SOURCE: Check Point Software Technologies, Inc.

Check Point Software Technologies, Inc.

July 18, 2011 05:00 ET

Check Point Software Technologies Reports Record 2011 Second Quarter Financial Results

REDWOOD CITY, CA--(Marketwire - Jul 18, 2011) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP)

  • Total Revenue: $300.6 million, representing a 15 percent increase year over year

  • Non-GAAP Operating Income: $171.0 million, representing 57 percent of revenues

  • Non-GAAP EPS: $0.68, representing a 17 percent increase year over year

Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the second quarter ending June 30, 2011.

"The first half of 2011 produced great results. We continued to outperform our projections in the second quarter. These good results are driven by increased sales of enterprise gateways with more software blades attached. In particular, our IPS and Application Control software blades have shown significant growth in the second quarter," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies.

Financial Highlights:

  • Total Revenue: $300.6 million, an increase of 15 percent, compared to $261.1 million in the second quarter of 2010.
  • GAAP Operating Income: $150.0 million, an increase of 23 percent, compared to $122.1 million in the second quarter of 2010. GAAP operating margin was 50 percent, compared to 47 percent in the second quarter of 2010.
  • Non-GAAP Operating Income: $171.0 million, an increase of 18 percent, compared to $144.7 million in the second quarter of 2010. Non-GAAP operating margin was 57 percent, compared to 55 percent in the second quarter of 2010.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $128.0 million, an increase of 24 percent, compared to $102.9 million in the second quarter of 2010. GAAP earnings per diluted share were $0.60, an increase of 25 percent, compared to $0.48 in the second quarter of 2010.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $145.5 million, an increase of 19 percent, compared to $122.4 million in the second quarter of 2010. Non-GAAP earnings per diluted share were $0.68, an increase of 17 percent, compared to $0.58 in the second quarter of 2010.
  • Deferred Revenues: As of June 30, 2011, the company had deferred revenues of $457.0 million, an increase of 10 percent, compared to $414.8 million as of June 30, 2010.
  • Cash Flow: Cash flow from operations was $175.5 million, an increase of 18 percent, compared to $148.9 million in the second quarter of 2010.
  • Share Repurchase Program: During the second quarter of 2011, the company repurchased 1.38 million shares at a total cost of $75 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $2,689.8 million as of June 30, 2011, an increase of $548.9 million, compared to $2,140.9 million as of June 30, 2010.

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

Business Highlights:
Check Point has continued to deliver advanced and award-winning solutions that have earned the trust of customers from around the world. The success of this quarter continues to validate the company's product innovation and continued growth as a pure-play security company. In addition, significant recent developments in Check Point's business include the introduction of new products and the promotion of an officer:

  • ZoneAlarm SocialGuard - Enables parents to protect their children against social threats on Facebook, such as online predators, cyberbullies, hacked accounts and malicious links. The product has received "Five Stars" from CNET and a "Highly Recommended" rating from PC Magazine.

  • ZoneAlarm 2012 Suite - Features new cloud-enabled security with parental controls and advanced antivirus capabilities that utilize ZoneAlarm DefenseNet™, a cloud-based service that detects over 50,000 new applications and threats daily, to silently stop existing and emerging attacks.

  • Promotion of Amnon Bar-Lev, Head of Global Field Operations to President - Check Point announced today that Amnon Bar-Lev has been promoted to President of Check Point Software Technologies, effective immediately. Amnon joined Check Point in 2005 and has led the company's field organization since 2006. During that period, Check Point's revenues have more than doubled to approximately $1.2B over the past four quarters. Amnon will continue to head the company's customer facing functions including sales, marketing, business development and technical services. He will continue to report to Gil Shwed, founder, chairman and CEO.

Recent Industry Accolades From Across the Globe:

  • NSS Labs Group Firewall Test - Check Point was the only vendor to pass the NSS Labs independent Firewall Group Test, achieving 100 percent in security effectiveness and earning the only "Recommend" rating in the initial comparative review.
  • Frost & Sullivan Asia Pacific - Check Point was recognized by the industry analyst firm as the 2011 Network Security Vendor of the Year.
  • Association of Support Professionals - Check Point was a winner of the "Top Ten Best Web Support Sites of 2011" for a third year.
  • SC Magazine UK, Best Secure Virtualization Solution - Check Point Security Gateway VE.
  • Computerworld Czech Republic, IT Product of 2011 - Check Point Application Control Software Blade.
  • Computerworld Hong Kong Awards - Named best UTM, Firewall/VPN and Intrusion Prevention solutions.
  • Electronic Times, 2011 Hit Products in Korea - Check Point Application Control Software Blade.
  • Computerworld Singapore, Customer Care Awards - Check Point Firewall/VPN.

In addition, Check Point's founder, chairman and CEO, Gil Shwed, along with Tal Payne, CFO, and the company's board of directors, rang the NASDAQ opening bell on June 28, 2011, commemorating the company's fifteenth anniversary since its initial public offering in 1996.

Shwed concluded, "Our security focus is continuing to pay off. I'm pleased to see that customers are adopting more software blades to enhance their threat protection and raise the level of security in their organization. We will continue to deliver on our 3D security vision combining policy, people and enforcement to provide the best protection for our customers."

Third Quarter Investor Conference Participation Schedule:

  • Pacific Crest Internet, Media and Telecommunications Conference
    August 8, 2011 - Vail, CO
  • Citi Global Technology, Media and Telecommunications Conference
    September 8, 2011 - NY, NY
  • Deutsche Bank Technology, Media and Telecommunications Conference
    September 14, 2011 - Las Vegas, NV

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 July 18, 2011 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit Check Point's website at: www.checkpoint.com/ir. A replay of the conference call will be available through July 25, 2011 at the company's website www.checkpoint.com/ir or by telephone at +1.201.612.7415, replay ID number 375092, account # 215.

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.

©2011 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, operating margin and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges, amortization of acquired intangible assets, restructuring and other acquisitions related costs, gain on sale of marketable securities previously impaired, 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.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Products and licenses $ 119,288 $ 103,904 $ 224,546 $ 194,942
Software updates, maintenance and subscription
181,356

157,187

357,372

311,226
Total revenues 300,644 261,091 581,918 506,168
Operating expenses:
Cost of products and licenses 18,983 16,287 36,635 32,792
Cost of Software updates, maintenance and subscription
15,623

13,547

29,920

25,792
Amortization of technology 7,850 8,150 15,699 16,216
Total cost of revenues 42,456 37,984 82,254 74,800
Research and development 27,524 25,807 55,167 50,129
Selling and marketing 64,785 58,619 123,294 113,395
General and administrative 15,833 15,980 29,823 29,282
Restructuring and other acquisitions related costs
-

588

-

588
Total operating expenses 150,598 138,978 290,538 268,194
Operating income 150,046 122,113 291,380 237,974
Financial income, net 10,832 7,133 21,360 14,326
Income before taxes on income 160,878
129,246

312,740

252,300
Taxes on income 32,887 26,385 62,659 51,398
Net income $ 127,991 $ 102,861 $ 250,081 $ 200,902

Earnings per share (basic)
$
0.62
$
0.49
$
1.20
$
0.96
Number of shares used in computing earnings per share (basic)

207,129


207,914


207,650


208,449

Earnings per share (diluted)
$
0.60
$
0.48
$
1.16
$
0.95
Number of shares used in computing earnings per share (diluted)

214,565


212,166


215,240


210,639
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,
2011 2010 2011 2010
(unaudited) (unaudited) (unaudited) (unaudited)
GAAP operating income $ 150,046 $ 122,113 $ 291,380 $ 237,974
Stock-based compensation (1) 9,900 9,080 18,145 18,013
Amortization of intangible assets (2) 11,032 12,893 22,063 25,656
Restructuring and other acquisitions related costs (3) - 588 - 588
Non-GAAP operating income $ 170,978 $ 144,674 $ 331,588 $ 282,231
GAAP net income $ 127,991 $ 102,861 $ 250,081 $ 200,902
Stock-based compensation (1) 9,900 9,080 18,145 18,013
Amortization of intangible assets (2) 11,032 12,893 22,063 25,656
Restructuring and other acquisitions related costs (3) - 588 - 588
Gain on Sale of marketable securities previously impaired(4) (649 ) - (2,017 ) -
Taxes on the above items (5) (2,759 ) (3,025 ) (5,688 ) (5,973 )
Non-GAAP net income $ 145,515 $ 122,397 $ 282,584 $ 239,186
GAAP Earnings per share (diluted) $ 0.60 $ 0.48 $ 1.16 $ 0.95
Stock-based compensation (1) 0.04 0.05 0.08 0.10
Amortization of intangible assets (2) 0.05 0.06 0.10 0.12
Restructuring and other acquisitions related costs (3) - 0.00 - 0.00
Gain on Sale of marketable securities previously impaired(4) (0.00 ) - (0.01 ) -
Taxes on the above items (4) (0.01 ) (0.01 ) (0.02 ) (0.03 )
Non-GAAP Earnings per share (diluted) $ 0.68 $ 0.58 $ 1.31 $ 1.14
Number of shares used in computing Non-GAAP earnings per share (diluted) 214,565 212,166 215,240 210,639
(1) Stock-based compensation:
Cost of products and licenses $ 19 $ 17 $ 30 $ 28
Cost of software updates, maintenance and subscription 255 231 445 458
Research and development 2,022 1,693 3,455 3,341
Selling and marketing 1,690 1,550 3,581 3,796
General and administrative 5,914 5,589 10,634 10,390
$ 9,900 9,080 $ 18,145 18,013
(2) Amortization of intangible assets:
Amortization of technology-cost of revenues 7,850 8,150 15,699 16,216
Research and development - 685 - 1,370
Selling and marketing 3,182 4,058 6,364 8,070
11,032 12,893 22,063 25,656
(3) Restructuring and other acquisitions related costs - 588 - 588

(4) Gain on Sale of marketable securities previously impaired
(649 ) - (2,017 ) -

(5) Taxes on the above items
(2,759 ) (3,025 ) (5,688 ) (5,973 )

Total, net
$ 17,524 $ 19,536 $ 32,503 $ 38,284
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
ASSETS
June 30, December 31,
2011 2010
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 359,018 $ 551,777
Marketable securities and short-term deposits 791,517 537,718
Trade receivables, net 197,168 283,192
Prepaid expenses and other current assets 52,042 44,247
Total current assets 1,399,745 1,416,934
Long-term assets:
Marketable securities 1,539,273 1,325,451
Property and equipment, net 36,996 37,065
Severance pay fund 6,965 6,532
Deferred tax asset, net 20,580 18,122
Other intangible assets, net 44,701 66,765
Goodwill 717,052 717,052
Other assets 15,827 17,381
Total long-term assets 2,381,394 2,188,368
Total assets $ 3,781,139 $ 3,605,302
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Deferred revenues $ 413,422 $ 424,158
Trade payables and other accrued liabilities 223,480 239,104
Total current liabilities 636,902 663,262
Long-term deferred revenues 43,545 40,394
Income tax accrual 208,762 169,370
Deferred tax liability, net 1,215 1,721
Accrued severance pay 12,179 11,224
265,701 222,709
Total liabilities 902,603 885,971
Shareholders' equity:
Share capital 774 774
Additional paid-in capital 612,060 580,276
Treasury shares at cost (1,431,820 ) (1,306,382 )
Accumulated other comprehensive income 18,362 15,584
Retained earnings 3,679,160 3,429,079
Total shareholders' equity 2,878,536 2,719,331
Total liabilities and shareholders' equity $ 3,781,139 $ 3,605,302

Total cash and cash equivalents, marketable securities and short-term deposits
$

2,689,808
$

2,414,946
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
(unaudited) (unaudited) (unaudited) (unaudited)
Cash flow from operating activities:
Net income $ 127,991 $ 102,861 $ 250,081 $ 200,902
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment
1,824

1,734
3,553
3,575
Decrease (increase) in trade and other receivables, net (3,319 ) 23,610 79,906 123,653
Increase in deferred revenues, trade payables and other accrued liabilities

35,622


1,740
21,764 2,149
Realized gain on marketable securities (2,481 ) - (2,481 ) -
Stock-based compensation 9,900 9,080 18,145 18,013
Amortization of intangible assets 11,032 12,893
22,063

25,656
Excess tax benefit from stock-based compensation (2,035 ) (1,127 ) (2,088 ) (2,960 )
Deferred income taxes, net (3,025 ) (1,857 ) (3,829 ) (4,249 )
Net cash provided by operating activities 175,509 148,934 387,114 366,739
Cash flow from investing activities:
Cash paid in conjunction with acquisitions, net of acquired cash (985 ) (13,624 )
(6,501
)
(13,624
)
Investment in property and equipment (1,623 ) (1,248 ) (3,484 ) (2,144 )
Net cash used in investing activities (2,608 ) (14,872 ) (9,985 ) (15,768 )
Cash flow from financing activities:
Proceeds from issuance of shares upon exercise of options
8,036

1,938

39,551

33,998
Purchase of treasury shares (75,000 ) (50,000 ) (150,000 ) (100,000 )
Excess tax benefit from stock-based compensation 2,035 1,127 2,088 2,960
Net cash used in financing activities (64,929 ) (46,935 ) (108,361 ) (63,042 )
Unrealized gain on marketable securities, net 9,633 2,051 6,094 5,988
Increase in cash and cash equivalents, marketable securities and short term deposits
117,605

89,178

274,862

293,917
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period
2,572,203

2,051,738

2,414,946

1,846,999
Cash and cash equivalents, marketable securities and short term deposits at the end of the period $
2,689,808
$
2,140,916
$
2,689,808
$
2,140,916