Check Point Software Technologies Ltd.

Greetings. Welcome to Checkpoint Software Technologies 2019 Fourth Quarter and Full Year Financial Results. 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. Please note this conference is being recorded. I will now turn the conference over to your host, Kip 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 2019 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 10th. If you'd like to reach us after the call, please contact Investor Relations by email at kipatcheckpoint.com. Before we begin management's presentation, I'd like to highlight the following. During the course of the presentation, checkpoint representatives may make certain forward-looking statements. These forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities and Exchange Act of 1934 include but are not limited to statements related to CheckPoint's expectations regarding business, financial performance and customers, the introduction of new products, 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 acquisitions and their integration, Our business and financial outlook, including our guidance for Q1 and full year 2020. Because these statements pertain to future events, they are subject to various risks and uncertainties. Actual results could differ materially from CheckPoint's current expectations and beliefs. Factors that could cause or contribute to such differences are contained in CheckPoint's earnings press release issued on February 3, 2020, which is available on our website at and other factors and risks, including those discussed in Checkpoint's annual report on Form 20F for the year ended December 31, 2018, which is on file with the Securities and Exchange Commission. Checkpoint 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, it's my pleasure to turn the call over to Tao Payne for a review of the financial results.

Thank you, Kip. 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 3% year-over-year to $544 million and our non-GAAP EPS grew by 21% to $2.02. both above the midpoint 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. Revenues reached $544 million, $2 million above the midpoint of our guidance. Product and security subscription revenues were $322 million. Our security subscription revenues continue to be healthy with 12% growth year-over-year, reaching $164 million. Our software update and maintenance revenues increased to $222 million, representing 2% growth year-over-year. Products are transitioning partly to the cloud The reduction in product line is naturally driving lower support levels. The growth in our subscription revenues is driven mainly by our Cloud Guard business and Infinity deals, which generated double-digit and triple-digit revenue growth, respectively. Deferred revenues as of December 31st reached $1,387,000,000. A growth of $49 million year-over-year. Revenue distribution by geography for the quarter was as follows. 44% of revenues came from the Americas. 45% of revenues came from Europe, Middle East and Africa region. The remaining 11% came from Asia Pacific. Since the beginning of 2019, Middle East and Africa region are part of Europe, Middle East and Africa. which before it was part of Asia Pacific, Middle East, and Africa region. The revenue distribution by geography for Q4 last year after reclassification would have been 45% of revenues came from America, 44% of revenues came from Europe, Middle East, and Africa region, and the remaining 11% came from Asia Pacific. Non-GAAP operating margin for the quarter were 51%, During the quarter, the dollar weakened against some currencies, mainly the Israeli shekel, creating a headwind of $4 million, or 3 cents, year over year. Our financial income for the quarter was $20 million, compared to $21 million last quarter and $17 million last year. During the year, we saw a change in trend, with a decrease in our portfolio yield as a result of the lower interest rate in the U.S. As a result of this decrease and the continued buyback program, our financial income for next year is expected to be around $19 million in the beginning of the year, moving down to $17 million a quarter by the end of the year. Effective non-GAAP tax rates for this quarter was zero, as expected. This quarter, similar to last year, our tax expenses included tax benefits from lapse of statute of limitation of certain provisions. Gap net income was $272 million, or $1.84 per diluted share, an increase of 21% from fourth quarter of 2018. Non-gap net income for the quarter was $299 million, or $2.02 per diluted share, an increase of 21% from the fourth quarter of 2018. EPS was $0.03 above the middle of our guidance. Our cash balances were $3,991,000,000 as of year-end. Operating cash flow continued to be strong with $246,000,000 compared to $249,000,000 in the fourth quarter of 2018. Collections from customers are strong. Our cash payments increased in line with our continued investments in sales and marketing. During the quarter, we acquired Protego and Simplify. Both have minimal effects on our profits for the quarter. During the quarter, we utilized the maximum quarterly buyback authorized and purchased 2.9 million shares for $325 million at an average price of $113 per share. Now let's take a look into the full 2019. Revenues for the year were $1,995,000,000, an increase of 4% 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 cloud, infinity solution, and mobile. On the infinity front, we have seen an increase of tens to hundreds of percentage in the annual run rate of business with customers that adopted the Full Infinity Threat Protection solution. This is great news. The product portion reduced since the allocation to subscription is quite large. During the year, we have increased cloud market penetration with over 2,500 or 2,500 customers. During 2019 and the beginning of 2020, we introduced a new appliance family. It is hard to predict the mix between the old and the new products and between the different types of appliances that the customers will end up choosing. As you know, our goal is to provide highest throughput across the line for the benefit of our customers, understanding that there is some risk of some customers buying lower priced appliances with highest throughput. Hence, it is quite hard to predict the effect of our new appliances on the average sales price in 2020. We also plan to bundle more services as part of our appliances next year, which will continue the transition that we are experiencing between product to subscription. Non-GAAP operating margins for the year were strong with 50% as we anticipated in the beginning of the year. We continue to invest in our workforce and marketing efforts. As discussed during the year, the dollar weakened against some currencies, mainly the Israeli shekel, and created a headwind for the full year of $5 million, or 4 cents. This headwind is expected to continue and to be $10 million, or 6 cents, in 2020, based on the current exchange rate. The acquisition we may do in the year are expected to have an effect of 3-4 cents on non-GAAP EPS, and 7.8 cents on GAAP EPS. As a result of the continued investment, currency effect and the acquisition, we expect the annual margin next year to be around 48%, with lower point in Q1 and with the highest point at Q4 next year. Effective non-GAAP tax rates for the year was 14%. For 2020, we expect the tax rate to be, for the year, around 12%, going down 2%. as a result of the change in regulation, structure, and tax studies. Quarterly taxes are expected to be around 17% in Q1, Q2, and Q3, and around zero in Q4 as a lapse of statute of limitation expected to occur in the fourth quarter as we've seen in the last two years. Gap net income for the year was $826 million, or $5.43 per diluted share, Gap earning per share grew by 5%. Non-gap net income for the year was $933 million, or $6.13 per diluted share, reflecting an increase of 7%. For the year, cash flow from operation was $1,102,000,000, compared to $1,130,000,000, quite similar. During the year, the company repurchased approximately 11.2 million shares at a total cost of approximately $1,278,000,000 at an average price of $114 per share. We believe that our market leadership and long-term growth prospects makes it an effective time to further utilize our cash to increase shareholder value. As such, we have announced today an increase of $2 billion to our buyback program with a quarterly repurchase of up to $325 million a quarter, consistent with our previous plan. The total amount available as of year-end from the old program was $382 million. Based on the above plan, we expect our average diluted number of shares for 2020 to be on average $144 million, starting at $147 and moving down to $141 in Q4 of 2020. Now let's turn the call over to Gil for his comments.