Check Point Software Technologies Ltd.

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 are in a listen-only mode that will be followed by a Q&A session. During the presentation, Checkpoint's representatives may make forward-looking statements. Forward-looking statements can relate to future events or future financial and or operating performance. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statement. Any forward-looking statements made only as of the date hereof and Check Point Software undertakes no obligation to update publicly any forward-looking statements except where 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. If you have any questions after the call, please feel free to contact Investor Relations by email at kip at checkpoint.com. Now I'd like to turn the call over to Nadav Zafrir.

Thank you all for joining us today. Our Q2 results were in line with our expectations and we continue to make tangible progress strengthening our go-to-market organization. We're actually encouraged by improving execution and a growing sales pipeline. We expect Q3 to mark the trough followed by a stronger Q4 that supports second half performance and we are maintaining our 2026 guidance. As a next step, we are significantly expanding our sales capacity by hiring hundreds of additional salespeople. We've launched a focused hiring campaign, reflecting our confidence in the long-term growth opportunity. Over the past few weeks, I met with more than 1,000 security leaders at Check Point Engage events in Chicago, Paris, and Singapore. Their message is consistent and unmistakable. Our industry is at an inflection point. AI, and particularly the latest frontier model, is driving a collapse in scarcity of adversarial capabilities. This is democratizing and industrializing sophisticated cyber attacks and challenging many of the assumptions that have guided cybersecurity for decades. We cannot stop AI adoption and we must prepare to defend against sophisticated attacks at unprecedented scale. This is the time for decisive action. At Check Point, securing our customers' AI transformation means executing the fundamentals better than ever, while building the next generation of cybersecurity and we must do it in parallel. The fundamentals start with prevention. Powered by a threat cloud AI intelligence, more than 100 AI agents, and telemetry from millions of enforcement points, prevention first security is in our DNA. But fundamentals alone are no longer enough. We must build security that operates at machine speed, learns continuously, and evolves as AI evolves. And so today, I'm excited to introduce the industry's first AI network firewall. We believe AI has created a new class of network traffic, and it deserved a new class of firewall. The AI Network Follower gives customers visibility, control, and security for prompts, agent actions, and model interactions. The AI Network Follower is a part of our AI defense plane. It's a full-stack AI security platform continuously trained on our threat research and intelligence. and build to protect applications, users and agents from AI-based attacks. With the release of the AI network firewall, we're embedding the AI defense planes across networks, private and public cloud and SASE, giving network security teams control they can put in place today. Beyond AI demand across our emerging technologies portfolio remains healthy. Subscription revenue grew 12% year over year in Q2, and we continue to integrate the capabilities from our recent acquisitions across the platform, strengthening our competitive position and expanding the value we deliver to customers. We're building momentum by expanding our go-to-market capacity and strengthening our product portfolio. The launch of our AI network firewall combined with our AI defense play reinforce the Check Point's mission of securing our customers' AI transformation. We remain focused on disciplined execution, accelerating growth and delivering long-term value for our customers, our partners, employees and shareholders. And with that, I'll turn over the call to Roei to review the financials. Thank you, Nadav. One moment.

Great, so thank you Nadav, and thank you everyone for joining the call. As Nadav mentioned, the second quarter was planned with 1% growth in revenues, driven by 12% growth in subscription revenues. Our total revenues reached $674 million, and we're 1 million below the midpoint of our projection, as a result of lower product revenues, as a lower demand for firewall appliances. When we're looking on our subscription revenues, it reached $333 million, and we're at the midpoint of our projections. Our adjusted free cash flow reached $161 million, $1 million above the midpoint of our projection and represents 24% of our revenues. Our non-GAAP EPS was $2.55 per diluted shells and exceeded our guidance and grew by 8% year-over-year. As mentioned, we had 1% growth in revenues, while our deferred revenues grew by 7% to $2.25 billion. Our calculated billing totaled to $639 million and was similar to last year, while our current calculated billing grew by 2% to $641 million. Our remaining performance obligation grew by 7% and reached $2.55 billion. Our current RPO reached $1.6 billion and a presenting 4% increase compared to last year. As we indicated in the call back in May, we expected lower product revenues, mainly as a result of our disruption affected by the changes we made in the go-to-market organization. Our product revenues declined by 14% in the second quarter. As we are looking on the second half of the year, we do expect to see similar trend in the third quarter with our firewall appliances, while we do see significant improvement in our pipeline, in the opportunities, in the qualified opportunities in Q4, and we do expect to see a back to growth in product revenues in the fourth quarter. When we are looking on the subscription revenues, it continues to accelerate to 12% growth this quarter, driven by the strong demand for emerging technologies, As email security and SITEMA continue to have a strong demand. When we are looking on the third quarter, we do expect slightly acceleration in our subscription revenues as a result of large appliances deals that were pushed from Q3 to Q4 and have also an impact on our subscription line items. As indicated, our total subscription business continues to be strong as we continue to experience strong demand for our emerging product portfolio, which remains the primary driver for our revenues growth. In the second quarter, if we are looking on the email security, CTEM and AI security, accumulated they exceeded 40% growth in ARR year-over-year, while the calculated billing from these products grew by 35% year-over-year. Looking on our revenues by geographies, so our revenues from EMEA in America were 44% each for the second quarter, while the remaining 12% came from Asia Pacific, similar to what we had last year. When we are reviewing, we are looking on our P&L for this quarter, so our gross profit increased from $585 million to $588 million, representing a gross margin of 87%. The slight decrease in the gross margin was explained due to higher memory costs. Our operating expenses, excluding R&D grants, increased by 13%, while on a constant currency basis, our operating expenses increased by 11%. Our Q2 results include approximately $28 million of benefits from R&D grants to be received from the Israeli government. When we are looking on our operating expenses, net of R&D grants, the expenses were $328 million and increased by 5% year-over-year. The net increase is primarily as a result of increases in our workforce and as a result in continuing investment in AI security and investment in our sales and marketing programs. When looking on the operating income, it continues to be strong at $260 million or 39% operating margin. Our non-GAP net income increased by 1% and reached $264 million, while our GAP net income reached $194 million and decreased by 4% year-over-year. Our non-GAP EPS grew by 8% and reached $2.55, 8% growth year-over-year, while our GAP EPS was $1.87, a 2% increase year-over-year. Our number of fully diluted outstanding shares for Q2 was 103.5 million shares. And while we continue to do our buyback, we expect the number of shares for the next quarter to decrease by approximately 1.5 million shares. Moving into our cash flow and cash positions. So our cash balances as of the end of the quarter was $4.2 billion cash and marketable securities and deposits. Our adjusted free cash flow reached $161 million as planned in line with our projections. We also continue to do our buyback program and purchase approximately 2.5 million shares for $325 million this quarter at an average price of $131 per share. During the quarter, the company announced also a $2 billion expansion of the company's share repurchase program. So we're going to continue to do this buyback. To summarize, so from one end, definitely strong demand, continuous strong demand for emerging technology led by email security and CTEM. That's becoming more and more significant to our total business. On the other hand, we did see, as expected, lower demand for firewall appliances this quarter. As I mentioned, we do expect similar trend to continue also in Q3, but definitely we do see significant improvement on the appliances business in Q4, and we do expect to be back to growth in Q4 in the product revenues. We're going to move to the guidance, to the business outlook. So first, regarding the full year, we're not touching the full year guidance. We're maintaining the same guidance as we gave you back in May in the last call. Looking on the Q3 outlook, so the total revenue range is between 655 to 685, subscription revenue between 332 to 343. Non-GAAP EPS between $2.43 to $2.53 while our adjusted and the GAAP EPS is $0.70 less and our adjusted free cash flow expected to be between $235 to $265 million. It is important to note as I mentioned earlier that we do see significant opportunities and deals that are expected to be pushed from Q3 to Q4 and therefore that have an effect a negative impact mainly on the appliances revenues and as I said we if I'm comparing to what we've seen in the pipeline for Q4 in May and now definitely we do see even stronger pipeline for Q4 definitely it's a more back and loaded deal it's also is a reflection of what of the go-to-market disruption that we've done but definitely we do see a positive sign First, of course, with the emerging product that continue to have a strong demand and also with the appliances and the firewall, we see positive signs that we are seeing the end in Q4 in terms of the decline and going back to growth in Q4. Thank you, and we are moving to Q&A. Kip, the floor is yours.