Check Point Software Technologies Ltd.

Thank you, Keith. And good to see you all. So we delivered a strong third quarter marked by double digit growth in calculated billings, driven by disciplined execution and the rising demand across all of our portfolio. And, you know, nearly a month into Q4, we remain confident in our trajectory, and we're raising our midpoint for 2025 revenue guidance, and Royu will share more on this shortly. As we discussed during our second quarter earnings call, our strategy continues to be anchored in four core principles that we believe define the foundation of a modern cybersecurity stack. shaped predominantly by the accelerating adoption of AI. As we continue to shape the future of cybersecurity, our strategy is guided by these fourth principles. First, securing the connectivity fabric as it evolves from a traditional infrastructure into an agentic autonomous reality. Second, our prevention first approach. which I believe is now more important than ever. As attackers leverage sophisticated agent capabilities, it's literally imperative that we dramatically improve the signal-to-noise ratio and limit our reliance on detection to a minimum. Our open platform philosophy. The open platform philosophy is not the easiest path, but it's the only viable one for achieving security resilience. Building an open, collaborative ecosystem among vendors demands communication and cooperation, sometimes even with fierce competitors. Yet, I can tell you from the trenches of cybersecurity, it's clear to us that it's essential. And our recent acquisition of Veri is a powerful example of how we're advancing this vision. By integrating Verity into our exposure management organizations, we've expanded integrations across endpoint, firewall, cloud providers, reaching over 100 deployments, and delivering automated remediation based on what's the best security possible. And finally, as I've emphasized before, securing AI is top priority. We are in the very first innings of the most impactful technological revolution of our lifetime. Moving from current phase of human enhancement to replacement and delegation to the next phase of crossover where sophisticated agents are taking over and crossing lanes, it's both exhilarating but also extremely challenging. And I think it's a race for relevance for everyone. And we must remember, and we see that at the same time, we're seeing how rapidly attackers are leveraging AI to outpace us as defenders. And this drives our mission to build a full-stack AI-powered security platform. Last week, we closed the acquisition of Lakira, a Zurich-based AI native security leader with deep expertise in protecting large language models and autonomous agents. But Kira enables real-time defense against prompt injections, data leakage, and model manipulation. And it gives us a unique security-oriented model that ensures evolving defense to stay ahead of emerging AI threats. And I believe that together we're building a comprehensive AI security platform that will enable our customers, the enterprises that we work with, to scale AI adoption securely and confidently. And what does that mean? It means securing employee usage of AI tools through observability and data loss prevention. It means protecting AI applications and agents with runtime defenses. And then finally, strengthening model robustness via continuous testing and compliance readiness. You should know that Liqueur is already trusted by Fortune 500 enterprises, including some of the biggest banks and largest technology companies worldwide. And we're just getting started. As AI adoption accelerates, it exposes new threats. And we're committed to leading the journey to enable organizations to adopt AI securely. We're investing organically in research and development. And we're identifying strategic acquisition opportunities that will reinforce our leadership position. Beyond that, I want to touch briefly on our latest go-to-market updates. During the quarter, we achieved FedRAMP authorization for the Infinity platform for government. This positioned us as a trusted partner for the most demanding federal environments. Our go-to-market organization is now fully staffed. Rachel Roberts joined us as President of America Sales. She brings deep enterprise sales expertise from her leadership roles at Cisco and Paolo to further build and scale our sales organization. Avi Rambam was appointed president of technical sales. Avi's been with us for a long time, and from here on, he'll lead the efforts to drive technical excellence and strengthen consumer-customer engagement. And finally, Brett Dice joins us as Chief Marketing Officer to strengthen our brand presence to fuel demand and position Check Point for its next chapter of market leadership. To close, before I hand over to Rui, so with over 10 months in my role as CEO at Check Point, I think that our strategic vision is taking shape. And I'm energized by the progress we've made already and where we're going in the future. And with that, I'll turn over to Rui.

Rui, can you see my screen?

Yep. Great. So thank you, everyone, and thank everyone for joining the call. As Nadav mentioned, we had a strong quarter driven by strong demand across our portfolio. If we are looking on our revenues, our revenue grew by 7% to $678 million, exceeded by $6 million our midpoint. Our non-GAAP EPS reached $3.94 per diluted shells and exceeded our guidance. It is important to note that this number includes a one-time tax benefit in connection with a tax settlement we signed during the quarter that resulted in an update for our tax provision, and that had the benefit of $1.47 both for our GAAP and non-GAAP EPS. Excluding the one-time benefit, our EPS exceeded the midpoint of our projection by approximately $0.02. Moving to our results, as I indicated, our revenues grew by 7%. Our deferred revenues grew by 8%, $1,887,000,000. Our calculated billing totaled $672 million, reflecting a robust 20% growth year-over-year that was driven by strong demand across our portfolio and across our geographies, that all of them grew by double digits. I do want to remind you that our billing also affected by approximately three points. from deals that were slipped from previous quarter. We talked about it in our last earning call. In addition, we had one large deal, early renewal that resulted in a 2% benefit, early renewal from Q4 that came in in Q3 and resulted in the benefit of two points to our biddings. If we're looking on our current calculated biddings, so that grew by 14% to $642 million. Our remaining performance obligation grew by 9% to $2.4 billion. I'll move forward. As I said, we did see a strong demand across our portfolio. If I were looking on our services calculated billing, services calculated billing is actually the calculated billing excluding our product business, and that grew 21%. compared to 7% last year. And, again, that's not only from certain products. That's across our portfolio. If it's the Quantum Firewall, Harmony Email, Harmony SASE brought these great results. If we're looking on our merging technology, so that's the ARR, we do see that it's a free – I calculated the free main product, the free companies that we acquired in the last few years – Harmony SASE, Harmony Email and Collaboration, and External Risk Management. All of these products grew organically more than 40% in ARR year-over-year, and we do see them becoming more and more significant to our total business. Moving back to our global revenues distribution, so we did see double-digit growth in America, a 10% growth that represents today 42% of our revenues in Q3, EMEA, which represents 45% of our revenues this quarter, grew by 3%, while APAC, Asia Pacific, grew by 8% and representing today 13% of our total revenues. Moving into our P&L, into operating performance, so our gross profit increased from $563 million to $602 million, representing a gross margin of 89%, similar to last year. Our operating expenses increased by 11%. The increase was mainly as a result of our continued investment organically and also the impact of cyberint and verity acquisition that were not part of Q3 last year, P&L. Our non-GAAP operating income continues to be strong at $282 million, 42% operating margin. Also, something that I discussed also in our last earning call, and I want to touch base on it again in this call, the U.S. dollar got, in the last few months, I would say, since the beginning of Q3 2020, The U.S. dollar got weakened significantly. This is the Israeli shekels. Given the fact that we have significant expenses in shekels, and although we are hedging a significant part of that expenses, still we do see a negative effect of this weaker dollar on our P&L. In this quarter alone, that affected our P&L by approximately one point to our margin, approximately, I would say, six cents. Looking ahead, if we're already talking about next quarter, so we continue to add, of course, our foreign exchange currencies, and we do expect to see approximately one point headwind to our margin in Q4. In addition, as Nadav mentioned, we closed last week the acquisition of Lakira, leading AI native security. for platform for agentic AI application. This acquisition that was closed last week will result in approximately after point headwind for margin in Q4. As we look further into 2026, and as I indicated in the previous earning call, based on the current FX rates, that can have an increase for our NL expenses next year in 2026 of approximately $50 to $60 million. That's something that we discussed last quarter, and again, because the current rates are similar to what we discussed last quarter, I wanted to bring it back again here. Moving into our cash flow... Our cash flow was very strong. Operating cash flow was very strong with $241 million operating cash flow. That included a $66 million one-time tax payment in connection with tax settlements signed during the quarter. I talked about it when we talked about the EPS. Excluding this one-time tax payment, our operating cash flow grew by 23%. very strong cash flow. People are looking on our total cash. Our total cash in the end of the quarter is $2.8 billion for cash and marketable securities and deposits. Another point that we had during the quarter, another two points that I want to mention here that we had during the quarter, we talked about it also last quarter that We are building a new checkpoint campus in Israel, in Tel Aviv. And during the quarter, we paid approximately $160 million for the land. And that's going to see it in the cash flow from investments. I do have to say here that we don't expect any significant additional investments until 2027. In addition, we continued to do our buyback, and we purchased our share. We purchased approximately $325 million of shares at an average price of $198. So to summarize, strong quarter revenues and EPS exceeded our projection, accelerating growth across our portfolio, driven by 20% growth in calculated billings, driven 20% growth in calculated billing and another strong operating cash flow and profitability quarter. Moving to the business outlook for Q4. Before we move to the Q&A. So if we're looking on Q4, so we'll start with Q4 and then touch base on the full yield. So Q4, our range is between 724 to 764. represents 6% in the midpoint. The non-GAAP EPS is between $2.70 to $2.80. GAAP EPS is expected to be $0.60 less. If we're looking on the annual guidance, so first I'll remind you that in the middle column you see the original guidance we provided in the middle of the year. Our midpoint or the updated midpoint of the revenues guidance will be $15 million above the original midpoint. So the range is between 2.705 and 2.745, midpoint of 2.725, 6% growth. Our non-gap EPS is expected to be between $11.22 to $11.32, and the gap EPS is expected to be approximately $2.29. Again, the EPS also includes the tax benefit that I discussed. And two items that I want to address here about revenues and EPS. Q4, which is more typical for Q4, it's a very heavy back-and-loaded quarter that also includes heavy hardware and heavy, heavy hardware projects. We see also in our final today significant a refresh project that's supposed to come in in Q4. And because it's more heavy, so again, there is more, we are providing the range. The range is mainly for the hardware portion that, again, we do expect to see more refresh projects, but because the hardware is more significant in Q4, that's something that we need to take into account in the guidance. And as for the EPS, I mentioned it when I discussed the P&L, the EPS in Q4 will be affected by two main items. One is the FX that will have approximately $0.07 to $0.08 effect based on the current rates in Q4, the weaker dollar that will affect our P&L, and LACIRA that will have approximately between $0.04 to $0.05 effect in Q4 EPS. That's it, and I'll turn it to keep to managing the Q&A.