Radware Ltd (RDWR) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the third quarter 2014 results conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder, the conference is being recorded.

And I'll now turn the conference over to our host President and Chief Executive Officer Mr. Roy Zisapel. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Radware's third quarter 2014 earning conference call. Joining me today is Meir Moshe, our Chief Financial Officer. Meir will start the call by reviewing the financial results, and afterwards, I'll discuss the business highlights of the third quarter results. After my comments, we'll open the discussion for Q&A. Meir?

Okay. Thank you, Roy, and welcome, everyone, to our third quarter conference call.

First, I would like to read you the safe harbor language. During the course of this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the Company.

We wish to caution you that such statements are just predictions and that actual events or results may differ materially, including but are not limited to general business conditions and our ability to address changes in our industry, changes in demand for products, the timing in the amount of orders, and other risks detailed from time to time in Radware's filing.

We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company's last Form 20-F filed in March 2014.

And now, ladies and gentlemen, for the financials. We are happy to report record quarterly results and improvement in many parameters, revenues of $56.8 million for the third quarter of 2014, representing 7% sequential growth and 18% year-over-year, increasing non-GAAP gross margin from 82% to 83%, EPS of $0.24.

Non-GAAP net income increased to $11.2 million, representing an increase of 44% compared to net income of $7.8 million or $0.17 per share in the third quarter last year and an increase of 36% compared to net income of $8.2 million or $0.18 per diluted share in the second quarter of 2014.

As a result of our leveraged business model, we were able to achieve 20% non-GAAP operating margin, improved GAAP net income, $2 million of stock-based compensation expenses, $400,000 of amortization of intangible assets, $1.1 million of litigation costs associated with IP litigation, offset by exchange rate income of $100,000, bring GAAP net income this quarter to $7.8 million or $0.17 per share, representing an increase of almost 170% compared to net income of $2.9 million or $0.06 per share in the third quarter of 2013.

The headcount for the end of third quarter totaled to 867 employees.

Following payment of $4.5 million in relation with other share repurchase, our overall cash position, including cash short-term and long-term bank deposits and marketable securities totaled to $306 million, and we have no debt. Shareholder's equity totaled to $315 million.

Guidance for the fourth quarter. We expect revenues to range between $59 million to $61 million, 82% gross margin. OpEx will range between $36 million to $36.5 million, financial income at $1.4 million, 13% tax rate, and non-GAAP EPS to range between $0.25 to $0.28.

As you can see, ladies and gentlemen, we had a quarter of record results with improvement in many parameters, which emphasized the leverage in our business model, and we expect higher and better results in the fourth quarter of 2014.

And now, I would like to turn the call over to Roy.

Thank you, Meir. Our third quarter results reflect strong demand in both enterprise and carriers for cyber security and application delivery solutions.

We were pleased to see all our regions posting (inaudible) growth. In addition, we had significant new account wins across the world that enables us to create a base for further expansion and growth.

Our North American region performed extremely well. Our US business continued to deliver very solid delivery of growth. And we continue to grow our market share.

We see significant opportunities in carriers, large enterprises and Cloud providers, [all we need] for better security, better response time for hosted and centralized Web applications, and better availability for the mission-critical applications.

In addition, we saw ongoing improvement in our international business. We continue to see year-over-year growth in EMEA. In Asia-Pacific, while we still see challenges in some markets like China, we are encouraged by strong wins and the steady growth we are seeing in the region overall.

From a vertical point of view, we see major opportunities in carrier Cloud providers and our key enterprise segments of financial services, government, and online businesses.

In the application delivery market, our newly introduced Alteon NG and the Alteon 5208 platform are receiving excellent market traction. Alteon NG goes way beyond legacy ADC offerings and allows our customers to guarantee the SLA for each application.

Through our leading virtualization architecture, our real-time application SLA monitoring, and FastView, with its best-of-breed application acceleration capabilities, we are the only vendor that can guarantee committed resources and performance on a per-application basis.

The new Alteon enterprise platform, the Alteon 5208, establishes a new performance benchmark for the enterprise market, providing very significant performance improvements over F5 and A10 platforms to the extent of five times more performance than competing platforms.

The power of these platforms allow us to offer up to 24 virtual ADC instances and run our advanced integrated security modules of Web application firewall and application authentication.

We believe that the sales of additional software modules, coupled with our growing Cloud security and Cloud delivery subscriptions, can positively impact revenue growth and gross margins.

During the course of the quarter, several customers adopted the Alteon NG platform. For example, Blue Coat Commerce, a software as a service provider in the furniture industry, now uses the platform to accelerate response time to its customers.

Brinkster, a Cloud and hosting provider, deliver application delivery service per customer based on the high density of the virtual ADC instances we have.

Yes Satellite, Israel's leading provider of home entertainment, uses the Alteon NG in yesGO, a new video platform service that allows customers to access video content on their PCs, iOS, and Android smartphones and tablets.

Our largest win for the new Alteon 5208 platform came from EMEA with a deal for 113 Alteon 5208 switches from a leading bank.

In the application securities space, our attack mitigation solutions continue to prove its unique capabilities in blocking major cyber-attacks on our customers' datacenters. We believe we are, if not the only solution, then one of very, very few that can deal with the rapidly evolving threat landscape.

Last quarter, we announced that our DefensePro family has achieved certification for Common Criteria Evaluation Assurance Level EAL 4+. One of the purposes for the Common Criteria certification process is to ensure that evaluations of information technology products are performed to high and consistent standards.

We are pleased to have this industry-unique high level of certification, which is essential for government bodies around the world.

We are seeing multiple projects across the world where leading carriers and hosting providers rely on our attack mitigation system to protect their internal infrastructure and more so to provide their key enterprises with new security Cloud services.

For example, IDC Frontier, which is a subsidiary of Yahoo Japan, provides Cloud datacenter hosting and IP network services. IDC Frontier selected Radware's attack mitigation system to protect its new Cloud-based network service from distributed denial of service attacks.

We continue to enhance our next-generation cyber security architecture, the attack mitigation network. Just to remind everyone on the call, AMN combines distributed detection and mitigation elements to work as a complete grid for optimal attack detection and mitigation across all enterprise resources, in the datacenter, at the perimeter, and in the Cloud.

With real-time synchronization of legitimate user patterns, attack traffic, and vectors across all networking-enabled and security devices in the datacenter and in the Cloud, AMN providers our customer with a new level of combating cyber-attacks against their datacenters.

This quarter, we released a new version of Defense4All, which is our SDN security application for the OpenDaylight controller. Radware's Defense4All application offers carrier and Cloud providers DDoS detection and mitigation as a native network service.

Utilizing the OpenDaylight SDN controller, Defense4All allows operators to provision DDoS protection service per customer in real time.

Going forward, we believe that some of the announcements we made this quarter point very well to where we believe there will be significant growth in our markets. We're focusing more and more efforts on cyber security, carrier and Cloud datacenters, and SDN.

We believe Radware is unique in its ability to provide a broad set of datacenter application services that include application delivery, attack mitigation, and Web acceleration. All of these services are in great need in Cloud and software-defined datacenters.

We are seeing very interesting opportunity for growth in these areas. And as a result, we are investing more resources, both in R&D and in sales and marketing to address these opportunities. We believe that these investments, which are already captured in our guidance, will allow us to continue to grow our revenues and profitability and present higher leverage in the business model.

Before concluding, I would also like to thank our customers and partners for their continuous support and trust and the Radware team for their all their efforts, commitments, and success in growing our business.

With that, I would like to open the discussion for Q&A.

(Operator Instructions). Mark Sue, RBC Capital Markets.

Yes, thank you. This is [Emit Prevu] calling on behalf of Mark Sue. Maybe if you could just share the geographic contribution in the quarter and sort of the contribution from enterprises and carriers?

Okay. The region, the US, 45% contributed to the sales, EMEA 23%, and Asia-Pac 32%. As for the enterprise-carrier, the enterprise was 70% and the carriers 30%.

Thanks. And just a quick question on the security portfolio. You're gaining traction in the market. Could you maybe talk about the competitive dynamics in security, what you're seeing sort of as you go against solutions from an A10, F5? And are you seeing an impact from F5's acquisition of Defense.net? And maybe if you could just talk about whether you need to buy or develop additional capabilities in your security portfolio as you sort of ramp ahead.

The main competitor we're seeing in security is Arbor Networks, especially on the carrier markets. Regarding the Cloud service providers, many of them, and especially the largest one, Akamai Prolexic, is actually using our technology. So, we have a lot of deals as partners in our ecosystem, both our ability to deliver the Cloud service and many of our customers relying on our technology to deliver Cloud DDoS mitigation.

And so, in general, we didn't see any competitive changes in the landscape in security. And we feel quite strong on our advantages and position.

Regarding the expansion of our capabilities, we're obviously looking both to continue internal development as well as on key capabilities that we might want to add. Security is a very -- cyber security is a very dynamic space.

And we are focused on the availability-based attacks, meaning attacks that are -- that their goal is to bring down your datacenter or your application or critical service. And in that regard, as the attackers are developing new ways to do so, so the same we need to do on our end, either with internal development or acquisitions. And definitely, we are looking on both.

And just a quick one on gross margins, security, and what your platforms are. And sort of do you agree that gross margins at 82%, can they go higher? Are you sort of looking at some conservatism here at the 82%, sort of considering 82% in 3Q?

We guided for next quarter for 82%. This quarter, we had 83% based on mix of product. So, it depends on the mix of product. We don't see right now the full quarter in front of us. So, we prefer to guide on the 82%.

Okay. Thank you. And good luck, folks.

Thank you.

Alex Henderson, Needham & Company.

Thanks. A couple of questions. First, what was it in the mix that actually caused the gross margin to be a little higher?

It's a combination of more high-end devices, more US mix, and more security.

Okay. But, so, all of those are trends that you would expect to continue I think. So, is there something that you would expect to reverse out of that?

I'm not sure that the amount of high end versus the mid and low end should continue. And I'm not sure that the US will continue its 45% of our total revenues. So, while we are encouraged, we're seeing good gross margin trends, currently, we would like to see more proof for the fact that the -- that it's really trending higher and not one-time phenomena. I agree with you. There's a base to be optimistic.

Can you talk a little bit about the growth rate in the subscription bookings in the quarter? Obviously, those have been quite strong. And simultaneous with that, can you talk about whatever -- whether you see any cannibalization of your system sales as a result of those subscription growth?

So, we continue to trend very well with subscriptions. Obviously, you only see a small portion of that in the revenue recognition line. We don't see cannibalization between our product sales and the subscriptions because we sell the subscriptions to an extended element of the -- of our solutions.

So, for example, if we sell an attack mitigation solution for the datacenter, the subscription sale is for the Cloud service that accompanies the on-premise device. It's not instead. It's always in addition to. And so, we see that as a complete addition.

Also, in the Cloud application delivery and acceleration, we sell that on top of a CDN service of the customer. So, again, it's not cannibalizing any of our regular appliance sales. And hence, we are very -- we look at that very positively on this trend.

So, the subscription growth rate, are we talking about a four, five X book to bill on that?

Yes.

Okay. I'll cede the floor. Thanks.

Michael Kim, Imperial Capital.

Hi, good morning. (inaudible). So, can you talk a little about your pipeline and how you feel about this really, especially from repeat sales and larger customers? Is it similar to kind of the level that we're entering in at the beginning of the quarter? Thanks.

So, obviously, it reflects also in our guidance and in the numbers we've posted. We feel very good on our business and the -- we don't give specific numbers on pipeline. But, the build of pipeline, the growth, and the projects that we have been -- one comment I want to make is that a lot of the large projects that you're seeing more and more of them appearing in the revenue recognition line, those enjoy very good repeat sales.

So, in many cases, we are gaining the first set of datacenters or the first set of applications and then those expansions that are coming with these large customers and also the ability to cross-sell more of our solutions. So, we are entering on ADC. We can start selling the Web application firewalls or the attack mitigation and appliances and vice versa.

So, as we are getting into more of those large projects and large customers, we're seeing strong repeat business as well as very strong cross-sales opportunity that, again, is helping our pipeline to grow nicely.

And in your earlier comments, you also talked about number of new account wins globally. Where are you seeing the greatest strength? Is it large enterprise, carriers, some Cloud providers? Can you give some color on where some of that demand's being driven from?

It's obviously -- in amount, in absolute numbers, we're seeing the highest one in large enterprise, simply because there's limited amount of tier one carriers.

But, across the three markets, we had significant wins, meaning seven-figure deals, in all of the verticals you've mentioned. So, we are very excited about that. And we think that doing more business with these customers is very, very possible for us. And as I've mentioned, growing this large base of large customers that can repeatedly give us more revenues is something that we start seeing happening in our revenue line.

And then just on a broader basis for your out margin target of 20%, how are you balancing that with your investments in growth for versus you have seen margin expansion?

Okay. Actually, we continue to invest in the Company. And you can see that we have proven here that the margin is achievable based on achievement of growth. So, if we continue to invest -- enjoy from higher gross margin, we'll go higher. We have done it this quarter earlier than market expected and earlier what we set the target for the market, only in the first quarter.

So, I believe it will go in line with the growth, while the Company continues to invest in sales, marketing, and R&D.

Very good. Thank you very much.

Thank you.

Jess Lubert, Wells Fargo Securities.

Hi, guys. And congratulations on a nice quarter. Also have a couple questions. First, it sounds like you're continuing to see an uptick in the number of large deals. Can you comment on the timeline of sales cycles and how that trended during Q3 and how you're thinking about the time to close deals going into Q4? You've seen that improve, stretch out. Any comments there?

Don't think we see a major change in that environment. The -- obviously, it's hard on the large deals to know the exact quarterly timing, at least of the initial purchase. And with the repeat business, we have a bit more visibility to the process and timeline.

So, we don't see any significant change. We are seeing more larger deals around the world. And we definitely see that as a good positive, especially from the nature of the customers we are now doing business with. So, we don't see any change. Environment, at least from what we can say, stays the same. But, we're seeing more of deals.

So, it's a greater volume of deals is giving you visibility to a strong Q4 versus improved close rates on a similar number of deals. Is that the way to think about it?

Yes.

And then deferred revenue looks like it declined sequentially and decelerated year over year. Can you help us understand what happened there?

No, not at all. The deferred revenues, if you take both lines, what you have in short term and long term, so they are up. The trend is up. In Q4 also, we expect it to be up.

Okay. And then on the competitive front, NetScout recently announced it would be buying Danaher's communication business and by extension Arbor. Any thoughts on how this acquisition's likely to change the competitive dynamics in the DDoS market? And what are you hearing from your customers? Is this likely to open some incremental opportunities for Radware? How are you thinking about that transaction?

I think it's still early for us to provide any meaningful feedback or comments. I think the -- some of the customers and employees are in wait-and-see mode to see when this transaction will close and what will be the exact, I would say, structure and operation.

And for us, we continue simply to stay focused. We have a leading solution. We have a great proposition here. And we're just very focused on growing that business.

All right. Thanks, guys. Keep up the good work.

Thank you.

Joseph Wolf, Barclays.

Hi. This is Tavy Rosner for Joseph. I was wondering if you could provide us with the core carrier telecom performance by geography?

Actually, this is the same proportion, about 30% -- 70% enterprise and 30% carriers also on the region.

Okay. Thanks. And you talked a lot about security, cyber security. I was wondering if you could give us a sense of what kind of upside potential you see there. When I'm looking at the guidance, higher revenues, what was the contribution from that?

We're not breaking the cyber security specifically. And -- but, last quarter, there were several high-publicity incidents across the world that I think even further -- not that it's my -- not that it was not before, but even further pushed the cyber security topic to the top of line of IT investments and even becomes even more strategic to large organizations, like financial services, retailers, that even the executive management is dealing with the whole issue of cyber security.

So, I think there's a lot of attacks taking place, a lot of enterprises and carriers that are suffering tremendously from the attacks. And as a result, there's a very, very strong interest and project activity in protecting your digital assets.

We don't see that disappearing. If at all, the hackers today, even more tools, more capabilities, more bandwidth, more computing power to generate even more sophisticated attacks. And as they are successful, the level of their interest and enthusiasm in launching even bigger attacks is just increasing. So, given all of that, I think there's a long-term driver here for our business.

Okay. Thank you.

Mark Kelleher, DA Davison & Company.

Great. Thanks for taking the question. I was just wondering if you could give us some more background on the Akamai partnership. You mentioned your technology is used by Prolexic. How does that partnership work? Is that a meaningful part of your revenue, or could it be?

So, it's one of our customers. They're using a -- and it's known in the market for quite some time. They're using our devices as part of their mitigation, attack mitigation service. They're a great service partner and using very effectively our platforms. And we are happy to see them successful.

Not a 10% customer, I would assume?

No, we don't have a 10% customer.

Okay. And just one other question. Can you give us maybe the percent of revenue from existing customers? Is that possible?

Yes, on existing customer, it was 80% this quarter, and new customers 20%.

Okay. Great. Thanks. Congratulations. Great quarter.

Rohit Chopra, Buckingham Research Group -- .

-- Questions here. Just, Meir, maybe you want to talk about currency and what the impact of translation was, if you can talk about that. And then I know you price in local currency, I guess, mostly in Europe. But, just want to get a sense. Is there any slowdown there due to the currency? That'd be my first question.

The currency had impact on Q3 about $250,000. As what you mentioned about Europe, our pricing is mainly in US dollars. So, there is no impact from this aspect or no big impact from this aspect on the revenues.

Back to the Americas, the strength there, what specifically are the products on the security side that people were buying this quarter? Was it specifically DDoS, or did you broaden beyond the DDoS products in the Americas?

For quite some time, we've seen the Americas, all the attack mitigation solution components, meaning the DefensePro itself or the DDoS and intrusion prevention. The AppWall is enjoying very, very strong growth in the Web application firewall and Web mitigation.

The DefensePipe, the Cloud subscription for DDoS, is doing very well. And we are also seeing cross-selling to the ADC product line, where they're using our Alteon solution to signal and to our attack mitigation solution as well as to decrypt SSL attack.

So, we're seeing actually a very, very broad adoption of solutions there with our customers. And they understand also that a single device or a single tool cannot cope today with the challenges of a cyber-attack.

And what you need -- and that's why we -- I'm not speaking on a product. I'm not speaking on DefensePro or AppWall. We're speaking about our attack mitigation solutions. They need a complete solution utilizing all the cyber-attack mitigation technologies working in tandem, very well orchestrated, very well managed, monitored through a single pane of glass, and operated by people that know how to fight cyber-attacks.

Any other way just deploying different appliances from different vendors, trying to synchronize them under attack, etc., was proven to fail.

And so, I think that's the reason why you see more and more of our customers really deploying the complete AMS solution and achieving very good results with it.

Just a quick follow up on the security piece. Is there -- can you talk a little bit about your roadmap on -- in the hardware area? Is there a new solution coming out where you're going to combine the ADC and the security? I know they're separate boxes. But, I just wanted to get a sense. Is there something new on the horizon over the next couple of quarters?

So, first, definitely there's new solutions we're bringing to market. But, our regular policy is to announce them only when we release them to market.

Regarding the combination of application delivery and security, that's already generally available. The ADC devices do include security modules, like DDoS protection to some level, attack mitigation signaling, meaning whenever we detect, we signal to our other security solutions, like the Cloud solution or the DefensePro.

I've mentioned the integrated authentication gateway, the integrated Web application firewall. So, there's a lot of security capabilities already built into the ADC and generally available, as I've mentioned.

Last question. Just, Meir, you mentioned that sales and marketing and R&D, there'll be a little bit more resources towards -- or thrown towards that. Is there some type of inflection, or should it continue to increase at the same rate we've seen it over the last several quarters?

We haven't said yet our plans for next year. But, we plan to invest based on the opportunities. As we see higher opportunities, we'll invest more. And the outcome of this, you have seen it this quarter when we introduced higher sales by that growth in the EPS and achieving margins even earlier than expected.

Because our sales now are ramping faster, you can assume also that there will be some ramp up also in expenses in line with that. But, as Meir mentioned, we continue to manage the business with high leverage that you've seen in the period.

And thank you. Do you want to move onto the next question?

Yes, please.

Catharine Trebnick, Dougherty & Company.

Hi. Thank you for taking my question. And congratulations on the quarter. Couple of questions. First, I hopped on the line looks like late. Can I have -- could you please regive the outlook for next quarter?

Yes, what we are talking about next quarter, the revenues will range between $59 million to $61 million, gross margins of 82%, operating expenses $36 million to $36.5 million, financial income at $1.4 million, tax rate of 13%, and non-GAAP EPS range between $0.25 to $0.28.

Thank you. And then couple other questions just in general. In looking at the security -- I know we beat this to death on the call -- but on the security piece of it, would you say that the majority of the products are more software related than hardware related, and that's one of the reasons why the Company has -- if it -- we estimate roughly 30% of your revenues from security, that that drives a higher gross margin, and that's one of the reasons why you're able to stay above 80% to 82%?

As I said, I think it's a bit more than that. Number one, in security, the customers that we are approaching today also tend to buy higher-end platforms, which by itself is a higher gross margin for us.

Second, we're seeing also on the ADC, we've seen very strong success with our high-end platforms that we've launched. And that, again, goes back to the gross margin.

And third, as I've mentioned, the US proportion this quarter was relatively high. And the US as a whole has a higher gross margin versus some of the -- for example, Asia-Pacific markets. So, I think, if you look on all these three together, that contributed to the result.

Okay. Great. And then next question is, on May, you announced your partnership with Cisco. And then, again, today, we -- you discussed some of your OpenDaylight activity. Could you pretty much bring us up to speed on some of your partnerships, Check Point, Juniper, and the more recent ones, Cisco, and IBM, and where you are with some of these relationships and getting traction?

Okay. With -- first, with Cisco, we have a marketing alliance where we are one of the partners around their ACI, application controlled infrastructure, platforms. And we continue to enhance this in working together with them.

And our Check Point business continues to grow well and perform well. And we're satisfied with the progress. And we hope to see even more coming.

Regarding Juniper, I don't have any news around this partnership. It's at the level that it was. I don't think I can provide any major update on that.

Regarding OpenDaylight, that's something that we've launched this quarter, the second generation in line with the second release of the OpenDaylight controller. And OpenDaylight is obviously a place that we are meeting many, many vendors that are adopting this controller. And now, they can enjoy our attack mitigation solution on top of that. So, it's great for us to start strategic relationships. And we think it's also a very good direction for us to bring our SDN business to early success.

All right. Thank you very much.

Thank you.

Alex Henderson, Needham & Company.

Hey, guys. So, a couple of questions. First one, can you talk about any success in actually delivering against the Cisco replacement opportunity?

Yes, absolutely. We have -- we continue to see these projects all the time. And we've just completed the -- a very important one in a tier one North America carrier that we're very pleased with. So, these opportunities continue to come, both in the enterprise and in the carrier market.

We don't see any specific uptick in this. It's just customers as they come to the replacement cycle. Cisco is out. They're checking their alternatives. And here, with our vADC density and the whole vADC concept, that matches or plays very well with the Cisco architecture. So, customers that bought Cisco and utilize their architecture find our platform is a very, very strong solution for the next-generation ADC.

And can you talk about vADC license attach rates on a per-system sale? Are you seeing an increase in the number of licenses on a per-system sale basis?

I'm not sure if we're seeing on a per system. But, we're seeing obviously the absolute number continue to grow. And we're seeing customers coming back and purchasing more instances.

So, we are seeing all the time the large customers populating more and more of their platforms with more instances and then continue to buy new platforms for the next set of instances. We see it from very large carriers in Asia-Pacific. We're seeing it from government bodies across the world. It's -- we're seeing more adoption of the concept.

And I don't think I heard a specific growth rate around either security or ADC. I assume the security business is growing faster than the ADC business. Can you just give us some relative rate of growth between those two?

Might change. It changes every quarter. It's not static. This quarter, we had a stronger security growth than ADC. And I think, long term, it's hard for me to predict, and specifically because we're also integrating a lot of the security capabilities into the ADC. And then it's a matter of interpretation, where do you allocate the revenues?

But, I think both markets can grow double digits and for some time. It might be that ADC, depending on pricing and vendor activity, etc., is high-single digit at some time and to low-double digit. And it might be that securities is obviously higher. But, I think both markets can have a robust demand for long term.

So, for the quarter, are we up over 20% in the security business?

Alex, we're not breaking it specifically. But, I think you can work with the assumptions I've shared and get a good result.

Well, given security generally is going to get you a higher multiple than the ADC business, why is it that you choose not to break it out?

We were thinking about it. We -- but, it's also -- we need to be consistent. And we need to have a very clear way of measuring the contribution of each component. Once we'll get into a conclusion, we'll be happy to share it. But, at this point, we are focused on growing the business, growing the revenues and the profitability. And I think that will get us higher multiple by itself.

So, you'd had a restructuring about midsummer last year in your European sales organization. Subsequently, for the last four quarters, you've grown 13% year over year each quarter. Is that going to show acceleration? Do you think that you can get that growth rate up towards the corporate averages, given the very rough performance you had in the prior six to nine months from that, or is the tougher conditions in Europe going to hold that back?

So, I think you're very right in your questions. There's a balance there. We definitely are looking for better growth from EMEA. We think we are progressing well. And we think we have a very strong team now in place. And we do believe there's an opportunity for growth there. And we need to take that together with the economic situation there. But, still, we believe there's room for improvement.

And looking at the EMEA business, obviously, there was a lot of turmoil in Russia with the Ukraine and the swing in the oil prices and that sort of good stuff that's going on over there.

Was there any disruption late in the quarter in EMEA? Was the linearity consistent over the course of the quarter in Europe, or was there disruption associated with some of those issues? How visible do you see the European condition based off of what you've seen over the course of the quarter going into -- and going into 4Q from that perspective?

I'm sure it doesn't help, but we don't -- we didn't see any specific interruption to the business from all of that. And also, I think, in general, we are very focused on specific areas that are very mission critical, both in the application delivery and application security market. I think we should be able to continue to grow. And as I said, we're targeting even faster growth in EMEA with the current climate as we see it.

Last question, and I'll cede the floor again. I assume the pricing environment is still flattish in the ADC market and no change in the security market?

Correct.

Okay. Thank you.

Catharine Trebnick, Dougherty & Company.

Thanks for taking my question again. Mine's easier than Alex's, but mine is more with, are you seeing from your end users buying for volumetric or application attacks? What seem to be the more crippling or -- I know both of them are. Just kind of wanted to get your color on which one.

Catherine, they need both. If they will protect only against volumetric, it will take the hacker 10 to 15 minutes to figure it out and vice versa. And the hackers are trying everything. The hackers are not a sterile lab environment that, now, I will only try a volumetric attack against you. And now, I will move to one application attack, which we're seeing.

We're seeing in every cyber-attack today multiple -- what we call multiple vectors, multiple attack attempts of different kind together being launched. You can see eight attack vectors. You can see 10 attack vectors. It's very rare you will see only a single attack vector in a cyber-attack.

So, if they're buying only volume protection and not application or the other way around, they're exposed. It's better for them not to buy anything than to invest their money in a half-baked solution.

So, then that's a good -- so, my other question is then, do you think -- where do you differentiate more against, like, an F5 or an A10 or an Arbor when it comes to several-vector solutions? Any of them have more of a hole in their solution than you?

So, I think, first, the ADC vendors are not yet real competitors in the security market. It's like us competing with our Alteon platform there. I don't think it -- that itself is obviously not what we are selling in the attack mitigation solution. And hence, I don't see currently F5 and A10 with their offering able to deal with the complete problem.

Regarding Arbor, I think we have -- without giving you too much technical specific information and boring the crowd, we have across the whole spectrum, volume, network, intrusion, scanning, application attacks, database attacks, multi-protocol, etc., across the whole spectrum. We have unique algorithms and capabilities.

All right. Thanks a lot, gentlemen.

George Iwanyc, Oppenheimer.

Thank you for taking my questions. When you look into 2015, how should we start to think about first quarter seasonality?

Okay. Usual, there is seasonality. As you asked seasonality in the first quarter, every year for everybody. We haven't started looking behind Q4 for the market. But, as Roy mentioned, the pipeline is building very well. Some of them will be closed in first quarter. It's too early to discuss now the first quarter.

But, it's based in your question that Q1 is [seasonality] for the entire market -- excuse me, is seasonality for the entire market.

Yes, and then just a couple specific questions. How much is left on the buyback, and how should we look at the tax rate for next year?

Actually, the buyback, we mentioned it. We spent $4.5 million for this quarter, so far just over $10 million, remaining almost $30 million for the next two quarters. And the tax rate -- this is as we guided, about 13%. We believe this is the tax rate that we'll see in the foreseeable future.

Thank you.

(Operator Instructions). Jessie Katz, Makor Capital.

Hi, guys. First of all, congratulations on the nice quarter. I wanted to ask you a bit if you could elaborate a bit on the ADC market, if you see gaining some market share against F5 or A10 or how you see that market a bit?

We need to see all the companies' reports. But, there were some preannouncements in our market. And given our growth and some of the data we have, we definitely believe we are gaining share right now. And we believe we are very well positioned. And we think we can continue that for the -- definitely for the coming 12 months. But, I don't have all the data for the quarter from all the vendors. It's based on the information that's public so far.

We see that there's a specific growth in this quarter in the ADC market, or is there a reason for that, or what -- how can we understand that?

I think the ADC market continues to grow consistently. I think, a year ago, there was some price adjustments driven by vendor activity in the market that resulted in the total market sizing dollars. Now, to grow, also, units continue to grow. This year, as the pricing environment is more stable, you're seeing the underlying growth of the market. And I expect that to continue.

Okay. There's a last question on the enterprise market and carrier market. Where do you think is the strongest potential for you? Do you think that the enterprise market is more attractive, or you see a pull-up in the carrier market? What are your expectations in that area?

I think we're seeing different opportunities, but good opportunities in both. In carriers, the move to LTE, the growth in data, the fact that they have more and more endpoints and their need to protect against cyber-attacks. In enterprise, the launch of new applications, the hybrid Cloud environment, the build-out of software-defined datacenters, the mission-critical applications.

We're seeing very good drivers in both markets. So -- and we're growing relatively well in both. So, we will continue to focus on the specific opportunities in each market as we see them.

Excellent. Thank you so much.

Thank you.

And we have no additional questions. Speakers, I'll turn it back to you for closing remarks.

Okay. Thank you, everyone, and have a great day.

Thank you. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. And you may now disconnect.