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Check Point Software Technologies Ltd.: Check Point Software Reports Record Financial Results for the Second Quarter 2009

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  Published in Science and Technology on Tuesday, July 28th 2009 at 2:10 GMT, Last Modified on 2009-07-28 02:10:11 by Market Wire
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REDWOOD CITY, CA--(Marketwire - July 28, 2009) - Check Point® Software Technologies Ltd. (NASDAQ: [ CHKP ]), the worldwide leader in securing the Internet, today announced record financial results for the second quarter ended June 30, 2009.

"I'm pleased to report record quarterly results. Our quarterly results came in at the high-end of our projections with 12 percent year over year growth in revenues and non-GAAP earnings per share. Revenue growth came from all regions and represented our highest quarterly revenues to date," said Gil Shwed, Chairman and Chief Executive Officer at Check Point. "The synergies associated with the successful acquisition of Nokia's Security Appliance business contributed to these record results and enabled us to achieve non-GAAP operating margin of 52 percent."

Financial Highlights for the Second Quarter of 2009

• Total Revenues: $223.6 million, an increase of 12 percent, compared to $199.6 million in the second quarter of 2008, and sequential quarterly growth of 15 percent.
• GAAP Operating Income: $86.7 million, up from $83.6 million a year ago. The GAAP operating income in the second quarter of 2009 included amortization of intangible assets in the amount of $4.6 million and restructuring charges of $9.0 million related to the Nokia security business acquisition.
• Non-GAAP(1) operating income: $116.4 million, an increase of 15 percent compared to $100.9 million a year ago. Non-GAAP operating margin was 52 percent, compared to 51 percent a year ago.
• GAAP Net Income and Earnings per Diluted Share: GAAP net income was $75.6 million compared to $79.2 million in the second quarter of 2008. Earnings per share were $0.36 for both periods. The GAAP net income in the second quarter of 2009 included amortization of intangible assets in the amount of $4.6 million ($0.02 per diluted share) and restructuring charges of $9.0 million ($0.04 per diluted share) related to the Nokia security business acquisition. Net of taxes these charges totaled $11.9 million ($0.06 per diluted share).
• Non-GAAP(1) Net Income and Earnings per Diluted Share: Non-GAAP net income was $100.9 million, compared to $92.7 million in the second quarter of 2008 and EPS was $0.48, an increase of 12 percent, compared to $0.43 in the second quarter of 2008.
• Deferred Revenues: As of June 30, 2009, we had deferred revenue of $362.1 million, which represented an increase of $82.9 million, or 30 percent compared to deferred revenues as of June 30, 2008.
• Cash Flow: Cash flow from operations was $112.7 million, an increase of 37 percent, compared to $82.6 million in the second quarter of 2008. We had $1.63 billion in cash and investments as of June 30, 2009.
• Share Repurchase Program: During the second quarter of 2009, we repurchased 2.2 million shares at a total cost of $50.0 million.

(1) For information regarding the non-GAAP financial measures discussed in this release, please see "Use of Non-GAAP Financial Information" and "Reconciliation of Non-GAAP to GAAP Financial Information."

Business Highlights

Mr. Shwed continued, "During the quarter we expanded our product portfolio with the introduction of our Power-1 11000 high end appliance series, the SMART-1 management appliances and the acquisition of the IP series appliance business from Nokia. We also added over 300 people as part of the acquisition, primarily in sales and marketing, R&D and technical services. As a result, we have increased our investment in future product development and have provided further resources to support our customers and partners even given today's economy."

During the second quarter of 2009 we expanded its security hardware appliance portfolio, giving customers more options to deploy our leading security software. In April, we completed the acquisition of the Nokia Security Appliance Business and delivered the new Check Point IP appliance line that utilizes our revolutionary new software blade architecture. This allows prior Nokia appliance customers the ability to take advantage of integrated Intrusion Prevention System (IPS) for the first time, and was followed by the introduction of the Power-1 11000 series appliances designed for high performance environments, based on our revolutionary Software Blade architecture.

Also in the second quarter, we introduced the SMART-1 appliances, representing the next step in our efforts to simplify security management for enterprises while providing the highest level of security. SMART-1 utilizes the benefits of Check Point's Software Blade architecture and provides flexibility and extensibility to the network administrator by unifying network, IPS and endpoint security policy management.

Additionally, in July during our Check Point Experience in the Asia Pacific region we introduced our latest management blade, SmartWorkFlow, which enables customers to streamline security operations and achieve higher levels of compliance. We also announced our latest endpoint security solution, Endpoint Security R72, our latest version of the industry's only single agent for endpoint security that utilizes our patent-pending WebCheck™ browser virtualization security technology to protect enterprise PCs against Web-based threats. Furthermore, to ease the end-user experience, Endpoint Security R72 OneCheck single authentication unlocks all endpoint security subsystems and VPN Auto-Connect simplifies remote access.

Mr. Shwed concluded: "I am proud of the record results we achieved this quarter. During my meetings with customers I encountered a great deal of enthusiasm for our strategy that was primarily focused on our software blade architecture and expanded appliance portfolio. I'd like to thank our partners and customers for their continued support of Check Point's business."

Conference Call and Webcast Information

Check Point will host a conference call with the investment community on July 28, 2009 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 12, 2009 at the company's website [ http://www.checkpoint.com/ir ] or by telephone at +1 201.612.7415, passcode # 327789, account # 215.

About Check Point Software Technologies Ltd.

Check Point Software Technologies Ltd. ([ www.checkpoint.com ]), 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 uncompromised 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.

©2003 - 2009 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, amortization of acquired intangible assets, restructuring-related charges 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 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. 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, our beliefs and expectations regarding our product introductions and enhancements. 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 Check Point's industry; economic and political uncertainties; the financial and business conditions affecting our customers; 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, 2008, which is on file with the Securities and Exchange Commission. The statements made in this press release are based on Check Point's expectations or beliefs as of the date hereof, and 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, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- (unaudited)(unaudited)(unaudited)(unaudited) Revenues: Products and licenses $ 82,801 $ 84,973 $ 154,545 $ 162,352 Software updates, maintenance and services 140,840 114,633 264,108 228,851 --------- --------- --------- --------- Total revenues 223,641 199,606 418,653 391,203 --------- --------- --------- --------- Operating expenses: Cost of products and licenses 16,837 9,693 26,463 18,686 Cost of software updates, maintenance and services 10,775 7,101 16,604 13,851 Amortization of technology 7,230 5,800 13,030 12,954 --------- --------- --------- --------- Total cost of revenues 34,842 22,594 56,097 45,491 Research and development 23,468 23,824 43,255 46,569 Selling and marketing 56,939 56,588 104,011 110,248 General and administrative 12,680 13,005 27,297 26,571 Restructuring 9,034 - 9,034 - --------- --------- --------- --------- Total operating expenses 136,963 116,011 239,694 228,879 --------- --------- --------- --------- Operating income 86,678 83,595 178,959 162,324 Financial income, net 8,130 7,949 16,543 20,312 --------- --------- --------- --------- Income before income taxes 94,808 91,544 195,502 182,636 Taxes on income 19,205 12,371 38,978 25,205 --------- --------- --------- --------- Net income $ 75,603 $ 79,173 $ 156,524 $ 157,431 ========= ========= ========= ========= Earnings per share (basic) $ 0.36 $ 0.37 $ 0.75 $ 0.72 ========= ========= ========= ========= Number of shares used in computing earnings per share (basic) 209,521 215,030 209,835 217,568 ========= ========= ========= ========= Earnings per share (diluted) $ 0.36 $ 0.36 $ 0.74 $ 0.71 ========= ========= ========= ========= Number of shares used in computing earnings per share (diluted) 211,615 217,951 211,847 220,192 ========= ========= ========= ========= CHECK POINT SOFTWARE TECHNOLOGIES LTD.RECONCILIATION OF SELCTED GAAP MEASURES TO NON GAAP MEASURES (In thousands, except per share amounts) -------------------- -------------------- Three Months Ended Six Months Ended -------------------- -------------------- June 30, June 30, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- (unaudited)(unaudited)(unaudited)(unaudited) GAAP operating income $ 86,678 $ 83,595 $ 178,959 $ 162,324 Stock-based compensation (1) 7,271 8,385 15,074 17,456 Amortization of intangible assets (2) 13,453 8,893 22,346 19,196 Restructuring (3) 9,034 - 9,034 - --------- --------- --------- --------- Non-GAAP operating income $ 116,436 $ 100,873 $ 225,413 $ 198,976 ========= ========= ========= ========= GAAP net income $ 75,603 $ 79,173 $ 156,524 $ 157,431 Stock-based compensation (1) 7,271 8,385 15,074 17,456 Amortization of intangible assets (2) 13,453 8,893 22,346 19,196 Restructuring (3) 9,034 - 9,034 - Taxes on stock-based compensation, amortization of intangible assets and restructuring (4) (4,499) (3,753) (6,622) (8,017) --------- --------- --------- --------- Non-GAAP net income $ 100,862 $ 92,698 $ 196,356 $ 186,066 ========= ========= ========= ========= GAAP Earnings per share (diluted) $ 0.36 $ 0.36 $ 0.74 $ 0.71 Stock-based compensation (1) 0.03 0.04 0.07 0.08 Amortization of intangible assets (2) 0.07 0.05 0.11 0.10 Restructuring (3) 0.04 - 0.04 - Taxes on stock-based compensation, amortization of intangible assets and restructuring (4) (0.02) (0.02) (0.03) (0.04) --------- --------- --------- --------- Non-GAAP Earnings per share (diluted) $ 0.48 $ 0.43 $ 0.93 $ 0.85 ========= ========= ========= ========= Number of shares used in computing Non-GAAP earnings per share (diluted) 211,615 217,951 211,847 220,192 ========= ========= ========= ========= (1) Stock-based compensation: Cost of products and licenses $ 13 $ 15 $ 21 $ 27 Cost of software updates, maintenance and services 107 194 300 377 Research and development 1,515 1,204 2,773 2,301 Selling and marketing 976 1,926 2,716 4,166 General and administrative 4,660 5,046 9,264 10,585 --------- --------- --------- --------- 7,271 8,385 15,074 17,456 --------- --------- --------- --------- (2) Amortization of intangible assets: Cost of products and licenses 7,230 5,800 13,030 12,954 Selling and marketing 6,223 3,093 9,316 6,242 --------- --------- --------- --------- 13,453 8,893 22,346 19,196 --------- --------- --------- --------- (3) Restructuring 9,034 - 9,034 - --------- --------- --------- --------- (4) Taxes on stock-based compensation, amortization of intangible assets and restructuring (4,499) (3,753) (6,622) (8,017) --------- --------- --------- --------- Total, net $ 25,259 $ 13,525 $ 39,832 $ 28,635 ========= ========= ========= ========= CHECK POINT SOFTWARE TECHNOLOGIES LTD.CONDENSED CONSOLIDATED BALANCE SHEET DATA (In thousands) ASSETS June 30, December 31, 2009 2008 ----------- ----------- (unaudited) (audited) Current assets: Cash and cash equivalents $ 714,094 $ 543,190 Marketable securities and deposits 307,291 371,197 Trade receivables, net 187,185 251,771 Other current assets 39,222 28,372 ----------- ----------- Total current assets 1,247,792 1,194,530 ----------- ----------- Long-term assets: Marketable securities 608,795 529,445 Property, plant and equipment, net 41,104 40,248 Severance pay fund 5,862 5,817 Deferred income taxes, net 17,353 19,003 Intangible assets, net 137,749 123,151 Goodwill 708,458 664,602 Other assets 22,293 16,820 ----------- ----------- Total long-term assets 1,541,614 1,399,086 ----------- ----------- Total assets $ 2,789,406 $ 2,593,616 =========== =========== LIABILITIES ANDSHAREHOLDERS' EQUITY Current liabilities: Short-term deferred revenues $ 329,985 $ 289,998 Trade payables and other accrued liabilities 141,472 112,556 ------------ ------------ Total current liabilities 471,457 402,554 ------------ ------------ Long-term deferred revenues 32,106 40,799 Income tax accrual 109,737 101,230 Deferred tax liability, net 17,605 22,225 Accrued severance pay 10,638 10,943 ------------ ------------ Total liabilities 641,543 577,751 ------------ ------------ Shareholders' equity: Share capital 774 774 Additional paid-in capital 513,862 503,408 Treasury shares at cost (1,151,758) (1,105,250) Accumulated other comprehensive income (loss) 7,717 (4,673) Retained earnings 2,777,268 2,621,606 ------------ ------------ Total shareholders' equity 2,147,863 2,015,865 ------------ ------------ Total liabilities and shareholders' equity $ 2,789,406 $ 2,593,616 ============ ============ Total cash and cash equivalents and marketable securities $ 1,630,180 $ 1,443,832 ============ ============ CHECK POINT SOFTWARE TECHNOLOGIES LTD.SELECTED CONSOLIDATED CASH FLOW DATA (In thousands) Three Months Ended Six Months Ended --------------------- --------------------- June 30, June 30, --------------------- --------------------- 2009 2008 2009 2008 ---------- ---------- ---------- ---------- (unaudited)(unaudited) (unaudited)(unaudited) Cash flow from operating activities: Net income $ 75,603 $ 79,173 $ 156,524 $ 157,431 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 2,223 2,145 5,035 4,293 Decrease (increase) in trade and other receivables, net 4,393 (11,301) 85,100 36,867 Increase in deferred revenues, trade payables and other accrued liabilities 16,159 1,213 9,275 4,544 Realized loss on marketable securities - - 1,896 - Stock-based compensation 7,271 8,385 15,074 17,456 Amortization of intangible assets 13,453 8,893 22,346 19,196 Excess tax benefit from stock-based compensation (2,043) (2,681) (4,514) (6,029) Deferred income taxes, net (4,352) (3,268) (6,242) (8,323) ---------- ---------- ---------- ---------- Net cash provided by operating activities 112,707 82,559 284,494 225,435 ---------- ---------- ---------- ---------- Cash flow from investing activities: Cash paid in conjunction with the acquisition of Protect Data, net - (9,042) - (9,042) Cash paid in conjunction with the acquisition of Nokia (57,540) - (57,540) - Investment in property, plant and equipment (1,207) (2,591) (2,601) (4,526) ---------- ---------- ---------- ---------- Net cash used in investing activities (58,747) (11,633) (60,141) (13,568) ---------- ---------- ---------- ---------- Cash flow from financing activities: Proceeds from issuance of shares upon exercise of options 18,514 9,304 42,303 15,772 Purchase of treasury shares (49,998) (50,000) (102,286) (123,000) Excess tax benefit from stock-based compensation 2,043 2,681 4,514 6,029 ---------- ---------- ---------- ---------- Net cash used in financing activities (29,441) (38,015) (55,469) (101,199) ---------- ---------- ---------- ---------- Unrealized gain (loss) on marketable securities, net 14,842 (8,844) 17,464 (9,404) ---------- ---------- ---------- ---------- Increase in cash and cash equivalents, deposits and marketable securities 39,361 24,067 186,348 101,264 Cash and cash equivalents, deposits and marketable securities at the beginning of the period 1,590,819 1,318,706 1,443,832 1,241,509 ---------- ---------- ---------- ---------- Cash and cash equivalents, deposits and marketable securities at the end of the period $1,630,180 $1,342,773 $1,630,180 $1,342,773 ========== ========== ========== ==========