Check Point Software Technologies .(CHKP) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue grew by 7% to $627 million,$5 million above the midpoint of the projection [26] - Non-GAAP EPS grew by 8% to $2.17,$0.02 above the midpoint of the projection [26] - Net income grew by 4% to $246 million [28] - Operating cash flow grew by 5$200 million [28] - Deferred revenues grew by 2% to $1.880 billion, with short-term deferred revenues growing by 3$1.342 billion [11] - Calculated billing grew by 10% to $620 million, with current calculated billing growing by 7$622 million [11] Business Line Performance - Product and subscription revenues grew by 10%, marking a turnaround since the end of 2023 [155] - Infinity business showed strong double-digit growth in both bookings and revenues [155] - Harmony Email continued to perform strongly, becoming more significant to the business [13] - Quantum Force, a new gateway product, showed good demand and growth in bookings [150] Market Performance - All geographies showed double-digit growth in new business annualized bookings, though revenue growth typically lags by a few quarters [27] - Public sector saw significant success, with 92 government agencies in 32 countries adopting the Check Point platform [55] Strategic Direction and Industry Competition - The company is focusing on AI innovations, including AI Infinity Copilot, Threat Cloud AI, and Gen AI Protect, which will allow customers to monitor AI product usage [31] - The company is working on integrating SASE (Secure Access Service Edge) into a unified platform, aiming to provide a single solution for remote employees, site-to-site, cloud access, and data centers [84] - The company is seeing growth in core network security, with some competitors experiencing declines in this area [37] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the second half of the year, with a healthy pipeline and positive indicators for growth [42][43] - Cybersecurity remains a high priority for customers, with continued investment in the sector despite broader IT budget pressures [46] - The company expects to sustain double-digit growth in new business bookings, which should translate into higher revenue growth over time [41] Other Important Information - The company announced the appointment of Nadav as the new CEO, effective December, bringing extensive experience in cybersecurity and leadership [9][10] - The company expanded its buyback program by $2 billion, with up to$325 million per quarter [28] - The company is investing heavily in sales and marketing, with a focus on increasing productivity and new logo acquisition [80][89] Q&A Session Summary Question: How is the new CEO expected to impact the company's strategy? - Nadav is expected to bring a more outbound and charismatic leadership style, complementing the existing strengths of the company [19][34] - The focus will be on building on the existing strategy, with potential for more innovation, go-to-market changes, and M&A activity [96] Question: What is the outlook for Infinity and its contribution to billings? - Infinity is becoming increasingly significant, with 15% of business in terms of revenue and much higher in bookings [85] - The utilization of Infinity allowances is growing, but it can be lumpy depending on customer needs and payment terms [85][142] Question: How is the company addressing the competitive landscape in network security? - The company is seeing growth in core network security, with some competitors experiencing declines in this area [37] - The company is focusing on integrating its solutions into a unified platform, which is expected to provide a competitive advantage [84] Question: What are the expectations for EBIT and free cash flow growth? - The company expects to maintain a healthy operating margin between 42% to 43% for 2024 [136] - Free cash flow growth is expected to follow billing growth, with a 5% increase in operating cash flow this quarter [137] Question: How is the company leveraging AI in its products? - AI innovations such as AI Infinity Copilot and Gen AI Protect are currently providing competitive differentiation, with potential for future revenue impact [104] - The company is focused on using AI to enhance security and simplify management for customers [31]