Check Point Software Technologies Ltd. (
Q3 2010 Earnings Call Transcript
October 20, 2010 8:30 am ET
Kip E. Meintzer – Investor Relations
Tal Payne – CFO
Gil Shwed – Founder, Chairman and CEO
Shaul Eyal – Oppenheimer & Company
Daniel Ives – FBR Capital Markets
Phil Winslow – Credit Suisse Group
Gregg Moskowitz – Cowen & Company
Michael Turits – Raymond James
Robert Breza – RBC Capital Markets
Philip Rueppel – Wells Fargo Securities
Sarah Friar – Goldman Sachs
Brent Thill – UBS
Keith Weiss – Morgan Stanley
Sterling Auty – J.P. Morgan
Jonathan Ho – William Blair
Walter Pritchard – Citigroup
Rob Owens – Pacific Crest
John Koski [ph] – Sanford Bernstein
Scott Zeller – Needham & Company
Todd Raker – Deutsche Bank
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Greetings, and welcome to the Check Point Software third quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kip E. Meintzer, Head of Global Investor Relations for Check Point Software Technologies. Thank you, Mr. Meintzer. You may now begin.
Thank you, Rob. Good morning, everyone. I'd like to thank all of you for joining us today to discuss Check Point's record financial results for the third quarter of 2010. Joining me on the call today are Gil Shwed, Chairman, and CEO; and Tal Payne, 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 October 27. 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. 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 fourth 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 purposes 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 20-F for the year ended December 31, 2009, which is on file with the Securities and 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 GAAP presentation – 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 hello, everyone. I’d like to thank you all for joining us today for the review of an excellent third quarter. This quarter we recorded all-time record results across all key metrics. Our results exceeded the high end of our projections as we continued to demonstrate solid growth across all regions. Our revenues for the third quarter increased by 17% over the same period in 2009, while our non-GAAP earnings per share were $0.63, representing 21% growth over the third quarter of 2009.
Before I proceed further into the numbers, let me remind you that our third quarter GAAP financial results include non-cash equity-based compensation charges, amortizations of acquired intangible assets, restructuring and other acquisition-related charges, and the related tax effects. Keep in mind that non-GAAP information is presented excluding these items.
Now let’s take a look at the financial highlights for the quarter. Third quarter revenues were all-time record of $273.2 million, an increase of 17% compared to $233.6 million in the same period a year ago. This growth was driven by exceptionally strong product sales. Product and license revenues were $106.4 million, representing a 22% increase over the same period last year. The growth came from all main network security product lines, including the Power-1, UTM-1 and Smart-1.
Our software updates, maintenance and service revenues reached $166.8 million this quarter, a 14% increase year-over-year. Deferred revenue as of September 30, 2010 was $396.3 million, an increase of $36.2 million or 10% over September 30, 2009. Our trend on the past two years is to move from – to more concentrated contract renewals in the fourth quarter by unifying each customer renewal into one large contract. We expect Q4 to show significant increase in deferred revenues just like we saw last year.
We had growth in revenues across all geographies, with the Americas and Asia-Pacific leading the growth. This is the fifth consecutive quarter in which the Americas are leading our growth. It is a good sign for the strength of our business in the US. Revenue distribution by geography for the quarter was as follows. Americas contributed 44% of revenues, Europe contributed 38% of revenues, and Asia-Pacific and Japan, Middle East and Africa region contributed the remaining 18%.