Radware's (RDWR) CEO Roy Zisapel on Q1 2016 Results - Earnings Call Transcript

| About: Radware Ltd. (RDWR)

Radware Ltd. (NASDAQ:RDWR)

Q1 2016 Earnings Conference Call

July 26, 2016 8:45 AM ET

Executives

Anat Earon-Heilborn – Vice President-Investor Relations

Doron Abramovitch – Chief Financial Officer

Roy Zisapel – Chief Executive Officer and President

Analysts

Alex Henderson – Needham

Michael Kim – Imperial Capital

Jess Lubert – Wells Fargo Securities

Joseph Wolf – Barclays

Mark Kelleher – D.A. Davidson

Catharine Trebnick – Dougherty and Company

Rohit Chopra – Buckingham Research

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter 2016 Earnings Call. At this time all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given to you at that time. [Operator Instructions] And as a reminder, today's conference call is being recorded.

I'd now like to turn the conference call over to Anat Earon-Heilborn. Please go ahead.

Anat Earon-Heilborn

Thank you, Cynthia. Good morning, everyone, and welcome to Radware's second quarter 2016 earnings conference call. Joining me today are Roy Zisapel, President and Chief Executive Officer; and Doron Abramovitch, Chief Financial Officer. A copy of today's press release and financial statements as well as the investor package for the second quarter are available on the investor relations section of our website. On the website you can also find my contact details, I look forward to working with you all.

During today's call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that these 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 the amount of orders and other risks detailed from time-to-time in Radware's filings.

We refer you to the documents the company files from time-to-time with the SEC, specifically the company's last Form 20-F filed on April 21st, 2016. Please note that management will participate in Oppenheimer Technology, Internet & Communications Conference in Boston in August and in Dougherty’s Institutional Investor Conference in Minneapolis in September.

With that I will turn the call to Doron Abramovitch. Doron?

Doron Abramovitch

Thank you, Anat, and welcome to Radware. Good morning everyone and thank you for joining us on the call today. I will start with an analysis of our financial results and business performance for the second quarter and then move on to our outlook for the third quarter of 2016.

Revenues for the second quarter were $49.6 million in line with our expectations. Looking at the geography breakdown, revenues from the Americas were $22.1 million, representing 45% of total revenues. Revenues from EMEA were $14 million, representing 28% of the total, and revenues from APAC were $13.5 million, representing 27% of total second quarter revenues. Revenues from the enterprise vertical were $34.4 million and contributed 69% of total revenues, where Australia revenues were $16.2 million, representing 31% of the total.

Before I moving to discussing the expenses and profit, let me remind you that I will do so in non-GAAP term. The differences between the GAAP and non-GAAP results for the quarter come primarily from stock-based compensation expenses as well as from litigation costs and amortization of intangible assets and exchange rate fluctuation related to balance sheet items. For a detailed GAAP to non-GAAP reconciliation, please refer to the financial tables accompanying our press release or to the investor package posted on our site.

Non-GAAP gross margin was 82.7% in Q2 2016 compared to 83.3% in Q3 last June and in line with our expectations. Our operating expenses were $39.6 million compared with $35.4 million in Q2 last year. We continue to invest in our business and in particular in sales and marketing in order to support our initiatives across regions and solutions as well as our focus on providing strategic customer service.

Non-GAAP net income this quarter was $2.6 million, or $0.06 per share diluted, is the higher end of our guidance, and compared with net income of $10.8 million, or $0.23 per share diluted in Q2 last year. The weighted average number of shares used for calculating diluted net earnings per share for the second quarter was approximately 44.5 million shares. We ended the quarter with approximately 43.7 million shares outstanding, a decrease of 457,000 from the end of Q1 reflecting our share repurchase activity.

As of June 30, 2016, we have approximately $315 million in cash and financial investments. We generated an operating cash flow of $7.8 million and spent $4.9 million on the repurchasing of our own shares. We plan to execute the remainder of our $40 million share repurchase plan in the coming few quarters. The total sum of short and long-term deferred revenues on our balance sheet was $80 million.

Adding uncollected bills amounts, which are often against trade receivables of $19 million, is up to a total of $99 million, up 20% from $82 million at the end of June 2015. We believe this metric, which represent a portion of our existing service contract with customers complements the revenue that are giving a more comprehensive feature of our business as the conditions from product purchases to service subscription. We ended the quarter with 992 employees. We believe we have the right threshold to support the business and its condition phase and to continue innovate leading solutions and bring them to the market.

Moving on our outlook for the third quarter. We expect revenues to be between $50 million and $52 million reflecting year-on-year growth despite the country challenging business environment and our assumption basically is now to improve significantly by the end of this quarter. Non-GAAP gross is expected to be approximately 82.5%. Non-GAAP operating expenses are expected to range between $39.5 million and $40.5 million. We expect non-GAAP effective tax rate to be 16% and non-GAAP EPS is expected to be between $0.07 and $0.09 per share diluted.

I will now turn the call over to our Roy.

Roy Zisapel

Thank you, Doron. We have solid results for the second quarter and strong bookings in Americas and the service provider segment. We are well positioned to resume growth in the second half of 2016. We continue to be very focused on executing our strategy, first providing a comprehensive integrated solution for datacenter application delivery and security. Second, virtualization in the market that is relates to datacenter attack mitigation, secured hybrid clouds and SDN NFV applications for secured networking.

In the second quarter, we announced that our Virtual Alteon Appliance Delivery Controller achieved 20-gig performance, the industry highest in OpenStack environment. OpenStack today is the de factor next-generation datacenter orchestration tool in cloud and hosting environment and is gaining the loss of traction with enterprises. Alteon Virtual Appliance for OpenStack is now more than five times faster than the nearest competitors.

This level of performance allows the network operators to truly leverage the advantages of Virtual infrastructures and OpenStack environment. Our third bullet in our strategy, increase our market footprints and position our channels, OEMs and alliances as well as cloud and content delivery network channels. We look forward to Cisco’s release of the FirePower 4000 line for the whole enterprise market with our DDoS module embedded in August. Once done, we will be at the position to start enjoying these OEM relationship revenues.

Fourth, we continue to build our subscription revenue base including cloud and product subscription offerings. This last quarter, we had record bookings from our cloud security and product subscriptions. We believe we are progressing well on this front and continue to build up on this new and rich revenue strength of the company. A nice example of a new cloud security customer is Myntex. Based in Canada, Myntex is the leading provider of trusted encryption solutions.

When hit with a series of massive DDoS attacks in April that combined numerous attack vectors Myntex experienced zero service interruptions and downtime. By implementing Radware Solution, Myntex was able within minutes to regain normal operations during the cyber attacks. Many applications and network DDoS attacks has been mitigated since the service was activated, including some massive attacks of 130-gig and 113-gig per second. This shows the magnitude of attacks currently taking place as well as the clear advantage we have in protecting enterprise customers and our digital presence.

We continue to invest in our cloud security infrastructure. We opened our software cloud security centers allowing local Japanese customers to enjoy best-of-class cloud security services. We’ve also received additional security specifications including ISO27001, ISO28000 and PCI. And our excellence in the cloud security area was noticed by Secure Computing Magazine that awarded best managed security service for 2016 award to Radware’s Cloud Security Service.

As I mentioned earlier, the service provider segment was strong. Last quarter, we announced that PenTeleData shows Radware to protect its own networks as well as its customers connected through its IP services. PenTeleData is a strategic partnership of local cable and telephone companies servicing Pennsylvania and New Jersey. This customer win was a competitive displacement resulting from dissatisfaction with the existing solution they have.

The evolving threat and attack landscape and the inability of the existing solution to block some of these attacks resulted in application disruptions, connectivity disruptions, and security risks. In competitive displacement is yet another proof point of our technology edge in the attack mitigation space. From a technology point of view, we have several key differentiators in the security fronts. First, our products utilized exceptionally strong and deep behavioral security technology that is based on mathematical Fuzzy Logic algorithms.

This is in short contract to our competitors that use thresholds to detect attacks. This is a major difference in our ability to accurately detect attacks, results forced positive or forced negative, critical to the success of the solution. Second, our products can create, on the fly in real-time, the best matching real-time signature for the defected attack. This is in short contract to other competitors requiring manual configuration with a signature that needs to be certified and second configured by a human being.

This is critical success factor when the number of attacks is on continuous rise and giving the absolute need to protect in real-time without waiting for slow error-prone manual processes. Third, we have a unique and strong incident response automation that allows us to block a certain attacker that is identified within a certain area for specific application in the datacenter and can block that attacker from accessing any applications across the global datacenter footprint. Our competition does not have an offering here.

Fourth, we provide the fastest attack mitigation system in the world capable of blocking network and application DDoS. And finally, we have a comprehensive hybrid cloud architecture, which utilizes our behavioral web application firewall and DDoS capabilities to provide the best-in-class security. Based on this technological advantages, we were able to secure the business of leading Tier 1 carriers globally, 10s of cloud and hosting providers, multiple leading banks, leading content delivery networks such as Akamai, Level 3 and Limelight and has been chosen by both Check Point and Cisco as their preferred DDoS solution.

Looking into the second half of 2016, we believe we are making solid progress in our business efforts. We continue to enjoy a strong product differentiation in the market. We are progressing with the build out of our cloud capabilities world-wide and continue to attract more customers along these lines. We continue to enjoy a strong cash position of $350 million, which we intend to use strategically to enhance our portfolio as well as our finance our buyback plans. Based on these strong fundamentals, we expect to resume our growth in the second half and continue to increase our cloud security business.

I would like to open the discussion now for Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We will first go to the line of Alex Henderson with Needham. Your line is open.

Alex Henderson

Thank you very much, so a couple of quick questions for you. The forecasts for the fourth quarter, I know you guys only want to do one quarter at a time, but the forecasts for the fourth quarter are up quite substantially versus the third quarter. Given the single digit numbers in the first three quarters of the year based on the 3Q guide, is it reasonable to think that we ought to be looking at very modest sequential improvement and not the $0.15 to $0.20 kind of numbers that are out in the street, are the street estimates too off market at this point?

Roy Zisapel

We don’t give guidance as you know for the fourth quarter, but I would not expect anything beyond the regular trends that we had in that past year. We don’t review this year as exceptionally strong Q4 as we find especially given the economic situation across the world. So, it might be too high…

Alex Henderson

Yes, thank you for clarifying that. The second question is how should we be thinking about the royalty numbers coming in from Cisco? Is that first kind of checks in the third quarter in the September timeframe, and then ramping into 2017? And how large a number can that be and any sense of the initial uptakes you know or the trajectory of that that royalty opportunity?

Roy Zisapel

Yes, so, we believe it will start signing in Q3 obviously on the low level and ramp from there. We don’t have yet statistics that we can share on the attach rates and the success of the Cisco product line, but obviously as I have mentioned in the comments the release of the 4,000 clients which is the enterprise next-gen firewall, I believe we will signal the term in Cisco to push the next-gen firewall product line over the current firewall line. And once that’s being done, I think we will have much better clarity.

Alex Henderson

Okay, one last question, and I will cede the floor. Any thoughts on the conditions in Europe post Brexit. Can you address that? Thanks.

Roy Zisapel

We don’t have clear visibility. I am not sure Brexit is the biggest event as if you look on the recent security events in Germany and France that might be even more worrying, I think, for the economy and tourism, et cetera, so we are tracking that. Q3 in any case is a relatively weak quarter in EMEA, and we took that into consideration in our guidance and we will track the situation.

Operator

Thank you. Our next question will come from the line of Michael Kim with Imperial Capital. Your line is open.

Michael Kim

Hi, guys. Can you just provide an update on the opportunities for ADC with NFV? And are you starting to see a ramp in production tenures? And how should we think about that translating into the overall ADC business relative to the product purchases?

Roy Zisapel

We think ADC and NFV and also I have mentioned the OpenStack environment are – clearly there was growth in ADC market. We've discussed in previous calls maybe some areas that are weaker for ADC but we’re definitely seeing several examples where there is a lot of potential growth in ADC, NFV being one of them. We are starting to do some initial projects in this area in Europe and the Far East, and getting calls also in the U.S. with the early proof-of-concept.

Michael Kim

And is the main differentiator of the performance versus competition, or are there other factors that maybe is driving some of that project activity?

Roy Zisapel

So, first, there is a very strong performance advantage in NVF. The key point, when carriers move to NVF, they obviously don't want to lose scale. And until today, and I think this is still the situation with our competition, the faster solutions, even on regular application delivery functions, are dramatically slower on the general purpose server than the appliances. We have a leading NFV performance capacity of 220 gigs today. We have the leading performance in OpenStack environment of 20-gig. And for the carrier customers it means that they can really move this function of traffic steering in mobile networks or low balancing in the cloud environments, they can move that function from a proprietary appliance to a software based solution running on X86.

So, our performance is the critical factor even in enabling such a project to take place, because otherwise it simply fails on the performance metrics of the current solution.

Michael Kim

Great, and then lastly I am not sure if I missed this, but can you provide a metric on what percentage bookings came from subscription sales, cloud and product subscription?

Doron Abramovitch

Well, we didn't say. But Roy mentioned that it was the best ever subscription booking, but we didn't say the number. We do not reveal it.

Michael Kim

Okay, great. Thank you very much.

Operator

Our next question comes from the line of Jess Lubert with Wells Fargo Securities. Your line is open.

Jess Lubert

Hi, guys; a couple questions as well. I also wanted to follow up on the outlook. You'd previously suggested the business would return to double digit growth during the second half of the year. You're now guiding quite a bit below those levels. I guess I just wanted to understand what changed in your forecast, maybe what the delta is versus your prior expectations with respect to the trajectory of the recovery you'd previously been forecasting in the second half?

Roy Zisapel

So, first you know we would like to take it one quarter at a time. For Q3 the leverage of our guidance is below double-digit but if you look on the half it depends where we will be on the whole range. So we might see double-digit we might be a little bit below that when you will I think our guidance go to 4% on the mid-range to 17%. So obviously it’s below a clear double-digit guidance however we still see a way to achieve that. I think the two main factors that our difference. Number one you see stronger subscription sales than we initially saw so the mix in booking between product and subscription including strongly on subscription. I think you can see that on some of our financial metrics.

And second the situation in some of the markets internationally it’s more challenging than we first beginning entering into the yield in Q1. I think those are the factors we see at very good growth especially on booking and to some extent on revenues in second half.

Jess Lubert

Roy, can you tell us how much Cisco revenue you are embedding, if any, into your Q3 forecast? I know there's a lot of uncertainty as to how much it will deliver, but to what degree are you factoring Cisco into the Q3 forecast?

Roy Zisapel

In Q3, its very little so any meaningful contribution would be offset.

Jess Lubert

And then just the last one from me, the enterprise business has now declined sequentially for six consecutive quarters. When you talk about a return to growth in the second half of the year, given some of the bookings and the shift to subscription, would you also expect to see that on the enterprise side, or is the growth you're looking at for the second half really more carrier focused?

Roy Zisapel

The most of our subscription business is enterprise. So I think what you’re seeing on the enterprise revenue recognition and is not necessarily declining in subscription bookings because in some marketplace in Americas I think we are growing quickly there. However you are seeing the impact of the subscription revenue recognition as the cloud to replace the order subscription our target in that market into a much lesser extent the clear end service provider.

So we believe that market would also different than our way are due to especially in the financial services, in online customers. I believe you will see improvement also and once the subscription revenues are getting into full recognition.

Jess Lubert

And does that start in Q3? Just trying to understand when subscription starts to become a tailwind versus a headwind?

Roy Zisapel

I think in Q3 we’re starting to enjoy that.

Jess Lubert

All right. Thanks guys.

Roy Zisapel

And being a growing factor as it's prorated over the contract time. So as quarters are passing, I think we will start to get into each quarter with much more annuity, business contribution from previous bookings.

Jess Lubert

Thanks guys.

Operator

Thank you. Next we’ll go to the line of Joseph Wolf with Barclays. Your line is open.

Joseph Wolf

Thank you. Just as a follow up, I think, to that question, you mentioned some numbers that I was just hoping you could repeat. With the $80 million to $99 million to get to the deferred revenue, would you mind just going through that again and then explaining how that works from a cash flow perspective?

Doron Abramovitch

Okay, well in the balance sheet you see the $80 million this is a deferred what we added for last few quarter is another additional, this quarter we did $90 million it’s the uncollected bids which were offset from the AR meaning that we didn’t collect the money yet so its not part of our AR and its not part of the deferred revenue. So from a cash perspective it’s a timing issue, I mean in cash perspective, we didn't collect it yet. It's supposed to be – I assume the business is growing in the next quarter or something like that. This is the only difference between the $80 million and the $99 million. The metrics that we say about is the $99 million if we selecting in a way our business by that you can connect what Roy mentioned regarding the subscription impact. So you can see a little bit growth is growing instead of what we used to have in the revenue now its going to the deferred or to the additional in $90 million.

Joseph Wolf

Okay. That was helpful. I didn't understand the first time around. Could you give us an update – you mentioned it during the remarks, but could you give us an update on the Check Point relationship and how that's turning into sales?

Roy Zisapel

I think we are progressing there well, we are enhancing now the relationship also to our cloud solution and we are doing joint marketing with them in North America and I think at least the pipeline we’re seeing continues to improve very nice new customer wins in the quarter of course it can contribute more to us given their size and we are working together to increase those numbers but we are a good corporation and commitment from both sides.

Joseph Wolf

Thanks. And then just finally on the geographic split, was there any specific slowdown in the last couple weeks of the quarter, or was it as a general sort of market condition that you're referring to? And then, could you just help us out in terms of the mix of business as you go through security subscription? Are these trends the same globally, or are the contributions from the different geographies slightly different right now?

Roy Zisapel

I don’t have anything specific on the international market to say. In Americas, we did see acceleration during the quarter and – we are happy also with the way we are entering the third quarter. And in terms of the subscription and security, the security is definitely a major portion of sales to new customers and large projects but recently subscription is even stronger in capturing the complete I would say budget of a customer it allows us to become very, very strategic and either to displace competition with our managed services or enhance our portion of the customer solution with our hybrid cloud solutions that include the product as well as the cloud service of company.

So we are definitely seeing acceleration we think acceleration in subscription revenues in Q2. We believe the pipeline is also very strong for that – for the coming quarters but we need to see that we will continue to execute well here.

Joseph Wolf

And that's a global observation, or is that more of an Americas observation?

Roy Zisapel

It’s a global phenomenon. But the key strength is in Americas given the maturity of cloud – of the cloud concept and the cloud services, both – meaning U.S.-based customers and Americas in general. These concepts are less utilized I would say in some key markets in APAC, in some second key markets in EMEA. So, definitely the US leads here as well

Joseph Wolf

Okay. Thank you.

Operator

Our next question comes from the line of Mark Kelleher with D.A. Davidson. Your line is open.

Mark Kelleher

Hello. Thanks for taking the questions. With respect to sales and marketing, I know you said a lot of [indiscernible] examples of return on revenue. Where does that stand right now? Are you comfortable with our sales organization, or should [indiscernible]?

Roy Zisapel

It was very hard to understand you. I think the line is a bit bad, can you repeat the question?

Mark Kelleher

Sure. Sales and marketing, can you get some leverage out of that? Are you happy with where your sales organization is right now?

Anat Earon-Heilborn

Cynthia, if you heard this, can you maybe repeat the question to us maybe it just – maybe it was only on our side, it is not clear.

Operator

And it is sort of staticy, but if you can repeat it one more time, Mark and I will try to repeat it for them?

Mark Kelleher

Okay. Sorry about the phone line. I'm just looking for sales and marketing. Are we getting any leverage there? Are we happy with where the sales organization is right now?

Operator

He wants to know if there is any leverage in sales and marketing.

Roy Zisapel

Okay. And I think there is a lot of our investments are obviously – we are seeing the expenses first and the leverage later, I know its around 15% increase in sales and marketing in this quarter versus the previous year and also obviously investment that we are making for growth in the future they are targeting key vertical that will see growth in key geographies and solutions.

Mark Kelleher

Okay. Thank you.

Operator

Thank you very much. And next we’ll go to the line of Catharine Trebnick with Dougherty and Company. Your line is open.

Catharine Trebnick

Oh, thank you, and thanks for taking the question; a couple questions. On geo, I noticed that EMEA has been down quite a bit year-over-year since September 2015, and then also Asia-Pac seemed to dip both year-over-year and quarter-over-quarter. Are there any dynamics going on in terms of opportunities that aren't happening? Can you give us some more color on that? Thank you.

Roy Zisapel

I think as we’ve discussed in previous calls in APAC we’ve done some changes and enhancements to our go-to-market plans there we believe on both EMEA and APAC that we are going to see better results in the second half. If we look on that in aggregate, we do see some weakness in some international markets, in EMEA as well as some markets in APAC that worsens. But we believe given where we stand today the pipeline our visibility is that second half also in this market will be positive.

Catharine Trebnick

Well, when you're saying weakness, are you talking in terms of the macro, Roy, or are you talking in terms of actual demand for specific like DDoS or ADCs?

Roy Zisapel

I'm not speaking on macro. I'm speaking on the projects we are seeing and most importantly, on the velocity at which they were closing. So, in EMEA in the last quarter and in some key market in APAC, we’ve seen delays and in budget allocation in terms of urgency and other priorities. In APAC specifically, we also have some markets that are weak for us like China, etc., for other reasons, the way the market is creating local competition, pricing et cetera.

Catharine Trebnick

Okay. So, all right. Thanks; one other question. So, you did say subscription was strong. Can you give a more quantitative around that for the modeling purposes? Was it up year-over-year, your subscription services, 90%? Can you give us some more quantitative data around that?

Roy Zisapel

Yes. We are not breaking it, but I think if you go back to Doron's comments and you look in the comparison between the two – between this year and current year on the numbers we shared you'll see there around 20% increase in the complete backlog of the deferred. It's predominantly coming from growth in subscription.

Catharine Trebnick

All right. That's it. I'll catch you on the post-call for the follow up questions. Thank you.

Roy Zisapel

Thanks a lot.

Operator

Next we’ll go to the line of Rohit Chopra with Buckingham Research. Your line is open.

Rohit Chopra

Thank you very much. A couple of questions. One, the first one, I just wanted to get a sense if there was any currency impact maybe on the top line, if you can give us a sense if there was any translation issues possibly that impacted the top line. And the second question, I think I just wanted to come back to something. The enterprise number wasn't that great sequentially.

And what I really wanted to understand here, is there any competitive impact here? And Roy, the reason I'm asking you is I think it was two and a half or three years ago where you mentioned that, when F5 came out with their new products, you saw a dip down in pricing. So, I'm wanting to get a sense if you're seeing anything like that this time as they release their new product cycle?

Roy Zisapel

Okay, so let me take this question first, and then Doron will answer on the exchange. We don’t see any of the pricing dip et cetera I’m not sure if I – still out with the product the ADC market refers but we are not seeing any such phenomenon I think the combination of our weaker results and we want to do in EMEA and APAC that are especially APAC more skewed into enterprise market and in Americas the split of subscription versus product sales which also impact our revenue recognized from that segment in the period.

However, when I’m looking on the bookings of the company and the project actually want and the orders I’m seeing good results in enterprise very strong growth in Americas and better than what you’re seeing in the revenue in the other region. So I know from – the number analysis currently on the quarter on the revenues it looks like a strong decline but it’s not versus the – we bought the orders and the projects that we are winning.

Doron Abramovitch

And for your other question, Rohit, in terms of the expenses we do see a slight increase in terms of the due to the fluctuations with their currency something like $0.5 million not more than this, and for the revenues we didn’t see something significant so this is the outcome of the exchange growth.

Rohit Chopra

Okay. And so just lastly, look, Catharine is trying to get to something and she's trying – if the subscriptions are really – are going to impact the business, I think it would be helpful if you could provide a little bit more data. And I think as you're saying, Roy, that the revenue numbers, they look kind of, let's just say, flattish. But if there is a percentage you can give us in the future or something like that, I think it would be helpful to make a better assessment. That would be great.

Roy Zisapel

Okay.

Operator

Next we’ll go to line of Reuben Gus [ph] with Opus Funds. Your line is open.

Unidentified Analyst

Yes, thank you for taking my question. It's just a quick question regarding your work with Cisco. So, if I understand correctly, there are two offerings. One is – would be a part of ASR 9300, and the second would be part of 4000 next generation firewall. And so, my question for ASR, is your DDoS protection the only software which is integrated with ASR? Also I see some publications that Arbor has their DDoS prevention software offer doing ASR. And the same question regarding your next generation firewall. Are you the only software DDoS protection company or there are others in the game also like Arbor? Thank you.

Roy Zisapel

Okay. So we are installed in the FirePower 9300 and soon in the FirePower 4000 series. We are the only leader provider there beyond the OEM and I can refer you to the Cisco website, please go to the next-gen firewall product line both in 9300 and the 4000 then you will see a clear description by Cisco of the line and the fact that Radware is the DDoS OEM partner.

Unidentified Analyst

So, this is basically just PowerPoint kind of announcement from Arbor that they are also – their Peakflow is integrated with Cisco 9300.

Roy Zisapel

I don’t want to relate to what others are doing I can just refer to you to the Cisco FirePower from the website all the information is there.

Unidentified Analyst

So, just – the revenues start being recognized from your work with Cisco on next gen firewall is just very small, but it's – you already saw the recognition of the revenues?

Roy Zisapel

I was pointing to Q3 as the potential start, yes.

Unidentified Analyst

Thank you.

Operator

With that, speakers, I would like to turn it back over to you for any closing comments.

Roy Zisapel

Thank you everyone for joining us today. And have a great day.

Operator

Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T's Executive Teleconference Service. You may now disconnect.

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