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Check Point Software Technologies Reports 2012 Second Quarter Financial Results

(July 18, 2012)

REDWOOD CITY, CA -- (Marketwire) -- 07/18/12 -- 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, 2012.

  • Total Revenue: $328.6 million, representing a 9 percent increase year over year
  • Non-GAAP Operating Income: $193.6 million, representing 59 percent of revenues
  • Non-GAAP EPS: $0.77, representing a 13 percent increase year over year
  • Share Repurchase Program: Expanded on-going program up to 1 billion dollars

"I'm pleased with the continued growth of our revenues and earnings in the second quarter. We've seen great acceptance of our new security appliances as a platform of choice for security consolidation. During the quarter, enterprise appliance units grew by over 20% and continued to drive market share gains," said Gil Shwed, founder, chairman, and chief executive officer of Check Point Software Technologies. "These results underscore the strength of Check Point's market position especially in light of the current macro-economic environment."

Today, the company announced in a separate release that the board of directors authorized the expansion of the on-going share repurchase program up to one billion dollars. Under the expanded plan, Check Point is authorized to repurchase up to one billion dollars of its outstanding shares during the next two years.

Financial Highlights:


  • Total Revenue: $328.6 million, an increase of 9 percent, compared to $300.6 million in the second quarter of 2011.
  • GAAP Operating Income: $180.5 million, an increase of 20 percent, compared to $150.1 million in the second quarter of 2011. GAAP operating margin was 55 percent, compared to 50 percent in the second quarter of 2011.
  • Non-GAAP Operating Income: $193.6 million, an increase of 13 percent, compared to $171.0 million in the second quarter of 2011. Non-GAAP operating margin was 59 percent, compared to 57 percent in the second quarter of 2011.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $150.0 million, an increase of 17 percent, compared to $128.0 million in the second quarter of 2011. GAAP earnings per diluted share were $0.71, an increase of 18 percent, compared to $0.60 in the second quarter of 2011.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $161.8 million, an increase of 11 percent, compared to $145.5 million in the second quarter of 2011. Non-GAAP earnings per diluted share were $0.77, an increase of 13 percent, compared to $0.68, in the second quarter of 2011.
  • Deferred Revenues: As of June 30, 2012, we had deferred revenues of $536.6 million, an increase of 17 percent, compared to $457.0 million as of June 30, 2011.
  • Cash Flow: Cash flow from operations was $157.5 million, compared to $175.5 million in the second quarter of 2011.
  • Share Repurchase Program: During the second quarter of 2012, we repurchased 1.4 million shares at a total cost of $75 million.
  • Cash Balances, Marketable Securities and Short Term Deposits: $3,201.8 million as of June 30, 2012, an increase of $512.0 million, compared to $2,689.8 million as of June 30, 2011.

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

During the second quarter and up to today, the company has launched several new products and technologies, including:

DDoS Protector™ Appliances - Check Point expanded into a new and critical security market segment. These new solutions combat a wide range of Distributed Denial of Service (DDoS) attacks and are integrated with Check Point Security Management environment.

Security Acceleration Module - The Security Acceleration Module with advanced SecurityCore™ technology enables customers in high-performance and low latency environments, such as financial trading and investment companies, to significantly boost network performance by accelerating key security operations. Customers are able to achieve 110 Gbps of firewall throughput and sub-five micro second (5 µs) latency -- enabling the industry's highest-performing two rack-unit firewall.

Check Point ThreatCloud™ - The first collaborative network of its type to fight cybercrime. A network that automatically detects and shares new attack information in real time by collecting and correlating attack information from Check Point customer's gateways and a dedicated attack sensor network.

Anti-Bot Software Blade - Check Point shipped a new software blade that can be activated on every Check Point enterprise gateway, delivering the industry's most sophisticated and integrated solution to fight software bots and protect against advanced threats and sophisticated malware.

New Software Version R75.40 & New Secure OS (GAiA) - This includes more than 100 new features, including the Anti-Bot Software Blade, an updated Anti-Virus Software Blade powered by Check Point ThreatCloud. R75.40 also includes the company's new integrated secure operating system (GAiA) that simplifies the operations and unifies the capabilities of all the company's new and previous appliance and software lines.

ZoneAlarm Free Antivirus + Firewall - This new product is the most complete free Internet security solution for consumers. It combines the world's No.1 firewall with award-winning antivirus into one easy-to-use product that protects consumers against online attacks.

Check Point Virtual Systems - New solution for private cloud environments and data centers that enables the consolidation of up to 250 security gateways on a single hardware platform.

Industry Accolades

Computerworld Hong Kong Awards 2012 - Check Point was recognized for ten years of IT excellence and received four prestigious awards for its Firewall / VPN Software Blade, Identity Awareness Software Blade, IPS Software Blade, and 4600 Appliance.

2012 Frost & Sullivan Asia Pacific ICT Award - Named "Network Security Vendor of the Year", this is the third time Check Point has received this prestigious distinction.

IPv6 Industry Certification - R75.40 and unified operating system (OS), Check Point GAiA™, tested at the UNH Interoperability Laboratory and achieved industry certification from the IPv6 Forum.

Shwed concluded, "We continued to expand our network security arsenal with the addition of Check Point's ThreatCloud™, Anti-Bot software blades, DDoS Protector™ Appliances and the latest edition of Check Point Virtual Systems further strengthening our leadership position in network security for enterprises of all sizes, data centers and cloud environments."

Third Quarter 2012 Investor Conference Participation Schedule:

  • Pacific Crest 14th Annual Global Technology Leadership Forum
    August 13, 2012 - Vail, CO
  • Oppenheimer 15th Annual Technology, Internet and Communications Conference
    August 15, 2012 - Boston, MA
  • Citi 2012 Technology Conference
    September 5, 2012 - New York, NY
  • Deutsche Bank 2012 dbAccess Technology Conference
    September 11, 2012 - Las Vegas, NV
  • ThinkEquity's 9th Annual Growth Conference
    September 13, 2012 - New York, NY

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, 2012 at 8:30 AM ET/5:30 AM PT. To listen to the live webcast, please visit the website at: www.checkpoint.com/ir. A replay of the conference call will be available through July 25, 2012 on the company's website or by telephone at +1.201.612.7415, replay ID number 397366, account # 215.

About Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (www.checkpoint.com), the worldwide leader in securing the Internet, 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 develop new innovations based on the Software Blade Architecture, providing customers with flexible and simple solutions that can be fully customized to meet the exact security needs of any organization. Check Point is the only vendor to go beyond technology and define security as a business process. Check Point 3D Security uniquely combines policy, people and enforcement for greater protection of information assets and helps organizations implement a blueprint for security that aligns with business needs. Customers include tens of thousands of organizations of all sizes, including all Fortune and Global 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft.

©2012 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, other than temporary impairment of marketable securities, net, and the related tax effects. 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. CONSOLIDATED STATEMENT OF INCOME (In thousands, except per share amounts) Three Months Ended Six Months Ended ----------------------- ----------------------- June 30, June 30, ----------------------- ----------------------- 2012 2011 2012 2011 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Products and licenses $ 123,155 $ 119,288 $ 233,337 $ 224,546 Software updates, maintenance and subscription 205,494 181,356 408,428 357,372 ----------- ----------- ----------- ----------- Total revenues 328,649 300,644 641,765 581,918 ----------- ----------- ----------- ----------- Operating expenses: Cost of products and licenses 20,671 18,983 40,275 36,635 Cost of Software updates, maintenance and subscription 16,745 15,623 32,784 29,920 Amortization of technology 536 7,850 3,394 15,699 ----------- ----------- ----------- ----------- Total cost of revenues 37,952 42,456 76,453 82,254 Research and development 27,262 27,524 54,104 55,167 Selling and marketing 65,815 64,785 124,914 123,294 General and administrative 17,092 15,833 32,876 29,823 ----------- ----------- ----------- ----------- Total operating expenses 148,121 150,598 288,347 290,538 ----------- ----------- ----------- ----------- Operating income 180,528 150,046 353,418 291,380 Financial income, net 9,774 10,832 20,236 21,360 ----------- ----------- ----------- ----------- Income before taxes on income 190,302 160,878 373,654 312,740 Taxes on income 40,321 32,887 80,047 62,659 ----------- ----------- ----------- ----------- Net income $ 149,981 $ 127,991 $ 293,607 $ 250,081 =========== =========== =========== =========== Earnings per share (basic) $ 0.73 $ 0.62 $ 1.43 $ 1.20 =========== =========== =========== =========== Number of shares used in computing earnings per share (basic) 205,482 207,129 205,798 207,650 =========== =========== =========== =========== Earnings per share (diluted) $ 0.71 $ 0.60 $ 1.39 $ 1.16 =========== =========== =========== =========== Number of shares used in computing earnings per share (diluted) 211,320 214,565 211,894 215,240 =========== =========== =========== =========== 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, ------------------------ ------------------------ 2012 2011 2012 2011 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) GAAP operating income $ 180,528 $ 150,046 $ 353,418 $ 291,380 Stock-based compensation (1) 11,920 9,900 21,705 18,145 Amortization of intangible assets (2) 1,181 11,032 5,185 22,063 ----------- ----------- ----------- ----------- Non-GAAP operating income $ 193,629 $ 170,978 $ 380,308 $ 331,588 =========== =========== =========== =========== GAAP net income $ 149,981 $ 127,991 $ 293,607 $ 250,081 Stock-based compensation (1) 11,920 9,900 21,705 18,145 Amortization of intangible assets (2) 1,181 11,032 5,185 22,063 Gain on Sale of marketable securities previously impaired (3) - (649) - (2,017) Taxes on the above items (4) (1,260) (2,759) (1,763) (5,688) ----------- ----------- ----------- ----------- Non-GAAP net income $ 161,822 $ 145,515 $ 318,734 $ 282,584 =========== =========== =========== =========== GAAP Earnings per share (diluted) $ 0.71 $ 0.60 $ 1.39 $ 1.16 Stock-based compensation (1) 0.06 0.04 0.10 0.08 Amortization of intangible assets (2) 0.01 0.05 0.02 0.10 Gain on Sale of marketable securities previously impaired (3) - (0.00) - (0.01) Taxes on the above items (4) (0.01) (0.01) (0.01) (0.02) ----------- ----------- ----------- ----------- Non-GAAP Earnings per share (diluted) $ 0.77 $ 0.68 $ 1.50 $ 1.31 =========== =========== =========== =========== Number of shares used in computing Non-GAAP earnings per share (diluted) 211,320 214,565 211,894 215,240 =========== =========== =========== =========== (1) Stock-based compensation: Cost of products and licenses $ 22 $ 19 $ 38 $ 30 Cost of software updates, maintenance and subscription 238 255 305 445 Research and development 2,614 2,022 4,553 3,455 Selling and marketing 2,738 1,690 4,827 3,581 General and administrative 6,308 5,914 11,982 10,634 ----------- ----------- ----------- ----------- $ 11,920 $ 9,900 $ 21,705 $ 18,145 ----------- ----------- ----------- ----------- (2) Amortization of intangible assets: Amortization of technology-cost of revenues 536 7,850 3,394 15,699 Selling and marketing 645 3,182 1,791 6,364 ----------- ----------- ----------- ----------- 1,181 11,032 5,185 22,063 ----------- ----------- ----------- ----------- (3) Gain on Sale of marketable securities previously impaired - (649) - (2,017) ----------- ----------- ----------- ----------- (4) Taxes on the above items (1,260) (2,759) (1,763) (5,688) ----------- ----------- ----------- ----------- Total, net $ 11,841 $ 17,524 $ 25,127 $ 32,503 =========== =========== =========== =========== CHECK POINT SOFTWARE TECHNOLOGIES LTD. CONDENSED CONSOLIDATED BALANCE SHEET DATA (In thousands) ASSETS June 30, December 31, 2012 2011 ------------- -------------- (unaudited) (audited) Current assets: Cash and cash equivalents $ 291,062 $ 493,546 Marketable securities and short-term deposits 1,080,710 865,994 Trade receivables, net 249,242 357,418 Prepaid expenses and other current assets 51,139 53,045 ------------- -------------- Total current assets 1,672,153 1,770,003 ------------- -------------- Long-term assets: Marketable securities 1,830,040 1,519,865 Property and equipment, net 36,558 36,639 Severance pay fund 5,867 6,052 Deferred tax asset, net 23,127 25,296 Other intangible assets, net 21,055 26,239 Goodwill 727,875 727,875 Other assets 17,802 16,094 ------------- -------------- Total long-term assets 2,662,324 2,358,060 ------------- -------------- Total assets $ 4,334,477 $ 4,128,063 ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Deferred revenues $ 474,073 $ 490,655 Trade payables and other accrued liabilities 276,317 271,815 ------------- ------------- Total current liabilities 750,390 762,470 ------------- ------------- Long-term deferred revenues 62,492 61,523 Income tax accrual 230,861 219,469 Deferred tax liability, net - 1,274 Accrued severance pay 10,212 10,236 ------------- ------------- 303,565 292,502 ------------- ------------- Total liabilities 1,053,955 1,054,972 ------------- ------------- Shareholders' equity: Share capital 774 774 Additional paid-in capital 662,226 630,508 Treasury shares at cost (1,662,510) (1,543,886) Accumulated other comprehensive income 13,380 12,650 Retained earnings 4,266,652 3,973,045 ------------- ------------- Total shareholders' equity 3,280,522 3,073,091 ------------- ------------- Total liabilities and shareholders' equity $ 4,334,477 $ 4,128,063 ============= ============= Total cash and cash equivalents, marketable securities and short-term deposits $ 3,201,812 $ 2,879,405 ============= ============= CHECK POINT SOFTWARE TECHNOLOGIES LTD. SELECTED CONSOLIDATED CASH FLOW DATA (In thousands) Three Months Ended Six Months Ended ------------------------ ------------------------ June 30, June 30, ------------------------ ------------------------ 2012 2011 2012 2011 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Cash flow from operating activities: Net income $ 149,981 $ 127,991 $ 293,607 $ 250,081 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 1,830 1,824 3,782 3,553 Amortization of intangible assets 1,181 11,032 5,184 22,063 Stock-based compensation 11,920 9,900 21,705 18,145 Realized gain on marketable securities (159) (2,481) (97) (2,481) Decrease (increase) in trade and other receivables, net (7,300) (3,319) 105,861 79,906 Increase (decrease) in deferred revenues, trade payables and other accrued liabilities (1,130) 35,622 (2,239) 21,764 Excess tax benefit from stock-based compensation (143) (2,035) 235 (2,088) Deferred income taxes, net 1,347 (3,025) 4,822 (3,829) ----------- ----------- ----------- ----------- Net cash provided by operating activities 157,527 175,509 432,860 387,114 ----------- ----------- ----------- ----------- Cash flow from investing activities: Cash paid in conjunction with acquisitions, net of acquired cash - (985) - (6,501) Investment in property and equipment (1,283) (1,623) (3,701) (3,484) ----------- ----------- ----------- ----------- Net cash used in investing activities (1,283) (2,608) (3,701) (9,985) ----------- ----------- ----------- ----------- Cash flow from financing activities: Proceeds from issuance of shares upon exercise of options 2,070 8,036 41,624 39,551 Purchase of treasury shares (75,000) (75,000) (149,999) (150,000) Excess tax benefit from stock-based compensation 143 2,035 (235) 2,088 ----------- ----------- ----------- ----------- Net cash used in financing activities (72,787) (64,929) (108,610) (108,361) ----------- ----------- ----------- ----------- Unrealized gain (loss) on marketable securities, net (2,799) 9,633 1,858 6,094 ----------- ----------- ----------- ----------- Increase in cash and cash equivalents, marketable securities and short term deposits 80,658 117,605 322,407 274,862 Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period 3,121,154 2,572,203 2,879,405 2,414,946 ----------- ----------- ----------- ----------- Cash and cash equivalents, marketable securities and short term deposits at the end of the period $ 3,201,812 $ 2,689,808 $ 3,201,812 $ 2,689,808 =========== =========== =========== ===========

INVESTOR CONTACT:
Kip E. Meintzer
Check Point Software Technologies
+1.650.628.2040
ir@checkpoint.com

MEDIA CONTACT:
James Rivas
Check Point Software Technologies
+1.650.628.2215
press@checkpoint.com


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