SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

January 28, 2010 05:00 ET

Check Point Software Reports Record Fourth Quarter and Fiscal Year 2009 Financial Results

Fourth Quarter 2009:

-- Revenue: $272.1 Million, Representing a 25 Percent Increase Year Over Year

-- Non-GAAP Operating Income: $152.7 Million, Representing 56 Percent of Revenues

-- Non-GAAP EPS: $0.61, Representing a 22 Percent Increase Year Over Year

-- Deferred Revenues: $425.3 Million, Representing a 29 Percent Increase Year Over Year

-- Revenue: $924.4 Million, Representing a 14 Percent Increase Year Over Year

-- Non-GAAP Operating Income: $505.7 Million, Representing 55 Percent of Revenues

-- Non-GAAP EPS: $2.05, Representing a 15 Percent Increase Year Over Year

-- Cash Flow From Operations: $548.7 Million, Representing a 28 Percent Increase Year Over Year

REDWOOD CITY, CA--(Marketwire - January 28, 2010) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the fourth quarter and fiscal year ending December 31, 2009.

"I am very pleased that we were able to deliver an all-time record fourth quarter and fiscal year 2009 results, which exceeded the high-end of our projections in both revenues and earnings per share," said Gil Shwed, chairman and chief executive officer at Check Point. "Our product sales have shown the highest sequential growth recorded in our history this quarter. This growth came from all product lines and across all regions."

Financial Highlights for the Fourth Quarter Ended December 31, 2009:

  • Total Revenues: $272.1 million, an increase of 25 percent compared to $217.6 million in the fourth quarter of 2008.
  • GAAP Operating Income: $130.6 million, an increase of 26 percent compared to $103.7 million in the fourth quarter of 2008. The GAAP operating income in the fourth quarter of 2009 included additional amortization of intangible assets in the amount of $4.9 million related to the acquisition of the Nokia security appliance business, which was completed during the second quarter of 2009.
  • Non-GAAP Operating Income: $152.7 million, an increase of 27 percent compared to $120.7 million in the fourth quarter of 2008. Non-GAAP operating margin was 56 percent, compared to 55 percent in the fourth quarter of 2008.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $109.5 million, an increase of 27 percent compared to $86.5 million in the fourth quarter of 2008. GAAP earnings per diluted share were $0.51, an increase of 24 percent compared to $0.41 in the fourth quarter of 2008. GAAP net income in the fourth quarter of 2009 included additional amortization of intangible assets in the amount of $4.9 million (which represented $0.02 in GAAP earnings per diluted share) related to the acquisition of the Nokia security appliance business in 2009. Net of taxes, these charges totaled $4.5 million ($0.02 per diluted share).
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $129.5 million, an increase of 23 percent compared to $105.6 million in the fourth quarter of 2008, and non-GAAP EPS was $0.61, an increase of 22 percent compared to $0.50 in the fourth quarter of 2008.
  • Deferred Revenues: As of December 31, 2009, we had deferred revenue of $425.3 million, an increase of 29 percent compared to $330.8 as of December 31, 2008.
  • Cash Flow: Cash flow from operations was $138.1 million, an increase of 54 percent compared to $89.4 million in the fourth quarter of 2008.
  • Share Repurchase Program: During the fourth quarter of 2009, we repurchased 1.5 million shares at a total cost of $50 million. There is approximately $31.4 million remaining of the $400 million authorized in 2008 under Check Point's share repurchase program. The company also expanded the share buyback program enabling the purchase of up to $250 million for the year.

Financial Highlights for the Year Ended December 31, 2009:

  • Total Revenues: $924.4 million, an increase of 14 percent compared to $808.5 million in 2008.
  • GAAP Operating Income: $415.0 million, an increase of 16 percent compared to $356.5 million in 2008. The GAAP operating income in 2009 included additional amortization of intangible assets in the amount of $14.8 million related to the acquisition of the Nokia security appliance business in 2009.
  • Non-GAAP Operating Income: $505.7 million, an increase of 19 percent compared to $425.8 million in 2008. Non-GAAP operating margin was 55 percent, compared to 53 percent in the 2008.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $357.5 million, an increase of 10 percent compared to $324.0 million in 2008. GAAP earnings per diluted share were $1.68, an increase of 12 percent compared to $1.50 in 2008. GAAP net income in 2009 included additional amortization of intangible assets in the amount of $14.8 million (which represented $0.07 in GAAP earnings per diluted share) related to the acquisition of the Nokia security appliance business in 2009. Net of taxes, these charges totaled $12.6 million ($0.06 per diluted share).
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $435.3 million, an increase of 13 percent compared to $386.0 million in 2008, and non-GAAP EPS was $2.05, an increase of 15 percent compared to $1.78 in 2008.
  • Cash Flow: Cash flow from operations was $548.7 million, an increase of 28 percent, compared to $429.9 million in 2008.
  • Cash and Investments Balance: $1,847 million as of December 31, 2009 compared to $1,444 million in 2008.
  • Share Repurchase Program: During 2009, we repurchased 7.8 million shares at a total cost of $202.3 million.

For information regarding the non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Information" and "Reconciliation of Non-GAAP to GAAP Financial Information."

"We generated revenue growth across all geographies. The Asia Pacific region was particularly strong, delivering over 40 percent year over year growth. Our non-GAAP operating margins expanded to 55 percent for 2009 from 53 percent in 2008, as a result of increasing revenues and the realization of synergies from the acquisition of the Nokia security appliance business," added Shwed.

In addition, today we are announcing an expansion of our share buy back program. The Check Point Board of Directors has authorized the repurchase of up to an additional $250 million for the year of our outstanding ordinary shares in the open market or through privately negotiated transactions. Under the repurchase program, share purchases may be made from time to time depending on market conditions, share price, trading volume and other factors. Such purchases will be made in accordance with the requirements of the Securities and Exchange Commission. For a portion of the authorized repurchase amount, Check Point may enter into a plan that is compliant with Rule 10b5-1 of the United States Securities Exchange Act of 1934. The repurchase program has no time limit, does not require Check Point to acquire a specific number of shares and may be suspended from time to time or discontinued. The share repurchases will be funded from available working capital. As of December 31, 2009, Check Point has approximately 209 million ordinary shares of outstanding stock. Since its initial share repurchase program announced in October 2003, Check Point has purchased approximately 73.6 million shares for a total of approximately $1.57 billion.

Business Highlights
During 2009, we introduced new and innovative security products and technologies including:

  • Our revolutionary Software Blade architecture provides customers with an integrated flexible security platform with over 30 software blades available to address their security needs.
  • The latest endpoint product innovations WebCheck and OneCheck technologies provide our customers with secure web browsing and single lock/unlock mechanism to multiple security subsystems.
  • New appliance products introduced during the year included:
    • UTM-1 130 entry-level appliance for branch offices and small businesses
    • High End Power-1 11000 appliances delivering up to 25Gbps throughput and 15Gbps of IPS performance
    • SMART-1 Management Appliances -- for managing a security infrastructure of any size
    • IP Series appliance line which was acquired from Nokia and introduced bundled with Check Point's Software Blade architecture
  • Acquired technology from FaceTime to detect and provide security for over 4,500 internet applications and 50,000 web 2.0 widgets.

Concluded Shwed, "I'm very proud of the record results we achieved this year -- generated across our key metrics while continuing to invest and advance our security industry leadership. This was a great finish to the decade that we closed by exceeding our projections and delivering the best results to date. I'd like to thank our loyal customers, partners and employees for their contribution."

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on January 28, 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 February 4, 2010 at the company's website http://www.checkpoint.com/ir or by telephone at +1.201.612.7415, replay ID number 341795.

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com), a worldwide leader in securing the Internet, is the only vendor to deliver Total Security for networks, data and endpoints, unified under a single management framework. Check Point provides customers 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 net income, operating income 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, restructuring-related charges, other than temporary impairment of marketable securities, net, 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.

Safe Harbor 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, including but not limited to, statements related to our plans to further increase the breadth of our security solutions portfolio, and to continue delivering products based on our unified security architecture; our expectations regarding our products and services; our expectation that we will continue to innovate and deliver products to address our customers' security requirements -- at every size of organization worldwide; and our expectations regarding our share repurchase program. Because these statements pertain to future events they are subject to various risks and uncertainties, actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to: Check Point's development and delivery of its security products; general market conditions in the Check Point's industry; economic and political uncertainties; the impact of political changes and weaknesses in various regions of the world, including hostilities or acts of terrorism in Israel where Check Point's international headquarters are based; inclusion of network security functionality in third-party hardware or system software; any foreseen and unforeseen developmental or technological difficulties with regard to Check Point's products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; rapid technological advances and changes in customer requirements to which Check Point is unable to respond expeditiously, if at all; a shift in demand for products, such as Check Point's; factors affecting third parties with which Check Point has formed business alliances; the timely availability and customer acceptance of Check Point's new and existing products; the timing and amount of our share repurchases, if any; and the economic environment in which Check Point operates. The forward-looking statements contained in this press release are subject to other factors and risks, including those discussed in Check Point's Annual Report on Form 20-F for the year ending December 31, 2008, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update these forward-looking statements.

                CHECK POINT SOFTWARE TECHNOLOGIES LTD.
            CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

               (In thousands, except per share amounts)

                           Three Months Ended            Year Ended
                        ------------------------  ------------------------
                              December 31,              December 31,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)   (audited)
Revenues:
  Products and licenses $   120,205  $    94,040  $   361,633  $   338,317
  Software updates,
   maintenance and
   services                 151,917      123,527      562,784      470,173
                        -----------  -----------  -----------  -----------
Total revenues              272,122      217,567      924,417      808,490
                        -----------  -----------  -----------  -----------

Operating expenses:
  Cost of products and
   licenses                  23,060       11,889       68,121       40,842
    Cost of software
     updates,
     maintenance
     and services            10,289        6,421       36,925       27,213
  Amortization of
   technology                 7,723        5,800       28,224       24,554
                        -----------  -----------  -----------  -----------
Total cost of revenues       41,072       24,110      133,270       92,609


Research and
 development                 24,062       21,867       89,743       91,629
Selling and marketing        60,487       53,395      220,877      214,439
General and
 administrative              15,920       14,448       56,409       53,313
Restructuring and other
 acquisition related
 costs                            -            -        9,101            -
                        -----------  -----------  -----------  -----------
Total operating
 expenses                   141,541      113,820      509,400      451,990
                        -----------  -----------  -----------  -----------

Operating income            130,581      103,747      415,017      356,500
Financial income, net         7,690       10,525       32,058       40,876
Other than temporary
 Impairment, net*            (1,277)      (8,933)      (1,277)     (11,221)
                        -----------  -----------  -----------  -----------
Income before income
 taxes                      136,994      105,339      445,798      386,155
Taxes on income              27,458       18,865       88,275       62,189
                        -----------  -----------  -----------  -----------
Net income              $   109,536  $    86,474  $   357,523  $   323,966
                        ===========  ===========  ===========  ===========

Earnings per share
 (basic)                $      0.52  $      0.41  $      1.71  $      1.51
                        ===========  ===========  ===========  ===========
Number of shares used
 in computing earnings
 per share (basic)          209,093      211,731      209,371      214,361
                        ===========  ===========  ===========  ===========

Earnings per share
 (diluted)              $      0.51  $      0.41  $      1.68  $      1.50
                        ===========  ===========  ===========  ===========
Number of shares used
 in computing earnings
 per share (diluted)        213,469      212,874      212,208      216,668
                        ===========  ===========  ===========  ===========

* Year ended December 31, 2009 and the three months ended December 31, 2009
include a net non-cash write down of $1.3 million related to our
marketable securities in accordance with ASC 320 (formerly SFAS 115). Year
ended December 31, 2008 and the three months ended December 31, 2008
include a non cash write down of $11.2 million and $8.9 million
respectively, of our marketable securities in accordance with ASC 320
(formerly SFAS 115).



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

                           Three Months Ended            Year Ended
                        ------------------------  ------------------------
                              December 31,              December 31,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)

GAAP operating income   $   130,581  $   103,747  $   415,017  $   356,500
Stock-based
 compensation (1)             8,138        8,014       30,907       32,327
Amortization of
 intangible assets (2)       14,006        8,893       50,653       36,982
Restructuring and other
 acquisition related
 costs (3)                        -            -        9,101            -
                        -----------  -----------  -----------  -----------
Non-GAAP operating
 income                 $   152,725  $   120,654  $   505,678  $   425,809
                        ===========  ===========  ===========  ===========

GAAP net income         $   109,536  $    86,474  $   357,523  $   323,966
Stock-based
 compensation (1)             8,138        8,014       30,907       32,327
Amortization of
 intangible assets (2)       14,006        8,893       50,653       36,982
Restructuring and other
 acquisition related
 costs (3)                        -            -        9,101            -
Other than temporary
 impairment of
 marketable securities,
 net (4)                      1,277        8,933        1,277       11,221
Taxes on the above
 items (5)                   (3,492)      (6,673)     (14,153)     (18,540)
                        -----------  -----------  -----------  -----------
Non-GAAP net income     $   129,465  $   105,641  $   435,308  $   385,956
                        ===========  ===========  ===========  ===========

GAAP Earnings per
 Share (diluted)        $      0.51  $      0.41  $      1.68  $      1.50
Stock-based
 compensation (1)              0.04         0.04         0.15         0.15
Amortization of
 intangible assets (2)         0.07         0.04         0.24         0.17
Restructuring and other
 acquisition related
 costs (3)                        -            -         0.04            -
Other than temporary
 impairment of
 marketable securities,
 net (4)                       0.01         0.04         0.01         0.05

Taxes on the above
 items (5)                    (0.02)       (0.03)       (0.07)       (0.09)
                        -----------  -----------  -----------  -----------
Non-GAAP Earnings per
 share (diluted)        $      0.61  $      0.50  $      2.05  $      1.78
                        ===========  ===========  ===========  ===========

Number of shares used
 in computing Non-GAAP
 earnings per share
 (diluted)                  213,469      212,874      212,208      216,668
                        ===========  ===========  ===========  ===========

(1) Stock-based
 compensation:
  Cost of products
   and licenses         $        12  $         6  $        47  $        48
  Cost of software
   updates,
   maintenance and
   services                     105          174          641          684
  Research and
   development                1,878        1,372        6,649        5,037
  Selling and marketing         547          993        5,032        6,855
  General and
   administrative             5,596        5,469       18,538       19,703
                        -----------  -----------  -----------  -----------
                              8,138        8,014       30,907       32,327
                        -----------  -----------  -----------  -----------

(2) Amortization of
 intangible assets:
  Cost of products and
   licenses                   7,723        5,800       28,224       24,554
  Selling and marketing       6,283        3,093       22,429       12,428
                        -----------  -----------  -----------  -----------
                             14,006        8,893       50,653       36,982
                        -----------  -----------  -----------  -----------

(3) Restructuring and
 other acquisition
 related costs                    -            -        9,101            -
                        -----------  -----------  -----------  -----------

(4) Other than
 temporary  impairment,
 net*                         1,277        8,933        1,277       11,221
                        -----------  -----------  -----------  -----------

(5) Taxes on the above
 items                       (3,492)      (6,673)     (14,153)     (18,540)
                        -----------  -----------  -----------  -----------

Total, net              $    19,929  $    19,167  $    77,785  $    61,990
                        ===========  ===========  ===========  ===========

* Year ended December 31, 2009 and the three months ended December 31, 2009
include a net non-cash write down of $1.3 million related to our
marketable securities in accordance with ASC 320 (formerly SFAS 115). Year
ended December 31, 2008 and the three months ended December 31, 2008
include a non cash write down of $11.2 million and $8.9 million
respectively, of our marketable securities in accordance with ASC 320
(formerly SFAS 115).



                CHECK POINT SOFTWARE TECHNOLOGIES LTD.
              CONDENSED CONSOLIDATED BALANCE SHEET DATA
                           (In thousands)
                               ASSETS
                                             December 31,      December 31,
                                                2009              2008
                                             -----------       -----------
                                             (unaudited)       (unaudited)
Current assets:
Cash and cash equivalents                    $  414,085         $  543,190
Marketable securities and deposits              469,913            371,197
Trade receivables, net                          283,668            251,771
Other current assets                             34,544             28,372
                                             ----------         ----------
Total current assets                          1,202,210          1,194,530
                                             ----------         ----------

Long-term assets:
Marketable securities                           963,001            529,445
Property, plant and equipment, net               38,936             40,248
Severance pay fund                                6,314              5,817
Deferred income taxes, net                       16,307             19,003
Intangible assets, net                          114,192            123,151
Goodwill                                        708,458            664,602
Other assets                                     20,176             16,820
                                             ----------         ----------
Total long-term assets                        1,867,384          1,399,086
                                             ----------         ----------

Total assets                                 $3,069,594         $2,593,616
                                             ==========         ==========

                          LIABILITIES AND
                       SHAREHOLDERS' EQUITY
Current liabilities:
Deferred revenues                            $  384,255         $  289,998
Trade payables and other accrued liabilities    166,970            112,556
                                             ----------         ----------
Total current liabilities                       551,225            402,554
                                             ----------         ----------

Long-term deferred revenues                      41,005             40,799
Income tax accrual                              134,949            101,230
Deferred tax liability, net                      11,636             22,225
Accrued severance pay                            11,061             10,943
                                             ----------         ----------

Total liabilities                               749,876            577,751
                                             ----------         ----------

Shareholders' equity:
Share capital                                       774                774
Additional paid-in capital                      527,874            503,408
Treasury shares at cost                      (1,199,752)        (1,105,250)
Accumulated other comprehensive income
 (loss)                                          12,555             (4,673)
Retained earnings                             2,978,267          2,621,606
                                             ----------         ----------
Total shareholders' equity                    2,319,718          2,015,865
                                             ----------         ----------
Total liabilities and shareholders' equity   $3,069,594         $2,593,616
                                             ==========         ==========
Total cash and cash equivalents and
 marketable securities                       $1,846,999         $1,443,832
                                             ==========         ==========



                CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                 SELECTED CONSOLIDATED CASH FLOW DATA
                           (In thousands)

                           Three Months Ended            Year Ended
                        ------------------------  ------------------------
                              December 31,              December 31,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)
Cash flow from
 operating
 activities:
Net income              $   109,536  $    86,474  $   357,523  $   323,966
Adjustments to
 reconcile net income
 to net cash provided
 by operating
 activities:
Depreciation and
 amortization of
 property, plant and
 equipment                    1,659        2,099        8,885        8,648
Other than temporary
 impairment, net              1,277        8,933        1,277       11,221
Realized loss on sale
 of marketable securities,
 net                              -            -        1,896            -

Amortization of
 intangible assets           14,006        8,893       50,653       36,982
Stock-based compensation      8,138        8,014       30,907       32,327
Increase in trade and
 other receivables, net     (95,020)     (92,414)      (9,971)     (53,776)

Increase in deferred
 revenues, trade payables
 and other accrued
 liabilities                101,643       72,098      126,412       97,478
Excess tax benefit from
 stock-based compensation      (514)      (3,459)      (7,502)     (13,019)
Deferred income taxes,
 net                         (2,657)      (1,265)     (11,386)     (13,926)
                        -----------  -----------  -----------  -----------
Net cash provided by
 operating activities       138,068       89,373      548,694      429,901
                        -----------  -----------  -----------  -----------

Cash flow from
 investing activities:

Cash paid in
 conjunction with
 acquisitions, net           (1,247)           -      (58,787)      (9,042)
Investment in property,
 plant and equipment           (639)      (1,363)      (4,283)      (8,301)
                        -----------  -----------  -----------  -----------
Net cash used in
 investing activities        (1,886)      (1,363)     (63,070)     (17,343)
                        -----------  -----------  -----------  -----------

Cash flow from financing
 activities:
Proceeds from issuance
 of shares upon exercise
 of options                  30,509        7,769       92,978       35,045
Purchase of treasury
 shares                     (49,999)     (66,717)    (202,285)    (239,542)
Excess tax benefit
 from stock-based
 compensation                   514        3,459        7,502       13,019
                        -----------  -----------  -----------  -----------
Net cash used in
 financing activities       (18,976)     (55,489)    (101,805)    (191,478)
                        -----------  -----------  -----------  -----------

Unrealized gain (loss)
 on marketable
 securities, net             (6,371)      10,067       19,348      (18,757)
                        -----------  -----------  -----------  -----------

Increase in cash and
 cash equivalents,
 deposits and
 marketable securities      110,835       42,588      403,167      202,323

Cash and cash
 equivalents, deposits
 and marketable
 securities at the
 beginning of the
 period                   1,736,164    1,401,244    1,443,832    1,241,509
                        -----------  -----------  -----------  -----------
Cash and cash
 equivalents, deposits
 and marketable
 securities at the end
 of the period          $ 1,846,999  $ 1,443,832  $ 1,846,999  $ 1,443,832
                        ===========  ===========  ===========  ===========

Contact Information

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

    MEDIA CONTACT:
    Greg Kunkel
    Check Point Software Technologies
    +1 650.628.2070
    press@checkpoint.com