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Check Point Software Technologies (CHKP)
Q4 2012 Earnings Call
January 23, 2013 8:30 am ET
Tal Payne - Chief Financial Officer
Gil Shwed - Co-Founder, Executive Chairman and Chief Executive Officer
Shebly Seyrafi - FBN Securities, Inc., Research Division
Shaul Eyal - Oppenheimer & Co. Inc., Research Division
Aaron Schwartz - Jefferies & Company, Inc., Research Division
Jonathan B. Ruykhaver - Stephens Inc., Research Division
Michael Turits - Raymond James & Associates, Inc., Research Division
Gregg Moskowitz - Cowen and Company, LLC, Research Division
Frederick T. Grieb - Nomura Securities Co. Ltd., Research Division
Daniel H. Ives - FBR Capital Markets & Co., Research Division
Daniel T. Cummins - B. Riley & Co., LLC, Research Division
Sterling P. Auty - JP Morgan Chase & Co, Research Division
Brent Thill - UBS Investment Bank, Research Division
Walter H. Pritchard - Citigroup Inc, Research Division
Keith Weiss - Morgan Stanley, Research Division
Jonathan Ho - William Blair & Company L.L.C., Research Division
Tal Liani - BofA Merrill Lynch, Research Division
Philip Winslow - Crédit Suisse AG, Research Division
Previous Statements by CHKP
» Check Point Software Technologies' Management Presents at NASDAQ OMX 29th Investor Program Conference (Transcript)
» Check Point Software Technologies' Management Presents at the Credit Suisse 2012 Technology Conference (Transcript)
» Check Point Software Technologies' Management Presents at UBS Global Technology Conference (Transcript)
Thank you. I'd like to thank all of you for joining us today to discuss Check Point's financial results for the fourth quarter and full year of 2012. Joining me on the call are Gil Shwed, Founder, Chairman and CEO; along with our Chief Financial Officer, Tal Payne.
As a reminder, this call is being webcast live on our website and is being recorded for replay. To access the live webcast and replay information, please visit the company's website at checkpoint.com. For your convenience, the conference call replay will be available through January 30. If you'd like to reach us after the call, please contact Investor Relations by emailing Kip@checkpoint.com or by phone at +1 (650) 628-2040.
Before we begin management's presentation, I'd like to highlight the following items. During the course of this call, Check Point's representatives will make certain forward-looking statements. These forward-looking statements may include our expectations regarding demand for our security products; our expectations regarding the introduction of new products, programs and the success of those products and programs; and our expectations regarding our business and financial outlook for the first quarter and full year of 2013. Other statements which may be made in response to questions, which refer to our beliefs, plans and expectations or intentions, are also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
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, the risks discussed in Check Point's latest annual report on Form 20-F.
As a reminder, Check Point assumes no obligation to update its forward-looking statements except as required by law. In our press release, which has been posted on our website, we present GAAP and non-GAAP results along with reconciliation tables, which highlight this data, as well as the reasons for our presentation of non-GAAP information.
Now I'd like to turn the call over to Check Point's Chief Financial Officer, Tal Payne, for a review of the financial results.
Thank you, Kip, and hello, everyone. I'd like to thank you all for joining us today for the review of the fourth quarter and the full year financial results. Our revenues for the year increased by 8% year-over-year, and non-GAAP EPS was $03.19 -- $3.19, at the top of our guidance and representing an 11% growth. Before I proceed further into the numbers, let me remind you that our fourth quarter and full year 2012 GAAP financial results include noncash equity-based compensation charges, amortization of acquired intangible assets and the related tax effects. Keep in mind that non-GAAP information is presented excluding those items.
Now let's take a look at the financial highlights for the quarter. In the fourth quarter, our revenues reached $369 million, representing an increase of 3% compared to $357 million in the fourth quarter of 2011. Our software update maintenance and subscription revenues reached $218 million, representing growth of 10% year-over-year. The growth was driven by our update and maintenance revenues, as well as our annuity software blades that are recognized as a subscription. We continue to see great success in our annuity blades, led by IPS, Application Control and antivirus.
Anti-Bot, which was launched earlier this year, is picking up nicely as well with thousands of units sold so far. Software blades revenues increased by over 35% year-over-year and are now over 20% of our service revenues.
Product and license revenues were $151 million, lower than last year's $158 million. These results were affected by weakening economy and by the transition to our new appliance product line. On a positive note, sequentially, both revenues and enterprise gateway units has increased by over 30%.
Revenue distribution by geography for the quarter was as follows: Americas contributed 45% of revenues; Europe with 37%; and Asia-Pacific and Japan, Middle East and Africa region contributed the remaining 18%.
Overall, deferred revenues as of December 31, 2012 were $519 million, an increase of $37.5 million or 7% over December 31, 2011. The growth rate is slower compared to 2011 for the following main 3 reasons. First, last year, the fourth quarter had 52% growth in long-term deferred revenues. This growth was as a result of update maintenance and subscription bookings that are over 12 months and came early. Consequently, 2012 bookings were reduced but not the run rate or the annualized contract value we have seen. Secondly, software blade deferred revenues continue to increase significantly. Naturally, the growth rate is slower than last year, and the total amount is much more significant. And third, as product bookings slowed down this year as we went through transition to the new appliances, the related new services bookings are lower.