Check Point Q3 Earnings Beat Estimates - Analyst Blog

Check Point Software Technologies Ltd. ( CHKP ) reported third quarter 2013 adjusted earnings (including stock-based compensation but excluding amortization of intangible assets) of 80 cents per share, which beat the Zacks Consensus Estimate by a couple of cents.


Check Point's third quarter revenues of $344.1 million not only increased 3.5% from the year-ago quarter but also came ahead of the Zacks Consensus Estimate of $343 million. Reported revenues were within management's guided range of $330.0 million to $350.0 million.

The year-over-year revenue growth was aided by a 5.6% increase in Software Updates, Maintenance and Services revenues and a marginal increase (up 0.04% year over year) in revenues from products and licenses.

Check Point reported growth in its Application Control and Anti-Bot applications. Moreover, the company also witnessed growth in its new small appliances business that waslaunched last quarter, and an increase in sales from data center applications.

During the quarter, Check Point launched the latest version of Software Blade Architecture and data center applications such as Check Point Security Gateway R77, Check Point Threat Emulation and 13500 Data Center Appliance Launch.

Geographically, the Americas contributed 46% of the revenues, Europe accounted for 36% and Asia Pacific, Japan, Middle East and Africa region contributed the remaining 18%.

Operating Results

Adjusted gross profit (including stock-based compensation but excluding amortization of intangible assets) increased 3.3% year over year to $304.1 million while margins decreased 21 basis points from the year-ago quarter to 88.4%, primarily due to revenue mix.

Total operating expenses increased 5.5% year over year as the company continued to invest in the business and hiring for research and development, sales and marketing and technological support. As a percentage of revenues, operating expenses increased 63 basis points.

Operating income (including stock based compensation but excluding amortization of intangible assets) came in at $187.2 million, up 2.0% year over year. Operating margin decreased 85 basis points year over year to 54.4%.

Adjusted net income (including stock-based compensation but excluding amortization of intangible assets) was $160.1 million or 80 cents per share, up from $153.2 million or 73 cents in the comparable quarter last year.

Balance Sheet & Cash Flow

Check Point exited the quarter with cash, cash equivalents and marketable securities of approximately $1.26 billion, up from $1.24 billion in the previous quarter. Trade receivables were $256.7 million. Cash flow from operations was $195.4 million, down from $204.7 million in the previous quarter.

During the quarter, Check Point repurchased 2.3 million shares at a total cost of $128.3 million.

Our Take

Check Point delivered better-than expected third-quarter results, which topped the Zacks Consensus Estimate on both counts primarily driven by growth across its software and data center applications.

The rapid adoption of Check Point's data center appliances and the continuous enhancements in the data center product lines are expected to provide adequate support to revenue growth.

However, stiff competition from Cisco Systems Inc. ( CSCO ), Juniper Networks Inc. ( JNPR ) and Fortinet Inc. ( FTNT ); an uncertain economic environment, competitive pressures, currency headwinds and Check Point's significant European exposure are concerns.

Currently, Check Point carries a Zacks Rank #3 (Hold).

CHECK PT SOFTW (CHKP): Free Stock Analysis Report

CISCO SYSTEMS (CSCO): Free Stock Analysis Report

FORTINET INC (FTNT): Free Stock Analysis Report

JUNIPER NETWRKS (JNPR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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