Check Point Software Technologies Reports 2014 First Quarter Financial Results

SAN CARLOS, CA--(Marketwired - Apr 29, 2014) -  Check Point® Software Technologies Ltd. ( NASDAQ : CHKP ), the worldwide leader in securing the Internet, today announced its financial results for the first quarter ending March 31, 2014.

  • Total Revenue: $342 million, representing a 6 percent increase year over year
  • Non-GAAP Operating Income: $198 million, representing 58 percent of revenues
  • Non-GAAP EPS: $0.84, representing a 6 percent increase year over year

"We are pleased with the results of the first quarter. Combined product and software blade subscription revenue grew by 10 percent, driven by data center appliances and strong software blades sales. Our small appliances delivered another quarter of strong performance as customers continue to embrace these best-of-breed products. In addition, we launched the security architecture for the future -- Software-Defined Protection (SDP) delivering security today to address future threats," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies.

Financial Highlights for the First Quarter of 2014:

  • Total Revenue: $342 million compared to $323 million in the first quarter of 2013.
  • GAAP Operating Income: $184 million compared to $177 million in the first quarter of 2013.
  • Non-GAAP Operating Income: $198 million compared to $189 million in the first quarter of 2013. Non-GAAP operating margin was 58 percent, compared to 59 percent in the first quarter of 2013.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $153 million compared to $148 million in the first quarter of 2013. GAAP earnings per diluted share were $0.78 compared to $0.73 in the first quarter of 2013.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $164 million compared to $159 million in the first quarter of 2013. Non-GAAP earnings per diluted share were $0.84 compared to $0.79 in the first quarter of 2013. 
  • Deferred Revenues: As of March 31, 2014, deferred revenues were $660 million compared to $586 million as of March 31, 2013. 
  • Cash Flow: Cash flow from operations was $172 million compared to $331 million in the first quarter of 2013. Net of the tax transactions related to previous years, our cash flow from operations increased by 13% from $252 in Q1 2013 to $284 in Q1 2014.
  • Share Repurchase Program: During the first quarter of 2014, the company repurchased 2.8 million shares at a total cost of $183 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $3,662 million as of March 31, 2014, an increase of $139 million, compared to $3,523 million as of March 31, 2013.

For information regarding the Non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Information" and "Reconciliation of GAAP to Non-GAAP Financial Information."

Business Highlights

During the first quarter Check Point launched new products and initiatives, and demonstrated new security achievements. These include:

Software-Defined Protection (SDP) - Designed to address today's ever-changing threat landscape, Check Point has introduced a modular and dynamic security architecture that provides a three-layer infrastructure allowing for operational resilience and real-time, proactive protection.

Doubling the Performance of the 61000 System - The 61000 provides multi-blade hardware architecture with scalable performance and up to 12 modular security gateway modules (SGM). During the quarter we delivered a new security gateway module that doubles the system performance. The new SGM260 module doubles the firewall and IPS aggregated throughput delivering up to 400 Gbps and 130 Gbps respectively. The SGM260 blade also doubles the 61000's security power up to 33,000 SecurityPower™ Units (SPU) and continues to be the industry's fastest security system.

Check Point Threat Emulation Tops Zero-day Malware Block Rates - The Threat Emulation Service, which protects organizations against new, unknown and targeted attacks before they infect a network, has the highest catch rate of malicious files. In our recent benchmark testing, 600 malicious files were scanned through Check Point Threat Emulation and other competitive products. The results found that Check Point outperformed all of the others in this test, with a malicious file catch rate of 99.83%.

During April, the following product announcements were made:

41000 Security System - New datacenter and telco grade high performance system based on the multi-blade hardware architecture of the 61000. The 41000 has a smaller footprint than the 61000 and enables more customers to deploy high performance scalable security. The 41000 delivers performance of up to 11,000 SecurityPower™ units (SPU), 40 Gbps of real-life firewall throughput, and 25 Gbps of real-life IPS throughput.

Smart-1 Appliance Family - Upgraded the entire line of the Smart-1 security management appliance family with five new appliances that deliver cyber security management for the era of big data. Smart-1 appliances enable organizations to consolidate security policy, log, and event management. The new Smart-1 Appliances allow for three times more effective storage capacity and report generation is greatly accelerated. 

Next-Generation SmartEvent - Announced the availability of Next-Generation SmartEvent, a new and powerful event monitoring solution for real-time processing and storing of threat detection data. Next-Generation SmartEvent offers one single view for all security threats and network components, to more easily manage and analyze big data security, and to make faster and more informed security decisions.

Industry Accolades:

Top Position in Worldwide Combined Firewall and UTM Appliance Market - Check Point continued to be the number one vendor in worldwide combined Firewall and UTM appliance revenue for 2013, according to the IDC Worldwide Quarterly Security Appliance Tracker.

CRN Channel Chief Award - Check Point President, Amnon Bar-Lev, has been named one of CRN's 2014 Channel Chiefs. This is the seventh year that Mr. Bar-Lev has appeared on CRN's prestigious list of the most powerful leaders in the IT channel. The CRN Channel Chief Award recognizes those executives directly responsible for driving channel sales and growth within their organization, while evangelizing the importance of the channel throughout the entire IT Industry.

Common Criteria Certifications - Check Point achieved the distinction of Common Criteria (CC) certification for Check Point R77 and Check Point Endpoint Security.

"Organizations today are faced with an ever-changing threat environment. The challenge is to build a security infrastructure that will withstand today and tomorrow's threats. Check Point's Software-Defined Protection (SDP) is a pragmatic new security approach that addresses these security challenges. SDP, with its three-layer architecture and real-time security intelligence, is designed to be the security architecture of tomorrow," Shwed concluded.

Second Quarter 2014 Investor Conference Participation Schedule:

  • Jeffries 2014 Global Technology, Media and Telecom Conference
    May 7, 2014 - Miami, FL
  • J.P. Morgan 42nd Annual Technology, Media and Telecom Conference
    May 20, 2014 - Boston, MA
  • Cowen & Company 42nd Annual Technology Media & Telecom Conference
    May 28, 2014 - New York, NY
  • Raymond James Internet / Software Crossover Conference
    May 29, 2014 - San Francisco, CA  
  • Stephens Spring Investment Conference 2014
    June 3, 2014 - New York, NY
  • Bank of America Merrill Lynch 2014 Global Technology Conference
    June 4, 2014 - San Francisco, CA

Members of Check Point's management team will 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.

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on April 29, 2014 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit the website at: www.checkpoint.com/ir. A replay of the conference call will be available through May 6, 2014 on the company's website or by telephone at +1.201.612.7415, replay ID number 13579956.

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com), the worldwide leader in securing the Internet, is the only vendor to deliver Total Security for networks, data and endpoints, unified under a single management framework. Check Point provides customers with uncompromised protection against all types of threats, reduces security complexity and lowers total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology. Today, Check Point continues to innovate with the development of the Software Blade Architecture™. The dynamic Software Blade Architecture delivers secure, flexible and simple solutions that can be fully customized to meet the exact security needs of any organization or environment. Check Point customers include tens of thousands of businesses and organizations of all sizes including all Fortune 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft.

©2014 Check Point Software Technologies Ltd. All rights reserved

Legal Notice 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. 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 for software-defined protection, Next-Generation SmartEvent and our other new solutions, and our expectations regarding our collaboration with VMware to automate and simplify the provisioning and deployment of network security in private clouds. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results 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; 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 March 28, 2014. 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 net income, operating income, operating margin and earnings per share, which are adjustments from results based on GAAP to exclude stock-based compensation charges, amortization of intangible assets 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
 
(In thousands, except per share amounts) 
 
    Three Months Ended
    March 31,
    2014   2013
    (unaudited)   (unaudited)
Revenues:            
  Products and licenses   $ 109,490   $ 106,530
  Software Blades subscriptions     60,206     47,817
Total revenues from products and software blades     169,696     154,347
  Software updates and maintenance     172,510     168,383
Total revenues     342,206     322,730
             
Operating expenses:            
  Cost of products and licenses     20,060     18,849
  Cost of software blades subscriptions     1,510     1,606
Total cost of products and software blades     21,570     20,455
  Cost of software updates and maintenance     17,248     16,248
  Amortization of technology     60     294
Total cost of revenues     38,878     36,997
             
  Research and development     32,966     29,314
  Selling and marketing     68,614     61,829
  General and administrative     17,250     17,586
Total operating expenses     157,708     145,726
             
Operating income     184,498     177,004
Financial income, net     7,149     8,842
Income before taxes on income     191,647     185,846
Taxes on income     38,562     37,886
Net income   $ 153,085   $ 147,960
             
Earnings per share (basic)   $ 0.80   $ 0.75
Number of shares used in computing earnings per share (basic)     192,019     198,459
             
Earnings per share (diluted)   $ 0.78   $ 0.73
Number of shares used in computing earnings per share (diluted)     195,760     202,594
 
 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION
 
(In thousands, except per share amounts) 
       
    Three Months Ended  
    March 31,  
    2014     2013  
    (unaudited)     (unaudited)  
                 
GAAP operating income   $ 184,498     $ 177,004  
Stock-based compensation (1)     12,471       11,170  
Amortization of intangible assets (2)     535       922  
Non-GAAP operating income   $ 197,504     $ 189,096  
                 
GAAP net income   $ 153,085     $ 147,960  
Stock-based compensation (1)     12,471       11,170  
Amortization of intangible assets (2)     535       922  
Taxes on the above items (3)     (2,189 )     (760 )
Non-GAAP net income   $ 163,902     $ 159,292  
                 
GAAP Earnings per share (diluted)   $ 0.78     $ 0.73  
Stock-based compensation (1)     0.06       0.06  
Amortization of intangible assets (2)     -       -  
Taxes on the above items (3)     -       -  
                 
Non-GAAP Earnings per share (diluted)   $ 0.84     $ 0.79  
Number of shares used in computing Non-GAAP earnings per share (diluted)     195,760       202,594  
(1) Stock-based compensation:                
  Cost of products and licenses   $ 16     $ 18  
  Cost of software updates and maintenance     185       199  
  Research and development     2,093       1,987  
  Selling and marketing     2,328       2,260  
  General and administrative     7,849       6,706  
    $ 12,471     $ 11,170  
                 
(2) Amortization of intangible assets:                
  Amortization of technology- Cost of revenues   $ 60     $ 294  
  Selling and marketing     475       628  
    $ 535     $ 922  
                 
                 
(3) Taxes on the above items   $ (2,189 )   $ (760 )
                 
Total, net   $ 10,817     $ 11,332  
 
 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
 
(In thousands) 
 
ASSETS
         
    March 31,   December 31,
    2014   2013
    (unaudited)   (audited)
Current assets:            
Cash and cash equivalents   $ 401,534   $ 408,432
Marketable securities and short-term deposits     805,684     758,382
Trade receivables, net     229,863     379,648
Prepaid expenses and other current assets     57,552     53,856
Total current assets     1,494,633     1,600,318
             
Long-term assets:            
Marketable securities     2,454,976     2,463,110
Property and equipment, net     38,003     37,991
Severance pay fund     6,388     6,488
Deferred tax asset, net     15,382     13,557
Other intangible assets, net     15,656     16,191
Goodwill     727,875     727,875
Other assets     20,376     20,907
Total long-term assets     3,278,656     3,286,119
             
Total assets     4,773,289   $ 4,886,437
             
LIABILITIES AND  
SHAREHOLDERS' EQUITY  
   
Current liabilities:                
Deferred revenues   $ 573,190     $ 586,696  
Trade payables and other accrued liabilities     253,457       396,102  
Total current liabilities     826,647       982,798  
                 
Long-term liabilities:                
Long-term deferred revenues     86,653       84,927  
Income tax accrual     215,544       205,420  
Deferred tax liability, net     258       308  
Accrued severance pay     11,083       10,887  
      313,538       301,542  
                 
Total liabilities     1,140,185       1,284,340  
                 
Shareholders' equity:                
Share capital     774       774  
Additional paid-in capital     798,810       774,917  
Treasury shares at cost     (2,569,240 )     (2,421,278 )
Accumulated other comprehensive income     3,830       1,839  
Retained earnings     5,398,930       5,245,845  
Total shareholders' equity     3,633,104       3,602,097  
                 
Total liabilities and shareholders' equity   $ 4,773,289     $ 4,886,437  
Total cash and cash equivalents, marketable securities and short-term deposits   $ 3,662,194     $ 3,629,924  
 
 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
 
(In thousands) 
   
    Three Months Ended  
    March 31,  
    2014     2013  
    (unaudited)     (unaudited)  
Cash flow from operating activities:                
Net income   $ 153,085     $ 147,960  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation of property, plant and equipment     2,191       2,016  
Amortization of intangible assets     535       922  
Stock-based compensation     12,471       11,170  
Realized gain on marketable securities     (11 )     (1,114 )
Decrease in trade and other receivables, net     145,143       94,376  
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities     (141,094 )     83,496  
Excess tax benefit from stock-based compensation     722       (4,171 )
Deferred income taxes, net     (984 )     (3,213 )
Net cash provided by operating activities     172,058       331,442  
                 
Cash flow from investing activities:                
Investment in property and equipment     (2,203 )     (2,582 )
Net cash used in investing activities     (2,203 )     (2,582 )
                 
Cash flow from financing activities:                
Proceeds from issuance of shares upon exercise of options     47,418       26,645  
Purchase of treasury shares     (186,869 )     (131,637 )
Excess tax benefit from stock-based compensation     (722 )     4,171  
Net cash used in financing activities     (140,173 )     (100,821 )
                 
Unrealized gain (loss) on marketable securities, net     2,588       (12 )
                 
Increase in cash and cash equivalents and marketable securities     32,270       228,027  
                 
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period    
 3,629,924
     
3,295,364
 
Cash and cash equivalents, marketable securities and short term deposits at the end of the period   $
 3,662,194
    $
3,523,391