SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

April 26, 2010 05:00 ET

Check Point Software Reports Record First Quarter 2010 Financial Results

REDWOOD CITY, CA--(Marketwire - April 26, 2010) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP)

  • Revenue: $245.1 million, representing a 26 percent increase year over year

  • Non-GAAP Operating Income: $137.6 million, representing a 26 percent increase year over year and reflecting 56 percent of revenues

  • Non-GAAP EPS: $0.55, representing a 22 percent increase year over year

  • Deferred Revenues: $419.8 million, representing a 29 percent increase year over year

  • Cash Flow from Operations: $217.8 million, representing a 27 percent increase year over year

Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced record financial results for the first quarter ended March 31, 2010.

"We delivered record first quarter results, attaining the top end of our projections for both revenues and earnings per share, while experiencing healthy growth across all regions," said Gil Shwed, chairman and chief executive officer of Check Point Software. "Our software blade architecture continues to make inroads with our annuity based software blades helping to drive services revenues. In addition to these great results, we delivered a record $218 million of operating cash flow for the quarter and now have cash balances exceeding $2 billion." 

  • Total Revenues: $245.1 million, an increase of 26 percent, compared to $195.0 million in the first quarter of 2009.
  • GAAP Operating Income: $115.9 million, an increase of 26 percent, compared to $92.3 million in the first quarter of 2009. The GAAP operating income in the first quarter of 2010 included additional amortization of intangible assets net of taxes in the amount of $3.3 million related to the acquisition of the Nokia security appliance business, which was completed during the second quarter of 2009.
  • Non-GAAP Operating Income: $137.6 million, an increase of 26 percent, compared to $109.0 million in the first quarter of 2009. Non-GAAP operating margin was 56 percent, same as in the first quarter of 2009.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $98.0 million, an increase of 21 percent, compared to $80.9 million in the first quarter of 2009. GAAP earnings per diluted share were $0.46, an increase of 21 percent, compared to $0.38 in the first quarter of 2009. GAAP net income in the first quarter of 2010 included additional amortization of intangible assets net of taxes in the amount of $3.3 million (which represented $0.02 in GAAP earnings per diluted share) related to the acquisition of the Nokia security appliance business, which was completed during the second quarter of 2009.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $116.8 million, an increase of 22 percent, compared to $95.5 million in the first quarter of 2009, and non-GAAP EPS was $0.55, an increase of 22 percent compared to $0.45 in the first quarter of 2009. 
  • Deferred Revenues: As of March 31, 2010, we had deferred revenue of $419.8 million, an increase of 29 percent, compared to $325.0 million as of March 31, 2009. 
  • Cash Flow: Cash flow from operations was $217.8 million, an increase of 27 percent compared to $171.8 million in the first quarter of 2009. 
  • Share Repurchase Program: During the first quarter of 2010, we repurchased 1.5 million shares at a total cost of $50 million.

Recent Business Highlights Include:

Since the beginning of the year, Check Point has introduced several new products and technologies.

  • Check Point Data Loss Prevention (DLP) solution -- a network-based solution that helps businesses move data loss protection from detection to prevention by preemptively protecting sensitive information such as regulatory, confidential and proprietary information from unintentional loss.

  • The new SmartEvent Software Blade -- a unified security management solution for real-time event visibility across multiple security systems, including Firewall, Intrusion Prevention (IPS), Data Loss Prevention (DLP) and endpoints.

  • Significant antivirus and URL performance improvements -- streaming technology dramatically increases software blades performance, benefiting Check Point security gateways through a software upgrade at no additional cost. In addition, Check Point extended its patented SecureXL acceleration technology to UTM-1 appliances, significantly boosting firewall throughput performance.

  • Check Point Abra -- a secure virtual desktop solution deployed from an encrypted USB stick that provides companies with a secure and affordable alternative to allowing third-party PC's access to the network.

  • ZoneAlarm DataLock Automated Encryption for Small Businesses and Consumers -- equipped with Pre-boot Authentication, ZoneAlarm DataLock prevents unauthorized users from accessing stored information, automatically encrypting all hard drive content to protect private and confidential data on laptops and netbooks.

During the first quarter, Check Point won several awards and industry accolades.

For the sixth time, Check Point won the SC Magazine Reader Trust Award for Best Enterprise Firewall.

In the Asia Pacific region, Check Point earned five awards -- two PC Market Hong Kong Best of I.T. Awards, one for Check Point Endpoint Security and the other for Check Point UTM-1 Total Security Appliances; CRN India named Check Point Channel Champion for overall network security; and PC3 Platinum Brand Election 2009 in Hong Kong recognized both Check Point Endpoint Security and Check Point SSL VPN Solutions.

Check Point's vice president of global field operations, Amnon Bar-Lev, was named a 2010 Channel Chief by the Everything Channel's CRN for the third consecutive year. 

Mr. Shwed concluded, "The first quarter marked a great start for the year. We posted record results and further expanded our addressable market by entering two new exciting markets: secure virtual desktop with Abra and Data Loss Prevention with our DLP solution. With the introduction of these latest technology innovations and security solutions, Check Point is well positioned to address the security needs of any size business."

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on April 26, 2010 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit Check Point's website at http://www.checkpoint.com/ir. A replay of the conference call will be available through May 3, 2010 at the company's website http://www.checkpoint.com/ir or by telephone at +1 201.612.7415, passcode # 348753, account # 215.

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 able 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.

©2010 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 operating income, operating margin, net income and earnings per share, which are adjusted from results based on GAAP to exclude non-cash equity-based compensation charges, amortization of acquired intangible assets and the related tax affects. 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's management also believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of Check Point's on-going core operations and prospects for the future. 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.

CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 
 (In thousands, except per share amounts)

 

    Three Months Ended
    March 31,
    2010     2009
    (unaudited)     (unaudited)
Revenues:              
  Products and licenses   $ 91,038     $ 71,744
  Software updates, maintenance and services     154,039       123,268
Total revenues     245,077       195,012
               
Operating expenses:              
  Cost of products and licenses     16,505       7,686
  Cost of software updates, maintenance and services     12,245       7,769
  Amortization of technology     8,066       5,800
Total cost of revenues     36,816       21,255
               
Research and development     24,322       19,787
Selling and marketing     54,776       47,072
General and administrative     13,302       14,617
Total operating expenses     129,216       102,731
               
Operating income     115,861       92,281
Financial income, net     7,193       8,413
Income before income taxes     123,054       100,694
Taxes on income     25,013       19,773
Net income   $ 98,041     $ 80,921
               
Earnings per share (basic)   $ 0.47     $ 0.39
Number of shares used in computing earnings per share (basic)     209,014       210,153
               
Earnings per share (diluted)   $ 0.46     $ 0.38
Number of shares used in computing earnings per share (diluted)     213,523       212,083

 

CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL INFORMATION
(In thousands, except per share amounts)

 

    Three Months Ended  
    March 31,  
    2010     2009  
    (unaudited)     (unaudited)  
                 
GAAP operating income   $ 115,861     $ 92,281  
Stock-based compensation (1)     8,933       7,803  
Amortization of intangible assets (2)     12,763       8,893  
Non-GAAP operating income   $ 137,557     $ 108,977  
                 
GAAP net income   $ 98,041     $ 80,921  
Stock-based compensation (1)     8,933       7,803  
Amortization of intangible assets (2)     12,763       8,893  
Taxes on the above items (3)     (2,948 )     (2,123 )
Non-GAAP net income   $ 116,789     $ 95,494  
                 
GAAP Earnings per share (diluted)   $ 0.46     $ 0.38  
Stock-based compensation (1)     0.04       0.04  
Amortization of intangible assets (2)     0.06       0.04  
Taxes on the above items (3)     (0.01 )     (0.01 )
Non-GAAP Earnings per share (diluted)   $ 0.55     $ 0.45  
                 
Number of shares used in computing Non-GAAP earnings per share (diluted)     213,523       212,083  
                 
(1) Stock-based compensation:                
  Cost of products and licenses   $ 11     $ 8  
  Cost of software updates, maintenance and services     227       193  
  Research and development     1,648       1,258  
  Selling and marketing     2,246       1,740  
  General and administrative     4,801       4,604  
      8,933       7,803  
                 
(2) Amortization of intangible assets:                
  Amortization of technology     8,066       5,800  
  Research and development     685       -  
  Selling and marketing     4,012       3,093  
      12,763       8,893  
(3) Taxes on the above items     (2,948 )     (2,123 )
                 
Total, net   $ 18,748     $ 14,573  
 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
ASSETS
 
      March 31,     December 31,  
      2010     2009  
      (unaudited)     (audited)  
Current assets:                  
Cash and cash equivalents     $ 588,266     $ 414,085  
Marketable securities       453,935       469,913  
Trade receivables, net       183,305       283,668  
Prepaid expenses and other current assets       36,478       34,544  
Total current assets       1,261,984       1,202,210  
                   
Long-term assets:                  
Marketable securities       1,009,537       963,001  
Property and equipment, net       37,991       38,936  
Severance pay fund       6,301       6,314  
Deferred tax asset, net       16,685       16,307  
Other intangible assets, net       101,429       114,192  
Goodwill       708,458       708,458  
Other assets       17,833       20,176  
Total long-term assets       1,898,234       1,867,384  
                   
Total assets     $ 3,160,218     $ 3,069,594  
                     
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:                  
Deferred revenues     $ 380,879     $ 384,255  
Trade payables and other accrued liabilities       165,507       169,011  
Total current liabilities       546,386       553,266  
                   
Long-term deferred revenues       38,898       41,005  
Income tax accrual       140,300       132,908  
Deferred tax liability, net       9,466       11,636  
Accrued severance pay       11,213       11,061  
                   
Total liabilities       746,263       749,876  
                   
Shareholders' equity:                  
Share capital       774       774  
Additional paid-in capital       546,446       527,874  
Treasury shares at cost       (1,223,531 )     (1,199,752 )
Accumulated other comprehensive income       15,888       12,555  
Retained earnings       3,074,378       2,978,267  
Total shareholders' equity       2,413,955       2,319,718  
Total liabilities and shareholders' equity     $ 3,160,218     $ 3,069,594  
Total cash and cash equivalents and marketable securities     $ 2,051,738     $ 1,846,999  
                       

 

CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands)
 
    Three Months Ended  
    March 31,  
    2010     2009  
    (unaudited)     (unaudited)  
Cash flow from operating activities:                
Net income   $ 98,041     $ 80,921  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization of property, plant and equipment     1,841       2,812  
                 
Amortization of intangible assets     12,763       8,893  
Stock-based compensation     8,933       7,803  
Increase in trade and other receivables, net     100,043       80,707  
                 
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities     409       (6,884 )
Realized loss on marketable securities     -       1,896  
Excess tax benefit from stock-based compensation     (1,833 )     (2,471 )
Deferred income taxes, net     (2,392 )     (1,890 )
Net cash provided by operating activities     217,805       171,787  
                 
Cash flow from investing activities:                
Investment in property and equipment     (896 )     (1,394 )
Net cash used in investing activities     (896 )     (1,394 )
                 
Cash flow from financing activities:                
Proceeds from issuance of shares upon exercise of options     32,060       23,789  
Purchase of treasury shares     (50,000 )     (52,288 )
Excess tax benefit from stock-based compensation     1,833       2,471  
Net cash used in financing activities     (16,107 )     (26,028 )
                 
Unrealized gain on marketable securities, net     3,937       2,622  
                 
Increase in cash and cash equivalents and marketable securities     204,739       146,987  
                 
Cash and cash equivalents and marketable securities at the beginning of the period     1,846,999       1,443,832  
Cash and cash equivalents and marketable securities at the end of the period   $ 2,051,738     $ 1,590,819  

Contact Information

  • INVESTOR CONTACT:
    Kip E. Meintzer
    Check Point Software Technologies
    +1 650.628.2040
    ir@checkpoint.com

    MEDIA CONTACT:
    Amber Rensen
    Check Point Software Technologies
    +1 650.628.2070
    press@checkpoint.com