Q1 2023 Check Point Software Technologies Ltd Earnings Call

Speaker 1: During the formal presentation, all participants are in listen-only mode, and this will be followed by a question-and-answer session. During this presentation, Checkpoints representatives may make certain forward-looking statements within the forward-looking statements within the meaning of Section 27A.

Speaker 1: of the Securities Act of 1933 and Section 21e of the Securities Act of 1934. Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements include, but are not limited to, statements related to our expectations regarding our product solutions expectations.

Speaker 1: related to cybersecurity and other threats. 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 events to differ materially from those projected.

Speaker 1: These risks include our ability to continue developing platform capabilities and solutions, customer acceptance, purchase of our existing solutions and new solutions, the market for IT, security continuing to develop, competition from other products and services, general market.

Speaker 1: political, economic, and business conditions, including as a result of the impact of COVID-19 pandemic. These forward-looking statements are also subject to written certifs, including those more fully described in our filings with the Securities Exchange Commission, including our annual report on Form 20-S. The forward-looking statement

Speaker 1: in this management presentation are based on information available to Check Point as of the date hereof and Check Point disclaims

Speaker 1: 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 and the reasons for our presentation of non-GAAP information. If you have any questions after the call, please contact investor relations at gapatcheckpoint.com.

Speaker 1: Now I'd like to turn the call over to Roy Galon for a review of our financial statement.

Speaker 2: Thank you Keith.

Speaker 3: And thank you for everyone for joining the call. Let me just show the presentation.

Speaker 3: Yes, so I'm excited to be with you to present our results for the third quarter of 2023. Our revenue this quarter reached $566 million, which is $1 million above the midpoint of our projections. Our earnings per share were $1.80.

Speaker 3: surpassed our endpoint of our projection and 7 cents above the midpoint of our projection.

Speaker 3: So despite the market uncertainty and the tough macro environment, we delivered 4% growth based on our projections and reached our projections and delivered 15% growth in our earnings to $1.80. So that is all we deserve!

Speaker 3: Now let's dive to the detailed view of the corridor. As I mentioned, the revenue increased by 4% to $566 million. Our deferred revenues were halved by 8% to $1,797,000,000. Our shortened deferred revenues were up 2% by 8%.

Speaker 3: Our calculated billing reached $485 million, a decline of 3% year-over-year. Let me remind you that our billing is affected by duration, payment terms, and in this kind of market uncertainty, we saw this quarter fewer customers willing to pay upfront for multi-year deals, which resulted in shorter billing duration.

Speaker 3: If you are looking on our current calculate billing, it was actually up 2% EO bill.

Speaker 3: Our product revenues declined by 7% year over year. This was the result of the market uncertainty that resulted in extended sales cycles and in the several projects, mainly refresh projects in the quantum appliances. And we see more cautious spending by customers around the replace projects and

Speaker 3: If we're looking on the sexuality subscription, we had a very strong quarter with 13% growth over the region and reached $228 million. This double digit growth was driven by our CloudGuard and our email businesses. This was both a strong double digit growth, both in revenues and both in new business bookings. You'll need all these options

Speaker 3: Also, we see that we had a great quarter with infinity to continue to flow in an accelerated way to our revenues and at least a growth of over 140% in our billion revenues.

Speaker 3: We see that we reached a key milestone of 80 percent of recurring revenue out of our total revenue. Actually 81 percent of our revenues are recurring revenues, which are the subscription revenues plus the support and maintenance revenues. And out of this 81 percent recurring revenue, 50 percent of them are subscription based.

Speaker 3: And we see a consistent growth of our subscription and our recurrent governance over the last few years.

Speaker 3: Now let's look at the revenue by June . Forty-five percent of our revenues came from EMEA, 43 percent of our revenues came from America, while 12 percent of our revenues came from Asia-Pacific. Let's dive now to the P&L eyelash for the quarter. Our growth profit was increased by five percent to five hundred and.

Speaker 3: in the remaining of 2023.

Speaker 3: Our operating expenses were increased by 11%. This was mainly as a result of our continued investment in our workforce, cloud infrastructures, and impulse on marketing activities, including our CPX event took place this quarter.

Speaker 3: So we reached this very strong operating income of $238 million that was 42% of the operating margin this quarter. Our financial income this quarter reached $19 million as we invest in higher interest rates over time. And we expect that this income will increase in the next few...

Speaker 3: and EPS of $1.80, which represents 50%, double digit of 50% growth, gave a very strong result. Our gap net income was $184 million, or $1.52 in the literature.

Speaker 3: If we're moving to our cash flow and cash position, so our cash balance is at the end of the quarter of the quarter well $3.6 billion. Our operating cash flow was strong at $386 million this quarter. During the quarter we continued our buy program and purchased 2.6 million shares for $325 million.

Speaker 3: at an average price of $127 per shell. In the past 12 months, we purchased in total $1.3 billion of shells.

Speaker 3: So if we sum it up as a financial result, so we have the double digit growth in subscription revenues driven by how many email and cloud products. Are we carrying revenues if the key milestone of 80% or more than 80% of our total revenues implications?

Speaker 3: The macro environment resulted in extended sales cycle that resulted in a decline in our product revenues. And we finished a very strong competability of 15% growth in E-commerce.

Speaker 3: Now I turn the call over to Gil.

Speaker 4: Thank you, Kip. Thank you, Rui. That was a very good...

Speaker 4: Update on the financial side. On the business side, I'd like to reiterate some of the messages and give some more color to the technologies, to the trends that we see. As you know, the need for cybersecurity remains high. The level, the number of attacks keeps growing. The sophistication of attacks keeps growing and we've had...

Speaker 4: what we are doing. But just to reiterate a little bit about some of the quarterly highlights that we see. So first, I'm very, very proud of the financial results. Our revenues were above the midpoint. 15% EPS growth is actually exceptional. And we had a very healthy business in the renewal, which shows.

Speaker 4: that our customers are loyal and care about that.

Speaker 4: Having said that, we are still operating in a challenging economy. We saw the effect of that economy on our business with extended sales cycles, projects being postponed and I think Roy also shared the decline in new deals with product sales.

Speaker 4: Still with that, double digit growth in CloudGuard and Harmony email, 140% growth in infinity revenues, 13% growth in all the security subscription. And again, I'm very proud that we now reached over 80% of recurring revenues, which is all driven by many, many important initiatives and many technologies that we are...

Speaker 4: delivering this quarter and every quarter. Let me give you some highlights for the things we launched in the first quarter. First and foremost is the infinity global services, second is getting into the new market of security operation center SOC with Verizon XDR XPR and I'll dive into each and every one of them and last and not least...

Speaker 4: start with the new infinity global services. I think we all know that customer wants to have better security, more security. We all know that there is a huge...

Speaker 4: skills shortage in the market for cybersecurity. Our partners, our customers all have a lot of expertise in cybersecurity, but none of them have everything included. And the idea here with introducing our infinity global services is to augment the needs of our customers and partners. When they want to run fast and get the best security and get the full.

Speaker 4: managed security services, we are here to help them. So we're taking many many services that we have

Speaker 4: Adding to them a whole new set of services based on the needs that our customers have and coming to our customer with a simple value proposition, we are here to help you to augment that. I believe that this is serving a very important market, the security services market is a $75 billion market. We are not going to be a giant player here.

Speaker 4: but we are going to participate in this market and help our customers accelerate their value realization from the security technology.

Speaker 4: We introduce Infiniti Global Services and we look forward to expand our capabilities and show results in the next few years.

Speaker 4: Next is I think I've talked about the new family for Horizon. This is another important market today. It's a sub $1 billion market expected to grow to almost $3 billion market in five years.

Speaker 4: And our approach here XDR XPR is meaning how do you collect information from multiple sources and out of them get additional security value. Now most XDR products today were actually called EDR endpoint detection and response focused about detection.

Speaker 4: focus about endpoint. What we're talking about XDR and also XDR is extensive prevention and response to all type of security events. Our approach here is very different because we turn things into automatic prevention very very quickly.

Speaker 4: AI driven and again focused on the prevention first approach. We include the network, we include the endpoint, we include the email, we include the checkpoint architecture but we also connect today to many many third parties.

Speaker 4: tools that are available in the infrastructure from Microsoft, from other vendors, all part of the system we already know how to include. And I think through that system in the last few months since we introduced it, we are seeing on a weekly basis new incidents that we find in our customers' environment and immediately turn that into prevention.

Speaker 4: So I think you see some of the analyst quotes here from ESG, Dave Gruber from ESG. The integrated approach here is unique. We can drive change across the broader security industry. I think it's a very, very good start to us. It gives access to the CISO, access to the Security Operations Center.

Speaker 4: And for a customer, it's tremendous value that they derive from this family and from the rest of the checkpoint technologies that they have.

Speaker 4: Last but not least is the expansion of the CloudGuard family. We've seen up for CloudGuard native application protection platform. Here we're combining six different technologies into one solution. When you look at the market for cloud security,

Speaker 4: It's a multi-billion dollar market, not a giant one, but the big one. But it spreads around many, many different technologies. Some of the stars in this market, they are speaking mainly about posture management, something we do for more than five years.

Speaker 4: Others are talking about workload protection, other in the development cycle, the dev of the pipeline or source security.

Speaker 4: and there's many many sub-segments and when the customer is getting into that

Speaker 4: They simply need too many technologies to get all of that work together. And I think with the checkpoint cloud guards, C&UP, we are combining all these elements into one family that gets more context, more actionable security, smarter prevention. And again, turning some of these things into prevention all the time, like the web application protection and the cloud network.

Speaker 4: security, some of them like the posture management, turn configuration, incident analysis, things like that into very quick prevention by changing configuration and by putting the right information in front of the security operations. So this is good and by the way I hope it helps us.

Speaker 4: drive some of the cloud.

Speaker 4: revenues that we've seen increasing last quarter. All of these elements plays into the what we discussed last quarter, the free sea strategy that we talked about. How do we make security comprehensive, consolidated and collaborative? And I think it's not enough to come up with a bunch of security technologies.

Speaker 4: look at the other two C's, I think no one has a more comprehensive architecture and checkpoint and no one has an architecture that's truly consolidated when you can get into one unified portal management.

Speaker 4: to automate, to do the same security management operation from one single management console.

Speaker 4: And I think this is reflected in some of the wins that we've experienced in the last quarter. We are doing thousands of deals every quarter, so it's hard to pick.

Speaker 4: the leading one, but we picked here a few examples that show all the different elements, the infinities, the harmony, the cloud guard.

Speaker 4: For example, here is an airline that

got our security assessment, we got in with our services, delivered a quick security assessment despite this vendor using 12 different vendors, they don't have the skills to manage, they

to manage all these different vendors. And we weren't getting the highest score. They decided that the approach of using a platform.

consolidating many solutions is the right approach. We did a very thorough process and I'm very glad to see that they standardized on infinity. It's a new customer to us and we are very proud of that.

Another one is a giant media company, one of the most complex cloud environments that we've seen, thousands of cloud accounts, different cloud platforms using different cloud security solutions in the environment. And again, they found it almost impossible to manage, not addressing all the needs.

And the new cloud project that they have drove this consolidation. We went in, we went live in less than a month and showed them how we can really elevate the level of security, consolidate so many elements. And all of that is just the beginning of the various strong roadmap and vision that we liked about what Check Point does.

Last example is about our Harmony email, something that's actually a fast selling solution that we have now. In this case we are talking about a giant telco.

suffered two embarrassing incidents which resulted in emails that got through

their security defenses. They used multiple solutions from multiple vendors and both solutions.

failed to improve, failed to address the issues and show them that next time this attack won't happen. We got in, showed them within days that we can, immediately that we can block this attack, but even more important, that we can scale our solution and provide a

the solution to a very large environment. Usually, by the way, our e-moil business started with mid-sized kind of customers. And here we showed them that within few weeks, we were able to scale to thousands and tens of thousands. And finally, we won the contract with over 100,000.

mailboxes on Harmony email, work, real world, production, and protecting that customer that failed to achieve the same thing with our solution. So these are just demonstrating some of the successes that we have in different areas of the cybersecurity.

So, to summarize, this quarter we had very good results despite the economic slowdown which affected us and that we see in the marketplace. Very glad to see the double digit growth, the 13% growth in subscription revenues, the 15% growth in EPS which is exceptional.

And I think we're demonstrating the values that we're talking about of providing the best securities with the Free Sea Strategy.

XDR, XPR, and with the smarter cloud prevention as part of our training program.

strategy. So I think that summarizes a pretty good quarter.

Before I get to your question, I'd like to share our projections. So I'll start with the projections for the year. These are unchanged, so we are just including that slide as a reminder. It's the exact same slide that we showed last quarter. Revenues for the year are expected to be between $2.34 billion to $2.3 billion.

to $8.30. non-GAAP EPS is expected to be approximately $1.22 less. Again, same slide that we showed last quarter. And I'm going to share the range for the second quarter, which we haven't shared before. And this again, within the same landscape here, revenues are expected to be between $570 similar in terms of over LCUN goes ahead and adds 12 cheese.

for the quarter, for the projections, and be very happy to open the call for your questions. Thank you. Thank you, Gil. As a reminder, please ask one question and one question only, and hopefully we can come back around and go through everybody once again.

Starting today is going to be Shaul Iyal as our first up with a question, followed by Keith Bachman from BMO. All right, Shaul. Good afternoon, everybody. Good to see, Gil, that you're keeping fiscal 23 guidance intact.

I had a question on the product decline. How much of that was attributed to infinity actually showing a very solid performance?

The product decline obviously doesn't come from infinity which actually shows very good performance when customers are buying more of our architecture, more comprehensive solutions and showing that it's coming from mainly from refresh projects that are being delayed.

As I mentioned, since I think Q4, since November , we see a very big change in the industries. And again, I think you've seen it in many other companies results, you've seen it in the declining PC shipments in the first quarter. We've seen it in results of other companies in the industry. And it's part of our business as well. That's why I'm so proud in the results that we've achieved.

without sharing the concern that we have about the tightening spending that we see across the marketplace. All right, next up will be Keith Bachman from BMO followed by Patrick Colville of Scotiabank.

Hi Gil, thanks very much. It's Keith Bachman from BMO. I wanted to ask a question about why do things get better? What's the driver of improvement? What I mean by that, let's break it into...

You commented that Billings growth net of duration changes was call it 2%. What's the catalyst in terms of a product acceptance driver that gets at to mid single digits or even higher? And if you could be comment can you know do you envision Billings being a positive or negative number?

during the course of calendar year 23. Thank you. I can let Rui maybe speak a little bit more about the technicalities of the billing and so on, but in terms of the business brand, which I think is the most important, there are several elements that I think can improve and can cause us to get into much higher growth. First, again, it's the economy and that's not up to us.

AI, but what we can do, there's plenty of we can do. First, I think the new products that we have, everything from Horizon, Harmony, CloudGuard, and the full infinity architecture can drive accelerated growth. Second is our engagement with customers. There is so much potential in the market that we don't touch within our install base and outside our install base. You know, we are meeting with so many CISOs, we can suggestedvity.mo to bring you experience.

Chief Information Security Officers, they love Check Point, they like our brand, and they don't know the full Check Point story. They don't know how much value we can provide to them. And I believe that we can do so much more by engaging more with customers and covering more of the market. So if I take all these elements, I'm actually

I think that we have plenty to do to drive more business. I think we're doing that. I think it takes time until we will see the results. And I think again, we can't forget the economy, but also as either tailwind or headwind. Right now is very strong headwind unfortunately. Okay, all right.

to see the launch this morning of CloudGuard CNAP, which you called out combined six technologies into one solution. I guess my question is of those six technologies, what's new here? Is it just a kind of rebranding and bundling or is there a new product launch alongside this announcement? And then I guess kind of the second part of the question is, do you expect CloudGuard CNAP to launch?

and new technology and AI technology that drives the posture management into much more focused security results and security. I mean, again, when you analyze the cloud infrastructure or any infrastructure, you see thousands of different issues. The point here is to take the important ones, highlight them and fix them.

and I think our new technology with the C-NUP launch is part of that. In the workload protection we had several new technologies in the last few months and that's also helping so clearly we have a lot new in that package and last and not least I don't think it's the newest technology but it's a very important one.

It's the web application protection that protects all the connection between applications. This technology has proven to be one of the best technologies to provide prevention. All the latest web vulnerabilities or cloud vulnerability with log4shell, web4shell, all these latest...

vulnerabilities that existed in the marketplace.

checkpoint was the only vendor that blocked them on zero day there was a recent day by one of the

a recent survey by one of the actually VC is in the security marketplace but tested I think around 20 different web application security solution and says that we're all vulnerable with attack except one which will check

I mean we basically said our industry can deal with it except checkpoint. So I mean combining all of that there is a lot new here and there is a lot that I think the offer of combining all of them brings plenty of value.

to customers because I think no customer can take all these technologies and apply to multi cloud environment in an effective manner.

Thank you, Gil. Thank you, Kip. All right, next up is Taliani slash Tomer Zil. Ah, Taliani is here. All right. And followed by Gray Powell from BTIG. Hi, guys. I hope you already hear about your brother, Tom.

you'll think you can. All right, next up is Taliani slash Tomar Zil. Taliani is here. All right. And followed by Gray Powell from BTIG. Hi, guys. I hope you already hear about your brother Tom. Yeah, thanks.

Thank you. Black moves on, unfortunately. I have a question on kind of the correlation between historical orders and supply constraints and what we're seeing now with products. I'm trying to understand if you can take us through the history of

All the companies that you didn't provide the data, but all the companies had some elevated orders in the past that were not able to ship because of supply constraints.

So as we go into this year, we thought that the product revenues of all companies will be safe for a quarter or two because now there are deliveries of supplies.

So the question is as we see today the product declines despite some historical orders or or back local borders Is it going to get worse the next few quarters because of the environment because you're you're running out of kind of back logo historical orders or are we seeing now a reflection of the environment

I believe that we've been able to ship products all the quarters. I mean, it's not that we had a huge backlog that we can't fulfill. Last Q1, by the way, we had one of the strongest quarters that we had in terms of driving new business.

And again, I don't think that we have any overhanging product supply. Unlike other vendors, we were able to supply pretty much all the orders that our customer expected us to ship every quarter. We paid the price for that in previous years with the extended cost that we've worked really, really hard to secure.

components for our manufacturing of appliances and so on, which is actually helping us a little bit now on the margin side, but not on the, not on the revenues or the shipment side. Thank you. Roy, anything you want to add? No, I think, yeah, yeah, I think that's definitely right. We didn't have any, I mean, we didn't have any significant issues last year in terms of delivering on time. Again, as Gil mentioned, it was mainly a...

The call has been, the call list has been predetermined. You'll be called in the order that it's brought up. Next up is Gray Powell from BTIG, followed by Joshua Tilton from Wolf Research.

All right, great. Thanks for taking the question. Is it possible to parse out how much of the billing's weakness in Q1 was related to uncertainty in the banking sector around things like SPV and just dynamics that are maybe more temporary in nature?

versus the general slow down and refresh activity that we saw back in November . And then anything that you can say in April trends would be really helpful.

So, you want me to start in terms, I think in terms of quantifying it, we thought we cannot, it's not something that we can quantify. We saw it. I mean, we saw it broadly. I mean, in terms of research projects that being postponed. Not specifically in certain industry. So, I don't see it's not something that again, in terms of something that we can quantify in dollars.

And so your second, what was the second question that you had?

Anything on April that in terms of recovery in April turns in terms of deals that they have closed or anything on April that you could say.

First, we usually don't provide, first I think it's too early in the quarter to say where we are, but again, when we are getting ready for this call, we do collect all the information about for the projections, about our pipeline, about the trends in the marketplace, about the, you know, everything our salespeople are saying.

Our salespeople are generally actually positive on the second quarter. They have an increased pipeline. I think if I want to be very very honest I would say that Rui and me are a little bit more cautious because of what we saw. Again that's the usual trend. Salespeople tend to be optimistic, finance people tend to be, I don't want to say pessimistic but realistic.

All right, next up is Joshua Tilton followed by Brad Zelnick from Deutsche Bank.

Hey guys, thanks for taking my question. I just want to clarify quickly, did the macro impact that you saw in 4Q actually get worse in 1Q? And then could you just remind us what exactly is baked into that full year guidance that you reiterated today in terms of your expectations for the macro environment for the rest of the year? So I think from Q4 to Q1 the situation became a little bit worse.

I think for the full year there's really no change. I mean, when we did the forecast for the year, we were a little bit more optimistic in terms of the, you know, repairing the plan for the year than we are now, but I think we're still in the range and we still hope to deliver on that. And there's a lot of expectation for improvement in the second half that would put us in the, you know.

in the upper hand of the range, but there's also risks involved, so we have to remember that. Thanks guys. Thanks Josh. Next up is Brad Zelnick followed by Ray McDonough. Great. Thanks so much for taking the question.

Gil, I've always appreciated the vision that you have within cybersecurity. Any thoughts on the impact of generative AI on the space and in particular how it might be used by both good and bad actors? Thanks. Absolutely. That's a subject that we are very busy with. I think AI generally is something which we've been investing in the last few years and generative AI that's in the market now for like five months.

I think is really creating a change in everything in technology. I'm not sure if it's going to be a real change revolution in technology or not, but I believe in it. I think it has the potential to be one of the biggest revolution that we saw. We are in the kind of in the middle of the change. So it's too early to say. Now it has an effect. It has a big effect on cybersecurity.

And I don't think that we can even comprehend the effect of a change. We've shown already in December , researchers showed how you can use generative AI to write attack code, which again, have access to all the code, the repositories, it can take code from them and without being a security expert, write.

sophisticated malware. If you're talking about phishing attack, which are fairly common actually, actually email and phishing attacks are the number one entry points of attacks into organization which plays into our arm on email. But when you look into them, when you look at most phishing emails...

You see that they don't have the perfect English or the perfect other language. And you can spot that with generative AI, it becomes seconds to write a very convincing phishing email. You can link that email record with, let's say, collect customer information, collect personal information. Again, this code can be written by the generative AI.

And you don't have to be a real expert, you actually get all the instruction from the generative AI how to create this kind of code. This is pretty scary about access to malicious things.

Equally on our side, there's plenty of usage that we can get from generative AI. And we are investing a lot in AI. We just had the...

I can tell first, I mean, just to be clear, we are on AI for many, many years. And the last year we've introduced 12 new threat cloud engines that are based on AI. By now our threat cloud, which is the kind of brain of our central system, is 70 something threat engines, 42 of them are AI based. So AI freaking

surprised with the level of innovation. I'm participating in these hackathons for years, seeing the innovation, it's the first time that like they presented ten finalists project and all the ten I said we can use them now. Like good technology, it's not like okay doesn't belong here maybe not the right quality almost all ten or something I said why aren't we

All right, next up is Ray followed by Max Gambrell from Goldman Sachs.

Great. Thanks for taking the question. Gil, maybe for you, how would you characterize the level of discounting you're seeing industry-wide, and how do you think about pricing concessions in this environment? And along with that, how much of an impact is the increase in financing costs that customers have to bear having on deal activity at this point? Would you characterize it as material, and has it become more apparent in recent months?

relatively consistent a bit higher discount because we also waste our prices this quarter so in the end we had a bit higher discount but pretty consistent what we've seen in the last few quarters.

And again, I think the one thing I'm very encouraged with is the healthy renewal business that we've seen in this past quarter. Customers are renewing, which means that A, they are using the technology second, they like it. Why not then replace that with aforesaid business?

And that's actually a very, very good sign. I'm hearing from other colleagues, not necessarily in the cyber industry, but in other industries that for them, the renewal business was always a source for growth and the expansion, especially SaaS vendors. And suddenly this business is also under pressure.

So far we haven't seen again, it stopped people ask for discounts people want that but it was relatively healthy In the samples that I've seen I can't even say that I've seen a consistent drive for more discounts Actually, some deals were even lower discounts this year in the 70 few but I've spotted This is from Randy from New York State University. All right,irth Thank you.

Max, followed by Saket Kalia of Barclays. Thanks for taking my question. I wanted to ask on Salesforce productivity, given that you substantially hired in 2022, especially towards the end of the year. How are some of the changes that you made to your go-to-market organization last year playing out this year and...

do you still plan to grow your sales headcount by double digits in 2023? So sales productivity remains, I mean our target for the sales people remains healthy and remains similar. We are not planning to grow the sales force significantly this year given the economy and given the fact that we want to digest and we want to make

the people which we hire productive. I do believe that our sales force can be far more productive, engage more with customers, we can do more so I think that we can do more with the people that we have. At the same time I think because we are cautious, because we are not overspending, because I think we watch everything.

We have the freedom and the flexibility to add people whenever we see it makes sense. So I'm, I mean, it's same message that you were hearing from me, that our self force hears from me. If you have opportunities to add people, if you see that if you'll add certain people in certain segments, certain countries, certain places that add value, I'll be happy to add them because we can. All right.

And I know that we don't guide to billings, but even qualitatively, can you just touch on how you're sort of thinking about billings through the rest of this year as you sort of balance, you know, ITP, a higher mix of ITP, you know, obviously duration changes within the industry, any thoughts that you could have on billings for the year would be helpful. Yeah, thanks for the question, Saki. So I think in general, again, infinity, most of the infinity, these are not being built up.

we see it growing in all regions, but in terms of billing, it can fluctuate, because again, it's specifically based on the payment terms for each deal. In terms of billing as in general, so again, we've seen this behavior in the last two quarters that we see customers that less intend to repay upfront for multi-year deals.

Again, it's in this kind of market environment that we have higher interest rates, so it's something that we see and we understand. But again, still healthy billing, annual billing, renewals as Gil mentioned, healthy billing in terms of all of the core pillars, mainly around the cloud business and the harmony email business.

So again, in terms of billing, it's tough for me to say how it will affect in the end, how it will impact the annual billing for 2023 because we just finished the first quarter. But that's how we see it.

So again, in terms of billing, it's tough for me to say how it will affect in the end, how it will impact the annual billing for 2023 because we just finished the first quarter. But that's how we see it. Very helpful. Thanks, guys.

Next up is Jonathan Ho from William Blair followed by Joel P. Fishfine Jr. from Truis. Fantastic. Can you maybe help us understand the impact from some of the deal postponements and delays that you talked about on the quarter if there's a way to quantify that?

And perhaps relative to the guidance, like why not sort of take the opportunity to take a more conservative view here? What's maybe giving you the confidence to support that? Thank you.

First, I think you see some of the impact in the product revenues and that's I think we were very straightforward about that. And that's the impact of the changes that we've seen in the, especially again, it's refreshing what we call new deals and new business that we have in the business.

about the forecast. Right now we're basing our projection based on our sales forecast, based on our pipeline and so on, and they still seem to support the projection for the year. I definitely don't want to lower guidance just so that we can...

you know show better numbers in the future. I think we have to be very responsible here. So as I said the range that we have is wide, there's a good potential that will be on the upper hand, there is a risk that we want, we have to take it into consideration. I think we are kind of very realistic about the range that we provide them.

I don't want to lower the range unless I'm sure that I'm not going to hit it. Let's put it that way. And I think, by the way, that I mean what will happen in the second half? Guys, I think we don't know. I mean like all the last, I don't want to grow all my experience, but just if we look at the last two or three years, there's been up and downs that nobody could have predicted in the last two or three years, including the

be explained. Thank you.

Thanks for taking my question and Gil, just curious, you know, you have $3.6 billion in cash in the balance sheet. You generate a lot of cash.

I wanted to ask you, I know you've been buying back a lot of stock, if there's been any change in your appetite for potential for doing more M&A, what the environment looks like on the M&A side, I would love to get your input from that. Thanks. So first, absolutely, we have more appetite to doing M&A, we are looking at additional deals. I think I'm kind of cautiously optimistic about that, because I see that companies are

evaluation become a little bit more realistic, more companies understand that they need to partner with someone because the market consolidation will happen in this part just like we're seeing in the market change from you know unlimited supply of money to profitability which is again part of the economy rules it's bound to happen. I think consolidation in the industry that's so fragmented like cyber security.

But as I said, I mean, I felt cautiously optimistic. We see more opportunities in all market segments, from small companies to mid-sized companies that we are looking into that, and I hope that we'll find the right opportunities. Thank you. Thanks, Joel. Next up is Greg Moskowitz followed by Shebly Sharafi.

Thank you for taking the question. So Gil, we've spoken a lot about the macro on this call, but since this is the lowest product revenue growth that we've seen from checkpoints since mid-2018, I just wanted to ask, would you attribute the weakness entirely to macro or were there any execution areas that may have also contributed to some degree? Thanks. I want to be, I don't want to sound arrogant here. I think

we can get much more productivity from our Salesforce, but our Salesforce is improving. In the last year, we hired a lot of good people, actually in the last six months, the level of attrition went drastically down and so on. We did hire some new people in the second half of 2022. I think if you remember when we went into 2022, I came in with pretty aggressive hiring targets for the Salesforce.

Some hired them in the first half of the year, some only got to vet hiring the second half of the year. But still, I mean our Salesforce I think is a is not the source of the challenge, the source of the data challenge is clearly the economy.

of the year, some only got to vet hiring the second half of the year, but still I mean our Salesforce I think is not the source of the challenge, the source of the data challenge is clearly the economy. Thanks Gil.

Thanks, Greg. Next up is Shebly Serafy followed by Dan Ives from Webbush. Thank you. Any vertical call outs, especially in the financial services vertical and the technology vertical? No, I think the trends in the marketplace are very universal. We had some challenges in the financial sector. We had some big wins in the financial sector.

Same with the technology sector, which is the financial sector is maybe our largest, our largest sector. And again, I think that's what we've seen in terms of the trends in the marketplace are pretty universal, I must say. Say anything you want to add to that.

Not in specific vector industry, vertical industry. I think we've seen broadly in everything, not specifically, we didn't see it in finance or some other industries. All right, it looks like Dan Ives is on CNBC or some other place, so we're gonna move forward with Irvin Liu.

followed by Michael Turitz. Hi, thanks for the question. Perhaps another one on macro. So I wanted to better understand the thought process behind some of your customers delaying project refreshes. Are some of these longer sales cycles the result of lower than expected IT spending budgets brought...

people, everybody and I'm saying everybody from CFOs, CEOs, CSOs, they all say that cyber is still a great source for investment, it's still very much needed. When you see the attack landscape there is definitely, you see the reasons for that. So nobody's thinking that they've...

that cyber security spending should go down. So I believe that what I see is the general trend from friends that I have in the industry, in other areas of IT, that the situation in other segments is much worse actually.

running cyber. All right. Thanks for the call. Our next caller is Michael Turretz followed by Itay Kidron who will be our last call for the day.

Hey, Gil and Roy and Kip, just wanted to come back to the Salesforce growth, which I think Kelly just said, not significant growth. I think you'd said for this year, I think it said a double digit growth previously. So is there a change there? Are you, are you pulling back on your expectations? And if so, what does that mean in terms of some of the things you're trying to achieve from a go to market perspective and to get that greater sales engagement you're talking about?

I think we've invested a lot in the Salesforce last year. We want to see it pays off. We wanted to see that it being digestible. If we see that, as I said, when we see an area that we believe that we can hire more people to increase, customer coverage or productivity will not be shy to do that. We have the resources and

To do that, I think our sales engagement can be much higher. I think we are not meeting enough see-saws. I think we're not. We can convey better our story at the higher levels in the organization. I think we can engage our customers in multiple ways. We see good examples of it every day when we are meeting with customers and say, Whoa!

I know Check Point, I've been working with you for 20 years, I didn't know that you have such an amazing platform today. I didn't know that you have this architecture, I should consider you for other projects. So I think we can do so much more even with the people that we have today and we have good people.

All right, thank you, Michael. Next up, Itai. Thanks, and thanks for the time, Gil. I guess I had a question about the productivity that you just talked about. You've tried for quite some time to improve productivity. So what is it you think that you're not doing internally to get the productivity up? Why is it so hard?

What are things that you're trying that are not working? What is the process to fix the things that are not working right? First, we are doing and we are improving and I'm glad to see that. And again, we have a lot of new people in the Salesforce in the management ranks and

in all the different tracks that we are doing. I think the main thing is how the Salesforce is being structured. It's a very distributed organization that over the years grew in an environment that's not very structured, that's been a poor mode, that's been how to provide the best technology, how to best serve our customers and I think we can instill far more discipline.

in a, you know, 3000 people distributed organization that doesn't have a discipline is challenging. By the way, in some cases, that may be the good thing in our sales force, but we have very good people that know how to work with customers to keep the customers happy to keep the customers loyal with know the technology, but some of it can be changed and can be improved.

you know, 3000 people distributed organization that doesn't have a discipline is challenging. By the way, in some cases, that may be the good thing in our sales force, which we have very good people that know how to work with customers to keep the customers happy, to keep the customers loyal, but know the technology, but some of it can be changed and can be improved. Thank you.

Thank you guys all for joining us today. That's going to conclude our call. We'll look forward to seeing you guys throughout the quarter. And the best to everybody. Thank you guys. Bye-bye. Thank you very much. Bye-bye. Thank you.