Q2 2022 Check Point Software Technologies Ltd Earnings Call
A review of our financial results.
And Chris and increase from the $526 million is basically more than doubled the growth rate compared to last year, and Q2, which was around 4%.
I know you will ask me about the gaming so let's say as we start billing in the quarter reached 571 million, which is the 6% the increase I want to remind you that the billings for us is affected significantly by the timing duration and payment terms and she's can fluctuate between.
Quarter to quarter, specifically, one we have a mega deals Mega deals with 20 million 30 million 40 million dollar deals in Q2 last year. If you recall and go through the script back then we said specifically we had quite a few where do your mega deals, which we're building in advance so mega deal can happen, but can be built.
Overtime.
Once a year and a split payments last year, we had a few large deals which will build actually in advance which created the dip in the billing right now, but no effect on the run rate and on the growth rate in general, which you can see very clearly in the P&L.
Deferred revenue was somewhat including that because if you compare the deferred revenue as it deals came instead of in Q2, and Q4 or got advance the beat than it will be part of the deferred revenues. So you can see deferred revenues is healthy it's 1 billion sticks out in a $66 million, which is an increase of 194.
Dollars or 15% growth year over year.
So that's to cover the subject of the revenues. If you go to the splits in the revenues Christmas that were the two line items together called product and subscription revenues together with the double digit growth, 13% growth year over year, reaching $343 million, it's a double digit growth in these.
Two lines together for two quarters, you know so it's nice to see stabilizing on the double digit and hopefully it's planned to continue so it's a great milestone for us even more than that for the first time in many many quarters, probably maybe 10 years, we had a really strong product license revenue.
I'll remind you that last quarter. When you asked me about the billing I told you so.
Some of it is product that had been a delay in delivery infinity, where you wait for customers to pull in or just delivery of two or three weeks. After the order, which can happen every quarter. It's also happened in this quarter, we have quite a lot of that as well in this quarter. So there's also slightly affecting the billing but you.
Can start is already seeing that translating into the P&L and we see 12% growth in our appliances. It came from like last quarter. When we talked about is also for SMB Mi large appliances. My Astro was very strong which is the switches that enable us Hyperscale network.
We see infinity customers also you're starting to use the product the allowance as they implement the security solution in their organization. So it's very nice quarter, four and the products, reaching double digits for the first time in a long time. If you look at the subscription it was double digit for a lot and it continues to be nice with 14%.
No.
In the subscription reaching $210 million.
Yeah.
It was an increase from the 12% last year over $184 million last year the growth continues to be driven by.
All the items going quantum cloud God harmony, but they did double D. G is driven by a cloud ghadhban harmony bosses ever considered new pillars for us for the last few restore our harmony email security continues to deliver great results I'm reminding you that we acquired the some of the email came from an acquisition and <unk>.
Number last year, which would be annualized even September .
So when she lives growth and both of them both cloud and in harmony all in all it's about 57% of our revenues are subscription now so it's becoming quite a large engine for us in the revenue.
With the creation.
If a rental revenues by geography, so what you can see here the printer.
Did she has all the same like last year's 16, 44% EMEA up 44% of our revenues coming from America, and 12% from APAC. If you calculate year over year, you will see the revenues grew across all geographies in a quite a similar range so quite healthy business all across the regions.
So that's also pretty nice and stable.
Our move to the profitability so of course, you're hearing so many many companies us included and.
Revenues, we discussed gross profit moves up from $470 million to 500, and the 1 million strong gross margin. So we continue to have strong with 88% is a tick down we actually pay a significant deal we talked about in the last two quarters in a row, it's week I actually expect it to continue for the rest of the year.
And which is part of the pressure on the margin, but it's okay. The temporary increase in the costs related to either putting our hands on raw material on the open market or expedited shipment because you need to get it early due to the production line.
And there's a strong margin taking into account these higher material cost and also shipping costs and hopefully these temporary phenomena, we man will go back to normal and towards that in 2020.
It's too early to say, but it looks like for the second half of the year. It's still here, we see the raw materials coming in these raw materials that we produce not wanting to be part of the cost in the next two quarters. So great results. They can enjoy calling the massive pressures that all the companies are seeing in their own material.
Operating expenses are very similar to last quarter, we see operating expenses, increasing faster than the revenues and 18%. This is in line with our plan from the beginning of the year I'll just remind you. Our plan was we're going to continue to increase our waterfall workforce, mainly in sales and R&D will continue.
Elevated investment and I'll walk us, which is mainly clouds God's in harmony.
So in line with the plan, we increased our workforce year over year, even in double digits, both in sales and in R&D and sales we still have some recruiting to continue as the year over year operating expenses increased mainly as a result of that fact, the conversation of course return to travel and face to face interaction some.
Now the expenses and the acquisition that we had last year of other non inspector all of this year. So that's also part of those expenses and there was not part of the original guidance. Therefore asked meeting the EPS. After these acquisitions as well it just shows the strength of the results.
If I'm moving to the below the operating income so what we can see here operating margin is higher than we planned is actually 44% with blended slightly below because we've seen in the recruiting process, we still havent finished and financial income.
We started you don't see it here because Q2 versus Q3 7 million, but if you compare it to Q1 the sequential quarters, you will see some increase as our portfolio is being released we invested in higher interest rate and we start to see an increase there on the other hand on the taxes tax provision are getting index since June .
As you know the indexes quite high inflation, which is the indexation is quite higher than the nobody planned for it as part of our tax expenses. That's why you see moving up to 19%.
That said each other therefore, the net effect was minimal.
And this quarter and the total net income was $209 million earnings per share of $1.64 wishes for sensible the meat points O'hara guidance, so quite good earning per share and operating income.
If I'm moving to our cash position and cash flow and I will start with the cash balances. So our cash balances as of the end of the quarter was $3 $7 billion. Our operating cash flow. This quarter was $212 million I'm reminding you that we hedge our balance sheet against currency fluctuation in order to.
Minimize the effect on the P&L. So as you do balance sheet hedged, it's minimize any effect on the P&L and protect our P&L and also this quarter. It has happened, but the fluctuations you see in the cash flow this quarter. The Fox fluctuation in the cash flow was significant it was about $47 million the hedge cash expense.
This is $6 million of income in Q2 last year next.
Operating cash flow, excluding the effect of the hedge in Texas is an increase of 2% so quite the healthy cash flow with continued strong collection from our customers and expenses in line with the growth of our head count and expenses in the P&L.
And during the quarter. We also continue on a buyback you can see here $325 million share repurchase continue repurchasing two 6 million shares for $325 million, an average price of $123.
$127 per share. So that's the cash position. So if I summarize we had strong results revenues and EPS at the high end of our projections with accelerated revenue growth double digit growth in product double digit growth in subscription.
And we are continue to be focused on the top line, while maintaining a very strong profits.
And not all within over the Gulf Beautiful his insightful college.
So thank you everyone and bird Ludlam wherever you only to join us.
Sure.
Jump right in to give a little bit more color to the business and the environment and mainly about some customer we but before that the ones who could Rob you later or keep for even very familiar you'll see what's keeping the very special move for both of them. The best group of people that if you wanted to celebrate with so happy birthday gifts.
Everybody. Thank you. Thank you. Thank you very much.
And now, let's talk a little bit about the Friedmans escape, which which you can see continues to intensify.
We continue with the money we received it for very long time, and it's actually quite relevant for so many years, we were seeing and as such are.
Mm.
It depends market, but we're seeing 32% decrease in overall cyber attack, we see parent organization on a global basis.
59% use sophisticated attacks like run somewhere you can see the statistics last quarter. One out of every four through realizations was impacted by a ransomware and even more so the talks are now going beyond just the small scale of docs or just hurting groups tour.
To a much bigger impact who've seen country extortion, we'd seen in nation state organization using our Gen five.
<unk> tools and we've even seen a lot of geopolitical attacks happening in many many parts of the world would one countries.
<unk> actually been attacking in using cyber warfare.
So way to disrupt the life.
All of our country.
Is it something that smelled part for real life, and we vote, we anticipate I think almost everyone around us with the strong demand for cyber security will continue we've got continuous wave.
The fifth generation of cyber attacks.
I believe and I think we are seeing with the customers of course would need the best security with you what we stand for and what we are going to provide.
I'm pretty sure that customers will understand and winning the preferred solution with our focusing on prevention and not just from detection of cyber attacks.
I think our view and consolidation will also take a bigger pace, both because we believe with better security and also because most organizations cannot manage the complexity of using tens or <unk> or even more of a different cyber solutions, which is happening and there are many.
Many cases.
So that's kind of the big frontline script, how do we address not just to remind you. We have been checkpoint will be called the Infinity architecture I think it's by far the most integrated the most comprehensive cyber security architecture in the market built on three pillars are free products families want to most of our business.
Network Security Cloud guard.
The cloud and the harmony to secure users ox system now we have an email is built upon a common management player and I'm first club, which actually make sure with all that information is being.
<unk> integrated them proliferate them in real time from one vector to another and we achieved the highest level of security.
Did we do on all these three pillars are in the last quarter and I think the good news is that we've seen accelerated.
Wrong every products pillar in quantum we've seen a nice growth from the low end from the branches and Smbs all the way to the.
Large installation.
I mean, you heard about the product numbers, the promo double digit growth, but even more so the unit growth was also very good and again all the way from the very small to the very large cloud guard since being continuous double digit growth when we've harmony, but we've extended the armani with big investment in humans.
Alrighty last year, we've seen over 50% growth in the email security part which is great.
And I think you already seem to be slide from Tulsa, I'll, just repeat what their shortly when see 9% revenue growth highest Roe for us more than double the rates what we've seen in the last couple of years.
And that's really fueled by the double digit growth in product and subscription you'll see the green line here and you'll see the correlation between the lines when the Green line actually takes up eventually the Blue line the total revenue growth.
And we are very happy about that.
The trend that we've been investing.
For a long time in the last two three quarters, we're glad with the.
This trend are intensifying.
How does it go with the different pillars. So I think the story here is kind of repetitive quantum we've seen strong product demand from the SMB to the large enterprises.
Digit growth on the gateways and let's look at few weeks I've actually starts from the small gateways year and these are both branch offices and also for small businesses. Your two examples utility companies in Europe more than 6500, Ruggedized gateway for the different power.
Power stations that are stationed all over the country and another example is the knowledge the European telecom, but using our products to secure shops across the country zero touch deployment very very nice type of deployment.
And little bit less usual Europe , another humanitarian organization, that's actually using our gateways for refugee housing projects.
This is actually first it's so nice to see that our products are used for such purposes, and it's also nice to see between 2022, one of the first things with her.
If you do get is actually Internet DOCSIS and even secure Internet DOCSIS.
Important so that's another project that we.
Just one and last but not least the 2500 gateways.
Hey, Paul can tell converts using web managed service for again 2500 small businesses across the nation.
Somewhat represent some of the wins that we have in the lower part of the market.
We look at the upper end of the market.
I picked your two examples both of them are new customers both of them are competitive replacements.
You can see on the right the health care provider in Asia.
Support high capacity to get to 20 sites the lifestyle or management. We replaced were 14 American won against Palo Alto and on the left side.
Very similar story slightly different products, that's super high performance with our scalable performance and the reason we picked us it wasn't just for the performance even if overtook maestro is simply because our solution was oh.
Only one with actually blocked the malicious file inventory because they were getting malicious file all the offer solutions that can be tested merely detected with fun, but lets have improved so people can open the attachment and still be infected even above the system in some cases recognize them check point and again, let's continue.
To prove our architecture, we were the only solution that actually block the malicious files it didn't lead to improve and of course with the.
According to this should be a winning factor to get such an installation.
This is for <unk>.
Let's look at one or two examples around cloud guards again here also continued the growth let's look at these two examples in Europe , an important financial institution.
<unk> had the business trends.
Section of it.
Is this acquisition as a result of that they were looking at ways to control their more sophisticated cloud environment.
Pins between AWS.
Sure and the Google Cloud, we wanted the better compliance better visibility and they actually even though by the way in this case. Many organizations are deploying a solution for the first time here, we did replace another solution and one visa com another.
Organization in Europe , a leading retailer.
Part of the.
Cloud transformation.
Wanted to get better Manageability. They liked our roadmap of how we provide more and more security to the cloud and the number of winning factor was the fact that they can connect and control.
For on premise environment in public cloud solution using the same unified experience using similar tools and connect with them in a better way. So in a very nice win in the cloud for them.
Last but not least is the harmonious sector securing users and again, we've augmented the harmony with the email security towards the end of last year and you see the numbers.
Really accelerated there they were good before but we're even better after the consolidation three quarters later the numbers are still growing very very nicely with over 50% growth.
And here you can see two examples.
In the U S. One is.
Holding company, they're challenged by the way similar to what we've seen.
We want to before and Thats. The nice thing in checkpoint, we applied the same principles are the same technology to different tact.
<unk> vector to different entrants victim to the organization. So here it will harm on the email.
They're all security solution didn't stop the ransomware attack.
Harmonium.
<unk> filed over 2800 attacks on very mailboxes.
And not only identified them, but actually blocked them high.
Highest they found the highest effectiveness of email security packages from everything we've seen.
And to the right another a major company in the U S in the safety and regulatory compliance industry.
Harmony was the only solution that was able to deliver to them a unified experience across email endpoint and mobile both cases by the way, it's both new customers and the competitive replacement which is.
In many cases, the best vacation. So we also can see we have been.
Winning streak across all product pillars across all geographies.
Cros.
Many customer segments.
So to summarize.
Yeah.
The quarter, what we had I think you see the main theme here was the double digit.
The fact that we doubled the revenue growth. The fact that we had the double digit growth on our products and subscription, but drives the new business and drive the business growth.
We've got to the upper end of our projection on both revenues and EPS.
And we've continued to see healthy demand more from one from the small to the large and for harmony and cloud garden. So I think overall I'm very pleased with the results this quarter and I hope it will keep seeing.
Good markets in the quarters to come.
Now before we open it for question and answer let me touch.
Touch a little bit on the guidance and the projections for the next quarter, So let's speak about the projections.
Our projections for the third quarter are as you can see on the slide revenues in the range of $555 million to $585 million non-GAAP earnings per share between <unk> $62 70 to GAAP EPS is expected to be approximately 32 cents I always.
This caveat projecting the future nothing that was given to.
Human cry, but I mean, it can be better than what we anticipated it can be worse.
Jim.
I think overall, we are seeing on one hand.
Good execution on the checkpoint field side.
Good enthusiasm for us and our team and the healthy demand in the marketplace on the other hand, I think you all know when the economy is showing some signs of softness.
And there is a lot of uncertainties around the world that something we see and we know that will affect us like the increase in cost. The fact with the supply chain remain challenging.
<unk> module for example, we were predicting that the supply chain issue will kind of get sold in the second half of this year and cost will return to the original cost right. Now we don't think it will happen in the next.
Half of the year that has an impact on the expenses side.
The revenues and the business growth side, that's something that's even less in our control and lessen our ability to project, but again I think we remain quite positive and was actually a little bit up the range for the revenue. So I mean, you can see but for projection for third quarter were actually better than our original plan.
Better than what.
Many of you.
I expect based on your current model.
For the forecast how do you want to add something on the projections before we open it for questions.
You're in Utah.
Now, let's leave it because probably they can ask questions about it.
Let's open the floor for the questions. Good so I'll start the presentation and will open to your questions.
Alright gang as always please limit your questions to one so we can get through as many as we can today, we're going to start out with Greg months Moskowitz from Mizuho followed by <unk>.
Alright, Thanks, Kevin Happy 'twenty.
Uh huh.
Question for scale are tolerant, perhaps both of you regardless of the macro environment Gail if I'm understanding your tone correctly. It sounds like the demand drivers for checkpoint are still healthy and intact, but similar to last quarter. Your billings were a little below consensus.
And in the Q1 period, you had called out that bookings grew strong double digits year over year and that <unk> grew over 20% and so wondering if you're able to share with us what the bookings growth <unk>. The RPI broke late this quarter I will let Paul talk about that but before that I'll. Just say that that is the main reason for that is that a year ago, we had.
Some more.
Mega deals in these mega deals again, we havent been like.
A group of like a dozen customers worldwide.
Even get to not even a dozen less than 1000 customers and I think a year ago. We had free of these customers that signed a three year contract prepaid in advance and I'm talking contracts for tens of millions of dollars, but had a very positive impact on the billing last year.
The main reason this year's excuse me were for your deals, they're not even the renewal or anything like that.
This year, so I think.
Overall for the for the quarter and for the first half I think we finished it.
In line with or not in line slightly better than what I would anticipate four for what I wanted and I can tell you can speak more about the numbers.
Yeah, maybe I'll just add another one because it's important I know, we're going to be asked about it every quarter and you know Greg because we are following us for so many years I've always said the name is not.
And indicators that we provided to you because the reason I said this is always because of that.
Longer deals changed dramatically in that number and the timing of the payment is when and if a deal has been approved by the court has put forward than the others.
And it's a big one that you were seeing the effect of the dealing with absolutely no effect on the real run rate and vice versa and they can they can come one week later it can affect your billing and then a week at a conference that it needs very high. So it is an indicator of that but I wouldn't look at it as part of the bigger picture and that's what I'm trying to give you more color. So.
Last quarter it was not about the comparable last quarter. It was about we talked about that we had to a booking. This came there was not even invoiced, yet and we've talked about that last time this quarter and go yeah. The invoice billings or bookings that came in was not invoiced and they're part of that.
Booking and I can tell you that the new business.
Growing double digit this quarter as well okay.
The biggest effect was really relating to the last year comparable that had a few really large deals but thinking of a customer.
Had a large deal last year as we create a big increase in the building has translated over time deferred revenues and so on.
But in this quarter you wanted to have it so it would actually create a flat or even a reduction although the business is very healthy with that customer.
We can go from just concluding from dealing with that's what I always say you look at the deferred revenues the revenues over time over four quarters and so on so I keep saying the same thing this quarter was mainly about the fact that there was quite a lot of deals last year, but not only was booked in advance but also build.
Helpful. Thank you both.
Welcome.
Our next step is sadly Ani bofa, followed by Adam Tindle.
Raymond James.
Hey, guys good morning.
I want to talk about demand enough skill can you can you talk about your expectations for.
Demand cyclicality, meaning in past years, we had better years of higher growth and lower growth and we're coming here up to three years, so very strong growth.
Demand for core products and beyond just the new products can you talk about your expectations for any demand cyclicality any reasons for demand to slow down or accelerate for core products and second on the same topic, you have new sales management et cetera regions and you have new products could you talk about the breakdown of new customers and old customers, meaning.
Are the new efforts do they help you to bring in new customers that you didn't have before.
But first I don't see much patterns right now in the cyclicality because of course, many factors some people anticipate.
The network security business.
Will slow down because of the shift to the cloud so far we haven't seen that actually for the mistake that we made in the past it may be under investing in the network security and over investing in the cloud on the same time again, the cloud will become and is becoming a very important factor. So I think the investments that we are very well justified so but.
The network security so far remains.
Stronger element.
And from the cyclicality again, we have customers of all sizes all around the world.
So I think a lot of it is our execution, but I think that we may see bigger factors and then just a bit.
In terms of sales management, so I think you're hitting on a good point, we do have in our relatively new sales management re energized.
Leading our field.
Paul was running Palo holding back who is running our global commercial organization sales and marketing and all of these functions joined us about a quarter ago. This was their first quarter and checkpoint.
Before that she was a board member and checkpoints. So she knows quite well and was very enthusiastic about the opportunity it's great to see that refreshed energy.
Her team is also relatively new our head of the Americas has been with us for just over a year and our head of Europe or both.
<unk> is about a little bit more than a year and a half. So I think overall, it's a very very good thing by the way interestingly enough. When you look at this new World. This week very meaty, we're meeting here in Tel Aviv for the first time in person. So it's kind of interesting to see that we have.
Global management team from I don't know five countries maybe more.
<unk> been working together for anything from a year two three years and are meeting seeing each other for the first time.
In person just this week, we started the week by asking everybody to stand up and seeing what you got legs for the first time.
We've made the entirety and we're also very tall.
It's a challenge.
So we are hearing Tel Aviv this week.
So.
In terms of new customers existing customers I do put a strong emphasis to new customers.
We are seeing that successful.
Especially in Europe , and Asia. We also got some nice wins I think I showed them in the Americas, particularly in America and the.
The U S, especially we have plenty of potential.
More new customers that we <unk>.
Joining the checkpoint family.
And a lot of our growth also comes from existing.
Existing customers that expand we're actually seeing that.
In many cases, we win new customers and growing network security and we will end with the existing customers we've actually expanded.
It seems like the cloud guys. So I think the pattern in many cases is that we like checkpoint because of the network security and when we expand to the cloud with a harmonious in both cases, some new customers that start with harmony and some existing customers with expenses.
Thank you.
Alright. Our next question is going to come from Adam Tindle from Raymond James followed by <unk> Kalia from Barclays.
Alright, Thanks, Kevin.
Just wanted to ask you've got some company specific tailwind to both growth and margins as we look for then wanted to double click on each on growth maybe you could recap the pricing actions that you've taken to date, if I've got it right I think there was maybe another one just about a month ago that you took so pricing actions to date that should.
Catalyze growth moving forward and on margin tell you mentioned material cost you also have some currency that I'm not sure immediately reflects so the tailwind to both growth from ASP increases in margin from material costs and currency moving forward would be helpful. Thank you.
Yes, so maybe first on the pricing you're correct, we had the price increase from the beginning of July .
July .
So it's not relevant for this quarter theoretically shouldn't be relevant for the future, but I would say there is a gap between the theory. The theory index reality in terms of what you see when the deals are coming in.
So hopefully it will it would help but I'm.
I'm not.
Counting on it let's put it this way and because there's a lot of pressures also in our customers now because we all in this new economic environment. So it's a tool to try to ramp, but I hope it will help but I'm not sure. So that's one regardless of a dropdown does to capture.
So far the price increases that you are doing they're trying to kind of pay for the increase in Cogs, but from the same time versus a counter pressure on discount. So I think overall, it's kind of bouncing off its not customers are not spending less but if you look at the average customers are not paying a higher unit cost to checkpoint at the moment.
Yeah.
So I don't know what the result is the discount will not increase right I don't plan is to actually increase that.
But maybe who knows I don't think so but we'll see.
We're now looking at the cost it's definitely increased you can see to be honest I'm not that concerned about it because I believe at this point of time I think it's a short term phenomena and much more importantly to be able to deliver I think you can see in many industries not ability to deliver and that's.
The entire Muslim Riley Kimberly our ability to deliver solid focus is even if we need to pay more we want to pay more in order to get it and to be able to ship it to our customer and keep them execute so that's our and the price point is that we lose a few cents, but I don't think it's it's a big deal.
Was hoping that it will fade away in the second half 2022, but it doesn't look like it's going to fade away at this point of time. So so we will follow up and we will update you as we see some changes, but again for a company like US $10 million is nice, but it's not something that move us towards probably right. We are we have profit okay.
And so that's regarding that.
Will it stay the same or increase the gap might even increase right. Because remember every time, there's something you were showing up some things are moving.
So it's just in raw material and some problems are not so and then if you follow the company or the chip companies published it doesn't look like they're going to solve this problem in Q3 I hope in the future. So.
Everything they do publish is affecting companies like I think like servers and other raw materials that are seven needs.
Quite a lot.
Alright, our next step is circa collier.
Followed by Joel Fishbein.
Okay great.
Thanks, everyone and happy birthday kept.
Tal maybe for you just on the Mega deals from from last year.
You talked about a few customers and tens of millions of prepaid.
Just to make sure that everyone's on the same page can you put a finer point on that alright, just so that we can kind of think about that normalized comparable and just to make sure. We're not maybe necessarily miss positioned kind of going forward.
Do you think about you called out in Q3 oven on I think is going to lap just as we calibrate our Q3 billings how much should we think about all of the non sort of lapping year over year, if you will.
I'm Gonna actually joined in September So that's not a big deal and in general I remember, having a few millions rights was when we acquired them. So it will have some effect maybe on the subscription line, but it's not 10% one maybe 2% right. So there's nothing dramatic that but the so that's regarding that a spec.
<unk> acquisition, a few million dollars increased expenses, but it was this year.
And again, nothing dramatic, but when you accumulate a few acquisitions is of course affected like when you looked at our expenses.
Of course, it added to our expenses a few millions of dollars as well right. So that's part of that growth that you're seeing the year over year. When you compare Q2 versus Q2.
And remember on the Mega deals up going back to the belief is.
So very hard to predict right because even if you know that you have in the funnel of specific deal you don't know if it will account for one year three year and what would be the payments right. So this is something that's hard to predict I would say building is a trick.
For you to luxury but be careful not to English overweight, that's what I'm, saying.
Alright very helpful.
Our next question is coming from Joel Fishbein, followed by Brad Zelnick of Deutsche Bank.
Happy birthday.
For you you did it helped.
It helped us with the customer wins.
Round quantum but I was hoping that you would help give us a little color around some of the customer wins.
With regard to cloud Guardian harmony and what the competitive dynamics look like in that in those two areas.
So I think I gave the example of them all fronts I gave a few examples.
Harmonium.
One of them Harmonia email, we want because where we were.
We're blocking filed with Arbor weren't blocking and again.
<unk> somewhere if it was impacting the customers and number one it was that plus the fact that we got the more consolidated view Thursday.
<unk> cases of harmony and cloud guard the markets.
A little bit more fragmented, we actually compete against many many different <unk>.
Vendors cloud for example over the probably a suite of I.
I don't know at least.
Harper doesn't it's much more different even major.
Different sub segments of the market with high ammonia, even more it's from endpoint to mobile E Mail.
This.
And data security. So many categories I think the value proposition, which we provide is not to compete necessarily buy against each of them.
One of the vendors the especially.
Especially on the cloud side, but also on the endpoint, but more providing the overall architecture, providing an end to end cyber security solution and they I think vet completeness of solution. The architecture and division is something thats very very unique to us, especially because these are all integrated because when.
We see a malicious file coming from your email. This file will also get blocked when you're trying to do.
Download it on the network.
And I don't think any other solution does it actually even worse. Many of these average solution will see the malicious file.
We let it through and 20 minutes later will send some alert that says hey, you.
Been infected in which two linked.
And again I don't think that we get the full credit from customers, but to understand it I think we need to do a better job demonstrating showing and winning bet, but we see the fact that this is something that makes the checkpoint security so much better than anyone else.
Thank you so much.
Alright, our next call. Our next question will come from Brad Zelnick of Deutsche Bank, followed by shallow Liao from Cowen.
Excellent. Thanks, so much and happy birthday.
Gil Congrats on the accelerating top line results, which seem to demonstrate strong resiliency in the business.
We achieved first half expectations, you've guided stronger for Q3, but you also gave some caveat is when you got it about the environment and you didn't update your full year guidance is there something youre seeing in real time that gives you hesitation or is not raising the full year just your typical conservatism.
But regardless checkpoint has weathered many cycles and people seem to expect spending on security to be resilient. During a downturn what is your experience from prior downturns and what are you seeing today okay.
Okay, that's very multiple parts and I think they all relate to the same subject markets excellent because I think your question is something that many people here probably worry about first I don't see anything that you don't see I mean, my concern about the global economy is what we all see in terms of the checkpoint salesforce the checkpoint customers I don't see any.
Changes in our forecast already.
Our pipeline.
Feedback as I've mentioned, we're just seeing here for the first time over sales leader in person I havent sense from them that makes sense.
Yeah.
Anything different about the third quarter or about the rest of the year, but we also see the economy and we know that things can happen in terms of the full year guidance that we didn't want to open the full year guidance, we are still within the range, but with <unk>.
Provided the beginning of the year, but we've actually looked into that and it's likely that will be.
Likely to the right there that would be.
We probably won't get to the lower part of it because we've already got.
And some I don't know over $10 million.
Revenues from the first two quarters.
I don't know Paul if you want to discuss it a little bit more detail, but yes. The guidance that we can provide we can calculate to narrow the range a little bit more to the right more to the upper end of the guidance, which we provided at the beginning of the year probably want to yeah.
I'm, just adding brands, it's like I know you know us, but it's not like knowing that it's about giving guidance at the beginning of the year.
We are in a very our quite bizarre microeconomic environment, many different metrics showing up on a different direction unemployment or the one that inflation on the other hand interest rate market. Many moving parts, Ukraine, Russia, there's many things happening and you should be cautious so on day, one and we don't see anything to worry about.
Except for everything that we see around US right. So and we never if you look at our history, we don't.
We have updated our guidance because this is not we don't think you should update your guidance through the year some companies providing guidance only for one quarter that we provide a year in the beginning of the year and then each quarter going forward. So in the short term looking into POC you see quite a good guidance. So that means we don't see anything you'll likely Q4.
It looks like beyond the mountains.
Wait to see what's happening in the in general in the market Q3 is ahead of us and it looks like we gave us very good guidance. So there's not too much details into that launch.
Okay. Thank you.
Alright. Our next question is coming from Shallowly, all followed by Matthew Hedberg of RBC.
Yeah.
Thank you for that good afternoon, everybody. So maybe let me try and continue on.
Brad's prior question.
On narrowing.
The annual range.
Tyler I understand that maybe you haven't done it in the past but.
But in the past you haven't even taken off.
<unk> had a powerpoint presentation that you've started like two or three quarters ago, what's the right thing by the way.
So.
Maybe that you know, it's it's a good point to reconsider that.
Okay.
Watch out.
In other words any reason that you think that you wouldn't be growing at least the midpoint or above your former wide range guidance.
I was going to say you know what I'll take this and next quarter, we'll update that in your guidance.
[laughter] that we're probably going to come again I want to kill.
Kill me, but I think we'll probably be.
Roughly at least $10 million more than the new midpoint should be probably at least $10 million more than the previous midpoint.
On the revenue side.
I think we're very happy about that.
I will say just they all I would just say if you look at Q4, which is the biggest quarter the biggest risk always relating to the product right.
So next quarter and to try and back the very low.
Visibility by the nature of the Beast right, so taking into account the general situation.
Think about it is like six months away because all the booking coming in December just a bit too early to be brave about December that's my opinion.
No argument.
Right.
Alright. Our next question is going to come from Matthew Hedberg follow up by Gray Powell of BTG.
Great. Thanks happy birthday to cap.
Ill.
Been around security for for a long time and you know in prior downturns you were primarily a firewall appliance vendor obviously now it's a much more diversified platform. How do you think some of the newer lines like cloud guard and Hermes will do versus quantum and I guess, specifically is there a higher ROI aspect to some of the newer products maybe quicker implementation.
<unk> versus maybe some historical maybe more transformational type sales.
First youre right.
If you implement the full Infinity architecture, you can get an amazing ROI and you can get much better security.
In much shorter time, and we've seen it.
We've seen it in some installation I think I gave the example in Q1 about one major infinity deal that we have but we got installed through harmonia agent immediately so.
Malware.
We didn't stop there and so with this organization was infected with the we have some really serious.
Buying it from probably a number of country and within two weeks, we completed the full transformation for Vets organization security architecture with the full Infinity architecture. This process usually takes between six to 18 months in most organizations. So I think the potential if you jump into the Infinity architecture and adult.
Both quantum cloud Guardian harmony is huge to elevate the level of security in a short time.
Our most organizations doing but I think unfortunately, there's still a lot of work too.
Develop the work methodologies to convince the customer to jump in.
Deepwater and do the transformation by the way once people do the transformation the Rois amazing you've got one consume one set of products you're seeing.
Prevent again, where everybody speaks about visibility gets much better visibility, but more important to simply block the attacks with other People's Don I think <unk>.
Just some of the cases that we've seen is in flux.
So ridiculous to see another.
Another solution, we taken file let the filing and 20 minutes later, we'll tell you you've been infected we know how to stop the file from getting units infected or another solution you will see a malicious email coming to your organization.
You will indentified an hour later the same file can come from the network because somebody will downloaded it want to be stopped and.
These are all the things that are unique about the checkpoint architecture, we know how to block. All these cases and I think if customers would implement our cloud guard, our harmony and our quantum solution as part of the Infinity architecture will get huge return on investment and much much better security.
Alright, our next question and last question will be coming from Gray Powell.
BTG.
Okay, great. Thank you very much for working me in I really appreciate it.
Yeah. So just to follow up on sort of the macro <unk> line of questioning I was hoping we could drill in on Europe , a little bit.
How has customer conversations has been in Europe .
The last three months.
Are you seeing any changes in the sales cycles. There are any additional scrutiny on deals just just any any additional color you can give you.
Can give us on Europe would be great.
I don't know I haven't noticed any change in Europe .
I mean, that's.
And the market are opened its looks like.
Our discussion around in Europe is the fact that we are seeing that everything is being opened up people behave like there is no corona corona increases, but it's not.
In terms of cyber spending I don't think that I've seen much discussion, maybe with the exception of Russia.
Partly in Europe .
But that has impacted our revenues.
Okay, Yeah, and I would say actually that result in Q2, a very good. So we didn't see like some issues then okay.
Okay. Just in terms of the 12% product revenue growth was up pretty evenly split across geographies or and anything standout Europe or elsewhere.
Generally with any of them.
Tom I had a slide that shows the.
The sales by geography, and where were the same this quarter than a year ago.
4% in Europe and in the.
And in the America.
In APAC, both Q2 last year in Q2 this year in terms of revenues.
Alright, Thank you very much.
Alright, guys. Thank you very much guys and gals. Thank you for attending today and thank you for all the progress.
They wishes and look forward to seeing you during the quarter and.
We'll be speaking to you after the call obviously so.
And.
Okay.
And last year in Europe .
For birthday waiver.
Right.