Check Point Software Technologies Q2 2010 Earnings Call Transcript

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.

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