. Barak, can you provide us with the actual changes that you guys have been taking operationally? I know you talked about streamlining and seeing some improvement, but is it being such a -- more on top on the salespeople, on top of the R&D, on top of delivery? What is it exactly that has began to change over the course of the first five, six months since you came on board as the new CEO?

So, thank you for the question, Shaul. Yes, it's basically all the above, but I'll be a bit more specific.

We are touching all of the areas that you talked about, on one hand with the leading forces in the company, which is product and innovation. And on that front, we accelerated a lot of the plans and focused some of the release plans of some of our products, which I talked about in the call, focusing a lot about analytical capabilities, changing priorities.

And I think you can see that from the releases that we have done in the last few month, starting from NICE Engage and the Insight Amplifier, the additional capabilities for the customer engagement analytics that bear fruit, Suspect Search on the security side. And on the financial crime and compliance, the partnership with Alacra was a breakthrough of a new platform that we have released over there.

So, this is on one front. And we see good traction to all of the things that I have mentioned. And we'll continue to focus on the right innovation and accelerated release to the markets, being way ahead of the curve, leveraging the great technology we have.

On the other side on the go-to-market, aligning some of the things we are doing in some of our regions in some of our go-to-market elements, making them much more of a global practice, making them much more focused. And that's on that front.

The third layer, if you would like, is the operational elements of the company. And this is looking on things a bit more holistically, consolidating different functions, looking on expenses and prioritizing them correctly.

And I think on that end you can see the results already in the operating margin and the operating income, which improved, actually stayed relatively flat, the expenses, while the revenue grew. Hence, the leverage of the company, leverage -- not the company, leverage of our revenues is higher than we have experienced before.

We'll continue in all of those fronts that I have mentioned before, and some additional acceleration on some fronts. And I hope to further improve the execution as a result.

Thank you for that. Just another question, and I don't know whether you or Dafna want to take it. So, Barak, five, six months now. I know maybe the next point or the next focus area could be taking a fresh look at capital allocation. Are you happy with the way the balance sheet cash flow is currently allocated or do you think there could be some potential room for improvement on that front as well, given the capital -- or given how cheap capital is out there?

Yes. So, just as a reminder, and I think you know that -- and actually you can see it in the numbers of this quarter. We allocate most of the capital, most of the cash we generate on a quarterly basis, you saw it this quarter, the combination of the buyback and the dividends was actually even a bit higher than the cash generation this quarter. And this is our current capital structure philosophy.

As I said before, we are looking on a variety of M&A opportunities, which we do plan to use the capital that we have for that matter. If we'll decide that this is not the right way for us to go, we will look into the capital structure of the company. But, right now I think we do have the right balance between money for investments and money or cash that goes back for buyback and for dividend.

Thank you very much. Good luck. Congrats.

Thank you.

Thank you.

Tal Grant, UBS.

Hi guys. So, just looking at your updated guidance for Q4, it looks like you're now expecting a slightly softer Q4 than you were previously. Just wondering, have some deals slipped into Q3, and is that why Q4 has come down a bit?

On the flipside, your upper end of Q4 guidance is still extremely high and implying unprecedented increases in revenues and earnings for Q4. Just wondering, is there some optionality? Is there a large deal -- a specific large deal there or a couple of large deals that you may sign in the quarter, and how are they going, if so?

Second question, I think you said in July that the product gross margin would improve in Q3. You might have meant Q4, but just wondering why is it weaker year-on-year? Is that just more hardware sales or is pricing coming down, or what's going on there?

And finally, on NICE Engage, just to get an idea of the opportunity here, is it 25,000 seats that will need to update to the new platform? And how is pricing going there with the customers you're talking to? Thank you.

Okay, I'll answer the third question and then Dafna will take the first and the second.

So, with respect to, I believe, the third question with respect to NICE Engage and the potential, basically the platform of NICE Engage is applicable to all our customer base, which is very significant.

We don't report the exact number of seats that we have out there, but it's definitely very significant. We see a business, the re-certs and license fees that come with that, a certain service element that comes with that, and feel the uplift for the maintenance.

The opportunity, we believe, is significant. It's not a matter of question. It's about execution, how fast we can approach all our customers and drive them to upgrade to NICE Engage.

As I've mentioned before, we launched it in July. We already saw this quarter several deals coming from leading customers. So, we are very positive about the trend that we can build over here.

Dafna, about the first and the second?

Yes. So, I'll start with the second one regarding gross margin. Yes, it is slightly below last year, but not significantly. The result is the product mix. And I believe that going forward in the fourth quarter and after we do target higher gross margin than 65%.

Regarding the guidance, we -- actually it's a combination. What you see in the guidance is a combination of what you've alluded to. On one hand, we are expecting significant growth sequentially. And this is based on the current pipeline, the healthy pipeline that we see in front of us.

There is a large amount of deals. Some of them are large deals that we are working on. And because of that, we do expect a significant sequential increase. We gave for the fourth quarter at this point of time relatively a wide range because there are many deals to close. But, overall we do expect a very strong fourth quarter.

Okay. And about bringing down the guidance for Q4, the midpoint anyway, is that because some deals were signed in Q3 and you thought they would be signed in Q4?

Actually, we didn't have a guidance for Q4 before.

But you had full year guidance and Q3, so you kind of did.

Yes, but the average of the yearly guidance is now higher than the third -- than what we had in the third quarter. We took down slightly the up range. We took up the low range. But on average, our -- the average of our guidance for the full year was higher than Q3 with more than the incremental revenues that we had in the third quarter, and above the current --.

Not by much, I mean, by $500,000, whereas you beat the midpoint of your Q3 range by $6 million.

Yes, but the overall average of the guidance is up.

Yes, but not by as much as Q3 beat the midpoint.

We gave the guidance for the fourth quarter based on what we see now. It's well within the yearly guidance and reflects a very strong sequential and year-over-year growth.

Okay. Thank you.

Yes, just to make sure the point is clear, the annual guidance is up actually more than the overachievement, if you would like, we have in Q3. And we didn't give guidance to Q4 before. What we see, the range of Q4 is based on the strong pipeline that we have in front of us, which alludes to the guidance -- the annual guidance that you see.

Okay. Maybe we can talk about it offline. Thank you.

Daniel Ives, FBR Capital Markets.

Hey, guys. This is Jim in for Dan. Great quarter. Can you just talk about the puts and takes geographically? It looks like the Americas had a really strong quarter. And maybe you could just talk about the other regions as well.

Sure. Hi, Jim. Thank you. Yes, so we saw a very nice and strong quarter in the Americas, also relatively healthy in EMEA.

The somewhat weakness we see in Asia-Pacific goes to the other comments about the security business. On one hand, we saw a nice growth in this business. It's a lumpy business. Not every quarter we see the exact same growth, and this time it's impacted the results in Asia-Pacific.

Okay, thanks. And then, if you could just maybe also elaborate a little more on the opportunities that you're seeing with the increased use cases around the analytics business.

Yes. So, we definitely -- the core of what we do is around analytics. This is our -- the day-to-day is about we have a variety of technologies in that domain and a lot of domain expertise in the markets that we operate in.

And we work very closely with our customers to find additional use cases. When we find such a use case, we usually work with a design partner of ours to further discover and further elaborate on this use case, and then we develop the right product in context.

When you look on the few use cases I've mentioned previously on the call, one of them is Customer Engagement Analytics. We announced it last year, a very robust analytics platform, definitely for the high end market but also going down market with that.

We signed, as I mentioned, an eight-digit deal with a large telco this quarter. And this is proving to us that we are in the right direction on that front. It opens up, we believe, a lot of additional use cases from the deployment and the dialogue with these customers.

The other two examples I've mentioned, Suspect Search, a classic example where we have a very strong presence in the relevant security markets. We come with such a capability that we heard about this need from customers, and now we believe that this can go both to our installed base as well as to new markets where we are not present.

And another part of the analytics, if you would like, in our financial crime and compliance business, that by itself most of what we do in this market is based on the very strong analytics.

Over there we have actually a unique combination of bringing data from a variety of sources, interaction data and transactional data. That's the uniqueness of what we do. And over there, we see multiple use cases to our analytics. And we will release them in an even more frequent way than in the other markets.

So, all in all, we have a lot of work to do materializing those use cases to business. And that's our focus.

Great. Thanks very much.

Thank you, Jim.

Greg McDowell, JMP Securities.

Thank you. Good morning. Thanks for taking my questions. Congratulations on the eight-digit telco deal. I wanted to ask, was any of the product revenue from that eight-digit deal recognized in Q3, or was it one of these situations where it's a big project where sort of the license sales are going to be recognized on delivery instead of -- delivery of the project instead of delivery of the licenses, if you could just talk about sort of the revenue recognition of a deal that large? Thanks.

So, it's a good question. So, the answer is yes to obviously some of the number that I've mentioned. There is -- such a deal has a variety of elements to it. It has license elements. It has services. It has maintenance. So, some of the revenue already has been recognized and some we'll see on the following quarters.

It also goes to the deals I've mentioned -- we've mentioned last year, at Q4 of last year, which we continue to see revenues from this deal in this quarter and in the following quarters as well.

Great. Thank you. And then, one thing I've noticed on this earnings call maybe versus some previous earnings calls is just all the commentary on the multimillion dollar deals. It definitely feels like there were more than usual. And given that, I was just wondering. As you enter this Q4, compared to Q4 last year do you feel like, based on your backlog, you have better visibility into the quarter this Q4 than last year? Thanks.

It's hard to say. What I can say is that we definitely have a very strong pipeline.

This Q4, it is higher than the pipeline we had last year. Assuming our conversation rate, and that goes to execution, would be the same or better than last year, we believe that the guidance that we gave is very realistic. And this is the reason for the range that we gave. But, definitely the pipeline is stronger.

Great. If I could slip in one more for Dafna, just the tax rate came down quite a bit in Q3. And I heard your explanation, but how should we think about a tax rate for Q4? I may have missed that, but if you could just give us a sense of whether we're talking about a 12% non-GAAP tax rate or an 18% non-GAAP tax rate. Thanks.

Yes, the tax rate. Going forward, our tax rate remains unchanged at 17% to 18% on a yearly basis. As always, there might be some fluctuations. In this quarter, we had a benefit from closing a tax assessment, as I've mentioned. But, we are not changing the longer term or the overall tax rate for the company longer term and for Q4.

Okay. Thank you very much.

Thank you.

Jeff Kessler, Imperial Capital.

Thank you. You've mentioned a couple of obviously large telecom deals, and I'm wondering have you beefed up your marketing efforts and go-to-market in that vertical? Is that vertical going to become -- obviously it's going to become over the shorter term a larger segment of your revenue base. But, is this targeted at being a larger segment of your revenue base, and for what reason?

Yes. Thank you, Jeff, for the question. It's a good question, and the answer is absolutely yes. We are historically operating in a variety of verticals in the enterprise sector as far as about 10 or 11 different verticals. Historically our stronger vertical was financial. It's still a very, very strong sector for us.

But, we invested in the last few months a significant go-to-market effort in additional verticals. Telco is one of them, and I truly believe that it will become a very strong vertical for us. We see the solutions that we have becoming even more applicable to telco. It's also to insurance, healthcare, and a few other industries.

I think that the reason for that, besides the focus of the go-to-market, is the fact of going back to the use cases that I've talked about before. The need of those organizations to take a vast amount of customer data from multiple channels and process them in real-time for a variety of use cases is definitely very appealing and a high need for telecoms, for healthcare, insurance, and obviously financial services.

And we now bring these solutions to all of those verticals. So, the answer is yes, I expect those verticals to become even more significant for us in the future.

Is there a margin mix that you would like to see, or a business mix that is more optimum for increasing margin? I mean, I could say it the other way. Which of these have higher margins and lower margins? But, obviously you're going to say you'd like to see them -- you'd like to get business from them all. The question is how would you like to tier those businesses in terms of what you get so that you maximize your margin from them?

Yes. I don't think we see different margins between those verticals. This not the driving force for us, why going to additional verticals. And we do operate in those verticals for many years.

The reason is the addressable markets. We believe that the solutions that we have are applicable to a variety of verticals. Historically, as I've mentioned, we had a lot of focus on financial services.

We still have this focus. But, we expanded and segmented the go-to-market teams to specialize in a variety of verticals, and we see the results. So, the driving force is the addressable market, not necessarily the margins.

Okay. One final question, also noticing that the financial and compliance segment grew at 7%, which actually has been pretty consistent, whereas security grew at 15%. And as you've already said, it's already going to be lumpier. Is security going to permanently be lumpier because of the size of projects, or does it have to grow to a certain size for it to be less -- for whatever you get involved with, secured cities' programs and things like that, does it have to be larger for that lumpiness to go away, or is it going to be always 1% up one quarter and 15% up another quarter?

Yes. So, for the short term, we might experience some lumpiness in this business. An important focus for us is for the long run, and we believe that we can bring this business to a much more sustainable growth.

And it goes to what you've hinted, which is basically scaling up the business on one hand, on the other hand making sure we have enough of what I'll call a run rate business in this domain, as well as those large projects. And if you combine the both of them, we'll have a much more sustainable growth.

So, we are trying -- we are doing some short term optimization to this business, as you have witnessed this quarter. And our long term plans, both on go-to-market, products, the places where we operate in, are definitely aiming -- we are aiming to get it into a much more of a sustainable growth business.

Okay. And are you able to describe in general terms any of those security programs? I realize you can't do it for some of them, but a general description of those?

You mean specific deals or customers?

The types of business -- yes, the types of operations and functions you're performing in security.

So, our security business is actually -- we are exposed, if you would like, to a very large addressable market in the security business. It's actually divided into a variety of markets. There is the physical security market, the public safety market, and the intelligence market. The commonality obviously is to bring analytics and similar technologies with different use cases to this market.

I think that the beauty is that, in all of those markets that I've mentioned, we see a strong demand and great potential with a very large addressable market. And we are focusing our efforts in the places where we see the ability to go with the strategy that I've mentioned before, on one hand building a sustainable run rate business, on the other hand obviously bringing those large projects.

When we get to this point, I do believe it will look much more similar to the rest of our business, that it has a very healthy ongoing recurring business, as well as mid and large size projects.

Thank you very much.

Thank you, Jeff.

Dan Bergstrom, RBC Capital Markets.

Yes, thanks for the question. Any comments on or trends in cloud demand in the quarter?

Oh, yes. I didn't get -- thank you for the question. Yes, we do see an increasing demand for cloud and SaaS. It continues to grow for us in double digits.

I think as I mentioned in previous calls, we go about it very smartly. On one hand, we manage our information to the cloud. Some of our products are very much applicable to that and going through this transformation relatively quickly. And in the other products, we are managing it much more carefully.

But overall, definitely the growth and the demand continue to be strong. I think that we have mentioned in a previous call, and that's an important point to mention, if you take our cloud business and you do what we like to call the perpetual equivalent, actually our organic growth rate would have been a bit higher in a few percentages than what you see right now. Applying that in the future, we can benefit from the growth that we see in the cloud business.

Thank you.

Thank you, Dan.

Thank you for your questions. We'll now return to Barak Eilam for closing remarks. Please go ahead.

Thank you, everyone, for joining us on this call. Looking forward to speaking to you shortly again. Thank you.

Thank you. Ladies and gentlemen, that concludes your conference. You may now disconnect. Do enjoy the rest of your day.