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Check Point Software Technologies (CHKP) Reports Record 2011 Second Quarter Financial Results

REDWOOD CITY, CA — (Marketwire) — 07/18/11 — Check Point® Software Technologies Ltd. (NASDAQ: CHKP)

  • Total Revenue: $300.6 million, representing a 15 percent increase year over year
  • Non-GAAP Operating Income: $171.0 million, representing 57 percent of revenues
  • Non-GAAP EPS: $0.68, representing a 17 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 second quarter ending June 30, 2011.

“The first half of 2011 produced great results. We continued to outperform our projections in the second quarter. These good results are driven by increased sales of enterprise gateways with more software blades attached. In particular, our IPS and Application Control software blades have shown significant growth in the second quarter,” said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies.

Financial Highlights:

  • Total Revenue: $300.6 million, an increase of 15 percent, compared to $261.1 million in the second quarter of 2010.
  • GAAP Operating Income: $150.0 million, an increase of 23 percent, compared to $122.1 million in the second quarter of 2010. GAAP operating margin was 50 percent, compared to 47 percent in the second quarter of 2010.
  • Non-GAAP Operating Income: $171.0 million, an increase of 18 percent, compared to $144.7 million in the second quarter of 2010. Non-GAAP operating margin was 57 percent, compared to 55 percent in the second quarter of 2010.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $128.0 million, an increase of 24 percent, compared to $102.9 million in the second quarter of 2010. GAAP earnings per diluted share were $0.60, an increase of 25 percent, compared to $0.48 in the second quarter of 2010.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $145.5 million, an increase of 19 percent, compared to $122.4 million in the second quarter of 2010. Non-GAAP earnings per diluted share were $0.68, an increase of 17 percent, compared to $0.58 in the second quarter of 2010.
  • Deferred Revenues: As of June 30, 2011, the company had deferred revenues of $457.0 million, an increase of 10 percent, compared to $414.8 million as of June 30, 2010.
  • Cash Flow: Cash flow from operations was $175.5 million, an increase of 18 percent, compared to $148.9 million in the second quarter of 2010.
  • Share Repurchase Program: During the second quarter of 2011, the company repurchased 1.38 million shares at a total cost of $75 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $2,689.8 million as of June 30, 2011, an increase of $548.9 million, compared to $2,140.9 million as of June 30, 2010.

For information regarding the Non-GAAP financial measures discussed in this release, please see “Use of Non-GAAP Financial Information” and “Reconciliation of GAAP to Non-GAAP Financial Information.”

Business Highlights:
Check Point has continued to deliver advanced and award-winning solutions that have earned the trust of customers from around the world. The success of this quarter continues to validate the company’s product innovation and continued growth as a pure-play security company. In addition, significant recent developments in Check Point’s business include the introduction of new products and the promotion of an officer:

  • ZoneAlarm SocialGuard – Enables parents to protect their children against social threats on Facebook, such as online predators, cyberbullies, hacked accounts and malicious links. The product has received “Five Stars” from CNET and a “Highly Recommended” rating from PC Magazine.
  • ZoneAlarm 2012 Suite – Features new cloud-enabled security with parental controls and advanced antivirus capabilities that utilize ZoneAlarm DefenseNet™, a cloud-based service that detects over 50,000 new applications and threats daily, to silently stop existing and emerging attacks.
  • Promotion of Amnon Bar-Lev, Head of Global Field Operations to President – Check Point announced today that Amnon Bar-Lev has been promoted to President of Check Point Software Technologies, effective immediately. Amnon joined Check Point in 2005 and has led the company’s field organization since 2006. During that period, Check Point’s revenues have more than doubled to approximately $1.2B over the past four quarters. Amnon will continue to head the company’s customer facing functions including sales, marketing, business development and technical services. He will continue to report to Gil Shwed, founder, chairman and CEO.

Recent Industry Accolades From Across the Globe:

  • NSS Labs Group Firewall Test – Check Point was the only vendor to pass the NSS Labs independent Firewall Group Test, achieving 100 percent in security effectiveness and earning the only “Recommend” rating in the initial comparative review.
  • Frost & Sullivan Asia Pacific – Check Point was recognized by the industry analyst firm as the 2011 Network Security Vendor of the Year.
  • Association of Support Professionals – Check Point was a winner of the “Top Ten Best Web Support Sites of 2011” for a third year.
  • SC Magazine UK, Best Secure Virtualization Solution – Check Point Security Gateway VE.
  • Computerworld Czech Republic, IT Product of 2011 – Check Point Application Control Software Blade.
  • Computerworld Hong Kong Awards – Named best UTM, Firewall/VPN and Intrusion Prevention solutions.
  • Electronic Times, 2011 Hit Products in Korea – Check Point Application Control Software Blade.
  • Computerworld Singapore, Customer Care Awards – Check Point Firewall/VPN.

In addition, Check Point’s founder, chairman and CEO, Gil Shwed, along with Tal Payne, CFO, and the company’s board of directors, rang the NASDAQ opening bell on June 28, 2011, commemorating the company’s fifteenth anniversary since its initial public offering in 1996.

Shwed concluded, “Our security focus is continuing to pay off. I’m pleased to see that customers are adopting more software blades to enhance their threat protection and raise the level of security in their organization. We will continue to deliver on our 3D security vision combining policy, people and enforcement to provide the best protection for our customers.”

Third Quarter Investor Conference Participation Schedule:

  • Pacific Crest Internet, Media and Telecommunications Conference
    August 8, 2011 – Vail, CO
  • Citi Global Technology, Media and Telecommunications Conference
    September 8, 2011 – NY, NY
  • Deutsche Bank Technology, Media and Telecommunications Conference
    September 14, 2011 – Las Vegas, NV

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 July 18, 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 July 25, 2011 at the company’s website www.checkpoint.com/ir or by telephone at +1.201.612.7415, replay ID number 375092, account # 215.

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.

©2011 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, 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 and other acquisitions related costs, gain on sale of marketable securities previously impaired, 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.

                   CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                 CONDENSED CONSOLIDATED STATEMENT OF INCOME

                   (In thousands, except per share amounts)

                             Three Months Ended         Six Months Ended
                         ------------------------- -------------------------
                                  June 30,                  June 30,
                         ------------------------- -------------------------
                             2011         2010         2011         2010
                         ------------ ------------ ------------ ------------
                          (unaudited)  (unaudited)  (unaudited)  (unaudited)
Revenues:
  Products and licenses  $    119,288 $    103,904 $    224,546 $    194,942
  Software updates,
   maintenance and
   subscription               181,356      157,187      357,372      311,226
                         ------------ ------------ ------------ ------------
Total revenues                300,644      261,091      581,918      506,168
                         ------------ ------------ ------------ ------------

Operating expenses:
  Cost of products and
   licenses                    18,983       16,287       36,635       32,792
  Cost of Software
   updates, maintenance
   and subscription            15,623       13,547       29,920       25,792
  Amortization of
   technology                   7,850        8,150       15,699       16,216
                         ------------ ------------ ------------ ------------
Total cost of revenues         42,456       37,984       82,254       74,800

  Research and
   development                 27,524       25,807       55,167       50,129
  Selling and marketing        64,785       58,619      123,294      113,395
  General and
   administrative              15,833       15,980       29,823       29,282
  Restructuring and
   other acquisitions
   related costs                    -          588            -          588
                         ------------ ------------ ------------ ------------
Total operating expenses      150,598      138,978      290,538      268,194
                         ------------ ------------ ------------ ------------

Operating income              150,046      122,113      291,380      237,974
Financial income, net          10,832        7,133       21,360       14,326
                         ------------ ------------ ------------ ------------
Income before taxes on
 income                       160,878      129,246      312,740      252,300
Taxes on income                32,887       26,385       62,659       51,398
                         ------------ ------------ ------------ ------------
Net income               $    127,991 $    102,861 $    250,081 $    200,902
                         ============ ============ ============ ============

Earnings per share
 (basic)                 $       0.62 $       0.49 $       1.20 $       0.96
                         ============ ============ ============ ============
Number of shares used in
 computing earnings per
 share (basic)                207,129      207,914      207,650      208,449
                         ============ ============ ============ ============

Earnings per share
 (diluted)               $       0.60 $       0.48 $       1.16 $       0.95
                         ============ ============ ============ ============
Number of shares used in
 computing earnings per
 share (diluted)              214,565      212,166      215,240      210,639
                         ============ ============ ============ ============

                   CHECK POINT SOFTWARE TECHNOLOGIES LTD.
          RECONCILIATION OF GAAP TO NON GAAP FINANCIAL INFORMATION

                  (In thousands, except per share amounts)

                         ------------------------  ------------------------
                            Three Months Ended         Six Months Ended
                         ------------------------  ------------------------
                                 June 30,                  June 30,
                         ------------------------  ------------------------
                             2011         2010         2011         2010
                         -----------  -----------  -----------  -----------
                         (unaudited)  (unaudited)  (unaudited)  (unaudited)

GAAP operating income    $   150,046  $   122,113  $   291,380  $   237,974
Stock-based compensation
 (1)                           9,900        9,080       18,145       18,013

Amortization of
 intangible assets (2)        11,032       12,893       22,063       25,656
Restructuring and other
 acquisitions related
 costs (3)                         -          588            -          588
                         -----------  -----------  -----------  -----------
Non-GAAP operating
 income                  $   170,978  $   144,674  $   331,588  $   282,231
                         ===========  ===========  ===========  ===========

GAAP net income          $   127,991  $   102,861  $   250,081  $   200,902
Stock-based compensation
 (1)                           9,900        9,080       18,145       18,013
Amortization of
 intangible assets (2)        11,032       12,893       22,063       25,656
Restructuring and other
 acquisitions related
 costs (3)                         -          588            -          588
Gain on Sale of
 marketable securities
 previously impaired(4)         (649)           -       (2,017)           -
Taxes on the above items
 (5)                          (2,759)      (3,025)      (5,688)      (5,973)
                         -----------  -----------  -----------  -----------
Non-GAAP net income      $   145,515  $   122,397  $   282,584  $   239,186
                         ===========  ===========  ===========  ===========

GAAP Earnings per share
 (diluted)               $      0.60  $      0.48  $      1.16  $      0.95
Stock-based compensation
 (1)                            0.04         0.05         0.08         0.10
Amortization of
 intangible assets (2)          0.05         0.06         0.10         0.12
Restructuring and other
 acquisitions related
 costs (3)                         -         0.00            -         0.00
Gain on Sale of
 marketable securities
 previously impaired(4)        (0.00)           -        (0.01)           -
Taxes on the above items
 (4)                           (0.01)       (0.01)       (0.02)       (0.03)
                         -----------  -----------  -----------  -----------
Non-GAAP Earnings per
 share (diluted)         $      0.68  $      0.58  $      1.31  $      1.14
                         ===========  ===========  ===========  ===========

Number of shares used in
 computing Non-GAAP
 earnings per share
 (diluted)                   214,565      212,166      215,240      210,639
                         ===========  ===========  ===========  ===========

(1) Stock-based
 compensation:
  Cost of products and
   licenses              $        19  $        17  $        30  $        28
  Cost of software
   updates, maintenance
   and subscription              255          231          445          458
  Research and
   development                 2,022        1,693        3,455        3,341
  Selling and marketing        1,690        1,550        3,581        3,796
  General and
   administrative              5,914        5,589       10,634       10,390
                         -----------  -----------  -----------  -----------
                         $     9,900        9,080  $    18,145       18,013
                         -----------  -----------  -----------  -----------

(2) Amortization of
 intangible assets:
  Amortization of
   technology-cost of
   revenues                    7,850        8,150       15,699       16,216
  Research and
   development                     -          685            -        1,370
  Selling and marketing        3,182        4,058        6,364        8,070
                         -----------  -----------  -----------  -----------
                              11,032       12,893       22,063       25,656
                         -----------  -----------  -----------  -----------

(3) Restructuring and
 other acquisitions
 related costs                     -          588            -          588
                         -----------  -----------  -----------  -----------

(4) Gain on Sale of
 marketable securities
 previously impaired            (649)           -       (2,017)           -
                         -----------  -----------  -----------  -----------

(5) Taxes on the above
 items                        (2,759)      (3,025)      (5,688)      (5,973)
                         -----------  -----------  -----------  -----------

Total, net               $    17,524  $    19,536  $    32,503  $    38,284
                         ===========  ===========  ===========  ===========

                   CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                 CONDENSED CONSOLIDATED BALANCE SHEET DATA
                               (In thousands)
                                   ASSETS
                                                   June 30,    December 31,
                                                     2011          2010
                                                 ------------  ------------
                                                  (unaudited)    (audited)
Current assets:
Cash and cash equivalents                        $    359,018  $    551,777
Marketable securities and short-term deposits         791,517       537,718

Trade receivables, net                                197,168       283,192
Prepaid expenses and other current assets              52,042        44,247
                                                 ------------  ------------
Total current assets                                1,399,745     1,416,934
                                                 ------------  ------------

Long-term assets:
Marketable securities                               1,539,273     1,325,451
Property and equipment, net                            36,996        37,065
Severance pay fund                                      6,965         6,532
Deferred tax asset, net                                20,580        18,122
Other intangible assets, net                           44,701        66,765
Goodwill                                              717,052       717,052
Other assets                                           15,827        17,381
                                                 ------------  ------------
Total long-term assets                              2,381,394     2,188,368
                                                 ------------  ------------

Total assets                                     $  3,781,139  $  3,605,302
                                                 ============  ============

                              LIABILITIES AND
                            SHAREHOLDERS' EQUITY

Current liabilities:
Deferred revenues                                $    413,422  $    424,158
Trade payables and other accrued liabilities          223,480       239,104
                                                 ------------  ------------
Total current liabilities                             636,902       663,262
                                                 ------------  ------------

Long-term deferred revenues                            43,545        40,394
Income tax accrual                                    208,762       169,370
Deferred tax liability, net                             1,215         1,721
Accrued severance pay                                  12,179        11,224
                                                 ------------  ------------
                                                      265,701       222,709

                                                 ------------  ------------
Total liabilities                                     902,603       885,971
                                                 ------------  ------------

Shareholders' equity:
Share capital                                             774           774
Additional paid-in capital                            612,060       580,276
Treasury shares at cost                            (1,431,820)   (1,306,382)
Accumulated other comprehensive income                 18,362        15,584
Retained earnings                                   3,679,160     3,429,079
                                                 ------------  ------------
Total shareholders' equity                          2,878,536     2,719,331
                                                 ------------  ------------
Total liabilities and shareholders' equity       $  3,781,139  $  3,605,302
                                                 ============  ============

  Total cash and cash equivalents, marketable
   securities and short-term deposits            $  2,689,808  $  2,414,946
                                                 ============  ============

                   CHECK POINT SOFTWARE TECHNOLOGIES LTD.
                    SELECTED CONSOLIDATED CASH FLOW DATA
                               (In thousands)

                            Three Months Ended         Six Months Ended
                         ------------------------  ------------------------
                                 June 30,                  June 30,
                         ------------------------  ------------------------
                             2011         2010         2011         2010
                         -----------  -----------  -----------  -----------
                         (unaudited)  (unaudited)  (unaudited)  (unaudited)
Cash flow from operating
 activities:
Net income               $   127,991  $   102,861  $   250,081  $   200,902
Adjustments to reconcile
 net income to net cash
 provided by operating
 activities:
Depreciation and
 amortization of
 property, plant and
 equipment                     1,824        1,734        3,553        3,575
Decrease (increase) in
 trade and other
 receivables, net             (3,319)      23,610       79,906      123,653

Increase in deferred
 revenues, trade
 payables and other
 accrued liabilities          35,622        1,740       21,764        2,149
Realized gain on
 marketable securities        (2,481)           -       (2,481)           -
Stock-based compensation       9,900        9,080       18,145       18,013
Amortization of
 intangible assets            11,032       12,893       22,063       25,656
Excess tax benefit from
 stock-based
 compensation                 (2,035)      (1,127)      (2,088)      (2,960)
Deferred income taxes,
 net                          (3,025)      (1,857)      (3,829)      (4,249)
                         -----------  -----------  -----------  -----------
Net cash provided by
 operating activities        175,509      148,934      387,114      366,739
                         -----------  -----------  -----------  -----------

Cash flow from investing
 activities:

Cash paid in conjunction
 with acquisitions, net
 of acquired cash               (985)     (13,624)      (6,501)     (13,624)
Investment in property
 and equipment                (1,623)      (1,248)      (3,484)      (2,144)
                         -----------  -----------  -----------  -----------
Net cash used in
 investing activities         (2,608)     (14,872)      (9,985)     (15,768)
                         -----------  -----------  -----------  -----------

Cash flow from financing
 activities:
Proceeds from issuance
 of shares upon exercise
 of options                    8,036        1,938       39,551       33,998
Purchase of treasury
 shares                      (75,000)     (50,000)    (150,000)    (100,000)
Excess tax benefit from
 stock-based
 compensation                  2,035        1,127        2,088        2,960
                         -----------  -----------  -----------  -----------
Net cash used in
 financing activities        (64,929)     (46,935)    (108,361)     (63,042)
                         -----------  -----------  -----------  -----------

Unrealized gain on
 marketable securities,
 net                           9,633        2,051        6,094        5,988
                         -----------  -----------  -----------  -----------

Increase in cash and
 cash equivalents,
 marketable securities
 and short term deposits     117,605       89,178      274,862      293,917

Cash and cash
 equivalents, marketable
 securities and short
 term deposits at the
 beginning of the period   2,572,203    2,051,738    2,414,946    1,846,999
                         -----------  -----------  -----------  -----------

Cash and cash
 equivalents, marketable
 securities and short
 term deposits at the
 end of the period       $ 2,689,808  $ 2,140,916  $ 2,689,808  $ 2,140,916
                         ===========  ===========  ===========  ===========
Monday, July 18th, 2011 Uncategorized