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Check Point Software Technologies Reports Record Third Quarter 2011 Financial Results

Revenue: $308.3 Million, Representing a 13 Percent Increase Year Over Year; Non-GAAP Operating Income: $180.7 Million, Representing a 15 Percent Increase Year Over Year, and 59 Percent of Revenues Versus 57 Percent Year Over Year; Non-GAAP EPS: $0.72, Rep (October 18, 2011)

REDWOOD CITY, CA -- (Marketwire) -- 10/18/11 -- Check Point® Software Technologies Ltd. (NASDAQ: CHKP), the worldwide leader in securing the Internet, today announced record financial results for the third quarter ending September 30, 2011.

"I am very pleased that we delivered record results for the third quarter. We exceeded our projections as a result of growth in all regions. Our software blade platform continues to gain traction in the marketplace, while our annuity software blades have provided significant contribution to our revenues and deferred revenue growth," said Gil Shwed, founder, chairman and chief executive officer at Check Point Software Technologies.

Financial Highlights for the Third Quarter of 2011

  • Total Revenues: $308.3 million, an increase of 13 percent, compared to $273.2 million in the third quarter of 2010.
  • GAAP Operating Income: $158.2 million, an increase of 17 percent, compared to $135.1 million in the third quarter of 2010. GAAP operating margin was 51 percent, compared to 49 percent in the third quarter of 2010.
  • Non-GAAP Operating Income: $180.7 million, an increase of 15 percent, compared to $156.9 million in the third quarter of 2010. Non-GAAP operating margin was 59 percent, compared to 57 percent in the third quarter of 2010.
  • GAAP Net Income and Earnings per Diluted Share: GAAP net income was $134.1 million, an increase of 17 percent, compared to $114.5 million in the third quarter of 2010. GAAP earnings per diluted share were $0.63, an increase of 17 percent, compared to $0.54 in the third quarter of 2010.
  • Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $152.9 million, an increase of 15 percent, compared to $132.6 million in the third quarter of 2010. Non-GAAP earnings per diluted share were $0.72, an increase of 14 percent, compared to $0.63 in the third quarter of 2010.
  • Deferred Revenues: As of September 30, 2011, Check Point had deferred revenues of $454.5 million, an increase of 15 percent, compared to $396.3 million as of September 30, 2010.
  • Cash Flow: Cash flow from operations was $154.5 million, an increase of 7 percent, compared to $144.6 million in the third quarter of 2010.
  • Share Repurchase Program: During the third quarter of 2011, the company repurchased 1.37 million shares at a total cost of $75 million.
  • Cash Balances and Marketable Securities: $2,776 million as of September 30, 2011, an increase of $520 million, compared to $2,256 million as of September 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 launched two new high-end appliances targeted at large enterprises, data centers and service providers:

  • The 61000 Security System - the industry's fastest security gateway offers scalable performance for data centers, telecommunication and cloud service providers, with a multi-bladed hardware platform that is potentially capable of future performance of more than 1Tbps in a single firewall and 200 Gbps this year. The new system supports 70 million concurrent connections and 600,000 sessions per second -- bringing unparalleled security performance to multi-transaction environments.
  • 21400 Appliance - combines high-speed networking technologies with firewall throughput of up to 100 Gbps and IPS throughput of up to 21 Gbps (default profile). The Check Point 21400 is optimized for a full range of software blade protections, providing large enterprises and data centers with industry-leading security and performance.

During the quarter Check Point continued to build on the 3D Security vision with the introduction of the R75.20 release based on the Software Blade Architecture™, The R75.20 release heightens security with Integrated URL Filtering, SSL Inspection and Expanded Data Loss Prevention. This new software blade provides granular control for web surfing in real-time and uniquely integrates with Application Control for unified enforcement of all Web controls. It also enables businesses to inspect SSL-encrypted traffic across all software blades. R75.20 further extends the Check Point DLP solution that now enables customers to protect against internal data leaks.

In addition, Check Point introduced a new metric for security performance -- SecurityPower™. The new metric allows customers to estimate their security needs and compare it to the SecurityPower Units (SPU) rating of each security solution -- improving the accuracy of performance measurements for appliances under security attack and during day-to-day operations.

Latest Announcements
In the beginning of October, the company released a new line of appliances and latest annuity software blade:

  • Six New Appliance Models - The new appliances represent a refresh of Check Point's current hardware offerings and are designed to address the security needs of any size business. These new appliances are optimized for Check Point's Software Blade Architecture™ and deliver three times the performance of previous enterprise versions at comparative pricing.
  • Anti-Bot Software Blade - The latest annuity software blade designed to help businesses discover, prevent and remediate bot attacks utilizing a unique ThreatSpect™ detection engine that analyzes traffic and discovers bots by correlating multiple risk factors. The solution is integrated into every gateway to provide businesses with multi-layered protection against bot attacks, Advanced Persistent Threats (APTs) and other forms of malware threats.

Recent Industry Accolades:

  • Leader in the Gartner Magic Quadrant for Mobile Data Protection - For the 11th time, Check Point is acknowledged for its comprehensive endpoint solutions that secure data on mobile platforms such as laptops, smartphones, and removable media.
  • Endpoint Security R80 - Named "Best Buy" and received a 5-Star rating in a comparative product review conducted by SC Magazine.

Shwed concluded, "During the quarter we've raised the bar for security across the industry by increasing the levels of security functionality and setting new records for security performance. We opened the fourth quarter with the most significant update to our appliance product portfolio to date by delivering three times the performance across the entire enterprise appliance product line. We continue to deliver on our 3D security vision, enabling customers to consolidate their security infrastructure with enhanced protections and increased performance."

Fourth Quarter Investor Conference Participation Schedule:

  • Wells Fargo Global Technology, Media and Telecommunications Conference
    November 8, 2011 - NY, NY

  • UBS Technology, Media and Telecommunications Conference
    November 15, 2011 - New York, NY

  • Morgan Stanley Global Technology, Media and Telecommunications Conference
    November 17, 2011 - NY, NY

  • Credit Suisse First Boston Technology, Media and Telecommunications Conference
    November 30, 2011 - Scottsdale, AZ

  • Barclays Technology Conference
    December 7, 2011 - San Francisco, CA

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 October 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 October 25, 2011 at the company's website www.checkpoint.com/ir or by telephone at +1.201.612.7415, replay ID number 380561, 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.

Safe Harbor Statement
Certain statements in this press release are forward-looking statements. Forward-looking statements include statements regarding Check Point's belief that its new 61000 security system is potentially capable of future performance of more than 1Tbps in a single firewall and 200 Gbps this year. Because these statements pertain to future events they are subject to various risks and uncertainties, and 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: any foreseen and unforeseen developmental or technological difficulties with regard to Check Point's products; and other factors and risks discussed in Check Point's Annual Report on Form 20-F for the year ended December 31, 2010, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations.

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, ----------------------- ----------------------- 2011 2010 2011 2010 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Products and licenses $ 120,700 $ 106,399 $ 345,246 $ 301,341 Software updates, maintenance and subscription 187,610 166,795 544,982 478,021 ----------- ----------- ----------- ----------- Total revenues 308,310 273,194 890,228 779,362 ----------- ----------- ----------- ----------- Operating expenses: Cost of products and licenses 18,760 18,799 55,395 51,591 Cost of software updates, maintenance and subscription 16,066 14,910 45,986 40,702 Amortization of technology 7,849 8,311 23,548 24,527 ----------- ----------- ----------- ----------- Total cost of revenues 42,675 42,020 124,929 116,820 Research and development 28,063 26,165 83,230 76,294 Selling and marketing 62,091 55,872 185,385 169,267 General and administrative 17,297 14,075 47,120 43,357 Restructuring and other acquisition related costs - - - 588 ----------- ----------- ----------- ----------- Total operating expenses 150,126 138,132 440,664 406,326 ----------- ----------- ----------- ----------- Operating income 158,184 135,062 449,564 373,036 Financial income, net 9,638 7,243 30,998 21,569 ----------- ----------- ----------- ----------- Income before taxes on income 167,822 142,305 480,562 394,605 Taxes on income 33,748 27,790 96,407 79,188 ----------- ----------- ----------- ----------- Net income $ 134,074 $ 114,515 $ 384,155 $ 315,417 =========== =========== =========== =========== Earnings per share (basic) $ 0.65 $ 0.55 $ 1.85 $ 1.52 =========== =========== =========== =========== Number of shares used in computing earnings per share (basic) 206,311 207,239 207,199 208,049 =========== =========== =========== =========== Earnings per share (diluted) $ 0.63 $ 0.54 $ 1.79 $ 1.49 =========== =========== =========== =========== Number of shares used in computing earnings per share (diluted) 213,412 211,637 214,505 211,339 =========== =========== =========== =========== CHECK POINT SOFTWARE TECHNOLOGIES LTD. RECONCILIATION OF SELECTED GAAP MEASURES TO NON GAAP MEASURES (In thousands, except per share amounts) Three Months Ended Nine Months Ended ------------------------ ------------------------ September 30, September 30, ------------------------ ------------------------ 2011 2010 2011 2010 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) GAAP operating income $ 158,184 $ 135,062 $ 449,564 $ 373,036 Stock-based compensation (1) 11,495 8,701 29,640 26,714 Amortization of intangible assets (2) 11,013 13,114 33,076 38,770 Restructuring and other acquisition related costs (3) - - - 588 ----------- ----------- ----------- ----------- Non-GAAP operating income 180,692 156,877 512,280 439,108 =========== =========== =========== =========== GAAP net income $ 134,074 $ 114,515 $ 384,155 $ 315,417 Stock-based compensation (1) 11,495 8,701 29,640 26,714 Amortization of intangible assets (2) 11,013 13,114 33,076 38,770 Gain on Sale of Marketable securities previously impaired (3) - - (2,017) - Restructuring and other acquisition related costs (4) - - - 588 Taxes on the above items (5) (3,689) (3,703) (9,378) (9,676) ----------- ----------- ----------- ----------- Non-GAAP net income $ 152,893 $ 132,627 $ 435,476 $ 371,813 =========== =========== =========== =========== GAAP Earnings per share (diluted) $ 0.63 $ 0.54 $ 1.79 $ 1.49 Stock-based compensation (1) 0.05 0.04 0.14 0.13 Amortization of intangible assets (2) 0.05 0.06 0.15 0.18 Gain on Sale of Marketable securities previously impaired (3) - - (0.01) - Restructuring and other acquisition related costs (4) - - - - Taxes on the above items (5) (0.01) (0.01) (0.04) (0.04) ----------- ----------- ----------- ----------- Non-GAAP Earnings per share (diluted) $ 0.72 $ 0.63 $ 2.03 $ 1.76 =========== =========== =========== =========== Number of shares used in computing Non-GAAP earnings per share (diluted) 213,412 211,637 214,505 211,339 =========== =========== =========== =========== (1) Stock-based compensation: Cost of products and licenses $ 11 $ 10 $ 41 $ 38 Cost of software updates, maintenance and subscription 235 322 680 780 Research and development 2,164 2,403 5,619 5,744 Selling and marketing 2,328 1,776 5,909 5,572 General and administrative 6,757 4,190 17,391 14,580 ----------- ----------- ----------- ----------- 11,495 8,701 29,640 26,714 ----------- ----------- ----------- ----------- (2) Amortization of intangible assets: Amortization of technology 7,849 8,311 23,548 24,527 Research and development - 685 - 2,055 Selling and marketing 3,164 4,118 9,528 12,188 ----------- ----------- ----------- ----------- 11,013 13,114 33,076 38,770 ----------- ----------- ----------- ----------- (3) Gain on Sale of Marketable securities previously impaired - - (2,017) - ----------- ----------- ----------- ----------- (4) Restructuring and other acquisition related costs - - - 588 ----------- ----------- ----------- ----------- (5) Taxes on the above items (3,689) (3,703) (9,378) (9,676) ----------- ----------- ----------- ----------- Total, net $ 18,819 $ 18,112 $ 51,321 $ 56,396 =========== =========== =========== =========== CHECK POINT SOFTWARE TECHNOLOGIES LTD. CONDENSED CONSOLIDATED BALANCE SHEET DATA (In thousands) ASSETS September 30, December 31, 2011 2010 ------------- ------------- (unaudited) (audited) Current assets: Cash and cash equivalents $ 420,711 $ 551,777 Marketable securities and short-term deposits 789,644 537,718 Trade receivables, net 197,495 283,192 Prepaid expenses and other current assets 52,762 44,247 ------------- ------------- Total current assets 1,460,612 1,416,934 ------------- ------------- Long-term assets: Marketable securities 1,566,115 1,325,451 Property and equipment, net 37,183 37,065 Severance pay fund 6,013 6,532 Deferred tax asset, net 24,795 18,122 Other intangible assets, net 33,688 66,765 Goodwill 717,052 717,052 Other assets 16,099 17,381 ------------- ------------- Total long-term assets 2,400,945 2,188,368 ------------- ------------- Total assets $ 3,861,557 $ 3,605,302 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Deferred revenues $ 407,292 $ 424,158 Trade payables and other accrued liabilities 228,681 239,104 ------------- ------------- Total current liabilities 635,973 663,262 ------------- ------------- Long-term deferred revenues 47,193 40,394 Income tax accrual 207,089 169,370 Deferred tax liability, net 1,135 1,721 Accrued severance pay 10,586 11,224 ------------- ------------- 266,003 222,709 ------------- ------------- Total liabilities 901,976 885,971 ------------- ------------- Shareholders' equity: Share capital 774 774 Additional paid-in capital 625,520 580,276 Treasury shares at cost (1,494,352) (1,306,382) Accumulated other comprehensive income 14,406 15,584 Retained earnings 3,813,233 3,429,079 ------------- ------------- Total shareholders' equity 2,959,581 2,719,331 ------------- ------------- Total liabilities and shareholders' equity $ 3,861,557 $ 3,605,302 ============= ============= Total cash and cash equivalents, marketable securities and short-term deposits $2,776,470 $2,414,946 ============= ============= CHECK POINT SOFTWARE TECHNOLOGIES LTD. SELECTED CONSOLIDATED CASH FLOW DATA (In thousands) Three Months Ended Nine Months Ended ------------------------ ------------------------ September 30, September 30, ------------------------ ------------------------ 2011 2010 2011 2010 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Cash flow from operating activities: Net income $ 134,074 114,515 $ 384,155 $ 315,417 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 1,808 1,730 5,360 5,305 Decrease (increase) in trade and other receivables, net (1,971) (7,939) 77,935 115,714 Increase in deferred revenues, trade payables and other accrued liabilities 5,323 19,876 27,087 22,025 Realized gain on marketable securities - (781) (2,481) (781) Stock-based compensation 11,495 8,701 29,640 26,714 Amortization of intangible assets 11,013 13,114 33,077 38,770 Excess tax benefit from stock-based compensation (2,660) (1,082) (4,748) (4,042) Deferred income taxes, net (4,549) (3,558) (8,378) (7,807) ----------- ----------- ----------- ----------- Net cash provided by operating activities 154,533 144,576 541,647 511,315 ----------- ----------- ----------- ----------- Cash flow from investing activities: Cash paid in conjunction with acquisitions, net of acquired cash (55) (333) (6,556) (13,957) Investment in property and equipment (1,989) (1,441) (5,473) (3,585) ----------- ----------- ----------- ----------- Net cash used in investing activities (2,044) (1,774) (12,029) (17,542) ----------- ----------- ----------- ----------- Cash flow from financing activities: Proceeds from issuance of shares upon exercise of options 11,827 12,568 51,378 46,566 Purchase of treasury shares (75,000) (50,000) (225,000) (150,000) Excess tax benefit from stock-based compensation 2,660 1,082 4,748 4,042 ----------- ----------- ----------- ----------- Net cash used in financing activities (60,513) (36,350) (168,874) (99,392) ----------- ----------- ----------- ----------- Unrealized gain on marketable securities, net (5,314) 9,131 780 15,119 ----------- ----------- ----------- ----------- Increase in cash and cash equivalents, marketable securities and short term deposits 86,662 115,583 361,524 409,500 Cash and cash equivalents, marketable securities and short term deposits at the beginning of the period 2,689,808 2,140,916 2,414,946 1,846,999 ----------- ----------- ----------- ----------- Cash and cash equivalents, marketable securities and short term deposits at the end of the period $ 2,776,470 $ 2,256,499 $ 2,776,470 $ 2,256,499 =========== =========== =========== ===========

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

MEDIA CONTACT:
Stephanie Look
Check Point Software Technologies
+1.650.628.2171
press@checkpoint.com


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