Q2 2021 Check Point Software Technologies Ltd Earnings Call
Keep in mind that as applicable non-GAAP information is presented excluding these items.
Now, let's take a look at the highlights of the call. It revenue for the quarter reached $526 million with 6% growth in products and security subscription revenue our subscription revenues continue to drive the growth with a.
Strong, 12% increase year over year, reaching $184 million during the quarter, both cloud God and Armani revenues continued to show great results with high double digit growth also infinity deal gathers momentum as customers move to more holistic solution with subscriptions.
Base price.
We had double digit unit growth in appliance sales, mainly in the Loran appliances and the maestro Orchestrator that enables the scalable solution at the same time, we continue to see the shifts from crawl back to the subscription revenues.
Logic portion of deals though.
Though allocate these are subscriptions both in appliance deals and infinity deal.
Deferred revenues as of June 32021 reached $1 billion and $472 million.
Growth of $134 million or 10% growth over June 30.
Scripture Wednesday calculated billing all from 9% quite strong.
Revenue distribution by geography for the quarter was as follows 44% of revenue came from America.
44% of revenue the same came from Europe, Middle East and Africa region and the remaining.
12% came from Asia Pacific.
From Asia Pacific. So you can notice the strong strength in the EMEA this quarter and Gil will allude to that our non-GAAP operating margin was healthy at 49% year over year, we had the headwinds from the weakening of the dollar as we discussed I guess different currencies around.
The world the effect year over year was around $9 million as planned in our budget and guidance. Our margin is higher than planned and we are still ramping up on the recruiting effort travel costs, while increasing are still not back to normal.
Our financial income for the quarter was $10 million.
Reflecting the reduction in the portfolio yield and the portfolio is rotating and new investments are in our all in slightly lower or significantly lower interest rates around 0.4 versus 2.5 before financial income will continue to endorse by 1 to 1 and a half million dollar a quarter as.
As we indicated before.
Effective non-GAAP tax rate for this quarter was around 19%, while the tax rates remain unchanged. Our provisions are linked to the index in different countries. Since the beginning of the year. We saw an increase in index from different countries, mainly in Israel, but also in the U S.
Which led to slightly higher tax expenses, we expect similar tax rates next quarter.
GAAP net income for the quarter was $186 million or $1.38 per diluted share non-GAAP net income was $217 million or $1.61 per diluted share an increase.
<unk> of 2 percentage year over year and involved with the top of our range.
Cash balances.
As of June 30 was $4 billion are operating and operating cash flow continues to be very strong and increased by 4% to $264 million strength came mainly from our.
Healthy collection from customers would be a 61 day.
During the quarter, we continued our buyback program and versus 2.7 million shares for $325 million at an average price of 118 doors.
So that sums it up for me and now all of them.
And I had the call to Gil for his presentation.
Yeah.
Yeah.
Hi, everyone very happy to see you on our.
Earning call or actually we're celebrating today I think it's all where my hundred than 1 earning called 25 years as a public.
Company, We went to Q2 from a 1996 was our first third quarter as a public company. So I'm very pleased to see you. All go quickly I'll try to go from <unk> presentation.
Keep the first few slides, but you sold the forward looking statements, but can speak about the business highlights.
This quarter I chose to focus from case studies, but we'll demonstrate our free pillars of security so before I jump into very quickly.
A quick introduction.
And you've seen the data you've seen the numbers, we presume the revenues from Victor again, so I won't stop on vet, but let's go to <unk>.
<unk> of the business first I think we've completed the pretty good actually a very good first half, especially in Europe and Asia.
You remember a couple of years ago, we put some new leadership in Asia, 2 quarters ago, we have a new leader for Europe, and I must say that the 2 quarters in we have excellent second quarter.
In Europe very good the first half.
Nice momentum you customers from all the pillars. So I'm very very pleased to see that in Europe, and I'm very pleased to see the first half in Asia with continues with a positive trend even with the few challenges that the that we're been in Asia due to the Corona.
In the second quarter, especially in India.
I by the way I hope that in the U S. When we have now a new leader of it was in the quarter for like 5 or 6 week during the quarter I hope that within a few quarters, we'll be able to see similar trends in the in the Americas as well in terms of technologies and products to the cloud Guardian.
Harm will need products like doubled in the past 2 years twice since 2019 and Theyre now account for 12.
20% of our subscription revenues almost doubling the amount that we were before so which is again pretty good the same strategic trends that we're speaking about we'd be infinity architecture, and last but not least.
Our Infinity program. The Infinity program includes customers that are what I would call strategic customers customers, but we commit to for a multiyear they commit to us for a multiyear usually most of the time they buy multiple pillars.
Of our technology.
It's not just 1.
1 set of technologies and this business tripled in revenues and.
Also in deals that we win which will show in the future in since second quarter of last year, So which is a very very good trend.
So let me speak a little bit about our architecture and what does it mean from the Infinity architecture include.
Frequently the quantum that's the network security family.
The harmony with our latest family securing users securing access very relevant now as we are.
Corona and post Corona timeframe in the remote work is becoming more prevalent in our world and last but not least is the cloud growth family I believe.
Believe it's the most comprehensive cloud suite in our industry all of that is based on the unified threat intelligence real time threat cloud.
Unified management and many many many other tools that can control the security across all the vectors of attack.
My belief is this is there.
The unique architecture with no 1 else in our industry is and this is I think a very important debt for the future the consolidation the simplification and providing companies with the real ability to block threats and the prevention first architecture to block threats.
On every aspect.
As I mentioned.
And what I chose this time is to give them a.
Few customer case studies all deals that we won in the second quarter and some of them are very large not necessarily the largest deals that we want in the quarter, but each 1 of each case study of the customer will demonstrate the use of our technology.
<unk> in the different pillars quantum cloud guard the harmony and.
The overall Infinity architecture, So let me jump right in and start with the Infinity architecture.
So the dealers I want to share with you here.
Quite interesting deal each day.
Yes.
Fortune 500 financial institution.
That went through a merger recently and following the merger <unk> decided to revisit versus security architecture, we had multiple vendors.
They were like many average shifting workloads to the cloud and decided to purchase checkpoint infinity consolidated the portfolio around our network and.
Cloud offerings.
Replacing several other vendors that we had there before namely you can see here is Cisco fireeye and trend micro and the overall is an 8 digit deal.
For multiple years again.
Strategizing and speaking the Infinity architecture at the core of their.
The architecture. So this is a.
A nice first example of a relatively a large deal that we had this quarter.
Let's shift gear into harmony, they mentioned harmonious our newest family to secure users and access.
And here's the deal with peak is actually.
Very interesting 1.
It's around harmony mobile harmony mobile is the software that runs on our mobile phones.
A very underserved segment of the security.
The security and the security landscape and my belief by the way we started investing in mobile security.
Years ago.
This is in many cases, the weakest link in in all of our security posture all of US carry these phones. They see everything we see they know everything we know we are connected to a personalized but they're equally connected to our business like most of the networks and just by seeing everything.
Mainly and yet less than 3% of enterprises do something about mobile security.
In this example, we're talking about the Fortune 500, food and beverage company in North America.
They are 1 of those that do see mobile security is an important element I think by the way is 1 of the reason is that their workforce.
Also works in.
Deliveries are really mobile people and they decided to change very mobile securities 30000.
Mobile devices for employees.
And each customer we asked why did Youtube checkpoint so.
Firstly.
They wanted the complete protection for mobile work force.
In their checks and their argument they float that we have a superior threat prevention and even more important they found that the way we block malicious application and also address.
Network traffic. So if you click on the wrong link if you go to a.
Fishing site, we will know how to block that they found with technology also superior in this account will replace Symantec with him.
A similar solution.
Mobile security. So this is a good example of that I think harmony mobile.
Very important yet still very small part of our portfolio.
Shifting gears to quantum and quantum is a very important part of our portfolio the biggest part of our portfolio.
In quantum we picked here are 2 examples.
And of course, because out of thousands of customers have purchased called quantum during the quarter.
But let's look at what.
These 2 first 1 is an energy company actually mainly in energy delivery pipelines and stuff like that.
And they decided to consolidate security in 3 main sites 36 remote sites.
And then put the full checkpoint solution hundreds of.
I think it's close to 1 hundreds of devices of the checkpoint quantum family and again, we ask them. The question why checkpoint. So first and foremost is something we're very proud day for many many years is our superior management security management architecture, and very experienced with a single console.
Second was the highest smaller catch rate based on their tests based on what we sold but the first 1 is also very interesting and you see the slide that the impact of them its launch of the slide it's everything behind them.
They felt with checkpoint is the vendor with the safest solution and what you see here is the number of security or cause.
The issues with every vendor reported you can see that we reported about 16 issues like that.
Compared to over 200, and almost 300 with 2 of our competitors year, but even more important shows of a sales with our code is more stable more mature much.
Much safer and the products is a much more secure.
Is how.
US this vendors in the security industry, our quote security. So in the checkpoint case, the average number of days to fix a security issue was 6 day.
Quite.
Quite fast in our competitor cases, you can see 4.5.
To figure secured.
<unk> I don't know how can you be a security vendor. If it takes you almost 6 months to efficacy to fix a security issue in your own code.
But that's what the data says this is by the way based on the reports of the vendors themselves. So this is our own reports.
When what's called the Cvs.
Found how many days later the vendor fixed index. So this the impact of this customer decision to purchase check point and we're very proud of that we replaced Palo Alto network and they standardize on checkpoint for her and network security, which is a good example, and let's shift to the second 1 here, we're talking about European government.
Agency of government office in 1 of the Big European countries.
Like everybody else, we're experiencing a higher and higher workloads, it's more people access government services government information over the Internet and we're looking to protect their data centers their public services.
And now and into the future. They chose the quanta Maestro <unk> to remind all of US as 1 of our biggest differentiator is the solution that allows the customer to build basically.
A very scalable agile flexible solution simply by adding up.
From.
A single.
Digit number of gateways to dozens of gateways and get basically almost unlimited scalability and the solution and yet from the same time get.
Redundancy reliability, because each 1 of these solutions.
Part of.
As part of the.
The cluster with mixed up each other.
So and by the way we see many many examples but that's why we picked this example, nice towards becoming a real game changer for our customers that are looking for reliability scalability performance and so on so they scaled up they can scale up now very security on demand as.
If they can find the flexible solution for their fast changing environment and.
Okay.
With all of you lose Gil for a SEC.
Okay.
Yes.
Let's see if we get them back here.
The problems with modern day technology.
That.
Let's say if it comes.
Comes back yet.
It's probably in jobs in order to connect again.
Yes.
Okay.
Apologize guys there was some issue here.
And the I man trying to.
<unk> resumed his presentation.
And I don't know when kilowatt place did you hear me.
It was the energy company a deal.
Okay. So.
So I was.
So probably the next 1 right after the energy company it would be weighted on that start.
Yeah, I'll, let see how quickly can I shift flight here.
Okay. So I was speaking about these customer hero speaking about my a straw were just too.
Sure.
I don't know if you heard it or not I was speaking about bias from Asbury as our scalable solution. It became a real game changer in the last year year and a half an hour solution basically mice for allows the customer to get them.
Our cloud like environment in terms of scalability redundancy reliability.
Forgeard datacenters simply by stacking up many solutions and get 1 high very high performance metrics security solution with a high level of redundancy. So in this case, we're talking about a government agency and 1 of the largest day European countries.
What day and needed to protect their public services.
Like everybody else, we see more.
More services provided through the Internet in the last year and a half and Theyre looking for a solution that will not just meet the current requirement, but will be a future proof.
And quantum measure was the winner year. The reason very quarter. These the ability to scale up our security environment from.
And the flexibility of our solution in a fast changing environment and also very important is the EAA L..4 plus certification, where it's 1 of the highest certification of products in our industry can get not many vendor have that certification. So they liked always factor and replace Cisco with our solution, which is a brand.
New customer to checkpoint 7 digit deal, which is a very very nice wins with our European team and actually by the way complete like you're winning streak.
Aim the same region with every quarter and that we win the similar day like that the major customer new customer with a large deal.
So this is something we're very proud of.
Last lets move to cloud guard I think we all know the importance of the cloud. These days the ability of companies to move workloads to the cloud to support private cloud public cloud.
And Claudia I think provides the most comprehensive solution.
For cloud customers I think we ever your toy examples that demonstrate different aspects.
Of our solutions in the cloud.
First 1 is a technology company in North America.
As technology company like many average they acquired several clouds.
Start ups and they realize that now we need to get more visibility more control into their multi cloud environment different companies different cloud providers and so on and <unk>.
Purchased cloud Guards, Pollster management and threat intelligence to to get that.
On this entire cloud the reason they quoted is the best visibility across the multiple cloud environment and the superior flexibility or the ability to do automation scripting whenever a new asset is added to the cloud. It automatically joins the control panel whenever automatic actions are needed to be taken.
Our scripting ability allows us to do it automatically and again 7 digit deal new customer to us and new customer to the cloud and competitive win over Palo Alto networks. So this is a good example in the heart of.
Silicon Valley.
And switching to the last example, which.
Which is a very large men many years checkpoint customer on the network side.
It's a fortune 500 media company.
And what they had ear is a complicated project on 1 hand, they are the new datacenter in new private cloud or physical data center and on the average.
<unk>, they are moving more and more applications to the public cloud and they needed to connect the private cloud in the public cloud.
And what we purchased theories both cloud guard and the quantum of my strong connected together and the reason they quoted for choosing check point was first unmatched scale.
Scalability with my stroke, which I think is great. When we talked about it earlier the increased efficiency with a unified management and this sounds simple because I've spoke about our management, but here. It's another angle of debt. We're the only vendor with to have the same architecture. The same management for most of the private cloud and the.
Cloud public cloud solution. It's the same management the same solution that can secure the data on both ends and that can connect the data from the edge data center to the public cloud. So that was a very important factor for them the ability to control it from within the same panel and loves.
They are not leased and I'm, saying it here because they conducted.
Very sophisticated test real life testing of us versus a several other vendors.
And checkpoint got the best results from the security side from the performance side and you see we won here over a Palo Alto networks and Cisco.
We're very proud of the 7 digit deal with expands our footprint in this a large media company.
So I think overall I gave you some color about why the checkpoint pillars, when and I think you can see some of these reason and by the way it sounds like our marketing material, but this is echoing.
What customers are saying is they like us first and foremost for the real time prevention by the way. This is a result, not just of these few cases, but of many many other cases that we collect an interview we ask customers why did you choose us and these are the reasons or even first our prevention first architecture, the real time prevention.
Sounds trivial, but it's not most of our competitors rely on detection and remediation which lets the.
Yeah.
Which led to the attacks in not very good and they liked our security management something that day.
I think where we.
Meaningful for 27 years now.
And they like the complete solution the infinity and so here. Many many examples that were part of the Infinity solution in part where multiple solutions from our.
3 pillars.
Start to show the consolidation in the important profit consoles.
Consolidation in the marketplace. So altogether, we really get that we think that we can prevent the next cyber pandemic, we can really protect against the gen..5 attacks that are now becoming the new norm.
For Internet and cyber attacks.
So we see this part about the customer.
1 slide may be about what we're seeing in the overall marketplace with our research organization for those of you follow and I recommend that you can follow or checkpoint research CPR blog, you'll see dozens of different researchers Dublin dozens of different vulnerabilities that we found but here I'm not going to go from.
Because let's say deserve a full presentation of its own just some of the trends we are seeing at a high level. So.
So we've seen 93% increase in Gen 5 attack, namely.
Year. The example here is ransomware account.
<unk>.
Over 1200 organization impact.
By Ransomware weekly based on our sensors, which is a 93% increase from June.
'twenty 'twenty. So this is huge and you can see that in the graph.
The living regions with the largest increases are in Latin America and Europe.
For those of you in North America after seeing the Columbia.
Part of the pipeline and so on I think you can definitely see that this is not just the.
Issue of Someplace else. This is an issue with the tax our critical infrastructure everywhere and visa tax if you remember we coined the term gen 5.2 or 3 years ago attached with a multi vector attacks that use zero.
<unk> multi vector means that they may start from 1 place go through the different environments until they hit you. So it's very hard to detect them and very hard to understand where it comes from.
In the last few months, we sold the supply chain.
So victor for entrants, but we haven't seen before.
And.
Zero.
This is becoming the new norm in Internet attacks now.
The good news the attacks that we sold so far customers have deployed the checkpoint infinity remain protected.
Even though it was zero day attacks, even though many of these attacks, whereas normally for so we are very proud of what we delivered to our customers.
Okay.
Move over many years and especially in the last couple of years, we've been Infinity architecture. So this is just what we should expect.
To summarize and to leave some time for your question, we had a strong Q2.
Financial results, both in terms of meeting our projections and so on but also.
More and more internal metrics that we've seen internally.
Especially in Europe and Asia.
The Infinity architecture, both the solution and selling to strategic customers, but also in the different pillars that we sell with our part of the overall architecture are gaining momentum with double.
As always growth in cloud Guardian, Armani, and triple digit growth for the Infinity deals. So overall I think that we have good progress. There is plenty, we still need to do there is plenty we need to ramp up.
And get to where we need to get but I think we are fulfilling on the strategy of providing the industry.
Most secure most comprehensive.
Digital architecture.
Kind of summarize my presentation.
And actually before I open it to your question 1 more thing projections for the first quarter. So here our projection revenues are expected to be between $515 million to $540 million.
<unk> you know my regular caveat.
Projecting the future is always very challenging definitely these days that the world is turning upside down.
Quite quickly and there is a high level of uncertainty for many reasons that can cause our results to be better or worse than our projections still the range year in revenue.
515 to $5.40 in the range of our EPS estimate is going to be between $1.50 for $2.64, and GAAP EPS is expected to be approximately 24 cents less bandwidth.
So once again, thank you very much for listening I Hope I gave you some good.
Revenue insight into what we're seeing into our business and we'll happy to hear your question now.
Thank you.
Alright, guys.
Please.
Keep it to 1 question.
At a time.
And our first step is going to be.
And Ho from William Blair and following him will be Rob Owens from Piper Sandler.
Hi, good morning, congratulations on the 25th anniversary for the company I just wanted to maybe get started with a little bit more color in terms of your recent sales leadership changes.
Jonathan New channel incentives and maybe could you help us understand sort of what's making the most difference in terms of driving either improved productivity or channel engagement. Thank you.
So I think first in terms of changes.
In Asia, we have new leadership for.
And from here I don't launch its new anymore in Europe with <unk>.
Got in.
Torsten was the new leader for Europe. During Q4, so it is now.
Second full quarter and I think we're very pleased with the results so far and good momentum in the U S. We've got a new leader Jeff.
Quite Jeff joined Us halfway through the quarter. So I think during second quarter has only been with us for 6 weeks. So.
I think still needs to deliver the first quarter of <unk>.
Leading the field and I think I hope it within a few quarters, we'll be able to see the changes we implemented the new hires.
<unk> brings a new spirit, which brings to America on top of that I think that we have a large sales force.
Vet.
He's doing a lot of different things on the last few months. We've spent a lot of energy trying to accommodate more of the channel support the channel, even though I must say that I think most.
Is that the power work is our I mean.
I know, it's putting the responsibility on the channel or an incentive program I think it's our people, which would work with the channel people at the end debt.
The.
Debt, what would lead the charge and moving forward.
We've.
Most of it's better in some areas, we can do better in other areas and I think overall as I mentioned we.
Pretty good very good first half in Europe, and Asia stable first half in the Americas and I hope that the Americas will follow this with you.
Europe.
In the next few quarters.
Okay.
We've done maybe I will just add that day.
We can talk about how we can move quite a lot of changes in the partner program.
<unk>, which was introduced.
Pilot last year, an increase in the amount this year.
A lot of dollars have been poured into the watch it together and marketing efforts.
Okay.
We have different rebate programs will be from the area.
A lot of the changes in our marketing efforts with the partners and day direct marketing as well.
Next step is Rob Owens, followed by cell layout.
Great. Good morning, Thanks for taking my question.
I wanted to focus a little.
Around the P&L and you've seen strong billing short term billings as well for the last year and revenue has been at this 4% Mark and I understand there is still as this transaction, which we've had for years a hardware to software and how that all plays out. So is there a point in time, where we should begin to see then the revenue growth accelerate from.
At 4% and converge more towards the billing short term billings type of numbers that you have been putting up in the high single digits.
So remember that again it shouldn't be an accelerated exploration at a certain point remember that if you look at the P&L of the products revenue was about.
The first day.
And they are active subscriptions and support so end to end day. When you assume that the fed is mainly the subscriptions are trying the products portion that it's quite small so over time short term question day reflected as the growth of the support and the subscriptions together subscriptions.
And at 12% supporting 2%. So it is still not in day rate they seem to be moving.
And the deferred revenue growth I should get there overtime products is separate this is what are you seeing the P&L is inline in high level, which what you actually sell it because it's not going to deferred revenue typically.
Nathan.
Except for the split portion of the bundles of course and another point to mention is when we have an infinity total protection anything in day 1.
Net product subscriptions and support the products portion, which is much better in the in the beginning or in the in.
We need to wait until the customer pool the products until it pulls the project we cannot recognize revenue and that that portion is still sitting in that deferred revenue sorry for that multi system deals you might get some delays alternative products portion, but rocket were reported in the P&L.
So is there a.
In the day time, then tell that we can expect growth.
The future debt.
[laughter] fair enough. Thank you.
Alright. Our next question is going to come from shallow lay out followed by Patrick Cold there.
Thank you good afternoon guys.
Now you've mentioned.
Point in double digit growth in the lower end there'll be a clients thus product portfolio I believe.
Is there any trend or have you seen debt, taking up a little bit in prior periods, what why is that happening now.
I have to say I saw an improvement in the last 2 or 3 quarters there.
In terms of Q&A and that's why I wouldn't answer to the previous question I said, we are losing some of the daughters.
Fiction deferred wrapping it but the number of units is that right.
It was a double digit growth not only in the lower end. The top end of clients is doing double digits double digit higher than 10 higher than it's being really healthy growth.
Imagine that.
No Andrew even high yet.
And yes it could.
When we launch a new product line is really catching nicely. It's not huge dollar that's why don't discuss it a lot, but it is growing very nicely because we except to penetrate through a few places.
Steve then the spending more of this type.
So that would that my external sales to be either because once you have master you can link to each different appliances, and you can start with small ones and I'm glad you need more overtime. So the traveling and talking to clients is quite nice to see the installed base is growing and the footprint is growing the top line.
Is being allocated between so.
Price display in the negative 3% <unk> grew up in that mortgage.
Thank you.
Alright. Our next question is coming from Patrick Colville, followed by Adam Tindle.
Okay. Thank you so much taking my question and congrats on a processor results coming through I see it.
<unk> billings growth in the 4.
Many lessons from them.
Impressive.
Were there any large deals this quarter that might have benefited results was the.
Deal sizes typical pool for any given quarter.
I think we had an increase in large deals and debt was very good in terms of especially.
Size of the deals.
I'm not sure in debt Talcott comment if we actually benefited them financially this quarter because many of these day like thousands our infinity deal when even the products portion may be deferred over a period of times total debt for you.
Yeah. So I'll say first it was a really nice quarter when it comes to large deal.
On the sustain it for a few quarters. So that's a nice trend in general which is in line are we selling more to customers and having more deal that has 2 pillars 3 pillars and they moved here. So that's nice phenomena, which we expect.
When we succeed in a specific quarter with the licensing deal. So that's 1 and therefore from the revenue.
But.
Most of it didn't get to the revenue yet because remember, let's take it typically affinity deal majority majority frankly, having a nice increase in the annual run rates with the cash flow. So let's take a deal that had 30% growth in the run rate.
Scripture typically start to be recognized early in the quarter.
Revenue supposedly start to be recognized all need the Ford Raptor, because remember we're very backend loaded it prohibitive comes in the last week after week since day, 1 product now it depends when the customer actually to their clients. So we would see it in the products revenue is only writing we lost from delivery and he has.
Rocket bucket each year at this time.
3 years deal let's.
That same bucket of $2 million from the first tier 2 million from the second NDA to me and for the 10 year and you can take it immediately.
Quarter gone at the end of the year just as an example.
Correlation between the timing of the booking and the billing.
What is the timing that you actually see it in the P&L.
Alright, our next.
Question is going to come from Adam Tindle, followed by Joel Fishbein.
Okay. Thank you I wanted to ask on investments Gil you entered this year with expectations of investments in R&D and sales and marketing in Q1 Opex.
That year over year and from Q1 to Q2 revenue grew faster than Opex I think it was just embracing are bracing for more investments year to date wondering how this has played out versus your expectations entering this year and maybe tell can touch on how we can think about investments on a go forward basis is this going to extend over a few quarters where margins.
Ex was going to continue to trend down below 50. Thank you.
Well first yes, we do want to invest heavily especially in sales and marketing and in R&D. We've hired many many people since the beginning of the year.
So I mean, the the hiring is actually going very well we have received a lot of T V.
Margin profile of.
It's an employer is actually also working very very well and we see the <unk>.
Huge increases from the same tower in tire industry is also seeing.
Increase the attrition.
And I must say that when I analyze the data Im happy to I mean, I don't Im not happy with the high level of.
Patricia I'm happy to see that amongst our high performer amongst our leaders it is still relatively low.
But to merge the 2 together it's hard so I think overall, we have like 100 people up in the past few months. Once we started investing more in the hiring but there is still much more.
So we need to do for me I would like to hire.
I would say, probably another and mix not a growth 300 more positions between now and year end or maybe even more I'm just trying to be realistic in what we think we can achieve.
Think that they missed on the numbers here I want to just say how come you're absolutely right.
We have a plan and we are ramping up as I mentioned it because I didn't want you to have an ex.
<unk> debt.
It's going to be in the Permian that we did recurrent but when dealing with all the plan because we are increasing the plans as well and the market is you have people coming in and people coming out as we see it all across the board right. So we are.
Far from it means you're going to get that much of the reported probably hopefully you will see a reduction in the my hopefully youll see a reduction in the margin in Q3 into Q4 as we continued to recruit the people that we want in order to execute from the growth from the revenues over the longer period.
Alright, our next question is coming.
Ramping up Joel Fishbein.
Good morning, good afternoon.
A follow up Gil you talked a little bit about.
Concerns about the macro environment, but youre, obviously your win rates are very strong here.
Here I'm curious about the funnel and the pipeline going into the back half of.
If you can give us some color around that irrespective of your macro concerns.
So first I think by the way the need for cyber.
Is it going to remain with us for a long time, so I mean, the long term projections without them for cyber space is positive very positive and I think the fact that.
The companies I mean, right now the competition is very tough for us a lot of <unk>.
Good companies around us, but from the same time I think the value proposition that we provide in terms of the level of security in terms of consolidation I think will win over the long.
The loan growth in terms of the pipeline, but we're getting.
I think the first quarter started with a.
Very positive pipeline, especially in the places that they say, we're seeing the nice changes in the management. So in Europe in Asia, It's very positive in the U S. It's also improving but for the U S. I think it will take us a few more quarters until we will see the effect.
With all the changes which were implemented.
Alright, our next call. Our next question is going to come from Gray Powell.
Claude by Gregg Moskowitz.
Alright, thanks for thanks for taking the question.
So yes. It was good to see the additional disclosures on cloud Garden Army 'twenty.
From a revenue doubled from 2019, how should we think about growth from those products going forward and how how big debate become over the next call it 2 or 3 years.
Before it gives you a little bit more of the numbers. If she can I don't know if we can or if we have specific projections for them I must tell you that there's a huge discussion.
20% in the marketplace about the potential for cloud and so on and yet at the end, it's a pretty small market today.
Being the big vendors selling I mean, I think I saw this week.
1 of the analysts categorizing the big companies in cloud security companies with over $50 million in revenue, which is even if it goes.
Sales to 100 or 200 is still tiny compared to the average security sub segment. So.
I think we all debt on the cloud we all think that the cloud is going to be very important for the future, but we will see how how quickly it will evolve and how big it will become.
From my experience for them.
No.
3 decades now.
Some of these markets become really become important in vessel, we bet on moving some of them become important but not that big So I mean, we are right now betting on the cloud with the chemo to giant market for us I do expect that we will see consistent day.
<unk>.
High double digits not.
Low double digit growth in cloud and in harmony and they will become a significant portion of our revenues and take share from the network secure we can quantify.
So hopefully the quantum family will grow.
But the quantum I think their projects and if we get everything right, but it will grow in.
I mean single digit or low double digit percentage is if everything works perfectly well in the world.
Tal any feedback or my routing I think its correct at the end of the day.
Yeah.
If you look at the way we deal with it we revealed a few growth engine in auditor.
Why don't succeed we will be in good shape think harmony, it's a great potential in cloud is a great potential in infinity is a combination right. So it can be conquering cloud frankly, menominee cloud regarding how many stores can be a combination, but theyre all geographies, let's upsell, so giving value to the customer of consolidated.
Holiday the security the best Security I mean affordable price at the end of the day that they approach and most of those dollars will come into the subscription line. So hopefully you will see what you sell day fall, where we had 90% growth in subscriptions than it will depend 11 trough and hopefully it will continue so that's the way you would see if 1 of them.
Brokers, then we'll continue with the double digit that will again be a portion in there for subscription growth will continue to grow that's what it will be pulled up because remember so partly linked to the products and the products at their clients and so I would say supporting products, there's potential that when you get a bigger footprint in the customer quantum but.
Cloud and harmony majority if not all of it is already being their subscription debt, where you should see if we wish to exceeding the plan.
Got it alright. Our next question is coming from Gregg Moskowitz, followed by socket Telia.
Alright. Thank you for taking the question so you outlined that Gil.
Some case studies, then about from new customers and our customers that have expanded in the cloud with check point. So now that we're halfway through 2021 I'd love to just hear how things are tracking with respect to your growth.
All 4 are for sales to grow their new business.
20% this year.
I think in May Europe and Asia.
In Asia, we are on track luxury fully hit the point, 20%, but I think.
We had a very good first half in Europe, we had an excellent second quarter and we're tracking right in the U S. We're seeing stability we've seen some good changes there, but again, it's still too early to say, what we're going to see at year end.
Alright, thank you.
Alright. Our next question is coming from Zach actually followed by Brian Essex.
Yeah.
Okay, great. Thanks, Thanks for taking my question here guys.
Maybe maybe just a broad question on guidance for you Gil I don't think we saw an update to the annual guide and I was wondering.
If if now that the first half is done and we have our Q3 guidance was there any commentary that you wanted to make here on Q4 or just how you thought about the prior annual guide.
Just as we think about sort of fine tuning our models for the year.
No I don't think that we have many changes for now.
We're staying with our annual guidance I think everything is tracking okay, I wish would play with them.
Saying that things are tracking much better than what I think and it may happen Youll never know again, all my experience with some things that day.
Suddenly a you know a huge wave of deals coming.
For the last quarter and it ended up every well in some years, we ended up very topic my favorite for all the years. We finished them well we finished from unplanned, but I think it's too it's not too early I mean, I will know that answer probably somewhere in the end of December.
Your question please.
Okay.
And I understand why you're asking it because you see we are higher than the midpoint of our guidance, which I completely understand.
The biggest question to your question Danielle is the product booking of Q4.
It's such a low visibility that there is no point to play with the guidance before you finish the Eni.
Got it thank.
Alright. Our next question is coming from Brian Essex, followed by Ben Bolan.
Thanks Kipp.
Gil congrats on the results.
With solid solid billings growth for sure.
I wanted to ask.
Until they get 1 question, so I guess that.
I'd like to ask about the channel and what Youre seeing in the channel were hearing about greater competition among channel providers.
West Coast in particular more competitive on the margin how does that what are you seeing in your business than it is your margins are relatively stable with regard to impact on pricing relationship with channel and these new deals that you've done.
You've kind of highlighted examples how many of those were.
Check point, driven new relationships versus channel driven.
I think will drive the channel I mean, theres a lot of discussion about channel programs and the margins then.
And all of these I think that is the least effect from the channel performance in I'm sorry.
Done.
I mean, you know sales people would like to say increased margin everything will follow I don't think Thats networks first we provide good margins to channel them.
Business, but at the end of the day. If every deal everybody wants to win so if we work together and everybody wants to win with something that's very familiar and we know when we feel that we can deal with.
<unk> here and I feel that.
For for a long time and again I don't want to go into the path, we've taken more and more ownership of our deal. We worked more closely with customers in the channel the channel by the way is involved in all of our deals I think we are the only vendor with 100% channel, but but the role of the channel became a little bit smaller.
In some of the deals and I think 1 of our tasks is to actually make the channel roll bigger do you actually make the channel work harder, which is get the channel to bring gas customers, but also support the channel and a much better way because when people work together we are committed they see how we are we will be become motivated them again when you when you also.
Waller all the margins in all the program take effect and I think we are trying to invest more and more invest in it's a lot of education is a lot of working closely with I think we get a lot of good feedback recently on both the programmatic side and also on the field side.
In the programmatic part I don't think again, we can do more but I.
And that will create that the big differences on the field side, we can do more.
Much more than what we are doing we need to educate every field person every channel person every account manager person how to work together with the channel.
Tim.
And I think he will do what we can get a very very.
I don't think yield an increase in the effects that we get from the channel.
Again I was born I built.
A lot of the security channel what we see today is not a lot all of it didn't exist when we start to checkpoint big part of it I don't know if its 60.70 or 80% of the channel partners that exist today.
Non marketplace.
Born and raised with check point and I think it's our job now to win them again and to make them work with us and for us and for the customer by the way it's not for US it's for the customer to bring them the best solution.
Alright.
Last question of.
And I'm going to come from Sterling Audi.
Please proceed.
Thanks, guys. So.
I'm kind of curious Gil I think theres a perception from investors that there is a surge in security spending because of the increase from ransomware attacks from the solar winds reach et cetera, how would you kind of characterize.
The day. They are seeing do you think that there is a surge maybe like we saw back in 2013 or 2014 or is it a modest increase how would you characterize it from how sustainable is it.
At least from what I've seen and again I'm not sure if I'm following all the macro trends.
The modest increase there is most of the surge versus multiyear.
What you would increase and the main thing is by the way today is not a shortage of budgets or anything like that the main thing is the confusion customers don't know what to do with way too many vendors and large customers there's way too many opinions in the account.
Small customers.
We are overwhelmed by.
The spectrum of solutions by the way I saw some we had some.
Talk about them here in the examples that we have some.
Customers with both into the total Infinity total protection the full checkpoint architecture really doing a 100% or close to a 100% diverse security we had few deals like that with.
Company, It's a few hundred people in different areas and construction and transportation and finance and law firms. We have a nice collection of deals like net with Infinity. These are amazing and when I meet with the person. They are saying you can see is telling me. It's me alone I can deal with 12 vendors I can deal with 55 vendors.
It was in June.
What companies like yours are dealing with.
And for me the checkpoint Infinity is really saving me in terms of the ability to deliver the highest level of security and by the way business why this technology in terms of an account like that.
On normal days.
The sales force would look at in a minor customer with a potential for $10.20000 transaction.
Sales people would like to focus on a bigger 1 and make this customer.
A few hundred thousand dollars customer because they now by the full portfolio for 3 or 5 years and suddenly from 20000.
Customers becomes half a million dollar customer and now everybody pays attention. So it is part of the potential again, most midsized companies are not very yet, but I am good examples of customers like that and again I gave the some of the field, which we sold from these are pretty good.
Makes sense. Thank you.
Alright. Thank you all for joining US today. We appreciate you guys attending and we look forward to speaking to you all throughout the quarter and we will see you next.
Next earnings call. So thank you and have a great evening or day. Thank you very much.
Bye guys.