Check Point Software Technologies Reports Record Fourth Quarter and Fiscal Year 2010 Financial Results

Total Revenue: $318.5 million, representing a 17 percent increase year over year
Non-GAAP Operating Income: $183.6 million, representing 58 percent of revenues
Non-GAAP EPS: $0.73, representing a 20 percent increase year over year

Fiscal Year 2010:

Total Revenue: $1,097.9 million, representing a 19 percent increase year over year
Non-GAAP Operating Income: $622.7 million, representing 57 percent of revenues
Non-GAAP EPS: $2.48, representing a 21 percent increase year over year
Cash Flow from Operations: $674.1 million, representing a 23 percent increase year over year

[ Check Point® Software Technologies Ltd. ] (NASDAQ: [ CHKP ]), the worldwide leader in securing the Internet, today announced its financial results for the fourth quarter and fiscal year ending December 31, 2010.

"I am very pleased with the all-time record results we achieved during the year. We exceeded our own expectations delivering close to $1.1 billion in revenues and $2.48 in earnings per share (Non-GAAP)," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies. "Our exceptional performance was driven by demand for our network security products, which is a market in which we continued to gain share. We also extended our market reach with our [ Intrusion Prevention System ] (IPS), [ Data Loss Prevention ] (DLP) and [ Mobile Access ] Software Blades™."

Financial Highlights for the Fourth Quarter ended December 31, 2010:

Total Revenue: $318.5 million, an increase of 17 percent, compared to $272.1 million in the fourth quarter of 2009.
GAAP Operating Income: $162.0 million, an increase of 24 percent, compared to $130.6 million in the fourth quarter of 2009. GAAP operating margin was 51 percent, compared to 48 percent in the fourth quarter of 2009.
Non-GAAP Operating Income: $183.6 million, an increase of 20 percent, compared to $152.7 million in the fourth quarter of 2009. Non-GAAP operating margin was 58 percent, compared to 56 percent in the fourth quarter of 2009.
GAAP Net Income and Earnings per Diluted Share: GAAP net income was $137.4 million, an increase of 25 percent, compared to $109.5 million in the fourth quarter of 2009. GAAP earnings per diluted share were $0.64, an increase of 25 percent, compared to $0.51 in the fourth quarter of 2009.
Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $156.2 million, an increase of 21 percent, compared to $129.5 million in the fourth quarter of 2009. Non-GAAP earnings per diluted share were $0.73, an increase of 20 percent, compared to $0.61 in the fourth quarter of 2009.
Deferred Revenues: As of December 31, 2010, we had deferred revenues of $464.6 million, an increase of 9 percent, compared to $425.3 million as of December 31, 2009.
Cash Flow: Cash flow from operations was $162.8 million, an increase of 18 percent, compared to $138.1 million in the fourth quarter of 2009.
Share Repurchase Program: During the fourth quarter of 2010, we repurchased 1.16 million shares at a total cost of $50 million.
Cash Balances and Marketable Securities: $2,414.9 million as of December 31, 2010, an increase of $567.9 million, compared to $1,847.0 million as of December 31, 2009.

Financial Highlights for the Year ended December 31, 2010:

Total Revenue: $1,097.9 million, an increase of 19 percent, compared to $924.4 million in 2009.
GAAP Operating Income: $535.0 million, an increase of 29 percent, compared to $415.0 million in 2009. GAAP operating margin was 49 percent, compared to 45 percent in 2009.
Non-GAAP Operating Income: $622.7 million, an increase of 23 percent, compared to $505.7 million in 2009. Non-GAAP operating margin was 57 percent, compared to 55 percent in 2009.
GAAP Net Income and Earnings per Diluted Share: GAAP net income was $452.8 million, an increase of 27 percent, compared to $357.5 million in 2009. GAAP earnings per diluted share were $2.13, an increase of 26 percent, compared to $1.68 in 2009.
Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $528.0 million, an increase of 21 percent, compared to $435.3 million in 2009. Non-GAAP earnings per diluted share were $2.48, an increase of 21 percent, compared to $2.05 in 2009.
Cash Flow: Cash flow from operations was $674.1 million, an increase of 23 percent, compared to $548.7 million in 2009.

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:

During 2010 Check Point entered, or expanded its presence in the most critical areas of security:

Data Security -- Set a new standard for data security with the introduction of [ Data Loss Prevention ] (DLP), making DLP product simple and accessible to a broad range of customers and further augments our data security product portfolio that include disk encryption, media control and the recent acquisition of document security technology.
Mobile Security -- Expanded our secure mobile offering with the introduction of the [ Mobile Access Software Blade ] providing secure, one-click access to corporate data from the iPhone and iPad.
Network Security -- Expanded the core network security firewall functionality with the introduction of [ Application Control ] technology, classifying and controlling over 100,000 Web 2.0 widgets and over 4,500 distinct applications. In addition, attained leadership in the [ Intrusion Prevention ] (IPS) market by providing an integrated IPS blade that can extend every security gateway to become an IPS device. For the first time in the industry, Check Point has proven that customers can get an integrated IPS that attains the highest standards in security as demonstrated by the latest NSS Labs test report.
Endpoint -- Shipped a unified endpoint security system with an integrated client and management that provide the industry's most comprehensive set of endpoint security technologies (Antivirus / malware protection, remote access VPN, WebCheck, and data security with full disk encryption and removable media controls).

Check Point security leadership was recognized during 2010 in many countries and publications, including a Leader's Position in three Gartner Magic Quadrants -- Enterprise Firewall, Mobile Data Protection and Unified Threat Management.

In addition, Check Point's founder and CEO, Gil Shwed, was named by Ernst and Young the 2010 "Entrepreneur of the Year" in Israel -- highlighting Shwed's personal contribution to Check Point's growth and role in pioneering the global security market.

Shwed concluded, "2010's excellent results underscore Check Point's commitment to our customers -- providing the best security platform for their environment. I would also like to recognize and thank our employees, partners and customers for their contribution to the results."

First Quarter Investor Conference Participation Schedule:

Stifel Nicolaus Technology, Communications & Internet Conference 2011
February 11, 2011 - San Francisco, CA
Morgan Stanley Technology, Media and Telecommunications Conference
February 28, 2011 - San Francisco, CA
Raymond James 31^stAnnual Investor Conference
March 7, 2011 - Orlando, FL
UBS Technology Conference
March 10, 2011 - London, UK

Members of Check Point's management team will 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 January 31, 2011 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit Check Point's website at: [ www.checkpoint.com/ir ]. A replay of the conference call will be available through February 7, 2011 at the company's website [ www.checkpoint.com/ir ] or by telephone at +1.201.612.7415, replay ID number 365088.

About Check Point Software Technologies Ltd.

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

*Magic Quadrant Disclaimer

The Magic Quadrant is copyrighted 2010 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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, operating margin and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges, amortization of acquired intangible assets, restructuring-related charges, other than temporary impairment of marketable securities, net, 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.

Safe Harbor Regarding Forward-Looking Statements

This press release and the conference call related to our earnings for the fourth quarter and fiscal year ended December 31, 2010 contain or may contain 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 our plans to further increase the breadth of our security solutions portfolio, and to continue delivering products based on our unified security architecture; our expectations regarding our products and services; our expectation that we will continue to innovate and deliver products to address our customers' security requirements -- at every size of organization worldwide; and our expectations regarding our share repurchase program. 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: Check Point's development and delivery of its security products; 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; the timely availability and customer acceptance of Check Point's new and existing products; the timing and amount of our share repurchases, if any; and the economic environment in which Check Point operates. 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 ending December 31, 2009, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update these forward-looking statements.

 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share amounts) Three Months Ended Year Ended ----------------------- ---------------------- December 31, December 31, ----------------------- ---------------------- 2010 2009 2010 2009 ----------- ----------- ----------- ---------- (unaudited) (unaudited) (unaudited) (audited) Revenues: Products and licenses $ 143,059 $ 120,205 $ 444,400 $ 361,633 Software updates, maintenance and services 175,447 151,917 653,468 562,784 ----------- ----------- ----------- ---------- Total revenues 318,506 272,122 1,097,868 924,417 ----------- ----------- ----------- ---------- Operating expenses: Cost of products and licenses 23,835 20,916 75,426 61,495 Cost of software updates, maintenance and services 15,019 12,432 55,721 43,551 Amortization of technology 8,299 7,723 32,826 28,224 ----------- ----------- ----------- ---------- Total cost of revenues 47,153 41,071 163,973 133,270 Research and development 29,454 24,062 105,748 89,743 Selling and marketing 66,034 60,487 235,301 220,877 General and administrative 13,887 15,922 57,244 56,409 Restructuring and other acquisition related costs - - 588 9,101 ----------- ----------- ----------- ---------- Total operating expenses 156,528 141,542 562,854 509,400 ----------- ----------- ----------- ---------- Operating income 161,978 130,581 535,014 415,017 Financial income, net 7,810 6,413 29,379 30,781 ----------- ----------- ----------- ---------- Income before income taxes 169,788 136,993 564,393 445,798 Taxes on income 32,379 27,458 111,567 88,275 ----------- ----------- ----------- ---------- Net income $ 137,409 $ 109,535 $ 452,826 $ 357,523 =========== =========== =========== ========== Earnings per share (basic) $ 0.66 $ 0.52 $ 2.18 $ 1.71 =========== =========== =========== ========== Number of shares used in computing earnings per share (basic) 208,280 209,093 208,106 209,371 =========== =========== =========== ========== Earnings per share (diluted) $ 0.64 $ 0.51 $ 2.13 $ 1.68 =========== =========== =========== ========== Number of shares used in computing earnings per share (diluted) 214,432 213,469 212,933 212,208 =========== =========== =========== ========== CHECK POINT SOFTWARE TECHNOLOGIES LTD. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (In thousands, except per share amounts) Three Months Ended Year Ended ------------------------ ------------------------ December 31, December 31, ------------------------ ------------------------ 2010 2009 2010 2009 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) GAAP operating income $ 161,978 $ 130,581 $ 535,014 $ 415,017 Stock-based compensation (1) 8,466 8,138 35,180 30,907 Amortization of intangible assets (2) 13,106 14,006 51,876 50,653 Restructuring and other acquisition related costs (3) - - 588 9,101 ----------- ----------- ----------- ----------- Non-GAAP operating income $ 183,550 $ 152,725 $ 622,658 $ 505,678 =========== =========== =========== =========== GAAP net income $ 137,409 $ 109,536 $ 452,826 $ 357,523 Stock-based compensation (1) 8,466 8,138 35,180 30,907 Amortization of intangible assets (2) 13,106 14,006 51,876 50,653 Restructuring and other acquisition related costs (3) - - 588 9,101 Other than temporary impairment of marketable securities, net (4) 785 1,277 785 1,277 Taxes on the above items (5) (3,566) (3,492) (13,242) (14,153) ----------- ----------- ----------- ----------- Non-GAAP net income $ 156,200 $ 129,465 $ 528,013 $ 435,308 =========== =========== =========== =========== GAAP Earnings per share (diluted) $ 0.64 $ 0.51 $ 2.13 $ 1.68 Stock-based compensation (1) 0.04 0.04 0.16 0.15 Amortization of intangible assets (2) 0.06 0.07 0.24 0.24 Restructuring and other acquisition related costs (3) - - - 0.04 Other than temporary impairment of marketable securities, net (4) 0.01 0.01 0.01 0.01 Taxes on the above items (5) (0.02) (0.02) (0.06) (0.07) ----------- ----------- ----------- ----------- Non-GAAP Earnings per share (diluted) $ 0.73 $ 0.61 $ 2.48 $ 2.05 =========== =========== =========== =========== Number of shares used in computing Non-GAAP earnings per share (diluted) 214,432 213,469 212,933 212,208 =========== =========== =========== =========== (1) Stock-based compensation: Cost of products and licenses $ 11 $ 12 $ 49 $ 47 Cost of software updates, maintenance and services 204 105 984 641 Research and development 1,581 1,878 7,325 6,649 Selling and marketing 1,707 547 7,279 5,032 General and administrative 4,963 5,596 19,543 18,538 ----------- ----------- ----------- ----------- 8,466 8,138 35,180 30,907 ----------- ----------- ----------- ----------- (2) Amortization of intangible assets: Amortization of technology 8,299 7,723 32,826 28,224 Research and development 685 - 2,741 - Selling and marketing 4,122 6,283 16,309 22,429 ----------- ----------- ----------- ----------- 13,106 14,006 51,876 50,653 ----------- ----------- ----------- ----------- (3) Restructuring and other acquisition related costs - - 588 9,101 ----------- ----------- ----------- ----------- (4) Other than temporary impairment of marketable securities, net* 785 1,277 785 1,277 ----------- ----------- ----------- ----------- (5) Taxes on the above items (3,566) (3,492) (13,242) (14,153) ----------- ----------- ----------- ----------- Total, net $ 18,791 $ 19,929 $ 75,187 $ 77,785 =========== =========== =========== ===========

* Year ended December 31, 2010 and the three months ended December 31, 2010 include a non-cash write down of $ 0.8 million related to our marketable securities in accordance with ASC 320 Year ended December 31, 2009 and the three months ended December 31, 2009 include a net non-cash write down of $ 1.3 million related to our marketable securities in accordance with ASC 320.

 CHECK POINT SOFTWARE TECHNOLOGIES LTD. CONDENSED CONSOLIDATED BALANCE SHEET DATA (In thousands) ASSETS December 31, December 31, 2010 2009 ------------- ------------- (unaudited) (audited) Current assets: Cash and cash equivalents $ 551,777 $ 414,085 Marketable securities 537,718 469,913 Trade receivables, net 283,192 283,668 Prepaid expenses and other current assets 44,247 34,544 ------------- ------------- Total current assets 1,416,934 1,202,210 ------------- ------------- Long-term assets: Marketable securities 1,325,451 963,001 Property and equipment, net 37,065 38,936 Severance pay fund 6,532 6,314 Deferred tax asset, net 18,122 16,307 Other intangible assets, net 66,765 114,192 Goodwill 717,052 708,458 Other assets 17,381 20,176 ------------- ------------- Total long-term assets 2,188,368 1,867,384 ------------- ------------- Total assets $ 3,605,302 $ 3,069,594 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Deferred revenues $ 424,158 $ 384,255 Trade payables and other accrued liabilities 239,104 169,011 ------------ ------------ Total current liabilities 663,262 553,266 ------------ ------------ Long-term deferred revenues 40,394 41,005 Income tax accrual 169,370 132,908 Deferred tax liability, net 1,721 11,636 Accrued severance pay 11,224 11,061 ------------ ------------ 222,709 196,610 ------------ ------------ Total liabilities 885,971 749,876 ------------ ------------ Shareholders' equity: Share capital 774 774 Additional paid-in capital 580,276 527,874 Treasury shares at cost (1,306,382) (1,199,752) Accumulated other comprehensive income 15,584 12,555 Retained earnings 3,429,079 2,978,267 ------------ ------------ Total shareholders' equity 2,719,331 2,319,718 ------------ ------------ Total liabilities and shareholders' equity $ 3,605,302 $ 3,069,594 ============ ============ Total cash and cash equivalents and marketable securities $ 2,414,946 $ 1,846,999 ============ ============ CHECK POINT SOFTWARE TECHNOLOGIES LTD. SELECTED CONSOLIDATED CASH FLOW DATA (In thousands) Three Months Ended Year Ended ------------------------ ------------------------ December 31, December 31, ------------------------ ------------------------ 2010 2009 2010 2009 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Cash flow from operating activities: Net income $ 137,409 $ 109,535 $ 452,826 $ 357,523 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 1,584 1,660 6,890 8,885 Other than temporary impairment of marketable securities, net 785 1,277 785 1,277 Realized loss (gain) on sale of marketable securities, net (193) - (974) 1,896 Amortization of intangible assets 13,106 14,006 51,876 50,653 Stock-based compensation 8,466 8,138 35,180 30,907 Increase in trade and other receivables, net (121,138) (95,020) (5,424) (9,971) Increase in deferred revenues, trade payables and other accrued liabilities 125,133 101,643 147,158 126,412 Excess tax benefit from stock-based compensation (720) (514) (4,763) (7,502) Deferred income taxes, net (1,599) (2,657) (9,406) (11,386) ----------- ----------- ----------- ----------- Net cash provided by operating activities 162,833 138,068 674,148 548,694 ----------- ----------- ----------- ----------- Cash flow from investing activities: Cash paid in conjunction with acquisitions, net - (1,247) (13,957) (58,787) Investment in property, plant and equipment (1,322) (639) (4,911) (4,283) ----------- ----------- ----------- ----------- Net cash used in investing activities (1,322) (1,886) (18,868) (63,070) ----------- ----------- ----------- ----------- Cash flow from financing activities: Proceeds from issuance of shares upon exercise of options 57,245 30,509 103,815 92,978 Purchase of treasury shares (50,000) (49,999) (200,000) (202,285) Excess tax benefit from stock-based compensation 720 514 4,763 7,502 ----------- ----------- ----------- ----------- Net cash used in financing activities 7,965 (18,976) (91,422) (101,805) ----------- ----------- ----------- ----------- Unrealized gain (loss) on marketable securities, net (11,029) (6,371) 4,089 19,348 ----------- ----------- ----------- ----------- Increase in cash and cash equivalents and marketable securities 158,447 110,835 567,947 403,167 Cash and cash equivalents and marketable securities at the beginning of the period 2,256,499 1,736,164 1,846,999 1,443,832 ----------- ----------- ----------- ----------- Cash and cash equivalents and marketable securities at the end of the period $ 2,414,946 $ 1,846,999 $ 2,414,946 $ 1,846,999 =========== =========== =========== ===========

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Check Point Software Technologies Reports Record Fourth Quarter and Fiscal Year 2010 Financial Results