David Syarto, Vice President Operations, Ruby Tuesday
Hi, Tal. This is Dave. Let me start with the first point. It’s important to remember that all of the appliance revenue is recognized ratably over three years. What we see in this quarter as appliance revenue is really the combination of the sales of units of physical appliances that we’ve made over many previous periods.
The only thing to remember right here I think is we can sell a virtual appliance as a new installation in the same way that we would sell a physical appliance. That is sold as an annual subscription not as [inaudible]. A new win or a new sale can manifest itself as either an appliance or as a subscription either in a virtual appliance or even in a cloud-only service which we sell into as well. I think the correlation of appliance to new sales is not necessarily the right way to think about.
I’ll let Peter jump in on the operating expense part of that and then I’ll come back to…
Richard Jenkins, Human Resources General Manager, Ruby Tuesday
Yes. Just to reiterate what Dave said I’m happy with the trend of the growth in the subscription business. We do have very fast growth in our virtual appliances and in our virtual appliances deployed in public cloud, which is helping drive that so we view that as a very positive trend for the business.
On the apex side, Tal, let me make a bunch of points here for you. You know I think the first is that we have showed already through the year about 6% in operating margin leverage all ready for the year. We have said each quarter – when we see investment opportunities we are going to try and capitalize on them. It wasn’t going to be straight linear, but we provided a lot of leverage all ready this year. We are going to show improvement next year also. We are still trending towards the long term model, but you can also see goings at accelerating each quarter, and we’ve been making investments in both sales and marketing and R&D to take advantage of where we see those opportunities.
Those investments in sales and marketing are happening in areas like the channels, where we continue to add partners and trying to increase our reach in our team that handles the growing public cloud opportunity. We are making investments there. Then finally and really are emerging and fast growing products like backup and engine firewall, we are making advantages to continue to grow those to where we think the opportunity is.
On the R&D side, this was a quarter where we had the first full quarter impact of C to C and that was the largest not the only but the largest contributor to growth in R&D span. Then also we continue to make investments in our products and these results in things like the Barracuda Security Sweep, which we think has a great opportunity to go displace old UTMs out there. You know the investment manifests itself in the storage refresh last quarter and also in things like the advance right protection subscription that we ruled out.
We try and balance those things. We feel like we have given good leverage throughout the year. We are going to give leverage next year, but where we do see those investment opportunities that will help drive growth. We are trying to capitalize on them.
Operator
Your next question is from Mark Kelleher with D.A. Davidson. Your line is open.
