SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

January 31, 2011 05:00 ET

Check Point Software Technologies Reports Record Fourth Quarter and Fiscal Year 2010 Financial Results

REDWOOD CITY, CA--(Marketwire - January 31, 2011) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP)

Fourth Quarter 2010:

  • Total Revenue: $318.5 million, representing a 17 percent increase year over year

  • Non-GAAP Operating Income: $183.6 million, representing 58 percent of revenues

  • Non-GAAP EPS: $0.73, representing a 20 percent increase year over year

Fiscal Year 2010:

  • Total Revenue: $1,097.9 million, representing a 19 percent increase year over year

  • Non-GAAP Operating Income: $622.7 million, representing 57 percent of revenues

  • Non-GAAP EPS: $2.48, representing a 21 percent increase year over year

  • Cash Flow from Operations: $674.1 million, representing a 23 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 fourth quarter and fiscal year ending December 31, 2010.

"I am very pleased with the all-time record results we achieved during the year. We exceeded our own expectations delivering close to $1.1 billion in revenues and $2.48 in earnings per share (Non-GAAP)," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies. "Our exceptional performance was driven by demand for our network security products, which is a market in which we continued to gain share. We also extended our market reach with our Intrusion Prevention System (IPS), Data Loss Prevention (DLP) and Mobile Access Software Blades™."

Financial Highlights for the Fourth Quarter ended December 31, 2010:

  • Total Revenue: $318.5 million, an increase of 17 percent, compared to $272.1 million in the fourth quarter of 2009.
  • GAAP Operating Income: $162.0 million, an increase of 24 percent, compared to $130.6 million in the fourth quarter of 2009. GAAP operating margin was 51 percent, compared to 48 percent in the fourth quarter of 2009.
  • Non-GAAP Operating Income: $183.6 million, an increase of 20 percent, compared to $152.7 million in the fourth quarter of 2009. Non-GAAP operating margin was 58 percent, compared to 56 percent in the fourth quarter of 2009.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $137.4 million, an increase of 25 percent, compared to $109.5 million in the fourth quarter of 2009. GAAP earnings per diluted share were $0.64, an increase of 25 percent, compared to $0.51 in the fourth quarter of 2009.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $156.2 million, an increase of 21 percent, compared to $129.5 million in the fourth quarter of 2009. Non-GAAP earnings per diluted share were $0.73, an increase of 20 percent, compared to $0.61 in the fourth quarter of 2009.
  • Deferred Revenues: As of December 31, 2010, we had deferred revenues of $464.6 million, an increase of 9 percent, compared to $425.3 million as of December 31, 2009.
  • Cash Flow: Cash flow from operations was $162.8 million, an increase of 18 percent, compared to $138.1 million in the fourth quarter of 2009.
  • Share Repurchase Program: During the fourth quarter of 2010, we repurchased 1.16 million shares at a total cost of $50 million.
  • Cash Balances and Marketable Securities: $2,414.9 million as of December 31, 2010, an increase of $567.9 million, compared to $1,847.0 million as of December 31, 2009.

Financial Highlights for the Year ended December 31, 2010:

  • Total Revenue: $1,097.9 million, an increase of 19 percent, compared to $924.4 million in 2009.
  • GAAP Operating Income: $535.0 million, an increase of 29 percent, compared to $415.0 million in 2009. GAAP operating margin was 49 percent, compared to 45 percent in 2009.
  • Non-GAAP Operating Income: $622.7 million, an increase of 23 percent, compared to $505.7 million in 2009. Non-GAAP operating margin was 57 percent, compared to 55 percent in 2009.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $452.8 million, an increase of 27 percent, compared to $357.5 million in 2009. GAAP earnings per diluted share were $2.13, an increase of 26 percent, compared to $1.68 in 2009.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $528.0 million, an increase of 21 percent, compared to $435.3 million in 2009. Non-GAAP earnings per diluted share were $2.48, an increase of 21 percent, compared to $2.05 in 2009.
  • Cash Flow: Cash flow from operations was $674.1 million, an increase of 23 percent, compared to $548.7 million in 2009.

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."

Business Highlights:

During 2010 Check Point entered, or expanded its presence in the most critical areas of security:

  • Data Security -- Set a new standard for data security with the introduction of Data Loss Prevention (DLP), making DLP product simple and accessible to a broad range of customers and further augments our data security product portfolio that include disk encryption, media control and the recent acquisition of document security technology.
  • Mobile Security -- Expanded our secure mobile offering with the introduction of the Mobile Access Software Blade providing secure, one-click access to corporate data from the iPhone and iPad.
  • Network Security -- Expanded the core network security firewall functionality with the introduction of Application Control technology, classifying and controlling over 100,000 Web 2.0 widgets and over 4,500 distinct applications. In addition, attained leadership in the Intrusion Prevention (IPS) market by providing an integrated IPS blade that can extend every security gateway to become an IPS device. For the first time in the industry, Check Point has proven that customers can get an integrated IPS that attains the highest standards in security as demonstrated by the latest NSS Labs test report.
  • Endpoint -- Shipped a unified endpoint security system with an integrated client and management that provide the industry's most comprehensive set of endpoint security technologies (Antivirus / malware protection, remote access VPN, WebCheck, and data security with full disk encryption and removable media controls).

Check Point security leadership was recognized during 2010 in many countries and publications, including a Leader's Position in three Gartner Magic Quadrants -- Enterprise Firewall, Mobile Data Protection and Unified Threat Management.

In addition, Check Point's founder and CEO, Gil Shwed, was named by Ernst and Young the 2010 "Entrepreneur of the Year" in Israel -- highlighting Shwed's personal contribution to Check Point's growth and role in pioneering the global security market.

Shwed concluded, "2010's excellent results underscore Check Point's commitment to our customers -- providing the best security platform for their environment. I would also like to recognize and thank our employees, partners and customers for their contribution to the results."

First Quarter Investor Conference Participation Schedule:

  • Stifel Nicolaus Technology, Communications & Internet Conference 2011
    February 11, 2011 - San Francisco, CA
  • Morgan Stanley Technology, Media and Telecommunications Conference
    February 28, 2011 - San Francisco, CA
  • Raymond James 31st Annual Investor Conference
    March 7, 2011 - Orlando, FL
  • UBS Technology Conference
    March 10, 2011 - London, UK

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 January 31, 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 February 7, 2011 at the company's website www.checkpoint.com/ir or by telephone at +1.201.612.7415, replay ID number 365088.

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

*Magic Quadrant Disclaimer

The Magic Quadrant is copyrighted 2010 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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-related charges, other than temporary impairment of marketable securities, net, 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.

Safe Harbor Regarding Forward-Looking Statements

This press release and the conference call related to our earnings for the fourth quarter and fiscal year ended December 31, 2010 contain or may contain 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, including but not limited to, statements related to our plans to further increase the breadth of our security solutions portfolio, and to continue delivering products based on our unified security architecture; our expectations regarding our products and services; our expectation that we will continue to innovate and deliver products to address our customers' security requirements -- at every size of organization worldwide; and our expectations regarding our share repurchase program. Because these statements pertain to future events they are subject to various risks and uncertainties, actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to: Check Point's development and delivery of its security products; general market conditions in the Check Point's industry; economic and political uncertainties; the impact of political changes and weaknesses in various regions of the world, including hostilities or acts of terrorism in Israel where Check Point's international headquarters are based; inclusion of network security functionality in third-party hardware or system software; any foreseen and unforeseen developmental or technological difficulties with regard to Check Point's products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; rapid technological advances and changes in customer requirements to which Check Point is unable to respond expeditiously, if at all; a shift in demand for products, such as Check Point's; factors affecting third parties with which Check Point has formed business alliances; the timely availability and customer acceptance of Check Point's new and existing products; the timing and amount of our share repurchases, if any; and the economic environment in which Check Point operates. The forward-looking statements contained in this press release are subject to other factors and risks, including those discussed in Check Point's Annual Report on Form 20-F for the year ending December 31, 2009, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update these forward-looking statements.

              CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                 (In thousands, except per share amounts)



                               Three Months Ended          Year Ended
                             ----------------------- ----------------------
                                  December 31,           December 31,
                             ----------------------- ----------------------
                                2010        2009        2010       2009
                             ----------- ----------- ----------- ----------
                             (unaudited) (unaudited) (unaudited) (audited)
Revenues:
  Products and licenses      $   143,059 $   120,205 $   444,400 $  361,633
  Software updates,
   maintenance and services      175,447     151,917     653,468    562,784
                             ----------- ----------- ----------- ----------
Total revenues                   318,506     272,122   1,097,868    924,417
                             ----------- ----------- ----------- ----------

Operating expenses:
  Cost of products and
   licenses                       23,835      20,916      75,426     61,495
  Cost of software updates,
   maintenance and services       15,019      12,432      55,721     43,551
  Amortization of technology       8,299       7,723      32,826     28,224
                             ----------- ----------- ----------- ----------
Total cost of revenues            47,153      41,071     163,973    133,270

  Research and development        29,454      24,062     105,748     89,743
  Selling and marketing           66,034      60,487     235,301    220,877
  General and administrative      13,887      15,922      57,244     56,409
  Restructuring and other
   acquisition related costs           -           -         588      9,101
                             ----------- ----------- ----------- ----------
Total operating expenses         156,528     141,542     562,854    509,400
                             ----------- ----------- ----------- ----------

Operating income                 161,978     130,581     535,014    415,017
Financial income, net              7,810       6,413      29,379     30,781
                             ----------- ----------- ----------- ----------
Income before income taxes       169,788    136,993      564,393    445,798

Taxes on income                   32,379      27,458     111,567     88,275
                             ----------- ----------- ----------- ----------
Net income                   $   137,409 $   109,535 $   452,826 $  357,523
                             =========== =========== =========== ==========

 Earnings per share (basic)  $      0.66 $      0.52 $      2.18 $     1.71
                             =========== =========== =========== ==========
Number of shares used in
 computing earnings per
 share (basic)                   208,280     209,093     208,106    209,371
                             =========== =========== =========== ==========

Earnings per share (diluted) $      0.64 $      0.51 $      2.13 $     1.68
                             =========== =========== =========== ==========
Number of shares used in
 computing earnings per
 share (diluted)                 214,432     213,469     212,933    212,208
                             =========== =========== =========== ==========




                  CHECK POINT SOFTWARE TECHNOLOGIES LTD.
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
                 (In thousands, except per share amounts)



                           Three Months Ended            Year Ended
                        ------------------------  ------------------------
                              December 31,              December 31,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)

GAAP operating income   $   161,978  $   130,581  $   535,014  $   415,017
Stock-based
 compensation (1)             8,466        8,138       35,180       30,907
Amortization of
 intangible assets (2)       13,106       14,006       51,876       50,653
Restructuring and other
 acquisition related
 costs (3)                        -            -          588        9,101
                        -----------  -----------  -----------  -----------
Non-GAAP operating
 income                 $   183,550  $   152,725  $   622,658  $   505,678
                        ===========  ===========  ===========  ===========

GAAP net income         $   137,409  $   109,536  $   452,826  $   357,523
Stock-based
 compensation (1)             8,466        8,138       35,180       30,907
Amortization of
 intangible assets (2)       13,106       14,006       51,876       50,653
Restructuring and other
 acquisition related
 costs (3)                        -            -          588        9,101
Other than temporary
 impairment of marketable
 securities, net (4)            785        1,277          785        1,277
Taxes on the above
 items (5)                   (3,566)      (3,492)     (13,242)     (14,153)
                        -----------  -----------  -----------  -----------
Non-GAAP net income     $   156,200  $   129,465  $   528,013  $   435,308
                        ===========  ===========  ===========  ===========

GAAP Earnings per share
 (diluted)              $      0.64  $      0.51  $      2.13  $      1.68
Stock-based
 compensation (1)              0.04         0.04         0.16         0.15
Amortization of
 intangible assets (2)         0.06         0.07         0.24         0.24
Restructuring and other
 acquisition related
 costs (3)                        -            -            -         0.04
Other than temporary
 impairment of marketable
 securities, net (4)           0.01         0.01         0.01         0.01
Taxes on the above
 items (5)                    (0.02)       (0.02)       (0.06)       (0.07)
                        -----------  -----------  -----------  -----------
Non-GAAP Earnings per
 share (diluted)        $      0.73  $      0.61  $      2.48  $      2.05
                        ===========  ===========  ===========  ===========

Number of shares used
 in computing Non-GAAP
 earnings per share
 (diluted)                  214,432      213,469      212,933      212,208
                        ===========  ===========  ===========  ===========

(1) Stock-based
 compensation:
   Cost of products and
    licenses            $        11  $        12  $        49  $        47
   Cost of software
    updates,
    maintenance and
    services                    204          105          984          641
   Research and
    development               1,581        1,878        7,325        6,649
   Selling and
    marketing                 1,707          547        7,279        5,032
   General and
    administrative            4,963        5,596       19,543       18,538
                        -----------  -----------  -----------  -----------
                              8,466        8,138       35,180       30,907
                        -----------  -----------  -----------  -----------

(2) Amortization of
 intangible assets:

   Amortization of
    technology                8,299        7,723       32,826       28,224
   Research and
    development                 685            -        2,741            -
   Selling and
    marketing                 4,122        6,283       16,309       22,429
                        -----------  -----------  -----------  -----------
                             13,106       14,006       51,876       50,653
                        -----------  -----------  -----------  -----------

(3) Restructuring and
 other acquisition
 related costs                    -            -          588        9,101
                        -----------  -----------  -----------  -----------

(4) Other than
 temporary  impairment
 of marketable
 securities, net*               785        1,277          785        1,277
                        -----------  -----------  -----------  -----------

(5) Taxes on the above
 items                       (3,566)      (3,492)     (13,242)     (14,153)
                        -----------  -----------  -----------  -----------

Total, net              $    18,791  $    19,929  $    75,187  $    77,785
                        ===========  ===========  ===========  ===========

* Year ended December 31, 2010 and the three months ended December 31, 2010 include a non-cash write down of $ 0.8 million related to our marketable securities in accordance with ASC 320 Year ended December 31, 2009 and the three months ended December 31, 2009 include a net non-cash write down of $ 1.3 million related to our marketable securities in accordance with ASC 320.

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

                                  ASSETS
                                                December 31,  December 31,
                                                    2010          2009
                                                ------------- -------------
                                                 (unaudited)   (audited)
Current assets:
Cash and cash equivalents                       $     551,777 $     414,085
Marketable securities                                 537,718       469,913
Trade receivables, net                                283,192       283,668
Prepaid expenses and other current assets              44,247        34,544
                                                ------------- -------------
Total current assets                                1,416,934     1,202,210
                                                ------------- -------------

Long-term assets:
Marketable securities                               1,325,451       963,001
Property and equipment, net                            37,065        38,936
Severance pay fund                                      6,532         6,314
Deferred tax asset, net                                18,122        16,307
Other intangible assets, net                           66,765       114,192
Goodwill                                              717,052       708,458
Other assets                                           17,381        20,176
                                                ------------- -------------
Total long-term assets                              2,188,368     1,867,384
                                                ------------- -------------

Total assets                                    $   3,605,302 $   3,069,594
                                                ============= =============

                              LIABILITIES AND
                           SHAREHOLDERS' EQUITY

Current liabilities:
Deferred revenues                               $    424,158  $    384,255
Trade payables and other accrued liabilities         239,104       169,011
                                                ------------  ------------
Total current liabilities                            663,262       553,266
                                                ------------  ------------

Long-term deferred revenues                           40,394        41,005
Income tax accrual                                   169,370       132,908
Deferred tax liability, net                            1,721        11,636
Accrued severance pay                                 11,224        11,061
                                                ------------  ------------
                                                     222,709       196,610

                                                ------------  ------------
Total liabilities                                    885,971       749,876
                                                ------------  ------------

Shareholders' equity:
Share capital                                            774           774
Additional paid-in capital                           580,276       527,874
Treasury shares at cost                           (1,306,382)   (1,199,752)
Accumulated other comprehensive income                15,584        12,555
Retained earnings                                  3,429,079     2,978,267
                                                ------------  ------------
Total shareholders' equity                         2,719,331     2,319,718
                                                ------------  ------------
Total liabilities and shareholders' equity      $  3,605,302  $  3,069,594
                                                ============  ============
Total cash and cash equivalents and marketable
 securities                                     $  2,414,946  $  1,846,999
                                                ============  ============




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



                           Three Months Ended            Year Ended
                        ------------------------  ------------------------
                              December 31,              December 31,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)
Cash flow from
 operating activities:
Net income              $   137,409  $   109,535  $   452,826  $   357,523
Adjustments to
 reconcile net income
 to net cash provided
 by operating
 activities:
Depreciation and
 amortization of
 property, plant and
 equipment                    1,584        1,660        6,890        8,885
Other than temporary
 impairment of
 marketable securities,
 net                            785        1,277          785        1,277
Realized loss (gain) on
 sale of marketable
 securities, net               (193)           -         (974)       1,896
Amortization of
 intangible assets           13,106       14,006       51,876       50,653
Stock-based
 compensation                 8,466        8,138       35,180       30,907
Increase in trade and
 other receivables, net    (121,138)     (95,020)      (5,424)      (9,971)
Increase in deferred
 revenues, trade
 payables and other
 accrued liabilities        125,133      101,643      147,158      126,412
Excess tax benefit from
 stock-based
 compensation                  (720)        (514)      (4,763)      (7,502)
Deferred income taxes,
 net                         (1,599)      (2,657)      (9,406)     (11,386)
                        -----------  -----------  -----------  -----------
Net cash provided by
 operating activities       162,833      138,068      674,148      548,694
                        -----------  -----------  -----------  -----------

Cash flow from
 investing activities:
Cash paid in
 conjunction with
 acquisitions, net                -       (1,247)     (13,957)     (58,787)
Investment in property,
 plant and equipment         (1,322)        (639)      (4,911)      (4,283)
                        -----------  -----------  -----------  -----------
Net cash used in
 investing activities        (1,322)      (1,886)     (18,868)     (63,070)
                        -----------  -----------  -----------  -----------

Cash flow from
 financing activities:
Proceeds from issuance
 of shares upon
 exercise of options         57,245       30,509      103,815       92,978
Purchase of treasury
 shares                     (50,000)     (49,999)    (200,000)    (202,285)
Excess tax benefit from
 stock-based
 compensation                   720          514        4,763        7,502
                        -----------  -----------  -----------  -----------
Net cash used in
 financing activities         7,965      (18,976)     (91,422)    (101,805)
                        -----------  -----------  -----------  -----------

Unrealized gain (loss)
 on marketable
 securities, net            (11,029)      (6,371)       4,089       19,348
                        -----------  -----------  -----------  -----------

Increase in cash and
 cash equivalents and
 marketable securities      158,447      110,835      567,947      403,167

Cash and cash
 equivalents and
 marketable securities
 at the beginning of
 the period               2,256,499    1,736,164    1,846,999    1,443,832
                        -----------  -----------  -----------  -----------
Cash and cash
 equivalents and
 marketable securities
 at the end of the
 period                 $ 2,414,946  $ 1,846,999  $ 2,414,946  $ 1,846,999
                        ===========  ===========  ===========  ===========

Contact Information

  • INVESTOR CONTACT:
    Kip E. Meintzer
    Check Point Software Technologies
    +1.650.628.2040
    ir@checkpoint.com

    MEDIA CONTACT:
    Stephanie Look
    Check Point Software Technologies
    +1.650.628.2171
    press@checkpoint.com