Check Point Software Technologies Ltd.

Welcome to Check Point Software 4th Quarter Full Year 2018 Financial Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kip E. Meintzer, Head of Global Investor Relations. Thank you. You may begin.

Thank you. I'd like to thank all of you for joining us today to discuss Check Point's 2018 fourth quarter and full year financial results. Joining me on the call today are Gil Shwed, founder and CEO, along with our CFO and COO, Tal Payne. As a reminder, this call is webcast live on our website and is 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 February 6th. If you'd like to reach us after the call, please contact Investor Relations by email at kip.checkpoint.com. Before we begin with management's presentation, I'd like to highlight the following. During the course of the presentation, Check Point representatives may make certain forward-looking statements. These forward-looking statements, within the meaning of Section 27 of the Securities Act of 1933 and Section 21 of the Securities and Exchange Act of 1934, include, but are not limited to, statements related to Check Point's expectations regarding business, financial performance, and customers, the introduction of new products and programs, and the success of those products and programs, the environment for security threats and trends in the market, our strategy and focus areas, demand for our solutions, our expectations regarding the acquisitions of Dome 9 and Forsnok, our business and financial outlook, including our guidance for Q1 and full year 2019. Because these statements pertain to future events, they are subject to various risks and uncertainties. Actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences are contained in Check Point's earnings press release issued on January 30, 2019, which is available on our website. And other factors and risks included in those discussed in Check Point's annual report on Form 20-F for the year ended December 31, 2017, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations or beliefs except as required by law. In our press release, which has been posted on our website, we present GAAP and non-GAAP results along with a reconciliation of such results as well as the reasons for our presentation of non-GAAP information. Now I'd like to turn the call over to Tal Payne for a review of the financial results.

Thank you, Keith. Good morning and good afternoon to everyone joining us on the call today. I'm pleased to begin the review of the fourth quarter and the full year. Revenues for the fourth quarter increased by 4% year-over-year to $526 million, towards the high end of our guidance, and our non-GAAP EPS grew by 6% to $1.68, exceeding the high end of our guidance. Before I proceed further into the numbers, let me remind you that our GAAP financial results include stock-based compensation charges, amortization of acquired intangible assets and acquisition-related expenses, as well as the related tax effects. Keep in mind that as applicable, non-GAAP information is presented excluding these items. Now let's take a look at the financial highlights for the quarter. Product and security subscription revenues were $307 million. Our security subscription revenues continue to be strong, with 13% growth year-over-year, reaching $147 million this quarter. Our software update and maintenance revenues increased to $218 million, representing 4% growth year-over-year. The growth in our subscription revenues is driven by our Advanced Threat Protection solution, the Sunblast, and our Cloud Guard business. During the quarter, we closed an impressive infinity deal in variety of industries, including large information and data corporations and a retail company. Deferred revenues as of December 31, 2018, reached $1,338,000,000, a growth of $151,000,000, or 13% over December last year. The deferred revenue growth is a reflection of the strengths in our security, subscription, and support. Revenue distribution by geography for the quarter was as follows. 45% of revenues came from the Americas, 39% of revenues came from Europe, the remaining 16% came from Asia Pacific, Japan, Middle East, and Africa region. From a deal size perspective, this quarter we had 102 customers with transactions over $1 million. The total value of this transaction continued to increase. Non-GAAP operating margin for the quarter was 53%, similar to the previous quarter . Effective non-GAAP tax rate for this quarter was 11%. This quarter, similar to last year and as expected, our tax expenses included tax benefits from lapse of statute of limitations on certain provisions. GAAP net income for the quarter for the fourth quarter of 2018 was $238 million or $1.51 per diluted share, an increase of 4% from the fourth quarter of last year. Non-GAAP net income for the quarter was $264 million or $1.68 per diluted share, an increase of 6% from the fourth quarter of 2017. EPS exceeded the top end of our guidance. Our cash balances were $4,039,000,000 as of year-end. Operating cash flow was $249,000,000, similar to last year. Collections from customers continue to be very strong. This quarter, part of Dom9 acquisition payment is presented in operating cash flow according to the accounting rules. Excluding this payment, the operating cash flow increased by 7%. During the quarter, we purchased 2.8 million shares for $305 million, at an average price of $111 per share. Now let's take a look into our 2018 full year highlights. Revenues for the year was $1,916,000,000, an increase of 3% from last year. During the year, subscription continued to be the main growth driver. The subscription revenues include majority of our new products and services, including our cloud and mobile solutions. Bear in mind that cloud license is sold as annual subscription while before we sold it as a perpetual license. On the infinity front, in the transaction that's closed during the year, we have seen an increase of tens to hundreds of percentage in the annual run rate. This is great news. The product portion reduced since the allocation to subscription is quite large. This is due to the inclusion of all of our available services in the Infinity offering. Non-gap operating margin for the year was strong at 53%. We continue to invest in our sales force and marketing efforts. The full effect for both, the headcount and the compensation increase, will be reflected next year. Also 2019 will include the full effect of both of our acquisitions, Dom9 and 4th Knock. Hence, we expect our margins to be around 50%. Effective non-GAAP tax rate for the year was 16%. For 2019, we expect the tax rate for the year to be approximately 14%, around 18-19% in Q1 to Q3, and around 0% in Q4, as the lapse of statute of limitation expected to occur in the fourth quarter, as we've seen in the last few years. Gap net income for the year was $821 million or $5.15 per diluted share. Gap earnings per share grew by 7%. Non-gap net income for the year was $911 million or $5.71 per diluted share, reflecting an increase of 7% as well. For the year, cash flow from operation increased by 4%, reaching $1,130 million compared to $1,090,000,000 in 2017. During the year, the company repurchased approximately 10.3 million shares at a total cost of about $1,104,000,000 at an average price of $107. So now I will turn the call over to Gil for his comments and thoughts. Thank you Tal and hello everyone joining us today.