Check Point Software Technologies Ltd. (CHKP)
Q2 2010 Earnings Call
July 21, 2010 8:30 a.m. ET
Gil Shwed – Founder, Chairman, and CEO
Tal Payne – Chief Financial Officer
Kip Meintzer – Investor Relations
Sterling Auty – JPMorgan
Robert Breza - RBC Capital Markets
Katherine Egbert - Jefferies & Co.
Jeff Evenson – Sanford Bernstein
Shaul Eyal – Oppenheimer
David Ives - Friedman, Billings, Ramsey
Israel Hernandez - Barclays Capital
Gregg Moskowitz - Cowen and Company
Rob Owens - Pacific Crest Securities
Walter Pritchard - Citigroup
Kash Rangan – BAS-Merrill Lynch
Keith Weiss – Morgan Stanley
Phil Winslow - Credit Suisse
Stephanie Withers - Goldman Sachs
Kash Rangan – Merrill Lynch
Jonathan Ruykhaver - ThinkEquity
Scott Zeller – Needham & Company
Brad Zelnick – Macquarie Research
Previous Statements by CHKP
» Check Point Software Technologies, Ltd. Q1 2010 Earnings Call Transcript
» Check Point Software Technologies Ltd. Q4 2008 Earnings Call Transcript
Thank you. I'd like to thank all of you for joining us today to discuss Check Point's record financial results for the second quarter of 2010. Joining me today on the call are Gil Shwed, our founder, chairman, and CEO, and Tal Payne, our chief financial officer. 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 August 5. If you'd like to reach us after the call, please contact investor relations at +1 650 628 2040. Before we begin with management's presentation, I'd like to bring the following to your attention.
During the course of the call, Check Point representatives will make certain forward-looking statements, and these forward-looking statements may include our expectations regarding demand for our security products, our expectations regarding the introduction of new products, and the success of those products, and our expectations regarding our business and financial outlook for the third quarter and full year of 2010. 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 purpose 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 discussed in Check Point's annual report on Form 20F for the year ended December 31, 2009, which is on file with the Securities Exchange Commission. As a reminder, Check Point assumes no obligation to update its forward-looking statements.
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 would like to turn the call over to Tal Payne, Check Point's chief financial officer, for a review of the financial results.
Thank you Kip, and thank all of you for taking the time to join us on the call today. Once again, I'm happy to review another excellent quarter with record results. Our revenues exceeded our projections, with 17% growth over the same period in 2009, while our non-GAAP earnings per share came in at the high end of our projections and was $0.68, representing 21% growth.
Before I proceed further into the numbers, let me remind you that our second quarter GAAP financial results include equity based compensation expenses according to ASC-718, expenses relating to acquisitions, including the motivation of intangible assets and restructuring costs and the related tax effects from such items. Keep in mind that non-GAAP information is presented excluding these items.
This quarter we consolidated Liquid Machines for the first time in the results since June 9. GAAP results for the quarter include the effect of certain charges relating to this acquisition. These charges include the motivation of intangible assets and restructuring charges which in aggregate total $700,000.
Now let's take a look at the financial highlights for the quarter. In the second quarter, revenues exceeded the high end of our projections. Revenues reached $261 million, representing an increase of 17%, compared to $223.6 million in the second quarter of 2009. This growth was driven by exceptional product sales.
Products and license revenues were $104 million, representing a 25% increase over the same period last year. The growth came from all main product lines, including the IP series, Power-1, UTM-1, and Smart-1. Our software update maintenance and service revenues reached an all-time high of $157.2 million this quarter, a 12% increase year-over-year.
The growth in deferred revenues was also significant this quarter. Deferred revenues as of June 30, 2010 reached $415 million, an increase of $53 million, or 15%, over June 30 last year.
We had growth in revenues across all geographies, with America delivering 20% growth over Q2 2009. Revenue distribution by geography for the quarter was as follows. America contributed 44% of the revenue, Europe with 41% of the revenue, and Asia-Pacific and Japan, Middle East, and Africa regions contributed the remaining 16%.
From a deal size and quantity perspective, this quarter we continued to see an increasing number of larger deals. Transactions greater than $60,000 accounted for 68% of the total order value, compared to 51% in the same period a year ago. We have 25 customers that each had transactions with a value greater than $1 million, compared to 21 customers in the same period last year.