Check Point� Software Technologies Ltd. (NASDAQ:CHKP), the
worldwide leader in securing the Internet, today announced its
financial results for the second quarter ended June 30, 2008.
�Check Point�s success during the quarter is a direct result of
effectively executing our Total Security strategy,� said Gil Shwed,
chairman and chief executive officer at Check Point. �We have
continued to experience strength across our business which is
reflected in the double-digit year over year growth in revenue,
earnings per share and deferred revenue.� Financial Highlights for
the Second Quarter of 2008: Total Revenues: $199.6 million, an
increase of 13 percent, compared to $176.2 million in the second
quarter of 2007. Product and license revenue was $85.0 million, an
increase of 16 percent, compared to $73.3 million in the second
quarter of 2007. Net Income � GAAP: $79.2 million, an increase of
14 percent, compared to $69.5 million in the second quarter of
2007. Net income in the second quarter of 2008 includes
acquisition-related charges of $8.9 million and equity-based
compensation expenses of $8.4 million. Net of taxes, these charges
totaled $13.5 million. Net income in the second quarter of 2007
included acquisition-related charges of $10.3 million and
equity-based compensation expenses of $8.6 million. Net of taxes
these charges totaled $16.2 million. Net Income � Non-GAAP:1 $92.7
million, an increase of 8 percent, compared to $85.7 million in the
second quarter of 2007. Non-GAAP net income excludes equity-based
compensation expenses and acquisition-related charges.2 Earnings
per Diluted Share � GAAP: $0.36, an increase of 18 percent,
compared to $0.31 in the second quarter of 2007. GAAP earnings per
diluted share for the second quarter of 2008 included equity-based
compensation expenses of $0.04 and acquisition-related charges of
$0.05. Net of taxes, these charges totaled $0.07. GAAP earnings per
diluted share for the second quarter of 2007 included
acquisition-related charges of $0.05 and equity-based compensation
expenses of $0.03. Net of taxes these charges totaled $0.07.
Earnings per Diluted Share � Non-GAAP: $0.43, an increase of 12
percent, compared to $0.38 in the second quarter of 2007. Non-GAAP
earnings per diluted share exclude equity-based compensation
expenses and acquisition-related charges. Deferred Revenues: As of
June 30, 2008, we had deferred revenue of $279.2 million, a $43
million or 18% increase compared to deferred revenues as of June
30, 2007. Cash Flow: $82.6 million in cash flow from operations and
we had $1.34 billion in cash and investments as of June 30, 2008.
Share Repurchase Program: During the second quarter of 2008, Check
Point repurchased 2.1 million shares at an approximate cost of
$50.0 million. Business Highlights for the Second Quarter of 2008:
Since April we have expanded and continued to improve the
performance of our unified line of security gateways. We introduced
the Power-1 appliances, a new line of high-performance security
gateways delivering excellent performance of up to 14 Gbps and
record price performance at less than $4 per Mbps. In addition, we
added five new UTM-1 Total Security appliances, expanded the range
of solutions from a sub-five thousand dollar model and up to 4.5
Gbps performance providing our customers with more choices when
selecting network security appliances. The new appliances further
compliment our Open Choice program which allows customers to choose
from a variety of gateway security platforms, including Check Point
Power-1 and UTM-1 branded appliances, software on open servers and
Check Point software integrated on partner appliances. We continued
to address the growing security needs of our customers utilizing
Apple�s Mac OS X and iPhone with the release of Check Point Full
Disk Encryption (FDE) for the Mac and VPN-1 support for the iPhone.
Our FDE for Mac is the only enterprise full-disk encryption
solution with pre-boot authentication available in the market
today. During the second quarter we also received awards from
third-party industry organizations including: �Best Enterprise
Firewall� from SC Magazine for Check Point VPN-1 Power, �Endpoint
Security Product of the Year� from Techworld for Check Point
Endpoint Security, �VB100 Award� from Virus Bulletin for ZoneAlarm
Internet Security and �Ten Best Web Support Sites� for 2008 from
Association of Support Professionals Mr. Shwed concluded, �I am
pleased with our results for the quarter as we have now exceeded
our plans for the sixth quarter in a row. During that time we have
also expanded and executed our strategy of delivering a
comprehensive integrated security solution that includes a unified
line of security gateways, a single-agent for endpoint security and
a single security management console.� Conference Call and Webcast
Information Check Point will host a conference call with the
investment community on July 22, 2008 at 8:30 AM ET/5:30 AM PT. To
listen to the live webcast, please visit Check Point�s website at
http://www.checkpoint.com/ir. A replay of the conference call will
be available through August 5, 2008 at the company's website
http://www.checkpoint.com/ir or by telephone at +1.800.642.1687
passcode # 54900277. 1 See �Use of Non-GAAP Financial Information�
and �Reconciliation of Supplemental Financial Information� below
for more information regarding Check Point�s use of non-GAAP
measures. 2 �Equity-based compensation expenses� refer to the
amortized fair value of all equity based awards granted to
employees. �Acquisition-related charges� refer to the impact of the
amortization of intangibles. About Check Point Software
Technologies Ltd. Check Point Software Technologies Ltd.
(www.checkpoint.com) is the leader in securing the Internet. Check
Point offers total security solutions featuring a unified gateway,
single endpoint agent and single management architecture,
customized to fit customers� dynamic business needs. This
combination is unique and is a result of our leadership and
innovation in the enterprise firewall, personal firewall/endpoint,
data security and VPN markets. Check Point�s award-winning
ZoneAlarm solutions protect millions of consumer PCs from hackers,
spyware and identity theft. Check Point solutions are sold,
integrated and serviced by a network of Check Point partners around
the world and its customers include 100 percent of Fortune 100
companies and tens of thousands of businesses and organizations of
all sizes. �2003�2008 Check Point Software Technologies Ltd. All
rights reserved. 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 net income, operating income and earnings per share,
which are adjustments from results based on GAAP to exclude
non-cash equity-based compensation charges in accordance with SFAS
123R, in-process R&D expense and acquisition related charges.
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. Safe Harbor Regarding
Forward Looking Statements This 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, including, but not limited to, statements related to
Check Point�s expectations that we will continue to build upon the
success of our industry-leading security products by increasing the
breadth of their functionality and providing tighter integration
throughout our comprehensive product line to address the security
needs of our customers worldwide. Because these statements pertain
to future events they are subject to various risks and
uncertainties, actual results could differ materially from Check
Point's current expectations and beliefs. Factors that could cause
or contribute to such differences include, but are not limited to:
general market conditions in the Check Point�s industry; economic
and political uncertainties; the impact of political changes and
weaknesses in various regions of the world, including hostilities
or acts of terrorism�in Israel, where�Check Point�s international
headquarters are based; inclusion of network security functionality
in third-party hardware or system software; any foreseen and
unforeseen developmental or technological difficulties with regard
to Check Point's products; changes in the competitive landscape,
including new competitors or the impact of competitive pricing and
products; rapid technological advances and changes in customer
requirements to which Check Point is unable to respond
expeditiously, if at all; a shift in demand for products such as
Check Point's; factors affecting third parties with which Check
Point has formed business alliances; and the timely availability
and customer acceptance of Check Point's new and existing products.
The forward-looking statements contained in this press release are
subject to other factors and risks, including those discussed in
Check Point's Annual Report on Form 20-F for the year ended
December 31, 2007, which is on file with the Securities and
Exchange Commission. Check Point assumes no obligation to update
information concerning its expectations or beliefs. CHECK POINT
SOFTWARE TECHNOLOGIES LTD. CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS � (In thousands, except per share amounts) � Three
Months Ended � Six Months Ended June 30, June 30, 2008 � 2007 2008
� 2007 (unaudited) (unaudited) (unaudited) (unaudited) Revenues:
Products and licenses $ 84,973 $ 73,318 $ 162,352 $ 139,366
Software updates, maintenance and services � 114,633 � 102,874 �
228,851 � 200,795 Total revenues � 199,606 � 176,192 � 391,203 �
340,161 � Operating expenses: Cost of products and licenses 9,693
6,747 18,686 11,987 Cost of software updates, maintenance and
services 7,101 5,899 13,851 11,357 Amortization of technology �
5,800 � 7,154 � 12,954 � 13,416 Total cost of revenues 22,594
19,800 45,491 36,760 � Research and development 23,824 20,775
46,569 39,643 Selling and marketing 56,588 55,176 110,248 107,338
General and administrative 13,005 11,621 26,571 25,721 Acquired in
process research and development � - � - � - � 17,000 Total
operating expenses � 116,011 � 107,372 � 228,879 � 226,462 �
Operating income 83,595 68,820 162,324 113,699 Financial income,
net � 12,789 � 11,645 � 27,409 � 24,713 Income before income taxes
96,384 80,465 189,733 138,412 Taxes on income � 17,211 � 11,004 �
32,302 � 22,003 Net income $ 79,173 $ 69,461 $ 157,431 $ 116,409
Earnings per share (basic) $ 0.37 $ 0.31 $ 0.72 $ 0.52 Number of
shares used in computing earnings per share (basic) � � 215,030 � �
223,291 � � 217,568 � � 222,989 Earnings per share (diluted) $ 0.36
$ 0.31 $ 0.71 $ 0.52 Number of shares used in computing earnings
per share (diluted) � � 217,951 � � 226,151 � � 220,192 � � 225,806
CHECK POINT SOFTWARE TECHNOLOGIES LTD. RECONCILIATION OF
SUPPLEMENTAL FINANCIAL INFORMATION � � �(In thousands, except per
share amounts) � � Three Months Ended Six Months Ended June 30,
June 30, 2008 � � 2007 � 2008 � � 2007 � (unaudited) (unaudited)
(unaudited) (unaudited) � GAAP operating income $ 83,595 $ 68,820 $
162,324 $ 113,699 Stock-based compensation (1) 8,385 8,588 17,456
16,926 Amortization of intangible assets (2) 8,893 10,338 19,197
19,308 Acquired in process research and development � - � � - � � -
� � 17,000 � Non-GAAP operating income $ 100,873 � $ 87,746 � $
198,977 � $ 166,933 � � GAAP net income $ 79,173 $ 69,461 $ 157,431
$ 116,409 Stock-based compensation (1) 8,385 8,588 17,456 16,926
Amortization of intangible assets (2) 8,893 10,338 19,197 19,308
Acquired in process research and development - - - 17,000 Taxes on
stock-based compensation and amortization of intangible assets (3)
� (3,753 ) � (2,698 ) � (8,017 ) � (5,344 ) Non-GAAP net income $
92,698 � $ 85,689 � $ 186,067 � $ 164,299 � � GAAP Earnings per
share (diluted) $ 0.36 $ 0.31 $ 0.71 $ 0.52 Stock-based
compensation (1) 0.04 0.03 0.08 0.07 Amortization of intangible
assets (2) 0.05 0.05 0.10 0.09 Acquired in process research and
development - - - 0.07 Taxes on stock-based compensation and
amortization of intangible assets (3) � (0.02 ) � (0.01 ) � (0.04 )
� (0.02 ) Non-GAAP Earnings per share (diluted) $ 0.43 � $ 0.38 � $
0.85 � $ 0.73 � � Number of shares used in computing Non-GAAP
earnings per share (diluted) � 217,951 � � 226,151 � � 220,192 � �
225,806 � � (1) Stock-based compensation: Cost of products and
licenses $ 15 $ 13 $ 27 $ 24 Cost of software updates, maintenance
and services 194 193 377 310 Research and development 1,204 1,060
2,301 2,070 Selling and marketing 1,926 2,627 4,166 4,348 General
and administrative � 5,046 � � 4,695 � � 10,585 � � 10,174 � 8,385
8,588 17,456 16,926 � (2) Amortization of intangible assets and
acquisition related expenses: Cost of products and licenses 5,800
7,154 12,954 13,416 Selling and marketing � 3,093 � � 3,184 � �
6,243 � � 5,892 � 8,893 10,338 19,197 19,308 (3) Taxes on
stock-based compensation and amortization of intangible assets �
(3,753 ) � (2,698 ) � (8,017 ) � (5,344 ) Total, net $ 13,525 � $
16,228 � $ 28,636 � $ 30,890 � CHECK POINT SOFTWARE TECHNOLOGIES
LTD. CONDENSED CONSOLIDATED BALANCE SHEET DATA (In thousands)
ASSETS � � � June 30, December 31, 2008 � 2007 � (unaudited)
(unaudited) Current assets: Cash and cash equivalents $ 472,970 $
509,664 Marketable securities 279,557 332,355 Trade receivables,
net 158,129 201,515 Other current assets � 29,899 � � 21,595 �
Total current assets � 940,555 � � 1,065,129 � � Long-term assets:
Marketable securities 590,246 399,490 Property, plant and
equipment, net 57,098 56,947 Severance pay fund 12,115 9,302
Deferred income taxes, net 17,793 14,920 Intangible assets, net
140,937 160,133 Goodwill 664,602 664,910 Other assets � 645 � � 636
� Total long-term assets � 1,483,436 � � 1,306,338 � � Total assets
$ 2,423,991 � $ 2,371,467 � � � LIABILITIES AND SHAREHOLDERS�
EQUITY Current liabilities: Deferred revenues $ 279,188 $ 273,693
Trade payables and other accrued liabilities � 81,404 � � 116,406 �
Total current liabilities � 360,592 � � 390,099 � � Income tax
accrual 91,470 78,545 Deferred tax liability, net 26,845 31,465
Accrued severance pay � 17,585 � � 14,403 � � Total liabilities �
496,492 � � 514,512 � � Shareholders� equity: Share capital 774 774
Additional paid-in capital 489,017 464,330 Treasury shares at cost
(1,011,033 ) (907,022 ) Accumulated other comprehensive income
(loss) (6,330 ) 1,233 Retained earnings � 2,455,071 � � 2,297,640 �
Total shareholders� equity � 1,927,499 � � 1,856,955 � Total
liabilities and shareholders� equity $ 2,423,991 � $ 2,371,467 �
Total cash and cash equivalents and marketable $ 1,342,773 � $
1,241,509 � CHECK POINT SOFTWARE TECHNOLOGIES LTD. SELECTED
CONSOLIDATED CASH FLOW DATA (In thousands) � Three Months Ended Six
Months Ended June 30, June 30, 2008 � � 2007 � 2008 � � 2007 �
(unaudited) (unaudited) (unaudited) (unaudited) Cash flow from
operating activities: Net income $ 79,173 $ 69,461 $ 157,431 $
116,409 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property,
plant and equipment 2,186 1,707 4,375 2,944 Decrease (increase) in
trade and other receivables, net (11,342 ) 2,063 36,784 40,624
Increase (decrease) in deferred revenues, trade payables and other
accrued liabilities � 1,213 � (7,557 � ) 4,544 (13,343 )
Acquisition of in process research and development - - - 17,000
Amortization of intangible assets 8,893 10,338 � 19,197 19,308
Stock-based compensation 8,385 8,588 17,456 16,926 Excess tax
benefit from stock-based compensation (2,681 ) - (6,029 ) -
Deferred income taxes, net � (3,268 ) � (3,136 ) � (8,323 ) �
(8,396 ) Net cash provided by operating activities � 82,559 � �
81,464 � � 225,435 � � 191,472 � � Cash flow from investing
activities: Cash paid in conjunction with the acquisition of
Protect Data, net (9,042 ) (260 ) (9,042 ) (594,294 ) Investment in
property, plant and equipment � (2,591 ) � (5,564 ) � (4,526 ) �
(9,986 ) Net cash used in investing activities � (11,633 ) � (5,824
) � (13,568 ) � (604,280 ) � Cash flow from financing activities:
Proceeds from issuance of shares upon exercise of options 9,304
7,418 15,772 14,935 Purchase of treasury shares (50,000 ) (50,000 )
(123,000 ) (105,627 ) Excess tax benefit from stock-based
compensation � 2,681 � � - � � 6,029 � � - � Net cash used in
financing activities � (38,015 ) � (42,582 ) � (101,199 ) � (90,692
) � Unrealized gain (loss) on marketable securities, net � (8,844 )
� (4,388 ) � (9,404 ) � 3,738 � � Increase (decrease) in cash and
cash equivalents, deposits and marketable securities 24,067 28,670
101,264 (499,762 ) � Cash and cash equivalents, deposits and
marketable securities at the beginning of the period � 1,318,706 �
� 1,121,506 � � 1,241,509 � � 1,649,938 � � Cash and cash
equivalents, deposits and marketable securities at the end of the
period $ 1,342,773 � $ 1,150,176 � $ 1,342,773 � � $ 1,150,176 �
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