Attunity's (ATTU) CEO Shimon Alon on Q4 2015 Results - Earnings Call Transcript

| About: Attunity Ltd (ATTU)

Attunity, Ltd. (NASDAQ:ATTU)

Q4 2015 Earnings Conference Call

January 28, 2016 10:00 AM ET

Executives

Garth Russell - IR

Shimon Alon - Chairman and CEO

Dror Elkayam - CFO

Analysts

Chad Bennett - Craig-Hallum

John Rizzuto - SunTrust Robinson Humphrey

Richard Baldry - ROTH Capital Partners

Glenn Mattson - Ladenburg Thalmann

Steve Emerson - Emerson Investment Group

Graham Tanaka - Tanaka Capital

Scott Billeadeau - Walrus Partners

Matt Dunham - Prescott Capital

Operator

Good day, everyone, and welcome to the Attunity Limited Fourth Quarter 2015 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Garth Russell of KCSA Strategic Communications. Please go ahead.

Garth Russell

Thank you. Before we begin today’s call, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts are forward-looking statements. The words anticipate, believe, estimate, affect, intend, guidance, confidence, target, project and other similar expressions typically are used to identify forward-looking statements.

These forward-looking statements are not guarantees of future performances and may involve and are subject to risks and uncertainties and other factors that may affect Attunity's business, financial condition, and other operating results which include, but are not limited to the risk factors and other qualifications contained in Attunity's Annual Report on Form 20-F, quarterly reports that are filed as well as other reports filed by Attunity with the SEC to which your attention is directed. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Attunity expressly disclaims any intent or obligation to update these forward-looking statements.

During this call, we may also present certain non-GAAP financial measures such as non-GAAP net income and certain ratios that are used with these measures. In our press release and on the financial tables issued earlier today which is located on our website at attunity.com, you will find our definitions of these non-GAAP financial measures, a reconciliation of these non-GAAP financial measures with the closest GAAP financial measures as well as the discussion about why we think these non-GAAP financial measures are relevant to our results. These financial measures are included for the benefit of investors and should not be considered instead of GAAP measures.

At this time, it is now my pleasure to turn the call over to Shimon Alon, Chairman and Chief Executive Officer of Attunity. Shimon, the floor is yours

Shimon Alon

Thank you everyone for joining our call today. With me is Dror Elkayam, our Chief Financial Officer. We will begin by providing you with an overview of our performance during the fourth quarter and the full year, following by the details of our financial results. After our prepared remarks, Dror and I will be happy to answer any of your questions.

With that let’s get started. I am happy to share with you our achievements for 2015 including an increase in revenue of 36% year-over-year with strong organic growth and we generated positive cash flow of $4.7 million, a record high. We are now half way to achieve our long term goal of $100 million a year in revenue.

As we March towards, this goal, I believe we will look back to 2015 as Attunity’s transformational year. In many respects, 2015 was kind of a year that many technologic companies can only hope to experience. Today the IT market no longer recognizes Attunity only as an add-on components for another vendor solution, but it is an end to end platform that competes with and displays traditional enterprise vendor. We are being selected by large multinational organizations for strategic base enterprise wide solutions and we are bidding for long term multimillion dollar contracts that will provide a strong foundation for both for many years to come.

As the Attunity brand has grown we have become a significant provider in the analytics and Hadoop market, resulting in broader access to opportunities with Fortune 500 companies. In this process, we have become more strategic to customers by filling a void left behind by the likes of [indiscernible] These bigger opportunities have enabled us to change our sales support which is being led by multiple strategic senior hires while expanding and aligning our sales team. This has allowed us to increase our revenue opportunities by engaging in larger and longer term deals rather than tactical transactional sales.

For example, we will spend additional time to secure larger enterprise deals instead of focusing on quicker wins with smaller scope and much higher results. Expanding beyond a project based emphasis to include strategic enterprise-wide solutions has had an effect on the sales approach, including sales cycle and licensing methods. We are continuing to improve our sales methodology in response to the need for more enterprise-wide solution which in turn will drive Attunity growth later on.

We see growth in the demand for corporate level agreements where multiple Attunity products can be used in many data centers across multiple geographies. While the transition impact our short-term revenue, this new strategic sales support will allow us to generate greater revenue from these customers over time.

We remain excited by our long-term outlook as our innovation continues for Hadoop, cloud and analytic markets. The cloud continues to be an area of growth as we benefit from expansion of our related offerings and our partnership. This growth is generated by several revenue sources including revenue from strategic OEM, direct sales and partners - sales from AWS and Microsoft. In addition, we are spending our offerings to accommodate additional solutions for Hadoop on AWS as well as for Google Cloud SQL.

Attunity Visibility is the most effective solution for enterprises optimizing their performance in the balancing the workloads from traditional data warehouse to Hadoop. Now with Hadoop becoming a platform for managing vast amount of data we have enhanced Attunity Visibility to enable data usage analytics in very large Hadoop clusters. With these capabilities Attunity Visibility is the market’s only big data management solution offering users business insights on the utilization of both Hadoop and data warehouses.

We are pleased that Visibility was named one of the trendsetting products in data management for 2016 by Database Trend and Application Magazine. As we previously discussed, the higher price point of Attunity Visibility for large scale big data environment is getting longer sales cycle and different licensing methods than originally expected. While this has impacted our short revenue growth Attunity Visibility continues to generate strong market demand and plays well in supporting our strategic position with larger customers.

About a year ago we introduced Attunity Replicate for Hadoop market. We have come long way since then, winning major accounts as the preferred solution in highly competitive engagements. In addition, we are now seeing more customers move to production and require data from significantly larger number of data sources. The customer needs are very different for Hadoop that require to move thousands of tables, manage clusters that are several petabytes in size and keep the implementation up to date with hundreds to thousands of different sources. Hadoop solutions are ten to hundred times bigger than typical data warehouse implementation. On top of this, the customer has increasing needs for real time analytics.

Attunity Replicate for Hadoop offer superior scalability, performance, speed and implementation as well as its close integration with the major Hadoop vendors works very well. So far in all of our competitive backdrops, we have shined and have performed better in all of these aspects. Customers recognize our ability to provide unique solution which has led them to select us over their existing vendors. In addition, some of our competitors find themselves at - with Hadoop as they also sell solutions that compete directly with this technology.

Attunity’s product strategy with pure play data management solution is more aligned to the needs of major customers who are looking at the ability of Hadoop and capitalize on the Hadoop opportunity. As an example, a major retail chain in the US that operate over 1,200 stores chose Attunity Replicate to move the call transaction information into Hadoop data link in order to improve their analytics based on data they received from the merchants. Initially they considered large competitor who have already in place for other application in their own environment. However, the competitor could not keep up with the scale of the deployment nor could they demonstrate tidy enough integration with Hadoop. Furthermore, the competitor was very difficult to use, took long time to implement or to install and Attunity therefore was - be able to come as their preferred vendor for their Hadoop deployment.

Market awareness for Replicate continues to increase as we briefed wide set of industry analysts having more industry events than ever before. We also introduced Replicate to increase awareness, make it easier to reach a broader market by allowing more people to download and try Replicate. In addition, the initial results are very promising. We are seeing a wide variety of new leads and starting to see beginning of conversion to pipeline in this. We recently completed the commercial version of Compose, a new data warehousing automation software comprise of BI-ready technology. As part of the process Compose has been enhanced and integrated with Attunity Replicate. So now we have a platform for Compose. In addition, we had several companies participating in a pile of programs for this new software which was very successful with hundreds of them converting. As a customer recently stated with Compose, in our data warehouse environment, we were able to reduce the effort and time in creating data mounts from weeks to a single day. Compose is the natural addition to our portfolio and it has enabled our customers to dramatically shorten the time needed to build out the data warehouse while also significantly reducing the associated cost and resources.

This new solution increases value proposition and extend our revenue opportunity in the data warehousing and analytics market. The strategic value of our offering is also drive further growth with our partners. As an example, our new global reseller agreement with the Teradata opens the channel into largest companies in the world. We have already closed first deal and continue to build a pipeline that should contribute to our growth in 2016. This type of partnership extends our market reach and complements our already robust direct sales effort.

I will now turn the call over to Dror Elkayam, our CFO to discuss the detail about our financials. Dror, please?

Dror Elkayam

Thank you, Shimon, and good morning, everyone. The total revenue of $13 million for the quarter represents a 20% increase over the $10.9 million reported for the same period last year. Total revenue for the quarter include an 11% increase in license revenue to $7.4 million and 33% increase in maintenance and service revenue to $5.6 million, compared with the same period last year.

Total non-GAAP revenue was $13.2 million, representing an increase of 20% compared with the same period last year. Non-GAAP revenue includes approximately $0.2 million of acquired maintenance revenue from Appfluent that was excluded from GAAP revenue due to business combination accounting rule. The non-GAAP revenue for the same period last year was $11 million and includes $0.1 million in maintenance revenue related to the Hayes acquisition that was excluded from the GAAP revenue for similar reason. The growth in total revenue this quarter is primarily due to sales of Attunity Visibility products and cloud replication solution. The increase in maintenance and services revenue is partially attributable to customer engagement acquired through the acquisition of Appfluent.

Gross margin on a GAAP basis was 84% this quarter, compared with 91% for the same period last year. This decrease is attributable to an increase $0.6 million in associated costs from the additional hires to our professional services team which we established during the year and new hires for our support teams during the last several quarters and an increase $0.4 million in amortization expenses of intangible assets mainly associated with the acquisition of Appfluent.

Non-GAAP gross margin, which excludes amortization costs associated with acquisition was 89% this quarter compared with 93% in the same period last year. We expect our non-GAAP gross margin to improve as we continue to scale the business.

Total R&D expenses were $3.2 million, representing an increase of 42% compared with the same period last year. This increase was primarily due to costs associated with Appfluent personnel, new hires, higher equity based compensation expenses and Appfluent acquisition related expenses and amortization.

Sales and marketing expenses for the fourth quarter increased 50% to $8.1 million from $5.4 million in the same period last year. This increase is primarily due to the increased headcount within our sales and marketing teams, including the increase in quota-carrying personnel, the additional investment in marketing activities to support our global expansion, higher equity based compensation expenses, Appfluent acquisition related expenses and higher commission expenses.

G&A expenses remain at the same level and amounting to $1.1 million. Net operating loss on a GAAP basis for the fourth quarter was $1.4 million, compared with operating income of $1.2 million for the same period last year. Non-GAAP operating income was $0.7 million, which excludes $2.1 million in expenses and amortization associated with acquisition and equity-based compensation expenses. This is compared with non-GAAP operating income of $2.1 million for the same period last year, which excludes $0.9 million of similar expenses.

Financial income for the fourth quarter was $168,000 compared with financial expense of $577,000 for the same period last year. Non-GAAP financial expenses decreased to $98,000 compared with $200,000 for the same period last year. The decrease is mainly due lower hedging costs following the implementation of cash flow hedging accounting in the beginning of 2015. Non-GAAP financial expenses this quarter excludes income from revaluation of liabilities presented at fair value of $0.4 million compared with expense of $0.2 million for the same period last year.

Our tax benefit on GAAP basis was $25,000 compared with tax expense of $727,000 for the same period last year. Our non-GAAP tax expenses were $0.4 million, which excludes a non-cash income tax benefit of $0.4 million associated with stock based compensation. This is compared with a non-GAAP tax expense of $0.9 million for the same period last year, which excludes $0.1 million associated with business combination accounting rule related to the Hayes acquisition.

Net loss on a GAAP basis was $1.2 million or $0.07 per diluted share, compared with net income of $57,000 million, or zero per diluted share for the same quarter last year. Non-GAAP net income was $150,000 million, or $0.01 per diluted share, compared with a non-GAAP net income of $1.1 million, or $0.07 per diluted share for the same period last year. Non-GAAP net income exclude a total of $1.4 million in expenses, which are mostly attributable to expenses and amortization costs associated with acquisition and equity-based compensation expenses. Non-GAAP net income for the same period last year excluded $1.1 million of similar expenses.

Moving on to financial results for fiscal year 2015 we had a record year of revenue reporting $48.4 million in total revenue for 2015 which represents a 36% increase over the $35.7 million reported last year. This includes a 26% organic growth. The growth in total revenue is primarily due to revenue from our cloud application solutions and $3.7 million of revenue from Attunity Visibility solutions. Total revenue for the year include a 33% increase in license revenue to $26.7 million and 39% increase in maintenance and service revenue to $21.6 million compared with last year.

Total non-GAAP revenue was $49.1 million, representing an increase of 36% compared with last year. Non-GAAP revenue includes approximately $0.7 million of acquired maintenance revenue from Appfluent that was excluded from GAAP revenue due to business combination accounting rule. The non-GAAP revenue last year was $36 million and include $0.4 million in maintenance revenue related to the Hayes acquisition that was excluded from GAAP revenue for similar reason.

Gross margin on a GAAP basis for the full year was 85% compared with 91% last year. This decrease is attributable to an increase of $2.2 million in associated costs from salary updates and additional hires to our professional services and support team and an increase of $1.6 in expenses and amortization associated mainly with the acquisition of Appfluent.

Non-GAAP gross margin, which excludes amortization costs associated with acquisition was 90% this year compared with 93% for last year. This decrease is mainly attributable to the establishment of our professional services and support team. However, we expect our non-GAAP gross margins to improve as we continue to scale the business.

Total R&D expenses were $11.1 million, representing an increase of 20% compared with last year. This increase was primarily due to the Appfluent personnel, and to Appfluent acquisition expenses and amortization.

Sales and marketing expenses for 2015 increased 53% to $29.2 million from $19.1 million last year. This increase is primarily due to the increased headcount within our sales and marketing teams, including the increase in quota-carrying personnel, the additional investment in marketing activities to support our global expansion, Appfluent acquisition related expenses and higher commission expenses.

G&A expenses increased to $4.9 million compared with $3.9 million last year. This increase is primarily due to one-time Appfluent acquisition related cost and equity based compensation expense.

Net operating loss on a GAAP basis for the 2015 was $4.1 million compared with operating loss of $0.1 million last year. Non-GAAP operating income was $3.9 million, which excludes $8 million in expenses and amortization associated with acquisition and equity based compensation. This is compared with non-GAAP operating income of $3 million last year which excludes $3.1 million of similar expenses.

Financial expenses for 2015 were $576,000 compared with $893,000 last year. The decrease is mainly due to lower financial expenses related to acquisition and lower hedging costs following the implementation of cash flow hedge accounting in the beginning of 2015. Non-GAAP financial expenses decreased to $289,000 compared with $398,000 last year. Non-GAAP financial expenses excluded $474,000 in financial expenses related to acquisition and income from revaluation of liabilities presented at fair value of $187,000.

Our tax expenses on a GAAP basis were $546,000 compared with tax expense of $734,000 last year. Our non-GAAP tax expenses were $2 million which excludes a non-cash tax benefit of $0.6 million related to stock based compensation and $0.8 million associated with business combination accounting rule mostly related to the Appfluent acquisition. This is compared with a non-GAAP tax expense of $1.1 million last year which excludes $0.4 million associated with business combination accounting rules related to acquisition. The increase in tax expense is mainly attributable to an increase in taxable income of our US subsidiaries partially offset by utilization of Appfluent acquired NOL. Net loss on a GAAP basis was $5.3 million or $0.33 per diluted share compared with $1.7 million or $0.11 per diluted share last year.

Non-GAAP net income remained at the same level year-over-year at $1.6 million or $0.10 per diluted share. Non-GAAP net income excludes a total of $6.9 million in expenses which are mostly attributable to expenses and amortization costs associated with the acquisition and equity based compensation expenses. Non-GAAP net loss last year excluded $3.3 million of similar expenses.

Moving to the balance sheet, our cash and cash equivalents amounted to approximately $12.5 million as of December 31, 2015 compared with $19 million as of December 31, 2014. The decrease is a result of the acquisition of Appfluent which included a payment of $10.4 million in cash as well as an earnout payment of $2.1 million for Hayes. The decrease was partially offset by strong positive cash flow from operations of $4.7 million generated during the year.

We continue to effectively manage our accounts receivables with notable DSO at 33 days. Our shareholders equity grew to $36.6 million as of December 31, 2015 compared with $31.2 million as of December 31, 2014. The increase is mostly attributable to the acquisition of Appfluent of which approximately $6.5 million was paid in the form of Attunity share. As of December 31, 2015 our total headcount was 226 compared with 162 at the end of 2014. This includes Appfluent personnel and the addition of recent hires in sales, marketing, professional services and support teams as well as in R&D.

Now, I would like to turn the call back over to Shimon for some closing comments.

Shimon Alon

Thank you very much, Dror. In summary, our business has evolved to the point where we are now able to successfully focus more attention on the larger customers and longer term contracts. Covered by our Enterprise level solutions, the solutions that we have developed and acquired are proving to be well-timed with the shift in the market including adoption of Hadoop and demand for data management platform; Attunity Visibility and Attunity Compose. As a result, I am proud to say that Attunity has emerged as the recognized brand in the industry for offering solution that allowing big data to be managed more effectively and more efficiently by saving an enterprise lot of money.

Looking ahead, we expect to benefit from a number of enterprise agreements that reflect a new multi-year, multi-tier licensing structure requested by global companies in our pipeline. These larger longer-term agreements will add recurring revenue to our business building over time as we engage an increasing number of customers under these new terms. Considering this and the growth from our traditional licensing business, we expect revenue for full year 2016 of total revenue to be in the range of $58 million to $62 million.

Before we conclude our prepared remarks, I would like to thank once again all our customers, partners, investors and all the members of Attunity team for their support. And now I would like to open the call for questions. Operator, please.

Question-and-Answer Session

Thank you. [Operator Instructions] Our first question is from Chad Bennett from Craig-Hallum.

Q - Chad Bennett

Hey, guys, thanks for taking my questions.

Shimon Alon

Thank you.

Chad Bennett

So can you, Dror or Shimon for that matter, can you tell us kind of where Appfluent ended the year, how much revenue they contributed in 2015?

Shimon Alon

Good morning, Chad. They contributed $3.7 million in total revenue.

Chad Bennett

Okay. And is there any way to, I understand the concept of you moving into larger enterprise deals and maybe more platform deals if you want to call them that. Can you help us understand or quantify how that impacted the near terms results and quantify the impact on the ‘16 guidance that you gave?

Shimon Alon

Yes, first of all, on the - thank you for the question. For the short term, as we came into fourth quarter and end of the fourth quarter we had two options, not always our option, that is to improve another $200,000, $300,000, $400,000 deal with heavy discounts pushing customers that not always like this push and try to get as much as we can in a short one quarter period. However, the market, mainly the Hadoop, we have to go back for a second to see what are the landscape. We are going after a very large enterprises, financial institutions and building those strategic analytics, real-time analytics, manufacturing, each one of them telecom, each one of them has thousands of servers, thousands of application and they really are not talking about the short term project. But they are talking about worldwide multi facilities and they are looking at the multi-year type of agreement.

And when we come to them and say yes, let’s close this project or this agent and we will give you x amount of discount, thinks that - when you look at the project base that’s how you sell. I will not say all of a sudden we plan for eight and actually we build for that. We build out platform first, we build all the products. We hire the executive sales people, the same from companies like Intel or Cisco, but that’s the way they manage those sales people with both new sales guys over the last six months that came from Teradata where their annual revenue was about $17 million. So we built a company to do it, we expected it to affect us on the longer-term in 2016 and ‘17 due to the move of some large projects already in the end of 2015, we delayed and again I don't want here to think that it would be closed in Q1 or not, it's not anymore, this project was not closed in Q4, it will be closed in Q1, and not in Q1, in Q2. It takes longer time, we were selected by the way by already few of them.

So it’s some kind of issue, the selection was done already in Q4 and we are in a very intensive negotiation on a very large contract of a multi-year required very intensive [indiscernible] very intensive accounting review or revenue recognition, add some pilots, even though we are the selected, they still want to do some pilot on some, what would they call production area, so we don’t have to go to acceptant test at the end of the project. But once we get it done in the next few months, then we have a multi-year agreement that will affect us in 2016, 17, 18 and more forward.

Our objective is to build this type of new licensing method of multi-year, multi-sized, multi-tier, each one of them has a different requirement as we continue to go. This is our focus, we’re just staying back on our kickoff meeting and the issues of sales methodology, sales training, exchange of quotas, hiring major account guys, we are focusing on, in addition to our traditional project base, about to see these declining revenue coming from a multi-year multi-tier very large corporation.

As I said, in one hand, we are very happy that we build a company to own it, and we successfully did it with a platform and a salesforce. In the other end, it definitely had the short-term effect, but this is the way to reach the $100 million a year company and I would like to focus everybody on the long-term goal that we have and if we didn’t do it now, it will be very tough to continue to sell project base and get to $100 million.

One last comment on this one, why we’re doing a very good job successfully in the technology and so on, some of our competitors are not [indiscernible]. So you know what’s going on with Informatica, they are not playing well in the Hadoop market in our mind and as a result, the customers are coming to us, treating us like dealing with Oracle. So they don’t want to deal with a project-based, we are replaced in Oracle technology, you’re replacing Oracle as a company now, it’s the vendor in the - all the terms, the legal terms, the accounting terms, everything, we’re living with a high level scenario, high level equipment people, it’s awful. Everything we do don’t get belong, it’s not an immediate shift from one method to another, it’s a transition that we make, which is a combination of what we build and what about getting you to the best match we can get.

Short-term effect definitely happens and you could say only from this type of deal. And all of them are in play right now and right now, it’s very interesting of 2016. We gave the guidance as we still don’t know how fast this would be closed or how many years, if it’s three years, it’s one effect, if it’s five years, it’s another effect. We are talking in a range all the way from $1 million to $10 million currently and they can come in different sizes, different tiers and different time.

So the guidance are the guidance, I would say it’s what we could see today, it’s definitely going to get more likes as we go forward.

Chad Bennett

So what are the new multitier multi-year license terms, what’s an example? Is it a term license contract or what is it?

Shimon Alon

I will give you three examples from three different ones. The first one is we would like to focus you on worldwide agreements, $1.5 million a year for five years. This is not the final term, it’s an example of one that come up with this idea. I don’t know if this will be the final one, some changes would be more upfront because of the investment, there is an example. The second one is a guy or a company that moved to adopt very large implementations, they have no idea how many causes the great, right now, they have 4500 different applications and they said, okay let’s decide on Phase 1, which is x amount of sources, few hundred thousand dollars, followed that within about 6 months, there would be another group after we deployed the first one. So it’s a tiered approach by the how fast, how many data. I’d call it by the size of the deployment with upfront money and a tiered approach with the implementation. Another company goes by the - again, by the number of tasks they have, they say, we have x amount of tasks and we’ll say by tasks and we know how to measure the tasks and we have to come to terms with it. By the way, it’s not - don’t come and say, this is the only way to do it, but they’re coming with different ideas, with some who have more junks than we already have written agreement that is being negotiated and we still are evaluating those sides, what is the best way to implement.

Chad Bennett

Okay. So last question for me, so give me an update on kind of the OEM or partner relationships like AWS and whatnot, and how those stand today and if there is any renewal risk heading into next year?

Shimon Alon

Well, so, first of all, there is no annual risk whatsoever, they are all in very good terms with us. In one end, we did very, very well with AWS. They’re very pleased, they definitely received the benefit, they get more traction, they get more volumes and I think cloud providers, not only AWS, I think the cloud, big data on the cloud is the major revenue opportunity for them and we are definitely in the best place to be there. So AWS relationship are very good, excellent and continued discussions about adding more I would call them, databases or more platforms that is a group of mainframes and others and data warehouses that they have, to decide when and how. But we are in active discussions with them. Microsoft as you know, we announced that we are supporting our Microsoft, the Azure SQL. Another company extended their agreement with us end of 2015. This long term agreement, they’re sharing with us. The need for additional platforms and we’ll be very happy to continue to work with them, there is an ongoing activity I would say of the architectures and design team together. Google started recently to deploy data to their Google cloud and we are very close with them. We increased the number of people in the business development team that are working on this partnership and of course traditional data warehouses such as Teradata, that we sign and bring us to a very large account. The deal was closed, this relationship are intact, we have a few others in our pipeline. I would say some very strong and good ones, we are still too early to discuss it.

Chad Bennett

Okay, thank you.

Shimon Alon

Thank you, Bernard.

Operator

And moving on, we will hear from John Rizzuto from SunTrust Robinson Humphrey.

John Rizzuto

Thank you. Good morning, fellas. I want to focus a little bit on margins and how we’re doing here, this particular quarter, and I imagine, and I know we talked about the shift to the strategic focus on the sales front, but you gave 5% to 8% GAAP operating margin guidance before with the revenue for next year, is that guidance still good?

Shimon Alon

The 5% to 8% is what we gave this morning.

John Rizzuto

Okay. I'm sorry, I must have missed it. I know you guided 50, I know you okay. So I'm sorry. I must have missed it. I know you guided 58 to 62. Okay. Now, okay, on that front, what can you give me a little insight behind why the operating margins were so constrained this quarter?

Dror Elkayam

As we said in previous quarters, we continue to invest mainly as you can see from the results or you could from my script, we continue to invest mainly sales and marketing. In some cases, heavily invested as well as built a professional services team that we did throughout the year and continue to invest in this group this quarter and the professional services team is very important factor to our success as Shimon mentioned earlier, we are entering into a much larger scale transaction and in so many cases, although our software is easy to use and easy to implement, customers require to put on the table or to add to the deal , professional services personnel to assist with the implementation. So these are the reasons for the lower margin this quarter.

John Rizzuto

Okay. But it looks like as a percentage, you are obviously expecting revenue to grow at a faster rate, so in 2015, but a question on the professional services, I don't have a lot of insight into it, with all these investments, you saw professional services and support go down sequentially in the quarter, obviously two components of that, but I think of it , maintenance renewal rate as well as your professional service engagement, is there any visibility you can provide as to why we saw that decline sequentially in the professional services?

Dror Elkayam

So first of all, in terms of the service revenues, in general, service revenues continue to grow. Our retention rate remains high at over 90%. There are fluctuations, mainly in the professional services revenues. So if you get several large deals and you need to fit with implementation in the certain quarter, then you get more revenues in that quarter. If there are, there is no such a large implementation, I'm not talking about the timing of closing the deal, but more of a timing of the, when the customer needs your service team, then you see less revenues, but there is no concern whatsoever from the maintenance team. The maintenance team will continue to grow. Professional services revenues will continue to grow and there might be some fluctuations within the quarter.

Shimon Alon

And John, on the professional service, I am very happy that we established this group. We couldn't get with all of them, and as of today, we will let you know that these large deals, we're negotiating and talking already with them. The implementation the professional service and training, and each one of them would be a very large engagement as well. So expect to see the results and the yield of what we build over the next quarters.

John Rizzuto

Good. I would agree. And just a little bit about this transition, and this would be last for me - as far as, as you are transitioning into the strategic objective, and you talked a lot about what you've done already to have the company ready, the type of sales guys you hire, type of management structure, type of processes, et cetera, can you just give us an indication of how far along are you in this retooling, recreating the sales go to market strategy for enterprise, and just how far are you as we get into this New Year?

Shimon Alon

It's very good point here. I will look at it in a different kind of views. The first one is from a technology point of view. It's an ongoing process that we're deploying in the technology we build. I would say today the technologies enable us to go after those multibillion multi-year, in fact, we are being selected. But we continue to drive at the areas in acceleration of delivery, I hope it's definitely a good example, empowerment of rapid utilization. This is what we call the data warehouse automation, the success of, I don't want to over excite everybody right now, we went to four accounts and within days, really days, they came back and said, we would like to buy.

So the warehouse automation combined with delivery, it's very strong and the visibility with the automation. So, technology one. From a sales point of view, we hired already the key guys to do it. We have a very strong sales management, we invested in this last year. We bought VPs of cloud companies who joined us, we recently, in December, we also hired also an additional person in the UK. So we have now the West Coast covered, the East Coast covered and the UK and we already see him doing a very good job in this last year.

We are hiring now the salespeople, not all our salespeople are ready for this type of change, the ongoing process that we have now, it's an ongoing training. We are adopting new methodology, it's a unified sales methodology to the entire company, we don't have it yet. The third one is the [indiscernible]. We are moving into the model consultant, so the technical people are not helping with the product, they are helping with the solution. So they are being trained on how to go to the customer and divide the customer platform based rather than project based.

And the last one besides the marketing, the lead generation. It will also want to be continue to be very successful one time, transactional project based, and we are hiring and insight salespeople and we hired insight sales manager, they are doing a very good job to continue to deal with customers who are not in the multi-million on the multi-year, and this is the job that they were assigned to do, helping the major account guys, the industry guys to process on. So how far we are? I think we are very well positioned, we have a lot of, I will say, investments in the topology and training and adjustment for it to continue.

John Rizzuto

Okay. Just one quick follow-up, I'm sorry, I know I said it was my last one, but what are you doing with the tactical deals and opportunity? Are you - you're obviously deemphasizing them, but how is that developing in your pipeline and is there a new strategy to still grab these, in other words, inside sales, telesales organization, so what are you doing just to still grabbing money, you don't want to walk away I imagine, but where the tactical and project deals are there, what are you doing to make sure you still are able to participate?

Shimon Alon

Absolutely. So the tiered approach in sales is the major account for the large ones and this multi-year. Then, we have a territorial account where lots of people in the territory, this year we are going to go for throughout, around 50 salespeople. So we finished the year with 40, we are going to have on the plane right now, 48 to 50 salespeople, which will increase the number of territories and the major accounts. So its major accounts territorial accounts to go after this tactical and then inside salespeople, call it telesales to go after this, $50,000, $60,000, $100,000 dollars deals.

John Rizzuto

Okay. Great. Thanks, fellas.

Operator

Moving on, we will take a question from Richard Baldry from ROTH Capital Partners.

Richard Baldry

Thanks. On the side of the table, can you talk about how you will be able to do revenue recognition in the projects, will it be, while they are still in development, because our understanding is a lot of those projects are going to be fairly lengthy developed cycles, so will you have to wait for them to move into production environment or can you start doing some deals before they are out in the production world?

Shimon Alon

It's actually, all the deals we see already are in our pipeline and moving into production, not right away, but short-term, the pressure we have is on companies who are actually moving into production as we speak. We see a long list of companies who are either moving the next few months or toward the end of the year, but there is enough immediate deployment - immediate move into production that we see already. They retained, I described in my script, this is somebody who needed to move right away already January, and we helped him significantly, talking about moving in the beginning of the second quarter. We have the ability to work with them on this credit deployment and we see last deployment to production, we grew very well. We also like to mention that because of our tight and integration with all the cloud era, we are highly recommended by these companies when it comes to how we can get this large-scale deployment to be done as fast as possible and as good as possible.

Richard Baldry

And can you talk about the drivers behind your decision to move sort of away from the tactical style model for the strategic style model in the fourth quarter, looking at the backdrop, investors were expecting you to stay on the sort of the same track you were on, expectations for more of those deals being done in the fourth quarter, so why would you take the timing now before the end of the year, as opposed to sort of starting a year with a fresh slate, setting new expectations around that to start a year rather than while you were trying to finish up one where our expectations are already on the table.

Shimon Alon

If you ask me at the beginning of the fourth quarter, we didn't think this process and this pricing structure will help them during the fourth quarter. As we were in the fourth quarter, we had as I said, a match between the way that our sales people sold before. So some of the accounts that we went there, there were returns for this side of pricing structure, I didn't know that this is how they will demand it, but most of the changes happened for two reasons, a, the customer wanted it and when we come close to the end of the year, they say, guys, we're not into this business, in closing Q4 deal for $200,000, we would like to build here a worldwide multitier, multimillion. So this was a dynamic that was combined with customers’ requests and there are only way we could convince some of them to get it and go and say, forget about $1 million multi-year, give us few hundred thousand dollars, we will make our numbers for the year, heavily discounting it and don't see a future revenue. I have responsibilities for the shareholders, I have responsibility for the company, this heavy discounts push was not the right thing to do in December, we know that we didn't do it in the past, but we still had the opportunity, not much, much bigger and the discount become unacceptable and we say, we better wait and get the bigger ones rather than to push and make the numbers, but, [indiscernible]

Richard Baldry

With that change, should we expect, you guide annually, not quarterly, seasonality in the past has been typically stronger Q4, some sort of dip in Q1, because you didn't push at year-end in Q4, should we expect seasonality now changes that it could be more of a sequential grower quarter over quarter, and also thinking about the bottom line, do you think you preserve pro forma profitability throughout the year without sort of that Q1 dip because again, the seasonality is changing because of the decisions you made in the fourth quarter? Thanks.

Shimon Alon

Okay. So I will say that there is no change in seasonality, now that Q4 has moved to Q1, Q4 has moved to 2016, so we are not seeing here another next quarter, they may, by the way. We are in negotiations with few of them, and they may close, may not, you know that if you go to the [indiscernible]. So it's all have to be predicted, and to get. We definitely know that we will get in 2016, we will get many more of them. I think that seasonality right now is as we had before, we are not going to change it. And of course we continue to update, [indiscernible] or in regards to the profitability of both margins, I would like to go to this one.

Dror Elkayam

So we, our plans are obviously to be profitable throughout the year. We may face quarters where we will be less profitable than others, or even break even. But the bottom line will be profitability between 5% and 8%. And together with the positive cash flow.

Richard Baldry

The last thing would be, you do emphasize that transactional business and could you talk a bit about the trends in the configure are better deals, did the trends throughout the year hold up in Q4 or were there any changes in that, maybe it got better in Q4 and that's one of the drivers, how do we think about the large deal progress throughout '15 and then into '16? Thanks.

Dror Elkayam

Rich, can you repeat the question?

Richard Baldry

Throughout the year, you've talked about six-figure deals, you have given us some examples along the way of deals that have closed in the six-figure range, sort of anecdotal data. So now that you deemphasize that transactional piece in the fourth quarter, can you tell us a little bit more of how the six-figure deals, and the deal flow in the fourth quarter works versus the rest of the year?

Dror Elkayam

So, we saw several nice deals, including six-figure deals in Q4. We did not see a change on that trend. We definitely see more larger deals and much, much larger deals than we saw in the past, which is the trend that Shimon was referring to. It is not clear now what would be the structure and we explained earlier, what would be the structure and whether it will be, in what model customers may choose, but we currently see in our pipeline and currently negotiate much larger deals than we built in the first quarter?

Operator

[Operator Instructions] We'll go next to Glenn Mattson from Ladenburg Thalmann.

Glenn Mattson

Hi, good morning. Lots been covered already, question I had perhaps, can you give us a little color on the composed deals, what were the size of those deals on average?

Dror Elkayam

These deals are pilot deals, ranging between like $50,000 to $250,000. They are not enterprise wide, they are just to show the capabilities and for the customer to look into it. The first one that we already received is again, it's worldwide operations that they selected one site to be the pilot in the tests. Within two weeks, they bought it and now they are looking at expanding its worldwide. The same thing we are doing today with another very large insurance company, same process, selecting one size in European country, which is a very small size operation compared to the worldwide. So solid indicator, it's more [indiscernible] if we have the competitive landscape and absolutely we feel very comfortable. We are launching the product in, we announced the launch of the product in two days. When we go for, full forward with the salespeople and then we can get more, Northwestern would be another large enterprise.

Glenn Mattson

Okay. And just on the other large enterprise deals that kind of shift in strategy, is that mostly for kind of across the product line or is that mainly for Replicate stuff or?

Dror Elkayam

The two main products that we sold, number one is Replicate, [indiscernible] scale of the Hadoop implementation required to go to a very large scale. The Hadoop implementation is not let's pick up servers and do it. There are always 1000s of servers and always tons of petabyte. It's not like 100 terabytes, it's petabyte. So triplicate for a dupe is 1, and the second one is visibility. We see very large deals on visibility and if you look very good into them, customers don't want to go and say, okay, give me one hour, there has been a large deployment, it's also a combination of Hadoop and additional data warehousing and in discussion right now, we are with a very large again enterprise. Now these are the two projects that were affected.

Glenn Mattson

Just, I guess. Lastly, trying to balance out the shift in strategy. I guess one of the comments you made when you talked about the salesforce was that kind of had this in mind, are always in that with the salesforce with this transition and mind. But then, at the same time, you can't talk about the kind of in the quarter, it kind of surprised you were bit. So I guess the reason I ask is, are those sales guys fully on board with this transition and the expected Sherman, the salesforce among some of the people there?

Dror Elkayam

First of all, it did not surprise me. I was not surprised, but just to put things in perspective, if we look at our guidance before the acquisition of visibility, we will, we are on spot. We are plus minus, $100,000, we are well - we said we will be. So we've been in the company to do it and we did very, very well in that area. It does mean that things did not shifted, but we were not surprised that limit what we call our original asset acquisition affluence, we changed the guidance, increased the guidance, with the idea that this would be also, and we saw these and all-in in the pipeline, but this was the first one that we closed. It's the speed that we expect with, at the end of the day, supermarket, from a performance point of view, additional before affluent, they definitely met whatever they say they will go.

Glenn Mattson

Okay. Great. And then lastly I guess just I don't think so, but there is no more burnouts expected for 16, right?

Dror Elkayam

There is. The second earnout of the Hayes acquisition is expected in April 1.

Glenn Mattson

And what is the size of that, can you remind us?

Dror Elkayam

Yes, it’s approximately $2 million.

Glenn Mattson

Okay. And anything beyond that?

Dror Elkayam

It is the last payment.

Glenn Mattson

Okay, great. Thanks guys.

Shimon Alon

Okay, thank you very much.

Operator

And we will hear next from Steve Emerson from Emerson Investment Group.

Steve Emerson

Can you quantify for us what proportion, let’s by year-end of revenues you expect to be multi-year deals. And the second question is now that the business model has shifted, would you give us a number as to how - what’s the quantity of deals, the dollar amount of deals that are now or you have been selected, but final terms have not been decided on and your backlog?

Shimon Alon

So first of all, it’s probably time to correct, but it’s on the shift, we are heading to our traditional. We are finding many more very large deals. We are signing it because we have the technology and sales people to go after it. So it’s not that we decide to defocus totally on the transactional date, we have as I said, this year 50 sales people, about 10 of them are major accounts, 15 will be major accounts and the rest will do transactional deal, project deals, territorial deal. This is a big flow, this is - the majority of the revenue is not going to go away. Throughout the year, we will get many more of these that would be recurring revenue and then we will be able to report on that. Right now, it’s kind of mission impossible to take our pipeline and talk about where we will be at the end of year with how much of this would be multiyear and how many of them would be a transactional deal. So bear with us, as we are building these, we will keep updating you on a quarterly basis. I encourage you again to think about it, think of the best deals we have. We build a company, we are building to the $100 billion revenue company, this is the way to go. We had it, we reached it. It takes little bit of an impact on the short-term, it’s going to negate on the long-term. I cannot analyze the short-term today, I can do it next quarter and the quarter after that.

Steve Emerson

Well, second question. Can you give us a dollar amount of deals where you can - you have been chosen, but final terms and over what period of time they will be delivered, obviously, you can’t determine that, but now that we have lack of visibility would help our shareholders tremendously perhaps some dollar amount are selected but not delivered or backlog any kinds of numbers you can give us would be very helpful?

Shimon Alon

I will give you an example of opportunity that we have, call it selected, definition [indiscernible]. If we sign the congress, I would tell you exactly, each product will continue for how many years ad for what amount, what size. We have a variety of agreements as I mentioned. One of them is in the size of around $8 million to $10 million for example, not only once, not only in 2016, but what we see right now is an opportunity, selected, not signed, not recognized, nothing in negotiation. In the develop of this one, we have another one thereby the same idea. On top of these, we have one colleague selected and not got final negotiation yet, which will be a shorter period of time, but about $2 million to $3.5 million. We have about two or three of these already in negotiation. That’s the - I am giving a little color, I cannot go one after the other next time with you.

Steve Emerson

Thank you very much.

Operator

We will hear next from Graham Tanaka, Tanaka Capital.

Graham Tanaka

Shimon, hi, how are you? Couple of housekeeping first. Number of shares outstanding looks like went up 8% last year. How much do you anticipate - how much you have either options or stock grants outstanding that can dilute number of shares in the future and what do you estimate the number of shares will be fully diluted in 2016?

Shimon Alon

First of all, as of today, we have outstanding 16.4 million.

Graham Tanaka

Fully diluted?

Shimon Alon

No, shares.

Graham Tanaka

That’s fully diluted with options and warrants or not?

Shimon Alon

I will answer, so a 16.4 million shares and on top of that we have roughly 2.2 million in employee stock options with a weighted average exercise price of $8. Now the total is roughly 18.6 million. Now, we grant generally every year retention option or retention stock to our employees. The numbers are not material to this 18.6 million. So I think these are - this is the 18.6, 18.8, this is the range you need to take into account on a fully diluted basis.

Graham Tanaka

It looks like the number of shares went up 8% last year, and I am wondering what that came from, was that just exercise adopting?

Shimon Alon

No, as I mentioned in my script, the major change was the acquisition of Appfluent. We acquired them in a combination of cash and stock.

Graham Tanaka

Got it, okay, thank you. The other thing is I think the analysts are having a difficulty trying to understand your mix of margins on different mix changing. What are the margins on, so as the maintenance versus license and what are the margins on larger deals versus the sort of the traditional smaller deals? Thanks.

Shimon Alon

So first of all, talking about - let’s talk about larger deals versus smaller deals, obviously and this is the reason for this change. Large deals are by far more profitable. By far, it may take longer time, but the yield is much, much higher.

Graham Tanaka

Is the percentage margin is much higher than the dollars?

Shimon Alon

Absolutely. So I am not sure this is for this call, but I will try to elaborate. Commission for sales people are percentages. The deal goes up, the percentage goes up as well. But when you have the larger deal, then the total profit, if I mistake that way is much, much higher than compared to a smaller deal, it is a simple math.

Graham Tanaka

So is that for the range - for the range in the margin of $0.05 to $0.08, is that largely giving you flexibility for having more larger deals, in other words, is that kind of range?

Shimon Alon

This range is actually to cover both end of the revenue target with some flexibility.

Graham Tanaka

Well, the other thing is I was wondering, what is - for your $100 million long-term target business model, what the gross margin and operating margin, R&D and SG&A for those because it seems to me that a 5% to 8% margin is not very high for a software and services company.

Dror Elkayam

You’re right. We were at 8% last year and we invested a lot in the infrastructure of the sales and marketing and professional services. This year as Shimon mentioned, we brought very senior management in the US and in the UK and the Head of Professional Services. Once we sell more of the strategic large-scale deal, our margins will go up substantially. So our long-term model, if we talk about the $100 million target, we will see that our operating margin will exceed 20%, and the gross margin will exceed 94% to 95%.

Shimon Alon

So a lot of that increased in 5% to 8% to 20% operating margin would be basic, operating leverage on S&M, sales and marketing and G&A.

Graham Tanaka

As you make this transition, and I understand, Shimon, you were saying it’s very difficult mission impossible to predict the mix. Let me ask it this way. What percentage of - were there any large deals, revenues in the fourth at all, did you start to book any revenues from any of those at all or not?

Shimon Alon

No, we did not book any revenue from this kind of multiyear agreements. We had one or two or three deals that are larger than $300,000, $400,000, but we did not yet implement it. Even though that we were selected in the fourth quarter, we will close them in the next either in Q1 or Q2.

Graham Tanaka

And how many are in the funnel? How many in the sales funnel, are we talking about four or five or 10 or 20 or how many?

Shimon Alon

When we lease them in different sizes right now in the magnitude of I will say that double the intent. It’s one of them [indiscernible]. It’s in discussion, some of them are much ahead and will be closed and much of them - some of them are in discussion.

Graham Tanaka

And that’s normal and I am just saying, did you take double 10 meaning 20, did you mean that 20 in the pipeline?

Shimon Alon

I don’t think this number is because it’s all pipeline and pipeline does not - I don’t want to mislead you by giving you a pipeline number. Actually, next Monday, I am in Boston, sitting with the sales management looking at each one of them and see when and how we can deal with them. So right now, it is a system, I can see them, I know them, I’m very familiar with some of them, by the way I am personally involved in few of them, because these type of the deal requires a CEO meeting, maybe when they don’t know the company. So I met with CIOs already and some of them I will visit in the next few months.

Graham Tanaka

So I understand it’s difficult to predict, but maybe you can look at your $100 million model long-term. At that point in time, what percent would the large amount of percent of revenue that we are talking about, 70% or 30%, we still don’t have good pick.

Shimon Alon

Graham, it’s too early to predict at this stage. Definitely it would be a very important number, which would be a growing number, but we will have to answer this question as we continue and moving forward.

Graham Tanaka

Thank you very much.

Operator

Our next question comes from Scott Billeadeau from Walrus Partners.

Scott Billeadeau

Hi, guys. Several of my questions have been answered. I was wondering if two things, one when you look at your guidance for the year, and you talked about some of these before, what do you have in there from those deals where you are doing some percentage chance of getting it, we’re going to put them - maybe give us a little feel for how much of these multiyear deals are in that guidance.

Shimon Alon

I will tell you within 2016, I will not say not looking at this levels first of all, but I will say that when we do a forecast and then guidance, we cannot take products that we didn’t say and we cannot take all those that are very large with high risks. So there is not - they are not there at all, but the majority of this, not in 2016 focused.

Scott Billeadeau

Okay, that’s helpful. And then secondly, I wonder as you mentioned, you certainly increased professional services staff, sales and marketing staff, I wonder if you could just briefly kind of give what are the increased numbers and right now, do you have “professional service staff” kind of on the bench waiting to be put to work? Maybe give us a little feel for what the capacity there is in terms of professional service people you have hired and spending on, but not really getting anything?

Dror Elkayam

So obviously when you build professional services, and especially when the head of the team join the - sometimes during the year, it is not fully utilized. They are improving and it sometimes a matter of the [indiscernible]. As we said throughout this call, we see potential large implementation with heavy professional services required, you can’t sign a major deal and then try to find the proper professional service resource to recruit, this does not work. So you know we need to be very careful with our recruitment and make sure that they are reasonably utilized. As we grow, I am sure that our utilization rates will improve. I am not concerned with that. I actually pushed to recruit professional services, both in order to enable the growth that’s amongst us.

Scott Billeadeau

I am with you, I mean, you need to do that. I was just trying to - maybe give us a little sense, I mean, what the headcount changes and sales, marketing and professional service, you have got absolute numbers, you can give us a little feel for what that looks like at the end of 2016?

Dror Elkayam

End of 2016.

Scott Billeadeau

No, as we enter 2016 here.

Dror Elkayam

Oh, as we enter 2016. So total number of employees is - as of the end of the year was 226 employees and support and professional services were just over 30 and the sales and marketing team were approximately 100.

Scott Billeadeau

And that’s up from - what would have that number been approximately entering 2015?

Dror Elkayam

I will tell you in a second. We entered with 70.

Scott Billeadeau

70 sales and marketing?

Dror Elkayam

70 sales, marketing, technical people and quota-carrying personnel.

Scott Billeadeau

And then how about support? Was there even a support function at that point?

Dror Elkayam

We had 19, hopefully 19 in the beginning of the year and now we have a bit over 30. In other words, we increased the infrastructure, sales infrastructure by over 50%.

Scott Billeadeau

All right. That’s it from me. Thank you.

Operator

And we will take a question from Chuck Reed [ph] from BlueLine Capital.

Unidentified Analyst

Yes, I am trying to understand something here. Two months ago, you told us, you were comfortable with the guidance you gave for the year, your growth behind sales business as your staff is growing, you’re delivering the gross margin won, sales and marketing won, R&D won. Now there is a change in strategy detailed by your clients, so if you’re going after bigger deals, do you expect to adjust your sales force? Because clearly the productivity is lower given the extended sales cycle and the revenue growth lagging headcount growth.

Dror Elkayam

We will increase the sales team in 2016 as well, not at the same tempo as we did in 2014 and 2015.

Shimon Alon

I think this alliance would want you…

Dror Elkayam

They are highly sales people strategy and sales structure changed as a result of what we just talked. So whatever -

Unidentified Analyst

So all this change took place in the last 60 days, is that what you’re telling me?

Shimon Alon

Also, the last - the changes started in 2016 when we started higher as VPs, as Regional Managers, that started higher, very experienced large deal people that came into our company and they were - some of them were placed in the territories and some of them placed in what we call a major [indiscernible]

Unidentified Analyst

Well, I think it’s a pretty safe assumption that given the performance of your stock today, there was a gross miscommunication regarding the change in strategy, the change in focus and the needs for different types of sales people with different level of expertise, lengthening sales cycles and it’s better up, gross miscommunication. So I beg to differ.

Dror Elkayam

This was communicated before about the ability and the hiring, yes, you’re right. We expected some of these, what we call impact, we will see in 2016 and we saw it coming earlier.

Operator

And moving on we’ll take a question from Matt Dunham from Prescott Capital.

Matt Dunham

Yes, I am just trying to understand how this these larger deals has added to [indiscernible] when growth expected in 2016 is less than what we saw in 2015?

Shimon Alon

Sorry, we could not hear your question. Can you repeat it?

Matt Dunham

How the transition to larger deals added to in your mind when the growth in 2016 is actually expected to be less than what we saw in 2015?

Shimon Alon

As we are stating repeatedly that multiyear, these large deals are multiyear deals, it’s right now impossible to predict how much of them will come in 2016, 2017 and 2018. This moment creates a large deal with recurring revenues. What we could see right now is what we had before the signing of this large deal and that’s why you see the growth in the magnitude of where it is right now.

Matt Dunham

I mean, to me added to would be if you sign zero deals, at least as much as you did in the prior year.

Shimon Alon

We will draw the company from about $49 million to the range of -

Matt Dunham

Right, I know, and that’s less than kind of what happened last year. And then secondly when you say this is a short-term phenomenon, is that because you expect growth to accelerate in 2017 and beyond, is that your destination of short-term?

Shimon Alon

Yes.

Matt Dunham

And so is 2017, the actual time that you expect acceleration.

Shimon Alon

Yes,

Matt Dunham

But you can’t quantify the degree of that?

Shimon Alon

I cannot.

Matt Dunham

And then working at the stock, down 40%, I mean, there is clearly a disconnect with your thoughts and the street’s thought, I mean what do you think you could maybe do better to avoid industry action going forward?

Shimon Alon

My job is to continue to manage the company to grow higher, people develop right products, go after the right customers and continue to focus on getting this growth on large [indiscernible]. That’s what we do, that’s what we are looking to do.

Matt Dunham

I mean, in terms of communication to make sure that there is not such a surprise when the report comes out, is there anything you think you can do to improve?

Shimon Alon

We are participating in financial conferences. We’re issuing press release when some large deal is coming and we will focus on something we are doing.

Operator

And it appears I have no further questions at this time. Shimon, I will turn the conference back over to you.

Shimon Alon

Thank you everybody for joining our call today. We will be participating in the ROTH Conference in March and love to see many of you can attend this conference. In the next few months, maybe more conferences of other bankers and we will participate in all of them. So if you need to meet with us or see us, we would be there. Thank you and have a great day.

Operator

And that does conclude our conference today. Thank you all for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!