SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

July 22, 2015 05:00 ET

Check Point Software Technologies Reports 2015 Second Quarter Financial Results

SAN CARLOS, CA--(Marketwired - Jul 22, 2015) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the second quarter ended June 30, 2015.

  • Total Revenue: $395 million, representing a 9 percent increase year over year
  • Non-GAAP Operating Income: $221 million, representing a 7 percent increase year over year
  • Non-GAAP EPS: $0.99, representing an 11 percent increase year over year
  • Deferred Revenues: $780 million, representing an 18 percent increase year over year

"We continued to post good financial results in the second quarter. Total revenues from products and software blades subscriptions delivered 11 percent growth, which was driven by strong demand across industries and business segments. Data Center, Super High-End and SMART-1 Management appliances drove product revenue growth. Subscription growth was driven by demand for our new and innovative technologies including Threat Emulation and Threat Extraction which combat advanced cyber-attacks," said Gil Shwed, founder and chief executive officer of Check Point Software Technologies.

Financial Highlights for the Second Quarter of 2015:

  • Total Revenue: $395 million compared to $363 million in the second quarter of 2014.
  • GAAP Operating Income: $199 million compared to $190 million in the second quarter of 2014.
  • Non-GAAP Operating Income: $221 million compared to $207 million in the second quarter of 2014.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $163 million compared to $160 million in the second quarter of 2014. GAAP earnings per diluted share were $0.88 compared to $0.83 in the second quarter of 2014.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $183 million compared to $172 million in the second quarter of 2014. Non-GAAP earnings per diluted share were $0.99 compared to $0.89 in the second quarter of 2014. 
  • Deferred Revenues: As of June 30, 2015, deferred revenues were $780 million compared to $660 million as of June 30, 2014. 
  • Cash Flow: Cash flow from operations increased to $193 million from $168 million in the second quarter of 2014.
  • Share Repurchase Program: During the second quarter of 2015, the company repurchased 2.9 million shares at a total cost of $245 million compared to $194 million in the second quarter of 2014.
  • Cash Balances, Marketable Securities and Short Term Deposits: $3,611 million as of June 30, 2015, compared to $3,643 million as of June 30, 2014. The change reflects our strong cash flow, offset by expanded share repurchase program and the Company's recent acquisitions.

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:

We launched the following new products and technologies:

Mobile Threat Prevention - The acquisition of Lacoon Mobile Security expands Check Point's mobile security portfolio by adding advanced mobile application threat emulation, behavioral risk analysis and real-time anomaly detection capabilities.

Critical Infrastructure Security - The launch of the 1200R security gateway appliance is an extension of Check Point's solutions for Industrial Control Systems (ICS) and critical infrastructure. The 1200R is a ruggedized security gateway appliance purposely-built for deployment in remote often harsh environments. It delivers full visibility and granular control of SCADA traffic to prevent network, devices and logical process attacks. 

Cloud Security - Check Point vSEC designed for VMware NSX to extend comprehensive, best-in-class security to private cloud environments. The integrated solution allows customers to accelerate security deployment in virtualized datacenter environments for east-west traffic. The solution prevents zero-day attacks, APTs and other security threats within the private cloud.

We have also expanded our research and security partnerships, including:

2015 Check Point Security Report - Check Point issued its annual Security Report, based on collaborative research and in-depth analysis from more than 16,000 Threat Prevention gateways and 1 million smartphones. The report revealed that 96% of organizations are using high-risk applications and that there was an increase in security incidents across all categories: more data leakage incidents, additional attacks and malware and an increase in malicious sites being accessed. The report is available at http://www.checkpoint.com/securityreport.

Discovered Massive Vulnerability in Magento eCommerce Platform - Check Point's Malware and Vulnerability Research Group recently discovered a critical RCE (remote code execution) vulnerability in eBay's Magento web ecommerce platform, affecting nearly two hundred thousand online shops. If exploited, the vulnerability would give the attacker the ability to compromise an online store based on the Magento platform, including credit card information and other customer financial and personal data.

Check Point and FireEye Partnership - Check Point and FireEye announced the sharing of threat intelligence to protect mutual customers from modern advanced attacks. As part of this cooperation, Check Point's ThreatCloud and Next Generation Threat Prevention solutions and the FireEye NX platform will share the latest threat intelligence in real-time, allowing customers to update firewall security policies dynamically based on the intelligence from both platforms.

We received the following industry accolades:

Leader in the Gartner Magic Quadrant for Enterprise Network Firewall - Check Point is positioned as a Leader in the Gartner Magic Quadrant for Enterprise Network Firewall. The company has been in the Leaders quadrant since 1997.1

Number One in Worldwide Firewall Equipment Market Share - Check Point led in the worldwide market share for Firewall Equipment for Q1 2015, according to the Gartner Market Share: Enterprise Network Equipment by Market Segment, Worldwide reports.2

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 Q1 2015, according to the IDC Worldwide Quarterly Security Appliance Tracker.3

"We are pleased with the increased demand for our latest technologies to combat cyber-attacks and the healthy interest in our mobile threat prevention technologies. We continue to execute on our vision for a consolidated security platform that addresses tomorrow's security needs," Shwed concluded.

Third Quarter 2015 Investor Conference Participation Schedule:

  • Needham 2015 Software and Services Conference
    August 5, 2015 - New York, NY

  • Pacific Crest 17th Annual Global Technology Leadership Forum
    August 11, 2015 - Vail, CO

  • Citi 2015 Global Technology Conference
    September 10, 2015 - New York, NY

  • Deutsche Bank 2015 Technology Conference
    September 16-17, 2015 - Las Vegas, NV (1x1 meetings only)

Members of Check Point's management team are expected to 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 July 22, 2015 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 July 29, 2015 on the company's website or by telephone at +1.201.612.7415, replay ID number 13614245.

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com), the largest pure-play security vendor globally, provides industry-leading solutions, and protects customers from cyber-attacks with an unmatched catch rate of malware and other types of attacks. Check Point offers a complete security architecture defending enterprises' networks to mobile devices, in addition to the most comprehensive and intuitive security management. Check Point protects over 100,000 organizations of all sizes. At Check Point, we secure the future.

©2015 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 the increased demand for, and penetration of, our latest technologies to combat cyber-attacks and the interest in our mobile threat prevention technologies; our continued execution on our vision for a consolidated security platform that addresses tomorrow's security needs; and our expectations for our products, services and technology and the market acceptance thereof. 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 for the year ended December 31, 2014, filed with the Securities and Exchange Commission on April 24, 2015. 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 and earnings per share, which are adjustments from results based on GAAP to exclude stock-based compensation charges, amortization of intangible assets and acquisition related expenses 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.

1 G00263955. Adam Hils, Greg Young, Jeremy D'Hoinne. 22 April 2015.

2 Gartner, Inc., Market Share: Enterprise Network Equipment by Market Segment, Worldwide, 1Q15, Christian Canales, Petr Gorodetskiy, Naresh Singh, and Joe Skorupa, June 2015. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

i-ii Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

3 Source: IDC Worldwide Quarterly Security Appliance Tracker 1Q2015, June 4, 2015.

 
 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONSOLIDATED STATEMENT OF INCOME
 
(In thousands, except per share amounts)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2015   2014   2015   2014
    (unaudited)   (unaudited)   (unaudited)   (unaudited)
Revenues:                        
  Products and licenses   $ 132,284   $ 124,342   $ 246,581   $ 232,281
  Software Blades subscriptions     76,627     63,743     150,976     125,500
Total revenues from products and software blades    
208,911
   
188,085
   
397,557
   
357,781
  Software updates and maintenance     186,423     174,513     370,353     347,023
Total revenues     395,334     362,598     767,910     704,804
                         
Operating expenses:                        
  Cost of products and licenses     23,973     22,353     44,933     42,413
  Cost of software blades subscriptions    
1,787
   
1,092
   
3,311
   
2,602
Total cost of products and software blades    
25,760
   
23,445
   
48,244
   
45,015
  Cost of Software updates and maintenance    
19,303
   
17,506
   
37,973
   
34,754
Amortization of technology     540     60     716     120
Total cost of revenues     45,603     41,011     86,933     79,889
                         
  Research and development     36,230     33,451     71,754     66,417
  Selling and marketing     92,126     79,821     168,142     148,435
  General and administrative     22,297     18,394     44,988     35,644
Total operating expenses     196,256     172,677     371,817     330,385
                         
Operating income     199,078     189,921     396,093     374,419
Financial income, net     8,582     7,298     16,620     14,447
Income before taxes on income     207,660     197,219     412,713     388,866
Taxes on income     45,024     37,563     89,194     76,125
Net income   $ 162,636   $ 159,656   $ 323,519   $ 312,741
Basic earnings per share   $
0.90
  $
0.84
  $
1.78
  $
1.64
Number of shares used in computing basic earnings per share    
180,416
   
189,933
   
181,767
   
190,972
Diluted earnings per share   $
0.88
  $
0.83
  $
1.74
  $
1.61
Number of shares used in computing diluted earnings per share    
185,140
   
193,380
   
186,391
   
194,566
                         
   
   
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION  
   
(In thousands, except per share amounts)  
   
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2015     2014     2015     2014  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
                                 
GAAP operating income   $ 199,078     $ 189,921     $ 396,093     $ 374,419  
Stock-based compensation (1)     18,801       16,587       36,578       29,058  
Amortization of intangible assets and acquisition related expenses (2)     3,317       535       4,603       1,070  
Non-GAAP operating income   $ 221,196     $ 207,043     $ 437,274     $ 404,547  
                                 
GAAP net income   $ 162,636     $ 159,656     $ 323,519     $ 312,741  
Stock-based compensation (1)     18,801       16,587       36,578       29,058  
Amortization of intangible assets and acquisition related expenses (2)     3,317       535       4,603       1,070  
Taxes on the above items (3)     (1,844 )     (4,679 )     (2,948 )     (6,868 )
Non-GAAP net income   $ 182,910     $ 172,099     $ 361,752     $ 336,001  
                                 
Diluted GAAP Earnings per share   $ 0.88     $ 0.83     $ 1.74     $ 1.61  
Stock-based compensation (1)     0.10       0.08       0.11       0.15  
Amortization of intangible assets and acquisition related expenses (2)     0.01       -       0.03       0.01  
Taxes on the above items (3)     -       (0.02 )     (0.02 )     (0.04 )
Diluted Non-GAAP Earnings per share   $ 0.99     $ 0.89     $ 1.86     $ 1.73  
                                 
Number of shares used in computing diluted Non-GAAP earnings per share     185,140       193,380       186,391       194,566  
                                 
(1) Stock-based compensation:                                
  Cost of products and licenses   $ 16     $ 22     $ 30     $ 38  
  Cost of software updates and maintenance     400       240       714       425  
  Research and development     2,862       2,661       5,241       4,754  
  Selling and marketing     4,323       3,874       7,919       6,202  
  General and administrative     11,200       9,790       22,674       17,639  
    $ 18,801     $ 16,587     $ 36,578     $ 29,058  
                                 
(2) Amortization of intangible assets and acquisition related expenses:                                
  Amortization of technology-cost of revenues   $ 540     $ 60     $ 716     $ 120  
  Research and development     1,897       -       2,352       -  
  Selling and marketing     880       475       1,535       950  
    $ 3,317     $ 535     $ 4,603     $ 1,070  
(3) Taxes on the above items   $ (1,844 )   $ (4,679 )   $ (2,948 )   $ (6,868 )
Total, net   $ 20,274     $ 12,443     $ 38,233     $ 23,260  
   
   
   
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
CONDENSED CONSOLIDATED BALANCE SHEET DATA  
   
(In thousands)  
   
ASSETS  
   
    June 30,     December 31,  
    2015     2014  
    (unaudited)     (audited)  
Current assets:                
Cash and cash equivalents   $ 215,991     $ 261,970  
Marketable securities and short-term deposits     1,011,113       1,050,492  
Trade receivables, net     243,223       366,700  
Prepaid expenses and other current assets     78,341       68,673  
Total current assets     1,548,668       1,747,835  
                 
Long-term assets:                
Marketable securities     2,383,498       2,370,471  
Property and equipment, net     42,663       41,549  
Severance pay fund     5,571       5,491  
Deferred tax asset, net     16,888       14,368  
Goodwill and other intangible assets, net     840,001       741,960  
Other assets     47,704       27,144  
Total long-term assets     3,336,325       3,200,983  
                 
Total assets   $ 4,884,993     $ 4,948,818  
                 
LIABILITIES AND  
SHAREHOLDERS' EQUITY  
   
Current liabilities:                
Deferred revenues   $ 634,708     $ 651,281  
Trade payables and other accrued liabilities     276,422       281,554  
Total current liabilities     911,130       932,835  
                 
Long-term liabilities:                
Long-term deferred revenues     145,631       132,732  
Income tax accrual     264,036       235,705  
Deferred tax liability, net     372       504  
Accrued severance pay     9,796       9,483  
      419,835       378,424  
                 
Total liabilities     1,330,965       1,311,259  
                 
Shareholders' equity:                
Share capital     774       774  
Additional paid-in capital     905,771       859,124  
Treasury shares at cost     (3,586,136 )     (3,126,685 )
Accumulated other comprehensive income (loss)     4,684       (1,070 )
Retained earnings     6,228,935       5,905,416  
Total shareholders' equity     3,554,028       3,637,559  
Total liabilities and shareholders' equity   $
4,884,993
    $
4,948,818
 
Total cash and cash equivalents, marketable securities and short-term deposits   $
3,610,602
    $
3,682,933
 
                 
   
   
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
SELECTED CONSOLIDATED CASH FLOW DATA  
   
(In thousands)  
   
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2015     2014     2015     2014  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Cash flow from operating activities:                                
Net income   $ 162,636     $ 159,656     $ 323,519     $ 312,741  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation of property and equipment    
2,541
     
2,248
      4,883       4,439  
Amortization of intangible assets     998       535       1,632       1,070  
Stock-based compensation     18,801       16,587       36,578       29,058  
Realized gain on marketable securities     (7 )     (143 )     (79 )     (154 )
Decrease (increase) in trade and other receivables, net     (26,167 )     (15,128 )     95,203       130,015  
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities    
36,658
     
11,594
      17,709       (129,500 )
Excess tax benefit from stock-based compensation     (2,084 )     (2,674 )     (2,301 )     (1,952 )
Deferred income taxes, net     (650 )     (4,703 )     169       (5,687 )
Net cash provided by operating activities     192,726       167,972       477,313       340,030  
                                 
Cash flow from investing activities:                                
                                 
Cash paid in conjunction with acquisitions, net of acquired cash     (62,413 )     -      
(96,544
)    
 -
 
Investment in property and equipment     (3,164 )     (2,328 )     (5,845 )     (4,531 )
Net cash used in investing activities     (65,577 )     (2,328 )     (102,389 )     (4,531 )
                                 
Cash flow from financing activities:                                
Proceeds from issuance of shares upon exercise of options    
 2,228
     
-
     
34,015
     
 47,418
 
Purchase of treasury shares     (244,997 )     (194,000 )     (486,682 )     (380,869 )
Excess tax benefit from stock-based compensation     2,084       2,674       2,301       1,952  
Net cash used in financing activities     (240,685 )     (191,326 )     (450,366 )     (331,499 )
                                 
Unrealized gain (loss) on marketable securities, net     (9,392 )     6,272       3,111       8,860  
                                 
Increase (decrease) in cash and cash equivalents, marketable securities and short term deposits    
 (122,928
)    
(19,410
)    
(72,331
)    
 12,860
 
                                 
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period    
 3,733,530
     
3,662,194
     
3,682,933
     
 3,629,924
 
                                 
Cash and cash equivalents, marketable securities and short term deposits at the end of the period   $
 3,610,602
    $
3,642,784
    $
3,610,602
    $
 3,642,784