Q3 2021 Check Point Software Technologies Ltd Earnings Call
As usual gross profit continues to be strong, reaching $474 million with 80% margin.
If we see compared to the sequential quarter same percentage, 89% compared to last year's small reduction will continue to invest into in two items. One is the of course the investment in the cloud infrastructure as we see the growth in our revenues and being in that business and the sandwiches on the cloud also the investments in our cloud infrastructure and.
Secondly, as you're all aware, there's some supply chain constraints in the market in general we delivered on time for all of our customers.
Slightly higher costs related to semi.
So that's part of the effect that we have you and even smaller affected the stock consolidation of other 19, O&M small numbers the material, but included here as well.
Operating expenses, so lets start with the <unk> with the main item that we talked about if you recall, we said we plan to invest in our head count as we increased our investment in sales marketing and R&D. This quarter, we added debt.
Over 250 employees. So we start to see us ramping up onto the plan is still it's still not fully there which means we still have growth there, which we're very excited about and you see some of it already in the P&L is due to increase in the cost and second and that's why you see even higher in the R&D is because the dollar weekend.
Hence the in many currencies, but also the shekel the year over year R&D, mainly in Israel the effects of the change in the currency is about $5 million this quarter.
If we look at their profits strong profitability continues we have a although the effect of increasing the head count and the weakness of the dollar.
Income $261 million, 49% operating margin and 41% net income margin cause he's a gap between the operating margin and the net income relating to what we discussed many times financial income as our cash balances rotate in the interest rates moved down the yield on this one.
For years, we've talked about the reduction of quarterly or for about one to one and a half and this quarter. It was just slightly less than 1 million standing on 90 million and we expect that to continue of course.
Our income taxes, similar to the sequential quarter with 19% a year over year, a slight increase relating to the fact that we have provisions in our taxes provision are linked to the index and we see in some countries, including Israel index, the and moving up resulting in an increase in the.
Tax rate I'll just relate to Q4 Q4 is in line with expectations. If you recall every Q4, if everything goes as usual and there's no things that I can't predict that we have a lapse of statute of limitation too far and therefore, the taxes are expected to be around is your percent of course can be slightly higher slightly lower but that's it.
The indication as of now.
Cash our cash flow position continued to be strong cash balance of $3 $8 billion. This quarter, we acquired Alpha now on a cash effect net cash effect was $234 million 220 million you can see in the investment activity and about 14 million is included in the operating activity.
Our operating cash flow of $251 million very strong strong collections. There so let's say around 56 days.
And if I eliminate the Aventine acquisition is an increase of 4% which is in line with expectations.
We continue to buy back shares this quarter, we acquired $2 6 million in chapter six forming in shares at an average price of 123 and the total amount of 324.
We are ran out of the previous program. That's why we have food and old horse a new share repurchase program same amount of expression of $2 billion up to 325 million at quarter end with the same rules. So all in all.
Really nice quarter and at this stage I wouldn't movies for Jay for you today and business highlights.
Hi, everyone pleased to have you all though our call today and I'd like to start by giving a little bit the business update I'd focus about the state of cyber security and how do we fit.
Introvert framework, so I think as we probably all know the first let's skip has never been greater but maybe it's a really really a puck surplus is extended we are seeing surge in large scale Gen. Five without I don't know if you remember, but the almost three or four years ago before.
Category of the fifth generation Gen. Five attacks Beck vans is a thought for fairly rare in the most departure from previous generation. This year 2021 were seeing the gen five with Doctor actually taking over and you can see here a few examples like the Thunder solar wind called the colonial pipeline.
The casino in many many abra thoughts that we're seeing.
On an ongoing basis sophisticated multi VIX door polymorphic.
Zero day attacks with a very very hard to identify and block.
And that's the challenge of our industry largely stopped with the talks and keep them out of our environments.
I think what we see is the reason, we seeing such a surge in attacks and especially sophisticated use multiple reasons, but I'll just point out the three main ones here.
What is the fact that the employees are everywhere and that means with areas first our tuck surfers as extended it now includes our home computer or a.
Doctors wife their home computer in many many places like before weren't connected to the corporate network.
And second with many things on the corporate side have opened with remember opened before when your victory floor trading floor or development environment. Many of these environments, where you have are completely isolated from the network or had very rare connection to the internet the malware widely connected.
The cloud, which is open and the relies on multiple application for multiple vendors, both our own but also application of additional vendors the hybrid data center, which means that towards more and more connections between application. Each connection likelihood is the vulnerability points and we see the <unk>.
Volume for very high risk profile.
Hercules are exploiting.
Challenge our industry the existing solution in many cases failed to address that in the appropriate level for multiple reasons to first more focus on prevention. If you look.
Huge part of our industries focusing on detection finding out what you've been breached that's too late and remediation again too late too expensive expensive model dollar wise expensing in the damage in the time and whats going on to the organization.
Jim.
Many many security solutions again versus hundreds.
Maybe more more than thousand security vendors typical enterprise would find itself between 12% to 55 security solution.
Unmanageable unbelievable in terms of managing that complexity and words with all of that it doesn't adolescent security. This solution works separately. They don't work in conjunction with one another to block the attack or something may be found by one solution, but may arrive on a different VIX short of its most protected.
We have some other technology that could have prevented this so we really need something different.
That's like that's what we're doing with checkpoint, we weren't infinity architecture, securing the cloud securing the network security user and access cloud goes quantum in harmony.
Brain with consolidated all modules, the complete management, but our threat cloud.
[laughter].
That makes sure that all of the solution works together.
<unk>.
And really address the critical attack vectors in a way that no other security architecture today in the marketplace can address that's not easy to deliver that with smart.
Yeah.
Requires a lot of effort, it's not just the supermarket of solutions, they actually need to work together, they actually need to be tightly architected invested challenge with two copper and ourselves and I think we are delivering and with very very well.
I think you can see some recognition and we get more and more industry analyst recognition you can find a lot on our website you can find them on our press releases.
But there is an example.
Sorry.
They're just too.
One that actually takes view of the product for multiple angle and this is a great testimony to the strength of our architecture. We appear on six different leadership breathed a leader in this category.
<unk> data mobile.
While security endpoint protection firewall and cloud workloads.
Vic is chosen by users. So this is based not just on theoretical discussion. This is based on actual users using the users use us as leaders in all these categories you can even see some of the quotes based cloud protection and points secured network more secured checkpoint firewall securities price lists all our quotes from the lost.
A few months, which is.
I think a good testimony to the fact that finally, we see recognition with this architecture works and being recognized as something that delivers the solution.
We have amazing list of customers, we have our infinity architecture and average them.
And we have all our stack of solutions and maybe I'll. Just show you a few examples of that because I think Paul already mentioned that and Thats one of the areas that they want to focus in today's infinity with our Infinity architecture and Infinity sale when infinity sale just to explain what it is is customers that have mulch.
You deal with us, but capture more multiple pillars from our architecture, so with customers make us their.
Their strategic security vendor and we make them a very important strategic customer when we support them and take care of them in a very very nice way, usually infinity deals are not simple deals of buying products, but we are allowing the customer <unk>.
Very wide DOCSIS, where a big portion of our portfolio against the broad issue for all the portfolio some infinity deals.
Only.
Two of the pillars in more free of the pillars that we have but we see them.
And they vary by size most vital infinity somewhat for large customers. Some are for small customers usually become larger strategic deal.
Here are a few examples again, it's a small small sample from some deals that we won this quarter and you can see all Geos all industries U S oil healthcare services medical devices.
Oil and gas.
Telcos utilities insurance and you can see here most of these deals are pretty large companies that are.
Our multibillion dollar companies Fortune 500, tens of thousands of employees, even if all I must tell you. We have a lot of very good deal with utility of companies with hundreds of employees and again, even if you add two or three or five or 700 employees. When you sign up to infinity becomes a strategic deal for both sides, maybe I'll go.
Give you. One example here for one win that we had with Infinity. This quarter and this is the large manufacturers the apparel.
More than 60000 employees operating in 160 countries.
Seven digit deal when they actually wanted to consolidate multiple elements and mainly to connect the network and data center in the cloud so very two pillars of the quantum and cloud Dart.
Which will deal like many others, but especially this one was highly competitive with some of our top competitors, claiming that we have a better performance in and tried to prove it with a way to enter the account. The company has hired a third party to evaluate the products in the lab and we are very very good.
<unk> that we came up on top in terms of performance.
And of course, the customer like the superior management and their ability to scale it almost.
Indefinitely with our extra solution that allows.
Kind of cloud like architectures in the data center and again here, it's important because we also need to connect it to the real cloud movies are very typical reasons why we win but it's always good to see them.
In large sophisticated customers, which is a good example of an infinity women typical one that we have.
Which we haven't hopefully will continue to grow the pipeline of such deals.
Let's switch gears, a little bit to the harmonic assembly and this quarter I wanted to focus on the harmony because we've expanded it because we've done a lot of it already stated that we've seen a nice double digit growth in harmony.
Like Infinity, many different customers different industries different case studies and you can see here. Some really nice example, semiconductor manufacturer 75000 employees water purification 40000 users.
Software company, which was a competitive replacement health care services.
The company, which is which has been a lot of patients in the government institution with more than 90000 endpoints now using checkpoint harmony.
Once again I want to give you one simple example of the customer wind case. This one is a very interesting one this customer was using security on the endpoint from multiple vendors.
Good reputable vendors by the way and not niche players good nice reputable vendors and on July <unk>, we were attacked by ransomware.
And we have a good relationship there and very contacted US immediately and we got our incident response unit by the way, which is second to none really high quality incident response team.
But we havent checkpoints they've got the same day.
And started investigating the case found out with tap and find out the type of rent somewhere and so on the next day the customers already requested to see what the checkpoint product could have done better for them and we've just seen a demo in the trial.
Harmonic suite.
And two weeks later or less than two weeks later, we already 10 days later, we already won the deal and replaced multiple vendors with a much with a solution, which superior of it works better than the threat intelligence threat hunting the real time blocking the real time alerts work together and deliver better security.
To this customer with 40000 employees this is pretty impressive and pretty big.
And but I think the big news this quarter was that we extended the harmonic family and we really extended it with stronger cloud email offering.
So I want to maybe explain a little bit the opportunity here and what we're doing in the field of cloud E Mail security.
And the cloud email security today is about $800 million Gartner or expecting that it will grow to 150% to almost $2 billion in the next few years.
And I think the big change here is that enterprises are moving a lot of their email to the cloud some of it is because all the regular benefits of the cloud and the general shifts some of it is a strong push from Microsoft to move the exchanger installations to office 365 installations on the cloud. So this is a very dominant power.
In the marketplace.
And the challenges that the conventional email security solution don't really fit the cloud email for example, they require you to reroute all your email program, what's called MTA mill transfer agent when in the cloud you already enjoying the fact that the cloud E mail arrived directly to the cloud provider. So there's no need to rerouting.
Many many other things that are with our issues with the existing solution not to mention the technological challenge, but they don't address all the different fishing zero day file.
Suspicious links with our contained an email let's also were challenged a bit both the security and the delivery are challenges for.
For E Mail security now usually I would say this is a big markets with big players. So it would be hard to enter it I think we have a unique opportunity here because of the shift in the market to cloud solutions.
Now one important thing to remember that the vast majority of cyber attacks start with some form of E Bay again, it can be a phishing E mail with that.
But somebody gives their credentials by mistaken that used to break into the company. It can be an E mail with links that go to.
Malicious sites or it can be just attachment and this is the worst part.
Documents with.
Known vulnerabilities documents with known vulnerabilities some of an existing solution are successful in blocking like regular known viruses with existing solution are fine with finding some of them are almost not dealt appropriately I'll say delicately with the existing solution. For example, most solutions in the marketplace today even.
As per your technology to detect zero day are doing sand boxing two messages.
And they I analyze files in the cloud.
We still put payment so USA recipients, receiving an email open the attachment to <unk> been infected.
It can be two minutes later it can be off an hour later it can be a day later somebody gets an alert that says you've been infected that's too late and the fact that someone had a technology that could have detected the attack.
Again too late the damage is already gone and I think thats fairly challenging in terms of addressing email threats in today's marketplace.
We've decided that it's an important market we've been offering a solution for that space for let's say the last two or three years, partly with partnership partly homegrown.
And this quarter, we decided to really expand upon this opportunity and acquired other non apparel has been the company we've been partnering before so we know them quite well they are the fastest growing cloud E Mail security vendor, so which is a very very important thing and they actually enjoy it.
Very nice data 5000 customers not trivial in our marketplace.
Two and a half million protected users number one peer insights so people really love our solution. It really simple five minutes to set up.
And 30% more attacks are prevented the governance solution. So we decided that this is a great opportunity to expand our market presence to expand our space and go strong into this changing market.
Some of the unique capabilities that we have here first this is born to cloud. It doesn't require you to reroute your E mail traffic.
Based on we plugged in directly to the cloud solution.
What I mentioned about preventing we our prevention first no email should pass our solution without ever being cleaned or analyzed before it reaches the user and we have the unique technology for it.
Fred.
<unk> the company and I think we I think Christie.
We will still see the results of some of these investments. Some we may have seen already this quarter.
The Infinity architecture is gaining momentum and again, we see it also in the growth rates on cloud guard the harmonium, the triple digit broken Infinity and I think the expansion in the cloud email security marks an important opportunity for us, which I hope will deliver the results.
Kind of summarizing Q3, I think it was a good quarter for us.
I want to thank you for joining us today and actually before we jump into the Q&A one more thing I want to share with you our projections for the <unk>.
Fourth quarter and the updates.
The increase of the projection for the full year.
So, let's look into that fourth quarter.
We expect revenues in the range of $560 million to $605 million.
EPS is expected to be between $2 <unk> to.
$2 22 and <unk>.
Sort of two to $2 <unk> to $2 20, <unk> GAAP EPS is expected to be approximately 26% plus I always say that sorry repeat.
Repeat words projecting future results very challenging.
A lot of unknown for the high level of uncertainties. There is a lot of potential upside, but also a lot of that can materialize.
So I think we need to always remember that and Theres nothing theres not much changed in this quarter compared to others you do have to take into account that.
We are now facing a very unusual situation both with the core Corona and also with a lot of supply chain issues. So we hope so far we werent affected by the supply chain, we were affected by our supply chain, we were able to mitigate that and supply all our products to our customers on a very timely manner without.
Affecting our quarterly results.
There's always a risk, but we will change we of course are getting ready to continuing supply that but.
As always.
<unk> with <unk>.
<unk>.
With are hard to predict or may or easy to predict it depends of how we look at it.
Having said that again, we still expect a very healthy and a good Q4.
For the year itself following three quarters, but I think we've exceeded our.
And guidance.
At least the mid points of our guidance that we are actually up lifting a little bit the full year projections for revenues are expected to be between $2 million $2 billion of 127 million.
2 billion, a $170 million 172 million.
EPS is expected to be between $6 81 to $7 <unk>.
GAAP EPS is expected to be approximately 94 place. So this is kind of summarizes our projection and with that I'll be very happy to.
And listen to your questions and hopefully provide the pardon me provide some good answers to that so thank you very much.
Alright, everybody as always we hope that Youll keep.
Keep to one question during the Q&A.
And our first step today is going to be circa Collier and followed by Sterling Audi.
Go ahead Sir.
Okay, great. Thanks, guys for.
For having me on here and for taking my question I'll keep it to one.
Maybe maybe for you Gil I'd love to dig a little bit deeper into <unk> plot.
Platform contracts a little bit.
I'm wondering what products are you seeing the most usage around Martin you've got such a nice integrated sort of offering there with it.
I imagine that quantum is is very heavily used but can you talk a little bit about qualitatively how much usage are you seeing in the other newer products for ITT customers.
So first I'll, just say for those who don't know what Itt's Itt's 10 for Infinity total protection, that's our broad platform when a customer gets actually have access to our entire.
Suite of technologies and products in an almost unlimited way depending on the organization side. When we're looking at we actually looked yesterday at the spreadsheet to look at some examples it's really really very of course, many people are using our network solution, but I can show you a few examples of customers, which were primarily on the harmony for example.
And it really varies so when a lot of people are using the quantum but the usage of cloud and the <unk>.
And the average solution ranges from 4% to maybe 10, 40, 50, 60% depending on the customer depending on the case and.
The interesting thing by the way, we just had last week a customer advisory panel.
Very very important pieces from around the world and they all right. For example, cloud is the high priority.
But in but on the same time I think the usage of cloud today still even though it's growing is still very limited. So I think if we start today, we wrestle with a customer that starts with the.
10% of the deployment of cloud.
I expect that to get more share in the next two to three year, then remember most IPP contracts are.
Three years contract, sometimes even more than that.
Very helpful. Thank you.
Our next question is coming from Sterling Auty, followed by shall we will lay out.
Alright.
Okay.
Okay.
Okay.
The mouse.
What is the experience.
Points to mine as.
Microsoft.
Our growing presence in E Mail security cloud and do you feel that you have all the solutions that need to be expanded in that market or major acquisition yesterday News Corp.
I'm caseloads are exploring options, including possible down major acquisition be something of interest to check decline.
So far.
This might make sense, we're evaluating we're looking for.
Purdue is I think being opportunity lies in the fact that during the strategic change in the market the shift to the cloud.
I am not underestimating the opportunity zone, traditionally, but Brazil and opportunity there because you know traditional E. Mail security is also growing but lenders reached in the REIT is of course with their cloud transformation and we have large installed base with the traditional solution. This will be translating into a challenging market when the growth is replay.
Just by the cloud.
The cloud you mentioned very well they are one of the received Microsoft itself, Microsoft offer multiple level of subscription for cloud service you want me three five.
The top levels offer a lot of security features so we are looking at there.
Are we competing with the platform itself something that by the way very hormone happened in many of the security aspect of competing with Macy's acute event.
Theres lawmaker are periphery.
Good grief all traditional Immaculate.
Mentioned.
Logica Bill.
Does that very well.
Stronger income player the eight figure.
Prevent firstly, we can.
Thoughts there.
The mob.
Terrific.
Either before for them.
Okay.
Unique.
Yeah.
Andrew.
When the faction restart.
I think the prevention first architecture better view some.
Again, I think we should definitely look at other options to expand our participation in them and security, but but I think it wasn't trivial for me, but I think we found a unique place in the marketplace with Avalon, which has been by the way the fastest growing email security vendor.
To get into this market and then hopefully maximize our ability to participate and minimize the risk gain there.
Got it thank you.
Our next question is coming from salary out followed by Gray Powell.
Thank you Hey, good afternoon guys.
A question on hiring so.
With a robust hiring environment in Israel globally.
Many R&D people.
To set up their own companies, how are you able to attract and maintain talent, maybe housekeeping associated with that tolerated the.
The additional 250 R&D related people so far as indicated in your slide does that include Avon and people.
Salary our own units that.
And I went on mute feature.
The answer is yes, the xiaomi, including a 100 people, which were about 100 people.
And I think first it's a very interesting environment today, all over the world and definitely in Israel, where many people are moving when the market is very hot it's actually been a good market for us in hiring August for example was our all time record months in hiring all timing checkpoint all timing I think most or all geographies too.
Well to a higher end the more the the most amount of people.
So the challenge is actually keeping up or is a lot of movement in the marketplace. It's still hard to find strong talent all around the world, It's a little bit easier to find younger people, which I think for the long run. It's the right thing the right for the long run, we should die or junior people and grow them within the company. So the challenges are there, but I must tell you with bema.
The amazing market for higher end actually we had record number of Cvs sense to our HR Department and record number of hiring there and hopefully we will continue with that trend. We had a slow start of the year, but I think Q3 has been an amazing record in terms of hiring and hopefully we'll keep that momentum.
Thank you.
Our next question is coming from Gray Powell, followed by Matthew Hedberg.
Great. Thanks for taking the question and congratulations on the on the good numbers so.
So my question is that a checkpoint and growing billings and call. It a high single digit pace, the last four quarters or so.
At some point does that translate into a revenue growth rate, that's kind of close to that pace or at least higher than for the quarter, a 5% revenue growth rate we've seen.
How should we think about the relationship between billings and revenue and billings as a leading indicator.
Yeah.
So.
The reason, we don't provide billing on a regular basis is exactly because of your question it doesn't necessarily correlate on a quarterly basis because it basically.
Invoicing, but there is a clear link so I would say over time is the consistency and the growth of the billing UNC consistently and we go through the P&L.
Okay.
The answer to your question.
I mean, it's been four quarters in a row sciences tiers.
<unk> started to see this quarter, it's already moved up so you can see even if you just look at the subscription we can see it starting to crawl up right. So it was 10% moved up to love Hal trial now is testing for yes, absolutely. There is a link all I said is the caveat that.
In a specific car you can see subtle changes, but in general you're absolutely right.
Okay. That's really helpful. Thank you.
Our next question is coming from Matthew Hedberg, followed by Patrick Colville.
Oh, Hey, guys. Thanks for taking my question Gil what is the sort of the checkpoint Yuan returned to office starting to travel again for salespeople and I guess I'm wondering.
As sales reps get out in the field with more face to face business with clients do you think that could have a positive impact on pipeline generation in the 2022.
First it's a very good question and I think we do we are already operating in a hybrid model in India. It really varies amongst the different areas in the world.
For example in Europe.
And then to the office is quite high 40, plus percent of the people come to the office every day.
Israel. We are also very similar into the U S is still very low and I think generally speaking I think our world will change into a hybrid model when we ask our employees. It's very very clear that we want to keep working in a hybrid model in the future and I endorsement I think it's a good thing.
When are you when we got into the Corona.
I didn't believe in this model I was very afraid with which will really hurt our business and I've changed my mind I think the people learned how to work remotely I think in the field, we definitely need to get the right combination for customer meetings are important and are and it can be.
Very very helpful in creating stronger relationships, but working on zoom for example can be much more productive you can do six meetings, a day and most probably the whole day to four one meeting by itself. So I think the combination can be stronger we are trying to see how to open up with just adopt the new set of guidelines to the field.
On a worldwide basis that enables more customer meetings, even starting to open up travel.
Not with travel by the way so much needed remember most of the field is local so we always look at travel. It's the number one issue, but most of the field is local with their customers.
But we are opening up steadily and hopefully we will see.
Improvement even in customer engagement.
Thank you.
Our next question is coming from Patrick Colville, followed by Joel P. Fishbein, which then will be followed by Philip Winslow.
Thank you so much for taking my question.
So I think amongst investors, we speak to the supply chain issues are highly topical as of June th Commvault earlier. This week kind of call out supply chain is being something that they source problematic to them.
As well as the checkpoint clearly in our results. This quarter suggests there wasn't much impact from some supply chain. So can you just talk to that slightly and why why have you guys been able to mitigate it and then look we're kind of at the end of October now how things trended thus far.
And in <unk>, and just help us understand supply chain as we enter the final quarter of the year. Thank you.
And I don't know Paul if you want to take it maybe I'll get one sentence annual complete with so far I think the logistical team that we have had the reporting total has done an amazing job in keeping our product supply without the delays by the way shipping very very quickly we ship product.
Very quickly to our customers and that's been very very good.
Thank you.
May be risks in that I mean, they've been working hard we've been spending more in order to get vessel Todd I don't know if you want to expand a little bit on that and stay what you've been seeing recently.
Yes, I'll say, Patrick Yeah, absolutely right I mean, we've been dealing with it very well we are following daily and weekly.
Okay.
Todd cut hours.
So I mean, I would try to take it off and you know I was cut out your cutout for Tulsa.
So if we get tons team has been very very good in keeping up with a different supplier who is trying to secure inventory of things. We didn't have I think we spend so far.
More than $10 million in additional spending just to secure their items that we need in the in a fast paced way.
Hopefully and I think we're ready for the fourth quarter, but it's not risk free and I think I've said it in my guidance.
So I think when we hope to try to bypass that.
That phenomenon, it's been a really shoe and hopefully we'll continue with the same pace that we've done before with.
We are continuing to supply product very fast very effectively from all of our suppliers all over the world.
Great. Thank you so much.
Our next question is coming from Joel P. Fishbein, followed by Philip Winslow.
Can you hear me.
Yes, we can hear you, but we can see we get somewhere.
Indeed, that's resolved okay I'm sure that we'll see you maybe we just need to put you on the spot like Shangri La.
I'd, rather get a lot of assessment.
Well I already out of the auction that's okay.
So now we are waiting for the next question.
Joel.
Jonathan on mute yourself please.
Yeah.
And Mr. Johnson.
Just wanted to I guess, maybe understand a little bit. If you can just give us a sense of the financial contribution around growth rate and impact to margins from Avalon and perhaps how much you're including into guidance for that acquisition any color would be helpful. Thank you.
Yeah. The simplest gallery that is immaterial so it.
Now, it's very very low this quarter, maybe 1 million effect on the bottom line and another $1 million in general Fanny now minions the projection going forward as often as you would conquer market share as Gil said it can become very interesting at this point of time is not material and therefore scans our guy.
<unk>, we didn't know or didn't increase.
Austin, a science as an organization to make a few millions of loses a few millions, but the product is the exciting part.
Yeah.
Great. Thank you.
Our next question is coming from Rob Owens, followed by Adam Tindle.
Good morning, and thanks for taking my question.
When you talked about the subscription line and the success you're seeing in the software Blade revenue. You did mentioned multiple factors can you talk about how infinity is contributing and thats been a transition that's been happening for a while so how is that playing out is it still a reasonable proxy to look at product plus software are we just seeing more.
In deferred relative to infinity, so we need to start incorporating more of a billing short term billings type of analysis. Thank you.
It's a bit early to do it more complicated analysis that you're right in the start when you take unlike common new cloud and majority of the dollars are going through the subscription line when yoga Infinity is actually in being split between product support and subscription still a majority of the dollar going to subscription because remember because most of the.
The product that we sell nowadays subscription than their fair value of the accounting drives everything into the subscription actually.
Also there's a day less of the DNA and the revenue recognition because 90 for the subscription living right second thing drawback. Unlike me fall when someone orders a product. She is recognized immediately in the revenue now even the portion that is allocated to infinity you need to wait until the customer pull back quite men and only then we recognize revenue.
Leaving us a product portion is now being accumulated in the defense revenues.
Alright, thank you.
Alright, Thanks, I wanted to ask a question on the U S. Geography, I know you talked about it stabilizing you had some new management in there takes a couple of quarters to get bearings, but if I sulfide correctly, an imputed it looks a little bit flattish on on our growth rate.
Maybe you can just give us an update on our traction in the U S and if you could maybe dovetail any public sector commentary, Kevin Federal fiscal year end and an outlook for our U S public sector would be helpful. Thank you.
I don't know if we have too much from the U S public sector, but definitely we have new leadership in the U S. We are working hard to get the potential there up and running we've seen some nice deals that we're seeing from the U S.
A year from the same time, it will take us time to get it up and running in the speed and the growth rates, but we need to have as I said I think we've seen this quarter, we've seen the U S. Stabilizes hopefully in the next two or three quarters, we will see to resuming growth resuming.
Fast-paced hirings.
And creating all the levels of salespeople leadership and so on so we can really really take advantage of the opportunities I think the very good news here is that the opportunity is the unbelievable in the U S. And we are still seeing a strong momentum with U S large deal, but but I think we're seeing only of the tip of the iceberg in terms of the.
Potentially all the different segments in the large enterprises and the enterprises in the midsized businesses, even in the SMB sector.
And all Geos and then I think in almost all laser because so.
Sure.
Great potential there.
And maybe I'll just relate to something from the previous question because I'm game I'm getting any comment on that Avalon did not affect materially any financial metrics, neither the billing and all the deferred revenue and other revenue nor the loss. So I hope I covered fully.
Question.
Okay.
Good morning, everyone. Thanks for taking the question I wanted to Ted.
Dress something a bigger picture higher level I suppose the industry has been talking a lot about consolidation new postures cloud and.
And yet the environment seems more complex never all the new acronym grew approaches.
Can you talk a little bit about how you think checkpoint play.
<unk> in that environment, what checkpoint doing differently. What are you doing to make customers' lives easier and the evaluation and deployment of new technology in and consolidation.
So first we're absolutely right with your assessment there on one hand people understand that the complexity that we have today is too much people see that the need for consolidation.
Consolidation yet on the same time, there's more solution more vendors many people in their customer.
Departments are still purchasing separate solution from separate vendors. So we clearly have.
I mean, it's working both ways I think I think what we are trying to do is create one platform for vet and vets fairly unique even not many vendors are trying to do that most vendors actually.
We have specialized in one Victoria or one part of the industry and not in others. Some come forward top competitors actually do mark at the similar architectural approach, but in reality they have a much more.
They they don't actually have one architecture and one set of products that work together, but it's more both businesswise in technological wide split into separate products that don't integrate some of them have clearly stated them and save it's very focused now not in adding more value to their platform, but rubber integrating what they say.
What we've got so I think in that regard what we aim to offer a checkpoint is an architecture of it works better and again in Q2, they mentioned actually more than two they mentioned at least three dimension what they mentioned is the management.
If the product and the deployment of the product, which is very important one dimension is the increased level of security and I gave the example of Avalon, which I think that within 30 to 60 days from the acquisition. We will have a product that have joined the engines that we didn't have before so it will have better security, even though we are within again in months.
So it's super fast integration, because the way our platform works.
So it's not just getting into one console and seeing different features but actually now enjoying the threat.
The extraction and the threat emulation engines that we have in our or the sandblast engines that we have in our in our cloud.
Of all the vectors, including the EMA for example.
Thank you.
Our next question is coming from Gregg Moscowitz, followed by Honda from Morgan Stanley.
Thank you for taking the question so.
The acceleration in any growth, 172% year over year, obviously extremely strong, but can you give us a sense of how much. It can any impacting your total billings growth today and secondly, do you think that you can sustain triple digit infinity growth for a little while longer.
So let.
Let me first relating the CNN. He said triple digit of course is the number one grow there will be some slowdown that they currently ramping up actually nasty still see it as a nice girl on when you look at the deferred revenues remember we don't issue in life for the entire area, we should invoice volume for the first year and remember most of it is it's a broadband subscription.
In line with our ranking system of billing so does now.
The pulling forward of demand from the next year. This is annual invoicing in line with the regular and it is growing very fast broke into deferred revenue and in the revenues.
But the good news is that you don't see all the infinity the free five years Infinity deal when the deferred revenue in most cases.
Thank you.
It's part of the I know you have a time allows the backlog the remaining obligation I'm not hearing that number currently suggest that you get a sense that increasing 16%.
So the more familiar is actually resides bad, but the billing is including only the first year naturally because they're not being Invoiced Ford Geely.
Very helpful. Thank you Barbara.
Our next question is from Hamzah, followed by tally on Asia will be our last question.
Alright, Thanks, guys and good morning, and thank you for taking my question.
My first question for you was on the.
Endpoint protection.
Business. It seems like we've been hearing some good things about that recently.
<unk> solution screen pretty well and the Mitre evaluation I'm curious how much is that contributing to your growth then.
The plan to kind of be more competitive in that space relative to some of the other vendors.
The first day I fully agree I think we have a solution was second to none were more capabilities that almost every vendor in the marketplace. Even hold the endpoint market has always been challenging there is some you know newcomers that as it has been amazing momentum in almost unlimited resources there to tackle the market has been the you know the.
The incumbent vendors that are strong large and have a good understanding of the customer environment and good Oldham the customer. So I think that's why we've decided to play with that for the harmonious with the Infinity architecture I think you've seen in you and that wasn't a coincident with this quarter I chose to speak a lot about harmony.
That's because we've seen some very good results this quarter, we've harmony. So let's say in the hormone include them. The majority is the endpoint solution that we are in that.
And we will build more of it we have a lot of.
<unk>.
If they are M D. Our xdr capabilities.
And the connection between the endpoint and the rest of the solution is very important and I think overall, we definitely have something very very good with that.
The opportunity size is almost unlimited the how much of it we can tackle that's a good question, but we're working hard to to do more of that and at least the last quarter. It was one of the big highlights.
Thank you.
Our last question will be from Talley Ani.
Maybe not.
Yeah, how about Brian Essex, My last question will be from Brian Essex.
We hear a lot now thanks. Thanks Kip. Thank you for taking my question and congrats on the results.
Maybe I'd like to get a maybe a sense for you.
About.
The overall spending environment, how CIO as Theyre looking at their enterprise architecture.
From a firewall perspective, so we're one of the strongest I think firewall spending cycles. We've seen in recent years, what are your thoughts with regard to refreshment.
Refresh replacement capacity enhancement versus migration to cloud and in.
And in demand for re Architected.
Enterprise Security network architecture.
And I think we're seeing all of that the question is how to quantify that customers do need to refresh customers are looking to consolidate by the way consolidated many cases works in our benefit we could take our maestro offering we can take a.
21st the previous firewall consolidate them into one solution, we have virtualized. The gateways in that we have almost I mean cloud like capabilities of scalability and I think I don't remember the exact percentages, but they looked recently on our maestro platform, which enables.
Hi scale <unk> deployments and Big portion was you know standalone gateways, and big portion, where virtually gateways, which means that customers were actually consolidated so it's a good opportunity as well our customers still need to increase barrier to increase capacity, even vogue workloads are moving to the cloud.
Loud in almost every case is connected to the data center and in almost and in many cases. The fact that we moved to work remotely means that we also need more capacity for people to work from home into the company.
And so I think the potential is all over and again, we also have a potential to increase market share in that space and I think we will win.
We intend to pursue it.
Great. Thank you very much thank you very much.
Thank you all for joining us today that concludes our video cast for the Q3 earnings. We look forward to seeing you guys at the end of the year, but also throughout the quarter at conferences and such.
Thank you very much.
But thank you very much.
Yeah.