Q4 2021 Check Point Software Technologies Ltd Earnings Call
Other threats expectations regarding our 2022 initiatives our ability to continue to develop platform capabilities and solutions customer acceptance and purchase of our existing solutions and new solutions the market for Iot security.
Security continuing to develop competition from other products and services and general Mark to market political and economic and business conditions, including as a result of the impact of COVID-19 pandemic. These forward looking statements are subject to risks and uncertainties, including those more fully described in our filings with the security.
And Exchange Commission, including our annual report on form 20-F filed with the SEC.
Forward looking statements in this presentation are based on information available to checkpoint as of the date hereof and checkpoint disclaims any obligation to update any forward looking statements, except as required by law in our press release, which has been posted on our website, we present GAAP and non-GAAP results along with reconciliation of such results.
As well as reasons for our presentation of non-GAAP information now I'd like to turn the call over to Tal Payne for a review of our financial results.
Thanks can you hear me.
And you see the presentation wonderful when this.
Okay, great. Thank you Kate good morning, and good afternoon to everyone joining us on the call today I'm pleased to begin the review of the fourth quarter.
Revenues for the quarter of $599 million, which is above the midpoint of our guidance and $17 billion quite nice earnings per share reached $2.25 above the top end of our guidance, which was $2.22 <unk> <unk> above the top end of iron guidance before I proceed further.
Through the numbers, let me remind you that I'll get financial results include stock based compensation charges amortization of acquired intangible assets and acquisition related expenses as well as the related tax effects keep in mind that as applicable non-GAAP information is presented excluding these items and as Dave Mowry.
More into the numbers and I will start with our revenues revenues for the quarter as you can see $599 million, 6% increase year over year on the right side you can see the bidding billing grew to 855 $1 million, 14% growth in our building very significant acceleration from the 8% you see in Q4.
Last year deferred revenue is some kind of some kind of a mirror of the billing we can see growth very strongly as well, 15% growth reaching $1.707 billion.
Moving into the drivers so first let's talk about product and security subscription continued to accelerate reaching $371 million and 9% year over year product increased nicely with my Astro continued to be differentiator and drives wins with customers. We're seeing strength in many product categories in SMB all the way.
Two large enterprise is funded so there was a nice quarter for these products as well subscription revenues in line with our expectation continues to accelerate reaching 14% versus last year. You can see 10% is already $204 million a quarter. We were the main drivers all we can see the double digit growth in harmony very nice.
Gross baths and double digit growth also in the cloud and got so the focus on those area of damage which drove it.
Moving to revenues by geographies revenues by geography is 49% of the revenues came from a nap.
40% came from America, and 11% from Asia Pacific.
As you can see EMEA had a great quarter and led the revenue growth.
I know when you calculate you will see lower results in Latin America, and APAC. So I'll just give you a highlight regarding the booking all three areas.
<unk> had a great bookings and we'll see where the strong growth great results with new customers and in many countries day in those regions as usual, there's a gap between the revenues and the booking as a result of timing and the timing of the bookings.
Examples of reasons the delivery of the go and the consumption of infinity products, the customer need to pull the product in order for us to recognize revenues and rendering of the services of course is over the periods of span of the service say one year and so I'll provide these ships moving on gross profit.
Remained strong at 87.
$524 million the margin is 88% very nice to hear one of the strongest in the market, we delivered to our customers with higher costs relating to the supply chain right. So let's talk a bit about that as you know there's a supply constraint in the market, which affects all of us many components cost increase leading to higher cost of the goods zone and slightly lower.
<unk>, which is between 1% to 1.5% depends on the quarter and we believe it's temporary situation in view of the supply chain go back to normal maybe in the second half of next year I think most of the people think it's going to be resolved towards the end of next year.
So just taking that into account as part of the guidance as well for next year.
Now our new pillars cloud guide in Harmony continue to show great results with double digit growth. The gross margin on how many connected home when you must securities lower than the average on the quantum therefore, it's also part of this reduction so all in all very strong result, and theyre taking into.
To account the fact that while Theres a lot of constrained we still meet the targets and deliver to our customers operating expenses highlights.
You can see operating expenses reached $239 million, an 11% growth is main two drivers as usual first we were very successful towards the end of the year. Two we put our plan in the head count. So we accelerated the growth and reached the 9% that we were aiming for the year over year growth. Most of it came towards the year end. So we received also as part of that.
Higher run rate that we start next year and the dollar effect of the dollar weakened against the currency also this quarter.
Which affected our results mainly you can see in the R&D expenses as the Israeli shekel and where are the RMB eases and in Israel. So that's the effect you see here.
And so resulting in operating expenses increasing 11%.
Operating income strong and $285 million, we can see the operating margin, 47%, we plan to be at 47% before but we reached it don't even know that this 47% we start to see also the results already in the booking as you can see net income margin also very strong at 49% Financial Inc.
Come in line with the guidance that we've provided I remind you the yield on the cash is lower as a result of lower interest rates and therefore, the $10 million and the taxes, you see that breakeven at zero percent as the statue limitations lapse on the provision at Q4 typically it's also lap this year in line with our expectation.
Bringing our tax rate in Q4 to a typical around zero percent.
GAAP net income was $260 million, which is $1.98 per diluted share.
Cash flow and cash position, our cashes that the $3 8 billion very strong $294 million, our operating cash flow, which represented an increase of 1%. It includes the hedge effect the balance sheet, the hedging income or for media last year since the dollar weaken even more we.
Made the $26 million in the incoming the gastro accurately close if we exclude the hedge effects, which happens every quarter. The operating cash flow was super strong at 9% growth year over year.
So that's quite significant.
During the quarter, we continue our buyback $325 million there.
Used to buy a share $2 8 million shares for an average price of $116.
So moving to the full year.
Yeah.
We are very pleased with the result of 2001, because it just shows our results versus our original guidance from the beginning of the year. So we can see the revenues for the year reached $2 billion $167 million, an increase of 5% year over year $37 million above the midpoint of our guidance.
Looking at our non-GAAP EPS was $7 two sense again above the high end of our guidance, which was $6 80, 517 cents actually above the top of our guidance.
A few more details if you calculate the billings for the full year, we see also in double digit for the full year, 11%, reaching almost $2 4 billion.
And deferred revenues, we discussed already quite strong at 16% for the year ends.
When we look at the full year and what caused the success our focus on infinity strategy and the three pillars. The quantum the cloud God. The harmony showed great success subscription level revenues led the growth with 13% growth year over year versus last year, there was 10% growth reaching 755.
Already around 35% of our revenues are coming from the subscription the growth driven mainly by the success of the cloud gun and harmony. Both again double digit also for the full year Infinity revenues, which include two all three pillars that we sell to customers at a great year with a triple digit growth.
Which also fuels that growth.
Looking at the full P&L just a few highlights I don't want to repeat everything were just a few island gross margins strong at 88, 7% operating expenses increased by 7% bear in mind that the majority of their interest and their campaign towards the end of the year. So that the effects on the P&L. It was at the lower rates, but expect to cut more.
Towards next year oil at the beginning of next year and the effect on the margin next year just from that item is probably around 1%. The weakening of the dollar had 20 million dollar effect on the full year. So those results are quite impressive when you take into account that we got a hit of $20 million just from the currency effects.
During Q4, the dollar continued to weaken against the shekel, reaching around three one which means that we predict also net zero negative next year and negative effect on our operating margin nothing to be concerned about it's always fluctuate, but as part of the guidance of course, and that's about 1% effect on our operating margin still very strong.
Operating margin was 48%.
non-GAAP operating margin.
Looking at the financial income here you see the drop again completely in line with what we expected lower interest rate the portfolio of brands and invested in low interest rate than the two 5% that we used to have historically, so we see the low interest rates tax expenses ended around 14%.
And as a result of the index, which was higher than everybody expected for this year looking into next year. The guidance remains the same meaningful financial income we expect it to drop maybe one 2 million for the next quarter or two and that's it we expect it to stabilize on those levels around $7 million to $8 million a quarter.
Taxes are expected to be 17% Q1, Q2 Q3, as we predicted for this year and around zero in Q4 on the same reserve assuming there will be no surprises the statue limitations lapse in Q4 and will bring us to the zero percent average for the year somewhere between 12% to 13% of course it can be.
1% more or less with.
We closed the year with a net income and GAAP net income of $860 million, which is $6 <unk> per diluted share and non-GAAP net income for the year strong at $942 million $7. Two <unk>, we talked about how it is versus the range, 4% growth in 17 cents involved.
The Hyatt in end of our guidance when we look at the operating cash flow for the full year again very strong cash flow operating cash flow was 1 billion almost $1 2 billion.
Very much in line with the operating profit so it's nice to see the link that we have between our cash flow and our P&L very untypical, but for US. It continues so that's nice to see very strong collection healthy DSO.
Excluding the effect of the hedge and acquisition related costs. These grew 6%. So that's very strong with purchase about 11 million shares for the full year for $1 $3 billion average price of $109 I'm, just reminding you that last quarter, we announced the extension of the buyback program in the amount of $2 billion.
Additional $2 billion again up to 383 hundred $25 million.
For 200, Joe for 2022 next year, we expect the average diluted share to be somewhere around 100, and 727 million shares starting in the 129 million and going down and by the year end to somewhere around 125 26.
So that's the also the forecast for the number of ships.
Turning to the summary.
Strong strong year.
Change in that trajectory, which is nice to see revenues in the top part of the guidance EPS exceeded the guidance strong billings growth across all of the focus areas, how many double digits cloud our double digit new customers growing nicely and continues to have a stronger profitability and.
So very pleased with you and with that I will turn the call over to bill for his business highlights and insights. Thank you.
Thank you very much fallen by me very pleased to see everyone here in the.
And sure, especially as we have this amazing quarter and really really mean that this was a very very unusual.
Quarter was probably our strongest quarter ever in our module speaking about the external the freemen interim results, but about the internal measures that we seem to remember every quarter I usually speak about the.
Last quarter achievement. This presentation, I'm actually going to dedicate primarily to speak about our stroke did you get the input when people when people were entering.
On the heels of Reefer amazing quarter, virtually really business growth real business turnaround in all three pillars borrowing the cloud in the harmony and even some very very good metrics of our core business. The quantum network security business, which probably contributed a lot of growth last quarter.
All the regions Mirror, a park and the America showed very good internal metrics.
So on top of that we're entering a new year with a renewed strategy a lot of energy a lot of investments and what I wanted to do here share with you. The key initiative, which we started 2022, so I mean, that's where we start.
Tier four of our major initiative them there will be more the number one objective of course is continue with accelerating our growth.
We start voting.
The next two slides will go into each of these four.
The four initiatives with a new message new logo, new branding, which I'll speak about in a second we are continuing with the.
A lot of innovation and I think we're starting the year with new products. Some leapfrogging the industry rebound precedent the price performance, we're going to create a new structure that we call the checkpoint brokers and I'm going to share and speak about web lost remotely growing continuing and growing our investment in our frontline sales force.
Our internal goal, which I hope will be able to make it grow the frontline salespeople by 45%.
Supporting more customers, reaching more customers and of course.
Delivering growth this year and mainly actually this investment we translate into results hopefully by the end of 'twenty 2022 'twenty three.
So let me start with the first my surgery or the first our initiative here.
Our new.
<unk>, our new branding best security Nobel Security by the way has always been the checkpoint differentiator I think that's our reputation that's what we do which we do for 29 years delivering the best security and one of the thing its very very important is to show that message and to explain it to everyone understanding why so important.
You can see here, we started the year, we have a fresh new look you new logo and a new message, but says you deserve the best security first time in 29 years with returns the logo.
So far it's being accepted with a lot of enthusiasm showing all the U N. There, but the most important message is understanding why is that so important.
We know where they don't need to go to be too much into how much we're dependent on the internet how much we're dependent on cyber space and we need to keep it secure and now the latest attacks that we'd seen them room from where the look for Jabil mobility.
All showed us how important it is.
But when it comes to cyber security.
You can't get good enough you can forget second that will get you breached.
You know when you drive a car you can say I want to pick brand a brand b brinci each one the heavies qualities.
Different prices different positioning at the end of the day all free cars will get you to a destination roughly at the same time.
Roughly the same same shape in <unk>.
Cyber security with smoke, but curious if you pick second best security you will get breached if there was one small thing what's open or like almost our entire industry does lifting zero of the infected file come through if you. Let these files come through that's where you'll get the ransomware and we've checkpoint with the small <unk>.
Which actually huge you won't get rich because we wanted responsible and many.
Many many examples of how we deliver this best security.
We believe that there is only one vendor that delivers the best security to protect against all these fifth generation cyber attacks and lets us a checkpoint.
Again, I can take about two hours and by the way can register to our.
Checkpoint experience CTX free 60 conference with just under two very watch the presentation understand better why.
But I will try to summarize some of the differences even in one slide.
It's all based on our Infinity architecture.
In this slide before the quantum cloud Garden Harmony network cloud user and access all based on the same platform all working together ultra true.
Translating each information Mr bulk of room about the vulnerability to an immediate protection in all the different pillars and what do you see what it means versus where you see the security coverage, which we provide in checkpoint. So if you look at the different attack vectors mobile devices network attacks email the number one Victor we knew each.
Malware get seem web servers also me can't underestimate very important endpoint devices to cloud and I picked here some of the best players in the marketplace. Some of them are a direct competitors some of them are not only direct competitors.
But you can see with no one comes even close to give you the full coverage and the full spectrum of prevention and protection against all of these types of attacks now, let's hear the check point Infinity and you can see full coverage through mobile full two network attacks, including zero day.
And for all known and prevention for unknown corporate email web server endpoint devices, where we score amazing results an amazing force them every review and they have returned and cloud, which we just expanded only check point infinity can actually deliver and that makes the whole difference between being pent up.
Rated or preventing the effects and I think that's the message that we want to convey we want to get our customers secure we feel with each one of your organization and each customer deserves the best security and we are here to deliver that.
I think you can see that in this expansion if a few years ago, we were known to be the metric security company and we were scoring now for 22 years in the Gartner market boardroom for firewall in the leaders quadrant.
This one is actually a different vendor G tube, which captures audience customers feedback re feedback about products and you see we're not just scoring now in the network security during the firewalls sector, you're scoring in nine categories.
We are living in nine categories, all coming in to see by the way. Many of these categories was more than one checkpoint technology in the leaders quadrant.
We are capturing and we are living in the entire infinity.
Architecture framework, securing the entire enterprise and I think that's a huge difference customers loved checkpoint and our leadership now extended into all these areas cloud endpoints mobile management intrusion prevention remote boxes firewall in everything.
And I think we use that and we continue to use them to drive innovation now of course, if I would give you a roadmap that will be another two hours, but I want to point here one important product that we just launched at the beginning of 2022 with can change the dynamics of our industry I think it's one of the most important if not the most important <unk>.
<unk> security products launched in the last decade, and let me talk a little bit about what we call. It quantum lightspeed focusing on the data center, focusing on where data move very very fast where people leave.
Super fast low latency data security and here, we're going to introduce the world fastest datacenter firewall 20 times, better 20 X bit better in security price performance than before and much better than the competition.
Hard to see where the markets where until now given the current analogy and you can see free the leading vendors ear and you can see the differences with Palo Alto you would get from a roughly $200000 58 gigabit per second.
Checkpoint before much better 78 gigabit per second.
Almost $140000 and you can see how fortunate.
Gibbs almost three times better performance almost 200 gigabit.
For Teekay.
Huge difference and I think that's we're fortunate built itself horn obese.
The huge gap in price performance with American believer.
And we are going to change that and change the dynamics in our marketplace and favorite you don't need to compromise with the new quantum load speeds and Vettori Lightspeed would come in 250 gigabytes 45 K.
<unk> the low end model, that's not the highest thing here, 20% better than 40.
20 times event, driven Palo Alto with unbelievable.
That's a lot of work done by our development team and for the first time utilizing a fix in our core products to accelerate with firewall in performance first time for checkpoint, we partnered with Nvidia the worlds most successful ASIC providers. These days to deliver these super high performance.
And our product line for quantum Lightspeed is four models from 250 gigabytes to 800 gigabit hyper fast throughput ultra low latency less than three.
<unk> second it's 10 times faster before it was 40 microseconds.
Scalability with MS dropped from three Terabits per second no one in the industry actually can deliver that kind of scalability and with kind of price performance. So we're very very proud of that we think that can change the dynamics at least in the data center part of the network security.
Industry.
So that's I think a very good place to start the year and then we move to my next initiative Tour next initiative when we call it rockets.
So what our rockets rockets are.
We'll be <unk>.
And of new types of internal organization would we want to drive and invest in places that are strategic that we feel that there's a high potential for growth. So we want to focus with agility and growth.
We want to align all the resources within the past checkpoint was very <unk>.
Unified company everything together, one RMB one sales organization, one marketing we want to create new structures between resides with invest with have the ability to move very fast developers tied with market. These tightened sales to drive growth in all these areas to be able to invest much more in much faster.
In key areas.
Entire business is moving to this direction, we are trying a new model year.
And we start with free areas cloud, which is a big area for us hundreds of people.
Harmony email, but.
In the emerging markets very important one based on the acquisition, but we do have recently.
And then you won with I won't spend too much time year, maybe next time MBR MPR managed detection and response or the way I would like to call. It managed prevention and this is kind of automatically managing the customer assets. So.
We detect things that needs that are not working and immediately prevent the attacks I think we can create a new industry or take on a new industry that we haven't been playing in before this is a small startup which starts from few people and no revenues again the harmonium.
Tens of millions of dollars in the cloud guard.
Over $100 million, so each one trying a different model in different way.
And to try this new model.
Let me focus a little bit on the cloud guard rocket.
I think we're very proud of what cloud delivered today or three MTV prevention was the only one with handle load for Jay before it was most I mean once we have seen a tack on lung for Jay without a signature without the attacks being known or AI technology blocks invest based on new cloud technology Cloud Guard ups.
<unk> introduced.
Around the year ago exactly the right time, exactly the right place that technology, which protects API and web servers really blocked.
Look for Jay before it was even known and this is one example, about how our cloud guard rocket you being able to address so many areas you can see the list of EM workloads poster management, the uptick the network and the cloud a lot of threat intelligence and we continue to expand that we continue that with the <unk> acquisition in recent years.
And that's expanding our cloud presence to what we call core securities.
Or developers first.
Security, that's a new area that puts inside the new type of customers for us developers by developers.
And I think it has a lot to do with the challenges with the code in the cloud is now we found with company spectral it's a small startup.
We really fell in love in the platform and the technology and we felt it Ted.
Wide range of use cases that we can go into because it's such a good technology to analyze the cloud code scan the infrastructure called Luka called Tempering prevention, and maybe the first application, which we call secret prevention, something we may understand even us with our lift developers.
Dave.
For example, if you live with accused to your application or two year safe box on your desk at the office the chances of somebody taking advantage of these are very slim to mistake, it's not simply the key return on the on your desk or the physical key on your desk, but again the offices.
Isolated and protected and many layers. So nothing will happen in the cloud it's completely the opposite of developer put the secret key that enables access to the other application inside the source code. The source code is being shared on public repository and within minutes, there will be a both which will scan the network will find the key and will take over.
Our servers and we see again a lot in the cloud.
We know how to detect threats, we know how to block it and the developers that will use it can be installed in a few minutes and within seconds get very accurate results in block that we're also getting into bed with a nice open source community was over 40000 downloads of the spectral.
Open source version of the product and I think this is great because it lets us play into into a new audience not only the <unk> and the security administrators will support us, but we can get to the developers from the time they start developing the code. So we are very happy with this acquisition, which we just announced in <unk>.
Completing this week.
Okay.
So to summarize and again bring many much more but I can speak up because we do so much more in all the aspects of the business. We're entering 2022, we've a lot of energy based on our accelerated results from Q4, 14% billing growth, which is a great number.
And again, we'll share it with the billing you can calculate and you do calculate on your own but I think this time, it's really an indicator to a lot of the internal things that we see in the company, which a lot of the internal indicators strong financial double digit billing growth.
We're accelerating our innovation towards examples that I, just talked about lightspeed them cloud code security and we are going.
To accelerate our investments you know it would be very easy to say this is our growth rate, we will keep doing that we will keep monitoring resources and delivery.
And get our profit margin to go to the Sky.
We have the highest profit margin in the industry.
And we decided to actually take.
The money that we make and invest all.
All the excess one and make the right investment in growing fervor and changing the mode of operating with operation into high growth. So we are going to expand the sales force I mentioned that 25% is our internal goal.
Create the rocket when we can make very focused investment in the growth areas and I think we really think with our business can grow faster, it's not going to be easy. It will take time for all of the initiatives to show the results, but we are more optimistic than ever about what we think we can deliver here.
So before I open the question the call to your question, but the time for our projection I think I've already stated the some of the assumptions that we are going the projections.
<unk>.
We feel with our billing can keep growing and growing in a nice rate our our internal.
Projections are definitely for our internal goals are definitely for double digit growth.
Not all of that will translate immediately into revenues partly because.
We are growing there.
The subscription part of our business and the deferred revenues, partly because there's risks associated with the supply chain and others that are.
May slow us down on some things even the introduction of quantum light speed, which is great because it can enable us to capture new market. The new market share has some risks in it.
Let's not forget that.
Because when we are bringing to the market, 10% to 20 times better price performance, where it can also be price cannibalization with can eat the striped away, but again, that's the right thing to do to capture the market and to win in this segment.
We will be a little bit more.
I mean, the translation of the billings to booking may be a little bit more conservative.
But we feel that we can drive very nice growth in our revenues as well much faster than we projected in the past of course.
And we will invest a lot in the business.
So if we start with that lets look at the projection for the full year for the full year, we actually have here a quite a wide range and again based on everything I've just said plus.
The uncertainty about the economy, but we are seeing everyday so between $2 $2 billion to $2 billion $375 million. That's the range for the revenue if you translate that that's a 6% growth target at the midpoint.
And 10% growth at the high end I mean, as you know my regular caveat projecting the future is very challenging there is always a high level of uncertainty.
Again with the potential of better results or even worse results in our projections I hope.
As to the through the better part, but you can never know non-GAAP EPS is expected to be between the range of $6 90 to $7 50.
And GAAP EPS is expected to be approximately dollar and 22 cents less than that but for the full year.
For the quarter the range for the revenues is expected to be between $517 million to $547 million and non-GAAP EPS is expected to be between $1 48 $2 58.
GAAP EPS is expected to be approximately 32 <unk> place.
So that's kind of conclude our presentation and we'd very much love to hear your questions.
Okay.
So who's going first.
While we're waiting for is probably going to do that my apologies for that.
Please everyone that is going to be asking a question don't raise your hand, we already have a list and you'll be selected.
I will call out your name and also call out the percentage in the hall. Please limit your questions to one so we can get as many of the panelists standard for Q&A as possible. Our first question is going to come from Patrick Colville of Deutsche Bank will be followed by Gregg Moskowitz from Mizuho.
Yes.
Thank you Kate and thank you for having me on.
Congratulations on a really excellent set of results I guess.
The standout was.
The guidance you just gave very impressive no doubts could you just kind of pick apart the factors behind that.
I guess contributing factors are probably the cypress group spending environments.
Product mix and suites.
And then any changes on pricing. So can you just kind of give some color around.
How those factors play into that guidance.
I'll have it for you.
Okay.
[laughter]. So so I would say the following we see we have seen last year, when we came into the year with the expectation of 3% but.
But we have seen through the year and acceleration. If you look at the 1 billion, both short term and long term, but even if you look at the short term, we see below growing so it's starting to translate into the P&L. So we start to see our revenues increasing from 3% to three <unk> four to <unk> five even higher the careful so we came in more optimistic because we see a really nicely.
You're seeing the revenues that's why I talked about it some reason look weaker than the other but actually building sales them finish strong. So hopefully is an indication that we're starting to see the results of some of our investments.
We invest in cloud that and in harmony, so while it's starting from small numbers.
Starting to have also an effect on our revenues.
So that's nice to see that as well so taking all that into account, we feel that the pinch points moving up to the area of whatever it was 6% right. So that's the beginning point.
The range is taking to account and thats something very hard to calculate and I think it was very open about it how much each risk translates very hard to know, but we do not really going into a year that there's higher risk when it comes to the supply chain because we see like a Q2 Q3, and Q4 will see more and more issues resolved all of them were working.
Them daily closing items, new programs offering serving them. So it's.
Very fast run with the shortages.
We assume it will continue probably in the first half of the year and start to elevate towards the second half I'm not sure it will happen, but im hoping it will happen.
So that's really related to the shortages microeconomic I don't know what will happen and I hope it will continue to be strong.
Covid.
Travel is going back more and more people travel how much it will affect we took an assumption midpoint within the Soma area.
We returned to 2019 level, we saw stronger levels of travel in Israel, hopefully, but we don't know is it different way of showing up in different regions and different reaction. So travel is somewhere in the middle currency took the current rates.
So if it will change dramatically I'm not talking only about the expenses. It also chose customers' behavior with their budget. So I'm assuming that what we know right now about the current state. So the fact the expenses, but <unk>.
Hopefully no effect on the revenues.
So the assumption there is no additional shifts there and growth in the cloud got growth in harmony growth in infinity definitely part of the assumptions.
I hope that answer your question.
Yes, I mean thats excellent. Thank you so much.
Alright next step we have Gregg Moskowitz from Mizuho, followed by Adam Tindle of Raymond James.
Alright, Thank you Kevin.
I could see the great results just terrific to see the improved growth and execution at checkpoint I have two related questions. If I may so.
From what we've heard some of your competitors are also doing pretty well and I guess my question for Hugo is with the network security is there anything that you can pinpoint that perhaps is driving stronger demand and then for checkpoint specifically I believe you said that internally youre expecting double digit billings growth for 2022, now obviously, there is a sales productivity ramp that Matt.
There is how reliant.
Is your growth projection on your ability to expand your frontline.
Sales force by 25% this year.
So that's excellent question first.
I mean, I think that many of the initial numbers that we enter based on the existing sales force, but we're pushing very very hard for the salesforce to hire faster and actually even higher at the beginning of the year, usually when we say 25% growth or 5% growth.
We do rent growth along the year. This one my message to the sales forces.
Higher sales people as fast as you can in the first quarter again I'm not sure if it will be able to make it it's hard to.
Recruit people these days.
And such growth is not a trivial growth to an organization our size, but still with the <unk>.
<unk> I think if everything works we are set to.
Very nice numbers, but I think not everything will work I think we wouldn't be able to recruit all the people they won't all be.
Productive, but I think that we can get to the numbers that we've set the range between 14 based on what we have now and based on the productivity. We have now so let's be.
Kind of the general and again I can tell you. We just finished our Cps conference suplex conferences.
For customers partners and employees, we had free and APAC.
In Europe and in the Americas today, the European one is going to enter it went very very well, 25% increase in that in these excellent scores excellent feedback excellent energy.
So I think we're starting the year on the on the right track.
Thank you.
If I can highlight for everybody also if you'd like to.
See the CTX event, you can actually sign up and register and we will have video on demand.
Next up we have Adam Tindle, followed by Gray Powell from <unk> go ahead, Adam Alright. Thanks, Kip just a clarification for talent and then a question for Gil Tao sixth consecutive quarter with accelerated billings are now approaching mid teens growth in the billings metric.
Just wanted to spell any skepticism there you've talked before how billings can be impacted by duration was there anything notable in the quarter on that and I think you also implemented some price increases here in the early part of 2022 any sense of pull forward. In Q4 ahead of that price increase based on what you're seeing here for billings trends in early February and.
If you could just talk about that broader decision for price increases in any customer or partner response based on your conversations. Thanks.
Okay that was a long question I'm not sure I remember it.
So first on the gaming the gaming was strong you can see also when you calculate the.
The short term billing is see a double digit growth, but I think it was 10 or 11%, which is also an acceleration from I think 6% last quarter and I can find the numbers, but you can calculate them. So the drop is if you look total billion or even short term gain and you see that as Google. So even if some of it came from <unk>, which it always does you can see that the.
That is accelerated also in the short term and long term is a good phenomenon start to suffer so that is a good phenomenon because customers are going with you for the long run. So that's always good but theyre both of that increase.
And the second part of the question I don't remember I made there was maybe a an effect on the price increase remember we sell to the distributor shelf without those sales with end users, it's very hard to know what caused.
The bidding our say probably there was an effect.
I don't think it was hundreds of millions I think might have been maybe $10 million yet the probably was some effect of that and trying to avoid the increase in devices.
And remember that our price increases will start from January 1st So again the impact is that maybe some of the people the purchases or the renewal of a little bit earlier, but again I think we want to be proud of the billing growth unless we felt it's.
It's meaningful let's put it that way as you know every quarter, we're trying to play down the billing number because again in many cases it doesn't represent this quarter I think we've seen some very good indicators, who were not just showing these numbers because they are impressive but because at least last quarter I don't know if a predict the next quarter, but last quarter, we still have very good internal.
Tricks.
Thank you.
Alright next step we have gray Powell from <unk>, followed by Matthew Hedberg from RBC.
Alright, great. Thanks for.
The question and congratulations on the on the good numbers.
So yeah, how should we think about the upsell opportunity with Avalon.
That acquisition contribute meaningfully to the improved billings growth in Q4, and then just how should we think about that acquisition in the context of your 2022 outlook.
And then just look at the total number now and then.
It had an effect, but very small and of course, it's a very small company, but we definitely believe in them and believe that it will grow significantly next year and that's like you said, we announced it as one of our rockettes the harmony email security. They are a major part of it also consolidated of course with the with checkpoint security.
So we believe we said, it's a fast growing we want to invest and if anything it's actually increased our investment which has different profit profile than checkpoint, which is part of their of the of the margin plan for next year, because we want to invest in it as we believe it takes a very nice and fast growing market.
Okay.
Thank you very much.
Next up is Matthew Hedberg from RBC capital markets, followed by Sterling Audi of Jpmorgan.
Hey, Thanks, a lot Kim congrats guys on the results and by the way I Love, the new logo and branding it's great.
Again, what really stood out to me is the 25% sales force growth expectations I'm curious.
How does that relate to maybe prior targets that you've had because it seems like it's a substantial uptick from what you've done historically and then can you talk about the challenge of finding good sales talent. These days and is that maybe an inhibiting factor as well, but the number the target looks really really strong.
First its youre right its much much bigger than what we had before in the last few years. The numbers were all single digit growth and in many cases, we didn't achieve them and some of them we didn't achieve them because.
We werent investing in some of them because the general tendency of the sales force is actually you know the sales people they like to keep her territory very big so they keep the opportunity for themselves and if they got the budget for hiring wed like to hiring support people that will help them. So over the last few years, it's actually analyze the hour.
Growth in the sale big parts of it came in the form of creating overlays that can support our strategic products and more technical help to the salespeople.
But in some areas, particularly in Americas, we didn't we almost didn't increase the capacity of the salespeople and we need more salespeople. So this investment is not just an investment you know from it's a big change.
Internally in the mindset of people, yes, we want to grow and.
And the attack, yes, we want to go and find new customers, Yes, we want to go and serve our customers and not only the big customers in all segments better and it's a big change internally now.
I think it's doable I think the target set for the people is that where you can hire all the people in the first quarter I don't think that we would necessarily achieve all of that in the first quarter.
But I think there are good people many people do come to work for checkpoints, we understand that.
Sometimes working for our company and there is a lot of promise for example, working for many startups, but on the other hand trying to build your reputation in the you know established yourself in the marketplace is not as easy as it sounds.
So I think that we do have a good cadence we do have a good pipeline of.
Of salespeople it will probably take us some time to to harvest, but I think the change should be should be meaningful.
Some of it this year some of it we may realize this year and a lot of the mixture.
Thank you.
Your next step is Sterling Auty from J P. Morgan followed by Joel P. Fishbein Junior from <unk> Securities.
I want a full name like that.
Thanks, guys. So.
Can you help us I wasn't completely clear what was the magnitude of the price actions that you took.
Was instituted during the December quarter, what was instituted after and how should we think about that.
Impacting the gross margins in light of the EPS guidance that you gave for.
Extra included as part of that right.
So let's talk about <unk> first the price increase was in the beginning.
Announced in December or it may be in October for the beginning of 'twenty.
Thats why although the recent price increase in the fourth quarter.
From January 1st just to be clear.
Yes.
And.
So that's one and secondly, we didn't do an increase in our many people increase significantly more we increased.
Only 7% so it's not a huge increase.
So that's not just so that's part of the of the next year you will start to see that and that's why the question maybe some of them before it looked like 30% more increases might have shifted their millions, but not this was unexpected to be 50 to 60 million increase right. So it's Mike and Bryan just drawing that an explanation, but it's very hard.
No.
For next year guidance, we took into account everything so on the one hand, you have that on the other annual price competition is regular.
Lightspeed, which Mike pooled SBA actually down and you have the higher cost the increase in the cost is higher than 7%.
So it is included as part of the margin right.
Got it alright, thank you.
Alright, our next caller is from junior.
And then it'll be followed by Philip Winslow from Credit Suisse.
Thanks Chip Joe just one for you one for Jay has made a lot of noise, but we really haven't seen a lot of breaches.
Right now what do you think the potential impact is of that for the overall market and then also you.
Hit on it a little bit in your prepared remarks that I'd love to hear how that could be an accelerator for you guys to your overall results.
We are not relying on any specific break.
It's an accelerator for our growth, but it will have an effect from the market. It's one of the most.
Challenging vulnerabilities every found not only because it's easy for two reasons first it easy to exploit secondly from interfaces that are open many vulnerabilities our own interfaces that are behind closed doors that are internal to the data center with the higher level of protection, but cloud for JD is almost.
Every web server in every of many many web services outside there and it's really easy to exploit one string causes the remote code execution. So that's the worst part now I think the industry created by the way that's evident hugely.
<unk> ability to everyday.
We see that inside the industry, but the most of them you don't find and exploit.
Maybe gary or exploit with or being used rarely so we don't see them, but you don't see the exploits and cloud for Jay within 48 hours, we sold like 60 different variants of explorer patients. So it was very very easy to understand how to use that to our tax systems.
I think with enterprises around the world do the right thing and pitched it and try to fix things and so on and with great, but I think if I remain tens of millions of servers out there with nobody touch because nobody knows that they're there because nobody's managing where nobody in the handling and they will be the source of infection for probably many years.
Because again the attackers are not just from day, one they wanted to show with Renault.
How to do it but.
And maybe ill explain when you look at the attack multiple steps.
Model.
And the micro module, which is how it works. So first is collecting intelligence secondly, finding the entry point and then very inflected with malicious malware. So this is the new entry points and easy entry point and this can be used in the future by many hedging groups wherever it's by many criminals and I'm sure it will be.
Who's been with the impact from the industry.
Okay.
Thank you.
Alright. Our next question is from Philip Winslow, followed by Jonathan Ho of William Blair and company.
Great. Thanks for taking my question Rich did well.
A question for you on cloud security. If you think about the commentary we've received from the Hyperscale is past couple of quarters is the accelerating shift of workloads to the cloud, but also just the mission criticality of workloads that are shifting nuts through single car, but multiple clouds, where do you think about the impact of that to the checkpoint and just sort of call. It attach rates of security in the cloud.
What are you hearing from customers and maybe you could give us some more color on regarding particularly accurate.
Cloud security is very high priority for every customer we see that every conference they or every interaction.
Not a giant industry or the momentum it's unclear by the way how it will shake up there is plenty of startups with our target that you had from multiple directions.
Cloud providers, Microsoft Google and Amazon are investing investing we shouldnt be blind to what they are investing in creating on top of that by the way one of the bigger the bigger confusion the big cloud providers are investing in making and are doing good job in making very platform secure we're not usually taking care.
Or.
If the customer application that the customer responsibility, but now we are making investments in securing the whole thing and make them be making security also part of their business even in some cases in multi cloud environments, because one of the arguments for our industries, but we will deal with everything so.
If there is an investment there I think it still remains a very important.
Yeah.
Area for us to protect very important.
Opportunity in the marketplace, how it will shake up I still don't know I mean, we see markets that have taken a I mean I'll give you. Another example, mobile security is a good example of a market that I think for me, it's evident that the people we need to invest but the companies are not investing in the mobile security enough.
I think the cloud will change because the structural impact of that is much much bigger it's not an individual device. It's the whole company, it's the whole assets.
And I think the benefits of checkpoint remain.
Very important the fact that we are connecting the private cloud to the public cloud. The fact that we are connecting all the different elements, but it's still a very interesting and a very challenging market and so I mean, we live.
Continue to invest in that and I think we were expecting some good to.
Good evolution in that marketplace.
Great. Thank you Ella.
Last question is going to come from Jonathan Ho of William Blair Go ahead Jonathan.
Three OEM and let me Echo my congratulations as well on a strong quarter.
I wanted to touch on sort of the lightspeed comments around cannibalization that you made and well call. It the ball out of the settlement better, but I don't think I've ever slow checkpoint play that sort of price performance call.
Or perhaps sort of shift.
Secondly, our own strategy going forward and how do you spoke about the cultural impact just given that the ratio dramatically focused let's talk all right. Thank you.
So first we've been competing in that and not necessarily on our list price, but we are a bit but we have been very competitive and by the way we win many of the big data centers, especially of the big financial when we compete head to head with the other companies that are.
Making price performance of our only business. So I think that's the reason that we feel.
The Lightspeed can change these dynamics again, there is some risk when we have we've put in place the measures to try and contain it for cannibalization because again when you sell 10 times more or 2010 to 20 times more performance for the same price or for a much lower price.
It can change the behavior, but I think overall it's.
The right move for us and we want to invest in.
Many many hundreds of let's put it that way the opportunity in the data center is far bigger today.
Then for example, cloud Securities five years from now I don't know, but in 2022, the data center market is bigger than the cloud security market.
And with the market with ours, we know the customers they love us for user and so on for expanding our market share in the data center is a is an important opportunity.
Alright, guys. Thank you very much.
Appreciate you attending today, we'll look forward to speaking with you after the call and in the coming days and weeks.
Again, if you guys would like to revisit CPI X go ahead and sign up we have it on video on demand for those of you that missed it.
And we'll see you in the coming weeks. Thank you. Thank.
Thank you very much.
Thank you.
Yeah.