Check Point Software Technologies Reports 2016 Third Quarter Financial Results
SAN CARLOS, CA -- (Marketwired) -- 10/31/16 -- Check Point� Software Technologies Ltd. (NASDAQ: CHKP), today announced its financial results for the third quarter ended September 30, 2016.
Third Quarter 2016:
- Total Revenue: $428 million, a 6 percent increase year over year
- Software Blades Subscriptions Revenues: $99 million, a 24 percent increase year over year
- GAAP Operating Income: $206 million, representing 48 percent of revenues
- Non-GAAP Operating Income: $231 million, representing 54 percent of revenues
- GAAP EPS: $0.99, a 7 percent increase year over year
- Non-GAAP EPS: $1.13, a 9 percent increase year over year
- Deferred Revenues: $889 million, a 15 percent increase year over year
"Third quarter financial results were very good with revenues coming in toward the upper end of our projections and earnings per share that exceeded our projections. Customers continue to leverage the Check Point security platform and increase their adoption of our advanced security capabilities which is resulting in higher subscription revenues," said Gil Shwed, founder and chief executive officer, "We continued to see strong sales of our SandBlast, Zero Day Protection solutions, resulting in triple-digit growth as customers focus on prevention."
Financial Highlights for the Third Quarter of 2016:
- Total Revenue: $428 million compared to $404 million in the third quarter of 2015.
- GAAP Operating Income: $206 million compared to $205 million in the third quarter of 2015.
- Non-GAAP Operating Income: $231 million compared to $228 million in the third quarter of 2015.
- GAAP Net Income and Earnings per Diluted Share: GAAP net income was $170 million compared to $168 million in the third quarter of 2015. GAAP earnings per diluted share were $0.99 compared to $0.92 in the third quarter of 2015.
- Non-GAAP Net Income: Non-GAAP net income was $194 million compared to $188 million in the third quarter of 2015.
- Non-GAAP Earnings per Diluted Share: $1.13 compared to $1.04 in the third quarter of 2015.
- Deferred Revenues: As of September 30, 2016, deferred revenues were $889 million compared to $772 million as of September 30, 2015.
- Cash Flow: Cash flow from operations of $214 million compared to $228 million in the third quarter of 2015.
- Share Repurchase Program: During the third quarter of 2016, the company repurchased 3.2 million shares at a total cost of $247 million.
- Cash Balances, Marketable Securities and Short Term Deposits: $3,708 million as of September 30, 2016, compared to $3,612 million as of September 30, 2015.
For information regarding the non-GAAP financial measures discussed in this release, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, please see "Use of Non-GAAP Financial Information" and "Reconciliation of GAAP to Non-GAAP Financial Information."
Business Highlights:
Check Point Defines Security Leadership in New Era of Cloud IT - Check Point's advanced threat prevention works across cloud platforms, integrating with the most popular SDN/cloud technologies such as VMware NSX, Cisco ACI, OpenStack, Microsoft Azure and Amazon Web Services (AWS). Fueled by the company's vSEC cloud security with R80 Security Management, Check Point is enabling businesses to secure physical networks and cloud environments with the same industry-leading solutions and policies -- all from a single management console.
SandBlast Agent for Browsers - As the newest member of its industry-leading SandBlast family of solutions, SandBlast Agent for Browsers is designed to protect users from evolving threats by seamlessly incorporating key components of the SandBlast security model into the browser. It provides real-time protection, all while reducing the resources required to prevent today's advanced attacks.
Industry Accolades: Achieved NSS Labs Recommended Rating Three Times in 2016 - Check Point received a 'Recommended' rating three times in the 2016 NSS Labs testing including:
- Next-Generation Intrusion Prevention System (NGIPS) Test with 99.95% exploit catch rate, the highest of all participates and the leading TCO rating
- NSS Labs Breach Detection Systems (BDS) group test
- Next Generation Firewall (NGFW)
Check Point has achieved 'Recommended' rating from NSS Labs for all thirteen tests the company has participated in since 2011.
Leader in the 2016 Gartner Magic Quadrant for Unified Threat Management - The new report evaluated the company's completeness of vision and ability to execute in areas such as security management and threat prevention within the small and medium business market. Check Point has been positioned as a Leader in Unified Threat Management Magic Quadrant for six consecutive years. Check Point is the only vendor to be a leader in both Firewall Gartner Magic Quadrants: Enterprise and Unified Threat Management.
Number One in Worldwide Firewall Equipment Market Share - Check Point is the leader in worldwide market share in 2Q 2016 for Firewall Equipment, according to the Gartner Market Share: Enterprise Network Equipment by Market Segment, Worldwide reports. (1)
Top Position in Worldwide Combined Firewall and UTM Appliance Market - Check Point continued to be the number one vendor in worldwide combined Firewall and UTM appliance revenue for 2Q 2016, according to the IDC Worldwide Quarterly Security Appliance Tracker.(2)
Security Research: 2016 Security Report - In the company's fourth annual Security Report, Check Point researchers analyzed the activity of more than 31,000 Check Point gateways worldwide, revealing specific details on the challenges enterprises are encountering with unknown malware, attack trends, and the impact of having more mobile devices in the enterprise.
Cerber - Check Point researchers investigated one of the largest active ransomware campaigns to have unprecedented insight into its devious scheme. In a detailed report, researchers shine a light on the growing ransomware-as-a-service industry, but revealing a path now being used to help individuals and businesses gain access to their encrypted files -- without paying the increasingly inflated ransoms of cyber criminals.
QuadRooter - The Check Point Mobile Research Team uncovered a set of four vulnerabilities in QualComm chipset drivers dubbed the name QuadRooter making at least 900 million Android smartphones and tablets vulnerable. If exploited, hackers could gain complete control of devices and unrestricted access to the sensitive personal and enterprise data on them. Access could also provide an attacker with capabilities such as keylogging, GPS tracking, and recording video and audio.
HummingBad - Cyber criminals utilized HummingBad malware to control over 10 million mobile devices globally, allowing them to manipulate the devices into downloading apps and clicking on advertisements to benefit the coalition of developers behind the malware. Check Point researchers discovered how this illegal network ran alongside a legitimate business of Android and iOS apps and analytics, and provided the details of their network operation.
"Cyberattacks are continuing to increase and the level of their sophistication keeps rising. Every organization should be concerned about achieving the highest level of defense against these attacks. The Check Point platform provides protection against the most advanced attacks and prevents them from entering the organization, while enabling each customer to manage their security on the network, mobile and the cloud through a single pane of glass management console," Concluded Shwed.
Fourth Quarter 2016 Investor Conference Participation Schedule:
- UBS Global Technology Conference Nov. 15, 2016 - San Francisco, CA
- Credit Suisse Annual Technology Conference Nov. 29, 2016 - Scottsdale, AZ
- Raymond James Supply Chain Conference* Dec. 6-7, 2016 - New York, NY
* Investor meetings only
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.
Conference Call and Webcast Information Check Point will host a conference call with the investment community on October 31, 2016, at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit the website at: www.checkpoint.com/ir. A replay of the conference call will be available through November 6, 2016 on the company's website or by telephone at +1.201.612.7415, replay ID number 13647361.
About Check Point Software Technologies Ltd. Check Point Software Technologies Ltd. (www.checkpoint.com) is the largest network cyber security vendor globally, providing industry-leading solutions and protecting customers from cyberattacks with an unmatched catch rate of malware and other types of threats. Check Point offers a complete security architecture defending enterprises - from networks to mobile devices - in addition to the most comprehensive and intuitive security management. Check Point protects over 100,000 organizations of all sizes.
�2016 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, the success of the new family of cybersecurity solutions that we have developed and our participation in investor conferences during the fourth quarter of 2016. 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 28, 2016. 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 charges, amortization of intangible assets and acquisition related expenses and the related tax affects. Check Point's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of Check Point's ongoing core operations and prospects for the future. Historically, Check Point has also publicly presented these supplemental non-GAAP financial measures in order to assist the investment community to see the Company "through the eyes of management," and thereby enhance understanding of its operating performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release to the most directly comparable GAAP financial measures is included with the financial statements contained in this press release. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and as such has determined that it is important to provide this information to investors.
(1) Gartner, Inc., Market Share: Enterprise Network Equipment by Market Segment, Worldwide, 2Q16, Christian Canales, Petr Gorodetskiy, Naresh Singh, and Joe Skorupa, September 2016. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. (2) IDC Worldwide Quarterly Security Appliance Tracker 2Q2016, September 2016.
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
September 30, September 30,
--------------------------- ---------------------------
2016 2015 2016 2015
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Products and
licenses $ 136,931 $ 135,218 $ 395,909 $ 381,799
Software Blades
subscriptions 98,575 79,622 279,403 230,598
------------- ------------- ------------- -------------
Total revenues from
products and
software blades 235,506 214,840 675,312 612,397
Software updates
and maintenance 192,068 189,016 579,282 559,369
------------- ------------- ------------- -------------
Total revenues 427,574 403,856 1,254,594 1,171,766
------------- ------------- ------------- -------------
Operating expenses:
Cost of products
and licenses 25,244 24,400 73,408 69,333
Cost of software
blades
subscriptions 3,009 2,351 6,695 5,662
------------- ------------- ------------- -------------
Total cost of
products and
software blades 28,253 26,751 80,103 74,995
Cost of Software
updates and
maintenance 21,371 20,107 61,536 58,080
Amortization of
technology 546 546 1,638 1,262
------------- ------------- ------------- -------------
Total cost of
revenues 50,170 47,404 143,277 134,337
Research and
development 44,443 37,495 130,631 109,249
Selling and
marketing 104,386 90,463 303,702 258,605
General and
administrative 22,087 23,860 66,124 68,848
------------- ------------- ------------- -------------
Total operating
expenses 221,086 199,222 643,734 571,039
------------- ------------- ------------- -------------
Operating income 206,488 204,634 610,860 600,727
Financial income,
net 12,145 8,285 33,908 24,905
------------- ------------- ------------- -------------
Income before taxes
on income 218,633 212,919 644,768 625,632
Taxes on income 48,981 45,176 141,875 134,370
------------- ------------- ------------- -------------
Net income $ 169,652 $ 167,743 $ 502,893 $ 491,262
============= ============= ============= =============
Basic earnings per
share $ 1.00 $ 0.94 $ 2.94 $ 2.72
============= ============= ============= =============
Number of shares
used in computing
basic earnings per
share 169,113 177,519 171,140 180,335
============= ============= ============= =============
Diluted earnings per
share $ 0.99 $ 0.92 $ 2.88 $ 2.66
============= ============= ============= =============
Number of shares
used in computing
diluted earnings
per share 171,882 181,804 174,549 184,846
============= ============= ============= =============
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
------------------------ ------------------------
Sep 30, Sep 30,
------------------------ ------------------------
2016 2015 2016 2015
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
GAAP operating income $ 206,488 $ 204,634 $ 610,860 $ 600,727
Stock-based compensation
(1) 20,818 19,956 61,034 56,534
Amortization of
intangible assets and
acquisition related
expenses (2) 3,282 3,309 9,858 7,912
----------- ----------- ----------- -----------
Non-GAAP operating
income $ 230,588 $ 227,899 $ 681,752 $ 665,173
=========== =========== =========== ===========
GAAP net income $ 169,652 $ 167,743 $ 502,893 $ 491,262
Stock-based compensation
(1) 20,818 19,956 61,034 56,534
Amortization of
intangible assets and
acquisition related
expenses (2) 3,282 3,309 9,858 7,912
Taxes on the above items
(3) (244) (2,556) (2,740) (5,504)
----------- ----------- ----------- -----------
Non-GAAP net income $ 193,508 $ 188,452 $ 571,045 $ 550,204
=========== =========== =========== ===========
Diluted GAAP Earnings
per share $ 0.99 $ 0.92 $ 2.88 $ 2.66
Stock-based compensation
(1) 0.12 0.11 0.35 0.31
Amortization of
intangible assets and
acquisition related
expenses (2) 0.02 0.02 0.06 0.04
Taxes on the above items
(3) - (0.01) (0.02) (0.03)
----------- ----------- ----------- -----------
Diluted Non-GAAP
Earnings per share $ 1.13 $ 1.04 $ 3.27 $ 2.98
=========== =========== =========== ===========
Number of shares used in
computing diluted Non-
GAAP earnings per share 171,882 181,804 174,549 184,846
=========== =========== =========== ===========
(1) Stock-based
compensation:
Cost of products and
licenses $ 16 $ 17 $ 50 $ 47
Cost of software
updates and
maintenance 560 396 1,535 1,110
Research and
development 2,993 3,295 9,291 8,536
Selling and marketing 5,508 4,193 13,311 12,112
General and
administrative 11,741 12,055 36,847 34,729
----------- ----------- ----------- -----------
$ 20,818 19,956 $ 61,034 56,534
----------- ----------- ----------- -----------
(2) Amortization of
intangible assets and
acquisition related
expenses:
Amortization of
technology-cost of
revenues $ 546 546 $ 1,638 1,262
Research and
development 1,897 1,897 5,691 4,249
Selling and marketing 839 866 2,529 2,401
----------- ----------- ----------- -----------
$ 3,282 3,309 $ 9,858 7,912
----------- ----------- ----------- -----------
(3) Taxes on the above
items $ (244) (2,556) $ (2,740) (5,504)
----------- ----------- ----------- -----------
Total, net $ 23,856 $ 20,709 $ 68,152 $ 58,942
=========== =========== =========== ===========
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
ASSETS
September 30, December 31,
2016 2015
------------- -------------
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 224,327 $ 192,312
Marketable securities and short-term deposits 1,005,902 1,091,915
Trade receivables, net 254,716 410,763
Prepaid expenses and other current assets 44,453 40,844
------------- -------------
Total current assets 1,529,398 1,735,834
------------- -------------
Long-term assets:
Marketable securities 2,477,626 2,331,187
Property and equipment, net 57,994 48,692
Severance pay fund 4,783 5,262
Deferred tax asset, net 62,030 65,711
Goodwill and other intangible assets, net 835,120 838,020
Other assets 36,307 45,174
------------- -------------
Total long-term assets 3,473,860 3,334,046
------------- -------------
Total assets $5,003,258 $5,069,880
============= =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Deferred revenues $ 677,755 $ 717,528
Trade payables and other accrued liabilities 323,617 339,325
------------- -------------
Total current liabilities 1,001,372 1,056,853
------------- -------------
Long-term liabilities:
Long-term deferred revenues 210,755 188,255
Income tax accrual 324,400 283,215
Deferred tax liability, net - 240
Accrued severance pay 9,185 9,451
------------- -------------
544,340 481,161
------------- -------------
Total liabilities 1,545,712 1,538,014
------------- -------------
Shareholders' equity:
Share capital 774 774
Additional paid-in capital 1,087,158 987,331
Treasury shares at cost (4,734,366) (4,043,271)
Accumulated other comprehensive gain (loss) 9,805 (4,250)
Retained earnings 7,094,175 6,591,282
------------- -------------
Total shareholders' equity 3,457,546 3,531,866
------------- -------------
Total liabilities and shareholders' equity $5,003,258 $5,069,880
============= =============
Total cash and cash equivalents, marketable
securities and short-term deposits $3,707,855 $3,615,414
============= =============
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 30, September 30,
-------------------------- --------------------------
2016 2015 2016 2015
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash flow from
operating
activities:
Net income $ 169,652 $ 167,743 $ 502,893 $ 491,262
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation of
property and
equipment 3,099 2,658 8,491 7,541
Amortization of
intangible assets 963 990 2,901 2,622
Stock-based
compensation 20,818 19,956 61,034 56,534
Realized loss (gain)
on marketable
securities (1,743) 176 (2,867) 97
Decrease in trade
and other
receivables, net 20,317 28,973 161,534 124,176
Increase in deferred
revenues, trade
payables and other
accrued liabilities 4,867 14,388 16,213 32,098
Excess tax benefit
from stock-based
compensation (3,387) (3,772) (8,200) (6,073)
Deferred income
taxes, net (662) (3,285) (1,876) (3,116)
------------ ------------ ------------ ------------
Net cash provided by
operating
activities 213,924 227,827 740,123 705,141
------------ ------------ ------------ ------------
Cash flow from
investing
activities:
Cash paid in
conjunction with
acquisitions, net
of acquired cash - - - (96,544)
Investment in
property and
equipment (7,143) (4,361) (17,793) (10,206)
------------ ------------ ------------ ------------
Net cash used in
investing
activities (7,143) (4,361) (17,793) (106,750)
------------ ------------ ------------ ------------
Cash flow from
financing
activities:
Proceeds from
issuance of shares
upon exercise of
options 46,310 20,074 79,839 54,089
Purchase of treasury
shares (247,000) (249,763) (739,937) (736,445)
Excess tax benefit
from stock-based
compensation 3,387 3,772 8,200 6,073
------------ ------------ ------------ ------------
Net cash used in
financing
activities (197,303) (225,917) (651,898) (676,283)
------------ ------------ ------------ ------------
Unrealized gain
(loss) on
marketable
securities, net (9,609) 4,150 22,009 7,261
------------ ------------ ------------ ------------
Increase (decrease)
in cash and cash
equivalents,
marketable
securities and
short term deposits (131) 1,699 92,441 (70,631)
Cash and cash
equivalents,
marketable
securities and
short term deposits
at the beginning of
the period 3,707,986 3,610,603 3,615,414 3,682,933
------------ ------------ ------------ ------------
Cash and cash
equivalents,
marketable
securities and
short term deposits
at the end of the
period $3,707,855 $ 3,612,302 $ 3,707,855 $3,612,302
============ ============ ============ ============
Source: Check Point Software Technologies Ltd.