SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

October 22, 2009 06:00 ET

Check Point Software Reports Record Financial Results for the Third Quarter 2009

All-Time Record Quarterly Results

-- Revenue: $233.6 Million, Representing 17 Percent Year Over Year Growth

-- Non-GAAP EPS: $0.52, Representing 19 Percent Year Over Year Growth

-- Non-GAAP Operating Income: $127.5 Million, Representing 20 Percent Year Over Year Growth, and 55 Percent of Revenues

-- Deferred Revenues: $360.1 Million, Representing 32 Percent Year Over Year Growth

REDWOOD CITY, CA--(Marketwire - October 22, 2009) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced record financial results for the third quarter ended September 30, 2009.

"I am proud of our ability to execute and deliver all-time record results across key metrics for the quarter. Our revenues came in at the high-end of our projections, with 17 percent growth, while non-GAAP earnings per share were $0.52, representing 19% growth, and exceeded our projections. This is particularly encouraging given the state of the economy and the weakness of the US dollar," said Gil Shwed, Chairman and Chief Executive Officer at Check Point. "Operationally, we performed well across all regions, with Asia Pacific having a particularly good quarter. We also continued to realize further synergies from our recent acquisition, which helped us to achieve these results and deliver non-GAAP operating margin of 55%."

Financial Highlights for the Third Quarter of 2009

  • Total Revenues: $233.6 million, an increase of 17 percent compared to $199.7 million in the third quarter of 2008.
  • GAAP Operating Income: $105.5 million, an increase of 17 percent compared to $90.4 million in the third quarter of 2008. The GAAP operating income in the third quarter of 2009 included amortization of intangible assets in the amount of $5.4 million related to the Nokia security business acquisition.
  • Non-GAAP(1) operating income: $127.5 million, an increase of 20 percent compared to $106.2 million in the third quarter of 2008. Non-GAAP operating margin was 55 percent, compared to 53 percent in the third quarter of 2008, and 52 percent during the second quarter of 2009.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $91.5 million, an increase of 14 percent compared to $80.1 million in the third quarter of 2008. GAAP earnings per diluted share were $0.43, an increase of 17 percent compared to $0.37 in the third quarter of 2008. GAAP net income in the third quarter of 2009 included amortization of intangible assets in the amount of $5.4 million (which represented $0.03 in GAAP earnings per diluted share) related to the Nokia security business acquisition. Net of taxes, these charges totaled $5.1 million ($0.02 per diluted share).
  • Non-GAAP(1) Net Income and Earnings per Diluted Share: Non-GAAP net income was $109.5 million, an increase of 16 percent compared to $94.2 million in the third quarter of 2008, and non-GAAP EPS was $0.52, an increase of 19 percent compared to $0.44 in the third quarter of 2008.
  • Deferred Revenues: As of September 30, 2009, we had deferred revenue of $360.1 million, an increase of 32 percent compared to $272.9 as of September 30, 2008.
  • Cash Flow: Cash flow from operations was $126.1 million, an increase of 10 percent compared to $115.1 million in the third quarter of 2008. We had $1,736.2 million in cash and investments as of September 30, 2009.
  • Share Repurchase Program: During the third quarter of 2009, we repurchased 1.8 million shares at a total cost of $50 million.
(1)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."


Mr. Shwed concluded, "We continued to realize good traction from our latest product introductions, including the new SMART-1 management appliances, the high-end Power-1 11000 series and low-end UTM-1 130 appliances. Our Software Blade Architecture experienced excellent adoption by our customers as they continue to recognize the benefits of a secure, flexible and easily managed security platform."

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on October 22, 2009 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 October 29, 2009 at the company's website http://www.checkpoint.com/ir or by telephone at +1 201.612.7415, passcode # 335046, account # 215.

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 delivers 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.

©2009 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, impairment of marketable securities, amortization of acquired intangible assets, restructuring-related charges 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        Nine Months Ended
                          ------------------------ ------------------------
                               September 30,            September 30,
                          ------------------------ ------------------------
                             2009         2008        2009         2008
                          ----------- -----------  ----------- -----------
                          (unaudited) (unaudited)  (unaudited) (unaudited)
Revenues:
  Products and licenses   $    86,882 $    81,925  $   241,427 $   244,277
  Software updates,
   maintenance and
   services                   146,759     117,795      410,867     346,646
                          ----------- -----------  ----------- -----------
Total revenues                233,641     199,720      652,294     590,923
                          ----------- -----------  ----------- -----------

Operating expenses:
  Cost of products and
   licenses                    18,598      10,267       45,061      28,953
  Cost of software
   updates, maintenance
   and services                10,033       6,941       26,637      20,792
  Amortization of
   technology                   7,471       5,800       20,501      18,754
                          ----------- -----------  ----------- -----------
Total cost of revenues         36,102      23,008       92,199      68,499

  Research and
   development                 22,426      23,193       65,681      69,762
  Selling and marketing        56,379      50,796      160,390     161,044
  General and
   administrative              13,190      12,294       40,487      38,865
  Restructuring                    67           -        9,101           -
                          ----------- -----------  ----------- -----------
Total operating expenses      128,164     109,291      367,858     338,170
                          ----------- -----------  ----------- -----------

Operating income              105,477      90,429      284,436     252,753
Financial income, net           7,825      10,039       24,368      30,351
Other than temporary
 impairment on marketable
 securities                         -      (2,288)           -      (2,288)
                          ----------- -----------  ----------- -----------
Income before income
 taxes                        113,302      98,180      308,804     280,816
Taxes on income                21,839      18,119       60,817      43,324
                          ----------- -----------  ----------- -----------
Net income                $    91,463 $    80,061  $   247,987 $   237,492
                          =========== ===========  =========== ===========

Earnings per share
 (basic)                  $      0.44 $      0.37  $      1.18 $      1.10
                          =========== ===========  =========== ===========
Number of shares used in
 computing earnings per
 share (basic)                208,738     213,728      209,465     215,247
                          =========== ===========  =========== ===========

Earnings per share
 (diluted)                $      0.43 $      0.37  $      1.17 $      1.09
                          =========== ===========  =========== ===========
Number of shares used in
 computing earnings per
 share (diluted)              211,688     216,567      211,790     217,942
                          =========== ===========  =========== ===========



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

                 (In thousands, except per share amounts)



                           Three Months Ended         Nine Months Ended
                        ------------------------  ------------------------
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)

GAAP operating income   $   105,477  $    90,429  $   284,436  $   252,753
Stock-based
 compensation (1)             7,695        6,857       22,769       24,313
Amortization of
 intangible assets (2)       14,301        8,893       36,647       28,090
Restructuring (3)                67            -        9,101            -
                        -----------  -----------  -----------  -----------
Non-GAAP operating
 income                 $   127,540  $   106,179  $   352,953  $   305,156
                        ===========  ===========  ===========  ===========

GAAP net income         $    91,463  $    80,061  $   247,987  $   237,492
Stock-based
 compensation (1)             7,695        6,857       22,769       24,313
Amortization of
 intangible assets (2)       14,301        8,893       36,647       28,090
Restructuring (3)                67            -        9,101            -
Other than temporary
 impairment * (4)                 -        2,288            -        2,288
Taxes on stock-based
 compensation,
 amortization of
 intangible assets and
 other than temporary
 impairment (5)              (4,040)      (3,849)     (10,662)     (11,867)
                        -----------  -----------  -----------  -----------
Non-GAAP net income     $   109,486  $    94,250  $   305,842  $   280,316
                        ===========  ===========  ===========  ===========

GAAP Earnings per share
 (diluted)              $      0.43  $      0.37  $      1.17  $      1.09
Stock-based
 compensation (1)              0.04         0.04         0.11         0.11
Amortization of
 intangible assets (2)         0.07         0.04         0.17         0.13
Restructuring (3)                 -            -         0.04            -
Other than temporary
 impairment * (4)                 -         0.01            -         0.01
Taxes on stock-based
 compensation,
 amortization of
 intangible assets and
 other than temporary
 impairment (5)               (0.02)       (0.02)       (0.05)       (0.05)
                        -----------  -----------  -----------  -----------
Non-GAAP Earnings per
 share (diluted)        $      0.52  $      0.44  $      1.44  $      1.29
                        ===========  ===========  ===========  ===========

Number of shares used
 in computing Non-GAAP
 earnings per share
 (diluted)                  211,688      216,567      211,790      217,942
                        ===========  ===========  ===========  ===========

(1) Stock-based
 compensation:
   Cost of products
    and licenses        $        14  $        15  $        35  $        42
   Cost of software
    updates,
    maintenance
    and services                236          133          536          510
   Research and
    development               1,998        1,364        4,771        3,665
   Selling and
    marketing                 1,769        1,696        4,485        5,862
   General and
    administrative            3,678        3,649       12,942       14,234
                        -----------  -----------  -----------  -----------
                              7,695        6,857       22,769       24,313
                        -----------  -----------  -----------  -----------

(2) Amortization of
 intangible assets:
   Cost of products
    and licenses              7,471        5,800       20,501       18,754
   Selling and
    marketing                 6,830        3,093       16,146        9,336
                        -----------  -----------  -----------  -----------
                             14,301        8,893       36,647       28,090
                        -----------  -----------  -----------  -----------

(3) Restructuring                67            -        9,101            -
                        -----------  -----------  -----------  -----------

(4) Other than
 temporary impairment*
   Financial income, net          -        2,288            -        2,288
                        -----------  -----------  -----------  -----------

(5) Taxes on stock-based
 compensation,
 amortization of
 intangible assets and
 other than temporary
 impairment                  (4,040)      (3,849)     (10,662)     (11,867)
                        -----------  -----------  -----------  -----------

Total, net              $    18,023  $    14,189  $    57,855  $    42,824
                        ===========  ===========  ===========  ===========

* Relates to impairment of Lehman Brothers bonds.



                 CHECK POINT SOFTWARE TECHNOLOGIES LTD.
               CONDENSED CONSOLIDATED BALANCE SHEET DATA
                             (In thousands)
                                 ASSETS



                                               September 30,  December 31,
                                                   2009          2008
                                               ------------- -------------
                                                (unaudited)   (unaudited)
Current assets:
Cash and cash equivalents                      $     608,221 $     543,190
Short-term deposit                                         -        26,302
Marketable securities                                348,898       344,895
Trade receivables, net                               191,156       251,771
Other current assets                                  34,477        28,372
                                               ------------- -------------
Total current assets                               1,182,752     1,194,530
                                               ------------- -------------

Long-term assets:
Marketable securities                                779,045       529,445
Property, plant and equipment, net                    39,956        40,248
Severance pay fund                                     6,315         5,817
Deferred income taxes, net                            16,926        19,003
Intangible assets, net                               123,448       123,151
Goodwill                                             708,458       664,602
Other assets                                          21,167        16,820
                                               ------------- -------------
Total long-term assets                             1,695,315     1,399,086
                                               ------------- -------------

Total assets                                   $   2,878,067 $   2,593,616
                                               ============= =============

                           LIABILITIES AND
                         SHAREHOLDERS' EQUITY


Current liabilities:
Deferred revenues                              $     322,764 $     289,998
Trade payables and other accrued liabilities         145,191       112,556
                                               ------------- -------------
Total current liabilities                            467,955       402,554
                                               ------------- -------------

Long-term deferred revenues                           37,361        40,799
Income tax accrual                                   121,138       101,230
Deferred tax liability, net                           15,127        22,225
Accrued severance pay                                 11,125        10,943
                                               ------------- -------------

Total liabilities                                    652,706       577,751
                                               ------------- -------------

Shareholders' equity:
Share capital                                            774           774
Additional paid-in capital                           512,200       503,408
Treasury shares at cost                           (1,173,239)   (1,105,250)
Accumulated other comprehensive income
 (loss)                                               16,895        (4,673)
Retained earnings                                  2,868,731     2,621,606
                                               ------------- -------------
Total shareholders' equity                         2,225,361     2,015,865
                                               ------------- -------------
Total liabilities and shareholders' equity     $   2,878,067 $   2,593,616
                                               ============= =============
Total cash and cash equivalents, deposits
 and marketable securities                     $   1,736,164 $   1,443,832
                                               ============= =============



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



                           Three Months Ended         Nine Months Ended
                        ------------------------  ------------------------
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)
Cash flow from
 operating activities:
Net income              $    91,463  $    80,061  $   247,987  $   237,492
Adjustments to
 reconcile net income
 to net cash provided
 by operating
 activities:
Depreciation and
 amortization of
 property, plant and
 equipment                    2,190        2,257        7,226        6,548
Other than temporary
 impairment                       -        2,288            -        2,288
Decrease (increase) in
 trade and other
 receivables, net               (50)       1,770       85,050       38,638

Increase in deferred
 revenues, trade
 payables and other
 accrued liabilities         15,494       20,836       24,769       25,380

Amortization of
 intangible assets           14,301        8,893       36,647       28,090
Realized loss on
 marketable securities            -            -        1,896            -
Stock-based
 compensation                 7,695        6,857       22,768       24,313
Excess tax benefit from
 stock-based
 compensation                (2,474)      (3,531)      (6,988)      (9,560)
Deferred income taxes,
 net                         (2,487)      (4,338)      (8,729)     (12,661)
                        -----------  -----------  -----------  -----------
Net cash provided by
 operating activities       126,132      115,093      410,626      340,528
                        -----------  -----------  -----------  -----------

Cash flow from
 investing activities:
Cash paid in
 conjunction with the
 acquisition of Protect
 Data, net                        -            -            -       (9,042)
Cash paid in
 conjunction with the
 acquisition of Nokia             -            -      (57,540)           -
Investment in property,
 plant and equipment         (1,043)      (2,412)      (3,644)      (6,938)
                        -----------  -----------  -----------  -----------
Net cash used in
 investing activities        (1,043)      (2,412)     (61,184)     (15,980)
                        -----------  -----------  -----------  -----------

Cash flow from
 financing activities:
Proceeds from issuance
 of shares upon
 exercise of options         20,166       11,504       62,469       27,276
Purchase of treasury
 shares                     (50,000)     (49,825)    (152,286)    (172,825)
Excess tax benefit from
 stock-based
 compensation                 2,474        3,531        6,988        9,560
                        -----------  -----------  -----------  -----------
Net cash used in
 financing activities       (27,360)     (34,790)     (82,829)    (135,989)
                        -----------  -----------  -----------  -----------

Unrealized gain (loss)
 on marketable
 securities, net              8,255      (19,420)      25,719      (28,824)
                        -----------  -----------  -----------  -----------

Increase in cash and
 cash equivalents,
 deposits and
 marketable securities      105,984       58,471      292,332      159,735

Cash and cash
 equivalents, deposits
 and marketable
 securities at the
 beginning of the
 period                   1,630,180    1,342,773    1,443,832    1,241,509
                        -----------  -----------  -----------  -----------
Cash and cash
 equivalents, deposits
 and marketable
 securities at the end
 of the period          $ 1,736,164  $ 1,401,244  $ 1,736,164  $ 1,401,244
                        ===========  ===========  ===========  ===========

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