Radware Ltd (RDWR) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Radware Q4 2014 Earnings Conference Call. For the conference, all participants are in a listen-only mode. (Operator Instructions) As a reminder, today's call is being recorded.

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

Thank you. Good morning, everyone, and welcome to Radware's fourth 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 will discuss the business highlights of the fourth quarter results. After my comments, we'll open the discussion for Q&A. Meir.

Thank you, Roy; and welcome, everyone, to our fourth quarter conference call. First, I would like to review 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 and amount of orders, and other risks detailed from time to time in Radware's filings. 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 very pleased to report an additional record quarter and additional record year of revenues and results, as well as continued improvement in gross margin, operating profit, and EPS.

Revenues for the fourth quarter totaled to a record of $61 million, representing 7% sequential growth and 15% year-over-year. Revenues for 2014 totaled to a record of $222 million, an increase of 15% compared to revenues of $193 million in 2013. At the same time, short and long-term deferred revenues increased by $8.6 million from $58.7 million to $67.3 million.

Non-GAAP gross margin remained at 83% in the fourth quarter, contributing to increase in our annual 2014 gross margin toward 83%. Non-GAAP operating expenses reached $77 million in this fourth quarter, bringing our non-GAAP operating margins to 22% in the fourth quarter and emphasizing our leveraged business model. The non-GAAP net income this quarter totaled to a record of $13.1 million or $0.28 per diluted share, compared to a net income of $11.2 million or $0.20 (sic - see Press Release) per share in the third quarter of 2014 and $10.1 million or $0.22 per share in the fourth quarter of 2013.

The non-GAAP net income for 2014 was $40.3 million or $0.86 per diluted share, representing an increase of 26% compared to net income of $32 million or $0.69 per share in 2013. Stock-based compensation expenses, an amount of $2 million; amortization of intangible assets, an amount of $400,000; and litigation cost associated with IP litigation, an amount of $1.5 million, bringing GAAP net income this quarter to $9.2 million or $0.19 per diluted share, compared to net profit of $5.7 million or $0.12 per share in the fourth quarter of 2013.

The headcount for the end of the quarter was 895 employees.

Following the buyback of our shares at the amount of $5 million this quarter, our overall cash position, including cash, cash short-term and long-term bank deposits, and marketable securities, amounted to $331 million, an increase of $24.3 million this quarter.

As for the full year of 2014, after buying back shares in the amount of $15 million, our overall cash position, including cash, short-term and long-term bank deposits, and marketable securities, increased by $45 million from $286 million to $331 million; and we have no debts. Shareholders' equity amounted to $334 million.

Guidance for the first quarter. We expect revenues to range between $56 million to $58 million; gross margin, 82% to 83%; operating expenses will range between $36.7 million to $37.2 million; financial income at $1.4 million; 13%, tax rate; and non-GAAP EPS to range between $0.20 to $0.23.

As you can see, ladies and gentlemen, we ended 2014 with an additional quarter of record results with continued improvement in many parameters and we look forward to making an excellent 2015.

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

Thank you, Meir. Our Q4 results reflect a strong finish for the year with solid demand across both our Cyber Security and Application Delivery solutions. We are specifically very happy with the broad-based demand for our security solutions where more and more customers are deploying the comprehensive Radware Security Solution, including data center protection, application security and cloud security services.

During the quarter, we continued to see strong performance from our North American region. Our US business continued to deliver very solid year-over-year growth. We see significant opportunities in carriers, large enterprises and cloud providers, all in need for better security, better response time for hosted and centralized web applications, and better availability of the mission-critical applications.

In addition, we saw improvement in our international business in 2014. Both our APAC and EMEA region were growing, although we expect stronger growth rates from these regions going forward.

In the Application Delivery market, with at least two high-scale application delivery controllers for mobile carriers and high-end enterprise data centers. Our new Alteon 8420 is a 160-gig ADC appliance that provides industry-leading consolidation ratios and vADC instances. With over a 100 vADC instances, it allows our carriers and cloud customers to drive multi-tenancy and consolidation to a whole new level, improving their application SLA and agility.

In addition, we released an industry-first in vADC. As network carriers and enterprise data centers seek to reduce their CapEx and OpEx as well as accelerate the deployment of new network and web services, these organizations are working to standardize the virtualization of the network functions for an industry standard called NFV.

The Alteon VA for NFV is a software ADC for NFV environments. Beyond being the only NFV solution in the market, it is by far the industry's fastest software ADC, providing 100-gig throughput, which is roughly 10 times faster than current offering from our top competitors. These product releases complete an entirely refreshed Alteon NG ADC product line, with the Alteon 5208, covering up to 26-gig performance band; the Alteon 6420, up to 80-gig; and now, the 8420 and the Alteon NFV in the high end. All of these platforms are coming with our Alteon NG software, enabling our customers to optimize and improve application SLA way beyond a traditional ADC and this we achieved through our FastView acceleration, our application performance monitoring, and integrated security capabilities, all of these as annual product subscriptions.

In the application security space, AMS, our Attack Mitigation Solution, continues to prove its unique capabilities in blocking major cyber attacks on our customers' data centers. We believe we are if not the only solution, then one of very few that can deal with the rapidly evolving threat landscape.

Our recently released Annual 2014 Global Application in Network Security Report shows that cyber attacks have reached a tipping point in terms of quantity, length, complexity, and the breadth of the target. The report indicates that cyber attacks now are longer and more continuous, lasting one month on average. As cyber threats are growing and expanding to new targets, 52% of respondents to Radware's report revealed they cannot effectively fight an around-the-clock campaign for more than a day.

The report and our customer feedback underscores the strategic value of our Emergency Response Team which actively monitors and mitigate attacks in real time. The ERT has extensive experience handling attacks in the wild as they occur. The firsthand and statistical research of Radware's 2014 report was compiled using data from 330 individual respondents within a wide variety of organizations globally that we are involved with.

Additionally, last quarter, we announced that we received a multi-million dollar contract from a national financial service company for cyber attack mitigation, With this customer and another large bank we won through our Check Point relationship, we are now counting five out of the top 12 US banks as customers.

During the quarter, we continued to advance our next-generation cyber security mitigation architecture, AMN, for enterprise networks. To recap, our Attack Mitigation Network strategy combines distributed detection and mitigation elements to work as a complete grid for optimal attack detection and mitigation across all enterprise resources. In the data center, at the perimeter or in the cloud. With real-time synchronization of legitimate user patterns, attack traffic and vectors across all networking enabled and security devices in the data center and in the cloud, AMN provides our customers with a new level of ability to combat cyber attacks against their data centers.

As part of our AMN strategy, we are putting more and more emphasis on cloud security services. We were first to market in 2013 announcing a hybrid DDoS cloud security solution with on-premise and cloud components. In Q4, we further expanded this cloud service to now provide a premium option of 24/7 fully-managed attack mitigation services via our ERT team.

Furthermore, in January, we released another cloud service, the Radware Cloud WAF. This hybrid web application firewall service is the industry's only service that allows our customers to unify their application security protections across cloud and private data center environments with centralized policy and security. Our Cloud Web Application Firewall solution provides a complete, no-compromise web application attack mitigation service in the cloud with built-in DDoS protection.

Looking forward, we believe that some of the announcements we made this past quarter point clearly to where we believe there will be significant growth in our markets. We are focusing more and more efforts on cloud data centers and services, SDN, NFV and cyber security. We believe Radware is unique in its ability to provide a broad set of data center application services that include application delivery, attack mitigation and web acceleration, all in great need in cloud data centers. We are seeing very interesting opportunities 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. These investments are the largest we have done, underlying the large business opportunity we are seeing. The increase in operating expenses is built into the guidance provided by Meir. Specifically, the ramp in Q1 operating expenses and what we further expect in Q2 also include a joint development or effort we are conducting with a larger OEM partner we signed recently.

Before concluding, I would like to thank our customers and partners for their continued support and trust, and the Radware team for all their efforts, commitment 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.

Thank you. Gentlemen, perhaps your discussion on just how you feel about the pipeline as we start the new year, the deal sizes as they're also expanding, particularly as security leads the efforts. And just kind of also separately, just your partnerships and how that's helping as well? Thank you.

Okay. Thanks, Mark. So we're starting the year with, as far as we see, a very strong pipeline, by the way, I would say worldwide, not only in North America. Definitely recent security wins across the world, including deals in France or the what happened around the Sony and The Interview movie, et cetera, are driving a lot of projects, a lot of interest, a lot of potential from organization across the world.

Regarding partnerships, I think we continue to execute well and advance it. We just announced this first week an integration with Cisco ACI, that is being presented in the Cisco Live Event in Milan. So, we are definitely seeing progress across data center partners, security partners, cloud partners, and we're very optimistic on that.

That's helpful. And Roy, just on partnerships, it seems that F5, A10, and now you have a partnership with Cisco, how should we think about differentiation there, end market customers or how often we can actually parse that opportunity? And then, separately, if we think about the opportunity in terms of the pricing dynamics, has that changed? There has been more pricing change, for example, A10 has led (inaudible) on their good, better, best. What does that mean from a change from a pricing point of view for Radware going forward?

Okay, I think where we have differentiation in the marketing partnerships, there are some partners that are working like you've mentioned the Cisco ACI with a broad set of ADC partners and there are partners that are choosing a much more specific and maybe more strategic integration in terms of product or solution integration. So I think overall, you can see maybe our alliance with Check Point, [is there] one type of partnership, the Cisco ACI maybe is a different type but all of them together are obviously assisting us in expanding our footprint, both at the customer level and in the channel level and you should expect different forms of partnerships going forward.

Regarding the pricing in the industry, we don't see a major change and we actually feel very good where we we sit now in terms of cost performance, especially with the high-end platforms we're pushing I think the envelope in the market. In addition, we have the NG and the NG Plus packages that include multiple services from Radware on top of the ADC and we are seeing actually a lot of interest from customers and initial subscription from them. So we are actually seeing and it's evident in our gross margin that we've seen in the second half of [2013] actually an upside in the gross margin versus our historical model.

That's helpful. Thank you. Good luck, gentlemen.

Alex Anderson, Needham & Company.

Thank you very much. Roy, a couple of questions. One, could you talk a little bit about the impact of the move to more a subscription model? What has your book-to-bill on subscription looked like in the quarter and what you're experiencing in terms of the subscription and security business impacting the ADC piece of your business and vice versa?

Okay. So we continue to see obviously very strong subscription booking in comparison to the actual revenues we are recording every quarter. We are recording every quarter. We're now also starting to enjoy booking of subscription on top of our ADC, especially as they relate to the Web Application Firewall, the application performance monitoring, the FastView Acceleration and so on. And we are also seeing projects that are combining our ADC and the attack mitigation solution to one comprehensive architecture and in that regard, not only that we enjoy product subscription for both our security and ADC offering, but we are starting to see more and more cloud subscriptions for DDoS, we now launched the WAF cloud, we have the acceleration cloud service. So, definitely, this year, we are putting a lot of emphasis in growing the subscription booking going forward and so far so good.

So is the subscription actually causing an increase in hardware purchases?

I will not say it's causing today an increase in hardware purchases. Time will tell regarding the ADC, whether it will push faster an upgrade cycle to our Alteon NG versus I would say a regular product upgrade as we've experienced in the recent years. We don't have yet full indication from that, but what I can tell you from subscriptions is that it's pushing the average deal size higher and specifically when we are attaching the cloud service on top of our appliance sales, there is a significant increase in the deal sizes.

Okay. And then, a second question, can you go over that comment at the end of your presentation about increasing spending? Specifically, what are you increasing spending on and you kind of implied it was one or two quarters, is that a more sustainable spend than that? Give us a little more color around those programs and the duration of that spend increase?

Okay. I think those two points regarding the spend increase, there is one that is being driven completely by the growth in the opportunities we see in the market and that growth in spend is in both R&D and sales and marketing. In addition to that or on top of that, because of an OEM joint development effort we are doing, we are ramping up the dedicated teams for that joint development and you already will start to see the impact of that in Q1 and continue to Q2. This is a long-term development effort that obviously is resulting we believe also in increased revenues once the products are released, but for 2015, I don't see that investment tailing off, because it's a longer-term project and I think a very broad agreement in scope. So we are seeing two types of areas that we would like to invest more, general investment in the market, especially as they relate to cloud, to security and both in go-to-market and field resources as well as R&D; and in R&D, investment with an OEM partner.

So is the OpEx costs -- I know you're increasing it sequentially and that's obviously in a seasonally weak quarter cause a little bit of compression. But is it on a full-year basis OpEx still growing less than revenues?

I believe so, yes.

Okay. And then, last, Meir, can you give us the Enterprise versus Service Provider break and the geographic numbers, please?

Yes, sure. The Enterprise contributes 69% of our revenues this quarter while the carrier of 31%. And the split between regions, [North] America was 42% of their business, EMEA 32% and Asia-Pac 26%.

Great. [I'll see report]. Thanks.

Michael Kim, Imperial Capital.

Yes, good afternoon, guys. Just wanted to kind of get a better sense of what you're seeing in Asia-Pac. I think last quarter, you talked a little about some challenges in China. And then, more broadly, one of your large competitors talked about some headwinds on larger projects and if you're seeing sort of similar dynamics in the marketplace. Thanks.

So APAC delivered, I would say, an okay quarter. We do believe that there is strong opportunity for growth in some of the countries. I don't believe the China situation is a one quarter, it's more a mix of items in the market, including reduced spend by government, maybe by carriers, by state-owned enterprises and so on, together with our pricing environment, which has a lot of local vendor competition. Having said that, we've grown in 2014 also in China and we do plan to grow in 2015. And so all in all, we think Asia-Pacific actually is a region that we can grow our revenue growth and we are expecting also this year to have a stronger year than 2014.

Regarding the large deals, we didn't see specific weakness in that and I think you can see by our overall results, and specifically our North America results that we saw quite a good environment in that.

Okay, great. And then, I don't know if I missed this, but what was the mix between existing customers and new customers for the business?

This quarter, the existing customers contributed 83% with the business and new customers, 17%.

And where are you seeing the strongest opportunities for cross-selling now as you've sort of built on that [LAN expand] model? Are you typically seeing just a lot of cross-sell between the delivery and security side of the business or is that (multiple speakers)?

Now, so the obvious one between ADC and security, but with our new offerings, there is also a very strong potential to cross-sell the cloud services, as well as sell the product subscription services. So I think with the new product offerings, we believe we've expanded our cross-sales potential and we actually can gain much more share of wallet from the existing customers.

Okay, great. Thank you very much.

Jess Lubert, Wells Fargo.

Hi, guys. A couple of questions as well, maybe just, first, showing out a fairly constructive demand and pipeline scenario entering 2015, and you're guiding Q1 below the consensus, I just want to understand what was driving that view? Has there been any change in customer willingness to spend, is it just conservatism, did you pull some business into Q4, just trying to rationalize that one point?

What you're seeing in the market I'd say is a consistent level of demand with what we've seen in 2014. So if you look on our 2014 H1 performance, I think we went out in the higher end of our guidance and grew 13% year-over-year. I think our guidance for Q1 last year was around 9% to 13% growth year-over-year. So we're seeing consistency in the demand and as a result our guidance is reflecting roughly the same growth rates. I think it's actually 10% to 14% year-over-year. So we're not seeing acceleration in growth rates, we're seeing simply consistent demand and that we need to execute on it.

Okay. And then, you mentioned passing or signing of a new large OEM partnership. So I was hoping you could provide some additional details regarding that relationship, when we might see that begin to contribute to sales, how material you think that partnership could become and you talked about investments tied to this relationship, can you maybe touch upon the joint investment coming from the other side and maybe what gives you confidence that this partnership may end up being more like Check Point and less like Juniper? You've had some hits and misses kind of on the OEM side, why should we believe this one is more likely to be successful?

Okay. So regarding the more details, at this point of time, we cannot share more specifics, but obviously once we can and once this relationship is going public, we will be happy to discuss further. Regarding the impact on revenues, obviously if we've done it, we believe it's going to be a positive investment and one that we hope that it will be significant. But, as we said, time will tell and not all OEM alliances are successful, but we believe we've also learned from the past and in this specific case, I think we're getting a lot of commitment and investment also from the other party, which is always good, at least in the beginning to gain more confidence in the seriousness they are treating this effort on their end.

Alright. Thanks, guys.

Thank you.

Joseph Wolf, Barclays.

Thank you. I guess, I was hoping we could get the breakdown of product and services as we hit year-end. Any comment you could have on services as a percentage of your business, your backlog and what your expectations are for growth in 2015?

Okay. The breakdown between services and the end product was approximately as last year, about 62% products and 38% services.

But growing consistently?

Yes.

Hello?

I guess just in terms of the -- as you mentioned, the cyber, can we get any more details this year as we start the year, maybe in terms of metrics, in terms of how far it is or how fast it's growing compared to the rest of the business and maybe a description by end market and geography? You mentioned, you've got a lot of global trends, but are the trends that you are seeing in the Americas, are they consistent across your geographies and are you selling the same kinds of products for security in each region at this point?

I think like in many other IT markets, the US market is leading in terms of adoption of new technologies and we see that also in the more advanced solutions from Radware. And so definitely, our security business and I would say the cloud subscription and so on is always first led by the US market. But then, we're seeing very consistent move and in recent years in a faster pace to the other geographies and I would say the second after the US is Western Europe and the developed markets in Asia-Pac like Australia, Japan, Korea and so on. So, we are now trying, of course, to accelerate this trend and to our help the cyber security events are really very broad and global in their nature. And so, I don't think the product splits that we have today are reflective that of something that's more applicable to a certain geography.

Another trend we are seeing is that our ADCs are involved in more and more applications that are security related, for example. The integration of our Web Application Firewall and Policy Management into the ADC are creating more and more cross-sales with our overall security solutions.

So we're seeing more and more projects where customers are deploying an application architecture from Radware across the data center and the perimeter that provide both load balancing and end-to-end security and the more we are integrating and providing security value across all the touch points in the network, the more we are seeing this trend.

That was helpful. And then, just finally, on the cash, you bought back $20 million of stock last year, you've got this investment going on with the OEM that you mentioned. What do you think the balance of investment and cash return will be in 2015?

No, we think those -- obviously, we are looking to make acquisitions to broaden our product portfolio and accelerate growth, that's something we definitely believe will be a very good use of cash. But, as we've discussed before, we are very conservative in this approach and we want to make sure that acquisitions that we do are really synergetic and not just depleting cash. So we are very serious about it, we are seeing opportunities and evaluating opportunities in the market and we think that especially in this environment where we are feeling good about our business, it's a good timing to try and make a broader step in the market.

Alright. Thank you.

Mark Kelleher, D.A. Davidson.

Great, thanks for taking the question. Just wondering if you could address foreign exchange, how much did that affect your December quarter and how much is that influencing your guidance very much, particularly in Europe?

Okay. So most of the currency exchanges were baked in in the guidance we gave already for Q4. Just bear in mind when we gave the guidance, the rate of the Israeli Shekel, for example, was 3.77 while the average for the year was 3.81 and the impact of every penny is about $25,000 on the quarter, so roughly it's about $100,000 in Q4. So it's implied in the result that we gave; exactly the same for the guidance we gave for this quarter. The exchange rate is included on that. So I don't believe that we expect any further impact from currencies in the quarter above what we gave in our guidance.

Okay, thanks.

Rohit Chopra, Buckingham Research Group.

Thanks very much. A few quick questions here. Roy, any dislocation at Arbor that you're seeing out there helping the Company or providing a tailwind?

We didn't see much. I think the deal also did not close yet. So -- and I think it's early also to say how the acquisition of NetScout will do, but at this point, we're very, very focused on executing our game plan. I think we have a very, very broad story beyond DDoS on the complete attack mitigation for data centers and we just need to run very fast and execute well.

And just another one, just on the OEM, can you say whether that's on the security side or is it on the ADC side?

At this point, I apologize, but I cannot share further deeply.

Alright, a couple more quick ones. For the Cisco ACI integration, the product that you demoed out there, what's the differentiation between your solution versus anybody else who has security integration into ACI? Is there something different that you're bringing to the table?

I'm not sure what the other vendors have demonstrated and how deep the integration is, but I think we and Cisco have done a very in-depth integration across both ADC and security. So the complete hardware portfolio can be managed, activated through the ACI controller and we're getting very good feedback, both from Cisco and from our customers about this integration and how broad and deep it is.

And my last question, maybe to Meir and yourself, but if you guys could offer maybe a target operating margin for the end of the year? I mean does 25% sound reasonable or unreasonable given the investments that you have in planned?

I think, it's too early for us. We're guiding a quarter at a time. Also like previous years, our main focus is in growth and really leveraging these opportunities as you've seen in 2014. Once we have a good growth, the operating leverage is probably almost taking care of itself. You've seen what we've done in Q3 and now again in Q4. I think we moved in two quarters from 15% to 22% operating margin. So we're really focused on growth and on the investments that we need to do for that. At the same time, we are running the business profitably. So we are running expenses at this point like we've done in previous years in our lower rate than revenues and then obviously providing our shareholders leverage from that growth. So, we don't like to, at this point, give a specific target for the end of the year. But obviously, we will come up with a medium-term target in the, I would say probably for the next quarter or midyear time.

Thanks, Roy.

Thanks.

Catharine Trebnick, Dougherty & Company.

Hi, thanks for taking my question. A couple of quick ones. So deferred revenue was only up roughly 14% and your guide was down, and you are saying that it's a healthy pipeline. So, can you give us some more details around this? And then, also, the other thing is, could you address perhaps the average deal sizes? You said they ticked up, but is it $250,000 and are you getting more multi-million dollar deals?

Okay. (multiple speakers).

Yes. Okay. Go ahead, gentlemen.

Go ahead, Meir. Go ahead. I'll take the second one.

Okay. [As this] deferred revenues, I mentioned this has increased by $8.6 million, it's nothing to do with the pipeline. It's also already booked and will be recognized on timely basis. So, the pipeline will be addressed by Roy.

Okay. And I think as we discussed also before, we're seeing good growth and you see the deferred revenue, which is mainly service contracts that were booked and not recognized yet, growing at roughly the same rate as our overall revenues again pointing out to the same growth rates across services and products that Meir alluded to before.

Regarding the deal sizes, we're seeing in ADC I would say stable deal sizes and now with subscription, we're starting to see a move upwards. It's [clearly] to give you specific data on that, but we believe there will be a nice impact from that. In security, we definitely see over the last several years a move upwards, in the deal sizes. It comes from several factors, the fact that enterprises are in need for protection for higher-capacity devices and they are generally going for our high-end offerings.

Second is our ability to sell more and more a complete solution and not only specific devices for a specific location in the data center. In that sense, we are seeing projects that involve encrypted attacks, application attacks, networks attacks and so on. And that by itself has a significant impact on the deal size. And last but not least, as I've mentioned, a cloud subscription. When we are getting in security or in ADC a data center design, you're probably speaking about north of $500,000.

Okay. And then, one other question. You said, North America was strong. Is that basically carrier or enterprise? And the reason I'm asking is in North America, you are completely, probably under-served as far as your partners are and extending through the sale of the enterprise compared to like an F5. So could you address, do you think is this more of the revenue from the carrier side, cloud side or enterprise? And then, if you're focused on this data center, how are you going to -- what are you going to do for your sales channel to actually penetrate that? Thanks.

Okay. So, this quarter, by the way, it's not the same answer for every quarter, but this quarter, we've seen strong growth in the enterprise side of our business. Regarding channels, we're looking on several types of channels, the traditional channels and here we are as our business is growing, there is definitely a stronger relationship with the key channels. In North America as obviously contracts like the ones I've mentioned on the top-tier National Financial Services and top-tier customers that we are able to close are gaining a lot of attention from the key channels.

In addition, we have channel partners like our OEM partners and I've also mentioned in that regard the Check Point relationship that's allowed us also this quarter to close a major US bank or a global bank with this relationship. So, we're seeing multiple ways to expand our channel footprint. Some of it is through OEM and reselling partnerships with other vendors that have a strong channel and network and some of it independently, simply as our business is growing and we're focused more on delivering through and working with the traditional channels, growing our own channel system.

Okay. And then, one final question. How much are you increasing OpEx by? I might have missed that commentary earlier when I jumped on for FQ1 and for the full-year?

Maybe it's a bigger number for quarter one.

Yes, the operating expenses for next quarter will range between $36.7 million to $37.2 million.

Okay. Alright, thanks. I'll pass it on.

[Michael Wiederhorn], Oppenheimer.

Hey, guys. Thanks for taking my question. I want to ask about the geographic growth, specifically EMEA. First two quarters of the year were pretty solid and then you saw a big slowdown in the fourth quarter. Is there anything in particular driving that? Russia, weakness in Europe, can you talk a little more on that slowdown and how do you see that reaching going forward?

So, we didn't get the revenue growth we wanted in Q4 in EMEA, but we think in that regard, it's mainly a pushout of some projects in key countries. I would not -- we don't think we need to read too much at this point in this and actually we believe 2015 will be a very strong revenue growth given the opportunities in the pipeline we're seeing in EMEA and we hope to re-discuss it in Q1 and hopefully show a different trend there.

[What sort] of projects in terms of the customers delaying the purchase of a solution?

We've seen several types. We've seen some large security projects being delayed, more in Western Europe. We've seen some interruption in Russia and the surrounding countries that was related to the economic issues and budget allocations, even the currency shifts there. So we've seen some pockets of weakness. But, as I said, we believe it should not be a long-term issue and we should be able to resume and accelerate growth there.

And the cloud providers, are they in the service [provider] or enterprise segment?

We're putting them in the service provider.

Okay. So within service provider, how does the growth compare between, might be referred to as traditional service providers versus the cloud players?

Okay. This is a very good question, but it's quite hard to segment. In the US, you have those independent cloud providers. But internationally, the majority of the carriers are also the largest cloud providers in these countries if you look on the Japan or Western Europe, et cetera. So, it's sometimes hard to classify it. So while in the US, we can say that cloud providers is growing faster than traditional carriers across the world, we simply are signing it to carriers, it's very hard to distinguish between the carrier or the hosting type of business and the new cloud initiatives and cloudifying their own network or data centers with NFV. You can assign the numbers as you wish practically.

Okay. And then, last question, Check Point, has there been any change in that relationship in terms of the level of, kind of demand that you get from it?

I think we are growing the relationship. Actually, just recently, today at another meeting with the Check Point President, I think the relationship is going very well in strengthening in the field. There is starting to be very nice significant wins and we're seeing good future for it.

Thank you, guys.

Alex Henderson, Needham & Company.

Yes, first, you've mentioned Russia. So kind of open that question up. How much exposure do you have in Russia or other geographies that have seen such significant changes in conditions that's occurred recently as a result of the oil price and commodity price pressures like Venezuela or Russia or places like that?

It's very little. Even if you count 2%, 3% of our overall revenues, but in a specific quarter, if you cannot book deals in a strong quarter, it Russia, it can impact EMEA growth in 2, 3 points year-over-year. So as I said, I will not read too much into that. Our business is well diversified. I think it's evident from what we've done last year, given all those specific issues that happened here and there and also in our guidance for next year.

And so, if I look at the split between security and ADC, is it reasonable to think that the ADC growth was in the 9% to 10% vicinity and the security was in the 25% to 30% vicinity? Is that kind of a reasonable cut at it?

I would say it's very reasonable to assume that the growth in security is faster than the Company growth rate and ADC is a bit lower than that, yes.

And then, on the sales force expansion, can you just remind me where you are in terms of expanding the US sales footprint and what your plans are around that in CY15? I know you've added substantially last year. I think it was 50% to your sales reach last year. What's your plans for this year on sales expansion in North America?

We continue to expand teams across the country, both on a segment basis, for example, enterprise or carrier-specific salespeople as well as to add the geographical coverage. And now, we have a strong plan of adding, we will also add internationally this year. There are select markets that we feel very good about. So you will see expansion also in the sales force in some other markets outside of North America.

And lastly, on the European situation, it does look like conditions have slowed there because of a variety of factors. Is your guidance for upcoming quarter being a little bit more cautious on your assumption for the European end-market environment or is it a function of just a very strong fourth quarter in the US and giving yourself a little bit more room for a more normalized kind of growth in the US? How should we view the forward guidance relative to those two geographies?

I think it's what you've mentioned is included, but generally, we are assessing the overall situation, the pipeline, the growth rates that we've experienced in previous quarters and we come up with our best conclusion on guidance. You can see our track record from the past, we've been relatively accurate, I would say. So I think it's a good call of what we're seeing out there, the range.

Okay. Thanks.

To the presenters, no further questions in queue.

Okay. Thank you very much, everyone, for attending and have a great day.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.