Check Point Software Reports 2005 Fourth Quarter and Annual Financial Results
Fourth Quarter EPS Increased 21% Year Over Year Strong Growth in Deferred Revenues
Redwood City, CA —
Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the fourth quarter and year ended December 31, 2005. "Check Point's fourth quarter business provided a strong finish to the year 2005," said Gil Shwed, chairman and chief executive officer of Check Point Software. "Our fourth quarter and annual 2005 financial results reached record levels across earnings per share, revenues, deferred revenues, and cash balances."
Financial Highlights for the Fourth Quarter of 2005:
- Revenues: $156.1 million, an increase of 9% compared to $143.0 million in the fourth quarter of 2004.
- Net Income: $89.2 million, an increase of 17% compared to $76.4 million in the fourth quarter of 2004. Net income excluding acquisition related charges1 was $90.9 million, an increase of 15% compared to $78.7 million in the fourth quarter of 2004.
- Earnings per Diluted Share: $0.36, an increase of 21% compared to $0.30 in the fourth quarter of 2004. EPS excluding net acquisition related charges was $0.37, an increase of 20% compared to $0.31 in the fourth quarter of 2004.
- Deferred Revenues: $169.0 million, an increase of $24.7 million or 17% over deferred revenues as of September 30, 2005.
- Share Repurchase Program: During the fourth quarter of 2005, Check Point purchased 1.25 million shares at a total cost of approximately $27.5 million. In 2005, the company purchased a total of 10.6 million shares for a total cost of $237 million.
1 "Acquisition related charges" refer to the impact of the amortization of intangible assets and stock-based compensation resulting from the acquisition of Zone Labs Inc., in March 2004.
Financial Highlights for the Year Ended December 31, 2005:
- Revenues: $579.4 million, an increase of 12% compared to $515.4 million for the year ended December 31, 2004.
- Net Income: $319.7 million, an increase of 29% compared to $248.4 million for the year ended December 31, 2004. Net income excluding acquisition related charges was $326.9 million, an increase of 17% compared to $278.7 million for the year ended December 31, 2004.
- Earnings per Diluted Share: $1.27, an increase of 33% compared to $0.95 for the year ended December 31, 2004. EPS excluding net acquisition related charges was $1.30, an increase of 21% compared to $1.07 for the year ended December 31, 2004.
- Cash and Investments Balance: $1.74 billion as of December 31, 2005
During
the year, Check Point introduced many products and technologies, as
well as continued to expand and unify the portfolio of security
solutions. The company also garnered many awards. Key business
highlights, product introductions and accolades include the following:
Business Highlights and Introductions during 2005
- Expanded Industry's only Unified Security Architecture – In 2005, Check Point launched the NGX™ platform, a major upgrade to Check Point's core technology. It is the unified security platform for perimeter, internal and Web security solutions enabling enterprises of all sizes to reduce the cost and complexity of security and ensure that their security systems can be easily extended to adapt to new and evolving threats.
- Internal Security, Intrusion Prevention & Web Security – During the year we have seen strong growth in our Web-security and SSL VPN product family, Connectra™, with revenue growth of over 250% for the year. We have also expanded our internal security family, InterSpect™ that combines active intrusion prevention, network zone segmentation and quarantine capabilities. We look forward to enhancing our technology with the pending acquisition of Sourcefire, Inc. A definitive agreement was reached in October 2005. We have received US anti-trust approval and we are waiting for a determination on our pending application with the Committee on Foreign Investment in the U.S. (CFIUS).
- New Product Family for Security Event Management, Eventia™ – In early 2005, Check Point introduced the new Eventia™ family that allows IT professionals to collect, analyze, correlate and report on security events, and enables a higher level of intelligence and protection of the network security.
- Introduced New Unified Threat Management (UTM) Solutions: Check Point Express CI™ and Safe@Office® 500 appliance series – Check Point has entered the market for Unified Threat Management Solutions gateways that include in a single product integrated firewall, VPN, antivirus, intrusion prevention and many other security technologies. These two product families enable affordable security for small and medium businesses ranging from $400 to $15,000 per gateway.
- Expanded Endpoint Security for Consumers and Enterprises – ZoneAlarm® 6.0 provides new multi-layered security for consumers and debuted with a new OSFirewall™ and Anti-Spyware solution to prevent the most dangerous Internet threats including spyware, rootkits, viruses, and more from invading PCs. Integrity™ delivers the most complete endpoint security solution, including intrusion prevention, outbound threat protection, access policy enforcement, advanced server and policy automation, to proactively protect PCs and enterprise networks from the newest worms, viruses, spyware, and hacker attacks.
Partial List of Awards & Industry Recognitions in 2005:
Recognition by Industry Analyst Firms:
- Tolly Group Tests Confirm Check Point Solution Completeness and Lowest TCO – Tests by the Tolly Group confirmed that Check Point provides the broadest breadth of security coverage at the lowest Total Cost of Ownership (TCO) for today's complex security vulnerabilities in comparison to competing solutions from Cisco and Juniper.
- Gartner Group Prestigious Magic Quadrant™ Report Leader – Check Point positioned in the leader quadrant of Gartner's Magic Quadrant for Network Firewalls. This report evaluates both network and application firewall vendors on their ability to execute and completeness of vision.
- META Group Industry Leader Position in METAspectrum™ Report – Check Point was ranked as a market leader in META Group's METAspectrum report on Network Intrusion Control Systems. Of 12 vendors, Check Point ranked the highest for "performance" – a category that measures the company's technology, services pricing and financial standing.
- Frost & Sullivan Global Market Leadership for Endpoint Security Solutions – Check Point, achieved prestigious recognition from Frost & Sullivan that bestowed Check Point Integrity™ endpoint security solution with their renowned Global Market Leadership Award for outstanding market share, revenue growth rate, profitability and market and technology innovation.
Awards and Recognition for Check Point's Partner Program:
CMP's VARBusiness Magazine:
- Top Channel Executive: Kevin Maloney, Vice President, Worldwide Sales
- Five-Star Rating: Check Point Valued Partner Program
- 2005 Annual Report Card: Check Point Achieves Exceptional Partner Satisfaction
- Security Vendor Partner of the Year
Awards for Products & Technology:
Check Point VPN-1® Pro: the industry's most proven and secure VPN
- 2005 Global Best Enterprise Security Solution and Best Firewall – SC Magazine
- Editor's Choice – China Information World
- Best Firewall/VPN – Computerworld Hong Kong
- Readers Choice, Best Firewall – Computerworld Malaysia, Computerworld Singapore
- Best Firewall – Relatorio Bancario, Brazil
- Readers' Choice, Best Server/Standalone Firewall – Windows IT Pro
ZoneAlarm® Security Suite: complete internet protection for consumers
- 2005 Global and European Best SOHO Security Solution – SC Magazine, SC Magazine (UK)
- 2005 Readers' Choice, Best Desktop Firewall – Windows IT Pro
- Editors' Choice, Desktop Security – CNet
- Editors' Choice, Best Security Suite – PC Magazine
- Editor's Choice, Best Security Suite – LAPTOP Magazine
Check Point Integrity™: complete solution for securing internal-network endpoint PCs
- 2005 European Best Enterprise Security Solution – SC Magazine
- Endpoint Security Evaluation Winner – Information Security Magazine
Unified Threat Management (UTM) Solutions for Small and Mid-Size Businesses
- Midmarket Product of The Year, Check Point Express CI™ – VARBusiness
- Editor's Choice, Safe@Office – InformationWeek
- Excellent Security, Safe@Office – ProtectStar, Germany
Mr. Shwed continued, "We've continued our expansion in 2005 by strengthening our Unified Security Architecture and delivering a unique set of integrated network security solutions for our customers. We believe that our innovative technology, breadth of solutions and customer acceptance will serve as the foundation for our future success."
Conference Call and Webcast Information
Check Point will host a conference call with the investment community
on January 30, 2006 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 February 13, 2006 at the Company's website http://www.checkpoint.com/ir or by telephone at (973) 341-3080, pass code 6888307.
Safe Harbor Statement
Certain statements in this press release are forward-looking
statements. Forward-looking statements include statements regarding
factors driving Check Point's position as a provider of network
security and position for long-term success, and Check Point's beliefs
regarding the potential benefits of the pending acquisition of
Sourcefire, as well as Check Point's expectations regarding the timing
of receipt of any regulatory approvals and completion of the
acquisition. These statements pertain to future events, and therefore
they are subject to various risks and uncertainties, and 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: the impact on revenues of economic and
political uncertainties, the impact of political changes and weaknesses
in various regions of the world, including the commencement or
escalation of hostilities or acts of terrorism; the 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; timely availability and customer
acceptance of Check Point's new and existing products; the parties'
ability to consummate the Sourcefire transaction, including the ability
of the parties to secure the CFIUS approval required for the
transaction on the terms expected or on the anticipated schedule, if at
all; unanticipated expenses associated with the Sourcefire acquisition;
the possibility that Check Point may be unable to achieve all of the
benefits of the acquisition within the expected time-frames or at all
and to successfully integrate Sourcefire's operations and technology
into those of Check Point; operating costs, customer loss and business
disruption (including, without limitation, difficulties in maintaining
relationships with employees, customers, clients or suppliers) may be
greater than expected following the Sourcefire acquisition; and other
factors and risks discussed in Check Point's Annual Report on Form 20-F
for the year ended December 31, 2004, which is on file with the
Securities and Exchange Commission. Check Point assumes no obligation
to update information concerning its expectations.
About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com)
is a leader in securing the Internet. It is a market leader in the
worldwide enterprise firewall, personal firewall and VPN markets.
Through its NGX platform, the company delivers a unified security
architecture for a broad range of perimeter, internal, Web, and
endpoint security solutions that protect business communications and
resources for corporate networks and applications, remote employees,
branch offices and partner extranets. The company's ZoneAlarm product
line is the highest rated personal computer security suite, comprised
of award-winning endpoint security solutions that protect millions of
PCs from hackers, spyware and data theft. Extending the power of the
Check Point solution is its Open Platform for Security (OPSEC), the
industry's framework and alliance for integration and interoperability
with "best-of-breed" solutions from over 350 leading companies. Check
Point solutions are sold, integrated and serviced by a network of more
than 2,200 Check Point partners in 88 countries and its customers
include 100% of Fortune 100 companies and tens of thousands of
businesses and organizations of all sizes.
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CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
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(In thousands, except per share amount)
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Three Months Ended
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Year Ended
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December 31
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December 31
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2005
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2004
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2005
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2004
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(unaudited)
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(unaudited)
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| Revenues: | ||||||
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Products and licenses |
$78,978 | $77,142 | $281,364 | $275,677 | ||
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Software subscriptions |
61,585 | 53,268 | 239,319 | 196,327 | ||
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| Total product and license revenues | 140,563 | 130,410 | 520,683 | 472,004 | ||
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Services |
15,495 | 12,639 | 58,667 | 43,356 | ||
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| Total revenues | 156,058 | 143,049 | 579,350 | 515,360 | ||
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| Operating expenses: | ||||||
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Cost of revenues |
6,344 | 5,988 | 24,718 | 23,552 | ||
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Research and development |
12,193 | 12,015 | 49,290 | 43,186 | ||
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Selling and marketing |
36,271 | 36,487 | 140,283 | 132,796 | ||
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General and administrative |
5,772 | 6,050 | 23,984 | 23,657 | ||
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Amortization of intangible assets |
2,161 | 2,783 | 9,387 | 8,852 | ||
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Acquisition related in-process R&D |
- | - | - | 23,098 | ||
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| Total operating expenses | 62,741 | 63,323 | 247,662 | 255,141 | ||
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| Operating income | 93,317 | 79,726 | 331,688 | 260,219 | ||
| Financial income, net | 13,987 | 11,970 | 54,177 | 44,777 | ||
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| Income before income taxes | 107,304 | 91,696 | 385,865 | 304,996 | ||
| Income taxes | 18,067 | 15,252 | 66,181 | 56,603 | ||
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| Net income | $89,237 | $76,444 | $319,684 | $248,393 | ||
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| Net income excluding in-process R&D and amortization of intangible assets and deferred stock compensation | $90,857 | $78,684 | $326,905 |
$278,717 |
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| Earnings per share (basic) | $0.36 | $0.31 | $1.30 | $0.99 | ||
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| Number of shares used in computing earnings per share (basic) | 244,517 | 248,585 | 245,520 | 251,244 | ||
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| Earnings per share (fully diluted) | $0.36 | $0.30 | $1.27 | $0.95 | ||
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| Earnings per share (fully diluted) excluding in-process R&D and amortization of intangible assets and deferred stock compensation | $0.37 | $0.31 | $1.30 | $1.07 | ||
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| Number of shares used in computing earnings per share (fully diluted) | 248,585 | 257,459 | 251,747 | 260,608 | ||
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CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED BALANCE SHEET DATA |
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(In thousands)
ASSETS |
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December 31,
2005 |
December 31,
2004 |
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(unaudited)
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(unaudited)
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| Current assets: | ||||
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Cash and cash equivalents
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$298,531 | $162,444 | ||
| Marketable securities | 1,052,070 | 791,799 | ||
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Trade receivables, net
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127,129 | 96,006 | ||
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Other receivables and prepaid expenses
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20,646 | 20,517 | ||
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Total current assets
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1,498,376 | 1,070,766 | ||
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| Long-term assets: | ||||
| Long-term investments | 386,753 | 623,045 | ||
| Other long-term assets | 875 | 867 | ||
| Property and equipment, net | 7,665 | 8,144 | ||
| Intangible assets | 20,215 | 25,857 | ||
| Goodwill | 174,295 | 175,536 | ||
| Deferred income taxes, net | 5,650 | 8,439 | ||
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| Total long-term assets | 595,453 | 841,888 | ||
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| Total assets | $2,093,829 | $1,912,654 | ||
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LIABILITIES AND SHAREHOLDERS' EQUITY
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| Current Liabilities: | ||||
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Deferred revenues
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$168,998 | $141,114 | ||
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Trade payables and other accrued liabilities
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136,872 | 137,932 | ||
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Total current liabilities
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305,870 | 279,046 | ||
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| Accrued severance pay, net | 3,271 | 2,784 | ||
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| Total liabilities | 309,141 | 281,830 | ||
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| Shareholders' Equity: | ||||
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Share capital
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774 | 771 | ||
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Additional paid-in capital
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386,544 | 369,452 | ||
| Deferred stock based compensation | (2,831) | (10,342) | ||
| Treasury shares | (380,834) | (244,586) | ||
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Retained earnings
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1,781,035 | 1,515,529 | ||
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Total shareholders' equity
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1,784,688 | 1,630,824 | ||
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| Total liabilities and shareholders' equity | $2,093,829 | $1,912,654 | ||
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| Total cash and cash equivalents, deposits and marketable securities | 1,737,354 | 1,577,288 | ||
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CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA |
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(In thousands)
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Three Months Ended
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Year Ended
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December 31,
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December 31,
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2005
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2004
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2005
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2004
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(unaudited)
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(unaudited)
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| Cash flow from operating activities: | ||||||
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Net income |
$89,237 | $76,444 | $319,684 | $248,393 | ||
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Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization | 1,371 | 1,382 | 5,352 | 5,519 | ||
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Decrease in trade and other receivables, net |
(44,777) | (23,233) | (31,451) | (20,644) | ||
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Increase (decrease) in trade payables and other accrued liabilities |
27,467 | 14,865 | 28,402 | 17,868 | ||
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Other adjustments |
6,028 | 1,285 | 15,552 | 1,426 | ||
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Amortization of intangible assets and deferred stock compensation |
2,161 | 2,783 | 9,387 | 8,852 | ||
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Acquisition related in-process R&D |
- | - | - | 23,098 | ||
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| Net cash provided by operating activities | 81,487 | 73,526 | 346,926 | 284,512 | ||
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| Cash flow from investing activities: | ||||||
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Cash paid in conjunction with the acquisition of Zone Labs, net |
- | - | - | (95,343) | ||
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Investment in property and equipment |
(1,392) | (1,169) | (4,873) | (4,500) | ||
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Net cash used in investing activities |
(1,392) | (1,169) | (4,873) | (99,843) | ||
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| Cash flow from financing activities: | ||||||
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Proceeds from issuance of shares upon exercise of options |
11,937 | 10,992 | 54,942 | 34,481 | ||
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Purchase of treasury shares |
(27,466) | (44,349) | (236,929) | (244,586) | ||
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Net cash used in financing activities |
(15,529) | (33,357) | (181,987) | (210,105) | ||
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| Increase (decrease) in cash and cash equivalents, deposits and marketable securities | 64,566 | 39,000 | 160,066 | (25,436) | ||
| Cash and cash equivalents, deposits and marketable securities at the beginning of the period | 1,672,788 | 1,538,288 | 1,577,288 | 1,602,724 | ||
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| Cash and cash equivalents, deposits and marketable securities at the end of the period | 1,737,354 | 1,577,288 | 1,737,354 | 1,577,288 | ||
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©2003 — 2008 Check Point Software Technologies Ltd. All rights reserved.