Check Point Software Technologies Ltd. (CHKP)

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Check Point Software Technologies Ltd. (CHKP)

Q4 2008 Earnings Call

January 27, 2009 8:30 am ET


Kip Meintzer - Director of Investor Relations

Gil Shwed - Chairman and CEO

Jerry Ungerman - Vice Chairman

Tal Payne - Chief Financial Officer


Robert Breza – RBC Capital Markets

Phil Winslow - Credit Suisse Group

Walter Pritchard – Cowen and Company

Shaul Eyal – Oppenheimer

Daniel Ives - Friedman, Billings, Ramsey

Garrett Bekker – Bank of America Securities

Brian Freed - Morgan Keegan

Katherine Egbert - Jefferies & Co.

Sarah Friar - Goldman Sachs

Todd Raker - Deutsche Bank

Rob Owens - Pacific Crest Investments

Michael Turits - Raymond James



(Operator Instructions) Welcome to the Check Point Software Technologies Fourth Quarter and Fiscal Year 2008 Financial Results. It is now my pleasure to introduce your host Kip Meintzer, Director, Investor Relations for Check Point Software Technologies.

Kip Meintzer

This is Kip Meintzer, Director of Investor Relations for Check Point Software. On the call with me today are Gil Shwed, Chairman and CEO, Jerry Ungerman, Vice Chairman and Tal Payne, Chief Financial Officer. We'd like to thank all of you for joining us today to discus Check Point’s fourth quarter and fiscal year 2008 results.

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 For your convenience, the conference call replay will be available through February 10th. If you'd like to reach us after the call, please contact investor relations at +1-650-628-2050.

Now, before we begin with management's presentation, I’d like to bring the following to your attention. During the course of this call Check Point representatives will make certain forward looking statements. These forward looking statements may include our expectations regarding the announced available for repurchase of our ordinary shares, our beliefs regarding the proposed acquisition of the Security Appliance Business of Nokia including the expected closing date, our expectations regarding our sales pipeline, our expectations regarding the potential impact of market conditions on our business as we move forward and our expectations regarding our business outlook for the first quarter 2009.

Other statements which may be made in response to questions which refer to our beliefs, plans, expectations or intentions are also forward looking statements for the purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act. 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 outlined in the press release that we issued today and the risks discussed in Check Point's annual report on form 20-F for the year ended December 31, 2007, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update its forward looking statements.

Now, I would like to turn the call over to Tal Payne, Check Point's Chief Financial Officer.

Tal Payne

I’m happy once again to begin the review of an excellent quarter and what turned out to be an exceptional year for Check Point. We achieved record quarterly and fiscal year results from revenues, non-GAAP net income and non-GAAP EPS perspective. Our results both quarterly and for the full year came in the high end of our projections as we continue to demonstrate solid growth across all regions. We continue to see the adoption of our products from new and existing customers throughout this quarter and the year as customers continue to embrace our unified security architecture and total security solutions.

Before I go further into the numbers let me remind you that our fourth quarter and fiscal year GAAP financial results include equity based compensation expenses according to FAS 123R, expenses relating to our acquisitions including our motivation of intangible and acquired in process R&D, impairments of marketable securities in accordance with FAS 116, and the related tax effects of such items. Keep in mind that the non-GAAP information is presented excluding these items.

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.

Let’s take a look at the financial highlights for the quarter. Fourth quarter revenues were $218 million an increase of 5% compared to $207 million in the fourth quarter 2007 and a 9% sequential increase over the third quarter 2008. From a geographical standpoint our revenue growth was led by our Enterprise business in the America’s as well as an increased demand across the Asia/Pacific region.

Revenue distribution for the quarter was as follows; America’s contributed 43% of the revenue, Europe/Middle East/Africa was 45% and Asia/Pacific/Japan region contributed the remaining 12%. Our product and license revenues were $94 million, the highest quarterly revenues for products and licenses in recent years. This was accomplished while we began shifting more toward subscription based technology programs that deliver recurring revenue. This program includes our smart difference services and our Total Security subscription packages.

Software maintenance service revenues were $124 million in the fourth quarter of 2008 representing 9% growth over the fourth quarter of last year and 5% over the third quarter 2008. GAAP net income for the fourth quarter of 2008 was $86 million, $0.41 per diluted share. Non-GAAP net income for the quarter was $106 million or $0.50 per diluted share. Both came in at the high end of our guidance, primarily as the result of our top line performance and expense control.

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