SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

October 23, 2014 05:00 ET

Check Point Software Technologies Reports 2014 Third Quarter Financial Results

SAN CARLOS, CA--(Marketwired - Oct 23, 2014) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the third quarter ended September 30, 2014.

  • Total Revenue: $370 million, representing an 8 percent increase year over year
  • Non-GAAP Operating Income: $215 million, representing 58 percent of revenues
  • Non-GAAP EPS: $0.93, representing a 9 percent increase year over year
  • Deferred Revenues: $660 million, representing a 16 percent increase year over year

"The third quarter represented another great quarter with results coming in at the high-end of our projections. We continued to deliver double-digit growth in our combined products and software blades revenues. Growth was driven by demand for our data center and enterprise security appliances and next generation threat prevention software blades," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies.

Financial Highlights for the Third Quarter of 2014:

  • Total Revenue: $370 million compared to $344 million in the third quarter of 2013.
  • GAAP Operating Income: $197 million compared to $186 million in the third quarter of 2013.
  • Non-GAAP Operating Income: $215 million compared to $201 million in the third quarter of 2013. Non-GAAP operating margin was 58 percent, same as in the third quarter of 2013.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $161 million compared to $160 million in the third quarter of 2013. GAAP earnings per diluted share were $0.84 compared to $0.80 in the third quarter of 2013.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $177 million compared to $169 million in the third quarter of 2013. Non-GAAP earnings per diluted share were $0.93 compared to $0.85 in the third quarter of 2013. 
  • Deferred Revenues: As of September 30, 2014, deferred revenues were $660 million compared to $567 million as of September 30, 2013. 
  • Cash Flow: Cash flow from operations was $202 million compared to $195 million in the third quarter of 2013.
  • Share Repurchase Program: During the third quarter of 2014, the company repurchased 2.8 million shares at a total cost of $192 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $3,656 million as of September 30, 2014, compared to $3,664 million as of September 30, 2013.

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."

Business Highlights
During the third quarter of 2014 Check Point launched new data center appliances: 13800 Appliance and 21800 Appliance.

13800 Appliance - Check Point launched the 13800 Appliance, extending the 13000 Data Center Appliance line. The 13800 offers exceptional security protections and advanced performance, with up to 3,800 SecurityPower™ units (SPU) and 6.5 Gbps of IPS throughput.

21800 Appliance - Check Point augmented the 21000 Data Center Appliance family with the 21800 Appliance. The 21800 delivers up to 4,300 SPU and 7 Gbps of IPS throughput, supplies the low latency required by the most demanding network environments, and provides high reliability and serviceability to minimize maintenance costs.

Check Point Malware and Vulnerability Research Teams Update:
Check Point security research teams have continued to find vulnerabilities to critical infrastructure in various technologies including mobile platforms, Telco infrastructure, web infrastructure and security products.

Man in the Binder - Researchers at Check Point studied Android's unique operating system (OS) architecture and demonstrated the potential capture of data and information being stored and communicated on Android devices through the Binder, the message passing mechanism in Inter-process Communication (IPC).

Bugzilla - Check Point uncovered a critical privilege escalation vulnerability in the popular bug-tracking platform called Bugzilla. Check Point's security researchers informed the Mozilla Foundation, and the team leading the Bugzilla project quickly fixed the exploit.

TR-069 Deployments - Check Point uncovered a number of critical zero-day vulnerabilities that might have resulted in the compromise of millions of homes and business worldwide, through flaws in several TR-069 server implementations. Check Point has provided guidance to many telcos and technology providers to remedy the situation.

Vulnerabilities Discovered in Three Network Security Vendors' System Admin Portals - Check Point discovered vulnerabilities in the Admin WebUI portals of three network security vendors. If targeted and exploited, these vulnerabilities would give hackers administrative control over the vendors' security systems, potentially leaving business networks exposed to attacks. Check Point has notified the relevant vendors and provided them with the information to remedy the vulnerabilities.

Industry Accolades:
Number One in Worldwide Firewall Equipment Market Share - Check Point increased its lead in the worldwide market share for Firewall Equipment in Q2 2014, according to the Gartner Market Share: Enterprise Network Equipment by Market Segment, Worldwide, 2Q14 report.

Leader in the Gartner Magic Quadrant for Unified Threat Management - Check Point is positioned as a Leader in the Gartner Magic Quadrant for Unified Threat Management (UTM). This is the company's fourth consecutive year in the Leaders quadrant.

Leader in Gartner's Magic Quadrant for Mobile Data Protection - Check Point is positioned as a Leader in Gartner's Magic Quadrant for Mobile Data Protection (MDP). The company has been in the Leaders quadrant for eight consecutive years.

Top Position in Worldwide Combined Firewall and UTM Appliance Market - Check Point continued to be the number one vendor in worldwide combined Firewall and UTM appliance revenue for Q2 2014, according to the IDC Worldwide Quarterly Security Appliance Tracker Q2 2014.

"Our security focus and advanced threat research has paid off once again this quarter with advanced protections against several new types of cyber-attacks. We continue to expand the reach of our security leadership with new technologies to fight the most critical cyber threats," concluded Shwed.

Fourth Quarter 2014 Investor Conference Participation Schedule:

  • RBC Global Technology Conference
    November 11, 2014 - New York, NY
  • Wells Fargo Securities Media & Technology Conference
    November 12, 2014 - New York, NY
  • UBS Global Technology Conference
    November 19, 2014 - Sausalito, CA
  • Credit Suisse Annual Technology Conference
    December 3, 2014 - Scottsdale, AZ
  • Raymond James Supply Chain Conference
    December 9, 2014- New York, NY
  • Barclays Global Technology Conference
    December 10, 2014- San Francisco, CA

Members of Check Point's management team will 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.

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on October 23, 2014 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit the website at: www.checkpoint.com/ir. A replay of the conference call will be available through November 1, 2014 on the company's website or by telephone at +1.201.612.7415, replay ID number 13593342.

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 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.

©2014 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 continued expansion of the reach of our security leadership with new technologies to fight the most critical cyber threats. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results 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 March 28, 2014. 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 net income, operating income, operating margin and earnings per share, which are adjustments from results based on GAAP to exclude stock-based compensation charges, amortization of intangible assets 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
 
(In thousands, except per share amounts)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2014   2013   2014   2013
    (unaudited)   (unaudited)   (unaudited)   (unaudited)
Revenues:                
  Products and licenses   $ 126,029   $ 119,526   $ 358,310   $ 343,971
  Software Blades subscriptions     67,164     55,046     192,664     156,550
Total revenues from products and software blades    
193,193
   
174,572
   
550,974
   
500,521
  Software updates and maintenance     177,177     169,555     524,200     506,508
Total revenues     370,370     344,127     1,075,174     1,007,029
                         
Operating expenses:                        
  Cost of products and licenses     24,076     21,727     66,489     61,492
  Cost of software blades subscriptions    
1,269
   
1,095
   
3,871
   
3,941
Total cost of products and software blades    
25,345
   
22,822
   
70,360
   
65,433
  Cost of Software updates and maintenance    
19,324
   
17,247
   
54,078
   
50,454
  Amortization of technology     60     60     180     552
Total cost of revenues     44,729     40,129     124,618     116,439
                         
  Research and development     32,605     30,034     99,022     88,717
  Selling and marketing     74,741     68,783     223,176     201,093
  General and administrative     20,914     18,690     56,558     53,995
Total operating expenses     172,989     157,636     503,374     460,244
                         
Operating income     197,381     186,491     571,800     546,785
Financial income, net     7,313     9,098     21,760     25,548
Income before taxes on income     204,694     195,589     593,560     572,333
Taxes on income     43,647     35,888     119,772     113,664
Net income   $ 161,047   $ 159,701   $ 473,788   $ 458,669
Earnings per share (basic)   $ 0.86   $ 0.82   $ 2.50   $ 2.33
Number of shares used in computing earnings per share (basic)    
187,293
    194,931    
189,736
    196,570
Earnings per share (diluted)   $
0.84
  $ 0.80   $
2.45
  $ 2.29
Number of shares used in computing earnings per share (diluted)    
190,984
    198,668    
193,360
    200,380
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD. 
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION 
 
(In thousands, except per share amounts) 
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
                                 
GAAP operating income   $ 197,381     $ 186,491     $ 571,800     $ 546,785  
Stock-based compensation (1)     16,979       13,642       46,037       38,564  
Amortization of intangible assets (2)     518       662       1,588       2,410  
Non-GAAP operating income   $ 214,878     $ 200,795     $ 619,425     $ 587,759  
                                 
GAAP net income   $ 161,047     $ 159,701     $ 473,788     $ 458,669  
Stock-based compensation (1)     16,979       13,642       46,037       38,564  
Amortization of intangible assets (2)     518       662       1,588       2,410  
Taxes on the above items (3)     (1,751 )     (5,115 )     (8,619 )     (6,426 )
Non-GAAP net income   $ 176,793     $ 168,890     $ 512,794     $ 493,217  
                                 
GAAP Earnings per share (diluted)   $ 0.84     $ 0.80     $ 2.45     $ 2.29  
Stock-based compensation (1)     0.09       0.07       0.24       0.19  
Amortization of intangible assets (2)     -       -       -       0.01  
Taxes on the above items (3)     -       (0.02 )     (0.04 )     (0.03 )
Non-GAAP Earnings per share (diluted)   $ 0.93     $ 0.85     $ 2.65     $ 2.46  
                                 
Number of shares used in computing Non-GAAP earnings per share (diluted)     190,984       198,668       193,360       200,380  
                                 
(1) Stock-based compensation:                                
  Cost of products and licenses   $ 14     $ 19     $ 52     $ 60  
  Cost of software updates and maintenance     293       266       718       714  
  Research and development     2,241       2,108       6,995       6,897  
  Selling and marketing     3,526       3,201       9,728       8,773  
  General and administrative     10,905       8,048       28,544       22,120  
      16,979       13,642       46,037       38,564  
                                 
(2) Amortization of intangible assets:                                
Amortization of technology-cost of revenues     60       60       180       552  
  Selling and marketing     458       602       1,408       1,858  
      518       662       1,588       2,410  
(3) Taxes on the above items     (1,751 )     (5,115 )     (8,619 )     (6,426 )
Total, net   $ 15,746     $ 9,189     $ 39,006     $ 34,548  
                                 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD. 
CONDENSED CONSOLIDATED BALANCE SHEET DATA 
 
(In thousands) 
 
ASSETS 
    September 30,   December 31,  
    2014   2013  
    (unaudited)   (audited)  
Current assets:              
Cash and cash equivalents   $ 249,861   $ 408,432  
Marketable securities and short-term deposits     989,969     758,382  
Trade receivables, net     216,351     379,648  
Prepaid expenses and other current assets     66,197     53,856  
Total current assets     1,522,378     1,600,318  
               
Long-term assets:              
Marketable securities     2,416,123     2,463,110  
Property and equipment, net     39,424     37,991  
Severance pay fund     5,823     6,488  
Deferred tax asset, net     13,447     13,557  
Other intangible assets, net     14,602     16,191  
Goodwill     727,875     727,875  
Other assets     26,453     20,907  
Total long-term assets     3,243,747     3,286,119  
               
Total assets   $ 4,766,125   $ 4,886,437  
               
LIABILITIES AND 
SHAREHOLDERS' EQUITY 
   
Current liabilities:            
Deferred revenues $ 545,358   $ 586,696  
Trade payables and other accrued liabilities   253,480     396,102  
Total current liabilities   798,838     982,798  
             
Long-term liabilities:            
Long-term deferred revenues   114,765     84,927  
Income tax accrual   228,214     205,420  
Deferred tax liability, net   570     308  
Accrued severance pay   9,999     10,887  
    353,548     301,542  
             
Total liabilities   1,152,386     1,284,340  
             
Shareholders' equity:            
Share capital   774     774  
Additional paid-in capital   835,922     774,917  
Treasury shares at cost   (2,942,705 )   (2,421,278 )
Accumulated other comprehensive income   115     1,839  
Retained earnings   5,719,633     5,245,845  
Total shareholders' equity   3,613,739     3,602,097  
Total liabilities and shareholders' equity $
4,766,125
  $
4,886,437
 
Total cash and cash equivalents, marketable securities and short-term deposits $ 3,655,953   $
3,629,924
 
             
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
 
(In thousands)
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Cash flow from operating activities:                                
Net income   $ 161,047     $ 159,701     $ 473,788     $ 458,669  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation of property and equipment     2,244       2,205       6,683       6,302  
Amortization of intangible assets     518       662       1,588       2,410  
Stock-based compensation     16,979       13,642       46,037       38,564  
Realized gain on marketable securities     (152 )     (226 )     (306 )     (1,300 )
Decrease in trade and other receivables, net     22,167       7,595       152,182       112,846  
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities     913       19,986       (128,587 )     132,547  
Excess tax benefit from stock-based compensation     (874 )     (3,075 )     (2,826 )     (9,180 )
Deferred income taxes, net     (381 )     (5,012 )     (6,068 )     (9,279 )
Net cash provided by operating activities     202,461       195,478       542,491       731,579  
                                 
Cash flow from investing activities:                                
                                 
Investment in property and equipment     (3,584 )     (2,759 )     (8,115 )     (7,385 )
Net cash used in investing activities     (3,584 )     (2,759 )     (8,115 )     (7,385 )
                                 
Cash flow from financing activities:                                
Proceeds from issuance of shares upon exercise of options     14,067       18,030       61,485       51,460  
Purchase of treasury shares     (192,401 )     (128,276 )     (573,271 )     (402,710 )
Excess tax benefit from stock-based compensation     874       3,075       2,826       9,180  
Net cash used in financing activities     (177,460 )     (107,171 )     (508,960 )     (342,070 )
                                 
Unrealized gain (loss) on marketable securities, net     (8,248 )     8,089       613       (13,199 )
                                 
Increase in cash and cash equivalents, marketable securities and short term deposits     13,169       93,637       26,029      
 368,925
 
                                 
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period     3,642,784       3,570,652       3,629,924       3,295,364  
                                 
Cash and cash equivalents, marketable securities and short term deposits at the end of the period   $ 3,655,953     $ 3,664,289     $ 3,655,953     $ 3,664,289