Q3 2022 Check Point Software Technologies Ltd Earnings Call
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 by E Mail at Kip at checkpoint Dot com. During this presentation checkpoints representatives may make certain forward looking statements. These forward looking statements within the meaning of section 27, a of the securities and <unk>.
Change Act of $19 33, and section 21 E of the Securities and Exchange Act of 1034 include but are not limited to statements related to our expectations regarding our products and solutions, our expectations regarding customer adoption of our products and solutions expectations related to cyber security.
And other threats expectations regarding our Q4 and full year 2022 projections and our projections regarding growing markets for ITT securities our expectations and beliefs regarding these matters may not materialize and actual results or events in the future are subject to risks and uncertainties that could cause actual results or.
Vince to differ materially from those projected. These risks include our ability to continue to develop platforms and solutions customer acceptance of our purchase and purchase of our existing products and solutions and new products and solutions. The continued effects of our business.
Related to COVID-19 pandemic the market for ITE security continuing to develop.
Competition from other products and services and general market political economic and business I think we covered everything. These forward looking statements are also subject to risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission, including our annual report on form 20-F filed with the.
The Securities and Exchange Commission the forward looking statements. In this presentation are based on information available to checkpoint as of the date hereof and checkpoint disclaims any obligation to update any forward looking statements, except as required by law in our press release, which has been posted on our website, we present GAAP and non-GAAP results.
Along with a reconciliation of such results as well as reasons for our presentation of non-GAAP information and finally now I would like to turn the call over to tell pain for a review of our financial results.
Yeah.
Thank you Keith.
Let me start the presentation I was shown in this slide again in case, you missed what Keith was reading tier.
[laughter] and now let's move to the presentation can you see the presentation.
We got the presentation, we got the forward looking statements still excellent. Okay. So let's start with there is no. Thank you Keith good morning, good afternoon to everyone. Joining us on the call today I'm pleased to begin another quarter, which ended up to be a great quarter revenues reached $578 million, which is in the top part of our.
Projections for 8 million above the mean.
Of the projections and <unk> per share non-GAAP earnings per share reached $1.77, which is again.
Five above the top end of our projections. So really good results both in the revenues and the earnings per share before I proceed further into the numbers. Let me just remind you that our GAAP financial results include stock based compensation charges amortization of acquired intangible assets and acquisition related expenses as well as the related tax effects as applicable.
All non-GAAP information is presented excluding these items now unless and dive into the results.
No.
Our revenues increased from $534 million to $578 million. This revenue growth is an acceleration from the 5% that we had seen last year, reaching 8% Intelsat, we still deferred revenues $1.647 billion and 13% growth year over year.
An increase of 190 $91 million billing also be scored our strong and grew by 8% reaching $559 million.
So that's the high level.
Turning to the revenues, we can see the product and security subscription isn't.
Increased by 13%. This is the third quarter consecutive quarter of double digit growth in our product and security subscription revenues were <unk>.
Remember, we had the big targets to have above 10% and to reach the double digits three quarters in Iran. It's very nice to see that reaching $348 million. If we look what drive this total growth of 13% we can see it coming from both items separately one of them is the product and license revenues.
Which is mainly our gateways in appliances, we see again second quarter in a run of double digit growth 11% growth.
Investors in a negative actually last year the growth came from many appliance lines.
Large appliances SMB appliances.
<unk> Master switches, which is the Hyperscale network and and also the smart one which is the management appliances, so pretty much across the board we've seen a nice increase in quantum two <unk>.
If we look at the subscription line also double digit 13% growth, reaching $260 million the double digit growth coming from cloud and harmony, yes, we've seen in the last few quarters. Both of them are in a double digit growth and continuing to grow nicely just as a reminder, this is Dan we purchased.
19 September last year. So Q4, this year will be the year of a apple to Apple compare when it comes to the email security acquisition.
So nice results in the subscription if I'm moving to the revenue by geographies, we had the growth across all geographies also this quarter, 45% of the revenues came from Americas, 43% of the revenues came from EMEA and the remaining 13% from Asia Pacific.
Nothing dramatic here.
If we look at the gross profit gross profit this quarter increased from $474 million to $506 million. This is a 97% growth with gross margin remains around 88% is quite impressive taking into account that we continued to pay additional costs for raw materials and shifting as a result.
The shortages there is some relief in the shortages, but we still pay quite a lot in order to get the inventory on time and to be able to deliver to our customers discouraged workers well about maybe between $8 million to $10 million. There in the cost of goods sold relating to the extra cost hopefully by 2023, and we were seeing more relief.
The improvement in that number which room help in.
As part of next year, although I can say that.
While the relief on the shortage is starting to be seen when we see an increase in the raw material price across many components. So maybe it will end up in a lower cost, but not all the way to the original level, having said that still the margin is amazing with 88% so nothing to complain about.
Looking at the <unk>.
The operating expenses, if you remember last quarter I think it was 20 something percent maybe 24% this quarter the year over year growth is 14%. So it's starting to normalize reaching $244 million. The increase mainly comes as usual from compensation, we tend to travel year over year.
In the face to face interaction and cloud expenses.
Remember at the beginning of the year, we said that our focus is to continue to increase our workforce both in sales and R&D and to continued elevated investments in a raucous as we've seen nice results. There. So in line with the plan we increased our walk first year over year in both in sales and R&D of course, and also other departments and we remain focused on continuing to grow.
In the in the shelf.
So operating income actually this quarter has increased slightly also in dollars.
Compared to previous quarter, we saw some reduction now we're starting to see increased $263 million.
Operating income.
The margin is higher than we planned as 45% operating margin. The plan. If you recall was in the beginning of the year at around 40% to 43%.
It's a reduction from last year and an improvement from the previous quarter.
Our financial income continues to increase as we invest in higher interest rates over time. So it increased from 9 million to $12 million and probably will continue.
To increase slightly every quarter and we've seen also in the past few quarters tax expenses $54 million around 19, 5%.
Again, everything as usual, we continue to see the indexation of the tax provision therefore, we higher than the original plan. So the financial income higher tax expenses are higher net pretty similar.
Similar to what we projected which resulted in net income of $221 million and EPS of $1 77, which is 5% above the top end and 7% growth.
Year over year, GAAP, net income was $184 million or $1.47 per diluted share.
If you look at our cash position cash position remains very strong our cash balances are three $6 billion. Our operating cash flow was strong at $240 million. This quarter a collection from customers continued to be very healthy of course payments naturally increased as a result of the elevated raw material.
<unk> costs that we have to pay for an investment in the workforce as we discussed.
And during the quarter, we continued our buyback program and purchased two 7 million shares for $325 million on an average price of 122 doors.
So if I summarize strong quarter strong revenues and earnings per share strong billing revenues above them each points non-GAAP EPS exceeding the top line, we see double digit growth both in products and in security subscription and we continue to focus on the top line, while maintaining a very strong profitability.
I will turn the call over to Dean for his business review. Thank you.
Okay.
Thank you Tal and I'm very glad to see all of them a few here, but I think one just like Tom said the number.
Good quarter, but we have so I would like to give you a little bit tough.
Highlights both on the state of cyber security are mainly about many innovations in the new technologies that we've actually launched in the last couple of months, but we're pretty active so first the because we all know the state of cyber security remains very active very challenging you can see here just fewer tax from the last few months Australia.
It's pretty bad everything from.
Retail to telco U S. We see a major case in L. A school district healthcare system in the U K attacks are carrying every day in our <unk>.
Very much reflected also in the statistics that we see 28% increase in the <unk>.
<unk> weekly cyber attacks globally, reaching over 1100 attacks per week per organization, let's think about normal.
Normal figure and we never get to this kind of level.
One out of 63 organization is impacted by running somewhere and visa attacks are all over them and we've seen countries being exported as the whole country. We are seeing the effects are getting more and more sophisticated with gen. Five fifth generation cyber attacks are taking a bigger place and again, it's coming from everywhere.
And it's impacting pretty much everyone.
And we do believe it through as an answer to that look around us everybody says well cyber it's maybe an unbelievable problem. We think it is solvable and we think that the checkpoint.
Infinity architecture is very very uniquely positioned to solve it it's the only prevention first.
Consolidated security that addresses all the key.
Victories on B.
Network on the cloud to the users and Thats pretty much by the way.
The structure of our Infinity architecture, you can see the three pillars of the top one two cloud garden Armani, who handle the network. The biggest part of our network to the cloud and the harmony for the users and their access and this quarter or last month, we've actually launched a new family Horizon, which focuses.
For the first iteration on managing the security operations.
So let me speak a little bit about the horizon I think it's fairly exciting so the first product in the horizon assemblies, the horizon, what we call NPR NPR.
MTR stands for managed to manage detection and response, which means.
Analyzing everything Thats happened on your environment the network the endpoint and so on.
And.
Trying to detect and respond to attacks will not like to call. It in VR, we actually like to call. It NPR managed prevention and response.
Think that's fairly unique in the check point architecture.
One solution that actually prevent the attack cannot detect them. It's also and again that's also a fairly unique the one solution that works across multiple attack vectors, but not just most of these solutions are addressing only one vector we know how to combine better more attacks.
It is based on a very solid foundation that we built in checkpoint that lot of engine a lot of automation tools and the idea here that this can be outsourcing providers.
<unk> solution.
So and then when you think about it most organization cannot afford.
<unk> Security Operation Center think about center, but you have a security expert sitting 24 by seven that's very very hard to get access to these people to develop the work methodologies and very expensive.
But something between seven by 24 is millions of dollars to operate in our service provide just vets and outsources versus the SaaS service for organization, we launched Betsy If you remember we talked about the rocket.
Structure at the beginning of the year. So this is one of the rockets, we launched in the beginning of the year.
And now we are ready to launch the products for the mass market just to keep in mind, we already have a few hundred customers on our <unk> platform, So which is actually having a lot of direction since the beginning of the year and we hope that it's now ready for prime time.
I think that this one is going to get us access to a pretty big market.
People expect it to be it's already a crowded market with many many small companies, but I think what you can see here just like IDC analysts are saying the checkpoint horizon of prevention first is a game changing feature for these markets. So we definitely hope that is going to be a good then trust, where an interesting market and the platform by.
The way for more technologies and more products.
Next and I think if you remember our commitment is to provide our customers with the best security, we've always slogan who deserve the best security and we keep working very very hard to elevate the level of security, we give our customers.
And then just the last few weeks, we launched the new quantum Titan.
Set of technologies for network security customers of its right in the core of our business and I think it's very very important. So let me talk for two minutes about what's included in quantum tightened its free to remember architecture based on what we call software blades.
The new software blades, the first tool the DNS security and the zero fishing.
Kind of hardening the security with any customer can happen by the way fishing and DNS are two of the most critical attack vectors that are being used by hackers today DNS is one of the only protocol, which remains open to the internet from any company DNS them for the domain.
Network service and Thats, the one that resolves over IP address checkpoint that come into something that our computer can access. So it must be open in the hikers are more and more finding ways to use the simple protocol to.
It's an attack vector whether it's to transfer information between a computer, it's operator or to leak information and even for some of your more severe cases.
So now we have a new blade, which focuses solely on DNS. It's based on AI based on deep learning and it can address as many many attacks and similarly sold the zero phishing prevention blade.
Again, if you look at phishing attack when somebody redirect you to the wrong site in there might take your credentials and use them to.
To strike back.
Many of these attacks are being analyzed in a few hours later after they start or is a signature that besides should not be accessed unfortunately, most of the damage and fishing has done in these early hours and many of these types actually go offline. After a few hours and they are being replaced with new sites, our zero fishing technology does it and really.
Time analyzes many many factors around the sites.
And can block access to the wrong side, you can see the results of that.
Zero fishing, we get Forex better.
Ability to block.
Fishing sites have been signature based technologies with the DNS blades buybacks better more attacks blocked compared to signature based technologies and I think this is very very impressive.
Impressive results based on advanced AI and deep learning technology.
Last but not least is the quantum Iot protect software and this is far more than better technology.
Technology on the main gateway factually and whole new system too.
To protect Iot devices, and Iot devices now post some of the biggest threat to any network because these devices cannot be controlled.
In many cases, they are fairly simple and that also means that in many cases, they are fairly simple to use agreements and attack vector to get into our enterprises.
Now there is a whole industry of Iot security vendors many of them on our partners, we like them, we work with them, but what we focus today is what's called discovery. They met your network that gives you at least of all the devices that you have and I. Just recently met the customer says well, yes, we got the least <unk>.
Poland Iot devices on the network now.
Now what do we do it takes months to understand what's the threat from each one and by the time you do that.
New devices in Brazil Fritz.
And I think thats, the beauty and the focus that we have on the quantum Iot protect which I believe is unique in the marketplace.
Is being translated from automatic discovery. That's included in the product into autonomous threat prevention. So we've taken a network map, we automatically map it into security profiling security rules.
Limits, each Iot access and reduces drastically the attack surface is eliminates the ability for somebody to get onto the device are mainly to use that attack is to launch put four four.
For additional layer attacks, which is that and this is by the way part of the much broader Iot solution that we have been checkpoint.
But we can harden Iot devices, steer more and do far and annualize them and do far more than that to give the most comprehensive bill.
<unk> for Iot devices on the network. So we're very proud of that that was just launched a couple of weeks ago and I think it can be.
A great platform for market expansion and remember always free blades with as just described we don't require the customer to use another vendor to build a new set of system, which is all plugged into the existing checkpoint quantum gateways and quality management, which may have so this is the.
Again, another breakthrough in this industry and you can see that we got some good quotes here a larger promotive company in Germany.
So that it works clerks in the U S again use the new two new blades and silver with it actually works and I think this recognition comes from many different areas you can see some additional costs that we got from Forest service once again put us in the.
Leaders.
Part of the Forrester wave.
And even more important because we've been on that leader for many many years in many analysts is to say, what we liked about checkpoint customer obsession and into my ruble prevention vision. So they got it.
For other products as well <unk> for the cloud growth posture management, you're going for our harmonic connect southeast solution of its early in the market.
Seats in the fast mover.
Category. So we're very very proud of this recognition and many others you can see some customer wins from.
Financial services in the U S to win Big University in EMEA, a carnival cruise in the U S. If you remember we launched another rocket based on our.
Acquisition a year ago.
Email security, so harmonia email continues to be a fast growing.
Platform for us and being.
Being record being bolted recognized by many customers and last but not least is the new horizon MTR MTR arch one of the large energy companies in the U S peak swept up and see that it works, but this is actually enables them to.
To stop attacks in real time, and last but not least is the third year in a row with Forbes speaks us as one of the world's best employer and I think we're number one in terms of cyber companies here, which is makes us very proud and I think it also shows a lot about the employees of checkpoint how proud they fill in the portfolio, which we bring to the mark.
<unk>.
So to summarize.
I think we finished the quarter with very strong financial results.
Above our midpoint and better when the euro expectation EPS, even better outside our range $1 77, and more important than that is the innovation because I think this quarter, we really really delivered on our vision and mission we've deal horizon platform with the quantum tie.
And really elevating the level of security that we deliver and the customers. So I'd like to thank you for being with us.
Actually before we open it.
To your question one more thing, let me speak about our projections for the for the fourth quarter and update the ranges for the year.
Hmm.
No big surprises here and I think this is a fairly good.
Revenues are expected to be between $608 million to $658 million.
Very much in line with what we planned at the beginning of the year and despite all the turmoil thats going on in the market.
We're seeing steady.
<unk> been very very good results non-GAAP EPS is expected to be between $2 22, and $2 42.
GAAP EPS is expected to be approximately 31 cents less.
And I think these are all very good and healthy numbers that we will have I always remind you my caveat projecting the future is always very very challenging.
High level of uncertainty now in particular I think on one hand, we see.
Very good feedback from channel partners.
Need for cyber security is obvious but from the same time, we cannot ignore the economical uncertainty around us and I think there is a higher level of uncertainty now than ever.
I hope that the good signs that we see again from the channel from the need for cyber and from the Amazing technologies that we launch we'll end up with.
With very good results.
And last but not least is the how does that fit into our.
Full year projections of what you see here in Gray is the poorly ranges from $2 2 billion to $2 $375 billion.
Now that we give the guidance for the projection for the fourth quarter you can see what the updated range for the year will be from 2 billion 901.
$2 billion to $199 million to $2 billion $349 million that means that we are placed very much at the high end of our projections from the beginning of the year no surprise, but.
Makes us.
The vet and similarly sold for the non-GAAP EPS original range was $6 90 to $7 50.
The updated range is $7 20 to $7 40, which is again at the high end.
Of bps expectation GAAP EPS expected to be dollar and 22 cents less services.
An update on the projection and I think it's a very good one so thank you very much and I would love to open the call for your questions.
Alright gang excuse me.
As always please limit your questions to just one so the rest of the analysts.
You don't have to make step up later on.
Our first question is going to come from Keith Bachman from BMO, followed by Hamzah firewall.
From Morgan Stanley .
Okay, alright that many thanks.
Good morning, good afternoon.
I wanted to ask I don't know.
MS Taylor Hill, but I'll throw it out there.
Is.
The journey to double digit billings look like in other words, you had a good quarter, 8% billings growth and even sequentially I would argue is better than normal seasonality of the building.
What needs to happen from here.
Yes.
In order to reach the double digit range that we've talked about for a while and specifically within the context of the question. If you could give us any update.
Sure.
On current demand trends in other words.
During the quarter as you look over the quarter ended December at trends gotten any better has demand across the industry gotten any better stay the same or gotten a little bit worse.
Sort of a micro update within your journey to double digit earnings growth. That's it for me. Thank you.
Maybe I'll start with that.
Can you hear me okay.
Yes.
Maybe I'll start with a double digit question. So when you talk about billing and remember that's one of the metrics that we don't really whats youre using and Thats why we gave the Q.
Our sense is the billings would have been a reflection of the annualized which means we will issue a billing for one year when it should be in line with our revenues over time. So to your question how do we get to billing double digit is when the revenues will reach double digits right, maybe it can be slightly earlier and in avoiding fluctuations that can happen, which.
When coda is when you get a deal yet.
Sometimes a quarter later, but in general in the absence or stable double digit mutually in a stable budget digit in the P&L. Excluding the deal that you can get a multi year deal and then it can get you to a strong double digit numbers Q4 last year. For example that was a strong double digit newish that's constant.
Because also there was a few multiyear deals it will deal and Q4 typically can be that time, you can get a very large scale.
And that can create a higher number but stable one has to be in link with revenues, reaching double digit. The good news is we reached double digit bulking product annual subscription support is not been double digits anymore right. It's a low single digit so to get to a total double digit you need even more accelerated.
<unk> of the product in the subscription in order to get to a charter I hope that answers your question.
Any comments on.
Just within the.
How did demand trends there within the quarter.
Companies like Microsoft have called out incremental weakness in demand trends service now not so much but just any change in aggregate demand that you're sensing that occurred during the quarter September or as you look over in the December quarter.
It was a Sunday was very strong for us but for US it's very hard to know because remember that majority of part of the booking activity comes in the last months in September and Q3 is quite a small quarter so as applications.
Medications. So it's very hard to conclude that also by the way when you're talking about Q4.
Majority of the number actually comes in the last month and in the last week. So it's very very hard to have also visibility when you look into Q3.
And Q4, each quarter right, but it's also very important for growing choice very handy.
Okay I'll get back in queue. Thank you.
Alright. Our next question is coming from Hamzah firewall, AR and with Rob Owens.
And the whole.
Got it.
Thank you so much for taking my question and congrats on a well earned sabbatical.
I'll keep it to one.
Todd can you remind us.
What the pricing impact.
On the growth rate looks like after the discounting and just any thoughts you have around pricing going forward just given the fact that the dollar has gotten so much stronger than you do price in U S. Dollar.
Our regions.
So good question because on the one hand, if you build it in an excel file then it should be a nice add.
A tailwind right because you have an increase in the price and the and the dollar getting stronger so but on the other hand, you have the customers, which we have many around Europe and Asia and prevent the budget actually effectively shrink in that we got so I think previously we've seen somewhat this phenomena filings themselves.
When I look at the it's clear to me it looks like its balance we didnt have an increase in the discount rate probably because of balanced each other Q4 again. It has been quarter Q3 is almost nothing indication for anything because it's smaller so in Q4, I think we will have more cartilage.
Thank you.
Next step is Rob Owens, followed by Michael tourists.
Great. Thank you very much and thanks for taking my question I'll take the opposite side of <unk> question, and maybe FX relative to Opex.
Number one can you remind us of the breakdown of Opex shekel versus non U S dollar versus taller.
And number two maybe around your hedging policy policies for the shackle, what hedges you have in place when they roll off and impact of rehashing textile.
Sure. So I'm, putting aside the balance sheet has because that have an effect on the cash flow for the P&L is pretty much <unk>.
Minimal right, so you're talking about the operational and we hedged in the beginning of the year pretty much the whole share count and also the euro. So in vast majority of the exposure is probably to get there.
Maybe 50% right I think the shekel might be 30%.
And that's the major one so if I'm looking now it's actually working for our benefit for next year, meaning if it will stay that way it should be here, we got the hits from all directions, right, whether or not we.
Hadn't increased costs, we had the currency against US we had probably around $3. One I think if I recall. So next year. If the dollar will stay that way hopefully it will help us and so for this quarter, we enjoyed from it slightly but nothing dramatic because most of them onto our hedged we're exiting <unk>.
<unk> from the currency that were not hedged, but it's a smaller amount because the majority of the exposures you needs to Indonesia, which is the shekel of R&D is located in Israel, and Europe , which is the euro.
So hedged in the U S, which is don't go anywhere.
Alright. Thanks.
Yeah.
Our next caller is Michael threats, followed by Andrew Nowinski.
Hey, thanks, everybody very solid quarter, and obviously tough environment, So maybe you'll pursue.
Keith Bachman question about double digit.
The clarification, Tom regarding revenues and billings, but from a fundamental perspective in terms of what would be the catalyst to get you to growth with record billings or revenue that economic growth over 10%.
Theres so much this wonderful in your product line and it keeps expanding.
So does the real trigger for that acceleration to something where you're really gaining share within the industry and the double digit is that trigger on the sales and marketing side.
Something else within the product line, so fundamentally what gets us there.
So I think over the last few months, we've built a lot of infrastructure prevents part of it is of course, having better products and better technologies and it's always been a strong point, but I think a lot of it is also about ourselves as execution just to remind you. What we did this year and I think we did a lot of them that we are in the still in the building phase we've started the new <unk>.
Victor we've rockettes, which pushed some of the new technologies, we've created a new go to market there with what we call commercial organization and they have a new head of their true Powell, who joined US in March I think.
We put a big investment into getting more frontline sales more people that would address the customers and go there and I think we're making very good progress on all of these initiatives I think there's definitely plenty of potentially all of whom will be right.
And I think I'm quite positive about the <unk>.
Both the midterm and the long term potential prevent and in the short term since the beginning of the year, we actually saw pretty good signs internally.
How would we translate now in the fourth quarter with everything around us that remains a good question, but as you see we have.
Very solid.
Very solid the projections for the for the revenues and EPS.
Thanks.
Next step is Andrew Nowinski, followed by <unk>.
Okay. Thank you.
Congrats on a nice quarter this morning.
So I wanted to ask about <unk>.
Indeed, some of the enhancements you've made to that subscription. So first you noted that horizon, the new one could be a game changer.
And you launched some other enhancements to clients on that you mentioned. So the question is do you think these new product launches and enhancements will be enough for your subscription growth to accelerate cost going forward because it seems like it may have peaked at that 14% level on this.
Maybe DSR and I'm just wondering.
I think we have plenty in our portfolio I think our portfolio today is very long term want to say too wide, but it's very very deep and wide and I think no. Other vendor has this kind of portfolio for addressing all the needs of security. The challenge that we have today is actually to educate the market to get the adoption of <unk>.
Architecture.
Once again, we get great feedback I mean, you can see some of the feedback that we get from customers room channel was about the.
The message about Infinity, resonating and again I'm glad to see if remember it skew years into vet and sudden now.
Getting more and more traction business lives. The potential is almost unlimited we are really really at the early stages of that.
And that will be the catalyst of growth in the <unk>.
Subscription growth.
Everything but.
Our number one focus.
Thank you.
Alright, our next step is for chemo Bolani, followed by Brad Zelnick.
Hi, a question for Tal Tal. Thank you so much for your partnership I Hope you had a very productive sabbatical.
I wanted to focus on the product gross performance in the quarter.
I mean I understand there is a number of factors here, especially I think I was hoping you could break that the inputs down for US I know you mentioned in your prepared remarks that the appliance families. All of them did well, but if you can give us a sense of how much some of the pricing actions you took this year and keeping remind us from any of the cuts this year, how much that impacted that.
Product performance as well as I think historically, you've talked about customers, who purchased the infinity package they tend to pull product.
Their discretion so how much of the product performance is more of a catch up from some of the Infinity transaction that you may have done in the past quarters that didn't necessarily have that product revenue recognition component. So just some more granularity on that the product revenue strength.
There's a number of factors in there. Thank you.
Remember that <unk> is now part of the module right. So every quarter you signed deals in every quarter you recognized some deals based on the pool. So there is no discrepancy between the signing and the and the pull at this point.
Probably around similar number if we looked at the beginning of the last <unk> was a big discrepancy because he signed contract by Acos, even happier again, nothing extra dramatic but still it takes some time for people to pull it.
Let's look first at the project connect what I was referring to is if you ask me from the beginning of this I can tell you product you can see it's performing well from the beginning of the year is both in units and in dollars.
It's not all of the product family this quarter I mentioned the specific one it was the large it was small it was SMB. It was a smart one and it was the switch is showing its majority of them, but not all of them just to be correct. Okay.
But it was a strong quarter.
And it's coming from.
Our dollars when I look at the full year, it's probably similar.
This quarter I think.
When you talked about the price increase there were two price increases this year I think the first one was in the beginning of the year and the second was in the beginning of this quarter and probably again I'm not trying it for my mind I think the previous loan was 7% and this one had a range maybe around six 7% side, but at the range depends on their plans.
Most of it was 18 by the discounts right. So it's balanced itself. That's what I was referring to when I said at the end it sort of balances itself.
Thank you Tom.
Next step is Brad Zelnick, followed by Jonathan Ho.
Great. Thanks, so much and good morning, everybody.
And congrats Gil and Tal on the strong execution, even if Q3 isn't necessarily seasonally indicative of what's happening out there, but I wanted to just to revisit the investments that you've made into sales and marketing capacity can you remind us exactly where you are and specifically the productivity ramp and how it's playing out versus what you'd expected.
How we should think about additional capacity coming online even even into next year. Thanks.
So first I don't want to say specifically from a competitive reasons exactly where we stand in each place in each location, but in terms of productivity is actually not expecting improved productivity because as we add more salespeople. The new people are coming is very low productivity and it takes them between six to 12 months to ramp up to the normal productivity that's kind of.
The productivity scale with we have our focus this year and again I think it is very important.
Get the much higher number of frontline salespeople people with address customers I think that's one of the key elements that we have is simply being bold enough and going to new customers and showing them. The checkpoint portfolio. We are seeing a lot of these customers are now seeing a lot of people visiting us on our executive briefing center here in our headquarter.
From all over the world. The reactions are amazing people people with loves US no doubt, which may keep liking what we the people that didn't know was people that haven't heard from us for many many years, they really like our revision and we need more people in the grow on the ground to actually deliver the checkpoints message.
Existing and to new customers.
Great. Thank you.
Okay.
Next step is Jonathan Ho followed by <unk>.
Thanks, and let me Echo my congratulations as well call on your well deserved sabbatical one thing I wanted to dig in a little bit is with your announcement around horizon MPA M.
MTR in MPR, how do you think about going to market with that product is there a need to sort of educate the channel as well around your capabilities here and it does strike me as being a little bit of a different go to market than what we typically see on the product side. So just any color there would be helpful. Thank you.
So first you're absolutely right and we are doing work and we are doing that since the beginning of the year. The good news is that we have a lot of people hear about it we like the idea of retried in many cases restart on the.
On the mid level or small scale and when we scale up.
And the demand is there.
That what we call a rocket, which as an organization with focuses around that so we can deliver the right.
Some attention, but the good news, but the demand is actually coming from our salespeople and from our channel partners.
By the way theoretically a potential of being with some conflicting the chosen partners because some channel partners may offer services in all we are very very careful whenever we launch new services.
To limit the competition or the conflict, we've already channel partners and so far the reaction from the channel is very good because most channels cannot perform this level of service and we're actually like to be in that market and when it goes to other companies in the field or other startups in Brazil, we do not participate here they can participate with us.
So overall the reaction is but again, it's very very small remember we're talking about very small numbers, but we're already at hundreds of customers that are connected to our stock and that's a big number I mean, I'm looking into our companies invest space and there is not a lot of companies with hundreds of customers that we're serving.
Thank you.
Our next caller is <unk> followed by <unk>.
Okay, Great Hey, Thanks for taking my question here and congrats Tal Tal as well Gil.
Gil maybe maybe for you just to just to zoom out a little bit you've been through several firewall cycles before.
Over over the decades that you've been in the industry I guess based on on your customer conversations.
Do you still feel like there are drivers for healthy growth in firewall going into next year or do you, maybe see a little bit more of a normalization.
I know there are a lot of factors, whether its supplier pricing, but but from a demand perspective, how do you feel about that and I understand I'm not looking for 23 guide, but as an industry. How do you feel about sort of growth prospects for firewall going into next year.
So very good question and I think if there is one mistakes that we've made in the last few years is actually thinking that we should invest more in other technologies in less apparel, because I mean, there is a very very healthy demand in firewalls today, I think people more and more realize that as much as we speak about advanced technologies and more environment.
The network is the best.
And it's the most important vicksburg to defend our enterprises, especially as you look at more applications and more.
And the more Iot devices and things like that that simply cannot be protected using our technologies.
No.
When I look into next year I don't have any strong indication one way or the other I am very very positive about our potential because we have plenty of potential not just to grow with the market, but also to grab market share and I think with the level of security that we provide now with quantum tightened everything we're doing for quantum platform, we need to work.
Much much harder to show the differentiation our gateways our network security platform.
We're doing far more than any other solution in the marketplace. You can also see the consolidation things that.
A few years ago, everybody felt will be a separate sub system and a new category are now it's very obvious to everyone, but they're part of the gateway between our part of the firewall. So the consolidation does take place and.
Sometimes it's a big struggle, sometimes it takes a few years, but clearly we are seeing with that.
Let's put it that way there is not many other platforms that emerge as critical or major platforming cyber security and.
The gateway and it's not just the firewall is the.
Actually they may be the biggest one.
Very helpful very.
Very helpful. Thanks.
Next question is with shallower a shallow liao followed by Joel Fishbein.
Thank you good afternoon guys congrats.
Tom quick question, so two quarters ago.
You shared with US your RPM number indicated indicating is going to be doing it on just a one time basis.
Maybe just before you depart on your brief sabbatical.
Can you leave us with some color on it just Conor.
And also if I recall correctly I think you might have mentioned that or maybe you did you had some mega deals back in for Q21, So how.
How should we be thinking about it in the context of your updated for Q 'twenty two guidance.
I can start with the first part.
I'm, sorry, because I didn't listen to the second part the might've, even as I have said this market back and I'd say I'll start with the first part.
<unk>.
So we talked about we said without providing because again, it's a backlog which is affected by many many factors, including mainly the multi a transaction, but if you really wanted I can tell you to double digit as well.
Got it.
Double digit growth.
Okay.
Good thank you congrats.
And you will see it in the annual of course, because we do provided every every annual rise as part of our financial reports, we will have to wait patiently to February .
Okay.
X plus O a dorm room at the second part sorry can you repeat it.
The second part of it was about the Mega deals.
In the context of your bank.
Mega deal for <unk> 'twenty one.
Out of that they are provided for Q2 guidance.
Question on Q4 last year was.
Heavy on Mega deals.
Maybe for deals.
Four five deals around 10 and above so it's.
Quite heavy which can again affect the billing very hard to predict those one because multiyear can affect significantly.
But <unk> is very healthy and growing somewhat conservative around that billing can be affected always that's why I always say watch out from the billing number it can fluctuate between quarters easily.
Understood.
Right.
Our next question is coming from Joel Fishbein, followed by tile Liana.
From Bofa.
Thank you for taking my question and congrats again to you for your sabbatical.
To follow up with a question for my good friend show on number one visibility into 'twenty, three obviously not asking specifically, but also.
Asking if there was any.
Deals that may have been pulled into three Q early renewed in <unk> and we've heard that happening as well in this environment love to hear any color on that thanks Tom.
And I don't think I saw anything major pull from Q3 to Q4 I did see actually some pause in Q1 and Q2 from Q3 and Q4.
And.
You always have pools. So yes, we had in Q1 I think we had in Q4 from Q1 last year, it's always happen and that's what I would tell you what's out from drilling not to get overexcited, rather depressed. It can fluctuate easily many times in depends on customer budgets and timing.
I didn't see anything dramatic between Q3, and Q4 I did see a few multi year that relates to Q4 that came last year and also collected last year relating to.
On the previous question, that's why I mentioned.
Yeah.
Great and then just to follow up on that is are there are there is still a mega deals in the pipeline in this for Q coming up.
I think that was Charles point about there being maybe a hole in the sports you relative to last <unk>.
We have a lot of large deals of course, because Q4 is heavy on large deals back there.
The more thing is many times depends on the customer and not on us and that's the way it can create mix shifts because this is the first we knew coming in.
Because you have to.
We decided to take five years as a new $50 million, it's really not in our hands and even now and I'm thinking because yards because interest rates are so high.
Probably less attractive to customers to pay in advance with such a high interest rate around so probably you would expect less.
Multi year again, no effect on the run rate or anything, but it can affect billings and bookings.
Got you. Thank you so much.
Sure.
Yeah.
Alright, our next call is coming our next question is coming from <unk> line. It doesn't look like Galliani it must be as associate.
Followed by Greg Moscowitz, who will be our last question.
Yeah, Hey, this is chalmers doberman on for <unk>, just a quick one for me.
EMEA growth was a little bit lower this quarter than the past few quarters is there anything to call out there and how is the new sales leadership across the region and progressing thank you.
I didn't hear that.
The question was about demand that may have looked like it's a slower growth so and that is actually doing well with fuel issue by the way around Russia.
Is there keep in mind that with Russia has been a good market for us in the past and right now the revenue from Russia is very very minimal given the political uncertainties in this reflection on accounting.
Beyond veterans again, Europe for Us is doing well the sales leadership the latest senior sales leader, but we added was in the U S. But in the next few levels of regional directors and so on both in the regional Vps now we've elevated that level in both U S and Europe .
We got some new people and we got some very good people that are doing.
Good job in restructuring and building things the right way.
Anything else that I missed on that one.
Your line is mainly Russia affecting our revenues as it was in a nice part of those little fewer personnel so was expected.
Yeah.
Got it thank you and congrats Tom.
Thank you Paul.
And last question of the day will come from Gregg Moskowitz. Please proceed.
Thank you Kevin.
Semi congrats Italian I think one interesting analysis, Todd will be comparing the number of miles that you log over the next six months with the number of hours that each of us spend processing earnings during that same time so.
Mike My question for you is it on a net new business I recall, you, saying that you did see double digit growth in.
Net new business in Q2.
Curious kind of how that looked in Q3, and then any comments as it relates to <unk>.
Not.
Sort of expansionary business per se, but just.
Prospects when you look at new customers as part of the pipeline any commentary that you can add around that.
Well thank you.
And so I'm trying to remember now I apologize.
I think it was a high single digit the new.
Maybe you can take the second part and I'll just clarify it okay.
Second part of what about the new customers than we.
We do see every quarter, some very nice wins, new customers. There sure are still not big enough, we need to focus and do more about about getting new customers on where people are still finding good then.
Great place to expand within our existing customers, but that's actually varies a growth region in Asia for us more new customers. There are some markets in the world with people have learned how to bring new customers and vets very very big focus that we invest by the way.
Some of the new hires to our Salesforce, we make them hunters and focus solely on new customers. It's a long journey, it's not an easy one it's not coming easily but it's an investment that I think will work because the potential is huge.
Yeah and to your question it was high single digit as a remember this.
A large deal that was supposed to be in Q3 and improved Q1, that's what I answered two questions before and that new portion actually being brought earlier.
Alright terrific. Thanks, I appreciate it and welcome.
Well. Thank you everyone for joining us today, we appreciate your participation in our earnings call and we look forward to seeing it throughout the quarter.
And into the new year.
Thank you and all of you take care Bye bye. Thank you very much bye bye.