SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

October 26, 2015 06:00 ET

Check Point Software Technologies Reports 2015 Third Quarter Financial Results

SAN CARLOS, CA--(Marketwired - Oct 26, 2015) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the largest pure-play security vendor globally, today announced its financial results for the third quarter ended Sept. 30, 2015.

  • Total Revenue: $404 million, representing a 9 percent increase year-over-year
  • Non-GAAP Operating Income: $228 million, representing 56 percent of revenues
  • Non-GAAP EPS: $1.04, representing a 12 percent increase year-over-year
  • Deferred Revenues: $772 million, representing a 17 percent increase year-over-year

"We had very good financial results in the third quarter. Revenues were toward the high-end of our projections, while earnings exceeded projections. Our combined products and software blades revenue continued to post double-digit growth, driven primarily by data center appliances, mid-size appliances, and software blades," said Gil Shwed, founder and chief executive officer, "Mobile devices are becoming the weakest link in cyber security, and we are committed to staying one step ahead and prevent these threats. This quarter we extended our technology to smartphones and tablets, while introducing new and innovative threat prevention solutions for cloud and network infrastructure." 

Financial Highlights for the Third Quarter of 2015:

  • Total Revenue: $404 million compared to $370 million in the third quarter of 2014.
  • GAAP Operating Income: $205 million compared to $197 million in the third quarter of 2014.
  • Non-GAAP Operating Income: $228 million compared to $215 million in the third quarter of 2014.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $168 million compared to $161 million in the third quarter of 2014. GAAP earnings per diluted share were $0.92 compared to $0.84 in the third quarter of 2014.
  • Non-GAAP Net Income: Non-GAAP net income was $188 million compared to $177 million in the third quarter of 2014.
  • Non-GAAP earnings per diluted share were $1.04 compared to $0.93 in the third quarter of 2014. 
  • Deferred Revenues: As of Sept. 30, 2015, deferred revenues were $772 million compared to $660 million as of Sept. 30, 2014. 
  • Cash Flow: Cash flow from operations increased by 13 percent to $228 million from $202 million in the third quarter of 2014.
  • Share Repurchase Program: During the third quarter of 2015, the company repurchased 3.1 million shares at a total cost of $250 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $3,612 million as of Sept. 30, 2015, compared to $3,656 million as of Sept. 30, 2014.

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: To battle today's mobile threat environment, Check Point announced Mobile Threat Prevention, a new mobile security solution for stopping mobile threats on iOS and Android. Check Point Mobile Threat Prevention provides the highest level of protection against malware targeted at smartphones and tablets.

SandBlast Zero-Day Protection: A new advanced threat prevention solution designed to provide a level of cyber protection unmatched in today's market. By utilizing CPU-level threat detection to uncover threats at the pre-infection level, Check Point SandBlast elevates threat defense with evasion-resistant malware detection and comprehensive protection from even the most dangerous attacks, significantly reducing the risk of expensive breaches.

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

We received the following industry accolades:

NSS Breach Detection Systems Results: Check Point's Next Generation Threat Prevention Solution received a "recommended" rating in the NSS Labs Breach Detection Systems (BDS) group test. Check Point received a 100 percent catch rate of HTTP, 100 percent catch rate for email and 100 percent catch rate for drive by malware. Check Point solutions also delivered the lowest reported price per protected Mbps of traffic according to the latest published report.

Leader in the Gartner 2015 Magic Quadrant for Unified Threat Management: Check Point is positioned as a Leader in the Gartner Magic Quadrant for Unified Threat Management for the fifth consecutive time.i

Leader in the Gartner 2015 Magic Quadrant for Mobile Data Protection: Celebrating its ninth consecutive year as a Leader in the Gartner 2015 Magic Quadrant for Mobile Data Protection, Check Point continues to secure the mobile space and recently announced Mobile Threat Prevention.ii

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

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 2Q 2015, according to the IDC Worldwide Quarterly Security Appliance Tracker.iv

We also expanded our partnership with VMware:

Charter Membership in the AirWatch Mobile Security Alliance: Together, Check Point and AirWatch will drive new ways for customers to protect the growing number of devices accessing corporate data and networks, delivering a comprehensive solution for stopping mobile threats before they start.

Our security research organization has also continued to expose vulnerabilities in today's internet infrastructure, these included critical vulnerabilities in mobile equipment and applications including:

WhatsApp Web Vulnerabilities: Check Point security researchers recently discovered significant vulnerabilities that exploit the WhatsApp Web logic and allow attackers to trick victims into executing arbitrary code on their machines in a new and sophisticated way. These vulnerabilities put up to 200 million WhatsApp users at risk and it was quickly remediated by WhatsApp.

Discovered Certifi-gate Vulnerability in Android: At Black Hat, Check Point's mobile security research team announced the discovery of "Certifi-gate," a vulnerability that allows applications to gain illegitimate privileged access rights, typically used by remote support applications that are either pre-installed or personally installed on the device. Attackers can exploit Certifi-gate to gain unrestricted device access, allowing them to steal personal data, track device locations, and turn on microphones to record conversations and more. We estimate that the Certfi-gate vulnerability exists in hundreds of millions of devices.

BrainTest related Mobile Malware: Check Point Mobile Threat Prevention multiple instances of a mobile malware variant infecting mobile devices. The malware, packaged within an Android game app called BrainTest, affected between 200,000 to million users. The Apps containing the malware were removed by Google subsequent to Check Point's report.

"This quarter we experienced significant growth in the sales of our advanced threat prevention technologies, including the SandBlast solutions and Anti-bot. In addition, we launched our mobile threat prevention solution to address our customers growing mobile security needs. These new technologies demonstrate our commitment to stay one step ahead of cyber security threats," Concluded Shwed.

Fourth Quarter 2015 Investor Conference Participation Schedule:

  • UBS Global Technology Conference
    Nov. 17, 2015 - San Francisco, CA
  • Credit Suisse Annual Technology Conference
    Dec. 2, 2015 - Scottsdale, AZ
  • Raymond James Supply Chain Conference*
    Dec. 8, 2015 - New York, NY
  • Barclays Global Technology Conference*
    Dec. 9, 2015 - San Francisco, CA
  • Cowen Cyber Security & Networking Summit*
    Dec., 15, 2015 - New York, NY

* Investor meetings only

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 Oct. 26, 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 Nov. 1, 2015 on the company's website or by telephone at +1.201.612.7415, replay ID number 13622818.

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 cyberattacks 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 our introduction of new technologies and solutions and the functionality of such technologies and solutions. 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 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.
i Gartner, Magic Quadrant for Unified Threat Management, Jeremy D'Hoinne, Adam Hils, Greg Young, August 7, 2014, ID Number: G00261973 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.
ii Gartner, Magic Quadrant for Mobile Data Protection, John Girard, October 8, 2015.
iii Gartner, Inc., Market Share: Enterprise Network Equipment by Market Segment, Worldwide, 2Q15, Christian Canales, Petr Gorodetskiy, Naresh Singh, and Joe Skorupa, September 2015.
iv IDC Worldwide Quarterly Security Appliance Tracker 2Q2015, September 14, 2015.

 
 
 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,
    2015   2014   2015   2014
    (unaudited)   (unaudited)   (unaudited)   (unaudited)
Revenues:                        
  Products and licenses   $ 135,218   $ 126,029   $ 381,799   $ 358,310
  Software Blades subscriptions     79,622     67,164     230,598     192,664
Total revenues from products and software blades    
214,840
   
193,193
   
612,397
   
550,974
  Software updates and maintenance     189,016     177,177     559,369     524,200
Total revenues     403,856     370,370     1,171,766     1,075,174
                         
Operating expenses:                        
  Cost of products and licenses     24,400     24,076     69,333     66,489
  Cost of software blades subscriptions    
2,351
   
1,269
   
5,662
   
3,871
Total cost of products and software blades    
26,751
   
25,345
   
74,995
   
70,360
  Cost of Software updates and maintenance    
20,107
   
19,324
   
58,080
   
54,078
  Amortization of technology     546     60     1,262     180
Total cost of revenues     47,404     44,729     134,337     124,618
                         
  Research and development     37,495     32,605     109,249     99,022
  Selling and marketing     90,463     74,741     258,605     223,176
  General and administrative     23,860     20,914     68,848     56,558
Total operating expenses     199,222     172,989     571,039     503,374
                         
Operating income     204,634     197,381     600,727     571,800
Financial income, net     8,285     7,313     24,905     21,760
Income before taxes on income     212,919     204,694     625,632     593,560
Taxes on income     45,176     43,647     134,370     119,772
Net income   $ 167,743   $ 161,047   $ 491,262   $ 473,788
Basic earnings per share   $
0.94
  $ 0.86   $
2.72
  $ 2.50
Number of shares used in computing basic earnings per share    
177,519
   
187,293
   
180,335
   
189,736
Diluted earnings per share   $
0.92
  $
0.84
  $
2.66
  $
2.45
Number of shares used in computing diluted earnings per share    
181,804
   
190,984
   
184,846
   
193,360
                         
                         
                         
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,  
    2015     2014     2015     2014  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
                                 
GAAP operating income   $ 204,634     $ 197,381     $ 600,727     $ 571,800  
Stock-based compensation (1)     19,956       16,979       56,534       46,037  
Amortization of intangible assets and acquisition related expenses (2)     3,309       518       7,912       1,588  
Non-GAAP operating income   $ 227,899     $ 214,878     $ 665,173     $ 619,425  
                                 
GAAP net income   $ 167,743     $ 161,047     $ 491,262     $ 473,788  
Stock-based compensation (1)     19,956       16,979       56,534       46,037  
Amortization of intangible assets and acquisition related expenses (2)     3,309       518       7,912       1,588  
Taxes on the above items (3)     (2,556 )     (1,751 )     (5,504 )     (8,619 )
Non-GAAP net income   $ 188,452     $ 176,793     $ 550,204     $ 512,794  
                                 
Diluted GAAP Earnings per share   $ 0.92     $ 0.84     $ 2.66     $ 2.45  
Stock-based compensation (1)     0.11       0.09       0.31       0.24  
Amortization of intangible assets and acquisition related expenses (2)     0.02       -       0.04       -  
Taxes on the above items (3)     (0.01 )     -       (0.03 )     (0.04 )
Diluted Non-GAAP Earnings per share   $ 1.04     $ 0.93     $ 2.98     $ 2.65  
                                 
Number of shares used in computing diluted Non-GAAP earnings per share     181,804       190,984       184,846       193,360  
                                 
(1) Stock-based compensation:                                
  Cost of products and licenses   $ 17     $ 14     $ 47     $ 52  
  Cost of software updates and maintenance     396       293       1,110       718  
  Research and development     3,295       2,241       8,536       6,995  
  Selling and marketing     4,193       3,526       12,112       9,728  
  General and administrative     12,055       10,905       34,729       28,544  
      19,956       16,979       56,534       46,037  
                                 
(2) Amortization of intangible assets and acquisition related expenses:                                
  Amortization of technology-cost of revenues     546       60       1,262       180  
  Research and development     1,897       -       4,249       -  
  Selling and marketing     866       458       2,401       1,408  
      3,309       518       7,912       1,588  
(3) Taxes on the above items     (2,556 )     (1,751 )     (5,504 )     (8,619 )
Total, net   $ 20,709     $ 15,746     $ 58,942     $ 39,006  
                                 
                                 
                                 
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
CONDENSED CONSOLIDATED BALANCE SHEET DATA  
   
(In thousands)  
   
ASSETS  
  September 30,   December 31,  
  2015   2014  
  (unaudited)   (audited)  
Current assets:            
Cash and cash equivalents $ 258,030   $ 261,970  
Marketable securities and short-term deposits   1,041,088     1,050,492  
Trade receivables, net   219,054     366,700  
Prepaid expenses and other current assets   75,236     68,673  
Total current assets   1,593,408     1,747,835  
             
Long-term assets:            
Marketable securities   2,313,184     2,370,471  
Property and equipment, net   44,366     41,549  
Severance pay fund   5,323     5,491  
Deferred tax asset, net   17,744     14,368  
Goodwill and other intangible assets, net   839,011     741,960  
Other assets   45,132     27,144  
Total long-term assets   3,264,760     3,200,983  
             
Total assets $ 4,858,168   $ 4,948,818  
             
             
             
LIABILITIES AND  
SHAREHOLDERS' EQUITY  
   
Current liabilities:            
Deferred revenues $ 614,128   $ 651,281  
Trade payables and other accrued liabilities   294,573     281,554  
Total current liabilities   908,701     932,835  
             
Long-term liabilities:            
Long-term deferred revenues   158,343     132,732  
Income tax accrual   265,570     235,705  
Deferred tax liability, net   306     504  
Accrued severance pay   9,369     9,483  
    433,588     378,424  
             
Total liabilities   1,342,289     1,311,259  
             
Shareholders' equity:            
Share capital   774     774  
Additional paid-in capital   935,878     859,124  
Treasury shares at cost   (3,823,224 )   (3,126,685 )
Accumulated other comprehensive income (loss)   5,773     (1,070 )
Retained earnings   6,396,678     5,905,416  
Total shareholders' equity   3,515,879     3,637,559  
Total liabilities and shareholders' equity $
4,858,168
  $
4,948,818
 
Total cash and cash equivalents, marketable securities and short-term deposits $
3,612,302
  $
3,682,933
 
             
             
             
CHECK POINT SOFTWARE TECHNOLOGIES LTD.  
SELECTED CONSOLIDATED CASH FLOW DATA  
   
(In thousands)  
                         
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2015     2014     2015     2014  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Cash flow from operating activities:                                
Net income   $ 167,743     $ 161,047     $ 491,262     $ 473,788  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation of property and equipment     2,658       2,244       7,541       6,683  
Amortization of intangible assets     990       518       2,622       1,588  
Stock-based compensation     19,956       16,979       56,534       46,037  
Realized loss (gain) on marketable securities     176       (152 )     97       (306 )
Decrease in trade and other receivables, net     28,973       22,167       124,176       152,182  
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities     14,388       913       32,098       (128,587 )
Excess tax benefit from stock-based compensation     (3,772 )     (874 )     (6,073 )     (2,826 )
Deferred income taxes, net     (3,285 )     (381 )     (3,116 )     (6,068 )
Net cash provided by operating activities     227,827       202,461       705,141       542,491  
                                 
Cash flow from investing activities:                                
                                 
Cash paid in conjunction with acquisitions, net of acquired cash     -       -       (96,544 )     -  
Investment in property and equipment     (4,361 )     (3,584 )     (10,206 )     (8,115 )
Net cash used in investing activities     (4,361 )     (3,584 )     (106,750 )     (8,115 )
                                 
Cash flow from financing activities:                                
Proceeds from issuance of shares upon exercise of options     20,074       14,067       54,089       61,485  
Purchase of treasury shares     (249,763 )     (192,401 )     (736,445 )     (573,271 )
Excess tax benefit from stock-based compensation     3,772       874       6,073       2,826  
Net cash used in financing activities     (225,917 )     (177,460 )     (676,283 )     (508,960 )
                                 
Unrealized gain (loss) on marketable securities, net     4,150       (8,248 )     7,261       613  
                                 
Increase (decrease) in cash and cash equivalents, marketable securities and short term deposits     1,699       13,169       (70,631 )     26,029  
                                 
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period     3,610,603       3,642,784       3,682,933       3,629,924  
                                 
Cash and cash equivalents, marketable securities and short term deposits at the end of the period   $ 3,612,302     $ 3,655,953     $ 3,612,302     $ 3,655,953