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Check Point's (CHKP) Q4 Earnings and Revenues Beat Estimates

Check Point Software Technologies Ltd.CHKP reported solid fourth-quarter 2018 results wherein both the top line and bottom line beat the Zacks Consensus Estimate.

The company's non-GAAP earnings per share of $1.68 beat the Zacks Consensus Estimate of $1.63. The figure came above the company's guidance of $1.56-$1.67 and climbed 6% year over year, driven mainly by higher revenues and lower share count.

Revenues came in at $526 million, up 4% year over year. The figure was within the company's guidance of $500-$528 million, and beat the Zacks Consensus Estimate of $517 million.

For full-year 2018, the revenues came in 3% higher than the previous year at $1.92 billion. Non-GAAP earnings per share of $5.71 rose 7%.

Check Point Software Technologies Ltd. Price, Consensus and EPS Surprise

Check Point Software Technologies Ltd. Price, Consensus and EPS Surprise | Check Point Software Technologies Ltd. Quote

Quarter Details

Security subscription revenues were $146.6 million, increasing 12.8% year over year, driven by strong demand for cloud, mobile and zero-day advanced threat prevention technologies.

However, revenues of $160.6 million from Products and licenses fell 3.1% year over year.

Software updates and maintenance revenues increased to $218.3 million, representing 3.8% growth.

As of Dec 31, 2018, deferred revenues were $1.34 billion, up 13% year over year, reflecting strength in security subscription and support.

Geographically, the Americas generated 45% of total revenues, Europe accounted for 39% while the Asia Pacific, Japan and the Middle East and Africa accounted for the remaining 16%.

Talking about deal size, the number of new customers - who signed deals worth $1 million or more - totaled 102. The value of these transactions increased significantly in the fourth quarter. In the quarter, Check Point bagged Infinity deals in various industries.

Check Point also acquired Dome9, with which it expects to enhance its Infinity architecture and CloudGuard security offering.

Moreover, Check Point hit a few milestones this quarter, including CloudGuard's integration with Amazon's AMZN AWS Security Hub. This further strengthened the CloudGuard portfolio.

Operating Results

Non-GAAP operating income for the quarter came in at $279 million, falling 4.5% year over year. Non-GAAP operating margin contracted 470 basis points (bps) to 53%. This can be attributed to increased investments in sales and marketing efforts by the company.

Non-GAAP net income for the quarter was $264 million, up from $259 million in the year-earlier quarter.

For full-year 2018, non-GAAP operating income came in at $1.015 billion, falling 0.9% year over year. Non-GAAP operating margin contracted 200 bps to 53%. Non-GAAP net income was $911 million, up from $888 million in the previous year.

Balance Sheet & Other Financial Details

Check Point exited the fourth quarter with cash and cash equivalents, marketable securities and short-term deposits of $1.75 billion compared with $4.07 billion in the previous quarter, due to the buyout.

During the reported quarter, the company generated cash worth $249 million from operational activities, remaining flat sequentially.

The company repurchased approximately 2.8 million shares for about $305 million in the fourth quarter and approximately 10.3 million shares for about $1.1 billion in the full year.

Outlook

Check Point provided guidance for the full year of 2019. Revenues are expected to be in the range $1.94-$2.04 billion. Non-GAAP EPS is projected to be within $5.85-$6.25.

Revenues for the full year of 2019 are expected to be between $1.940 billion, up to $2.040 billion. Non-GAAP EPS for the full year is expected to be between $5.85 and $6.25.

The company expects first-quarter 2019 margins to be under pressure due to the expenses for Dome9 buyout, as well as the recent buyout of ForceNock. The margins are expected to be approximately 50%.

For 2019, the tax rate is expected to be approximately 14%. It should be about 18% in the first quarter.

Furthermore, for the first quarter of 2019, revenues are expected to be between $460 million and $480 million and non-GAAP EPS between $1.28 and $1.34.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the broader Computer and Technology sector are Twitter, Inc. TWTR and Marvell Technology Group Ltd. MRVL , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Long-term earnings growth rate for Twitter and Marvell is projected to be 22.05% and 9.38%, respectively.

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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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