Check Point Software Reports Financial Results for the Second Quarter of 2008
Redwood City, CA —
- Revenue: $199.6 Million - 13% growth year over year
- Products & Licenses Revenue: $85.0 Million - 16% growth year over year
- Deferred Revenue: $279.2 Million - 18% growth year over year
- Non-GAAP EPS: $0.43 - 12% growth year over year
REDWOOD CITY, Calif., -- July 22, 2008 — Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced its financial results for the second quarter ended June 30, 2008.
"Check Point’s success during the quarter is a direct result of effectively executing our Total Security strategy." said Gil Shwed, chairman and chief executive officer at Check Point. "We have continued to experience strength across our business which is reflected in the double-digit year over year growth in revenue, earnings per share and deferred revenue."
Financial Highlights for the Second Quarter of 2008:
- Total Revenues: $199.6 million, an increase of 13 percent, compared to $176.2 million in the second quarter of 2007. Product and license revenue was $85.0 million, an increase of 16 percent, compared to $73.3 million in the second quarter of 2007.
- Net Income – GAAP: $79.2 million, an increase of 14 percent, compared to $69.5 million in the second quarter of 2007. Net income in the second quarter of 2008 includes acquisition-related charges of $8.9 million and equity-based compensation expenses of $8.4 million. Net of taxes, these charges totaled $13.5 million. Net income in the second quarter of 2007 included acquisition-related charges of $10.3 million and equity-based compensation expenses of $8.6 million. Net of taxes these charges totaled $16.2 million.
- Net Income – Non-GAAP:1 $92.7 million, an increase of 8 percent, compared to $85.7 million in the second quarter of 2007. Non-GAAP net income excludes equity-based compensation expenses and acquisition-related charges.2
- Earnings per Diluted Share – GAAP: $0.36, an increase of 18 percent, compared to $0.31 in the second quarter of 2007. GAAP earnings per diluted share for the second quarter of 2008 included equity-based compensation expenses of $0.04 and acquisition-related charges of $0.05. Net of taxes, these charges totaled $0.07. GAAP earnings per diluted share for the second quarter of 2007 included acquisition-related charges of $0.05 and equity-based compensation expenses of $0.03. Net of taxes these charges totaled $0.07.
- Earnings per Diluted Share – Non-GAAP: $0.43, an increase of 12 percent, compared to $0.38 in the second quarter of 2007. Non-GAAP earnings per diluted share exclude equity-based compensation expenses and acquisition-related charges.
- Deferred Revenues: As of June 30, 2008, we had deferred revenue of $279.2 million, a $43 million or 18% increase compared to deferred revenues as of June 30, 2007.
- Cash Flow: $82.6 million in cash flow from operations and we had $1.34 billion in cash and investments as of June 30, 2008.
- Share Repurchase Program: During the second quarter of 2008, Check Point repurchased 2.1 million shares at an approximate cost of $50.0 million.
1 See "Use of Non-GAAP Financial Information" and "Reconciliation of Supplemental Financial Information" below for more information regarding Check Point’s use of non-GAAP measures.
2 "Equity-based compensation expenses" refer to the amortized fair value of all equity based awards granted to employees. "Acquisition- related charges" refer to the impact of the amortization of intangibles.
Business Highlights for the Second Quarter of 2008:
Since April we have expanded and continued to improve the performance of our unified line of security gateways. We introduced the Power-1 appliances, a new line of high-performance security gateways delivering excellent performance of up to 14 Gbps and record price performance at less than $4 per Mbps. In addition, we added five new UTM-1 Total Security appliances, expanded the range of solutions from a sub-five thousand dollar model and up to 4.5 Gbps performance providing our customers with more choices when selecting network security appliances. The new appliances further compliment our Open Choice program which allows customers to choose from a variety of gateway security platforms, including Check Point Power-1 and UTM-1 branded appliances, software on open servers and Check Point software integrated on partner appliances.
We continued to address the growing security needs of our customers utilizing Apple’s Mac OS X and iPhone with the release of Check Point Full Disk Encryption (FDE) for the Mac and VPN-1 support for the iPhone. Our FDE for Mac is the only enterprise full-disk encryption solution with pre-boot authentication available in the market today.
During the second quarter we also received awards from third-party industry organizations including: "Best Enterprise Firewall" from SC Magazine for Check Point VPN-1 Power, "Endpoint Security Product of the Year" from Techworld for Check Point Endpoint Security, "VB100 Award" from Virus Bulletin for ZoneAlarm Internet Security and "Ten Best Web Support Sites" for 2008 from Association of Support Professionals.
Mr. Shwed concluded, "I am pleased with our results for the quarter as we have now exceeded our plans for the sixth quarter in a row. During that time we have also expanded and executed our strategy of delivering a comprehensive integrated security solution that includes a unified line of security gateways, a single-agent for endpoint security and a single security management console."
Conference Call and Webcast Information
Check Point will host a conference call with the investment community on July 22, 2008 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 August 5, 2008 at the company's website http://www.checkpoint.com/ir or by telephone at +1.800.642.1687 passcode # 54900277.
About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com) is the leader in securing the Internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers’ dynamic business needs. This combination is unique and is a result of our leadership and innovation in the enterprise firewall, personal firewall/endpoint, data security and VPN markets.
Check Point’s award-winning ZoneAlarm solutions protect millions of consumer PCs from hackers, spyware and identity theft. Check Point solutions are sold, integrated and serviced by a network of Check Point partners around the world and its customers include 100 percent of Fortune 100 companies and tens of thousands of businesses and organizations of all sizes.
©2003–2008 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 net income, operating income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123R, in-process R&D expense and acquisition related charges. Check Point’s management believes the non-GAAP financial information provided in this release is useful to investors’ understanding and assessment of Check Point’s ongoing core operations and prospects for the future. Historically, Check Point has also publicly presented these supplemental non-GAAP financial measures in order to assist the investment community to see the Company "through the eyes of management," and thereby enhance understanding of its operating performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release to the most directly comparable GAAP financial measures is included with the financial statements contained in this press release. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and as such has determined that it is important to provide this information to investors.
Safe Harbor Regarding Forward Looking Statements
This press release 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, including, but not limited to, statements related to Check Point’s expectations that we will continue to build upon the success of our industry-leading security products by increasing the breadth of their functionality and providing tighter integration throughout our comprehensive product line to address the security needs of our customers worldwide. Because these statements pertain to future events they are subject to various risks and uncertainties, actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to: general market conditions in the Check Point’s industry; economic and political uncertainties; the impact of political changes and weaknesses in various regions of the world, including hostilities or acts of terrorism in Israel, where Check Point’s international headquarters are based; inclusion of network security functionality in third-party hardware or system software; any foreseen and unforeseen developmental or technological difficulties with regard to Check Point's products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; rapid technological advances and changes in customer requirements to which Check Point is unable to respond expeditiously, if at all; a shift in demand for products such as Check Point's; factors affecting third parties with which Check Point has formed business alliances; and the timely availability and customer acceptance of Check Point's new and existing products. The forward-looking statements contained in this press release are subject to other factors and risks, including those discussed in Check Point's Annual Report on Form 20-F for the year ended December 31, 2007, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations or beliefs.
###
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
 |
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
||||
|
June 30,
|
June 30,
|
||||
| 2007 | 2007 | ||||
|
|
|
|
|
|
| (unaudited) | (unaudited) | (unaudited) | |||
| Revenues: | |||||
|
Products and licenses |
$84,973 | $73,318 |
$162,352
|
$139,366 | |
|
Software updates, maintenance |
114,633 | 102,874 |
228,851
|
200,795 | |
|
|
|
|
|
|
| Total revenues | 199,606 | 176,192 | 391,203 | 340,161 | |
| Operating expenses: | |||||
|
Cost of products and licenses |
9,693
|
6,747
|
18,686
|
11,987
|
|
|
Cost of software updates, maintenance and services |
7,101
|
5,899
|
13,851
|
11,357
|
|
|
Amortization of technology |
5,800
|
7,154
|
12,954
|
13,416
|
|
|
|
|
|
|
|
| Total cost of revenues |
22,594
|
19,800
|
45,491
|
36,760
|
|
|
Research and development |
23,824
|
20,775
|
46,569
|
39,643
|
|
|
Selling and marketing |
56,588
|
55,176
|
110,248
|
107,338
|
|
|
General and administrative |
13,005
|
11,621
|
26,571
|
25,721
|
|
|
Acquired in process research and development |
-
|
-
|
-
|
17,000
|
|
|
|
|
|
|
|
| Total operating expenses |
116,011
|
107,372
|
228,879
|
226,462
|
|
| Operating income |
83,595
|
68,820
|
162,324
|
113,699
|
|
| Financial income, net |
12,789
|
11,645
|
27,409
|
24,713
|
|
|
|
|
|
|
|
| Income before income taxes |
96,384
|
80,465
|
189,733
|
138,412
|
|
| Taxes on income |
17,211
|
11,004
|
32,302
|
22,003
|
|
|
|
|
|
|
|
| Net income |
$79,173
|
$69,461
|
$157,431
|
$116,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share (basic) |
$0.37
|
$0.31
|
$0.72
|
$0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of shares used in computing earnings per share (basic) |
215,030
|
223,291
|
217,568
|
222,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share (diluted) |
$0.36
|
$0.31
|
$0.71
|
$0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of shares used in computing earnings per share (diluted) |
217,951
|
226,151
|
|
225,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
RECONCILIATION OF SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share amounts)
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|||
|
June 30,
|
June 30,
|
|||
|
2008
|
2007 | 2008 | 2007 | |
|
|
|
|
|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| GAAP operating income | $83,595 | $68,820 | $162,324 | $113,699 |
|
Stock-based compensation 1 |
8,385 | 8,588 | 17,456 | 16,926 |
|
Amortization of intangible 2 |
8,893 | 10,338 | 19,197 | 19,308 |
|
Acquired in process research and development |
- | - | - | 17,000 |
|
|
|
|
|
| Non-GAAP operating income | $100,873 | $87,746 | $198,977 | $166,933 |
|
|
|
|
|
|
|
|
|
|
| GAAP net income | $79,173 | $69,461 | $157,431 | $116,409 |
|
Stock-based compensation 1 |
8,385 | 8,588 | 17,456 | 16,926 |
|
Amortization of intangible assets 2 |
8,893 | 10,338 | 19,197 | 19,308 |
|
Acquired in process research and development |
- | - | - | 17,000 |
|
Taxes on stock-based compensation and amortization of intangible assets 3 |
(3,753) | (2,698) | (8,017) | (5,344) |
|
|
|
|
|
|
Non-GAAP net income |
$92,698 | $85,689 | $186,067 | $164,299 |
|
|
|
|
|
|
|
|
|
|
| GAAP Earnings per share (diluted) | $0.36 | $0.31 | $0.71 | $0.52 |
|
Stock-based compensation 1 |
0.04 | 0.03 | 0.08 | 0.07 |
|
Amortization of intangible assets 2 |
0.05 | 0.05 | 0.10 | 0.09 |
|
Acquired in process research and development |
- | - | - | 0.07 |
|
Taxes on stock-based compensation and amortization of intangible assets 3 |
(0.02) | (0.01) | (0.04) | (0.02) |
|
|
|
|
|
|
Non-GAAP Earnings per share (diluted) |
$0.43 | $0.38 | $0.85 | $0.73 |
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in computing Non-GAAP earnings per share (diluted) |
217,951 | 226,151 | 220,192 | 225,806 |
|
|
|
|
|
|
|
|
|
|
| 1 Stock-based compensation: | ||||
|
Cost of products and licenses |
$15
|
$13
|
$27
|
$24
|
|
Cost of software updates, maintenance and services |
194
|
193
|
377
|
310
|
|
Research and development |
1,204
|
1,060
|
2,301
|
2,070
|
|
Selling and marketing |
1,926
|
2,627
|
4,166
|
4,348
|
|
General and administrative |
5,046
|
4,695
|
10,585
|
10,174
|
|
|
|
|
|
|
8,385
|
8,588
|
17,456
|
16,926
|
|
| 2 Amortization of intangible assets and acquisition related expenses: | ||||
|
Cost of products and licenses |
5,800
|
7,154
|
12,954
|
13,416
|
|
Selling and marketing |
3,093
|
3,184
|
6,243
|
5,892
|
|
|
|
|
|
|
|
8,893
|
10,338
|
19,197
|
19,308
|
|
3 Taxes on stock-based compensation and amortization of intangible assets and acquisition related expenses |
(3,753)
|
(2,698)
|
(8,017)
|
(5,344)
|
|
|
|
|
|
|
Total, net |
$13,525
|
$16,228
|
$28,636
|
$30,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
ASSETS
|
||
|
June 30,
|
December 31,
|
|
|
2008
|
2007
|
|
|
(unaudited)
|
(unaudited)
|
|
| Current assets: | ||
| Cash and cash equivalents |
$472,970
|
$509,664
|
| Marketable securities |
279,557
|
332,355
|
| Trade receivables, net |
158,129
|
201,515
|
| Other current assets |
29,899
|
21,595
|
| Total current assets |
940,555
|
1,065,129
|
| Long-term assets: | ||
| Marketable securities |
590,246
|
399,490
|
| Property, plant and equipment, net |
57,098
|
56,947
|
| Severance pay fund |
12,115
|
9,302
|
| Deferred income taxes, net |
17,793
|
14,920
|
| Intangible assets, net |
140,937
|
160,133
|
| Goodwill |
664,602
|
664,910
|
| Other assets |
645
|
636
|
| Total long-term assets |
1,483,436
|
1,306,338
|
| Total assets |
$2,423,991
|
2,371,467
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
||
| Current liabilities: | ||
| Deferred revenues |
$279,188
|
$273,693
|
| Trade payables and other accrued liabilities |
81,404
|
116,406
|
| Total current liabilities |
360,592
|
390,099
|
| Income tax accrual |
91,470
|
78,545
|
| Deferred tax liability, net |
26,845
|
31,465
|
| Accrued severance pay |
17,585
|
14,403
|
| Total liabilities |
496,492
|
514,512
|
| Shareholders' equity: | ||
| Share capital |
774
|
774
|
| Additional paid-in capital |
489,017
|
464,330
|
| Treasury shares at cost |
(1,011,033)
|
(907,022)
|
| Accumulated other comprehensive income |
(6,330)
|
1,233
|
| Retained earnings |
2,455,071
|
2,297,640
|
| Total shareholders' equity |
1,927,499
|
1,856,955
|
| Total liabilities and shareholders' equity |
$2,423,991
|
2,371,467
|
| Total cash and cash equivalents and marketable |
$1,342,773
|
1,241,509
|
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands)
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|||
|
June 30,
|
June 30,
|
|||
|
2008
|
2007
|
2008
|
2007
|
|
|
|
|
|
|
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
| Cash flow from operating activities: | ||||
| Net income |
$79,173
|
$69,461
|
$157,431
|
$116,409
|
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
|
Depreciation and amortization of property, plant and equipment |
2,186
|
1,707
|
4,375
|
2,944
|
|
Decrease (increase) in trade and other receivables, net |
(11,342)
|
2,063
|
36,784
|
40,624
|
|
Increase (decrease) in deferred revenues, trade payables and other accrued liabilities |
1,213
|
(7,557)
|
4,544
|
(13,343)
|
|
Acquisition of in process research and development |
-
|
-
|
-
|
17,000
|
|
Amortization of intangible assets |
8,893 | 10,338 | 19,197 | 19,308 |
|
Stock-based compensation |
8,385
|
8,588
|
17,456
|
16,926
|
|
Excess tax benefit from stock-based compensation |
(2,681)
|
-
|
(6,029)
|
-
|
|
Deferred income taxes, net |
(3,268)
|
(3,136)
|
(8,323)
|
(8,396)
|
|
|
|
|
|
| Net cash provided by operating activities |
82,559
|
81,464
|
225,435
|
191,472
|
|
|
|
|
|
| Cash flow from investing activities: | ||||
| Cash paid in conjunction with the acquisition of Protect Data, net | (9,042) | (260) | (9,042) | (594,294) |
| Investment in property, plant and equipment | (2,591) | (5,564) | (4,526) | (9,986) |
|
|
|
|
|
| Net cash used in investing activities | (11,633) | (5,824) | (13,568) | (604,280) |
|
|
|
|
|
| Cash flow from financing activities: | ||||
|
Proceeds from issuance of shares upon exercise of options |
9,304
|
7,418
|
15,772
|
14,935
|
|
Purchase of treasury shares |
(50,000)
|
(50,000)
|
(123,000)
|
(105,627)
|
|
Excess tax benefit from stock-based compensation |
2,681
|
-
|
6,029
|
-
|
|
|
|
|
|
| Net cash used in financing activities |
(38,015)
|
(42,582)
|
(101,199)
|
(90,692)
|
|
|
|
|
|
| Unrealized gain (loss) on marketable securities, net |
(8,844)
|
(4,388)
|
(9,404)
|
3,738
|
|
|
|
|
|
| Increase (decrease) in cash and cash equivalents, deposits and marketable securities |
24,067
|
28,670
|
101,264
|
(499,762)
|
| Cash and cash equivalents, deposits and marketable securities at the beginning of the period |
1,318,706
|
1,121,506
|
1,241,509
|
1,649,938
|
|
|
|
|
|
| Cash and cash equivalents, deposits and marketable securities at the end of the period |
$1,342,773
|
$1,150,176
|
$1,342,773
|
$1,150,176
|
|
|
|
|
|
|
|
|
|
|
###
©2003 — 2008 Check Point Software Technologies Ltd. All rights reserved.