Check Point Software Technologies Reports 2018 Second Quarter Financial Results

Check Point® Software Technologies Ltd. (NASDAQ: CHKP), today announced its financial results for the second quarter ended June 30, 2018.

Second Quarter 2018:

• Total Revenue: $468 million, a 2 percent increase year over year
• Deferred Revenues: $1,158 million, a 9 percent increase year over year
• GAAP Operating Income: $224 million, representing 48 percent of revenues
• Non-GAAP Operating Income: $247 million, representing 53 percent of revenues
• GAAP EPS: $1.24, a 10 percent increase year over year
• Non-GAAP EPS: $1.37, an 8 percent increase year over year

“We are pleased with our second quarter results and the progress in our initiatives we have achieved to date.  Revenues for the quarter were towards the top of our guidance while EPS over the top.” Said Gil Shwed, Founder and CEO of Check Point Software Technologies. “Every major enterprise today is faced with overwhelming threats from cyberattacks. We believe that Check Point Infinity is the only platform that is focused on full prevention of Gen V attacks across the entire threat landscape, including cloud and mobile.” Shwed concluded.

Financial Highlights for the Second Quarter of 2018:

• Total Revenue: $468 million compared to $459 million in the second quarter of 2017, a 2 percent increase year over year.
• GAAP Operating Income: $224 million compared to $222 million in the second quarter of 2017, representing 48 percent of revenues in the second quarter of 2018 and 2017.
• Non-GAAP Operating Income: $247 million compared to $248 million in the second quarter of 2017, representing 53 percent and 54 percent of revenues in the second quarter of 2018 and 2017, respectively.
• GAAP Taxes on Income: $43 million compared to $45 million in the second quarter of 2017.
• GAAP Net Income and Earnings per Diluted Share: GAAP net income was $198 million compared to $188 million in the second quarter of 2017. GAAP earnings per diluted share were $1.24 compared to $1.12 in the second quarter of 2017, a 10 percent increase year over year.
• Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $218 million compared to $212 million in the second quarter of 2017. Non-GAAP earnings per diluted share were $1.37 compared to $1.26 in the second quarter of 2017, an 8 percent increase year over year.
• Deferred Revenues: As of June 30, 2018, deferred revenues were $1,158 million compared to $1,065 million as of June 30, 2017, a 9 percent increase year over year.
• Cash Flow: Cash flow from operations of $213 million compared to $226 million in the second quarter of 2017. Year over year, currency-hedging transactions had a $25 million effect on our cash flow from operations with minimal impact on our financial income as intended. This quarter includes excess payments related to our currency hedging transactions in an amount of $14 million compared to $11 million of income in the second quarter of 2017.
• Cash Balances, Marketable Securities and Short Term Deposits: $4,042 million as of June 30, 2018, compared to $3,806 million as of June 30, 2017.
• Share Repurchase Program: During the second quarter of 2018 we purchased approximately 2.5 million shares at a total cost of approximately $250 million.
• 100% Increase in the Share Repurchase Program: Today, we announced a 100 percent increase to the share repurchase program.  Under the updated plan, $2 billion is allocated for share repurchase, compared to $1 billion in the previous program, with purchases of up to $325 million a quarter, compared to $250 million in the previous program.

For information regarding the non-GAAP financial measures discussed in this release, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, please see “Use of Non-GAAP Financial Information” and “Reconciliation of GAAP to Non-GAAP Financial Information.”

Second Quarter Highlights:

• Check Point a “Leader in End Point Security Suites”: In the Forrester Research report, Check Point’s SandBlast Agent Complete Endpoint Protection earned the highest possible scores across a majority of the evaluation criteria that included Malware Prevention, Data Security, Mobile Security, External Integrations, and Product Support criteria, as well as Corporate Vision and Focus.
• Check Point’s ZoneAlarm Anti-Ransomware Earns “Editor’s Choice” from PC magazine Once Again: Check Point ZoneAlarm endpoint security blocks ransomware attacks and has received this quarter the top award from PC magazine. The anti-ransomware functionality can work within the ZoneAlarm full suite or in conjunction with other antivirus solutions.
• 97 Percent of Organizations Are Unprepared for Gen V Attacks:Check Point’s newly published 2018 security report provides a clear overview of a threat landscape where 5th Generation cyberattacks are becoming more and more frequent. A key finding from the report is that over 300 mobile apps in trusted, reputable app stores are infected with malware, while cloud threats, crypto-mining attacks and IoT device vulnerabilities are on the rise.

Check Point’s Research Team https://research.checkpoint.com exposes vulnerabilities and attacks to ensure our customers have the highest levels of prevention and protection.  In the second quarter, our publications included the following:

• Remote Code Execution Vulnerability on LG Smartphones: Check Point Research discovered two vulnerabilities that reside in the default keyboard on all mainstream LG smartphone models. Both vulnerabilities could have been used to remotely execute code with elevated privileges on LG mobile devices by manipulating the keyboard updating process, act as a keylogger and thereby compromise the users’ privacy and authentication details.
• SiliVaccine: Inside North Korea’s Anti-Virus: In an exclusive piece of research, Check Point Researchers carried out a revealing investigation into North Korea’s home-grown anti-virus software, SiliVaccine. One of several interesting factors is that a key component of SiliVaccine’s code is a direct copy of one of Trend Micro’s software components.
• Necurs is Back, Just in Time for Easter: Necurs, considered to be the world’s largest botnet, was previously used to distribute several malware families such as the Locky and Jaff ransomware. Check Point researchers picked up new activity from Necurs that showed the infamous botnet is back once again and is spreading QuantLoader malware through email attachments.
• Return of the Festi Rootkit: After the author of the Festi Rootkit was arrested in 2012, his once popular lay dormant – until Check Point researchers noticed it was again active and back in the wild, distributed mainly by the RIG exploit kit. The new variants of Festi are accompanied by a tricky new dropper that masquerades as an Adobe Flash Player update in order to elevate privileges.
• Uncovering Drupalgeddon 2: Drupal, the open-source content management system (CMS) that is used by more than one million sites around the world (including governments, e-retail, enterprise organizations, financial institutions and more), published a highly critical vulnerability, nicknamed Drupalgeddon2, that allowed an unauthenticated attacker to perform remote code execution on default or common Drupal installations. Details of the vulnerability were not available to the public, however, until Check Point Research expanded upon this vulnerability and revealed exactly how it works.
• A New Phishing Kit on the Dark Net: Check Point Research discovered the next generation in phishing kits, currently being advertised on the Dark Net. Unlike previous kits that are primarily composed of just one or two pages to collect personal or financial data, this new and advanced phishing kit offered much more in order to create a more convincing fake site.
• NTLM Credentials Theft via PDF Files: Just a few days after it was reported that malicious actors can exploit vulnerabilities in MS outlook using OLEto steal a Windows user’s NTLM hashes, the Check Point Research team revealed that NTLM hash leaks can also be achieved via PDF files with no user interaction or exploitation.
• Telegram, Cyber Crime’s Channel of Choice: Threat actors no longer need to use the Dark Net to communicate and promote their malicious plans and tools. Instead, they have shifted to new channels, such as the popular mobile messaging app, Telegram, to evade authorities. Check Point Research reveals how it works.
• GlanceLove: Spying Under the Cover of the World Cup: Check Point researchers got hold of samples of the mobile malware, dubbed ‘GlanceLove’ that had been used by the Hamas terrorist organization to target Israeli military personnel under the guise of a World Cup scheduling app. The malware recorded the infected victims’ phonecalls, tracked their GPS location, stole photos, SMS messages and contact lists and took photos of the victim’s surroundings.
• Cryptomining Malware Targeting Unpatched Server Vulnerabilities: With the emerging threat of miners and the rise of cryptocurrencies that have taken the world by storm lately, Check Point Research discovered a large scale crypto-mining operation which had already infected over 6000 machines.
• Banking Trojans Up 50 Percent Among Threat Actors:  Check Point’s latest Global Threat Index for June 2018, revealed the global impact of banking Trojans has increased by 50% during the past four months, with two Trojan malware families entering the Index’s top ten ‘most wanted’ ranking.

Conference Call and Webcast Information
Check Point will host a conference call with the investment community on July 25, 2018, at 8:30 AM EDT/5:30 AM PDT. To listen to the live webcast or replay, please visit the website www.checkpoint.com/ir.

Third Quarter Investor Conference Participation Schedule:

• Oppenheimer 21^st Annual Technology Conference
  August 7, 2018 – Boston, MA
• KeyBanc Capital Markets 20^th Annual Global Technology Leadership Forum
  August 13, 2018 – Vail, CO
• Citi 2018 Global Technology Conference
  September 5, 2018 – New York, NY
• Deutsche Bank 2018 Technology Conference
  September 12-13, 2018 – Las Vegas, NV (Meetings Only)

Members of Check Point’s management team are expected to 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.