Radware Ltd (RDWR) 2015 Q4 法說會逐字稿

Good morning and welcome to the Radware's fourth-quarter 2015 results conference call. At this time all parties will be able to listen only until the question-and-answer portion. Also today's conference is being recorded. (Operator Instructions)

I would now like to turn the call over to Radware's Chief Finance Officer, Mr. Doron Abramovitch. You may begin, sir.

Thank you, Kathy. Good morning, everyone, and welcome to Radware's fourth-quarter 2015 earnings conference call. Joining me today, Roy Zisapel, Radware's President and CEO. A copy of today's press release is available on our website. This quarter, you can also find supplemental information on our website.

During today's call, we may make projections or other forward-looking statements regarding future events or future financial performance of the Company. I wish to caution you that such statements are just predictions, and we undertake no obligation to update these predictions. 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 document the Company files from time to time with the SEC, specifically the Company's last Form 20-F filed on April 27, 2015.

Now, let me provide you with an analysis of our financial results and business performance for the fourth quarter and full-year 2015 as well as our outlook for the first quarter of 2016. We achieved solid results in the fourth quarter, in line with our expectations. Revenues for the fourth quarter were [$65.3 million].

Looking at the revenue breakdown per geography, Americas accounted for $20.9 million and 38% of total revenue; EMEA, $19.8 million and 36% of total revenue; and APAC, $14.6 million and 26% of total revenues this quarter.

Enterprise revenues contributed 66% of total revenues and carrier 34%. Looking at full-year total revenue were $216.6 million, approximately 2% lower than 2014. In our press release, and in our supplemental financial data accompanying our results, you will find a GAAP to non-GAAP reconciliation of $0.08 difference in EPS for Q4. My comments in the quarter will be focused on the non-GAAP results.

The main differences between the GAAP and non-GAAP results for the quarter are related to stock-based compensation expenses, exchange rate differences, IP litigation costs, and amortization of intangible assets. We continue to keep our high-growth margin, which remains at approximately 82.6% for the full quarter and 82.9% for full year. Our operating expenses in Q4 were $38.9 million in the lower end of our expectations.

The net income this quarter was $7.6 million, or $0.17 per share diluted, compared to net income of $13.1 million or $0.28 per share diluted in the fourth quarter of 2014. The net income in 2015 was $33.7 million, or $0.72 per share diluted compared to net income of $14.3 million or $0.86 per share diluted in 2014.

Turning to the balance sheet, as of December 31, 2015 we had approximately $315 million in cash and financial investments. Cash flow from operations during the quarter was $15.7 million compared to $22.5 million in Q4 2015. Cash flow from operations for 2015 totaled $39.1 million. In the fourth quarter, in accordance with the plan approved by the Board, we repurchased over 0.5 million of our common shares for a total of approximately $8.4 million with an average price of $[15.3]. Given our strong cash position and positive outlook for continued cash generation in 2016, we plan to continue executing our share buyback plan.

We announced earlier that our Board of Directors authorized a new one-year share repurchase plan, allowing the Company to invest up to $40 million to repurchase ordinary shares. This plan will begin immediately, once the previously announced plan will be fully implemented. Our deferred revenues, which include short-term, long-term, and also revenues which were not based and not yet recognized, offset against the trade receivable balance, increased 19% year over year and totaled to $101.2 million compared to $85.3 million in 2014.

We are very pleased with this increase of the deferred revenue, and as we migrate further into cloud, product subscription and service as a business model we expect our deferred revenue to continue to increase during 2016. In addition, our subscription revenues continue to grow by approximately 60% year over year. We ended the year with 996 employees, an increase of approximately 11% from last year.

Moving on to our outlook for Q1 2016, we entered 2016 with solid indicators to our key drivers and continue to remain focused on optimizing our business model to accommodate a changing market. We also take into account the macro environment and uncertainty impacts.

Our revenue guidance for the first quarter of 2016 is $48 million to $51 million. Gross margin is expected to be approximately 82.5%. OpEx will be in the range of $39 million to $40 million and our non-GAAP EPS is anticipated to be in the range of $0.04 to $0.07 per share. Our product offerings, strong security position, and the cloud opportunities together with internal focus on better execution and sales will enable us to grow our top line in the second half of 2016 and beyond.

I will now turn the call over to Roy Zisapel.

Thanks. During the fourth quarter, we performed according to our projected revenue forecast and financial performance. We finished the quarter with strong overall bookings, despite a challenging market environment. While we saw improvement in our overall revenues and bookings versus the third quarter, we still saw weakness in several geographies such as China, Japan, Russia, and Brazil, in the US carrier and service provider market.

We have taken several steps to improve our sales results, including focusing resources internationally on markets that we feel continue to be strong and reducing investment in some of the weaker markets. In the US, we created a special salesforce to focus on service providers while we focused the broader teams on the enterprise market.

Despite the weakness we saw in the US service provider market, we continue to see a lot of business potential and new account wins in the segment. For example, in the fourth quarter we announced several wins, predominantly coming within two main applications. The first, protecting the providers infrastructure against attacks, and the second, delivering new security services to service provider customers, namely cloud security services.

Two examples from the fourth quarter for protecting service providers customers are SingleHop, a Chicago-based leading provider of managed hosting and infrastructure as a service, serving more than 5,500 customers, and [Quasi-net], a Los Angeles-based food service data center provider with additional locations in Dallas, Miami and Atlanta.

The main reasons these companies chose us with attack mitigation systems were its fast detection and mitigation of DDOS attack vectors, actuating detection of legitimate traffic resulting in lower false positives, and low administrative overhead. In addition, we announced last quarter a $1.5 million contract for a comprehensive infrastructure protection project from a leading global cloud hosting company that focuses on business continuity and disaster recovery.

We finished the fourth quarter with strong bookings, highlight by continued growth in our subscription and service business. This growth resulted in a 19% year-over-year growth in our deferred revenue from $85 million in 2015 to $101 million in 2016. As Doron mentioned, in 2015, our overall subscription recognize revenues grew 60% year over year.

In the past quarter, we continued to expand our cloud business and cloud customer base and we believe we are progressing well in building a subscription revenue stream in addition to our product and service revenue stream. Overall, we see more transactions where customers are consuming our products and solutions either completely as a service or where cloud subscriptions and managed services are a bigger portion of the deal.

While in the short term, it has a negative impact on revenues versus a straight product purchase, we see the strong growth in clout and product descriptions as a clear positive for the business. It provides for larger deal sizes, more strategic positioning within our customers IT organizations, and strong potential for renewable revenue streams and enhancements.

If the cloud subscriptions are a key pillar of our strategy, I would like to take a couple of minutes and review our offering in the space. We are offering today a broad set of cloud services, including our DDoS cloud and DDoS hybrid cloud, mitigation services, our Cloud WAF web security service, and our FastView cloud acceleration service. Our DefensePipe hybrid DDoS mitigation services comprised of our DefensePro device and installed on the customer's premise, and our global footprint of cloud scrub incentive.

The on-premise device detects attacks and mitigates them in real time. If and when the attack becomes a volumetric attack that supersedes the data center Internet pipe, the customer traffic is automatically diverted to our cloud scrubbing data centers, where the attack is cleaned and the legitimate traffic is forwarded back to the customer data center. This solution offers the broadest and most advanced attack detection, coupled with the real-time mitigation in the data center, and in the cloud in the fully automated manner.

Our WAF cloud service provides an always on web application firewall data center IPF, and DDoS prevention service in target customers that are either completely operating from a cloud data center, or ones that are interested in a complete security as a service offering. In addition, we offer customers our premium ERP-managed service with the shortage of security resources on our customers end, and the lack of expertise and protecting against cyber attacks, the [ELT] premium service provides our customers with a fully managed attack mitigation service for their on-premise and in the cloud Radware solutions. It provides for the complete outsourcing of monitoring, management, and mitigation of cyber attacks on customer data centers.

In the application delivery market, we saw improved trends in the fourth quarter. As we announced, they also named Radware is a leader in the application delivery market for the sixth time. This is another proof point for our leading products and technology.

During the quarter, we saw very good number of contract awards in Global 2000 large enterprises and leading carriers displacing competitive products.

Looking into 2016, we believe we are making solid progress in our business and are focused on both on the full-year basis despite our Q1 guidance. Furthermore, we are focused on growth in the deferred revenue, driven primarily by our growing subscription business.

We are very excited by the opportunities ahead of us, especially in the cyber security space. We provide the best attack mitigation solution in the market with a complete data center and cloud solution, and we plan to focus more efforts on this market.

We have the strongest market adoption for our solution by cloud security providers such as Akamai and Level III, large enterprise accounts and leading security vendors, such as Cisco and Check Point. Our revenues from the checkpoint OEM continue to grow, and we see nice growth in the pipeline for 2016. Check Point recently expanded the OEM contract with us to include also the DefensePipe cloud solution.

As it relates to the Cisco OEM relationships, we are getting closer to the Cisco launch of the Firepower product line with the Radware DDoS module, and are excited by this opportunity. We believe initial revenue recognition from Cisco OEM will start at calendar Q3.

Looking forward, we will execute our strategy with the following key points. First, we are very focused on providing a comprehensive integrated solution for data center application delivery and security. Second, we lead the innovation in the market as it relates to the data center attack mitigation, secure hybrid cloud, and SDN NAV applications for secure networking. Third, we will increase our market footprint through traditional channels, OEMs, cloud, and CDN channels and acquisitions.

To summarize, we believe on a full-year basis, 2016 will be a growth year for Radware we have a leadership position in both ABC and data center attack mitigation. We are experiencing strong growth in our subscription business but drove a 19% deferred revenue growth in 2015, and we expect this trend to continue. We are seeing increase growth in revenues in activities from our Check Point OEM relationships and are looking forward to the Cisco OEM launch. And, we have a strong financial standing with continued positive cash flow.

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

(Operator Instructions) Alex Henderson, Needham.

Didn't catch the revenue guide. There was some static on the line when you gave it. Could you just repeat that for me?

Alex, Doron. $48 million to $51 million.

Okay, great, thanks. And can you talk about the percentage of business coming from security? Given the rough guide here, I think we need some sense of that at this juncture. Can you give us a little bit more clarity on the difference between the growth in that business versus possibly declines in the ADC or is it across both lines? Can you delineate between the two a little bit, please?

Yes, so come in general, the security market is growing faster than the ADC market and definitely from a booking point of view. A lot of our cloud prescription and product subscription are focused around security and as a result, when it comes to revenues, some of those bookings are deferred and are going into our deferred product line. So, from a booking perspective, when we include the cloud services and product subscriptions we are doing, security is growing faster than ADC and that was the trend. And for the full-year and also the past year, and from a revenue perspective, it's -- we are not breaking it and -- but, as I said, there are more factors to it.

So, can you give us some sense of what the percentage is at this point? It has been a couple of quarters since we have had any remote indications between the two. It's a critical juncture here for that piece.

Alex, we are not providing the break between the products. There is a lot of overlap also between some of them and others between them. In our view going forward, we really focused on the subscription business, the services business and the products overall. That is the view we are taking of our business, not necessarily ADC, security, and overlapping applications of ADC and security.

So, we want to think about our business as the products that are going into enterprise data centers and clearing data centers, product and cloud descriptions of augmenting our products and services that are primarily maintenance renewal contract.

Okay, one last question and I will cede the floor. China and Japan, Russia, Brazil, if you aggregate the areas that you specified as weak geographies, are we talking about, what, 35% of the revenue base in that footprint? Or more? (technical difficulty)

Thank you, is that all, Mr. Henderson?

No, I tried to ask another question there.

(technical difficulty) We are not getting -- the host line has just disconnected. Hold just a moment, we will get them right back online. (Operator Instructions) Go ahead with your second question.

Can you guys hear me?

Yes.

Great, so one last question and I will cede the floor. China, Japan, Russia, Brazil, cited as weak geographies. Can you give us a scaling on what portion of the business is in the geographies you are describing as weak?

It's around 20%, 25% aggregated together last year and obviously declined this year.

Okay, thank you.

Michael Kim, Imperial Capital.

Regarding the Q1 revenue guidance, can you clarify if there is a change in the mix in that revenue, relative to the product descriptions? And maybe clarify if there is some larger or smaller deal flow. Thank you.

The host line just disconnected again, I apologize. We will have them back shortly. (technical difficulty)(Operator Instructions)

Can you guys hear me?

Now we can.

My question was about the assumption in Q1 revenue guidance on the mix shifts towards descriptions and product service and product subscriptions, and also trends in deal sizes.

So we don't see a change in Q1 revenue mix, versus what we see in Q4 and Q3. However, we do see a change versus last year, where our subscription and service revenues proportion will be higher, and we expect this trend to continue throughout 2016. And as a result, obviously, there is growth in deferred revenues and less revenues to be recognized over the short term.

Any significant shifts in deal size or expectations through the early part of the year?

Not really. When we sell cloud services, obviously especially if it is a multiyear contract, there was some increase in the security deal but overall, in ADC, and regular security, in deals we don't see a difference.

And with the growth in the subscription revenue, is that primarily driven by selling multiple subscriptions to existing customers, new customers taking on more subscription services for new opportunities, or some combination?

It's generally for new applications, either in existing customers, but relatively speaking to our other revenue base, a big number of new customers.

Great, thank you very much.

Jess Lubert, Wells Fargo.

First for Roy, I was hoping to dig into the verticals a bit and better understand how much of the sequential carrier improvement was due to the recapture of slip deals versus a more sustainable improvement and perhaps of the five deals that slipped last quarter, how many have closed. How many are still outstanding?

Around half are still outstanding and the bad news, they are outstanding. The good news, they are still -- we believe -- in play. And we believe we are in a good position to win them so I don't have any bad news there except for the budget [slide scale] and the budget allocation which takes us way longer than we were expecting or we were experiencing in the past.

So some of the (inaudible) carrier are definitely the slip deal so you would -- I think it might be good to look at Q3 and Q4 in carriers together. I don't think dramatically our business has changed from the 70% to 75% enterprise,

It's generally for new applications, either in existing customers, but relatively speaking to our other revenue base, a big number of new customers.

Great, thank you very much.

Jess Lubert, Wells Fargo.

A couple questions, first for Roy. I was hoping to dig into the verticals of it, and better understand how much of the sequential carrier improvement was due to the recapture of slipped deals versus a more sustainable improvement, and perhaps the five deals that slipped last quarter, how many have closed? How many are still outstanding?

Around half are still outstanding, and the bad news, they are outstanding. The good news they are still, we believe, in play, and we believe we are in a good position to win them. So I don't have any bad news there except for the budget cycle and the budget allocation. That takes us way longer than we were expecting or we were experiencing in the past. So, some of the uptick in the carrier is definitely the slipped deals, so I think it might be good to look at Q3 and Q4 and carrier together. I don't think dramatically our business has changed from the 70% up to 75% enterprise, 20% of to 25% carrier over the long run, and 25% to 30% on carrier. Over the long run -- sorry, 25% to 30% in carrier. Over the long run, this quarter was a bit higher on carrier and service providers.

Roy, last quarter you suggested or implied that around $10 million worth of carrier business had slipped. Is it fair to assume that about $5 million came in and the rest is outstanding? Is that the way to think about that?

Yes, give or take, $4 million to $5 million came in.

And then, can you touch on what you're saying in the enterprise, why that was down sequentially and to what extent you are saying any impact from the shift of workloads to the public cloud, and to what extent you believe that is or isn't a threat to your business?

I think the majority, the impact is not necessarily from that. But I think the majority of the impact of the deferred revenue, as it relates to subscription selling, is on the enterprise. So our cloud services, the DDoS cloud, WAF cloud, [ERT] premium, the FastView cloud, they are being sold to enterprise customers and less so to carriers and service providers. And as a result, the impact that you are seeing in growth in deferred from subscriptions is on the account or on the expense for product recognition in that segment, and I think that is one.

Second, I think the US market overall did not perform as we wanted, and that is a bit also contributing to that factor. As it relates to public cloud, the move to public cloud is mixed impact on our business. If a large customer is moving to public cloud, it is generally around one or two specific applications.

We did not see a complete bank, for example, moving their whole infrastructure to a public cloud. In deal scenarios, we actually can benefit from a hybrid cloud deployment in ADC, and very important even in a higher scale, selling security cloud services as we move to the public cloud.

The bigger impact on our business in the move of the public cloud is actually the new startups that are starting there and building their whole infrastructure there, and then we are not seeing them or covering them through our regular channels. To that end, you are seeing us more and more working with content delivery networks, with cloud data centers, hosting data centers, where they are buying our solutions, and I have mentioned some of those examples. They are buying our solutions and offering them as a service to their customers.

With that, we are enjoying some of the move towards private cloud, hybrid cloud, public cloud and data centers.

And then just last question for me, this one for Doron. It seems like the revenue outlook is a little weaker but OpEx is expected to take up sequentially in Q1. So, I was just hoping to understand how you are thinking about the need to invest, relative to the desire to show leverage what your leverage expectations are for 2016, should margins be up year over year and what would cause you to maybe temper the rate of investment moving forward? Thanks.

As we said, we do believe that 2016 will be better. So, we continue to invest. We mentioned it in the previous call that the main R&D investment is -- was done in 2015 and now we are focusing on sales and marketing, so the run rate from Q4 in some minor additions that we plan to have in Q1 2016, it is something to take the run rate of the OpEx of it higher. We do feel comfortable with our monitors and in how we see the business going forward. So, with the relatively lower number for Q1, approximately $50 million, of course the margins will be less than what we anticipated to be in the full year of 2016.

But, this is how we build the business, start now with infrastructure. It is very -- it is strong and is ready for the growth.

Thanks.

Ittai Kidron, Oppenheimer.

Thanks. Roy, I wanted to ask about your conviction of return to growth later in the year. Does that assume that the macro environment improves? Or this is independent of that, meaning just looking at your business momentum and so on and so forth?

We are looking on current business [terms], so we are not factoring into that an improved macro.

Okay. And then regarding your subscription revenue, I think you mentioned that it was up 60% year over year. I have to say, it feels like at this point of your growth and move into subscription, we should see triple digit year-over-year growth, not 60%. You see the growth in deferred, it is about $5 million, $6 million on a year-over-year basis. I can't imagine that all of that relates to subscription, which means that your subscription revenue is still low single digits revenue.

Why are we not seeing 200%, 300% increases in the subscription revenue?

Ittai, I think we have given a full breakdown of our deferred revenue this time to give more visibility, to the investor community and our deferred revenue, our total deferred revenue this year went up by 17 -- $17 million, from $85 million to $101 million, $102 million. And you can assume that the big portion or a significant portion here is coming from the description services, especially as the product sales are not going up, it is hard to increase the maintenance renewal.

So, it's clearly coming from product subscription, cloud subscription, that we were selling. And so I think that can give you maybe more indication to the strength we are seeing in the segment.

In addition, we have outlined that the actual revenue recognition, of course this is deferred over the period of the contract. The actual revenue recognition moved up 60% year over year.

Is the average life of a contract or software description more than a year, or is it a year?

The minimum we sell the subscription to is a year, so by this definition, the average would be over a year. We are not selling shorter than a year contract.

Okay, well, I am looking at your deferred revenue right now on your balance sheet and it looks like it is $42 million in December 2014 near term, and $46 million in December 2015. So it is only a $4 million increase and there is no increase of long-term deferred.

So, can you reconcile the numbers? Because I'm just looking at the balance sheet right now. I only see a $4 million only short-term increase in deferred.

Ittai, Doron. Please go back to the bottom line of the balance sheet. There is some indication what with the deferred revenues. You need to take the long term, the short term, and as I said, you need to take some amount that is not yet recognized and we did not get the money yet, which is approximately $30 million, which is offset from the account receivable. There is some [star] over there, so you can see the calculation and taking these two numbers together with the $30 million, you will get to the $101 million, $102 million that we mentioned compared with the $85 million. There will be also some numbers in the investor [day] that we will upload later that will be easy for you to calculate as well. But you can see it in the press release.

Very good, good luck, guys.

Joseph Wolf, Barclays Capital.

With that two-year in the deferred revenues that you just alluded to, is there a cadence with which we should expect shipment, or they come off in an even fashion and we should start to see that rolling off through 2016 or is there some other method we can use to look into that breakdown of the deferred revenue to get a sense of where there could be an inflection point in the growth in 2016?

The contracts are recognized pro rata, so month by month basically across the period of the contract. So if it is one year, you are going to see it being recognized over the 12 months. And if it is 36 or three years, it is being recognized evenly across 36 months.

So all the contracts are written the same way.

Yes.

Okay. And then, you mentioned briefly that Cisco is -- correct me if I heard this wrong, you mentioned that Cisco -- the (technical difficulty) should start to produce revenue in the third calendar quarter of the year. What happens between now and the third quarter? Are you past sampling? Are you sending out a lot of product?

And as that relationship starts to contribute in the third quarter, will you break that out for us or give us directionally how that business is going?

Okay, so a couple of points here. First, it's a Cisco product, so it is a Cisco hardware. Our portion here of the -- or our part of this product is software. So our DDoS and attack mitigation software runs on top of the Cisco Firepower, next-generation firewall product line. So it is the Cisco hardware and the platform is running, of course, Cisco software and one of the key modules there is the hardware defense for DDoS. So we are supplying software and those are software revenues for us, which obviously carry with them a very high gross margin.

The reason I am mentioning Q3 for revenue recognition for hardware because we are -- Cisco is reporting to us one quarter after they start the sales. So, you can assume that we are expecting them to start selling or to start producing revenues in Q2 and during the time from now and then, there is a lot of training. There is a lot of -- initial customers, data customers that takes place.

Okay, that's fine, and that revenue will come in just as revenue. It won't go into deferred at all.

Correct.

Okay, thank you.

Mark Kelleher, D.A. Davidson.

Just clarification first; did you say that you expect year-over-year revenue to be up in 2016 or up by the fourth quarter? I just wasn't clear on that.

Yes, for the full year.

For the full year. So, that implies that the shift over to subscription revenue, that has -- that is going to be less of a headwind. Is that fair to say? Because it seems to be a significant headwind, and it would seem to be a significant headwind for the full year, but I might have that wrong. Can you just help clarify that?

So, I think headwinds from an immediate revenue recognition point of view from cash deal sizes has added -- we believe it is very positive. As we said in our remarks, we believe we will grow for 2016 and deferred revenues will grow as well. So, we continue to see deferred growing because of growth in cloud subscription and product subscription, and at the same time, we believe revenue recognition for the full year will also grow versus 2015.

Right. (multiple speakers)

But we are planning to end up basically the year with growth over this $101 million and $102 million of deferred as we exit 2016.

But I guess I am still unclear. So you are down 12% year over year in this quarter. Some quarter going forward, you're going to have to make that up significantly despite a headwind in subscription switching. Is that correct?

Correct.

Okay, thanks.

(Operator Instructions) Rohit Chopra, Buckingham Research.

Guys, I've got a couple of questions. The first one is just on gross margin. It has been ticking down for the last three quarters. I just want to get a sense, is there a material difference between gross margins and security and gross margins on the ADC side? So that's the first question, so just the difference between gross margin.

The second question, I just want to try to get an understanding here on the competitive environment. Can you tell us what you saw? And maybe Roy, you could elaborate on this. Why wouldn't there be an increase in competition as new -- there's other competitors who are now copying you. So they have standalone DDoS boxes, etc., coming out.

And then you have sort of the bottom end of the market moving to the cloud, as you said, sort of the startups, so let's just say you have a smaller TAM or something like that. Why wouldn't there be more competition going forward in that market? So gross margin and the competitive environment, if you can elaborate on that.

So, regarding gross margin, we have roughly similar between ADC and security, the level of gross margin. However, in cloud, the description initially -- in the initial contract -- it might be that the gross margin is lower with the renewal periods. And so on, that also improves as we need to provision the customer, the customer equipment, the capacity to absorb the new customer. And then over time, it obviously improves the gross margin. So, we don't see anything material so far here (technical difficulty) current market conditions will stay.

Now regarding the competition, you asked me specifically on the security market. And I think in the security and specifically in our attack mitigation, while you can have dedicated boxes or specific boxes for DDoS, today we are looking on attack mitigation in a much broader manner. There is a lot of mathematical algorithms that are needed to detect behavior or to detect an anomaly and, for example, one of our key advantages is the ability in 18 seconds automatically from seeing an anomaly to create a fingerprint without any manual intervention. That is something that I think is taking a lot more time for others to catch up versus maybe launching a dedicated DDoS box.

And I think if you look at our attack mitigation system and what we have built, it is a complete system. It is the product itself. It is the cloud subscription and the cloud footprint on top. It is the managed service of both the on-prem devices and in the cloud, the complete ecosystem here, which includes also Cisco and Check Point promoting our products through the endpoint that can be complemented by our cloud offering. I think we have several layers of differentiation in this market, and we will continue to invest strong to keep the competitive advantage and expand it.

Thanks, Roy.

Catharine Trebnick, Dougherty & Company.

This is Jack on the line for Catherine. Roy, one quick question. Can you give us more color on the progress at Check Point? I know you signaled that revenues from the OEM relationship increase in the quarter, but going forward, should we expect a steady increase throughout the year? Or, are you expecting and acceleration and growth from this partner in the second half?

Yes, so, so far -- and we don't have visibility for the full year, but especially in recent months, and last quarter and so on, we are seeing another uptick in the field activity, promotions, collaboration between our field and the Check Point field. And revenues and pipeline indication are quite positive.

On top of that, as I have mentioned in my remarks, Check Point expanded the breadth of the solution that they are now reselling from us. So initially, it was the DefensePro product itself. It is now extended also to the cloud solution, and as a result, we believe we can -- with that on top of the raise activity, we can grow the joint revenue even further.

So, so far, activity levels, pipeline, recent quarters revenues are quite positive.

Great, thank you for taking my call.

Thank you. We have no further questions in queue. So, please go ahead with any closing remarks.

Thank you Kathy. I would like to thank everybody for joining us today and have a great call.

Thank you, ladies and gentlemen. That does conclude our conference for today. Take you for your participation.