Alan Roden - SVP, Corporate Development Dan Bodner - CEO and President Doug Robinson - CFO.

Shaul Eyal - Oppenheimer Jonathan Ho - William Blair Kyle Chen - Credit Suisse Jeff Kessler - Imperial Capital Nandan Amladi - Deutsche Bank.

Good day ladies and gentlemen and welcome to the Verint Systems Incorporated Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Alan Roden, Senior Vice President of Corporate Development. Sir, you may begin..

Thank you, operator. Good afternoon and thank you for joining our conference call today. I’m here with Dan Bodner, Verint’s CEO and President; and Doug Robinson, Verint’s CFO. By now, you should have seen a copy of our press release that includes selected financial information for our first quarter ended April 30, 2016.

Our Form 10-Q will be filed shortly. Each of our SEC filings and earnings press releases is available on the Investor Relations link on our website and also on the SEC website.

Before starting the call, I’d like to draw your attention to the fact that certain matters discussed in this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the Federal Securities laws.

These forward-looking statements are based on management’s current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed and/or implied by forward-looking statements.

The forward-looking statements are made as of the date of the call, and except as required by law, Verint assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements.

For more detailed discussion of how these and other risks and uncertainties could cause Verint’s actual results to differ materially from those indicated in forward-looking statements, please see our Form 10-K for the fiscal year ended January 31, 2016 and the other filings we make with the SEC.

The financial measures discussed today are primarily non-GAAP and believe investor's focus on those measures and comparing results between periods among our peer companies.

Please see today’s earnings release for a reconciliation of non-GAAP financial measures to GAAP measures for the current period, as well as in the Investor Relations section of our website for a reconciliation of both current and prior periods.

Non-GAAP financial information should not be considered in isolation or as a substitute for GAAP financial information, but included because Management believes it provides meaningful, supplemental information regarding our operating results when assessing our business and is useful to investors for informational and comparative purposes.

The non-GAAP financial measures the company uses have limitations and may differ from those used by other companies. Now I’d like to turn the call over to Dan.

Dan?.

Thank you, Alan. Good afternoon, everyone and thank you for joining us today. We’re pleased to report that in Q1 we delivered $251 million of non-GAAP revenue on a constant currency basis and $0.46 of diluted non-GAAP earnings per share.

Verint has a long history of strong growth and historically we experienced similar levels of growth in both the enterprise and security markets. As we discussed in our last conference call, this year we expect another year of growth in enterprise and a temporary decline in security.

In the first quarter results, we’re consistent with these expectations. Given this dynamic we will discuss enterprise and security separately today. Starting with enterprise intelligence, we are pleased to have achieved a [$167 million] of revenue on a constant currency basis, representing 6.5% year-over-year growth.

Also I would like to report that we've largely completed the go-to-market adjustments we discussed in our prior call, designed to reduce our dependency on large transformative deals that require longer sales cycle. Here are the adjustments we completed. The first adjustment is relative to how we market our portfolio.

Recognizing that enterprises are transforming their customer engagement operations at different rates, we’re highlighting to the market our portfolio of best-of-breed solutions is modular and can be deployed over time based on the customer specific objective. The second adjustment is with respect to our customer discovery process.

Our sales force continues to work closely with our customers to develop long-term customer engagement optimization strategies. At the same time, we're focusing more on identifying near term priorities and budgets with the goal of shortening sales and approval cycles. The third and last adjustment is with respect to our sales commission plan.

In Q1, we implemented new plans designed to make our sales force more neutral and incentivize them to do what's best for the customer. We're pleased to have largely completed this adjustment in Q1 and would now like to provide an update on other parts of our go-to-market strategy starting with our cloud strategy.

Over the last five years, Verint has gradually introduced cloud-ready applications to the market and we've grown our cloud customer base to over 1,000 active cloud deployments.

Following these investments, we've recently announced that our entire customer engagement optimization portfolio is now available fully in the cloud, fully on premises as well as in a hybrid model. Verint is a leader in the large enterprise market with a customer base that includes over 80% of the Fortune 100.

Historically, large enterprises have deployed our type of solutions on premises. Looking forward with our hybrid model, large enterprises can select which applications they want to deploy on-premises or in the cloud while laying the foundation to gradually evolve through a full cloud deployment over time if they desire.

We believe that our strategy of flexible deployment model is differentiated in the market and during the quarter, we received orders that illustrates why this flexibility is important to our customers. The first example is a gain that started as a cloud opportunity and ended up as an on-premises deployment.

This new customer was initially planning on deploying multiple components of our portfolio in the cloud, but subsequently requested a proposal for an on-premises deployment. Ultimately for both economic and operational reasons, the customer decided to deploy our solutions on premises.

Customers like this one, like the fact that we're able to provide them with proposal for both types of deployment models, help them understand the pros and cons of each and ultimately give them that flexibility to select the best alternative for their specific need. The second example is a cloud deployment.

This new customer in the financial services sector is deploying our Voice of the Customer Analytics in the cloud to more effectively measure and improve customer experience, satisfaction and loyalty.

This customer is benefiting from the quicker implementation of all cloud offerings, reduced upfront capital expenditures, as well as reduced ongoing internal IT support requirement and the third example is a hybrid deployment.

This existing customer is in the retail vertical and is expanding its deployment of Verint’s portfolio via hybrid model with certain applications being deployed in the cloud while other components of our portfolio are being deployed on premises.

This competitive win is a great example of the power of our broad portfolio and flexible deployment models. The customer previously had engagement management applications from Verint and workforce optimization applications from another vendor.

The customer liked the fact that they could deploy a customer engagement optimization suite from a single vendor as well as had this ability to deploy certain applications in the cloud and certain applications on premises.

Other than those could not effectively compete with us as their portfolios were not as broad and their deployment models not as flexible. Next I’d like to discuss our partner strategy. Our cloud strategy resonates well with existing and perspective partners.

Verint Solutions are offered directly by Verint as well as through a broad set of partners that OEM or resell our solution in the cloud or on premises. We’ve invested in our indirect channel over many years and our partners know that they can rely on Verint for best-of-breed solutions as well as our reputation for strong partner support.

We believe that our cloud experience including with market finance and private cloud deployment, positions Verint as the industry’s leading partner for customer engagement optimizations in the cloud.

Today as a result of years of cloud investment, we’ve many partnerships including with 40 cloud infrastructure vendors and we continue to invest to expand and extend our partner program.

Overall, we're pleased with our first quarter enterprise intelligence results and believe we're well positioned for growth, driven by our broad portfolio, flexible cloud deployment models and extensive partner network. I would now like to turn to security intelligence.

As we discussed on our last conference call, after many years of strong growth, this year we expect temporary decline in our first quarter revenue of $94 million on a constant currency basis was consistent with this expectation.

Long term we believe that the economics in the security intelligence markets remain positive as crime and terror continue around the world and government customers continue to face new technological challenges requiring sophisticated solutions.

Verint's long history of market leadership in the security market was driven by our ability to identify customer challenges early and invest to bring to market innovative solutions to help our customers address these challenges.

Our plan this year is to continue investing to expand our security portfolio so that we’re well positioned to return to grow when the environment improves. Our investment this year focused on expanding our capabilities across our portfolio, including cyber intelligence, cyber security and situational awareness.

We are also maintaining our broad geographical coverage across emerging and developed markets. During the quarter, we received several large orders that reflect demand for our solutions and our ability to help organizations address both traditional and evolving security threats.

These large orders include an expansion order in excess of $20 million, another order from an existing customer in excess of $15 million this year, as well as several multimillion dollar orders from new customers.

While we're pleased with these large orders, it is too early to report a change in trends in emerging markets and we continue to expect a 10% to 15% decline in security for the year. Longer term, we believe that the emerging market headwinds we are facing are temporary.

The need for security intelligence globally remains strong and we're well positioned for long-term growth with our expanding portfolio and large global customer base.

Turning to our annual guidance, we're pleased with the progress we made in Q1 and are maintaining our expectations for the year with revenue growth in enterprise and a temporary decline in security. We're also maintaining our investment levels and will continue with selective hiring to support long-term growth.

Longer term we expect security to resume growth and the investments we've made to drive margin expansion over time. And now, let me turn the call over to Doug..

Yes thanks Dan and good afternoon, everyone. Most of our discussion today will focus on non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available as Alan mentioned in our earnings release and in the IR section of our website.

Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions, including fair value of revenue adjustments, amortization of acquisition-related intangibles, certain other acquisition-related expenses, stock-based compensation, as well as certain other non-cash or non-recurring charges, for certain metrics that also includes adjustments related to foreign exchange rates.

I’ll start my discussion today with the areas of revenue, gross margin and operating margin. In the first quarter, we generated $249 million of revenue or $251 million on a constant currency basis with $156 million in Enterprise Intelligence and $93 million in Security Intelligence of which $67 million was in cyber and $26 million was in video.

This compares to $270 million of total revenue in the first quarter of the prior year with a $147 million in enterprise, $92 million in cyber and $31 million in video. In terms of geography, in Q1 we generated $139 million in Americas, $73 million in EMEA and $37 million in APAC.

This compares to $138 million in Americas, $82 million in EMEA and $50 million in APAC in the first quarter of prior year. Q1 gross margins were 64.1%. As we discussed in the past due to product, services and revenue mix within our cross segments, overall gross margins can fluctuate significantly from period-to-period.

For the full year, we expect gross margins similar to last year. During the first quarter, we generated operating income of $34.8 million with an operating margin of 14%. As in prior years, we expect operating margins to increase sequentially throughout the year commensurate with revenue growth.

Our adjusted EBITDA for the quarter came in at $41.9 million or 16.8% of revenue. Now let’s turn to other income and interest expense. In the first quarter, other expense net totaled $1.4 million reflecting $6 million of interest expense and a $4.6 million gain from foreign exchange, driven primarily by intercompany balance sheet translations.

Our cash tax rate was 8.9%. As we discussed previously, we expect to enjoy a low cash tax rate for several years due to our NOLs and the amount of income we generate in low tax rate jurisdictions. For the quarter, we had $62.9 million average diluted shares outstanding. These results drove diluted EPS of $0.46 for Q1. Now turning to the balance sheet.

As of April 30, 2016, we had $383 million of cash and short term investments including restricted cash. Cash flow from operations on a GAAP basis came in at $62 million. During the quarter we repurchased 500,000 shares for approximately $17 million as part of our previously announced share repurchase program.

We ended the quarter with net debt of $429 million, excluding discounts and issuance cost, primarily associated with our convertible debt. Before moving to Q&A, I’d like to discuss our guidance for the year ending January 31, 2017. As discussed previously, we continue to see different near-term growth dynamics in enterprise and security.

In our enterprise segment, we expect mid-to-high single digit revenue growth for the year. In our security segments, we expect an annual decline in revenue of between 10% to 15%. Overall we expect total revenue to be similar to prior year plus or minus 2%.

We expect to deliver operating margins of between 21% and 22%, similar to last years as we continue to invest in both enterprise and security to be well positioned to return to growth in security when the emerging market environment improves.

We expect quarterly interest and other expense excluding the potential impact of foreign exchange to be approximately $6 million. Given the continued volatility in foreign exchange rates, there could be future gains or losses related to balance sheet translations in our future results, which is not included in our guidance.

We expect our non-GAAP cash tax rate to be approximately 9% for the year, reflecting the amount of taxes we expect to pay this year.

Based on these assumptions and assuming approximately $63.3 million average diluted shares outstanding for the year, we expect diluted earnings per share at the midpoint of our revenue guidance to be similar to last year, excluding any future impact from our share repurchase program.

Given the separate dynamics in enterprise and security, in addition to our annual guidance, we’d like to provide you with some additional color for our second quarter. For modeling purposes in Q2 you can assume revenue in the range of $255 million to $275 million, with sequential increases in both enterprise intelligence and Security Intelligence.

You can also assume gross margins and operating expenses in Q2 will be similar to Q1, driving a sequential improvement in operating margin. In conclusion, we’re pleased to have returned to growth in enterprise intelligence in Q1 and believe longer term we’re well positioned for growth in both enterprise and security.

This concludes my prepared remarks.

And with that operator, can we open up the lines for questions?.

Thank you. [Operator Instructions] And our first question comes from Shaul Eyal from Oppenheimer. Your line is now open..

Thank you. Hi, Good afternoon, guys. Dan, back in the third quarter if I am not mistaken, you signed an agreement with two MSSPs on the enterprise security front. If I am not mistaken, one was U.S.-based, the other one was outside, I think APAC.

Can you talk to us how that has been developing so far part of your sales strategy?.

Yes. So these two partnerships were in the context of our enterprise cyber security.

In Q3 last year, we announced that we intent to take the product that we develop for government customers to enterprise market as well and then in the context, we intent to bring the product directly and through partners and to speak with our part of the indirect approach that we've taken to market.

Since that time since Q3 last year, we built a small enterprise sales force. We discussed the fact that this is a separate sales force focused on enterprise customers.

We also mentioned that we are limiting our investments at this point to about five countries give or take around the world to have now taken globally or which ones and that we are planning to enter into partnership with cyber security channels as well as MSSP as channels. So overall, in Q1 we saw an increase in activity in enterprise cyber security.

We sold a couple of deals. We continue to work with our channels to develop the markets and we do expect this year to be a growth year in enterprise security -- but, enterprise cyber security, but it’s still obviously very small numbers and we still continue to consider investing more into the enterprise cyber markets over time..

Got it. Got it. Fair enough. Fair enough.

Switching to the other side of the equation, so over the course of the past three weeks, one of your cloud related resellers on a call center front, was acquired by a competitor of yours, what's your view on those potential relations going forward?.

Yes. So I think we should kind of understand that in the context of our overall partner program, we have a very large and diversified set of partners and actually 50% give or take of our revenue overall coming from partners. So we have many years of working through partners.

Specifically in enterprise, we have strong reputations for being very partner friendly and supporting our partners very well without the channel conflicts. Some of our partners, we sell our solutions on-premises and some sell them in the cloud. Some of our partners are focused on enterprise customers.

Others are focused on the SMB markets, so small and medium businesses and we also have partners actually are service both the enterprise and the SMB market. So very diversified partner programs that we carry for many years.

Our strategy overall in enterprise intelligence is in the high end enterprise market we sell both directly and through many partners. In the SMB markets, we chose to service the SMB market and sell only through partners. So it’s a pure indirect approach to the SMB, SMB market.

So in context, specifically the relationship with the cloud infrastructure vendor that we announced several years ago and it was designed for us to service the SMB market. And as I mentioned before, we have now 40 partners in total that are focused predominantly on the same thing, which is cloud infrastructure for the SMB market.

And as you know, the SMB market is highly diversified and fragmented and many companies going after this opportunity and because we sell the SMB market only through partners, we do not have any channel conflict with any of this partner and we have very strong experience in supporting multi-tenants and that goes also back to my comment on the cloud strategy.

So our multitenant support is also very important fir this SMB cloud vendors that always benefit from lower cost of multitenant strategy. So overall we feel that we have a very strong strategy for partners and specifically cloud partners and then specifically to the impact of the acquisition of Contact.

So we do expect that the relationship will wind down over time, but we also expect that other partners will see our best position as with no channel conflict and will join our partner program and will wind up.

So in terms of impact of the revenue this year, it could be a small negative impact, but also it could be an upside from other partners and it’s really too soon for us to tell.

Overall, I think we're enabling many partners in this highly fragmented SMB market and we believe that we give them best of breed customer engagement solutions and we also give them the ability to work as a partner that have no channel conflict..

Got it. So pretty much net-net neutral maybe in Contact fades away gradually, but as you said some other partnerships and relations take off or continue to increase..

Yes..

Thank you very much for this color. Appreciate it..

Thank you. Our next question comes from Jonathan Ho from William Blair. Your line is now open..

Hi guys. I just wanted to start out with your guidance and some of the commentary that you had around the second quarter. It seems like that you’re going to end up potentially of the more back ended loaded, always stick to my calculations between 1.5 and 2.5 based on the revenue.

I just want to understand the dynamics that you're seeing there and what may be driving that and perhaps why you have confidence around that second half strength?.

Yeah. So I’ll ask Doug to give you some more numbers but we do see different dynamic in enterprise and security as you all know, which is obviously we think is temporary, but we also see a difference in the H1, H2 mix between enterprise and security. So, I think Doug can give you some more color on that..

Yeah. Okay. Sure. Yeah, we do see different dynamics.

We do see sequential revenue growth in both segments throughout the remaining three quarters, but in enterprise we see first half revenue coming in kind of professional to what we’ve done in the past like 48%, 52% in terms of first half, second half similar to these all kind of seasonally we have there with little stronger Q4 in particular in the smaller Q1.

On the security side, we’ve seen that being down. We guided to 10% to 15% being down. We saw retaining on Q1, but we expect with Q2 that will probably give us about 44% of what we expect for the year. So, 56% in the second half. So, we're looking at a bigger second half on the year.

Really no change in the view we had, but it’s really the way we see the timing of the deals in our pipeline..

Right. And I’d like to add that this is no difference than what we expected when we ended -- when we started the year, and we looked at where we are with the pipeline and the timing of deals and security. So, this 44%, 56% mix is not a new development..

Got it. Thanks for the color.

In terms of your confidence level around security picking up next year, I guess could you may be walk through, what you see driving that change and what gives you that confidence right now in terms of the pipeline picking up in 2018?.

Yeah.

So as we mentioned before we received two large orders, $20 million, $50 million and several multimillion dollars orders security, which is obviously encouraging because we -- in the security business, we used to see large deals any quarter for many, many years and of course last year we started to report that because what we see as emerging market weakness and budget pressure we saw fewer larger orders.

So at the same time, I caution people not to read too much into this large orders in the first quarter because it’s not a trend yet and we need to see more of this large orders coming in, in order for us to feel better about the EM market recovery. Again we do believe in the recovery. We have conversion -- ongoing conversions with customers.

There is clearly a need customers are sharing very clear requirements they have as a result of emerging security needs and emerging technologies. So, we're very confident that the need is there and we're also pretty confident that the type of solutions we have and our discussions with customers we do see that customers react very well.

So we believe we have the right solutions for these customers. I believe that two large deals do provide confidence that the Verint solutions are high quality and that customers still see that we are on top of the challenges that they are trying to address.

So with all that, the confidence in H2 again is not related to the developments specifically in Q1, but just as well look at the pipeline, we saw certain deals that our schedule to be awarded later in the year and that’s what we see the basis for projecting stronger second half in security than first half..

Great. Thank you..

Thank you. Our next question comes from Michael Nemeroff from Credit Suisse. Your line is now open..

Hi, this is Kyle Chen filling in for Michael Nemeroff. Thanks for taking the question.

Doug, to start with you, relative to the cloud availability for the customer engagement optimization products, can you discuss any plan changes fir your sales organization and how you’re planning on incentivizing the sales people to sell the cloud applications? Are you planning on steering business for the cloud over on-promise or just offering optionality to customers? And then for Doug, will you need to adjust your revenue forecast considering the change in RevRec for the cloud deployments or is that already factored into your outlook?.

Yes, so in terms of the sales force, the sales force is the same sales force for the various delivery models right. So we changed our commission plans to have them be neutral. So our sales guys more look at what the customer wants.

We oftentimes quote on-premises and hybrid and cloud quotes all with the same deal and really let the customer choose what model works best for them. In terms of the revenue impact to that, we have seen some increase in the amount of cloud revenues we have.

We expect at the end of this year probably to have around 60% or so will be recurring revenues, but we don’t see anything dramatic there, more just kind of an evolutionary build as customers take on little bit more of the cloud solutions than they have in the past..

Yes. So let me expand on Doug’s answer.

I think it’s important to understand that we’ve been offering cloud solutions to the market for the last five years and we already have more than 1,000 active customers in the cloud and as Doug mentioned and I will expand on that, we already have 60% of our revenue is recurring revenue coming from ratable sources such as private cloud, public cloud, support eminent services.

So what we announced now is really the completion of our solutions being all available in the cloud, but also all available on premises in a hybrid model.

So the intention behind this strategy is to really be totally neutral in terms of discussion selection, but it’s not just net at the sales force being neutral, their commission plan, but it’s also Verint overall wants to be a trusted advisor and to help customers make the right decision in their specific environment.

And different customers may have different needs in terms of their privacy, security, IT infrastructure or OpEx cycle investments. So we've really found the enterprise market to have strong preference toward high flexibility in a hybrid model and that's how we’re going to drive the cloud strategy going forward.

So as we look at where we're now, all the solutions are available to cloud. We have also developed hosted capabilities, so we can deliver our solutions to the cloud and it’s not just that we deliver through partners, but we also deliver ourselves and using third-party datacenters as needed. And this provide us the ability to be neutral for customers.

60% of our revenue is recurring revenue this year that's what we expect for the year and we believe that this level is not too far from other vendors that also have hybrid offerings and they report recurring revenue in the 60s.

So overall, I think the importance of this milestone is that we reached a point that we can be neutral and we reached a level of recurring revenue that is consistent with other companies that have hybrid models..

Okay. Thanks for the color. Appreciate it.

One more for Doug, can you tell us the -- what was the revenue contribution in the quarter from Contact Solutions and Intelligent and what are your expectations for each for the year?.

Yeah, well, Intelligent we did last year, it's small more just product oriented and Contact Solutions similar small maybe a few in the quarter, but really small contribution. So to just clarify that we see a part of our land and expense strategy.

We're expanding our portfolio and when we see opportunities for tuck-in acquisitions that can provide us capabilities obviously that supports our overall strategy intelligent products communities and contact solutions bring to us the contextual self service capabilities.

And in terms of providing some match mix regarding companies that the tuck-in acquisitions we do, we generally just focus on the technology and how to bring this technology into our portfolio and of course when we do a larger acquisitions then we provide a complete breakdown of revenue and gross margin and profit, but it’s really not applicable in this case..

Got it. Appreciate the color. Thanks..

Sure..

Thank you. And our next question comes from Jeff Kessler from Imperial Capital. Your line is now open..

Thank you. As you build your neutral model and you’re getting orders from both hybrid on-premises and cloud, are you seeing certain types of applications that are more applicable to the cloud, certain types of applications that are being kept on premises more or and other applications that are -- that’s better staying -- that are becoming hybrid..

Yeah.

We actually do get -- we’d like to move the decision at the end to the customer and we’re not pushing any application in any different way because again different customers have different environment, but generally I would say that recording because recording has a lot of data privacy issues, lot of customers tend to prefer to still do it on premise especially financial services customers, perhaps in other industries they are less sensitive to the data privacy.

And when we sell our analytics solutions, customers are generally more comfortable delivering analytics or deploying analytics in the cloud, but again the beauty of the hybrid model is that customer can have the recording and the storage sitting on premise while some of the analytics is going on in the cloud.

So they can mix and match different solutions based on again their security profile, their IT profile and their investment profile of CapEx and OpEx. And over time, I’m sure that enterprise customers will change that preferences we see for example enterprise customers are getting more comfortable with private clouds and public cloud.

It’s still in the cloud, but they have more control over security in the private cloud.

So, yeah different solutions have different preferences, but we see that as an ongoing change and we’d like to be in a position to advise the customers what’s right for them and not just generally what is the trend in the industry because again each customer has a different set of requirements and environment..

Okay. Well follow-up to that is while analytics had some rough years in terms of may be over promising a few years ago, it seems that they're reaching a maturation point and not a maturation point, but let's call it a inflection point now.

What are you seeing in analytics that are improving your ability to do things like situational awareness and/or surveillance or for that matter using those types of government related applications to provide them to the enterprise? How are analytics being -- how are analytics improving to hit both the government and surveillance side as well as the enterprise side if they are?.

Yes, that’s a very good question because you’re right, analytics when it's on its own, since like it was over-promising in other deliveries but what we did and that’s not you, we started to do this many years back, is we decided to embed analytics in our operational software.

So we had a lot of different unstructured analytics, voice analytics, video analytics, text analytics, predictive analytics, there is lot of different engines that are targeted towards specific behavior analytics, but what really is working well is when the analytics engine is embedded into a workflow and it’s supporting a specific need or a specific used case of customers rather than being sold as a generic capability to analyze unstructured data.

And we’ve embedded analytics everywhere. That's the way the term we use that the Verint portfolio of analytics everywhere and you can buy lot of different modules from Verint and analytics is not going to be a separate price line. It’s really going to be embedded within that specific module..

So the sales force will be -- the sales force will be selling that as part of the package, not as an additional or a standalone or part?.

As a part of the used case, it could be package a bundle that could include several modules or even a specific best of breed solutions that analytics will be embedded in making that used case more effective..

Great. Okay. Thank you very much..

Okay. Thank you..

Thank you. Our next question comes from Nandan Amladi from Deutsche Bank. Your line is now open..

Thanks for taking my questions. So Dan on the last earnings call, you had talked about redirecting some of their security sales resources to the more developed markets because the emerging markets hadn’t come up to your expectations.

As you're doing that, how are you balancing moving those resources to grow securities in the developed markets? Whilst still hopefully maintaining some level of pipeline monitoring I guess in the emerging markets? So when the demand does come back, it will be ready to close over those deals..

Yes, so what we’ve discussed in the last call is the fact that our security business is approximately 50% from DM, developed markets and 50% from EM, emerging markets right.

And so we have presence in both type of markets and it’s kind of equally contributing to our revenue over the last few years, but we also discussed the fact that when we look at the last three-four years, the growth that we had in emerging markets was faster than DM.

And that faster growth in EM basically caused us to invest more in EM countries, develop relationships and be well positioned with many, many customers in EM countries. It is very important for us at this point to emphasize that what we see as an EM weakness is temporary. We do believe that EM countries have serious security challenges.

They’re not going away and that they will eventually need to spend the money in order to buy technology to deal with thess security challenges. So we’re not taking away resources from EM and shifting them to DM. We’re keeping the DM resources focused on DM customers and we’re keeping the EM resources focused on EM customers.

That's why we basically told the market that we want to maintain the investment level. Obviously in DM we’re expecting this year to be small growth similar to what we saw in prior years and in EM, we’re expecting a big decline. But again this decline is temporary and we do not want people to take away that we’re shifting away from EM.

We're well positioned to resume growth in EM once the situation is improving and we think that based on ongoing discussions with customers we have in EM countries, we see that their needs are growing and at some point they will be able to fund it and we will be happy to continue and grow our business in EM countries..

Thank you..

Sure..

Thank you. And I’m showing no further questions at this time. I would now like to turn the conference back over to Mr. Alan Roden for any closing remarks..

Thank you, operator. And thanks everyone for joining us tonight. We look forward to talking to you on our next conference call. Have a great evening..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day..