SOURCE: Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd.

October 20, 2010 05:00 ET

Check Point Software Technologies Reports Record Third Quarter 2010 Financial Results

REDWOOD CITY, CA--(Marketwire - October 20, 2010) - Check Point® Software Technologies Ltd. (NASDAQ: CHKP)

  • Revenue: $273.2 million, representing a 17 percent increase year over year

  • Product Revenues: $106.4 million, representing a 22 percent increase year over year

  • Non-GAAP Operating Income: $156.9 million, representing a 23 percent increase year over year or 57 percent of revenues versus 55 percent a year ago

  • Non-GAAP EPS: $0.63, representing a 21 percent increase year over year

Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced record financial results for the third quarter ended September 30, 2010.

"I am very pleased that we were able to deliver all-time record quarterly results this quarter. We exceeded the high-end of our projections in both revenues and earnings per share," said Gil Shwed, chairman and chief executive officer at Check Point. "This growth was a result of strong network security product sales across all regions with particular strength coming from the America's and Asia Pacific."


Financial Highlights for the Third Quarter of 2010

  • Total Revenues: $273.2 million, an increase of 17 percent, compared to $233.6 million in the third quarter of 2009.
  • GAAP Operating Income: $135.1 million, an increase of 28 percent, compared to $105.5 million in the third quarter of 2009. GAAP operating margin was 49 percent, compared to 45 percent in the third quarter of 2009.
  • Non-GAAP Operating Income: $156.9 million, an increase of 23 percent, compared to $127.5 million in the third quarter of 2009. Non-GAAP operating margin was 57 percent, compared to 55 percent in the third quarter of 2009.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $114.5 million, an increase of 25 percent, compared to $91.5 million in the third quarter of 2009. GAAP earnings per diluted share were $0.54, an increase of 26 percent, compared to $0.43 in the third quarter of 2009.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $132.6 million, an increase of 21 percent, compared to $109.5 million in the third quarter of 2009. Non-GAAP earnings per diluted share were $0.63, an increase of 21 percent, compared to $0.52 in the third quarter of 2009.
  • Deferred Revenues: As of September 30, 2010, we had deferred revenues of $396.3 million, an increase of 10 percent, compared to $360.1 million as of September 30, 2009.
  • Cash Flow: Cash flow from operations was $144.6 million, an increase of 15 percent, compared to $126.1 million in the third quarter of 2009.
  • Share Repurchase Program: During the third quarter of 2010, we repurchased 1.44 million shares at a total cost of $50 million.
  • Cash Balances and Marketable Securities: $2,256 million as of September 30, 2010, an increase of $520 million, compared to $1,736 million as of September 30, 2009.

Recent Business Highlights Include:

  • Introduction of Check Point Application Control Software Blade - Enables Web 2.0 security through a unique combination of technology, user awareness and broad application control from the world's largest application classification database, the Check Point AppWiki, with over 50,000 Web 2.0 widgets and more than 4,500 Internet applications.
  • Security Gateway Virtual Edition (VE) Software Blade - Provides businesses with one-click security protection for private and public clouds with VMsafe integration.
  • Series 80 Appliance - Designed for remote and branch offices, the new appliance delivers stronger security at 1.5 gigabit per second for under $2,500.
  • Multi-Domain Management Software Blades - Provides virtual security management to businesses of all sizes and simplifies management by segmenting security into virtual domains based on location, business unit or security functions.
  • New Check Point R71 Training and Certification Programs - Interactive programs to teach security professionals how to deploy, maintain and optimize the latest Software Blade Architecture™ protections.

In addition, Check Point validated its commitment to the continual promotion of the open development, evolution and secure use of the Web with the appointment of Check Point Fellow, Robert Hinden, to the Board of Trustees for the Internet Society, the organization that facilitates the creation of standards for the future of Internet infrastructure.

Check Point products also continued to receive awards and certifications from around the world, including:

  • Information Security Magazine's Readers' Choice Awards:
    • Gold Medal - Check Point IPS Software Blade and IPS-1 Appliance
    • Gold Medal - Check Point's Safe@Office and UTM-1 family of appliances
    • Silver Medal - Check Point Endpoint Security
  • Virus Bulletin's VB100 Award - ZoneAlarm® Internet Security Suite was recognized in the August comparative review of antivirus solutions. Check Point's Endpoint Security was also ranked highly in Virus Bulletin's RAP (Reactive and Proactive) averages quadrant test based on its superior ability to proactively detect new and unknown malware samples.
  • Common Criteria EAL4+ Certification - Check Point Media Encryption
  • Best International Innovation - Check Point Abra at the 2010 Information Security Day (ITBN) Conference in Hungary
  • Readers' Choice Awards - Check Point Firewall Software Blade from Computerworld Malaysia and Singapore

Mr. Shwed concluded. "It is great to see the success of our strategy reflected in our record all-time-high quarterly results. The Software Blade Architecture combined, with a unique focus on our customers' security needs, continues to drive Check Point's industry leadership. "


Fourth Quarter Investor Conference Participation Schedule:

  • Wells Fargo Securities 2010 Technology, Media and Telecom Conference
    November 9, 2010 - New York, NY

  • Credit Suisse 2010 Global Technology Conference
    December 1, 2010 - Scottsdale, AZ

  • Barclay's 2010 Technology Conference
    December 8, 2010 - San Francisco, CA

Members of Check Point's management team will present at these conferences and will discuss the latest company strategies and initiatives. Check Point's conference presentations are expected to be available via webcast at the company's web site. To view these presentations and access the most updated information on presenters and the schedule, please visit the Investor Relations section of the company's web site at http://www.checkpoint.com/ir. The schedule is subject to change.

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on October 20, 2010 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit Check Point's website at http://www.checkpoint.com/ir. A replay of the conference call will be available through October 27, 2010 at the company's website http://www.checkpoint.com/ir or by telephone at +1 201.612.7415, passcode # 385515, 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 uncompromising 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.


©2010 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 operating income, operating margin, net income and earnings per share, which are adjusted from results based on GAAP to exclude non-cash equity-based compensation charges, amortization of acquired intangible assets, restructuring and other acquisition related charges and the related tax affects. Management uses both GAAP and non-GAAP information in evaluating and operating the business internally and as such has determined that it is important to provide this information to investors. Check Point's management also believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of Check Point's on-going core operations and prospects for the future. 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.

               CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                 (In thousands, except per share amounts)

                              Three Months Ended      Nine Months Ended
                            ----------------------- -----------------------
                                September 30,           September 30,
                            ----------------------- -----------------------
                               2010        2009        2010        2009
                            ----------- ----------- ----------- -----------
                            (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
  Products and licenses     $   106,399 $    86,883 $   301,341 $   241,428
  Software updates,
   maintenance and
   services                     166,795     146,759     478,021     410,867
                            ----------- ----------- ----------- -----------
Total revenues                  273,194     233,642     779,362     652,295
                            ----------- ----------- ----------- -----------

Operating expenses:
  Cost of products and
   licenses                      18,799      17,848      51,591      40,579
  Cost of software updates,
   maintenance and services      14,910      10,783      40,702      31,119
  Amortization of
   technology                     8,311       7,471      24,527      20,501
                            ----------- ----------- ----------- -----------
Total cost of revenues           42,020      36,102     116,820      92,199

  Research and development       26,165      22,426      76,294      65,681
  Selling and marketing          55,872      56,379     169,267     160,390
  General and
   administrative                14,075      13,190      43,357      40,487
  Restructuring and
   other acquisition
   related costs                      -          67         588       9,101
                            ----------- ----------- ----------- -----------
Total operating expenses        138,132     128,164     406,326     367,858
                            ----------- ----------- ----------- -----------

Operating income                135,062     105,478     373,036     284,437
Financial income, net             7,243       7,825      21,569      24,368
                            ----------- ----------- ----------- -----------
Income before income taxes      142,305     113,303     394,605     308,805

Taxes on income                  27,790      21,839      79,188      60,817
                            ----------- ----------- ----------- -----------
Net income                  $   114,515 $    91,464 $   315,417 $   247,988
                            =========== =========== =========== ===========

Earnings per share (basic)  $      0.55 $      0.44 $      1.52 $      1.18
                            =========== =========== =========== ===========
Number of shares used in
 computing earnings per
 share (basic)                  207,239     208,738     208,049     209,465
                            =========== =========== =========== ===========

Earnings per share
 (diluted)                   $     0.54  $     0.43  $     1.49  $     1.17
                            =========== =========== =========== ===========
Number of shares used in
 computing earnings per
 share (diluted)                211,637     211,688     211,339     211,790
                            =========== =========== =========== ===========





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


                           Three Months Ended         Nine Months Ended
                        ------------------------  ------------------------
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)

GAAP operating income   $   135,062  $   105,478  $   373,036  $   284,437
Stock-based
 compensation (1)             8,701        7,695       26,714       22,769
Amortization of
 intangible assets (2)       13,114       14,301       38,770       36,647
Restructuring and other
 acquisition related
 costs (3)                        -           67          588        9,101
                        -----------  -----------  -----------  -----------
Non-GAAP operating
 income                     156,877  $   127,541      439,108  $   352,954
                        ===========  ===========  ===========  ===========

GAAP net income         $   114,515  $    91,464  $   315,417  $   247,988
Stock-based
 compensation (1)             8,701        7,695       26,714       22,769
Amortization of
 intangible assets (2)       13,114       14,301       38,770       36,647
Restructuring and other
 acquisition related
 costs (3)                        -           67          588        9,101
Taxes on the above
 items (4)                   (3,703)      (4,040)      (9,676)     (10,662)
                        -----------  -----------  -----------  -----------
Non-GAAP net income     $   132,627  $   109,487  $   371,813  $   305,843
                        ===========  ===========  ===========  ===========

GAAP Earnings per share
 (diluted)              $      0.54  $      0.43  $      1.49  $      1.17
Stock-based
 compensation (1)              0.04         0.04         0.13         0.11
Amortization of
 intangible assets (2)         0.06         0.07         0.18         0.17
Restructuring and other
 acquisition related
 costs (3)                        -            -            -         0.04
Taxes on the above
 items (4)                    (0.01)       (0.02)       (0.04)       (0.05)
                        -----------  -----------  -----------  -----------
Non-GAAP Earnings per
 share (diluted)               0.63  $      0.52  $      1.76  $      1.44
                        ===========  ===========  ===========  ===========

Number of shares used
 in computing Non-GAAP
 earnings per share
 (diluted)                  211,637      211,688      211,339      211,790
                        ===========  ===========  ===========  ===========

(1) Stock-based
 compensation:
  Cost of products and
   licenses             $        10  $        14  $        38  $        35
  Cost of software
   updates, maintenance
   and services                 322          236          780          536
  Research and
   development                2,403        1,998        5,744        4,771
  Selling and
   marketing                  1,776        1,769        5,572        4,485
  General and
   administrative             4,190        3,678       14,580       12,942
                        -----------  -----------  -----------  -----------
                              8,701        7,695       26,714       22,769
                        -----------  -----------  -----------  -----------

(2) Amortization of
 intangible assets:
  Amortization of
   technology                 8,311        7,471       24,527       20,501
  Research and
   development                  685            -        2,055            -
  Selling and
   marketing                  4,118        6,830       12,188       16,146
                        -----------  -----------  -----------  -----------
                             13,114       14,301       38,770       36,647
                        -----------  -----------  -----------  -----------

(3) Restructuring and
 other acquisition
 related costs                    -           67          588        9,101
                        -----------  -----------  -----------  -----------

(4) Taxes on the above
 items                       (3,703)      (4,040)      (9,676)     (10,662)
                        -----------  -----------  -----------  -----------
Total, net              $    18,112  $    18,023  $    56,396  $    57,855
                        ===========  ===========  ===========  ===========





                  CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                CONDENSED CONSOLIDATED BALANCE SHEET DATA
                             (In thousands)
                                 ASSETS
                                                September 30, December 31,
                                                    2010          2009
                                                ------------- -------------
                                                 (unaudited)    (audited)
Current assets:
Cash and cash equivalents                       $     438,785 $     414,085
Marketable securities                                 515,448       469,913
Trade receivables, net                                165,712       283,668
Prepaid expenses and other current assets              38,265        34,544
                                                ------------- -------------
Total current assets                                1,158,210     1,202,210
                                                ------------- -------------

Long-term assets:
Marketable securities                               1,302,266       963,001
Property and equipment, net                            37,329        38,936
Severance pay fund                                      6,237         6,314
Deferred tax asset, net                                19,956        16,307
Other intangible assets, net                           79,972       114,192
Goodwill                                              714,803       708,458
Other assets                                           18,076        20,176
                                                ------------- -------------
Total long-term assets                              2,178,639     1,867,384
                                                ------------- -------------

Total assets                                    $   3,336,849 $   3,069,594
                                                ============= =============

                            LIABILITIES AND
                          SHAREHOLDERS' EQUITY
Current liabilities:
Deferred revenues                               $    362,918  $    384,255
Trade payables and other accrued liabilities         195,582       169,011
                                                ------------  ------------
Total current liabilities                            558,500       553,266
                                                ------------  ------------

Long-term deferred revenues                           33,430        41,005
Income tax accrual                                   155,137       132,908
Deferred tax liability, net                            5,687        11,636
Accrued severance pay                                 10,967        11,061
                                                ------------  ------------
                                                     205,221       196,610

                                                ------------  ------------
Total liabilities                                    763,721       749,876
                                                ------------  ------------

Shareholders' equity:
Share capital                                            774           774
Additional paid-in capital                           563,494       527,874
Treasury shares at cost                           (1,306,030)   (1,199,752)
Accumulated other comprehensive income                23,220        12,555
Retained earnings                                  3,291,670     2,978,267
                                                ------------  ------------
Total shareholders' equity                         2,573,128     2,319,718
                                                ------------  ------------
Total liabilities and shareholders' equity      $  3,336,849  $  3,069,594
                                                ============  ============
Total cash and cash equivalents and marketable
 securities                                     $  2,256,499  $  1,846,999
                                                ============  ============





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

                           Three Months Ended         Nine Months Ended
                        ------------------------  ------------------------
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)
Cash flow from
 operating activities:

Net income              $   114,515  $    91,464  $   315,417  $   247,988
Adjustments to
 reconcile net income
 to net cash provided
 by operating
 activities:
Depreciation and
 amortization of
 property, plant and
 equipment                    1,730        2,189        5,305        7,225
Decrease (increase) in
 trade and other
 receivables, net            (7,939)         (50)     115,714       85,050
Increase in deferred
 revenues, trade
 payables and other
 accrued liabilities         19,876       15,494       22,025       24,769
Realized loss (gain) on
 marketable securities         (781)           -         (781)       1,896
Stock-based
 compensation                 8,701        7,695       26,714       22,768
Amortization of
 intangible assets           13,114       14,301       38,770       36,647
Excess tax benefit from
 stock-based
 compensation                (1,082)      (2,474)      (4,042)      (6,988)
Deferred income taxes,
 net                         (3,558)      (2,487)      (7,807)      (8,729)
                        -----------  -----------  -----------  -----------
Net cash provided by
 operating activities       144,576      126,132      511,315      410,626
                        -----------  -----------  -----------  -----------

Cash flow from
 investing activities:

Cash paid in
 conjunction with
 acquisitions, net of
 acquired cash                 (333)           -      (13,957)     (57,540)
Investment in property
 and equipment               (1,441)      (1,043)      (3,585)      (3,644)
                        -----------  -----------  -----------  -----------
Net cash used in
 investing activities        (1,774)      (1,043)     (17,542)     (61,184)
                        -----------  -----------  -----------  -----------

Cash flow from
 financing activities:

Proceeds from issuance
 of shares upon
 exercise of options         12,568       20,166       46,566       62,469
Purchase of treasury
 shares                     (50,000)     (50,000)    (150,000)    (152,286)
Excess tax benefit from
 stock-based
 compensation                 1,082        2,474        4,042        6,988
                        -----------  -----------  -----------  -----------
Net cash used in
 financing activities       (36,350)     (27,360)     (99,392)     (82,829)
                        -----------  -----------  -----------  -----------

Unrealized gain on
 marketable securities,
 net                          9,131        8,255       15,119       25,719
                        -----------  -----------  -----------  -----------

Increase in cash and
 cash equivalents and
 marketable securities      115,583      105,984      409,500      292,332

Cash and cash
 equivalents and
 marketable securities
 at the beginning of
 the period               2,140,916    1,630,180    1,846,999    1,443,832
                        -----------  -----------  -----------  -----------

Cash and cash
 equivalents, and
 marketable securities
 at the end of the
 period                 $ 2,256,499  $ 1,736,164  $ 2,256,499  $ 1,736,164
                        ===========  ===========  ===========  ===========



Contact Information

  • Investor Contact
    Kip E. Meintzer
    Check Point Software Technologies
    +1.650.628.2040
    ir@checkpoint.com

    Media Contact
    Amber Rensen
    Check Point Software Technologies
    +1.650.628.2070
    press@checkpoint.com