Check Point Software Technologies Ltd.

Financial Results video conference call. I'm Kippy Meitzer, Global Head of Investor Relations, and joining me today are founder and executive chairman Gil Schwed, Chief Executive Officer Nadav Zafrir, and our Chief Financial Officer Roy Dilan. Before we begin, I'd like to remind everyone that this conference is being recorded and will be available for replay on our website at Checkpoint.com. During the formal presentation, all participants will be in listen-only mode, and that will be followed by a Q&A session. During this presentation, Check Point's representatives may make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance. These statements involve risks and uncertainties that could cause actual results to be materially different than projected in the forward-looking statements. Any forward-looking statements made speak only as of the day hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. 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. If you have any questions after the call, please feel free to contact Investor Relations by email at kip.checkpoint.com. And with that, I'd like to turn the call over to Roy Golan for the start of our presentation.

Thank you, Kip. And thank you, everyone, for joining the call. So I think we finished 2024 with a high note, with strong demand for all our main products. Our revenues reached $704 million, $9 million above the midpoint of our projections. Our non-gap EPS was $2.70 at the top end of our projections. Moving to the annual results, so our revenues reached $2,565,000, $50 million above the midpoint of our projection in the beginning of the year, while our non-GAAP EPS reached $9.60, 9% growth year-over-year, and $0.16 above the midpoint of our projections. So as I mentioned, we did see a strong, we did finish the year with high note, with strong demand for our product. I mentioned the revenues, our deferred revenues grew by 5% to $2 billion. Our calculated billing grew by 11% to $959 million, while our current calculated billing grew by 9%. Our RPO grew by 12% to $2,516,000,000. So I think, again, that was driven for strong demand for our product mainly for our quantum force appliances, the firewall appliances, that we can see here the trend that we do see. Since we launched this quantum force in the beginning of the year, we continue to see the positive trend and the strong demand for our product. This quarter, we achieved 8% growth in revenues with $171 million of revenues. We also continue to see strong adoption for our Infinity platform by existing customers and also by new customers that are joining Check Point with this platform. I think this is answering their needs under one umbrella of product and services. The revenues from Infinity platform agreements add another strong quarter with strong double-digit growth. Moving to the revenues by geographies. So as you can see, all our geographies grew. I have to say this is the revenues, but when I'm looking on the new business booking, all the geographies grew by double digits in new business. So I think that's the most important part because in the end, that's translated into revenues. So again, very strong demand in all geographies. Moving to our P&L, our gross margin was similar to last year with 89%. Our operating expenses reached $317 million, 12% increase compared to last year. That was mainly driven from our continued investment in our go-to-market and also the addition of cyber in that we acquired in the end of Q3. Our operating income was $306 million, 44% operating margin. Moving to the financial income, this quarter it reached $25 million as we keep investing in higher interest rates over time. Our non-GAAP tax rate this quarter was around 8%, mainly due to updates of tax provision, due to several tax assessments we have worldwide. Our non-GAAP net income grew by 2% to $303 million, while our GAAP net income was $258 million, or $2.30 per diluted check. 7% increase overall. For the annual P&L, we can see that our calculated billing also on an annual basis had a strong growth of 9% year-over-year. Our total revenue grew by 6%. Again, gross margin similar to our last year's 89%. Our operating margin grew by increased by 10% to $1,181,000,000, while our operating expenses increased by 10%, while our operating income grew by 2% to almost $1.1 billion. And when I'm looking into next year and our operating margin, we need to take into account a half a point dilution related to our recent acquisition of Cyberint. I think we discussed it also when we acquired Cyberint last quarter, but again, also a reminder for 2025. Looking on the financial income for the year, again, reached $96 million because of the higher interest rate. We finished the year with non-GAAP tax rate of 13% compared to 14% last year. Again, mainly due to up in our tax provision as we had tax assessment worldwide. As for the tax expenses next year, we're expecting to be around the same levels in each queue and also annually. As a reminder, we're in the middle of tax assessment worldwide, and closing this method during the year could change the effective tax rate accordingly. Our non-GAAP net income reached $1,039,000,000, an increase of 4% year-over-year, while our EPS was $9.60, and as I mentioned, it grew by 9% year-over-year. And when I'm looking for next year in terms of our number of shares, so we need to take into account a decrease of approximately 1 million shares every quarter. So we are starting now from 112, and we expect to see a 1 million shares reduction every quarter. Moving to the cash flow. So we finished the year with $2.8 billion of cash and marketable securities and deposits. Our operating cash flow for the quarter was strong with $249 million, 6% increase year over year. Our annual operating cash flow for 2024 was $1,059,000,000. And also, we continue to do our buyback and bought more shares in the amount of $325,000,000 in Q4. And for the full year, we bought shares for $1.3 billion. To summarize, so we had a strong quarter. Our revenues and EPS above the midpoint of our projections. We had the demand. It was mainly driven by strong demand for our quantum force appliances. You did see the double-digit growth in calculated billing and also in RPO, and we're maintaining strong profitability. With that, I'll hand over the call to Gil.

Thank you, Rui, and glad to see here everyone. It's a pleasure being here. For me, it's a very exciting day because it marks my transition to my new role as the chairman. But before I jump into that, first about the quarter. So we have a slightly different format today. I'm not going to present the regular slides that speaks about the deals and the quarter. And Nadav is going to spend more time not talking about the quarter, but talking about his vision for Checkpoint and about his view of the world. I think it's very important that you all get to start knowing Nadav. For me, the last quarter marks a very good one. I think you heard from Roy about the financial result. It's great to transition with such results. Pretty much all the key financial metrics performed very, very well. I know that some of you were concerned last quarter on billings, and you saw that this quarter, without any particular focus, billings as an indicator, that's not what we measure internally, but billing as an indicator shows very good health with 11% growth. We've won many of the deals that were postponed last quarter. We've got more deals there. In this quarter, one of the strong points is that it wasn't one or two large deals that skewed the quarter in one direction. It was a collection of wins across the globe and across the different sectors and also across the different product lines. Mainly the quantum and the quantum force product line showed strength. something that we've been seeing improving over the last few quarters. And it's great to see now because that's the core of our business. But our Infinity deals were very good. Our email security business was also very good. We even saw some nice growth in the cloud business. So overall, all the key metrics that we had were in line with what we expect. And that's a great way, again, to transition my job. With that in mind, I want to thank everybody that did that, our customers that showed faith in the best security that we deliver in Check Point, our employees, whether it's the developers or the people who do ship our product, and mainly the salespeople, and our GCO organization with the lead of Rupal that delivered a very good quarter. But it's more than just one quarter. And here I want to turn always thanks to all of you, our shareholders, an analyst that followed us for so many years. And again, the same thing, our customers, our employees, our leadership team that may checkpoint what it is. And if you look at this slide that summarizes my 30, actually I'm 32 years doing what I'm doing, but you see here a summary of almost 31 years of business. And you see that on every business metric, we have very strong fundamental. If we look at 95, the year before we went public, We grew since then in revenues 250 folds and in profits kind of very similar. EPS grew by more than 300 or close to 400 folds from 95 and so on. Our share price, if I look at the basis of 95, it's almost 800 fold high. I look just at the IPO price in 96, it's 80 fold high. which is also a pretty good number. So I think all of these numbers are a testament to the strength of the security of Check Point and mainly to the very, very good people that surrounded me and will now work with Nadav to take Check Point into new height. Now, in the last few months, I had the pleasure of working with Nadav. We did a very good... training and transition process. Over the last 45 days, Nadav took the role of the CEO and he's doing extremely well. I couldn't be happier than that. Many people ask me, what do I do as a chairman? So keep on hearing these pictures about me riding my bike. So yes, I am riding my bike and as a chairman, I intend to do it. not once a week, but maybe twice a week, but I still come every day to the office. I'm very, very excited about the future of Check Point. I'm actually enjoying my new role very, very much, taking away all the day-to-day operational responsibilities of running a large company and the ability to speak, to listen, to think about the future. It's a great pleasure for me. and relaxing a little bit. And over the next few months, I'm going to redefine my role and mainly be a resource for everybody in Checkpoint and mainly to Nadav in the way I can help with thinking and experience in helping in the future. This month and a half, I think Nadav is already doing a great job. I couldn't have picked a better leader for Checkpoint. I know that Nadav or I will take Check Point to new heights and I wish him and I anticipate that we'll have great, great success with it. And I hope it will be here a year from now, five years from now, 10 years from now and see how the graph that I showed you continue to perform well. This is what I wish for everybody, for you, for our customers that will get more security, for employees. And with that, I think it's a great transition to transfer the call to Nadav so you can hear his thoughts about the future. Nadav, the floor is yours.