Check Point Software Technologies Ltd.
) were up 2.13% on Wednesday's trade after the company's
second-quarter top and bottom lines not only beat the Zacks
Consensus Estimate but were also up year over year.
Check Point's second-quarter revenues of $362.6 million
increased 6.6% from the year-ago quarter and also came marginally
ahead of the Zacks Consensus Estimate of $360.0 million. Reported
revenues came in at the higher end of management's guided range of
$340.0 to $375.0 million.
The year-over-year revenue growth was aided by 9.6% increase in
revenues from Products & Software Blades and 3.5% improvement
in Software Updates and maintenance revenues. The company reported
21.8% year-over-year growth in revenues from Software Blades
Check Point witnessed higher adoption of its Application
Control, Anti-Bot and URL Filtering blades coupled with higher
demand for its data center and high-end appliances. Another factor
that contributed to the overall growth scenario was the increasing
number of large deal signings. During the quarter, Check Point
witnessed 35.0% year-over-year increase in customers who signed
deals worth $1.0 million or more.
Geographically, the Americas contributed 49.0% of the total
revenue while 35.0% was derived from Europe. The remaining 16.0%
was contributed by Asia Pacific, Japan, Middle East and Africa
On a year-over-year basis, adjusted gross profit (including
stock-based compensation but excluding amortization of intangible
assets) increased 6.8% to $321.6 million, while margins came in at
88.7% compared with 88.5% reported in the year-ago quarter.
Adjusted operating expenses (including stock-based compensation
but excluding amortization of intangible assets) increased 12.2%
year over year to $131.2 million as the company continued to invest
in the business and hire for research and development, sales and
marketing and technological support. As a percentage of revenues,
it increased 180 basis points (bps).
Adjusted operating income (including stock-based compensation
but excluding amortization of intangible assets) came in at $149.4
million, up 3.2% year over year. However, margins contracted 135
bps primarily due to higher expenses.
Adjusted net income (including stock-based compensation but
excluding amortization of intangible assets calculated on a
proportionate tax basis) was $160.0 million or 82 cents, up from
$151.8 million or 76 cents reported in the comparable quarter last
Balance Sheet & Cash Flow
Check Point exited the quarter with cash, cash equivalents and
marketable securities of approximately $1.23 billion compared with
$1.21 billion in the previous quarter. Cash flow from operations
was $167.9 million compared with $172.1 million in the previous
quarter. During the quarter, Check Point repurchased 3.0 million
shares for $194 million.
Check Point expects its revenues in the range of $355.0 to
$375.0 million, in line with the Zacks Consensus Estimate of $365
million at the mid-point. The company also expects non-GAAP
earnings per share to be between 88 cents and 92 cents, while the
Zacks Consensus Estimate is pegged at 82 cents.
Check Point delivered better-than-expected second-quarter
results. The company also reported modest third-quarter revenue
Nonetheless, the rapid adoption of Check Point's data center
appliances and the continuous enhancements in data center product
lines are expected to provide adequate support to revenue
Moreover, Check Point's settlement with the Israeli Tax
Authorities is a long-term positive. The company's continuous share
buybacks also bode well with the investors.
However, stiff competition from
Cisco Systems Inc.
Juniper Networks Inc.
); an uncertain economic environment, competitive pressures,
currency headwinds and Check Point's significant European exposure
are the concerns.
Currently, Check Point carries a Zacks Rank #3 (Hold).
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