Check Point® Software Technologies Ltd. (NASDAQ: CHKP), today
announced its financial results for the first quarter ended March
31, 2020.
First Quarter
2020:
- Total Revenues: $486 million, a 3 percent increase year over
year
- Deferred Revenues: $1,349 million, a 3 percent increase year
over year
- GAAP Operating Income: $201 million, representing 41 percent of
revenues
- Non-GAAP Operating Income: $231 million, representing 48
percent of revenues
- GAAP EPS: $1.23, Non-GAAP EPS: $1.42
“The first quarter success is a testament to our commitment to
customers, partners and our employees during these unprecedented
times. Despite the COVID-19 pandemic, we sustained elevated
business activity levels and delivered results in the upper half of
our guidance with strength coming from the Americas,” said Gil
Shwed, Founder and CEO of Check Point Software Technologies. “We
saw an increased demand for network security gateways in order to
support higher capacities and expand the use of our remote access
VPN solutions. We continued to provide the highest level of
security to our customers to allow them to run their business.”
“During the quarter our work environment changed completely. We
managed through lack of components in the supply chain and closure
of some of our logistics centers. We transitioned almost
exclusively to work from home and created new environments that
allowed our R&D and technical services to work remotely.
Our sales team is also operating from home with no physical
meetings with customers, which previously was the primary method of
our sales engagements. We also shifted to virtual marketing
activities. We managed through these challenges smoothly, yet
it’s hard to predict what effect this changing environment will
have on the future. I would like to thank our customers,
partners and employees for their engagement, dedication and for
making this possible,” concluded Shwed.
Financial Highlights for the First Quarter of
2020:
- Total Revenues: $486 million compared to $472
million in the first quarter of 2019, a 3 percent increase year
over year. Revenues were above the midpoint of our guidance.
- GAAP Operating Income: $201 million compared
to $206 million in the first quarter of 2019, representing 41
percent and 44 percent of revenues in the first quarter of 2020 and
2019, respectively.
- Non-GAAP Operating Income: $231 million
compared to $235 million in the first quarter of 2019, representing
48 percent and 50 percent of revenues in the first quarter of 2020
and 2019, respectively.
- GAAP Taxes on Income: $41 million compared to
$45 million in the first quarter of 2019.
- GAAP Net Income and Earnings per Diluted
Share: GAAP net income was $179 million compared to $180
million in the first quarter of 2019. GAAP earnings per diluted
share were $1.23 compared to $1.15 in the first quarter of
2019.
- Non-GAAP Net Income and Earnings per Diluted
Share: Non-GAAP net income was $206 million compared to
$205 million in the first quarter of 2019. Non-GAAP earnings
per diluted share were $1.42 compared to $1.32 in the first quarter
of 2019, a 7 percent increase year over year.
- Deferred Revenues: As of March 31, 2020,
deferred revenues were $1,349 million compared to $1,312 million as
of March 31, 2019, a 3 percent increase year over year.
- Cash Balances, Marketable Securities and Short Term
Deposits: $3,990 million as of March 31, 2020, compared to
$3,949 million as of December 31, 2019.
- Cash Flow: Cash flow from operations of $359
million compared to $379 million in the first quarter of 2019. Year
over year, currency-hedging transactions had a $20 million effect
on our cash flow from operations with minimal impact on our
financial income as intended. This quarter includes excess payments
related to our currency hedging transactions in an amount of $12
million compared to $8 million of income in the first quarter of
2019.
- Share Repurchase Program: During the first
quarter of 2020, the company repurchased approximately 3.0 million
shares at a total cost of approximately $325 million.
For information regarding the non-GAAP financial measures
discussed in this release, as well as a reconciliation of such
non-GAAP financial measures to the most directly comparable GAAP
financial measures, please see “Use of Non-GAAP Financial
Information” and “Reconciliation of GAAP to Non-GAAP Financial
Information.”
First Quarter Key Highlights
Our product announcements focused on extending the
Infinity architecture to deliver the highest-caliber threat
prevention, on-demand scalability and consolidated
security.
In April, we announced the transformation of our appliance
security gateways into the new Quantum Security
GatewaysTM delivering premier security.
The new line of 15 security gateway models extends the
Infinity architecture from the branch office to the data center.
All Quantum models out-of-the box deliver our highest level of
threat prevention using the Sandblast Zero-day Protection,
providing more than 60 security and threat prevention services. We
believe it offers a higher level of security with lower TCO than
competing products. Quantum is highly scalable with up to 1.5
Tera-bps of threat prevention performance using the HyperScale
technology, high port density and half the energy consumption of
rival high-end appliances.
We enhanced our consolidated security capabilities with the
release of R80.40. R80 is advanced threat prevention and security
management software for data centers, cloud, mobile, endpoint and
IoT. The newest R80.40 software release has over 100 new features,
including zero-touch deployment capability that enables new
security appliances to be set up and running within five
minutes.
The latest R80 release provides Security Management from the
cloud allowing for more efficient security management, and cutting
operational time by up to 60% compared with other solutions.
This simplifies the deployment of Check Point’s unified security
across the entire security infrastructure from the web browser,
with no need for ongoing maintenance or manual updates.
The impact of COVID-19 on cyber security was evident
throughout the first quarter. Our research group identified
significant increase in Coronavirus-related malicious
attacks
Check Point, through Dimensional Research, conducted a survey
with 411 IT and security professionals to examine the coronavirus
pandemics’ impact on enterprise security. The findings revealed
that 71% of IT and security professionals reported an increase in
security threats as criminals seek to exploit the remote working
explosion.
We revealed a dramatic rise in the number of coronavirus-related
cyber-attacks. On average, over 14,000 coronavirus-related
cyber-attacks occur each day with a daily 20,000 peak in April.
Since January 2020, 68,000 coronavirus-related domain names were
registered and we identified malicious domains at double the rate
of others.
On the Mobile front, Our researchers discovered 16
different malicious apps, all masquerading as legitimate
Coronavirus apps, which contained a range of malware aimed at
stealing users’ sensitive information or generating fraudulent
revenues from premium-rate services.
Lastly, coronavirus-related attacks did not stop attacks
targeting nations and governments as seen in Vicious Panda: The
COVID Campaign: We intercepted a targeted
cyber-attack by an APT group on a public sector entity of Mongolia.
The malicious group sent coronavirus-related documents,
impersonating the Mongolian Ministry of Foreign Affairs. The
documents lured recipients into exposing remote network access and
access to steal sensitive information.
Vulnerabilities in Applications &
Infrastructure:
Critical Vulnerabilities in Azure Cloud Infrastructure:
Researchers at Check Point identified major security flaws in
Microsoft Azure, one of the leading cloud-computing providers in
the world. Researchers discovered that a user on the Azure network
could have potentially taken control over the entire server,
opening a path to business code theft and manipulation.
The Dark Side of Smart Lighting: Hackers could exploit
vulnerabilities in the popular ZigBee protocol to deliver
ransomware or spyware to networks by compromising smart lightbulbs
and their controllers. Our researchers showed how a hacker could
exploit an IoT network to launch attacks on conventional networks
in businesses or even smart cities.
Tik or Tok? Is TikTok secure enough: Check
Point Research discovered multiple vulnerabilities in TikTok that
could enable an attacker to manipulate a user’s account by
deleting, uploading, and making private videos public. An
attacker could also access information that was saved on the users
account such as credit card details, private addresses, and
emails.
We continued our focus on security through innovation
and industry recognition:
Check Point recognized as a Microsoft Security 20/20 award
winner for the Most Prolific Integration Partner category. Azure
customers are choosing Check Point as their top choice in cloud
security. The award underscores Check Point’s leadership and vision
in cloud security, and further emphasizes Check Point’s ability to
meet the new and complex nature that surrounds today’s cloud. Check
Point SandBlast Agent advanced endpoint protection and threat
prevention solution achieved an ‘AA’ rating in the recent NSS Labs
2020 Advanced Endpoint Protection (AEP) Test. SandBlast Agent
detected 100% of HTTP and email threats, 100% of malware using
sophisticated evasion techniques, and 100% resistance to
evasion.
Successful completion of two Common Criteria
Certifications for R80.30 Security Management and Gateway
appliances. The EAL4+ and Protection Profile compliance
certifications follow an international standard for validating
products that meet specific security requirements for Governments
around the world.
Enhanced Global Partner Program: Developed in close consultation
with hundreds of Check Point partners, Our enhanced Partner Growth
Program encourages closer alignment with Check Point’s channel
teams while implementing best practices, speed, agility, time to
market, and customer value.
Conference Call and Webcast Information Check
Point will host a conference call with the investment community on
April 27, 2020, at 8:30 AM ET/5:30 AM PT. To listen to the live
webcast or replay, please visit the website:
www.checkpoint.com/ir.
Second Quarter Investor Conference Participation
Schedule:
- J.P. Morgan 48th Annual Technology, Media and Telecom
Conference May 12 - 14 2020 – Virtual Fireside Chat &
1x1’s
- Cowen 2020 TMT Conference May 26 – 29, 2020 –
Virtual 1x1’s
- Bank of America Merrill Lynch 2020 Global Technology
Conference June 2, 2020 – Virtual 1x1’s
- 2020 Baird Global Consumer, Technology & Services
Conference June 3 - 4, 2020 – Virtual 1x1’s
- Mizuho 2nd Annual Cybersecurity Summit June 9,
2020 – Virtual 1x1’s
- Nasdaq 42nd Investor Conference June 15 - 17,
2020 – Virtual 1x1’s
Members of Check Point's management team are expected to present
at these conferences and discuss the latest company strategies and
initiatives. Check Point’s conference presentations are expected to
be available via webcast on the company's web site. To view these
presentations and access the most updated information please visit
the company's web site at www.checkpoint.com/ir. The schedule is
subject to change.
About Check Point Software Technologies
Ltd.Check Point Software Technologies Ltd.
(www.checkpoint.com) is a leading provider of cyber security
solutions to governments and corporate enterprises globally. Its
solutions protect customers from cyber-attacks with an industry
leading catch rate of malware, ransomware and other types of
attacks. Check Point offers a multilevel security architecture that
defends enterprises’ cloud, network and mobile device held
information, plus the most comprehensive and intuitive one point of
control security management system. Check Point protects over
100,000 organizations of all sizes.
©2020 Check Point Software Technologies Ltd. All rights
reserved
Legal Notice Regarding Forward-Looking
StatementsThis press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements generally relate to
future events or our future financial or operating
performance. Forward-looking statements in this press release
include, but are not limited to, statements related to our
expectations regarding our products and solutions, expectations
related to our partner programs, , and our participation in
investor conferences during the second quarter of 2020. Our
expectations and beliefs regarding these matters may not
materialize, and actual results or events in the future are subject
to risks and uncertainties that could cause actual results or
events to differ materially from those projected. These risks
include our ability to continue to develop platform capabilities
and solutions; customer acceptance and purchase of our existing
solutions and new solutions; the market for IT security continuing
to develop; competition from other products and services; the
impact of the COVID-19 pandemic on our business, as well as on our
customers, suppliers and business partners; governmental action
related to the coronavirus pandemic; and general market, political,
economic and business conditions. The forward-looking
statements contained in this press release are also subject to
other risks and uncertainties, including those more fully described
in our filings with the Securities and Exchange Commission,
including our Annual Report on Form 20-F filed with the Securities
and Exchange Commission on April 2, 2020. The forward-looking
statements in this press release are based on information
available to Check Point as of the date hereof, and Check Point
disclaims any obligation to update any forward-looking statements,
except as required by law.
Use of Non-GAAP Financial Information In
addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, Check Point uses
non-GAAP measures of operating income, net income and earnings per
diluted share, which are adjustments from results based on GAAP to
exclude, as applicable, stock-based compensation expenses,
amortization of intangible assets and acquisition related expenses
and the related tax affects. Check Point’s management believes the
non-GAAP financial information provided in this release is useful
to investors’ understanding and assessment of Check Point’s ongoing
core operations and prospects for the future. Historically, Check
Point has also publicly presented these supplemental non-GAAP
financial measures in order to assist the investment community to
see the Company “through the eyes of management,” and thereby
enhance understanding of its operating performance. The
presentation of this non-GAAP financial information is not intended
to be considered in isolation or as a substitute for results
prepared in accordance with GAAP. A reconciliation of the non-GAAP
financial measures discussed in this press release to the most
directly comparable GAAP financial measures is included with the
financial statements contained in this press release. Management
uses both GAAP and non-GAAP information in evaluating and operating
business internally and as such has determined that it is important
to provide this information to investors.
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, in millions, except per share
amounts)
|
Three Months Ended |
|
March 31, |
|
2020 |
|
2019 |
Revenues: |
|
|
|
Products and licenses |
$110.2 |
|
$112.8 |
Security subscriptions |
158.8 |
|
144.0 |
Total revenues from products and Security subscriptions |
269.0 |
|
256.8 |
Software updates and maintenance |
217.5 |
|
215.0 |
Total revenues |
486.5 |
|
471.8 |
|
|
|
|
Operating expenses: |
|
|
|
Cost of products and licenses |
20.9 |
|
19.6 |
Cost of security subscriptions |
6.5 |
|
5.3 |
Total cost of products and security subscriptions |
27.4 |
|
24.9 |
Cost of Software updates and
maintenance |
23.2 |
|
22.7 |
Amortization of technology |
1.6 |
|
1.4 |
Total cost of revenues |
52.2 |
|
49.0 |
|
|
|
|
Research and development |
62.2 |
|
57.6 |
Selling and marketing |
143.0 |
|
135.1 |
General and administrative |
28.5 |
|
24.1 |
Total operating expenses |
285.9 |
|
265.8 |
|
|
|
|
Operating income |
200.6 |
|
206.0 |
Financial income, net |
19.3 |
|
18.9 |
Income before taxes on income |
219.9 |
|
224.9 |
Taxes on income |
41.2 |
|
45.0 |
Net income |
$178.7 |
|
$179.9 |
|
|
|
|
Basic earnings per share |
$1.24 |
|
$1.17 |
Weighted-average number of shares used in computing basic earnings
per share |
144.2 |
|
154.2 |
|
|
|
|
Diluted earnings per share |
$1.23 |
|
$1.15 |
Weighted-average number of shares used in computing diluted
earnings per share |
145.4 |
|
155.9 |
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED FINANCIAL METRICS
(Unaudited, in millions, except per share
amounts)
|
Three Months Ended |
|
March 31, |
|
2020 |
|
2019 |
|
|
|
|
Revenues |
$486.5 |
|
$471.8 |
|
|
|
|
Non-GAAP operating income |
231.2 |
|
234.9 |
|
|
|
|
Non-GAAP net income |
205.9 |
|
205.5 |
|
|
|
|
Diluted Non-GAAP Earnings per
share |
$1.42 |
|
$1.32 |
|
|
|
|
Number of shares used in
computing diluted Non-GAAP earnings per share |
145.4 |
|
155.9 |
CHECK POINT SOFTWARE TECHNOLOGIES
LTD.RECONCILIATION OF GAAP TO NON GAAP FINANCIAL
INFORMATION
(Unaudited, in millions, except per share
amounts)
|
Three Months Ended |
|
March 31, |
|
2020 |
|
2019 |
|
|
|
|
GAAP operating income |
$ 200.6 |
|
$ 206.0 |
Stock-based compensation
(1) |
26.4 |
|
24.8 |
Amortization of intangible
assets and acquisition related expenses (2) |
4.2 |
|
4.1 |
Non-GAAP operating income |
$231.2 |
|
$234.9 |
|
|
|
|
GAAP net income |
$ 178.7 |
|
$ 179.9 |
Stock-based compensation
(1) |
26.4 |
|
24.8 |
Amortization of intangible
assets and acquisition related expenses (2) |
4.2 |
|
4.1 |
Taxes on the above items
(3) |
(3.4) |
|
(3.3) |
Non-GAAP net income |
$ 205.9 |
|
$ 205.5 |
|
|
|
|
Diluted GAAP Earnings per
share |
$ 1.23 |
|
$ 1.15 |
Stock-based compensation
(1) |
0.18 |
|
0.16 |
Amortization of intangible
assets and acquisition related expenses (2) |
0.03 |
|
0.03 |
Taxes on the above items
(3) |
(0.02) |
|
(0.02) |
Diluted Non-GAAP Earnings per
share |
$1.42 |
|
$1.32 |
|
|
|
|
Number of shares used in
computing diluted Non-GAAP earnings per share |
145.4 |
|
155.9 |
|
|
|
|
(1) Stock-based
compensation: |
|
|
|
Cost of products and licenses |
$ 0.1 |
|
$ 0.0 |
Cost of software updates and maintenance |
0.9 |
|
0.9 |
Research and development |
4.8 |
|
4.3 |
Selling and marketing |
7.8 |
|
6.1 |
General and administrative |
12.8 |
|
13.5 |
|
26.4 |
|
24.8 |
|
|
|
|
(2) Amortization of intangible
assets and acquisition related expenses: |
|
|
|
Amortization of technology-cost of revenues |
1.6 |
|
1.4 |
Research and development |
0.8 |
|
2.1 |
Selling and marketing |
1.8 |
|
0.6 |
|
4.2 |
|
4.1 |
(3) Taxes on the above
items |
(3.4) |
|
(3.3) |
Total, net |
$27.2 |
|
$25.6 |
CHECK POINT SOFTWARE TECHNOLOGIES
LTD.CONDENSED CONSOLIDATED BALANCE SHEET
DATA
(Unaudited, in millions)
ASSETS
|
March 31, |
|
December 31, |
|
2020 |
|
2019 |
|
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$407.4 |
|
$279.2 |
Marketable securities and
short-term deposits |
1,336.0 |
|
1,300.7 |
Trade receivables, net |
318.7 |
|
495.8 |
Prepaid expenses and other
assets |
53.4 |
|
58.5 |
Total current assets |
2,115.5 |
|
2,134.2 |
|
|
|
|
Long-term assets: |
|
|
|
Marketable securities |
2,246.3 |
|
2,368.8 |
Property and equipment, net |
91.5 |
|
87.7 |
Deferred tax asset, net |
51.8 |
|
55.3 |
Goodwill and other intangible
assets, net |
1,022.7 |
|
1,024.7 |
Other assets |
92.9 |
|
94.2 |
Total long-term assets |
3,505.2 |
|
3,630.7 |
|
|
|
|
Total assets |
$5,620.7 |
|
$5,764.9 |
LIABILITIES
ANDSHAREHOLDERS’ EQUITY
Current liabilities: |
|
|
|
Deferred revenues |
$997.3 |
|
$1,011.9 |
Trade payables and other accrued
liabilities |
380.4 |
|
384.8 |
Total current liabilities |
1,377.7 |
|
1,396.7 |
|
|
|
|
Long-term liabilities: |
|
|
|
Long-term deferred revenues |
351.4 |
|
374.8 |
Income tax accrual |
396.3 |
|
393.3 |
Other long-term liabilities |
29.6 |
|
31.3 |
|
777.3 |
|
799.4 |
|
|
|
|
Total liabilities |
2,155.0 |
|
2,196.1 |
|
|
|
|
Shareholders’ equity: |
|
|
|
Share capital |
0.8 |
|
0.8 |
Additional paid-in capital |
1,811.5 |
|
1,770.3 |
Treasury shares at cost |
(8,409.7) |
|
(8,092.7) |
Accumulated other comprehensive
income |
15.7 |
|
21.7 |
Retained earnings |
10,047.4 |
|
9,868.7 |
Total shareholders’ equity |
3,465.7 |
|
3,568.8 |
Total liabilities and
shareholders’ equity |
$5,620.7 |
|
$5,764.9 |
|
|
|
|
Total cash and cash equivalents,
marketable securities and short-term deposits |
$3,989.7 |
|
$3,948.7 |
CHECK POINT SOFTWARE TECHNOLOGIES
LTD.SELECTED CONSOLIDATED CASH FLOW
DATA
(Unaudited, in millions)
|
Three Months Ended |
|
March 31, |
|
2020 |
|
2019 |
|
|
|
|
Cash flow from
operating activities: |
|
|
|
Net income |
$178.7 |
|
$179.9 |
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation of property and
equipment |
4.6 |
|
3.6 |
Amortization of intangible
assets |
2.0 |
|
1.8 |
Stock-based compensation |
26.4 |
|
24.8 |
Realized (gain) loss on
marketable securities |
(0.2) |
|
0.5 |
Decrease in trade and other
receivables, net |
183.1 |
|
181.3 |
Decrease in deferred revenues,
trade payables and other accrued liabilities |
(40.6) |
|
(16.7) |
Deferred income taxes,
net |
5.0 |
|
3.6 |
Net cash provided by
operating activities |
359.0 |
|
378.8 |
|
|
|
|
Cash flow from
investing activities: |
|
|
|
|
|
|
|
Cash paid in conjunction with
acquisition, net of acquired cash |
- |
|
(5.5) |
Investment in property and
equipment |
(8.4) |
|
(9.6) |
Net cash used in
investing activities |
(8.4) |
|
(15.1) |
|
|
|
|
Cash flow from
financing activities: |
|
|
|
Proceeds from issuance of
shares upon exercise of options |
22.9 |
|
51.3 |
Purchase of treasury
shares |
(325.0) |
|
(305.0) |
Payments related to shares
withheld for taxes |
(0.7) |
|
(0.6) |
Net cash used in
financing activities |
(302.8) |
|
(254.3) |
|
|
|
|
Unrealized gain (loss) on
marketable securities, net |
(6.8) |
|
26.2 |
|
|
|
|
Increase in cash and cash
equivalents, marketable securities and short term deposits |
41.0 |
|
135.6 |
|
|
|
|
Cash and cash equivalents,
marketable securities and short term deposits at the beginning of
the period |
3,948.7 |
|
4,039.1 |
|
|
|
|
Cash and cash
equivalents, marketable securities and short term deposits at the
end of the period |
$3,989.7 |
|
$4,174.7 |
|
|
|
|
INVESTOR CONTACT: |
MEDIA
CONTACT: |
Kip E. Meintzer |
Gil Messing |
Check Point Software Technologies |
Check Point Software Technologies |
+1.650.628.2040 |
+1.650.628.2260 |
ir@checkpoint.com |
press@checkpoint.com |
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