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Check Point Software Technologies Reports 2019 Third Quarter financial Results

SAN CARLOS, Calif., Oct. 28, 2019 (GLOBE NEWSWIRE) -- Check Point® Software Technologies Ltd. (CHKP), today announced financial results for the third quarter ended September 30, 2019.

Third Quarter 2019:                                                         

  • Total Revenue: $491 million, 4 percent increase year over year
  • Deferred Revenues: $1,242 million, 8 percent increase year over year
  • GAAP Operating Income: $214 million, representing 44 percent of revenues
  • Non-GAAP Operating Income: $246 million, representing 50 percent of revenues
  • GAAP EPS: $1.25, Non-GAAP EPS: $1.44

“During the third quarter, our security subscriptions continued to drive results with 13 percent growth. This was underscored by expanded customer adoption of our cloud solutions,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We continued to increase the breadth of our offerings with the introduction of CloudGuard Connect and CloudGuard Edge, providing enterprises with industry leading threat prevention driven by a cloud service.”

Financial Highlights for the Third Quarter of 2019:

  • Total Revenue: $491 million compared to $471 million in the third quarter of 2018, a 4 percent increase year over year.
  • GAAP Operating Income: $214 million compared to $226 million in the third quarter of 2018, representing 44 percent and 48 percent of revenues in the third quarter of 2019 and 2018, respectively.
  • Non-GAAP Operating Income: $246 million compared to $250 million in the third quarter of 2018, representing 50 percent and 53 percent of revenues in the third quarter of 2019 and 2018, respectively.
  • GAAP Taxes on Income: $47 million compared to $45 million in the third quarter of 2018.
  • GAAP Net Income & Earnings per Diluted Share: GAAP net income was $188 million compared to $198 million in the third quarter of 2018. GAAP earnings per diluted share were $1.25, same as third quarter of 2018.
  • Non-GAAP Net Income & Earnings per Diluted Share: Non-GAAP net income was $217 million compared to $219 million in the third quarter of 2018.  Non-GAAP earnings per diluted share were $1.44 compared to $1.38 in the third quarter of 2018, a 4 percent increase year over year.
  • Deferred Revenues: As of September 30, 2019, deferred revenues were $1,242 million compared to $1,148 million as of September 30, 2018, an 8 percent increase year over year.
  • Cash Balances, Marketable Securities & Short Term Deposits: $4,055 million as of September 30, 2019, compared to $4,072 million as of September 30, 2018.
  • Cash Flow: Cash flow from operations of $244 million compared to $249 million in the third quarter of 2018.
  • Share Repurchase Program: During the third quarter of 2019, the company repurchased approximately 2.9 million shares at a total cost of approximately $323 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.”

Key Business Highlights

We announced several new products delivering advanced threat prevention through cloud services, for small and branch offices and expanding the data center performance at the high end.

Product Announcements

  • New Solution for Enterprise Branch Office Security Delivered from the Cloud: Check Point CloudGuard Connect and CloudGuard Edge allow enterprises to deploy branch office security in minutes from the cloud or on premise. The solution is integrated with leading SD-WAN providers like VMware and Silver Peak and provides a unified threat and access management platform that reduces OPEX by up to 40%.
     
  • Innovative Series of Small / Branch Office Appliances: The new 1500 series security gateways empower small and midsize businesses with Enterprise Grade Security. The new appliances feature 100% block score for malware prevention, up to 2 times more performance with up to 4 Gbps Firewall and 660 Mbps of full Threat Prevention. The solution delivers out-of-box Zero Touch provisioning, mobile app for security on the go and a unified management portal.
     
  • Latest Data Center Security Appliances: Check Point introduced the 16000 model and 26000 turbo security gateways. The 16000 Base, 16000 Plus and the 26000 Turbo deliver up to 30 Gbps of Gen V Threat Prevention security and are extensions of Check Point’s new gateway appliance series 16000 and 26000, which were introduced in June.

Industry Recognition

Check Point’s Research

Check Point’s Research Team https://research.checkpoint.com exposes vulnerabilities and attacks to ensure our customers have the highest levels of prevention and protection.  In the third quarter, our publication highlights included the following:

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on October 28, 2019, at 8:30 AM EDT/5:30 AM PDT. To listen to the live webcast or replay, please visit the website: www.checkpoint.com/ir.

Third Quarter Investor Conference Participation Schedule:

  • Jefferies 2019 Cybersecurity Summit
    November 12, 2019 – SF, CA
  • Credit Suisse 23rd Annual Technology Conference
    December 2, 2019 – Scottsdale, AZ
  • Wells Fargo TMT Summit 2019
    December 4, 2019 – Las Vegas, NV
  • Raymond James 2019 Technology Investor Conference
    December 10, 2019 – NY, NY
  • Cowen 6th Annual Networking & Cybersecurity Summit
    December 11, 2019 – NY, NY

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.

©2019 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 regarding our products and solutions, including the CloudGuard family of products, and our participation in investor conferences during the third quarter of 2019.  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; 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 23, 2019. 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 thousands, except per share amounts)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
Revenues:              
Products and licenses $118,261   $121,130   $352,883   $364,935
Security subscriptions   153,892     136,354     446,530     395,681
Total revenues from products and security subscriptions   272,153     257,484
    799,413
    760,616
Software updates and maintenance   218,755     213,339     651,439     630,303
Total revenues   490,908     470,823     1,450,852     1,390,919
               
Operating expenses:              
Cost of products and licenses   20,984     21,683     61,975     62,656
Cost of security subscriptions   6,073     4,375     17,833     12,101
Total cost of products and security subscriptions   27,057     26,058
    79,808     74,757

Cost of Software updates and maintenance   24,006     22,608     69,842     65,666
Amortization of technology   1,388     546     4,164     1,638
Total cost of revenues   52,451     49,212     153,814     142,061
               
Research and development   60,061     50,531     176,570     154,183
Selling and marketing   137,300     124,142     411,381     368,393
General and administrative   27,255     20,834     76,652     62,793
Total operating expenses   277,067     244,719     818,417     727,430
               
Operating income   213,841     226,104     632,435     663,489
Financial income, net   20,884     17,234     60,682     48,509
Income before taxes on income   234,725     243,338     693,117     711,998
Taxes on income   46,860     45,108     139,786     128,942
Net income $187,865   $198,230   $553,331   $583,056

Basic earnings per share
$1.26   $1.27   $3.64   $3.71
Number of shares used in computing basic earnings per share   149,444     155,941     151,876     157,026

Diluted earnings per share
$1.25   $1.25   $3.61   $3.64
Number of shares used in computing diluted earnings per share   150,756     159,050     153,436     160,131


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED FINANCIAL METRICS
(Unaudited, in thousands, except per share amounts)

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2019   2018   2019   2018
                 
Revenues   $490,908   $470,823   $1,450,852   $1,390,919
Non-GAAP operating income     246,380     249,750     723,094     735,871
Non-GAAP net income     216,730     219,271     633,659     647,345
Diluted Non-GAAP Earnings per share   $1.44   $1.38   $4.13   $4.04
Number of shares used in computing diluted Non-GAAP earnings per share     150,756     159,050     153,436     160,131


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION

 (Unaudited, in thousands, except per share amounts)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
               
GAAP operating income $213,841     $226,104     $632,435     $663,489  
Stock-based compensation (1)   29,246       21,310       80,052       64,451  
Amortization of intangible assets and acquisition related expenses (2)   3,293       2,336       10,607       7,931  
Non-GAAP operating income $246,380     $249,750     $723,094     $735,871  
               
GAAP net income $187,865     $198,230     $553,331     $583,056  
Stock-based compensation (1)   29,246       21,310       80,052       64,451  
Amortization of intangible assets and acquisition related expenses (2)   3,293       2,336       10,607       7,931  
Taxes on the above items (3)   (3,674 )     (2,605 )     (10,331 )     (8,093 )
Non-GAAP net income $216,730     $219,271     $633,659     $647,345  
               
Diluted GAAP Earnings per share $1.25     $1.25     $3.61     $3.64  
Stock-based compensation (1)   0.19       0.13       0.52       0.40  
Amortization of intangible assets and acquisition related expenses (2)   0.02       0.02       0.07       0.05  
Taxes on the above items (3)   (0.02 )     (0.02 )     (0.07 )     (0.05 )
Diluted Non-GAAP Earnings per share $1.44     $1.38     $4.13     $4.04  
               
Number of shares used in computing diluted Non-GAAP earnings per share   150,756       159,050       153,436       160,131  
               
(1) Stock-based compensation:              
Cost of products and licenses $48     $41     $116     $117  
Cost of software updates and maintenance   1,233       921       3,172       2,458  
Research and development   5,439       4,741       14,446       12,989  
Selling and marketing   7,778       5,179       20,824       14,917  
General and administrative   14,748       10,428       41,494       33,970  
    29,246       21,310       80,052       64,451  
               
(2) Amortization of intangible assets and acquisition related expenses:              
Amortization of technology-cost of revenues   1,388       546       4,164       1,638  
Research and development   1,511       974       5,036       3,845  
Selling and marketing   394       816       1,407       2,448  
    3,293       2,336       10,607       7,931  
(3) Taxes on the above items   (3,674 )     (2,605 )     (10,331 )     (8,093 )
Total, net $28,865     $21,041     $80,328     $64,289  


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA

(Unaudited, in thousands)

ASSETS

  September 30,   December 31,
  2019   2018
Current assets:      
Cash and cash equivalents $302,335   $303,687
Marketable securities and short-term deposits   1,382,124     1,448,092
Trade receivables, net   292,466     495,390
Prepaid expenses and other current assets   68,440     74,738
Total current assets   2,045,365     2,321,907
       
Long-term assets:      
Marketable securities   2,370,601     2,287,345
Property and equipment, net   87,042     78,514
Deferred tax asset, net   59,243     84,688
Goodwill and other intangible assets, net   991,534     991,539
Other assets   87,535     64,220
Total long-term assets   3,595,955     3,506,306
       
Total assets $5,641,320   $5,828,213

LIABILITIES AND
SHAREHOLDERS’ EQUITY

Current liabilities:      
Deferred revenues $899,801     $980,175  
Trade payables and other accrued liabilities   355,113       351,695  
Total current liabilities   1,254,914       1,331,870  
       
Long-term liabilities:      
Long-term deferred revenues   342,264       357,779  
Income tax accrual   428,187       356,750  
Other long-term liabilities   32,756       9,425  
    803,207       723,954  
       
Total liabilities   2,058,121       2,055,824  
       
Shareholders’ equity:      
Share capital   774       774  
Additional paid-in capital   1,736,987       1,597,800  
Treasury shares at cost   (7,771,849 )     (6,844,702 )
Accumulated other comprehensive gain (loss)   20,942       (24,497 )
Retained earnings   9,596,345       9,043,014  
Total shareholders’ equity   3,583,199       3,772,389  
Total liabilities and shareholders’ equity $5,641,320     $5,828,213  
Total cash and cash equivalents, marketable securities and short-term deposits $4,055,060     $4,039,124  


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA

(Unaudited, in thousands)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
Cash flow from operating activities:              
Net income $187,865     $198,230     $553,331     $583,056  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation of property and equipment   4,485       4,273       11,704       12,305  
Amortization of intangible assets   1,782       940       5,346       2,820  
Stock-based compensation   29,246       21,310       80,052       64,451  
Realized loss (gain) on marketable securities   (316 )     237       170       326  
Decrease in trade and other receivables, net   45,291       13,156       219,828       194,892  
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities   (28,342 )     8,730       (25,160 )     15,924  
Deferred income taxes, net   4,328       2,148       10,617       7,191  
Net cash provided by operating activities   244,339       249,024       855,888       880,965  
               
Cash flow from investing activities:              
Proceeds/(payment) in conjunction with acquisitions, net of acquired cash   415       -       (5,094 )     -  
Investment in property and equipment   (5,531 )     (3,677 )     (20,232 )     (13,116 )
Net cash used in investing activities   (5,116 )     (3,677 )     (25,326 )     (13,116 )
               
Cash flow from financing activities:              
Proceeds from issuance of shares upon exercise of options   21,895       83,273       84,895       182,370  
Purchase of treasury shares   (322,961 )     (299,982 )     (952,910 )     (798,939 )
Payments related to shares withheld for taxes   (404 )     (894 )     (5,496 )     (4,317 )
Net cash used in financing activities   (301,470 )     (217,603 )     (873,511 )     (620,886 )
               
Unrealized gain (loss) on marketable securities, net   7,730       2,321       58,885       (23,238 )
               
Increase (decrease)  in cash and cash equivalents, marketable securities and short term deposits   (54,517 )     30,065       15,936       223,725  
               
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period   4,109,577       4,041,705       4,039,124       3,848,045  
               
Cash and cash equivalents, marketable securities and short term deposits at the end of the period $4,055,060     $4,071,770     $4,055,060     $4,071,770  


Investors: Kip E. Meintzer 
Check Point Software Technologies
+1.650.628.2040
ir@checkpoint.com
Media: Ekram Ahmed
Check Point Software Technologies
+1.650.628.2260
press@checkpoint.com