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Check Point's (CHKP) Q1 Earnings and Revenues Beat Estimates

Zacks Equity Research

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

The company’s non-GAAP earnings per share of $1.32 beat the Zacks Consensus Estimate by a penny. The figure came within the company’s guidance of $1.28-$1.34 and climbed 2% year over year, driven mainly by higher revenues and lower share count. Infinity consolidated solution was a significant revenue driver.

Revenues came in at $472 million, up 4% year over year. The figure came within the company’s guidance of $460-$480 million, and beat the Zacks Consensus Estimate of $471 million.

Quarter Details

Security subscription revenues were $144 million, increasing 13.1% year over year, driven by strong demand for its cloud, mobile and zero-day advanced threat prevention technologies.

However, revenues of $112.8 million from Products and licenses fell 4.5%.

Software updates and maintenance revenues increased to $215.1 million, representing 4% growth.

As of Mar 31, 2019, deferred revenues were $1.3 billion, up 13% year over year, reflecting strength in security subscription and support.

Geographically, the Americas generated 45% of total revenues, Europe, Middle East and Africa (Middle East and Africa will henceforth be considered part of Europe) accounted for 44% while the Asia Pacific accounted for 11%.

Talking about deal size, the number of customers — who signed deals worth $1 million — were 47 compared with 44 in the prior-year quarter. Like last year, transactions greater than $50,000 was 71% of total order value.

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

During the quarter, the company completed the acquisition of ForceNock. The buyout will add machine learning to Check Point’s offerings and thus strengthen its portfolio.

Among the new products launched by the company during the quarter, the Check Point Maestro Hyperscale and the 6000 Series Getaways are worth mentioning. Notably, the Maestro has already attracted a few deals.

Operating Results

Non-GAAP operating income for the quarter came in at $234.9 million, falling 1.7% year over year. Non-GAAP operating margin contracted 300 basis points to 49.8%. This can be attributed to increased investments in sales and marketing efforts by the company. Moreover, full effect of the acquisitions of Dome9 and ForceNock were also realized in the quarter, which reflected in the operating results.

Non-GAAP net income for the quarter was $205.5 million, down from $209.9 million in the year-earlier quarter.

Balance Sheet & Other Financial Details

Check Point exited the first quarter with cash and cash equivalents, marketable securities and short-term deposits of $1.76 billion compared with $1.75 billion in the previous quarter.

During the quarter, the company generated cash worth $378.8 million from operational activities, up from $249 million in the fourth quarter. The generated cash included a payment of $2 million for the ForceNock buyout.

The company repurchased approximately 2.7 million shares for about $305 million in the first quarter.


Check Point reiterated guidance for the full year of 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 will continue to shift its revenues from products to subscriptions and Infinity. Subscription revenues are expected to continue growing throughout the remaining quarters of the year.

For the second quarter and third quarter of 2019, the tax rate is expected to be approximately 19%.

Furthermore, for the second quarter, revenues are expected to be between $474 million and $500 million and non-GAAP earnings in the $1.32-$1.40 range.

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. Quote

Zacks Rank and Other Stocks to Consider

Check Point currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Computer and Technology sector are Logitech International LOGI, CACI International CACI and Verint Systems VRNT, each sporting 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 Logitech, CACI and Verint is projected to be 9%, 10% and 11%, respectively.

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