Check Point Software Technologies Reports 2019 Third Quarter financial Results

Monday, 28. October 2019 11:00

SAN CARLOS, Calif., Oct. 28, 2019 (GLOBE NEWSWIRE) -- Check Point® Software Technologies Ltd. (NASDAQ: CHKP), today announced financial results for the third quarter ended September 30, 2019.

Third Quarter 2019:                                                         

  • Total Revenue: $491 million, 4 percent increase year over year
  • Deferred Revenues: $1,242 million, 8 percent increase year over year
  • GAAP Operating Income: $214 million, representing 44 percent of revenues
  • Non-GAAP Operating Income: $246 million, representing 50 percent of revenues
  • GAAP EPS: $1.25, Non-GAAP EPS: $1.44

“During the third quarter, our security subscriptions continued to drive results with 13 percent growth. This was underscored by expanded customer adoption of our cloud solutions,” said Gil Shwed, Founder and CEO of Check Point Software Technologies. “We continued to increase the breadth of our offerings with the introduction of CloudGuard Connect and CloudGuard Edge, providing enterprises with industry leading threat prevention driven by a cloud service.”

Financial Highlights for the Third Quarter of 2019:

  • Total Revenue: $491 million compared to $471 million in the third quarter of 2018, a 4 percent increase year over year.
  • GAAP Operating Income: $214 million compared to $226 million in the third quarter of 2018, representing 44 percent and 48 percent of revenues in the third quarter of 2019 and 2018, respectively.
  • Non-GAAP Operating Income: $246 million compared to $250 million in the third quarter of 2018, representing 50 percent and 53 percent of revenues in the third quarter of 2019 and 2018, respectively.
  • GAAP Taxes on Income: $47 million compared to $45 million in the third quarter of 2018.
  • GAAP Net Income & Earnings per Diluted Share: GAAP net income was $188 million compared to $198 million in the third quarter of 2018. GAAP earnings per diluted share were $1.25, same as third quarter of 2018.
  • Non-GAAP Net Income & Earnings per Diluted Share: Non-GAAP net income was $217 million compared to $219 million in the third quarter of 2018.  Non-GAAP earnings per diluted share were $1.44 compared to $1.38 in the third quarter of 2018, a 4 percent increase year over year.
  • Deferred Revenues: As of September 30, 2019, deferred revenues were $1,242 million compared to $1,148 million as of September 30, 2018, an 8 percent increase year over year.
  • Cash Balances, Marketable Securities & Short Term Deposits: $4,055 million as of September 30, 2019, compared to $4,072 million as of September 30, 2018.
  • Cash Flow: Cash flow from operations of $244 million compared to $249 million in the third quarter of 2018.
  • Share Repurchase Program: During the third quarter of 2019, the company repurchased approximately 2.9 million shares at a total cost of approximately $323 million.

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.”

Key Business Highlights

We announced several new products delivering advanced threat prevention through cloud services, for small and branch offices and expanding the data center performance at the high end.

Product Announcements

  • New Solution for Enterprise Branch Office Security Delivered from the Cloud: Check Point CloudGuard Connect and CloudGuard Edge allow enterprises to deploy branch office security in minutes from the cloud or on premise. The solution is integrated with leading SD-WAN providers like VMware and Silver Peak and provides a unified threat and access management platform that reduces OPEX by up to 40%.
     
  • Innovative Series of Small / Branch Office Appliances: The new 1500 series security gateways empower small and midsize businesses with Enterprise Grade Security. The new appliances feature 100% block score for malware prevention, up to 2 times more performance with up to 4 Gbps Firewall and 660 Mbps of full Threat Prevention. The solution delivers out-of-box Zero Touch provisioning, mobile app for security on the go and a unified management portal.
     
  • Latest Data Center Security Appliances: Check Point introduced the 16000 model and 26000 turbo security gateways. The 16000 Base, 16000 Plus and the 26000 Turbo deliver up to 30 Gbps of Gen V Threat Prevention security and are extensions of Check Point’s new gateway appliance series 16000 and 26000, which were introduced in June.

Industry Recognition

Check Point’s Research

Check Point’s Research Team https://research.checkpoint.com exposes vulnerabilities and attacks to ensure our customers have the highest levels of prevention and protection.  In the third quarter, our publication highlights included the following:

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on October 28, 2019, at 8:30 AM EDT/5:30 AM PDT. To listen to the live webcast or replay, please visit the website: www.checkpoint.com/ir.

Third Quarter Investor Conference Participation Schedule:

  • Jefferies 2019 Cybersecurity Summit
    November 12, 2019 – SF, CA
  • Credit Suisse 23rd Annual Technology Conference
    December 2, 2019 – Scottsdale, AZ
  • Wells Fargo TMT Summit 2019
    December 4, 2019 – Las Vegas, NV
  • Raymond James 2019 Technology Investor Conference
    December 10, 2019 – NY, NY
  • Cowen 6th Annual Networking & Cybersecurity Summit
    December 11, 2019 – NY, NY

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

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com) is a leading provider of cyber security solutions to governments and corporate enterprises globally. Its solutions protect customers from cyber-attacks with an industry leading catch rate of malware, ransomware and other types of attacks. Check Point offers a multilevel security architecture that defends enterprises’ cloud, network and mobile device held information, plus the most comprehensive and intuitive one point of control security management system. Check Point protects over 100,000 organizations of all sizes.

©2019 Check Point Software Technologies Ltd. All rights reserved

Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements in this press release include, but are not limited to, statements related to our expectations regarding our products and solutions, including the CloudGuard family of products, and our participation in investor conferences during the third quarter of 2019.  Our expectations and beliefs regarding these matters may not materialize, and actual results or events in the future are subject to risks and uncertainties that could cause actual results or events 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 23, 2019. 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 operating income, net income and earnings per diluted share, which are adjustments from results based on GAAP to exclude, as applicable, stock-based compensation expenses, 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.


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONSOLIDATED STATEMENT OF INCOME

 (Unaudited, in thousands, except per share amounts)

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Revenues:       
Products and licenses$118,261 $121,130 $352,883 $364,935
Security subscriptions 153,892  136,354  446,530  395,681
Total revenues from products and security subscriptions 272,153  257,484
  799,413
  760,616
Software updates and maintenance 218,755  213,339  651,439  630,303
Total revenues 490,908  470,823  1,450,852  1,390,919
        
Operating expenses:       
Cost of products and licenses 20,984  21,683  61,975  62,656
Cost of security subscriptions 6,073  4,375  17,833  12,101
Total cost of products and security subscriptions 27,057  26,058
  79,808  74,757

Cost of Software updates and maintenance 24,006  22,608  69,842  65,666
Amortization of technology 1,388  546  4,164  1,638
Total cost of revenues 52,451  49,212  153,814  142,061
        
Research and development 60,061  50,531  176,570  154,183
Selling and marketing 137,300  124,142  411,381  368,393
General and administrative 27,255  20,834  76,652  62,793
Total operating expenses 277,067  244,719  818,417  727,430
        
Operating income 213,841  226,104  632,435  663,489
Financial income, net 20,884  17,234  60,682  48,509
Income before taxes on income 234,725  243,338  693,117  711,998
Taxes on income 46,860  45,108  139,786  128,942
Net income$187,865 $198,230 $553,331 $583,056

Basic earnings per share
$1.26 $1.27 $3.64 $3.71
Number of shares used in computing basic earnings per share 149,444  155,941  151,876  157,026

Diluted earnings per share
$1.25 $1.25 $3.61 $3.64
Number of shares used in computing diluted earnings per share 150,756  159,050  153,436  160,131


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED FINANCIAL METRICS
(Unaudited, in thousands, except per share amounts)

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2019 2018 2019 2018
         
Revenues $490,908 $470,823 $1,450,852 $1,390,919
Non-GAAP operating income  246,380  249,750  723,094  735,871
Non-GAAP net income  216,730  219,271  633,659  647,345
Diluted Non-GAAP Earnings per share $1.44 $1.38 $4.13 $4.04
Number of shares used in computing diluted Non-GAAP earnings per share  150,756  159,050  153,436  160,131


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION

 (Unaudited, in thousands, except per share amounts)

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
        
GAAP operating income$213,841  $226,104  $632,435  $663,489 
Stock-based compensation (1) 29,246   21,310   80,052   64,451 
Amortization of intangible assets and acquisition related expenses (2) 3,293   2,336   10,607   7,931 
Non-GAAP operating income$246,380  $249,750  $723,094  $735,871 
        
GAAP net income$187,865  $198,230  $553,331  $583,056 
Stock-based compensation (1) 29,246   21,310   80,052   64,451 
Amortization of intangible assets and acquisition related expenses (2) 3,293   2,336   10,607   7,931 
Taxes on the above items (3) (3,674)  (2,605)  (10,331)  (8,093)
Non-GAAP net income$216,730  $219,271  $633,659  $647,345 
        
Diluted GAAP Earnings per share$1.25  $1.25  $3.61  $3.64 
Stock-based compensation (1) 0.19   0.13   0.52   0.40 
Amortization of intangible assets and acquisition related expenses (2) 0.02   0.02   0.07   0.05 
Taxes on the above items (3) (0.02)  (0.02)  (0.07)  (0.05)
Diluted Non-GAAP Earnings per share$1.44  $1.38  $4.13  $4.04 
        
Number of shares used in computing diluted Non-GAAP earnings per share 150,756   159,050   153,436   160,131 
        
(1) Stock-based compensation:       
Cost of products and licenses$48  $41  $116  $117 
Cost of software updates and maintenance 1,233   921   3,172   2,458 
Research and development 5,439   4,741   14,446   12,989 
Selling and marketing 7,778   5,179   20,824   14,917 
General and administrative 14,748   10,428   41,494   33,970 
  29,246   21,310   80,052   64,451 
        
(2) Amortization of intangible assets and acquisition related expenses:       
Amortization of technology-cost of revenues 1,388   546   4,164   1,638 
Research and development 1,511   974   5,036   3,845 
Selling and marketing 394   816   1,407   2,448 
  3,293   2,336   10,607   7,931 
(3) Taxes on the above items (3,674)  (2,605)  (10,331)  (8,093)
Total, net$28,865  $21,041  $80,328  $64,289 


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA

(Unaudited, in thousands)

ASSETS

 September 30, December 31,
 2019 2018
Current assets:   
Cash and cash equivalents$302,335 $303,687
Marketable securities and short-term deposits 1,382,124  1,448,092
Trade receivables, net 292,466  495,390
Prepaid expenses and other current assets 68,440  74,738
Total current assets 2,045,365  2,321,907
    
Long-term assets:   
Marketable securities 2,370,601  2,287,345
Property and equipment, net 87,042  78,514
Deferred tax asset, net 59,243  84,688
Goodwill and other intangible assets, net 991,534  991,539
Other assets 87,535  64,220
Total long-term assets 3,595,955  3,506,306
    
Total assets$5,641,320 $5,828,213

LIABILITIES AND
SHAREHOLDERS’ EQUITY

Current liabilities:   
Deferred revenues$899,801  $980,175 
Trade payables and other accrued liabilities 355,113   351,695 
Total current liabilities 1,254,914   1,331,870 
    
Long-term liabilities:   
Long-term deferred revenues 342,264   357,779 
Income tax accrual 428,187   356,750 
Other long-term liabilities 32,756   9,425 
  803,207   723,954 
    
Total liabilities 2,058,121   2,055,824 
    
Shareholders’ equity:   
Share capital 774   774 
Additional paid-in capital 1,736,987   1,597,800 
Treasury shares at cost (7,771,849)  (6,844,702)
Accumulated other comprehensive gain (loss) 20,942   (24,497)
Retained earnings 9,596,345   9,043,014 
Total shareholders’ equity 3,583,199   3,772,389 
Total liabilities and shareholders’ equity$5,641,320  $5,828,213 
Total cash and cash equivalents, marketable securities and short-term deposits$4,055,060  $4,039,124 


CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA

(Unaudited, in thousands)

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Cash flow from operating activities:       
Net income$187,865  $198,230  $553,331  $583,056 
Adjustments to reconcile net income to net cash provided by operating activities:       
Depreciation of property and equipment 4,485   4,273   11,704   12,305 
Amortization of intangible assets 1,782   940   5,346   2,820 
Stock-based compensation 29,246   21,310   80,052   64,451 
Realized loss (gain) on marketable securities (316)  237   170   326 
Decrease in trade and other receivables, net 45,291   13,156   219,828   194,892 
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities (28,342)  8,730   (25,160)  15,924 
Deferred income taxes, net 4,328   2,148   10,617   7,191 
Net cash provided by operating activities 244,339   249,024   855,888   880,965 
        
Cash flow from investing activities:       
Proceeds/(payment) in conjunction with acquisitions, net of acquired cash 415   -   (5,094)  - 
Investment in property and equipment (5,531)  (3,677)  (20,232)  (13,116)
Net cash used in investing activities (5,116)  (3,677)  (25,326)  (13,116)
        
Cash flow from financing activities:       
Proceeds from issuance of shares upon exercise of options 21,895   83,273   84,895   182,370 
Purchase of treasury shares (322,961)  (299,982)  (952,910)  (798,939)
Payments related to shares withheld for taxes (404)  (894)  (5,496)  (4,317)
Net cash used in financing activities (301,470)  (217,603)  (873,511)  (620,886)
        
Unrealized gain (loss) on marketable securities, net 7,730   2,321   58,885   (23,238)
        
Increase (decrease)  in cash and cash equivalents, marketable securities and short term deposits (54,517)  30,065   15,936   223,725 
        
Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period 4,109,577   4,041,705   4,039,124   3,848,045 
        
Cash and cash equivalents, marketable securities and short term deposits at the end of the period$4,055,060  $4,071,770  $4,055,060  $4,071,770 


Investors: Kip E. Meintzer 
Check Point Software Technologies
+1.650.628.2040
ir@checkpoint.com
Media: Ekram Ahmed
Check Point Software Technologies
+1.650.628.2260
press@checkpoint.com

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