Check Point Software Technologies Reports 2012 Third Quarter Financial Results

Marketwired

SAN CARLOS, CA--(Marketwire - Oct 17, 2012) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the third quarter ended September 30, 2012.

  • Total Revenue: $332.4 million, representing an 8 percent increase year-over-year
  • Non-GAAP Operating Income: $195.6 million, representing 59 percent of revenues
  • Non-GAAP EPS: $0.79, representing a 10 percent increase year over year

"Third quarter results continued to be good with healthy growth in enterprise appliance units and software blade sales. Our revenues and earnings per share came in at the upper half of our projections," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies. "Geographically, North America continued to deliver great results with double digit growth in product and service revenues."

Financial Highlights:

  • Total Revenue: $332.4 million, an increase of 8 percent, compared to $308.3 million in the third quarter of 2011.
  • GAAP Operating Income: $182.6 million, an increase of 15 percent, compared to $158.2 million in the third quarter of 2011. GAAP operating margin was 55 percent, compared to 51 percent in the third quarter of 2011.
  • Non-GAAP Operating Income: $195.6 million, an increase of 8 percent, compared to $180.7 million in the third quarter of 2011. Non-GAAP operating margin was 59 percent, the same as in the third quarter of 2011.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $152.4 million, an increase of 14 percent, compared to $134.1 million in the third quarter of 2011. GAAP earnings per diluted share were $0.73, an increase of 16 percent, compared to $0.63 in the third quarter of 2011.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $164.1 million, an increase of 7 percent, compared to $152.9 million in the third quarter of 2011. Non-GAAP earnings per diluted share were $0.79, an increase of 10 percent, compared to $0.72, in the third quarter of 2011. 
  • Deferred Revenues: As of September 30, 2012, we had deferred revenues of $505.9 million, an increase of 11 percent, compared to $454.5 million as of September 30, 2011. 
  • Cash Flow: Cash flow from operations was $180.4 million, an increase of 17%, compared to $154.5 million in the third quarter of 2011.
  • Share Repurchase Program: During the third quarter of 2012, we repurchased 3.2 million shares at a total cost of $156.1 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $3,246.8 million as of September 30, 2012, an increase of $470.3 million, compared to $2,776.5 million as of September 30, 2011.

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 quarter, we announced the new Check Point Virtual Systems -- Latest solution for private cloud environments and data centers enabling the consolidation of up to 250 security gateways on a single hardware platform. Customers can now secure multiple network segments by selecting any combination of Check Point software blades, which are capable of simplifying security, reducing costs and boosting performance.

We've continued to receive industry recognition worldwide including:

Top Position in IDC Worldwide Combined Firewall and UTM Appliance Market -- Check Point is positioned as the number one vendor in worldwide combined Firewall and UTM appliance revenue for Q2 2012 according to the IDC Worldwide Q2 2012 Security Appliance Tracker.

Leader in Gartner's Magic Quadrant for Mobile Data Protection -- Check Point is positioned as a leader in Gartner's Magic Quadrant for Mobile Data Protection, 2012. The company is recognized for its ability to encrypt data and secure mobile endpoints.

NSS Labs "Recommended" Rating -- Check Point IPS Software Blade earned NSS Labs' coveted "Recommended" rating for the second year in a row.

Shwed concluded, "We are pleased with IDC's recognition of Check Point's number one position in security appliance sales this past quarter. We believe that with our appliances and software blades architecture we deliver the deepest and broadest security solutions available in the market."

Fourth Quarter 2012 Investor Conference Participation Schedule:

  • Wells Fargo Securities Media & Technology Conference
    November 7, 2012 - New York, NY
  • UBS Global Technology Conference
    November 15, 2012 - New York, NY
  • Credit Suisse Annual Technology Conference
    November 27, 2012 - Scottsdale, AZ
  • 29th Annual NASDAQ OMX Investor Program
    December 4, 2012 London, UK

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 October 17, 2012 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 October 24, 2012 on the company's website or by telephone at +1.201.612.7415, replay ID number 401438.

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com), the worldwide leader in securing the Internet, 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 develop new innovations based on the Software Blade Architecture, providing customers with flexible and simple solutions that can be fully customized to meet the exact security needs of any organization. Check Point is the only vendor to go beyond technology and define security as a business process. Check Point 3D Security uniquely combines policy, people and enforcement for greater protection of information assets and helps organizations implement a blueprint for security that aligns with business needs. Customers include tens of thousands of organizations of all sizes, including all Fortune and Global 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft. 

©2012 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, operating margin and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges, amortization of acquired intangible assets, gain on sale of marketable securities previously impaired or other than temporary impairment of marketable securities, net, and the related tax effects. 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   Nine Months Ended
    September 30,   September 30,
    2012   2011   2012   2011
    (unaudited)   (unaudited)   (unaudited)   (unaudited)
Revenues:                        
  Products and licenses   $ 121,036   $ 120,700   $ 354,373   $ 345,246
  Software updates, maintenance and subscription     211,320    
187,610
    619,748    
544,982
Total revenues     332,356     308,310     974,121     890,228
                         
Operating expenses:                        
  Cost of products and licenses     20,606     18,760     60,881     55,395
  Cost of software updates, maintenance and subscription     17,380    
16,066
    50,164    
45,986
  Amortization of technology     294     7,849     3,688     23,548
Total cost of revenues     38,280     42,675     114,733     124,929
                         
  Research and development     28,517     28,063     82,621     83,230
  Selling and marketing     64,501     62,091     189,415     185,385
  General and administrative     18,412     17,297     51,288     47,120
Total operating expenses     149,710     150,126     438,057     440,664
                         
Operating income     182,646     158,184     536,064     449,564
Financial income, net     10,452     9,638     30,688     30,998
Income before taxes on income     193,098     167,822     566,752     480,562
Taxes on income     40,691     33,748     120,738     96,407
Net income   $ 152,407   $ 134,074   $ 446,014   $ 384,155
Earnings per share (basic)   $ 0.75   $ 0.65   $ 2.17   $ 1.85
Number of shares used in computing earnings per share (basic)     203,928     206,311     205,170    
207,199
Earnings per share (diluted)   $ 0.73   $ 0.63   $ 2.12   $ 1.79
Number of shares used in computing earnings per share (diluted)     208,717     213,412     210,831     214,505
                         
   
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION  
   
(In thousands, except per share amounts)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
                                 
GAAP operating income   $ 182,646     $ 158,184     $ 536,064     $ 449,564  
Stock-based compensation (1)     12,029       11,495       33,734       29,640  
Amortization of intangible assets (2)     922       11,013       6,107       33,076  
Non-GAAP operating income   $ 195,597     $ 180,692     $ 575,905     $ 512,280  
                                 
GAAP net income   $ 152,407     $ 134,074     $ 446,014     $ 384,155  
Stock-based compensation (1)     12,029       11,495       33,734       29,640  
Amortization of intangible assets (2)     922       11,013       6,107       33,076  
Gain on sale of marketable securities previously impaired(3)     -       -       -       (2,017 )
Taxes on the above items (4)     (1,250 )     (3,689 )     (3,013 )     (9,378 )
Non-GAAP net income   $ 164,108     $ 152,893     $ 482,842     $ 435,476  
                                 
GAAP Earnings per share (diluted)   $ 0.73     $ 0.63     $ 2.12     $ 1.79  
Stock-based compensation (1)     0.06       0.05       0.16       0.14  
Amortization of intangible assets (2)     0.01       0.05       0.03       0.15  
Gain on sale of marketable securities previously impaired(3)    
-
      -      
-
      (0.01 )
Taxes on the above items (4)     (0.01 )     (0.01 )     (0.02 )     (0.04 )
Non-GAAP Earnings per share (diluted)   $ 0.79     $ 0.72     $ 2.29     $ 2.03  
                                 
Number of shares used in computing Non-GAAP earnings per share (diluted)    
208,717
      213,412      
210,831
      214,505  
                                 
(1) Stock-based compensation:                                
  Cost of products and licenses   $ 12     $ 11     $ 50     $ 41  
  Cost of software updates, maintenance and subscription    
234
      235      
539
      680  
  Research and development     1,951       2,164       6,504       5,619  
  Selling and marketing     2,445       2,328       7,272       5,909  
  General and administrative     7,387       6,757       19,369       17,391  
    $ 12,029     $ 11,495     $ 33,734     $ 29,640  
                                 
(2) Amortization of intangible assets:                                
  Amortization of technology-cost of revenues     294       7,849        3,688       23,548  
  Selling and marketing     628       3,164       2,419       9,528  
      922       11,013       6,107       33,076  
(3) Gain on Sale of marketable securities previously impaired     -       -       -       (2,017 )
                                 
(4) Taxes on the above items     (1,250 )     (3,689 )     (3,013 )     (9,378 )
                                 
Total, net   $ 11,701     $ 18,819     $ 36,828     $ 51,321  
                                 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
 
(In thousands)
 
ASSETS
    September 30,   December 31,
    2012   2011
    (unaudited)   (audited)
Current assets:            
Cash and cash equivalents   $ 330,391   $ 493,546
Marketable securities and short-term deposits     1,119,878     865,994
Trade receivables, net     240,911     357,418
Prepaid expenses and other current assets     50,266     53,045
Total current assets     1,741,446     1,770,003
             
Long-term assets:            
Marketable securities     1,796,515     1,519,865
Property and equipment, net     35,505     36,639
Severance pay fund     5,818     6,052
Deferred tax asset, net     22,146     25,296
Other intangible assets, net     20,132     26,239
Goodwill     727,875     727,875
Other assets     18,428     16,094
Total long-term assets     2,626,419     2,358,060
             
Total assets   $ 4,367,865   $ 4,128,063
             
LIABILITIES AND  
SHAREHOLDERS' EQUITY  
   
Current liabilities:                
Deferred revenues   $ 449,614     $ 490,655  
Trade payables and other accrued liabilities     301,300       271,815  
Total current liabilities     750,914       762,470  
                 
Long-term deferred revenues     56,330       61,523  
Income tax accrual     241,050       219,469  
Deferred tax liability, net     -       1,274  
Accrued severance pay     9,987       10,236  
      307,367       292,502  
                 
Total liabilities     1,058,281       1,054,972  
                 
Shareholders' equity:                
Share capital     774       774  
Additional paid-in capital     674,195       630,508  
Treasury shares at cost     (1,802,819 )     (1,543,886 )
Accumulated other comprehensive income     18,375       12,650  
Retained earnings     4,419,059       3,973,045  
Total shareholders' equity     3,309,584       3,073,091  
Total liabilities and shareholders' equity   $ 4,367,865     $ 4,128,063  
Total cash and cash equivalents, marketable securities and short-term deposits   $ 3,246,784     $ 2,879,405  
                 
   
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
SELECTED CONSOLIDATED CASH FLOW DATA  
   
(In thousands)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Cash flow from operating activities:                                
Net income   $ 152,407     $ 134,074     $ 446,014     $ 384,155  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation of property and equipment     2,228       1,808        6,010       5,360  
Amortization of intangible assets     922       11,013       6,107       33,076  
Stock-based compensation     12,029       11,495       33,734       29,640  
Realized gain on marketable securities     (396 )     -       (493 )     (2,481 )
Decrease (increase) in trade and other receivables, net     9,359       (1,971 )     115,219       77,936  
Increase in deferred revenues, trade payables and other accrued liabilities    
6,200
      5,323      
 3,961
     
 27,087
 
Excess tax benefit from stock-based compensation     (1,854 )     (2,660 )     (1,619 )     (4,748 )
Deferred income taxes, net     (448 )     (4,549 )     4,374       (8,378 )
Net cash provided by operating activities     180,447       154,533       613,307       541,647  
                                 
Cash flow from investing activities:                                
Cash paid in conjunction with acquisitions, net of acquired cash    
 -
      (55 )    
-
     
 (6,556
)
Investment in property and equipment     (1,175 )     (1,989 )     (4,876 )     (5,473 )
Net cash used in investing activities     (1,175 )     (2,044 )     (4,876 )     (12,029 )
                                 
Cash flow from financing activities:                                
Proceeds from issuance of shares upon exercise of options    
 13,837
     
11,827
     
55,461
     
 51,378
 
Purchase of treasury shares     (156,059 )     (75,000 )     (306,058 )     (225,000 )
Excess tax benefit from stock-based compensation     1,854       2,660       1,619       4,748  
Net cash used in financing activities     (140,368 )     (60,513 )     (248,978 )     (168,874 )
                                 
Unrealized gain (loss) on marketable securities, net     6,068       (5,314 )     7,926       780  
                                 
Increase in cash and cash equivalents, marketable securities and short term deposits    
 44,972
     
86,662
     
367,379
     
 361,524
 
                                 
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period    
 3,201,812
     
2,689,808
     
2,879,405
     
 2,414,946
 
                                 
Cash and cash equivalents, marketable securities and short term deposits at the end of the period   $ 3,246,784     $
2,776,470
    $
3,246,784
    $ 2,776,470  
                                 
Contact:
INVESTOR CONTACT:
Kip E. Meintzer
Check Point Software Technologies
+1.650.628.2040
ir@checkpoint.com

MEDIA CONTACT:
James Rivas
Check Point Software Technologies
+1.650.628.2215
press@checkpoint.com

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