Q3 2011 Earnings Call Company Participants: Operator

Company Name: Allot Communications Ltd Company Ticker: ALLT US Date: 2011-11-01 Event Description: Q3 2011 Earnings Call
Market Cap: 325.79 Current PX: 13.685 YTD Change($): +2.045 YTD Change(%): +17.569
Bloomberg Estimates - EPS Current Quarter: 0.106 Current Year: 0.388 Bloomberg Estimates - Sales Current Quarter: 19.800 Current Year: 74.013
Q3 2011 Earnings Call Company Participants

Jay Kalish, Executive Director-Investor Relation Rami Hadar, President & Chief Executive Officer Nachum Falek, Chief Financial Officer
Other Participants
Ittai Kidron Matt Robinson Jay Srivatsa Sanjit Singh
MANAGEMENT DISCUSSION SECTION

Operator
Good day and welcome to Allot Communications 2011 Q3 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jay Kalish, Executive Director of Investor Relations. Please go ahead, sir.
Jay Kalish, Executive Director-Investor Relation

Thank you, Kaleen and thank you all for joining us on our third quarter 2011 conference call today. Joining me are Allot's President and CEO, Rami Hadar, as well as our Chief Financial Officer, Nachum Falek. The press release announcing our third quarter results is available on the investor relations section of our website at www.allots.com. All results and expectations we review on the call are on a non-GAAP basis unless otherwise described as GAAP. Non-GAAP net income and non-GAAP net income per share excludes stock-based compensation expenses as well as amortization of intangible assets and certain one-time expenses. Please note that all earnings per share amounts are on a fully diluted basis. Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflects management's best judgments based on currently available information. I direct your attention to the risk factors contained in today's press release and in the Annual Report on Form 20-F filed by Allot with the US Securities and Exchange Commission on June 9, 2011. On the marketing side, I'm attending the Needham Conference today in New York and we will be marketing in the U.S. next week. Management is also planning to market during the third week of November as well as in early December. Please be in touch with me if you would like to schedule a meeting. With that, I'll now turn the call over to Rami.
Rami Hadar, President & Chief Executive Officer
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Thank you Jay, and thank you all for joining us today. It was a great quarter followed with continued growth on our top and bottom line. We have reached a new milestone as revenues crossed the $20 million level, a 37% increase over last year and 9% over the second quarter. Net profits reached $3.7 million or $0.14 per share. Our operating income continued to grow and we've reached $3.2 million on a non-GAAP basis and increased our operating margin to 16%. As I said it repeatedly during this year, we see plans to continue leveraging our financial model during 2011 by a taking portion of increased revenues down to the bottom line while investing in the business to meet the ever-increasing opportunities. Due to timing issues with $9.5 million initial order we received from an Asian Tier 1 fixed line operator, in order we split from September to October. The book to bill ratio for the quarter was below one. However if we take this order into account, our book to bill would have been over one for third quarter as well. Overall with this caveat the book to bill ratio has been over 1 for more than two years which has allowed us to build a healthy and growing backlog and demonstrates the momentum we are seeing in the market. During the quarter, we received large orders from nine large service providers, three of which are from mobile customers, five of the orders were from new service provider customers, two of which were from mobile. On operational side we had one-tenth of ten customers during the quarter. We continued to execute in all of our major markets. In addition to the $9.5 million order on the wire line side, we are maintaining our leadership in the mobile space. During the quarter, we completed our first major LTE deployment with one of the European Tier 1 operator where they rolled out 4G -- although the 3G network. This is proof of our value proposition for 4G/LTE network in the face of dramatically increasing data, expected over the next few years and at geographical level we continue to see growing opportunities throughout the world. In the U.S. we are seeing initial activity despite consultancy in the regulatory environment. Although this is quite visible in the U.S. we are working closely with mobile operators and fully engaged in this market. In addition we see increasing number of new opportunities in A-Pac which will hopefully begin to materialize next year. We have [indiscernible] in Europe and the concerns of some of you that were expressed to me about our business in this territory. At this time, we have not seen any slowdown in activity, no real delays in our project completion because all of our private markets, our customers and professional customers are telling me that envision to optimizing network to meet the flood of the data particularly videos were major concerns today have helped to drive new revenues over the network. However, this has been a fair deal [indiscernible] concept. By enabling smart charging and enabling entire increase range of value added services all on a single service gateway platform, we offer service providers a most robust solution in the market. We help service providers generate revenues and save on operating expenses while offering attractive ROI within several months of deployment. We continue to increase in debt over a while with some [indiscernible] growth in balance consuming mobile handsets and applications are driving our top line growth. As long as these trends are not affected by the macroeconomic [ph] conditions and they have not been affected to-date, we anticipate continued upside to our business. These are some are the reasons that we have seen consistent growth. To sum up, it was a greater for us. There is continuous increase in revenue and profitability. The top line opportunities continuous to increase, we're not seeing any slowdown in European markets and we see a number of opportunities in the U.S. and A-Pac for 2012. Our set of gateways of the service providers with compressive, expandable, and upgradable solution, which [indiscernible] the main concern, how to generate revenues over the network. It shows a significant ROIs another major reason that we are seeing growth in our service market. I will now turn the call over to Nachum for short financial review. Nachum, please go ahead.
Nachum Falek, Chief Financial Officer
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Thanks, Rami and good morning everyone. Let me take a few minutes to review the results we published earlier today and we'll be discussing non-GAAP bills which excludes stock-based compensation, amortization expenses and certain expenses we incurred during the quarter related to the public offering, which we pulled in the beginning of the quarter. Full conciliation of the pro-forma results discussed in this call to GAAP results is currently available for review on website and in the press release issued today. Now let me walk you through the results for the quarter. Revenues for the third quarter increased to $20.1 million, up 37% over the third quarter of 2010 and 9% over the second quarter of 2011. As a percentage of our revenues sales in America accounted for 21%, EMEA 60%, and Asia pacific 19%. Out of total revenues during the quarter products were 73% and services 27%. Gross margins for the third quarter came in a 71.7% slightly better than the 71.6% we had on the second quarter of 2011. Our operating expenses increased to $11.1 million and in line with our expectations. During the quarter we recruited 80 new employees mainly to the R&D and sales and marketing department. For the quarter we were happy to report earnings per share of $0.13 as compared to $0.10 in the second quarter. As a percentage of sales total OpEx went down from 56% in the second quarter of 2011 to 55% in the third quarter. As a result the operating margin continued to improve increasing to 16% from 15% in the second quarter. This further demonstrate the strategy we discussed with you to leverage a portion of the top line growth to the bottom line while continuing to reinvesting the business in order to meet the increasing opportunities we are seeing in the market. Cash balances increased to $66.7 million compared to $63.5 million in the second quarter of 2011. During the third quarter, we generated $3.4 million in cash from operating activities. Our DSO went up to 59 days from DSO level of 55 days we had in the second quarter of 2011. Inventory was similar to the second quarter level. It's $9 million versus $9.7 million in the previous quarter. Deferred revenues were at $14.2 million versus $15.8 million in the second quarter of 2011. The major reason for the decline was that we recognized revenues from several projects of which user acceptance testing was completed during the quarter. For us deferred revenues relates to payments we received for orders which have not yet been recognized due to terms and condition of the [indiscernible]. That concludes my remarks and we will now open the call for questions.
Q&A
Operator
Thank you. [Operator Instructions] We will take our first question today from Ittai Kidron in Oppenheimer. Please go ahead. <Q - Ittai Kidron>: Thanks and congrats, gentlemen on a great quarter. I have three questions. Nachum, starting with you on the large deal that you've announced of the carrier in Asia, is this something that will be recognized over the quarter or two or do you see like a multiple quarter type of deployment for this project? <A - Nachum Falek>: Sure Ittai, good question, it's Nachum. It's true, obviously it's a little bit too early, we just perceived the order during October, but it looks like we won't be able to recognize this order on one quarter and it will probably be a multiple quarter in terms of recognition. Again it's too early. We still need to evaluate the best way to do it according to the accounting rules obviously. <Q - Ittai Kidron>: Great. And second clearly fourth quarter is typically a seasonally solid quarter for your business, but how should think about also your March quarter seasonality, in the past you've managed to grow in those quarters given the environment we think about a more typical seasonal carrier-related type of business maybe flattish slightly down potentially in the March quarter?
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<A - Nachum Falek, Chief Financial Officer>: Yes, again you are right, in telecom in general, we do see that first quarter is kind of little bit slower due to seasonality. Looking at the look and the growth we showed in the past, we continue to grow also on the first quarter, it's a little bit too early for us to really focus the first quarter and you know that we are not giving guidance. But I think that you know in general as I said you are correct, first quarter is a little bit I would say slower on growth if I will compare it to the fourth one. <Q>: Very good and Rami you had a nice 10% sequential increase in R&D, can you give us a little bit more color as to where are you putting your R&D dollars right now or is it sort of the next things I know you can't disclose products before they arrive but maybe conceptually how do we think about the investment there? <A>: Yeah, the growth in R&D actually is reflected on let's say the two main outgoing activities in a typically R&D in a growing company. On one end, we have the majority of the R&D team executing on the long term roadmap alongside our vision in market demand and that's obviously goes on usual but we are facing in terms of need to grow is as we're getting to these very large deals into our very large and greater tier 1 service providers and many of them come with really great idea with new functions and features that we have not thought about at the beginning of the year. These are now say customer specific features which will go into a different category but really almost like accelerated the need of our roadmap and this is where if we are we sometimes find our sales team under pressure to execute quickly on certain features and function to go and see wins [ph]. That portion is growing as we sign up larger, larger customers. <Q>: Okay and lastly on the Americas revenue I mean a great performance there I mean in the first three months of the year you did more deals than you did in all of last year. In that region, can you you talked about U.S. as a great opportunity for you in 2012, can you give us a little bit more color as to what you as to what U.S. carriers are doing or what can they do, what are they doing and how do you think the regulatory environment could either change or ease somewhat to accelerate that? <A>: Hi, so you observe it right and we did get a nice bump up in revenues in couple of them, large deals, both in South America and North America. Right now it's a little bit too early to talk about the trend and therefore right now I can't give you more color, but you do observe them right and Americas is the loss anticipated growth in America as hopefully starting to happen. I'd like to wait a little bit to see a trend before we talk about specifics. The regulatory environment is totally better than it was the last year given this the clarification that came out of the SEC codes in the latter part of last year, but I would really want to see a little bit more clarity and deterministic guidance from that we see what's allowed and what's not allowed and to make this trend into a really growth engine. <Q>: Very good. Good luck guys. <A>: Thank you, very much. Thank you.
Operator
We will take our next question from Matt Robinson from Wunderlich. Please go ahead. <Q - Matt Robinson>: Good morning and congrats from here as well. Can you start with a little bit of the regional flavor for the new customers and not going to maybe if you could give us your sense of where we should expect deferred revenue to go in the current quarter? And I guess also where you think the regional strength will be in the current quarter? <A>: So, yeah, good morning Matt and again thank you very much. I would say the same, one is there is obviously over the 10% of customers that is mainly European although not but mainly European and that is well known and I would put that aside. Besides that the distribution of new large deals with Tier 1 operators, the multimillion dollar deals are actually coming from all over. I am not sure we've been digging up statistical bases to discuss one regional or another but if I kind of quickly go back and look at first three quarters -- the large deals came from all three major markets, Asia Pacific is totally is very large. [indiscernible] received during October, some from EMEA and actually two very nice deals one in South America and one in North America. So it's right now it's kind of popping all over the place. The fundamental demand for the functionality we provide both on optimization and monetization doesn't have
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any geography dependency except the fact that there obviously one needs to see 3G and above multi-national in order to deal with data functionality. <A>: And not on your comment on the deferred so the large deal that Rami mentioned and we had a press release last week about so we got thoughts of DPO [ph], we've got the cashing advance already. So talking about DPO alone, it's obviously that either that DSO will be lower. If we recognize something we already got the cash all mean that the deferred revenues would increase due to that deal during the end of the fourth quarter. <Q>: So it looks like after all these many periods of really strong book-to-bill, you got customers now putting the equipment to work and you're recognizing revenue. So, even though this big deal that you announced last week is going be multi-quarter in recognition. You could have an offset with a lot of the bookings you've achieved in recent periods of recognition that might net it to kind of a neutral deferred revenue quarter? <A>: Exactly. <Q>: Okay. And at some point in the call, can you come back to us with operating cash flow, CapEx and depreciation? <A>: Sure. <Q>: Okay. I'll come back with further questions later. Thanks a lot. <A>: Thank you, Matt.
Operator
We will take our next question from Daniel Marron from RBC Capital Markets. Please go ahead. <Q>: Thank you. Congrats Rami and Nachum on the very strong execution, nice job as usual. <A>: Thank you. <Q>: Sir, and just I wanted to get a little bit perspective on the competitive dynamics or the overall strategic opportunities that a carrier has right now imagining its traffic either on the wire and wireless side, a lot people are talking about move [ph] to royalty and how it's going to impact architecture, some vendors are trying to introduce some TPI solutions into their gear and obviously you do have that some direct competitors, how should we look about around those direct competitors on the one hand and then the potential changes in the architecture of how characteristic changes may change? How carriers address the [indiscernible] traffic management? <A>: Okay, so I guess although there is some relation between the two elements you talked about, we're really surprised [ph] first, and thank you for giving me the opportunity to boast [ph] about our LT deployment. For us, it's a very significant milestone. One is that we are proving to our customer count customer base in [indiscernible] that a lot is LT compliance and not only [indiscernible], but actually in prices. We are talking about a very large mobile operator in Europe who has deployed that commercially in their LT rollout. From a product positioning point of view, we continue to prove our leadership in the mobile phase with a great execution by the team and the [indiscernible] roll out. From a marketing point of view, I am actually happy this is a service provider who rolled out LT in the past 6 to 9 months and rarely we see the need for our service gateway with its DPI functionality and this gives me greater confidence that LP could be a growth engine for us as we continue to see serious deployments into 2012, 2013. In my marketing presentations that I have already said that although ALLT will provide some relief in capacity given the phenomenal growth in data rates that is going to be too little too late and the demand for our equipment will remain healthy. On the competition side, there is no new news there. We do see we continue to see two sides of our competitors, one is the standalone and usually [indiscernible] there is a two or three of us in this game. All companies by the way are
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growing which is a nice sign for the market as a whole. And in terms of we haven't seen any new entrance to our market I've always talking about the huge build to entry to develop a DPI engine with the 100 of signatures and protocols and applications that one to identify in order to really have a topnotch in DPI device. So the standalone market and says the same and no new entrance in terms of indirect primarily what are the [indiscernible] in 3G or PGW, in 4G the concept is the same. Some of these vendors are trying to claim DPI functions in their gateway, in their GGSN. Right now we haven't seen anything a functional and scalable compared to what we have to offer, but in general these are very strong companies and I always consider them as a mid to long term threat is one of them continues to improve the function. But right now, when the service provider decides to issue in our fee it really means that they have made a decision that's integrated approach was not good enough and our feet typically called for a standalone base of resolution. <Q>: Thank you, well I mean I guess some of the recent trends are a testament to that. On that note given when that you had with the fix line operator in Asia. Can you is that the beginning of the trend where we see the fixed line operators come back to table I think that they were a very big part of your growth, probably five years ago and then the mobile operators kind of took the lead. Are we expected to see some of those operators come back to the table in coming years? Is there a way to quantify this is going to be the same rate of growth as we've seen from the mobile operators? <A>: Good question, Daniel. And we've been asking ourselves the same end question. I have said it in the past that while mobile is where we are seeing the most the highest rate of growth in mobile came from nowhere and that was 5% three years ago and today we're somewhere in the 50% range. Fix didn't go away and it's even naturally on an absolute level continued to grow from a dollar point of view, but it's absolutely at a much lower rate than mobile. Right now, I'm ready to say that fix remains an important part of our in our business and the need there is true and is there, but nevertheless to declare that I expect the similar type of growth rate from fix, probably it's too early right now. Mobile is really the fastest growing category. <Q>: Thank you. Then the last question from me, as you look into the area that your service gateway needs to ramp up and I think that we have seen the OpEx growth this quarter, what area of the investment do you see in your internal R&D or partnerships or potentially some technology acquisitions that you may need to do down the line? <A>: From an organic point of view, I would say that I mean, there are several areas thatjust to give you one example, we will talk about the phenomenal growth in data over mobile, but that's on everyday basis, they really an interesting execution challenge to give a feeling. One of our quantifiable metrics is our ability to deal with the month of data sessions that are established through over the mobile networking and flowing obviously through our service gateway. I can tell you that in the past 24 months, we had to scale an order of magnitude of 10 times in somewhat like 18 months in order to catch up this phenomenal growth. This is way beyond anymore to low same descriptions or anything that I've seen in telecom to be able to grow a telecom and device in order of magnitude in less than 18 months, which is much less than a platform product cycle requires that lot of very fast engineering while obviously maintaining very high quality and in Tier 1 availability and so on. So, this is one example. But we are constantly improving our value-added services, our reporting capabilities offering more and more insights report to our customers. So, their first on all fronts and as I said before some of the acceleration is really driven by effected rate securing ahead a plan and revenues and with these very large deals and come in they need to accelerate so roadmap requirement. <Q>: Okay, very good. Thank you.
Operator
Our next question comes from Dan Cummins from ThinkEquity. Please go ahead. <Q>: Thank you. I had a couple questions. I wonder if you could talk about the sales funnel with respect to used cases to the extent that you could describe requirements in the funnel, customer requirements around either reporting traffic
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management onto service creation, be curious if service creation is approaching parity yet with the other two and then in terms of fourth quarter seasonality. I wondered if you would be able to tell us what book-to-bill was in fourth quarter of 2010, just may be give us a sense of historical pattern and expectations for how you are doing? Thanks. <A>: That was the [indiscernible] question. We have been reporting book-to-bill of over one for the past two years, so fourth quarter 2010 book-to-bill was over one as well. In terms of your first question, Dan, used cases it's a very pretty elaborate thing on topics. In general, you described this in a right way. The fundamental offering is really growing [indiscernible], lay off certain type of reporting whether it's based on subscribers, application, service class, network awareness, many types of various approach, short and long term, real time, [indiscernible] but I can tell you we are taking that in 95% of our deals, we are reporting is not enough, all of the deals by holding plus in another level of functionality. In terms of the next level of traffic management, obviously that has been a fundamental used case for us for the past couple of years. Now you can take profit management into two directions one which was the most classical one, traffic management for optimization of savings. But for example in differentiating priority between real time applications and non real time applications, you can drive efficiency out of the network or do CapEx and saving, that's the traditional one. But you can also say traffic shaping to generate service creation by offering to your services. We see that as the growing segment because now we're talking about increasing our pool in top line. That which is relatively are the new element of our offering probably have reached clarity, almost clarity with the first two propositions, reporting and optimization. So most of our customers today do all three, great reporting, network intelligence, optimization by product, I think by traffic and then offering tier services to improve top line growth. The next level which we introduced earlier this year really speaks about charging. Charging in indirect way is also service situation because if you offer a if you move from flat base to usage base you haven't done anything in terms of traffic shaping but you certainly have invented a new class of service and consulting effect in a positive way your revenue per subscriber. We have dramatically improved our charging capabilities over the past year and I would say that by now again how to quantify but maybe 10% to 20% of our overall service provider deals and more on the mobile side are banging to our unique charging function. <Q>: Thank you, that's terrific and one follow-up. If you had to guess right now for the full year, full calendar 2011 how many different 10% customers do you think you will have? Thanks. <A>: So I think on an annual basis obviously we will probably have one at least, on a quarterly basis I would say three to four. <Q>: Okay. Thank you. <A>: Thank you, Dan.
Operator
We will move to our next question from Jay Srivatsa from Chardan Capital Markets. Please go ahead. <Q - Jay Srivatsa>: Thanks for taking my question, can you Rami can you talk to me a little bit about this charging solution and your recent partnership with Dot Net? When do you expect that really start to play out in terms of additional service provider revenues? <A - Rami Hadar>: Yeah, so I'll say three focusing same to revenue creation part of our offering or the monetization. Certainly in the category smart and small charging are being able to move again for flat rate, to usage based and charging, in that we've been simply usage based charging, but also more sophisticated based on difference ratings for different applications for example and so on, off net provides a complementary products while they have a softer suite called PCRF which is really a middleware that is part of the 3G start that really stands out policy command in one hands and gets from us [indiscernible] our reports from start restarting from the network. They are also known for their online charging software that gets rating information from assort to give an example we would be the one would count
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retime traffic coming from specific user and a specific application report to their software when they reaches when they reached at certain threshold. So the products are very complementary, but very different. There is a software platform products real time networking element. We have announced several partnerships in this category because there is obviously complementary products in the past I spoke about a similar partnership with HP and certainly Nokia Siemens has some products in this area. The most recent addition is [indiscernible] mentioned, we already have at least one that I am aware of joint deployment in the EMEA market and I do expect that the joint announcement will drive more joint venture. <Q>: All right, you have talked about LTE in Europe, but it looks like China is only now really moving into 3G is there any other opportunity there for DPI and specifically your products over in China as they shift over to 3G. Can you share with us some of the conversions you had over there? <A>: Yeah, well actually portions of China are even moving now to 4G with our unique variations of that. So, there is we have been we have seen deployments in China for the past 22 years, we actually have some strategic penetrations there I would say, but I haven't spoken about that from a something financial strategic so far. To be very gained about something we can penetrate a very large customer, but on very tactical level, let's say $7 million deal. In that case, I usually do not discuss it on a specific basis and still I feel the penetration is really strategic and meaningful also from revenue. What we've done so far, we have penetrated in a tactical way so, we're very interesting operators there, but I'm not yet ready to talk out before we achieve strategic one. The leaders there again China like many other geographies and mobile operators there have similar issues dealing with congestion, optimization and coming up with revenue stream the market result in several competitors. And in my point of view, in mobile our large mobile operator in China has the same issues like a large mobile operator in Europe. The only difference is that obviously winning deals in China requires also lot of a commercial [indiscernible] and presence. We have presence in China. They are part of our business, but yet to be strategic. <Q>: Thank you very much. <A>: Thanks. <A>: Thank you, Jason.
Operator
We will now move to our next question from Catharine Trebnick from Northern Securities. Please go ahead, Madam. <Q>: Yes and congratulations on this quarter. My question is you only announced four orders from expansion sales. Could you give a little color to why it was down from the 18? <A>: Bumpiness in quarter, Catherine, vis--vis that not so seasonal but these are large telecom dealers that usually take 6 to 12 months to close internally and our customers that go through our many levels of signatures and approvals and trials and whatever and so there the rate of closure and the timing is very hard to control. We have said in the past that we are still a relatively a small company and there is always lumpiness in the business. You're seeing it right now with sort of quarters they started to announce their lot of deals get closed and some quarters may be small nothing of a trend maybe the one element is that in Q3 given the August month many of the people in the signature process might be out in that might slow down a little bit getting signoffs and saying [indiscernible] but all in all just natural lumpiness in timing of closing of these. <Q>: Okay thank you and then my other question really have to do with the five new customers. I wanted to know if you could tell me predominantly if any of the five had one particular lead used case. The reason I am asking the question is, I'm charging was a big discussion on the last earnings call and I'm trying to understand what percentage of the revenues would be attributed to your value-added services and how we can market that going forward? Thank you.
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<A>: Let's try and [indiscernible] and applications. I would say that the place to check if our new propositions are effective in taking grant it's not sometimes in the new deals but actually in the existing ones. The reason is that when we win a new mobile customer, in all of the cases our ability in smart charging has the major influence, in all cases and in high importance. Having said so, in most of these cases, a mobile or even a fixed operator when they go about slowing us, they want the charging is really kind of south of the pyramid in terms of our deliverables and integration into new customer and typically comes several months into the deployment. As ones get deployed and operated day one, there is another interoperability with companies like Openet as Jay [ph] previously pointed out. So when you evaluate the effectiveness and how these new features are catching up, I actually go back to the extension name deals and there I see customers that we've won in the past one or two years coming back and say, okay, now we are ready to buy from you these new charging functions of this new value-added service. To give you specific statistics on that I did discuss some of that on the fourth six months of the year and I hope that the next quarter when we have the full use of statistics, I'll be able to provide more quantified bullying numbers. <Q>: Okay. Thank you very much. I appreciate all the additional color. <A>: Thank you, Catherine.
Operator
We will now move to our next question from Sanjit Singh from Wedbush Securities. Please go ahead. <Q - Sanjit Singh>: Hi, guys. I had a couple of questions. First one, book-to-bill below one, I know that was from the deal starting from Q2 to Q3, could you give us any color why the deal slipped and additionally if you're seeing no macro slowdown and no slowdown in the business, I just want to reconcile your commentary about longer time for signatures? <A>: So, I can't point to any strategic reason simply two more signatures in the process and appeal in the context [ph] that you expect to get down through the last month of the quarter slips by two weeks, as simple as that. The only real element is the August month obviously is slow to push deals through internal processes with a very large Tier 1 companies. The second part of your question was, please remind me. <Q>: That I'll get to it, did your current pipeline [indiscernible], would that allow you to get to book the bill above one next quarter? Just to look at your current pipe line? <A>: Yes. We have a policy, not to provide any forward any quantitative forward guidance, but I think I was very clear as per my talk that we are seeing a good [indiscernible] facilities, actually a growing one and if my observations are correct, we should be able to grow into Q4 and hopefully get back to book-to-bill over one. <Q>: Great. My final question is, were there any winds where you displaced a competitor and what was the head count in the quarter? <A>: Displace because of our products are very sticky nature once you're in an account, the amount of the deployments both into the network and then integration with other equipment surrounding us is a pretty elaborated process. Those were all [indiscernible] in the deal [ph] both for us and for our competitors. Very rarely it happens with very rarely, if you win a Tier 1 deal and you've done a good job deploying, you could be subject to displacements. Having said so, we have seen one of our competitors I don't want name any name that has we've noticed has been getting weaker in the past year or two where deployments which are less than two years got the place. So, in of them the answer would be yes. <Q>: I appreciate that, and head count in the quarter? <A>: 307.
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<Q>: Thank you. <A>: 307. Thank you.
Operator
We have one follow-up question from Michele Robinson from Wonder Lake. Please go ahead. <Q>: Hey, thanks. I found that you're on page [indiscernible]. So no need of deliver the cash flow questions, except I will ask you on the DSO receivables, did you do that as a linearity function and if so how was the linearity? <A>: I think it was a typical quarter, Matt, it little bit depends on when we recognize also that we got some of them we got prepaid and some of them are not, so it's simply when we actually got in general this quarter was linear as most of the quarter and I think bottom line is the cash flow and I mean as you can see we generate more than 3 million on the third quarter. <Q>: And Rami, you might have I apologize if you have already said this but can you comment on percentage from enterprise and education versus service providers? <A - Rami Hadar, President & Chief Executive Officer>: Matt, allow me to take this office, I don't have the number in my hand. My high level observation is that it's not very different than our prior quarter and roughly enterprise as a whole is somewhere in the sub 20% same category and so survivals of the whole is the rest of the 80%. So my guess is that I have not done any part of that, but my guess is this quarter has not been any different. <Q>: The North American business did involve any revenue recognition from outside of enterprise in the quarter? <A - Rami Hadar, President & Chief Executive Officer>: Nachum? <A - Nachum Falek, Chief Financial Officer>: Without getting into specific most of it was enterprise and known... <Q>: So the deal that you talked about was service provider? <A - Rami Hadar, President & Chief Executive Officer>: Same booking going forward. <Q>: Okay. Thanks <A>: Thank you Matt.
Operator
As there are no further questions in the queue that will conclude today's question and answer session. I would now like to turn the call back to your host for an additional or closing remarks.
Jay Kalish, Executive Director, Investor Relations

Thank you again for joining us we reviewed today very successful quarter look forward to meeting with you over the next few months and we are welcoming you at our next call for Q4 this year. Thank you.
Operator
That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect your lines.
Page 10 of 11
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Page 11 of 11

Q3 2011 Earnings Call Company Participants: Operator

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Q3 2011 Earnings Call Company Participants: Operator

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Company Name: Allot Communications Ltd Company Ticker: ALLT US Date: 2011-11-01 Event Description: Q3 2011 Earnings Call

Q3 2011 Earnings Call Company Participants

MANAGEMENT DISCUSSION SECTION

Jay Kalish, Executive Director-Investor Relation

Rami Hadar, President & Chief Executive Officer

Nachum Falek, Chief Financial Officer

<Q>: Thank you. <A>: 307. Thank you.

Jay Kalish, Executive Director, Investor Relations

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