Q1 2022 Check Point Software Technologies Ltd Earnings Call
Hi, Tao.
Hi.
Yes.
When lives to everybody.
Very good.
Dan.
Yes.
Okay blood is nowhere alive. So we've got a serious looks on yes.
Okay.
Okay.
Okay.
I'll be joining in the second look I can just get a majority of the zinc yep.
Hopefully we will get there. She is we got a team on narrowing down.
Good morning, good morning your lives.
We can have our normal banter with everybody.
Yeah, Dave.
It has to be Pega this time, yes.
Hey.
Okay.
Okay.
I actually got a nice comment from somebody that Sid Caesar. He is not a nice place, especially as BB lives there so.
I guess I guess, we know his political affiliation.
Yeah.
I won't comment on it.
Matthew Brian .
Okay.
And as soon as Gil shows up we'll probably get underway.
As usual guys would all be doing is I'll be calling out the first et cetera.
When it comes to who's in who's going to be up first and who is going to be the <unk> the <unk>.
One to be up next the first one up this time is going to be sacked it followed by Jonathan hub and then we'll go from there, but sac will be the first one.
Yes.
And we should be getting started here shortly.
Yeah.
Their skill.
Hum.
He was raising their hand.
Right.
You're muted Gil.
Okay.
Maybe as a reference.
Yeah that might be true [laughter].
Yes.
Yeah.
So Keith we're ready when you are ready alright.
Hi.
Yeah.
Okay.
Yeah.
Yes.
Yeah.
Yeah.
Okay.
Yes.
Yes.
Okay.
Yeah.
Yes.
Well thanks, guys.
Yes.
Okay.
Okay.
Yes.
Yeah.
Okay keep my senior recording which means higher releases.
No we got to wait till we get to the.
Yeah.
Well, we'll start it away then.
Okay.
Yes.
Alright, guys greetings my name is JP mindset global head of Investor Relations for check point software I'd like to welcome everyone to our first quarter 2022 financial results video conference. At this time all participants are in a listen only mode. During the formal presentations, which will be <unk>.
Followed by a question and answer session. Joining me remotely today on the call are Gil <unk> founder and CEO , along with our CFO and CLO Calpain as a reminder, the video conference is live on our website and is recorded for replay to access the live conference and replay information. Please visit the company's website at checkpoint dotcom.
For your convenience the replay will be available on our website, if you'd like to reach us after the call. Please contact investor relations at email.
At Kip at checkpoint dotcom.
During the course of this presentation checkpoints represented representatives may make certain forward looking statements. These forward looking statements within the meaning of section 27, a of the Securities and Exchange Act of 1933 and section 21 E of the Securities Exchange Act of 1934 include but are not limited to statement.
Related to check point's expectations regarding our products and solutions expectations regarding our customer adoption of our products and solutions expectations related to cyber security and 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 I G security continuing to develop competition from other products services and general Marty market political economic and business conditions, including as a result of the impact of the COVID-19 pandemic. These forward looking.
Statements are subject to other risks and uncertainties, including those more fully described in our filings with the Securities Exchange Commission, including our annual report on form 20-F filed with the Securities Exchange Commission. The forward looking statements. In this presents Jason are based on information available checkpoint as of the date our checkpoint.
<unk> claimed 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 a 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.
Our financial results.
Greg Thank you Keith and just one sonic.
Okay. So I hope you can see the presentation.
Good morning, and good afternoon to everyone joining us on the call today I'm really pleased to begin the review of the first quarter.
And the state Fanboy and <unk> forward looking statements as I'm sure you're familiar with keep cover that one so I'll go straight to the results and let's start with Dan.
The two metrics that revenues in the EPS both of them at the high end of our projections revenues, reaching $543 million.
Which is at the high end of the guidance and the 11 million above the midpoint. If we're looking at the earnings per share is when any per share $1 67, <unk> <unk> above the midpoint and also in the top half of our guidance before I proceed further into the numbers. Let me just remind you that I'll get financial results includes stock based.
<unk> charges amortization of acquired intangible assets and acquisition related expenses as well as the related tax effects keep in mind that as applicable men GAAP information is presented excluding these items.
Now, let's dive into the numbers and I will start with the first one and then it.
It might resolve most of your questions.
<unk> debating so let's start with the top line revenues grew 7%.
$508 million to $543 million really nice results and ahead of our plan, we look at deferred revenue deferred revenue, increasing 14% for reaching a 1.666 billion when you calculate the billing the billing increased by 4%.
This makes two things very clear to start with the booking was very strong double digit growth in our annualized booking in the total bookings it was across all regions and it was almost in any metrics that we look at that this was one of the strongest quarters that I remember, we had significant growth in the bouquet, but significant part is still not.
Part of the billing remaining performance obligation, which I never provided quarterly boss. So it would be helpful. For you to see that this quarter just because of the misalignment between the actual strong bookings that we had and the building you can see remaining performance obligation, which all of you familiar with it some more the reflection of the backlog.
Deferred revenues plus day, the booking that was not invoiced, yet increased by over 20% year over year, So really strong quarter.
Moving ahead.
Let's look at the revenues by product and security subscription again quite the exciting quarter. When it comes to the breakdown product increased you can see from negative in the last two year over year, both in Q1 and in Q1, 2020 , one <unk> six percentage an acceleration from the growth that we've seen in Q4.
And which is in line with what we're seeing also in ne in the booking which was actually significantly stronger when youre looking at security subscription again, 10% moving to 12%.
Gross moving to 14% growth strong gross they're less diet diet with beach to the drivers behind the growth. So we look at the product appliances were very strong we see a growth both in units and in dollars when it comes to appliance day product.
Bookings and revenues and it came from a cross state lines family SMB clients meet the blind slabs as manageable.
<unk>.
Routing Dolan journey.
Yes.
Can you hear me well, okay. It went away good thank you.
So I'll repeat the less centers just in case, you didn't hear it a appliances SMB mid size large sized today my extra switches all increased both in dollars and a number of units so very strong quarter. When it comes to product subscription revenues growth continued to be strong with 14% coming from the same drivers.
We see success in harmony cloud God broadening revenues double digit infinity revenues, which include two or three pillars of our solution continue as well to be strong with triple digit growth year over year in the weapons. So really nice results from any angle that we looked at this from this perspective first.
Time in a few years that product and subscription revenues together reached the first metric that we put for ourselves with a target to reach double digit growth in our new business, which is typically in the product and the and the subscription.
Revenues, so increased from 5% to 7% and heating for the first time I think for 2017% to 11% growth. So that's very very nice to see and in line with our <unk>.
And our plans moving ahead by geographies also here when you calculate the revenues. It was it clearly it was quite a nice quarter America with 43% EMEA was 44% and 13% for APAC.
When you calculate USD two things you would see that auto regions increased this quarter.
And we're super excited about the Lyrica, which moved to a nice graph I can give you in the background. The data that you don't see very strong double digit growth in new business bookings across all regions.
New nuclear booking it means it's not renewal so we see growth of double digits in all regions EMEA Americas and APAC also annualized booking which is excluding the multi year on campus way. We received the health of the business was double digit in all regions and America, leading the growth under the new leadership with a super exciting.
So really nice to see that.
Moving to the P&L details that with the gross profit to gross profit gross margin.
Continues to be strong at 88% and.
Naturally as you all know there are supply constraints in the market, which affects all of US many components cost increased significantly leading to higher costs than you would see it as part of our cost of withdrawal, which led to to the margin moving down in between 1.5% to 2%.
The small portion of our total gross margin despite still very strong at 88%, but when you look at the cost of wood strongly which is significant decrease bench for US number one priority is to deliver to our customers and to focus on the top line growth as we define in the beginning of the year. We were very successful back in so far as some delays.
Maybe a week two weeks three weeks, but we are way ahead of the market in terms of our ability to deliver I hope we'd lose stay that way I will stay exactly the same like the previous quarter I cannot guarantee, but we're working really hard and vein, what we need to do in order to be able to deliver to our customers.
As for the situation I hope this is temporary.
<unk> chain constraints, it looks longer than people thought last year I hope it will be finished by the end of the year, but we cannot guarantee that all of us in the news about the China and the lockdown. So hopefully it will be resolved quickly.
Moving ahead with operating expenses highlights. So you can see operating expenses increased significantly and 16% for us. It's good news because I'll remind you when discussing our plan that we want to increase the workforce, mainly sales and R&D.
And continued elevated investments in our rockets cloud Dod harmony and in order to continue the strong momentum that we've seen already in the fourth quarter of last year and we see the continued momentum also in the first quarter of 2022. So in line with that plan, we increased our workforce in about 15%, which is as you see.
We're very much aligned with the increase of the expenses that we see here of course is including also Avalon and spectral acquisition of NR was Q4 and year over year is not there as part of the graph and spectral was in February 2022, or so its parts, partially part of that number.
Operating income operating income non-GAAP operating income continued to be stronger 270, $439 million, which is 44% operating margin very strong still under the growth of the 15% in the head count.
Financial income in line with our projections of about $7 million, reflecting the reduction in the portfolio yield which should happen in the last two and a half years. I think this is niche we're in an environment that interest rates are going up so over time as the portfolio. We release, we will be investing in higher interest so.
Very very slowly probably we will start to see them. The next day.
Two or three years the growth in the in the interest income assuming that everything else will stay the same.
Meaning excluding M&A is in activities like that.
non-GAAP tax rate for this quarter was around 17% and in line with the plan expect similarly for next quarter, a non-GAAP net income was $204 million and $1.57 EPS, which is for sensible red our midpoint and 2% in.
<unk> year over year.
GAAP net income was $169 million or $1.30 per diluted share.
Moving to our cash flow so cash flow balances of $3 8 billion dollar very similar to the end of Q4 is actually slight increase operating cash flow. This quarter was super strong almost $400 million, an increase of 6% year over year. If we eliminate the acquisition effect is actually 7%.
During the quarter, we continue our buyback program, we purchased $2 5 million.
Sure so less than we planned because the share price moves up the average share price that we acquired 131 dollar per share. So it's two 5 million shares for a total of $325 million in line with our buyback program.
And now I would just summarize it so very strong financial results revenues in EPS at the high end of our projections, we've seen growth in all geographies, which is nice to see America, joining that growth with double digit growth in the product and subscription revenues together, a very nice milestone and we'll continue to focus.
On the top line growth and that's where we are at this point to science and now I'll turn the call over to Gil for his business review. Thank you.
Okay.
Thank you Tal and Hello, everyone I Hope you can see me well.
I want to give you a little bit of color about.
How we did in the quarter for all all about the industry in general and what we're seeing in cyber space and also about the.
Specifically about the some color with all we can share about the check point. So let me start with the state of cyber security, which I think is also reflected somehow in the financial markets. We see constant increase in the level of cyber Frits you can see here on the chart, which is where we measure the number of.
The number of attacks on every organization every week when the global scale and you can see with where the 54% increase in weekly cyber attacks globally known organization in the last quarter. One out of 53 organization was impacted by ransomware, that's again at 24% increase in on a qualitative side we see.
Pineal seem crazy sophisticated attack, what we call <unk>.
Generation cyber attacks, which is I think also something that we all need to worry about so clearly receiver.
We look at the Gen five attacks the things with our call attached with a call supply chain attacks, but to get to us through software components and software, let's get into our infrastructure and infiltrate the rest we've seen last quarter. The look for J one of the most devastating.
Exploits.
It will never abilities that we've ever seen this quarter. It was followed by something similar not very strong but in the same order of magnitude spring for shell in long for Jay we saw with more than 50% of corporate networks, where targeted investor component by the way the log for Jay was a component which appears on almost every web server and web service.
Spring for Sheryl, if I said, something similar slightly lower magnitude, but already in less than a month's one further corporate networks, where exploited by vet. We're very very proud to say that checkpoint upsell cloud guard uptick was the only solution to provide preemptive protection against with some customers that Lisa.
<unk>.
You can install our infinity architecture pull tweets uptick which is AI based component in front of their web servers were protected and that's where our messages about.
In providing the best security and doing it in a preventative mode with really not just indicated that its not just gave them alert it's actually block the attack before the attack was even known to the world to US which is an interesting indication about.
What we can do.
And it's not just that they are noticing that sorry, the primary spending in front there are four.
Of your Presidente, they'll move myself, a little bit, but you see with the Joe Biden issued a statement about demand for coal, which is a critical moment, it's time to accelerate our work to improve domestic cyber security and the next sport.
Your vigilance and urgency today can prevent you also says or mitigate attacks. We are in the prevention. So you can prevent I think is the best possible way. So I think there is a room for the world and varies a lot, but we can do to actually make that happen and prevent the next cyber attack present, the next cyber pandemic and I think vessels.
We are doing now handling gen five attacks modules Gen three attacks.
And doing that with prevention consolidation and providing the best security. So I'm very very proud of that and I think that's what we aim to do a checkpoint and that's what we do in order to do that I think last quarter, we shared the word five key initiatives for the year.
And for the year and for the quarter and I think we've started pretty well on all of them company rebrand who's the new slogan what we've been doing for almost 30 years, but the new slogan you deserve the best Security and you go to market organization, our checkpoint rockets organization product right through we will require to light light speed.
And continuous investment in growing the organization and specifically growing our frontline sales I'll go through some of these initiatives in the next few slides and just to give you a quick update on what we've done because I think we've done.
Quite well and did a lot in the first quarter to make that happen.
So I think you'll also overview logos and I think that resonates very well in the you deserve the best security people are starting to get.
Our message about the differentiation of checkpoint security and that's not just based on slogan remarketing, but actually based on the checkpoint Infinity architecture about the fact with our network security cloud security user and access security are all built together all using the same advanced technologies with can stop every firm.
On each one of the axis victories.
Using our shared Infinity vision, our shared the threat cloud with real time threat prevention to actually stop these attacks and again demonstrated the some example, I'll show you later.
More <unk>.
Switching to our new go to market organization, we brought new leadership to head our go to market organization Rupaul Hollenbeck Rupaul has been on our board for a little bit more than a year. So we started knowing gear and we were very impressed she has a very impressive record of being a CMO for Oracle and more so more than 20 years and Intel and leaving.
A $23 billion global datacenter sales organization, who should clearly understand.
What it's like to run the largest scale organization and.
We will also move the headquarter of this organization to Silicon Valley, which I think is also a very very positive thing where it should be.
And I think we have a free goes in making that move one is extend the reach with what we do to more customers more segments and broaden what we do doing it with better integration between sales and marketing that will generate greater impact and scaling and extending our partner relationship our relationship with the entire <unk>.
The system and I think this should work very well and should resonate very well. So we started that move and I think it was accepted very well.
We continue then we've made a big push in order to grow our investment in the organization and specifically my number one focus is to grow frontline salespeople vo work and call and deal with customers and sometimes partners to grow the same my goal was 25%.
As soon as possible as you can see in the chart, where over one quarter pretty much halfway there and I expected within the next two three months will hit with target will be very close to it and we'll have more capacity to grow our sales in the second half of the year and mainly be ready before 2020 free.
With the capacity that we need we've also continued the hiring in other parts of the organization RMB, we've been extremely successful actually a little bit better than we anticipated we already reached our yearend their growth targets in the many organization specifically in R&D invest despite the tough hiring conditions despite everything.
We're seeing all around the world of <unk>.
Resignations and tough too.
Recruit top talent, we've been more successful who have anticipated and by the way that also has a slight impact on our expense level, which is higher than we anticipated because we hired the two many people, but I think it's the right thing and we're building the right infrastructure.
We've also formed along these lines the free rocket organization and just to remind you the idea with the rocket is too.
Make a much tighter combination between RMB sales and marketing in specific growth areas. So we can launch it fast and they'll be very very agile and make bigger investments and bigger growth in key organization. We started west structure, we'd free organization, the cloud organization, which is pretty big over 100 million.
Yeah.
And secondly, the harmonia email, which is mid sized tens of millions of dollars in cell based on acquisition. We did last year, but again, a great expansion area would we see a lot of success and first one is more of a start up is the rockets with hardly being launched.
And what's the MBR managed detection and response or what I'd like to call. It managed prevention and response because the checkpoint. We don't just detect we actually prevent the attack. So we've launched these free rockets and I think it's starting to work quite well.
Hopefully, we'll see better more results and better results later in the year from that.
And so I think all in all you can see that we're executing on all the pillars them. All the initiatives that we have and I think vet, reflecting some of the business momentum.
We've seen in the quarter and without interfering too much with the financial slide that you already show from Paul just if you look at revenues you can see that over the last three quarters, we had a very nice steady increase in the revenue growth and if you remember we've talked in the past about the fact with APAC, we got things pretty much right in.
<unk> will lead the major turnaround last year and brought new leadership in last year had an amazing results in EMEA, and we're saying U S little bit behind and here you can see with the U S. This quarter, while starting to make this turn around and produce very very good growth rates.
Across the board, which is something we're very proud of so free quarters. After we've had the we've had the new leader of our U S organization exactly a year ago April or May of 2021 through three quarters later.
<unk>.
We are seeing good traction here and I really really hope with restriction is assigned for continuous of with the continuation of these charts.
And this is best demonstrated by not just by you know the chart in the overall numbers, but where we win and you can see few examples I talked about the harmony email <unk>. So you can see some results with real customers a big U S government agency.
40000 users.
<unk>.
Tested our solution within 10 minutes be found 50000 phishing attacks with our solution you replaced the other vendor that was there before very proud of that.
And we're very happy about the results that we had and number one a big manufacturing actually a sophisticated one in the technology space in North America and have an email based attacks wasn't happy that they weren't ready we were previous solution.
And they found that with checkpoint, we got the best catch rate against zero day malware see slightly different when phishing attacks, a little bit about the alber customer 15000 users implemented it on their cloud email.
Again, great results great success for visa.
And technology, but as I said, our success lives Motorola vision is not just about individual components or but it's about the integration and the infinity vision that we have and you look at that and you see a few examples of customers that are expanding the use of our technology.
Of these we have infinity all of them deploying more and more pillars from our technologies and look at the checkpoint based security is the main reason to switch you can see on the left side. The U S transportation in the rail industry in America, new customer.
Where we replaced Cisco and so they were looking at both our quantum and harmonic families not look they purchased our harmony and quantum family again, great success in a new customer in the middle in the sports industry in the U S.
And they actually implemented the flu.
Three pillars quantum harmonium cloud guard they found very testing that we provide much better security much better management, one against Palo Alto and again I gave all the examples so far about the U S. Because we truly had a good quarter in the U S. But the rest of the world wasn't much behind the rest of the World was also goods one <unk>.
Ample from Europe .
There appear on energy and utility vendor.
Implemented quantum in harmony, one against 40, militancy, scoring new customer I think.
They found again the checkpoint security to be the best and these are all good example by the way. These are not the largest deals of the quarter. We had some really really large deals and expansion of giant customers that we have in sectors that we all know we chose year to show some new examples of new things and new initiatives.
What we are doing and I think we're doing quite well on them saw refinery to summarize we had a very good quarter acuity be more pleased than again, some things you see here on the revenue side than on other metrics, some things I see internally and internally the measures that we see are or even healthier Mb.
Better strong performance on the revenue and EPS America strikes back I think overall our market. Despite all the challenges despite the supply chain issues with a real despite the tension in the round the world all of which have impact on us, but despite all of that I think the market remains healthy a rare results continue to be.
Quite good and we continue to invest in growth in this quarter and very very pleased to see that we sold the results both on the investment side, but more important on the topline side and I hope that we see traction. We continue so thank you very much and I would be very happy to open it to your questions or I don't know may actually first.
Let me speak about projections so.
Okay.
Yeah.
Projections, you know my regular caveat.
Always upside always challenges. These days are specific leavers plenty of the.
Challenges.
And on the same token I think we had a pretty good beginning of the year actually I can't remember such a good start for the year. Many many many years, usually we start Q1 slow and when we accelerate.
This year.
We started very strong and I hope it will be able to keep up with the with the pace of business that we had in the fourth quarter.
Am so projections I mean, we're keeping the projections for the year and for the quarter for the second quarter, which would improve the provide projections revenues are expected to be in the range of $545 million to $575 million I think slightly higher than some of the model than some of the analyst non <unk>.
GAAP EPS between the range of $1 55, $2 65, GAAP EPS is expected to be approximately 45% less I think.
And we are again I'm very optimistic I don't want to be over optimistic I don't want you to raise your expectations too much but I think we had a very strong beginning of the year and I hope for the rest of the year will show even more of with their results flowing from our business pipeline for our business bookings too.
Revenues into the EPS.
So thank you very much Tom I don't know if you have something to add before we switch to the Q&A on the projections.
Frankly, we can start with a question.
Yeah.
Alright.
Our first question of the day is going to come from <unk> Kalia, followed by Jonathan Ho from William Blair.
Okay. Great can you hear me okay. Yeah, we can all hear you okay excellent.
Everyone. Thanks for taking my questions here Tal, maybe just to start with you I. Appreciate you addressing the billings and bookings point upfront I think you said double digit growth in bookings and lets called for 4% growth in billings I was wondering if you could just dig into that divergence between <unk>.
<unk> and billings, a little bit more is that because of supply chain challenges.
As we've been hearing about is that because of infinity and related to that why do you think those two metrics may be start to converge a little bit more.
Good question, because if you recall, we've been here for a few years and I've always said I don't want to give the name because it will confuse you. So two quarters. After we started its already continues.
Coffee is there is any the resultant GAAP I mean, it's not the first time. It has many times there is a gap over time of course is clouded by the specific quarters can be higher or lower than the reaction is always dramatic. So I'll start in advance I will give the explanation because now we give them the daily So I'll just give you two examples.
Let's take Infinity say affinity typically.
Give you. Three example, just to give you a sense why they can begin.
First if you have a deal that in English quarterly and then of course, you will see already in the first quarter and the billing, but in the book and you will have the full amount.
Do you have.
Infinity the invoicing of the product is only one big one state police and if you recall attending infinity and they have a year if they didn't call. It that you will not see the billing but another example, another example, much simpler in product delivery, we issue the invoice only once we deliver now since the end of the quarter is typically very back in.
Loaded in irregular universe. The ways you can deliver in five hours. Since you provided that there are there in the new universe, sometimes it takes you a week or two weeks or maybe three weeks.
So you will see the billing on any once you deliver solve their mom can create a gap between the booking and the billing. So it's the same reasons that always been so there always was the difference between the billing and actually and then it translated to revenue. So there's like three lag as far as the bookings and the billings and the revenues.
Are you you're putting behind two steps behind the revenues, but it is never close and sometimes it is highest honor the desire over a year it should be aligned in high level.
Okay got it maybe maybe the follow up then then for.
Maybe maybe I'll make it for you Gil.
You've talked about investing more in go to market and I think some of the hiring numbers show that here as well.
A new regional leadership as well to enable that.
The question is can you just maybe go one level deeper into some of the changes that you'd like to see them in go to market to really sustain this type of growth.
Well I think there's many first I think we have amazing team of people in our field and they're doing good job, but I think we need to be far more aggressive in addressing customers far more intimate with customers I think one of the things, what's holding us back, but we have very loyal customers they like us.
We stick to us, but we work with awesome.
Their firewall side on the network security side, and we have to work really hard in order to be elevated in the organization and they get to other projects and other areas, we have to attack more and get more new customers and I think we can do but I think we need to in many cases.
<unk> be more aggressive on that expand the methodologies that we work.
To get to the relevant points about providing the best security again, we've always stood to provide the best Securities. When you were already a customer you can take that for granted you don't even see with urea you think that that's the world we need to make sure that people understand that and people understand that there is a huge differentiation in product.
And vendors and the level of security, we get too many environments, where our competitors, where we replaced a competitive product and we see.
The product was activated.
Very very basic rudimentary security capabilities and when we start enabling more advanced security capabilities. We find so much thing with can be stopped.
So I think these are some of the biggest changes that we added and it's the coverage and it's again because all of these things that needs to be done on the field and began the combination of field sales and marketing and also add to that.
I think we're making good progress on all of that and hopefully we'll do even more.
Very helpful guys. Thank you.
Thank you. Our next question is going to come from Jonathan Ho, followed by Keith Bachman from BMO.
The topic of cooperation on the strong quarter I just wanted to follow up on sockets question regarding RTL supply chain challenges.
Fact, archeology to continue growing our car here or default, maybe the scope may be reversed course.
Get a sense like I know, you're not guiding them and.
How we should think about maybe that normalization.
And what that pattern look like this year, given the impact of the lungs.
Yeah, I'll take that and you're welcome to add I'll, just say remember all of these measurements.
Including our P. O is basically a reflection of the backlog and backlog is affected by the billing minus whatever by the booking and minus whatever you recognize as revenue rises you remaining obligation. So if the if the booking is the law and then it should increase in the booking is not one it will decrease but I will always.
Say you need to watch out for fluctuation between quarters that can happen very easily if I get a very large contract that is a multi year, then you're right RP always increase desperate I'm actually not using that as a metric because I don't want to confuse you I just try to give you color from a few angles C. You will feel comfortable to.
Talent, that's why and in omni during the IPO, we shall never do and I don't intend to.
But just to give you to give you the comfort level. So you would have transparency I gave you also the booking I told you annualized booking on purpose because annualized booking takes away the multiyear and that increasing double digits say was really healthy quarter. When we look at product product was also double digit billions.
It was really healthy and any cut what will happen in a specific quarter I don't think it's the right metrics to be honest I always said it because I think it can fluctuate depends on large deals that can come in in one quarter and moves between quarters. So you need to look at the full picture typically.
That's helpful. And then just given some of the shorter delays that you have in terms of product availability and supply chain challenges relative to competitors are you seeing this dynamic healthier business in terms of win rates or any.
Are you seeing any early order activity from customers as well.
I didn't hear the end of the sentence can you repeat the end or are you seeing any early ordering activities of pre ordering activity from customers who are worried about the ways. Okay.
Okay.
With the end user.
Can't really know that remember that we don't sell to inventories except for very low level of the created by the regular business, we make sure that the customer at the end of the road.
The customer decided to order earlier, maybe it happens, but I don't see something very data relating to that we looked at it last quarter I didn't really hear it in a big way.
But it might happen I'm, just not aware of that.
Jumping a year I think we'd be doing some projects because we were able to supply product and some competitors do to them and that's good but on the same time, we had the opposite effect because some customers who are building data centers, we couldnt get there other equipment servers networking equipment and so on from other vendors and delays the whole project even.
What we were ready to supply so I can say that with our ability over time be mobility to work with our suppliers and deliver products.
Of course, it was very important to us, but I can't say that it's increased the business by a big way because again there is an impact if the customer can get her switches routers. Then we don't also don't get versus we delayed the order from <unk> Securities.
Thank you that's very helpful. All right. Our next question comes from Keith Bachman, followed by Philipp Winslow and if we can keep the questions to one that would be greatly appreciated. Thank you.
Hi can you hear me Okay. Yes, we can great. Thank you tell I wanted to come back to you.
On the last quarter, you had talked about as you look out over the course of calendar year 'twenty two the opportunity to grow double digits and I just wanted to hear.
Just on <unk>.
A lot of questions on the difference between billings and kind of underlying fundamentals, but as you think about.
The opportunity for billings for the year, how should we be thinking about that or would you rather characterized that as you know the opportunity to reach.
Double digits in revenue in terms of growth.
So we're all just trying to filter the disparity between I think.
The solid revenue performance in underlying.
Bookings versus the billings and Kip I know, you're asking me to keep one but.
Was hoping also Joe you could just touch on any.
Our initial thoughts on lightspeed.
Would be great traction and how we should be thinking about this over the course of calendar year 'twenty two many thanks.
Keep asking a class two question not because the mine just because we don't remember the first question.
Yeah.
I'm, hoping I'm, hoping chip doesn't remember that asked too.
Okay.
And I think it was about the projection for the year. So I'll say the following in order to reach if you remember one of our biggest milestone that we were looking for was and then candidly. We're also defined it.
New business double digit growth because it will be it is when you sell product.
And new harmony quantum because that's the way they go out because we knew all the really outpaced voice was never a concern right. So we are focusing on the new business.
So I will focus on double digit new business remained the focus and we believe we're going to achieve that that's what we're aiming for we need that in order to be able over time to get to the double digit growth in the revenues on the revenues you have the fast act, which is of course, the milestone that we actually hit this quarter and I hope it will stay that way.
The combination of the product into subscription a lot of it is the new business because product is in your business and subscription some of it is renewal some of it is new but when you're in double digit growth that you got to have new visits in order to get to double digit otherwise if you just renewals in your low single digit just like disappoint. So to answer your question, we need to grow.
Double digits on our.
On our new business in order to achieve our target of growing our revenues.
Okay great.
Yeah.
And I think you'll have a slight fever dream of Lightspeed, we had good traction within there too.
Too many deliveries, but we did what we do have some major customers that are big enthusiastic about that and we do have good pipeline and I feel good order book for Lightspeed in general So I think it didnt have much impact on the first quarter in terms of revenues, but so far the trucks that is pretty positive.
Okay. Thank you.
Our next question comes from Philip Winslow, followed by Patrick Colville.
Great. Thanks for taking my question just had a question about refocusing on the pricing environment. Obviously, there are a lot of moving parts here. Just curious what are you where you are seeing out there obviously, you've got your component issues component price increases, but also <unk>.
We do price in U S dollars and there's obviously been some FX fluctuations there. So I guess, maybe if you could break down sort of just what youre seeing in terms of call it like that.
And then the news subscription.
Bookings in any sort of pricing impact there and then also just as you think about just the renewal side, you have maintenance and subscription anything there as well thanks.
Okay I can say one thing is clear the price of the component definitely moved up one way streets. Okay. So you can see it in our cost of goods sold it moved up and as part of the gross margin the EC So.
The only thing that is clear when it comes to the revenue side. Then you have a lot of things moving and it's very hard to know of course. So we increased the price. If you remember at 7%, which I think is the lowest for any other vendor I think fortinet, increasing like 30% in the Palo Alto, maybe an 8% then there we increases.
7%.
But if you're asking me to reach the end user I would say it depends some indeed, some indeed and it depends on the project it depends on the competition, just like any products or it's harder to measure that.
And when it comes to the expenses then that's the only thing again clearly you can measure year over year, we actually aligned so the effect on the expenses of the currency Q1 versus Q1 is very minor, maybe 1 million or $2 million.
The real affected the growth in the head count, which is again is that you will see it also in Q2 in your sites as part of the guidance as well because we recruited them toward February March So you actually see the effect more fully.
Keep them.
Got it.
Alright, thank you.
Keep you on mute, except as Patrick Colville, followed by shallow lay out.
Alright. Thank you so much taking my question since you asked about the kind of geographic segmentation.
Checkpoints business over the last four years.
As an extremely well and in EMEA I mean, thats been the standout success for the company.
And many Americas and some underperforming bulker results this quarter to me actually the trend is very much changed.
Sequential growth Americas was actually pretty healthy and above trends.
It was somewhat disappointing versus recent trends.
If my numbers are correct is 19%.
Sequential decline.
So can we just talk about geographic segmentation right away and that lets stop here I'm not sure I understand all of them increased if you compare quarter to quarter all of them increased in that 678%. So all of that increase year over year.
In terms of revenues actually year over year in May increase a little bit more.
But that's again because of projects we won in previous quarters I think all in all were very healthy this quarter, we had the big turnaround in America in terms of the internal metrics of America. The best result.
But Europe remained healthy as it could be in vet remember Europe also suffered from lack of sales in Russia and Ukraine. So.
But still and taking that apart Europe had a very healthy quarter.
Everything everything included.
You're right that the growth was slower than what <unk> seen in Q3 and in Q4.
Yeah.
What I was referring to was sequentially from looking at tomo and <unk> and I'm looking at the dollar amount in <unk>.
No doubt healthy.
But I guess as to where it was anything to call out so.
Gil you mentioned, Russia is in this we should be aware of so that.
Kind of factor that into the main effect in Q1 is Russia of course, where he had basically no revenues. So that sits in Europe of course.
But again Europe is healthy and we're very very happy with what's going on for us in the Europe I, we ship everything would behave like that.
Great. Thank you so much.
Alright next step they sell only our followed by Matthew Hedberg.
Thank you good afternoon, and good morning, everybody So Gil.
You are essentially keeping guidance intact for the year.
You've accelerated your year over year growth to 7% as we've seen in the first quarter sound very bullish some of US who covered you for Asia like we haven't seen as bullish as you are for some time now.
Well you are keeping your wide annual guidance and pack and still at the bottom of it it implies a decline.
Why not narrow the bottom range of your guidance.
And maybe also I know you just mentioned, Russia, but kind of what's your view on holding business in China are you getting out are you still.
<unk> business and in Russia, I'm sorry.
So I think that you're right about that we haven't got too much into the annual guidance and updating the model just in terms of analyzing it.
I'm very bullish and positive so I think you're reading me right. So I'm not trying to wear.
But remember there are still risks I mean, there are still a lot of unrest in the world economy. We don't know what will be the impact of inflation. We don't know what will be the impact of the <unk>.
Pick a effect even the unrest in Europe , where we hope it will be peace their resumes and their business is going to go all over the world, but the ratio of Russia, and Ukraine represent many tens of millions of revenues with the right now we're.
Pretty much lost for us and I don't know if we will recover them in the reminder of the year or we will start doing more business. There is again hopefully will be some piece reached.
And so I think overall I'm positive I think in.
I would like to say unusual circumstances, but remember usual circumstances unusual circumstances, there are probably easily raise the lower part of our guidance because we just had one quarter of it was a little bit better.
Jim.
And I again, I'm optimistic, but again remember there's a lot of things that can change and I hope for.
I don't want to jinx, it by being too I would just say and because when you're thinking of where they are and where the sensitivity is in the range is typically in the product.
Right because support and subscription you have slightly better visibility much better visibility and part of that is sort of every quarter. As you go and in a University Baptist deterioration in the supply chain is it's been more prudent to keep a wider range.
Understood. Thank you guys.
Yeah.
Next up is Matthew Hedberg, followed by Adam Tindle.
Great Hey, Thanks kept pace Paul I had a question for you I really do appreciate your comments on annualized bookings. That's super helpful. I guess I'm wondering could you put a little bit more color on that and maybe comment on bookings duration and maybe how it changed from <unk> to <unk> and where there any very large sort of multiyear deals that impacted Q1 this quarter.
No because remember if I said annualized booking is in progress eliminating them I can tell you off the record Nobody's listening then also booking was double digits. Okay.
[laughter], but I wanted to give you the annualized turned around the a follow up question of are they together really big large deal of working here. So I wanted to put the farther way than just to say actually annualized business run rate moved up in the double digit bookings. So that was really nice to see that so that was my point I eliminated.
Do we have in the booking all saw a nice double also life <unk>, Yes every quarter, we have very large nicely. So yes. It was a good quarter also for transactions of customers that purchased above do on linear and we had an increase in that brought a number of deals and in dollars. So that was also a healthy metric.
Got it thanks Paul.
Sure.
Next step is Adam Tindle, followed by Andrew Nowinski.
Alright, Thanks Kipp.
Just wanted to ask on the go to market investments, particularly around the Americas region investors often compare this to a few years ago with the hiring of Chris Scanlan and others have mixed feelings looking back at that period of time and Chris has now moved on this time you're off to a very strong start with acceleration in metrics in Americas, what did you learn from that period before.
And maybe what's different this time with coupon investments that youre doing.
Alright, I think every person that we hire we are because we think that there are good and they by the way. We did have a lot of good people some fit and some were able to execute better in some dividend some of it by the way is the people in the field some of us disaster and headquarter, but don't always provide the best thing.
For example in the past I focused a lot about improving the sales productivity, which I think we still Kim we can improve the individual productivity.
Today, I think that we can do that in conjunction with bigger investments will not just stop and say that's what we have lets grow the productivity by 10 or 20% of the existing people, but let's do that but also as in this case, 25% more head count. So overall, if we if we succeed on bulk will have doubled.
I'll have more capacity, if we succeed only on one we will still do well so right now I mean, I would say I've learned with I want to invest more in the business and maybe we could have done it in the past too.
And I think overall.
I will tell them again.
Again, now three quarters in the job.
Jeff our new leader in Americas produced a very very good quarter and hope it will remain that way I'm very pleased with that.
We would have liked it to be two quarters emea's could tap in five quarters later it could I mean, there's no secrets here and we'd like always we like better results faster rates I think you like if you highlighted too.
And freeze not bed by the way three quarters to make a change.
Alright, Thank you Adam.
Our next question is from Andrew Nowinski, followed by our last question from Gregg Moskowitz.
Okay, great. Thank you for taking the question I wanted to ask about your product revenue, obviously up 6% this quarter on the heels of the recent lightspeed launch I'm wondering given.
Given that that was an acceleration and in light of the chip shortage that you're dealing with as well.
Are you seeing any sort of perhaps cannibalization with the new lightspeed appliances, maybe scene.
Seeing growth there versus cannibalizing some of your other next Gen. Firewall solutions are both doing well if you can just give us some color on.
On the appliance.
Growth Youre seeing and how sustainable it is going forward. Thank you.
So I think overall I don't have all the data in front of me, we had very very good healthy growth in appliance sales lightspeed didn't have much impact on the quarter results. It's the let me now I mean again it is there.
Eventually.
We had a good order backlog, we had some big customers that have adopted it but you don't think it had significant or any impact on the quarter results and overall when I look at what's happened to appliance sell the extremely positive almost all product families group grew nicely.
Number of units grew very well I think a S. P. A mature if it went up or has it remained steady on the different families again the mix of the families can cause that to fluctuate a little bit I don't know tally for us more color to that but I think overall again I think today when you look at the broad back except for and the growing year Nathan Green.
Dollar by each family vault in ASD, which was their steady didn't go down again, except for anecdotes, but in general it was.
It was healthy.
And then new product in effect again, because it's one we will need to monitor it of course, because I know you asked we talked about it in the beginning of the year as one of the ways that there might be some cannibalization. There. So he didn't start and we're planning to try to avoid that parts right. So it's not there yet.
Thank you.
All right. Our last question is from Gregg Moscowitz go for it Greg.
Thank you for taking the question I'll Echo what some other sad about that I appreciate any additional bookings in our PEO disclosures on this call from a booking perspective, specifically I just would love to hear kind of how you would characterize the linearity this quarter as compared with a typical Q1. Thank you.
Oh attitude.
Slightly first our linearity is still very much backend loaded, but I think this quarter look well from the very beginning of the quarter. So again filled the majority of orders we get in the last few weeks of the quarter, but I think this quarter. It was slightly I mean actually I don't know I don't want to mislead us I don't know.
It was more or less backloaded, but from the beginning it was very healthy we had very healthy growth of the booking from the first few weeks of the quarter.
All right very clear thank you.
Alright. Thank you all for joining US today, we appreciate your participation and we look forward to seeing you throughout the quarter.
And.
If you would like to have a chat with us after the call. Please reach out send me an email at <unk> checkpoint dotcom. Thank you guys have a great day.
Sure.
Bye bye.
Yes.