22.10.2007 08:00:00
|
Check Point Software Reports Financial Results for the Third Quarter of 2007
Check Point® Software Technologies Ltd.
(NASDAQ:CHKP), the worldwide leader in securing the Internet, today
announced its financial results for the third quarter ended September
30, 2007.
"During the third quarter, Check Point
delivered record quarterly results for revenues and non-GAAP net income
and EPS,” said Gil Shwed, chairman and chief
executive officer of Check Point Software. "The
overall success of the quarter is a result of our pure focus on security
and Unified Security Architecture. This is demonstrated by the growth of
our new data security business and core network security business, which
delivered the largest quarterly revenue contribution in our history.” Financial Highlights for the Third Quarter of 2007: Total Revenues: $184 million, an increase of 29 percent
compared to $142.5 million in the third quarter of 2006. Network
security accounted for a record $163 million in revenues and data
security contributed $21 million in revenues.
Net Income – GAAP: $76.7 million, an
increase of 8 percent compared to $71.1 million in the third quarter
of 2006. Net income in the third quarter of 2007 includes acquisition
related charges, net of taxes, of $7.5 million and equity-based
compensation expenses, net of taxes, of $7.7 million. Equity-based
compensation expenses have been reported since the beginning of 2006 pursuant to SFAS 123R.
Net Income – Non GAAP1:
$91.9 million, an increase of 17 percent compared to $78.6 million in
the third quarter of 2006. Non-GAAP net income excludes equity-based
compensation expenses and acquisition related charges2.
Earnings per Diluted Share – GAAP:
$0.34, an increase of 10 percent compared to $0.31 in the third
quarter of 2006. Equity-based compensation expenses of $0.04 are
included in the third quarter of 2007 GAAP results pursuant to SFAS
123R and acquisition related charges of $0.05. Net of taxes, these
charges totaled $0.07.
Earnings per Diluted Share – Non GAAP:
$0.41, an increase of 21 percent compared to $0.34 in the third
quarter of 2006. Non-GAAP EPS excludes equity-based compensation
expenses and acquisition related charges.
Deferred Revenues: $227.2 million represented an increase of
$53.8 million or a 31 percent increase compared to deferred revenues
as of September 30, 2006.
Cash Flow: cash flow from operations was $88.8 million, an
increase of 18 percent compared to the third quarter of 2006.
Share Repurchase Program: during the third quarter of 2007,
Check Point repurchased 1.8 million shares at a total cost of $42.3
million.
Recent Business Highlights Include: Increasing number of large transactions –
We continued to see growth in the number of large transactions
originating from a variety of industries, and across all geographies.
Transactions greater than $50 thousand accounted for 40% of total
order value. This quarter, we had 15 transactions larger than one
million dollars including customers from the world’s
largest financial institutions, consumer goods manufacturers,
telecommunication companies and government agencies.
Third Quarter Geographical Revenue Distribution –
Remained consistent with the second quarter, with the Americas
representing 47% of revenue, with EMEA contributing 42%, and Asia
Pacific and Japan contributing the remaining 11% of revenue for the
quarter.
Leadership Recognized in Gartner’s 2007
Magic Quadrant - Gartner, Inc. announced Check Point’s
leadership position in the 2007 "Magic Quadrant for Mobile Data
Protection 2007" report. This evaluation is a validation of Check Point’s
continuing success and commitment to securing sensitive information.
Check Point offers businesses complete, industry-proven solutions that
deploy quickly and easily to protect all sensitive data.
Awarded New Government Security Certification - Certification
in FIPS 140-2 for Pointsec Protector and the cryptography module
utilized in Pointsec PC and Pointsec Mobile further establishes Check
Point as a leading provider of data security solutions. The FIPS 140-2
standard ranks among the most difficult to achieve and is required
before any encryption products can be offered to government entities.
Key Partner and Customer Events –
During the third quarter we hosted two of our annual Check Point
Experience Events in Asia Pacific and Europe in which we shared our
vision and solutions with key customers and partners. We've seen over
a 30% increase in the number of attendees in our European conference.
Mr. Shwed continued, "The third quarter of
2007 underscores the success we have experienced so far this year. We
continue to be pleased with the performance of our data security
business as we continue to lead this new and emerging market. Our core
network security business is tracking better than our original
expectations, driven largely by the success of our UTM-1 appliance
products and Unified Security Architecture.” Recent Changes in Check Point’s Financial
Reporting
We have updated our financial statement reporting in accordance with the
latest reporting standards. We now combine the Software
Subscription line with the services line and it is now called Software
updates, maintenance and services. We also split the Cost of revenues
line in order to present Cost of products and licenses, cost of software
updates, maintenance and services and Amortization of technology
separately.
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 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 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.
Conference Call and Webcast Information
Check Point will host a conference call with the investment community on
October 22, 2007 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 November 5,
2007 at the company's website http://www.checkpoint.com/ir
or by telephone at (973) 341-3080, pass code 9308086.
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 intangible assets and other acquisition related expenses.
About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com)
is a leader in securing the Internet. The company is a market leader in
the worldwide enterprise firewall, personal firewall, data security and
VPN markets. Check Point’s PURE focus is on
IT security with its extensive portfolio of network security, data
security and security management solutions. Through its NGX platform,
Check Point delivers a unified security architecture for a broad range
of security solutions to protect business communications and resources
for corporate networks and applications, remote employees, branch
offices and partner extranets. The company also offers market leading
data security solutions through the Pointsec product line, protecting
and encrypting sensitive corporate information stored on PCs and other
mobile computing devices. Check Point's award-winning ZoneAlarm Internet
Security Suite and additional consumer security solutions protect
millions of consumer PCs from hackers, spyware and data theft. Extending
the power of the Check Point solution is its Open Platform for Security
(OPSEC), the industry's framework and alliance for integration and
interoperability with "best-of-breed" solutions from hundreds of leading
companies. 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.
©2003–2007 Check
Point Software Technologies Ltd. All rights reserved. Check Point,
AlertAdvisor, Application Intelligence, Check Point Express, Check Point
Express CI, the Check Point logo, Check Point Pointsec Protector,
ClusterXL, Confidence Indexing, ConnectControl, Connectra, Connectra
Accelerator Card, Cooperative Enforcement, Cooperative Security
Alliance, CoSa, DefenseNet, Dynamic Shielding Architecture, Eventia,
Eventia Analyzer, Eventia Reporter, Eventia Suite, FireWall-1,
FireWall-1 GX, FireWall-1 SecureServer, FloodGate-1, Hacker ID, Hybrid
Detection Engine, IMsecure, INSPECT, INSPECT XL, Integrity, Integrity
Clientless Security, Integrity SecureClient, InterSpect, IPS-1, IQ
Engine, MailSafe, NG, NGX, Open Security Extension, OPSEC, OSFirewall,
Pointsec, Pointsec Mobile, Policy Lifecycle Management, Provider-1,
Safe@Home, Safe@Office, SecureClient, SecureClient Mobile,
SecureKnowledge, SecurePlatform, SecurePlatform Pro, SecuRemote,
SecureServer, SecureUpdate, SecureXL, SecureXL Turbocard, Sentivist,
SiteManager-1, SmartCenter, SmartCenter Express, SmartCenter Power,
SmartCenter Pro, SmartCenter UTM, SmartConsole, SmartDashboard,
SmartDefense, SmartDefense Advisor, Smarter Security, SmartLSM,
SmartMap, SmartPortal, SmartUpdate, SmartView, SmartView Monitor,
SmartView Reporter, SmartView Status, SmartViewTracker, SofaWare, SSL
Network Extender, Stateful Clustering, TrueVector, Turbocard, UAM,
UserAuthority, User-to-Address Mapping, UTM-1, VPN-1, VPN-1 Accelerator
Card, VPN-1 Edge, VPN-1 Express, VPN-1 Express CI, VPN-1 Power, VPN-1
Power VSX, VPN-1 Pro, VPN-1 SecureClient, VPN-1 SecuRemote, VPN-1
SecureServer, VPN-1 UTM, VPN-1 UTM Edge, VPN-1 VSX, Web Intelligence,
ZoneAlarm, ZoneAlarm Anti-Spyware, ZoneAlarm Antivirus, ZoneAlarm
Internet Security Suite, ZoneAlarm Pro, ZoneAlarm Secure Wireless
Router, Zone Labs, and the Zone Labs logo are trademarks or registered
trademarks of Check Point Software Technologies Ltd. or its affiliates.
ZoneAlarm is a Check Point Software Technologies, Inc. Company. All
other product names mentioned herein are trademarks or registered
trademarks of their respective owners. The products described in this
document are protected by U.S. Patent No. 5,606,668, 5,835,726,
5,987,611, 6,496,935, 6,873,988, 6,850,943, and 7,165,076 and may be
protected by other U.S. Patents, foreign patents, or pending
applications.
CHECK POINT SOFTWARE TECHNOLOGIES LTD. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2007
2006
2007
2006
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenues:
Products and licenses
$76,890
$58,787
$216,256
$172,098
Software updates, maintenance and services
107,122
83,731
307,917
242,948
Total revenues
184,012
142,518
524,173
415,046
Operating expenses:
Cost of products and licenses
8,511
3,579
20,498
9,399
Cost of software updates, maintenance and services
6,249
4,485
17,606
12,912
Amortization of technology
7,154
1,353
20,570
4,061
Total cost of revenues
21,914
9,417
58,674
26,372
Research and development
19,885
14,266
59,528
46,460
Selling and marketing
52,515
38,013
159,853
114,092
General and administrative
12,038
10,383
37,759
32,937
Acquired in process research and development
-
-
17,000
-
Total operating expenses
106,352
72,079
332,814
219,861
Operating income
77,660
70,439
191,359
195,185
Financial income, net
11,569
15,595
36,282
47,321
Income before income taxes
89,229
86,034
227,641
242,506
Taxes on income
12,491
14,897
34,494
44,020
Net income
$76,738
$71,137
$193,147
$198,486
Earnings per share (basic)
$0.35
$0.31
$0.86
$0.83
Number of shares used in computing earnings per share (basic)
221,893
231,008
223,361
238,458
Earnings per share (diluted)
$0.34
$0.31
$0.85
$0.83
Number of shares used in computing earnings per share (diluted)
224,974
231,656
226,266
239,327
CHECK POINT SOFTWARE TECHNOLOGIES LTD. RECONCILIATION OF SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2007
2006
2007
2006
(unaudited)
(unaudited)
(unaudited)
(unaudited)
GAAP operating income
$77,660
$70,439
$191,359
$195,185
Stock-based compensation (1)
8,299
6,473
25,225
27,388
Amortization of intangible assets and acquisition related expenses
(2)
10,338
1,504
29,639
5,441
Acquired in process research and development
-
-
17,000
-
Non-GAAP operating income
96,297
$78,416
$263,223
$228,014
GAAP net income
$76,738
$71,137
$193,147
$198,486
Stock-based compensation (1)
8,299
6,473
25,225
27,388
Amortization of intangible assets and acquisition related expenses
(2)
10,338
1,504
29,639
5,441
Acquired in process research and development
-
-
17,000
-
Taxes on stock-based compensation and amortization of intangible
assets and acquisition related expenses (3)
(3,438)
(542)
(8,782)
(1,625)
Non-GAAP net income
$91,937
$78,572
$256,229
$229,690
GAAP Earnings per share (diluted)
$0.34
$0.31
$0.85
$0.83
Stock-based compensation (1)
0.04
0.03
0.11
0.11
Amortization of intangible assets and acquisition related expenses
(2)
0.05
0.00
0.14
0.02
Acquired in process research and development
0.00
0.00
0.07
0.00
Taxes on stock-based compensation and amortization of intangible
assets and acquisition related expenses (3)
(0.02)
0.00
(0.04)
(0.00)
Non-GAAP Earnings per share (diluted)
$0.41
$0.34
$1.13
$0.96
Number of shares used in computing Non-GAAP earnings per share
(diluted)
224,974
231,656
226,266
239,327
(1) Stock-based compensation:
Cost of revenues
$188
$88
$522
$257
Research and development
1,225
909
3,295
7,426
Selling and marketing
2,459
966
6,807
5,782
General and administrative
4,427
4,510
14,601
13,923
Total before taxes
$8,299
$6,473
$25,225
$27,388
(2) Amortization of intangible assets and acquisition related
expenses:
Cost of revenues
$7,154
$1,353
$20,570
$4,061
Selling and marketing
3,184
151
9,069
453
General and administrative
-
-
-
927
Total before taxes
10,338
1,504
29,639
5,441
(3) Taxes on stock-based compensation and amortization of intangible
assets and acquisition related expenses
(3,438)
(542)
(8,782)
(1,625)
Total, net
$15,199
$7,435
$46,082
$31,204
CHECK POINT SOFTWARE TECHNOLOGIES LTD. CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
ASSETS
September 30,
December 31,
2007
2006
(unaudited)
(unaudited)
Current assets:
Cash and cash equivalents
$327,803
$519,443
Marketable securities
394,662
571,621
Trade receivables, net
130,264
141,881
Other receivables and prepaid expenses
23,950
22,408
Total current assets
876,679
1,255,353
Long-term assets:
Marketable securities
482,364
558,874
Property, plant and equipment, net
56,853
47,192
Intangible assets, net
170,471
23,117
Goodwill
657,009
182,115
Deferred income taxes, net
4,806
6,977
Other assets
681
534
Total long-term assets
1,372,184
818,809
Total assets
$2,248,863
$2,074,162
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Deferred revenues
$227,156
$204,149
Trade payables and other accrued liabilities
171,327
153,900
Total current liabilities
398,483
358,049
Deferred tax liability, net
33,775
-
Accrued severance pay, net
5,360
4,580
Minority
447
-
Total liabilities
438,065
362,629
Shareholders’ equity:
Share capital
774
774
Additional paid-in capital
448,653
422,381
Treasury shares at cost
(848,752)
(728,909)
Accumulated other comprehensive loss
(1,458)
(6,293)
Retained earnings
2,211,581
2,023,580
Total shareholders’ equity
1,810,798
1,711,533
Total liabilities and shareholders’ equity
$2,248,863
$2,074,162
Total cash and cash equivalents and marketable securities
1,204,829
1,649,938
CHECK POINT SOFTWARE TECHNOLOGIES LTD. SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2007
2006
2007
2006
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Cash flow from operating activities:
Net income
$76,738
$71,137
$193,147
$198,486
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property, plant and equipment
1,602
1,501
4,546
4,246
Decrease (increase) in trade and other receivables, net
3,214
(5,598)
43,845
37,286
Increase (decrease) in deferred revenues, trade payables and other
accrued liabilities
(3,878)
(1,479)
(17,221)
4,654
Acquisition of in process research and development
-
-
17,000
-
Amortization of intangible assets
10,338
1,504
29,639
4,514
Stock-based compensation
8,299
6,473
25,225
27,388
Deferred income taxes, net
(7,467)
1,827
(15,863)
3,980
Net cash provided by operating activities
88,846
75,365
280,318
280,554
Cash flow from investing activities:
Cash paid in conjunction with the acquisition of Protect Data, net
(214)
-
(594,508)
-
Investment in property, plant and equipment
(2,652)
(1,905)
(12,638)
(41,915)
Net cash used in investing activities
(2,866)
(1,905)
(607,146)
(41,915)
Cash flow from financing activities:
Proceeds from issuance of shares upon exercise of options
7,954
6,111
22,889
46,559
Purchase of treasury shares
(42,272)
(201,440)
(147,899)
(403,798)
Tax benefit related to exercise of stock options
-
-
-
3,450
Net cash used in financing activities
(34,318)
(195,329)
(125,010)
(353,789)
Unrealized gain on marketable securities, net
2,991
7,852
6,729
1,857
Increase (decrease) in cash and cash equivalents, deposits and
marketable securities
54,653
(114,017)
(445,109)
(113,293)
Cash and cash equivalents and marketable securities at the beginning
of the period
1,150,176
1,726,067
1,649,938
1,725,343
Cash and cash equivalents and marketable securities at the end of
the period
1,204,829
1,612,050
1,204,829
1,612,050
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