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Check Point (CHKP) Q2 Earnings Top, Revenues Meet Estimates

Zacks Equity Research

Check Point Software Technologies Ltd. CHKP reported second-quarter 2019 results wherein the bottom line beat and the top line matched the Zacks Consensus Estimate.

The company’s non-GAAP earnings per share of $1.38 beat the consensus estimate by a penny. The figure came within the company’s guidance of $1.32-$1.40 and climbed 0.7% year over year, driven mainly by higher revenues and lower share count.

Revenues came in at $488 million, up 4% year over year. The figure came within the company’s guidance of $474-$500 million.

Growth in security subscriptions revenues, including advanced threat prevention and CloudGuard suite of products boosted the top line.

Check Point Software Technologies Ltd. Price, Consensus and EPS Surprise

Check Point Software Technologies Ltd. Price, Consensus and EPS Surprise

Check Point Software Technologies Ltd. price-consensus-eps-surprise-chart | Check Point Software Technologies Ltd. Quote

Quarter Details

Security subscription revenues were $149 million, increasing 13% year over year, driven by strong demand for its cloud and Infinity solutions; and SandBlast zero-day advanced threat prevention technologies. However, revenues of $121.8 million from Products and licenses fell 3.1%. Thus, total revenues from product and security subscriptions totaled $270.5 million, growing 5% year over year.

Software updates and maintenance revenues increased to $217.6 million, representing 4% growth.

As of Jun 30, 2019, deferred revenues were $1.29 billion, up 11% year over year, reflecting strength in security subscription and support.

Region wise, the Americas generated 48% of total revenues, Europe, Middle East and Africa (Middle East and Africa will henceforth be considered part of Europe) accounted for 40% while the Asia Pacific accounted for 12%.

The Infinity Gen V security platform witnessed solid traction and drove customer acquisition, leading to new deals in various industries.

During the quarter, the company focused on IT modernization. The cloud business more than doubled in size. Also, the Maestro Hyperscale, launched in the first quarter of 2019, witnessed solid traction with many new deals.

The company continued to innovate on its core product line and introduced high end 16000 and 26000 security appliances, which are optimized for Gen 5 security operations.

The America region witnessed a healthy growth rate. Check Point also significantly increased its marketing activities during the quarter. The Check Point experience program was propagated to different cities around the world with participants growing to almost 11,000.

The company’s research team identified major malware and vulnerabilities in mobile and cloud during the second quarter. In the mobile space, a vulnerability in Xiaomi mobile devices was found that may affect more than 100 million devices. Moreover, malware Agent Smith, which affected numerous applications and more than 25 million android users, was also identified by the company. Additionally,  Check Point discovered a security gap in Electronic Arts, Apex Legend game that might have affected 300 million online users.  

Operating Results

Non-GAAP operating income for the quarter came in at $241.8 million, falling 2.1% year over year. Non-GAAP operating margin contracted 720 basis points to 60%. This can be attributed to increased investments in sales and marketing efforts by the company.

Non-GAAP net income for the quarter was $211.5 million, down from $218.2 million in the year-earlier quarter.

Balance Sheet & Other Financial Details

Check Point exited the second quarter with cash and cash equivalents, marketable securities and short-term deposits of $1.6 billion compared with $1.8 billion in the previous quarter.

The company generated cash worth $233 million from operational activities, down from $378.8 million in the first quarter.

It repurchased approximately 2.8 million shares for about $325 million in the second quarter.


Check Point reiterated guidance for full-year 2019. Revenues are expected to be in the range $1.94-$2.04 billion. Non-GAAP earnings are projected to be $5.85-$6.25.

The company intends to continue shifting its revenues from products to subscriptions and Infinity.

Furthermore, for the third quarter, revenues are expected to be between $480 million and $500 million, and non-GAAP earnings in the $1.36-$1.44 range.

Zacks Rank and Stocks to Consider

Check Point currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are Rosetta Stone RST, Lattice Semiconductor Corporation LSCC and Alteryx AYX, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, Lattice and Alteryx is currently projected to be 12.5%, 12.5% and 13.7%, respectively.

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