Q2 2023 Check Point Software Technologies Ltd Earnings Call
Kip E. Meintzer: --the video conference call will be Gil Shwed, our CEO and founder as well as Roei Golan, our CFO.
Roy Golan, our CFO.
Kip E. Meintzer: Before we begin, obviously, the good old forward-looking statements. During this presentation Checkpoint's representatives may make certain forward-looking statements. These forward-looking statements within the meaning of section 27, A of the Securities Exchange Act of 1933 and section 21 E of the Securities and Exchange Act of 1934 include but are not limited to statements related to our expectations regarding our product solutions, expectations related to cyber security 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.
but are not limited to statements related to our expectations regarding our product solutions, expectations related to cyber security 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.
Kip E. Meintzer: These risks include our ability to continue to develop platform capabilities and solutions, customer acceptance, purchase of our existing products and solutions, new products and solutions the market pricing, security, et cetera, political, economic business, everything under the sun, including the impact of the COVID-19 pandemic.
Et cetera, political economic business everything under the Sun, including the impact of the COVID-19 pandemic.
Kip E. Meintzer: These forward looking statements are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities Exchange Commission, including our annual report on form 20-F filed with the SEC on April 27th, 2023.
Kip E. Meintzer: The forward-looking statements in this presentation are based on information available to Check Point as of the date hereof and Check Point disclaims any obligation to update any forward-looking statements, except as required by law in this presentation or 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 the reasons for our presentation of non-GAAP information. And guess what? This year is our 30th year in business. I hope you'll all join us in celebrating. Toast a glass or what have you have you of your favorite beverage. We had an accumulation of $30 billion in revenue over the 30 years and I hope you'll cheer us to the next 30.
of non-GAAP information. And guess what? This year is our 30th year in business. I hope you'll all join us in celebrating. Toast a glass or what have you have you of your favorite beverage. We had an accumulation of $30 billion in revenue over the 30 years and I hope you'll cheer us to the next 30.
Toast a glass or what have you have you of your favorite beverage. We had an accumulation of $30 billion in revenue over the 30 years and I hope you'll cheer us to the next 30.
We had an accumulation of $30 billion in revenue over the 30 years and I.
Roei Golan: Actually a week ago.
Kip E. Meintzer: There you go. And with that, I will toss this over to Roei Golan, our CFO. And I'll remind you again, please do not raise your hand. Thanks.
And with that I will toss this over to Roy Golan, our CFO and I'll remind you again, please do not raise your hand.
Thanks.
Roei Golan: Thank you Kip. Just let me show my presentation. Can you see my screen?
Yes.
Can you say my screen.
Kip E. Meintzer: You need to go into the presentation mode.
Roei Golan: I know, I know but okay, great. Okay. Thank you Kip and greetings to everyone joining the call today. I'm excited to be with you and begin to review our second quarter of 2023. We had a very strong profitable quarter reaching the highest [inaudible] for more than a decade.
Roei Golan: Our net income grew by 14% to $238 million while our non-GAAP EPS was up by 22%, highest since 2009 to $2 per sale. Our revenues reached $589 million, which is 1 million above the midpoint of our projections. And as I mentioned, our non-GAAP earnings per share reached $2, which is five cents above the top end of our projection, really strong results.
While our non-GAAP EPS was up by 22%.
Since 2009 to $2 a barrel shale.
Our revenues reached $589 million, which is 1 million above the midpoint of our projections and as I mentioned, our <unk>. Our non-GAAP earnings per share reached $2, which is <unk> <unk> above the top end of our projection really strong results.
Roei Golan: And now let's deep dive into the numbers. As I mentioned, revenues were up to $589 million [inaudible] percent growth year over year. Because our deferred revenues went up to $1,774,000, 7% growth year over year while our current deferred revenue showed them a leach $1,307,000, 8% growth year over year.
7% growth <unk>, while our current deferred revenue showed them a leach $1.307 billion up.
8% growth <unk>.
Roei Golan: Our calculated billings reached $566 million, which is 1% decline year over year, and 70% growth compared to Q1 2023. Our current calculated billings reached $581 million, up 4% year over year. Same as in previous quarters, we see that due to the high interest rate environment, we see fewer customers willing to pay upfront [inaudible] which resulted in short term billings duration.
Our current calculated billings reached $581 million up 4% <unk>.
Same as in previous quarters, we see that due to the high interest rate environment, we see fewer customers willing to pay upfront [inaudible] which resulted in short term billings duration.
Roei Golan: In addition, as a result of infinity becoming more and more significant and you will see it in the upcoming slide, the flexibility in billing terms effecting of course, the billing time.
Roei Golan: The revenues growth was driven by strong subscription revenues with 14% growth year over year to $239 million. That was driven mainly by our [inaudible] securities, which continue to deliver great results with triple digit growth E mobility.
That was driven mainly by our own when you email securities, which continue to deliver great results with triple digit growth E mobility.
Roei Golan: With that, we saw a decline in our product revenues of 12% year over year, which was resulted by longer sales cycles and delaying refresh projects, but also to the fact that we saw this quarter much more customer buying our products for infinity agreements and most of it has not translated into revenues immediately as they have the flexibility to utilize the allowance usually within 12 months.
In 12 months.
Roei Golan: It is important to note that we did see a strong renewal business as our customers continue to benefit from our security services and support. As I mentioned, we keep seeing strong adoption of our Infinity strategy. We saw Infinity revenues exceeded 10% of our total revenue for the first time since we launched Infinity. We see more and more customers are adopting our platform entering their needs under one umbrella of products and services.
As I mentioned, we keep seeing strong adoption of length N at the strategy, we sell infinity revenues exceeded 10% of our total revenue for the first time since we allowance infinity.
We see more and more customers are adopting our platform entering their needs under one umbrella of products and services.
Roei Golan: Now, let's look at our revenues by Geos. We had growth across all Geos. 45% of our revenues came from EMEA, 43% came from the Americas, while the remaining 12% came from Asia Pacific.
<unk> of our revenues came from EMEA, 33% came from the Americas, while the remaining 12% came from Asia Pacific.
Roei Golan: Now, let's review our P&L. We had significant improvement in our gross margin, which went up from 88% last year to 90%. We feel we saw a significant improvement in our supply chain, which resulted in lower costs. And I'll remind you that we had a very challenging supply chain last year that drove our margin below 90%. We hope to see this positive trend continue in the remainder of 2023.
And I'll remind you that we had a very challenging supply chain last year that drove our margin below 90%. We hope to see this positive trend continue in the remainder of 2023.
Below 90%, we hope to see this trend continue we hope to see this positive trend continue in the remaining of 2023.
Roei Golan: Our operating expenses will increase by 5% and 7% on constant currency. The increase was mainly as a result of our continuing investments in our workforce, cloud infrastructure, marketing and increasing our [inaudible].
We can't we the increase was mainly as a result of our continuing investments in our workforce cloud infrastructure marketing and increasingly profitable.
Roei Golan: Our non-GAAP operating income continues to be strong at $263 million, a 45% margin compared to 44% margin in previous years.
Roei Golan: Our financial income this quarter reached $21 million as we invest more in higher interest rates overtime, and we expect this trend to continue as our security matures. As our security matures then we invest in higher interest rates.
As we invest more in <unk> and <unk>.
Interest rates overtime, and we expect this trend to continue as.
Security is much through our <unk>.
Security mature then we invest in highly interested.
Roei Golan: Our non-GAAP tax rate for this quarter was around 16%, mainly due to indexation and updates in tax provision because of several tax assistance we have worldwide. Our non-GAAP net income reached $238 million or $2 per share which is 5 cents of our guidance, above the top end of our projections.
<unk> share which is <unk>.
Bob our guidance above the top end of our projections.
Roei Golan: Our GAAP net income was $202 million or $1,70, 25% both growth year over year. .
Or $1 70, 25% both yield videos.
Roei Golan: Now let's move to our cash flow and our cash position. Our cash balances as of the end of the quarter was $3.5 billion. Our operating cash flow was $191 million this quarter, what affected our cash flow was very backend loaded quarter. We can see that our account receivables went up by 20% year over year. The balance that we have at least compared to the same period last year is up by 20% with so much more booking and billing coming in the last month than usual and it's something that we continue to see. We would continue to see these trends since the beginning of the year or actually since Q4.
Roei Golan: The balance that we have at least compared to the same period last year is up by 20% with so much more booking and billing coming in the last month than usual and it's something that we continue to see. We would continue to see these trends since the beginning of the year or actually since Q4.
Roei Golan: During the quarter, we continued our buyback program and purchased 2.6 million shares for $325 million at an average price of 125 dollar per share. In total, we purchased $1.3 billion in the past 12 months.
Roei Golan: Now let's summarize our results. We had very strong subscription revenue with 40% growth year over year which was driven by harmony email and continued strong adoption of our infinity platform. While we saw the leafless project experience delays, we saw very strong and healthy renewal business.
Roei Golan: Also we saw improvement and strong operating margin that resulted in over 22% EPS growth, highest since 2009. Now I'll turn the call over to Bill.
Since 2009.
Now I'll turn the call over to Bill.
Gil Shwed: Thank you very much Roei and great to have all of you here with us, especially now as we celebrate thirty years for Check Point. I think we've achieved a lot but this is just the beginning and there's plenty more we need to achieve in the coming thirty years. But let me jump right in and give some of my flavor.
FERC tiers for checkpoint with the.
Gil Shwed: I think we all have seen some of the kind of recapture of what Roei said in the summary for the quarter. Very healthy quarter with 22% EPS growth. Revenues above our midpoint of the projections. We've had positive trends in the Americas, very important. That sets the tone for the rest of the world and I hope it may be setting the stage for
above our midpoint of the projections. We've had positive trends in the Americas, very important. That sets the tone for the rest of the world and I hope it may be setting the stage for
And that shows that we are which we should expect better economy in the next six months all over the world stronger operating margin.
I think we are seeing with our customers and actually very happy with our products and technologies. So much of it to me.
Deferred some of the renew on some of the refresh projects and the renewal is very strong and customers are happy with the product I think in the future we want to translate into additional growth and I think we're seeing something very very important infinity and I'll speak about that which is the pinnacle of our strategy exceeding 10% of our.
Our total revenues for the first time and the harmonious continues.
Very high growth rates, capturing another segment of busy cyber security market. So let me start by speaking about some of the wins, we have we been infinity.
And I think our commitment and our vision is to give the best security Infinity I think.
Expressed as vet division in the best possible way, what do we give the customer the full platform, where everything works together to deliver the best security and it can serve everyone and you can see here a few examples of recent wins in the Infinity landscape one is the.
Important bank, which expanded the network security remains Super high speed, but also added to that Infinity architecture. The harmonia email because of its highest scottrade and combines all of that with our new horizon family with correlates always events and create a more collaborative.
<unk> security toward resistance.
In the Middle you see another sector or in some cases these underserved in security, but here, it's a pretty large network of educational.
Facilities, replacing a competitive vendor products and chose the whole platform network E mail endpoint to secure their entire stake and to the right number of sector. It is very important which is an existing customers large existing customers was very satisfied with our quantum solution.
<unk> and translated into a bigger win with full infinity implementation consolidated across the network the cloud the endpoint.
If a sizeable deal so what we're seeing here is our infinity.
Conserve customers in all sectors and deliver on that vision of the best security for everyone.
I think to vet with I already alluded is the success that we have in the email security market.
You can also see here a few examples of customer wins different customers one large bank.
Well not very happy with the fact with their existing email security was missing.
Yeah.
Suspicious email and let them through they tested our aramony email and.
What took them before weeks or months to install to optimize the system to get to a reasonable result, they got so much better security in less than five minutes for a larger organization.
Similar to where it is on top of a large pharmaceutical.
Chose armani email due to the fact that it has a much higher catch rates versus the competition and again is implementation. We see all of that is starting to ache going beyond those three report, we see Google home, who forced their way when we're coming relatively quickly from nowhere to the leadership.
Areas of these charts.
Charts, one is to the upper right. One is in the middle and I think we're making a breakthrough.
In this industry, especially when we're speaking about cloud based email, but I think our solution is very very unique in the way it works and compared to everything has the best security in the highest category.
I think what I've spoken in the beginning of the year, even with our vision for the year includes these free seas to bear to create security, which is the best and prevent the attacks.
Third of just the reporting about them and let the bad guys in and the free food is.
Comprehensive consolidated and collaborative.
Huge focus on the collaborate collaborative.
Aspects of the system not the offerings are also relatively checkpoints is living in them, but the collaborative is I think what makes that security stand out. The fact that we are able.
[laughter], who identified threats in one location in the network and translate that into full prevention all over the network I think is completely unique in our industry. The way, we do it the scope, which we do it and the fact that we are able to connect so many technologies not only from checkpoint, but we are working more and more to connect also for the <unk>.
Alrighty technologies to vet, the architecture and if we see an example of how it works here.
Typically when the unfortunately these events happen every day.
A single endpoint on the network notices.
The user received an email.
Attachment attachment is infected.
Zero day threat, which means that it's not identified by most technologies.
<unk>.
Some don't even detected some detective few hours after the computer has been infected checkpoint is the only one but does it in real time before the malicious file on the zero day has the chance to affect the user computer, but that's not the end of the story because once we tried to be analyzed by our threat cloud AI, we mean.
Obviously isolate that endpoint <unk> and make sure that the entire network protects against against these five of them. They want to reach any other computer bye the way wherever these computers have our advanced endpoint or wherever where security is not sufficient we will block the download.
With final Andi mean of communication immediately and automatically again. This is something very typical we're seeing examples of that happening.
On a constant basis.
And I think we are the only vendor with can actually make the security infrastructure work together. So so it does deliver that level of prevention.
So to summarize I think I've talked a little bit about our strategy about how we demonstrate the technology and how it works I think we gave you some.
Really good cases of some some of the technologies that drive our growth hormone email to name one infinity, two named <unk>, which I'm very very proud of what we see the infinity. We're working on several years now starting to be a significant part of the business and our financial results for the quarter were pretty good 22%.
<unk> growth something we haven't seen for a <unk>.
More than a decade.
A 14% growth in the security subscription.
Again, all our advanced technologies the threat cloud AI the cloud guard the Harmonia email are all driving that security subscription growth.
And I think we see the collaborative security in action every day and I think we'll see more of that in the second half of the year as we launch more products and more technologies with more innovation around the collaboration and security.
So that summarizes our results for the second quarter.
Before I open it to your question I wanted to maybe touch a little bit about our projections for the remainder of the year in the third quarter.
So let.
Let me speak for two minutes about the projections.
And for the entire year.
This slide you've seen it before you've seen at the beginning of the year. There is no change in that slide we are well within the range that we provided for the year revenues in the range of $234 billion to $2 five $1 billion for the year non-GAAP EPS of $7 70 to $8 30 and <unk>.
GAAP EPS is expected to be approximately $1 22, since les I always say that with projecting the future is always challenging we are seeing the world changing around us all the time.
I'm actually more optimistic about the second half of the year, but we never know what will happen. So that's again no.
Changes in the annual guidance just repeating what we've seen before for the first quarter. We haven't shared the projections that we have so let me share what we have now based on <unk>.
All the analysis that we've done so far.
Revenues are expected to be in the range of $570 million to $605 million.
non-GAAP EPS is expected to be between $1 97 to $2 seven.
GAAP EPS is expected to be approximately 35% less than that.
So that's where we stand in terms of projections, I think well within our projection for F well or the guidance for the year.
And with that I would be very Frank. Thank you for joining us today and it'll be very happy to open the call for your questions.
Thank you.
Alright folks first step today is gonna be Joseph Gallo, followed by Tagliani as a reminder, please limit yourselves to one question. So we can get through as many.
The participants as possible with that Joe Please Jake.
Awesome. Thanks for the question, Jeff and congrats on the 30 years guys. Appreciate the cycle time commentary and delayed refresh commentary can you just talk through the new logo side of the business and then maybe just talk about the macro dynamics and <unk> did it worsen hold course or ease a little bit versus <unk> and then maybe just how would you characterize your <unk>.
Billings performance in Q2 was at all impacted by macro or are there some areas for improvement.
So the billing a laboratory I think we had pretty good billings, but the ROE you will comment about that in terms of the macro environment I think it day to remain tough, but it was better in Q1 I think of all the metrics, we've seen better results in the first quarter slightly better much better product sales.
The metrics are slightly better than Q1.
The renewals much stronger and I think what we've seen in things like Harmonia emails and few other areas, where better again I'm also a little bit optimistic because the U S segment of our business has shown some good signs of recovery in some good optimistic signs of growth. So I mean, I hope with this.
We'll be at the like our bellwether for the future and for the rest of the world.
Rohit do you want to.
And I think we see significant improvement in the billing compared to Q1, I would say that even though we saw that we had Q2 had a lot of really nice infinity deals that are not translated into billings or revenues, especially in America, we had a very strong infinity business and new customers new logos.
Existing customer that moves to infinity and this and some of it you don't see it still in the building, it's not stopping in the billing some of it yet in the beginning but in the end I mentioned those during the call we.
Our billing was up 70% compared to Q1 2020 fully I know there is also seasonality here, but still 17% is impressive.
I think that our billing.
Was okay. It was good I mean this quarter also we want to be better and we want to be high we want to grow but I think also you can see the short term billing of the current billing. This went up by 4% So thats.
So thats I think thats, a much much better than what it is.
Awesome Alright.
Our next caller is Sally on a followed by shell shell will lay out.
Hi, guys Gil I want I want to take a step back and kind of look at things from a higher level.
And it's related to the question before at the end of the day, our revenue growth is 3% and Youre billing growth is minus one what are your long term targets in a sense that you invested heavily in new products in the last few years and still the growth is well below what other cyber security companies are achieving.
How do you see the growth accelerating over the next few years, what are the areas that could drive it up and what are the targets.
Hi, Tal apologize, we got somehow disconnected I think I heard your question.
Yeah.
Can you see here me now yes.
Yes, I can hear you okay. So I think.
The last the last few words of the question I think you asked about our growth rate and about our investment in what we are shooting for and first we are absolutely shooting for much much higher growth rates I think we have the technology, we have the product.
I think we have a lot of.
A lot of differentiation in the best and the best Security and I think we have many many loyal customers I think we need to translate it to a much more aggressive.
The winning of both existing and new customers to expand what we are shooting for double digit growth in the in all the metrics, let's put it that way.
And I think we've started doing many good investment in our field and marketing organization in the past year now starting from growing the organization and investing in sheer size and growth and this year. The focus is actually on.
Making sure the organization is.
<unk>.
Performing calling reaching out engaging with customers.
I must say that for the last three months, we've seen a big change there I think the field people have done a good job, we're seeing much higher level of engagement with customers.
And I think that the cycle is the engagement with customers. It leads to funnel creation opportunities in these opportunities. Eventually should result in increased sales for the second half of the year and especially for the fourth quarter, we already see the increase in the pipeline even vote just the beginning because I think most of these.
Performance improvement has happened in the last I would say three months roughly starting kind of March.
And the Big improvement was kind of May and June .
And I hope it will be translated to the results, but I am expecting I think we have plenty of potential and I'm seeing the and I am seeing progress I don't want to say that we're seeing the wins because the numbers are not there yet, but I'm seeing the progress on our internal metrics.
Thank you.
Alright next step Shallowly al followed by Joel Fishbein.
Thank you good afternoon guys.
Question, four or so on the maintenance flying front given that product has been declining in recent quarters.
What could be the impact on the maintenance line longer term and maybe I know you've mentioned in your prepared commentary.
Linearity trend, but maybe can you talk to us how this quarter has been progressing.
April May June .
Yes, sure so as for the first question. So I would say like we mentioned we had a very strongly in that business. So auto customer didn't buy the product.
<unk> a product we sold less release those project, we did see them renewal renewal of the supposedly knew the maintenance.
So therefore on the short term I mean again it starts with me to say what is going to be a long term or short term I don't expect any effect on on this line item as long as the renewal business will keep we will keep it will be strong and as we've seen in the last in this quarter and also in the last few quarters.
So that's in terms of that in terms of linearity, yes. So we've seen it's something that we've seen by the way also in Q4 <unk>.
Since Q4 2022 and also of course in Q1 and also this quarter, we see much more backend loaded.
And we see Thats significant part of the deals are coming in the last two or three weeks of the quarter.
And thats affected as I mentioned it has affected our cash flow.
But therefore, we expect a very strong cash I mean stronger cash flow in Q2 in the in Q3, because we've used you can see all accomplished syllable. It's went up significantly because most of the bidding and booking and billing came in the last few weeks of the quarter. So so that's something that I'm, assuming we continue with US also in the next quarter.
As long as the.
This existing macro environment will stay with us.
Thank you.
Next step is Joel Fishbein, followed by Ray Mcdonough.
Thanks for the question.
Great job on the margin front Gil I wanted to follow up on <unk> question, maybe you could share some specifics about investments that youre, making in the go to market, obviously, having a lot of new products Infinity is getting some some good traction, but how are you balancing this profitability and growth and give us some specifics around these go to.
A market initiatives that.
Could potentially lead to this revenue acceleration that you are speaking about.
Hmm.
First I think again last year, we had the big focus on increasing the fleet size, making sure we have people, making sure we show where it feels that we're willing to invest.
This year, we moved into understanding or.
Whats our productivity are we engaging with enough customers are engaging with enough prospect.
And I think the big focus is making sure that all the checkpoint people are in.
In connection with their customers are creating this.
In customer engagement, which at the end of the leads to.
Two the sales.
I mean, the customer want to buy our vision if they don't know about a revision if we don't communicate to them the better and I think that's where most of the investment. These were doing more seminar. We're doing more conferences. We are working on new programs for our partners in four hours and I think we should expect much more on that front as well, but the number one investment.
But we are seeing is again engaging with customers, making sure that customers know our story I can tell you firsthand every meeting that I have with Cisco we've achieved.
Our information Security officer.
And as we've well I didn't know that you had this amazing.
Strategy architecture is something I should definitely can continue and what's the good part number good part is that they all say that they are a very warm, placing very hartford checkpoints checkpoint enjoys a very good reputation with them for being a great partner for being a great for providing best security. So we start the <unk>.
Good parts. The bad part is usually it's 95% of the cases, how come I didn't hear from you for such a long time. So this is something we can change we can fix by engaging with them.
Delivering our vision by meeting with them by X by showing them, what we can do and by the way.
That's by the way explained some of the growth in Infinity still.
Potential is still huge over there, but when we show customers the potential of infinity, they buy into that vision, we realize the value they get far more security technologies and far more security to their environment than we used to do before.
Thank you very much.
Alright next step as Ray followed by Brad Zelnick.
Great. Thanks, Joe you mentioned, you're more optimistic about the back half of the year and one of the things we start to pick up in our conversations with partners is a refresh activity is actually starting to pick up. So when you talk to customers do you sense, we're at the point, where sweating assets, it's becoming less feasible, meaning should we start to see more refresh activity in the <unk>.
Half of the year and into 'twenty four.
How should we think about when refresh activity really comes back here.
First I would like to think that we will see some this quarter and more in Q4 I know when they think that they have all the reasons to believe it will see far more than that next year in 2024.
But also I'm by the way pretty positive about the fact that such a big portion of our business became annuity business. When we look at these.
Infinity contracts and I think that's where you mentioned, even some of the product is moved from the product line to the infinity.
Backlog and deferred revenues financially on the balance sheet at me maybe on the balance sheet, maybe even be off the balance sheet. It depending on how the deal is recorded.
But this is not a bad thing this is creating more stability more long term.
Relationship with the customers and I would like to see bigger part of the business.
Moves to annuity of course, not at the cost of a slower growth rate I think over long term, we want to increase our growth rate. So no doubt about that by the way I really really want customers to refresh some of the older appliances to get new technologies, which will give them better.
<unk> in some cases better security.
The cases, the same security just newer books will definitely gives us more revenues, but the fact that customers are not there you know.
Okay. So anxious to do that is actually a very very good testimony to the quality of our products. These products. Some of them are three years old. Some of them are 10 years old are working really really well I just had a conversation with a large customer that have a relatively product with our end of life and they want to upgrade.
They don't do it on time, but the way they are very happy with the products that we have which is a very very good testimony to a company that can produce products for 10 years later, we're still delivering and I'm talking by the way about environments that are mission critical high performance high security and not above.
<unk>.
<unk> is small.
The small business with May make may or may not care about it.
Great.
Our next step is Brad Zelnick, followed by Adam Borg.
Great. Thanks, very much for taking the question and happy anniversary to you. All you will there are a lot of religious debates in the market around the architecture. Some are adamant that native cloud proxy is the right architecture, others insist firewall is here to stay and it just needs to be embedded natively in the cloud what's your view on how this plays out over the next five years.
And specifically I'm interested in your thoughts on the future of proxies as it was actually an old friend of Yours, just reminded me last week that the earliest firewalls were proxy firewalls, but actually lost out to checkpoints network firewall almost 30 years ago.
So first you're absolutely right and that is true for two years ago. There were some proxies. They werent flexible we didn't support all the protocols.
Required every client to change and I think we've really.
Revolutionize the market by having kind of lease transparent firewall that can support any protocol any communication high speed high performance without the without the.
The applications kind of even aware of that that's still what we do and I think we've shaped up the entire market.
I think in the future we will continue to see a lot of firewalls firewalls are all remain by the way the most important element today and securing the networks.
Unfortunately, or Fortunately for us we are not really replace them, but it doesn't mean that they cannot be augmented with many many other technologies. So yes in the cloud we also need to use cloud native technologies in the cloud. We also need the posture management to understand where the cloud is configured the well and in cloud environments.
We're far more suspect able to attacks simply because we are public simply because we are exposed and there is a lot of good things, but that exists on the cloud, but when youre environment is more exposed.
It means that it can suffer for more attacks and again Unfortunately in our business, we see it almost every day.
By the way the fact that the cloud I'm sure. He's also adds a level of risk because that means that the same thing can be replicated. The same threats can be replicated with data can leak from one environment to another is things that are less likely to happen when it's every customer as an isolated environment.
Now I think of it in the future we're seeing multiple technology I don't think that there is one between when the market is far more sophisticated than that these days.
I think we were active in both we have very good posture management for the cloud we are very good.
Firewall or a network virtual network firewalls in the cloud and I think we should make them simpler and easier to use even in a cloud environment.
And by the way what we also have is a huge benefit that we can connect the hybrid cloud environment. The private data center to the public cloud, which event, which in almost every large enterprises crucial because all all of you all of US we have data centers, we have private application and we have a cloud application and we.
Need to connect them together.
Thanks for your perspective.
Alright, our next stop is Adam Board, followed by a second Cataria Gilead.
Awesome. Thanks.
Thanks, So much for the question so great to hear about the positive trends youre seeing in Americas, and maybe I'd love to hear a step deeper just what exactly you're seeing there what's giving you the optimism, especially as you think that can help translate to the rest of the world later this year. Thanks, so much.
I think the bottom line is but in my internal metrics of sales and so on and I'm seeing that the Americas is showing growth in let's say on all on all parameters. The America commercial region for us is showing growth and that's great. That's what we wanted to have I also see it in other indicators like the level of engagement with customers and so on.
The Americas, a big threat.
Slightly better than others. We also had changes in other places in the world, but that's.
And that's what caused me to be optimistic how much of it is macro economy outside how much of it is our own execution, it's hard to say.
I'd like to think that both in terms of engagement I know, but it's our execution in terms of results.
Don't know if its us or if it's the.
Konami out there slightly improving.
Super clear thanks, so much.
Alright next step is sackett, followed by Andrew Nowinski.
Okay, Great Hey, guys. Thanks for taking my question here and cheers to 30 years as well.
Gil maybe maybe for you great to see Infinity make up roughly 10% of total revenue maybe the question is what products as part of Infinity, our customers really using more broadly.
Beyond network security and as part of that.
Can you share anything on what impact Infinity is maybe having on on metrics like on a revenue run rates or deal size. Our net retention does it makes sense.
Absolutely. So first for US every in order to be Infinity deals I'll say, what's kind of the some of the criteria forget first with the customer and compas is not it's not just one product or few products purchased it tends to be an architectural win it tends to be a large kind of enterprise wide deployment of infinity.
It has to include so these tend to be larger deals.
It has to include more than one.
Product family more in our portfolio. So it can't be just network security tends to be network security, plus harmonia or a network security plus.
Cloud the best ones that we include the full.
The full architecture and I think it all the example that I've shown I have shown that <unk> include the different elements.
Right now the wildcard with many people buy the hardware in the email.
Yes.
<unk>.
That is growing fast, but cloud is there on almost every deal.
And the high ammonia endpoint is quite frequent to beat that and more and more we're seeing the new family. The new family is really small the horizon family that we launched less than a year ago and horizon is all about.
I'm kind of security event analysis security orchestration and analytics and it's kind of.
Martha brains behind connecting all the elements of the security So horizon is becoming now.
Part of many of the new Infinity deals.
Thank you.
Let's try that without mute next step as Andrew Nowinski, followed by <unk>.
Great. Thank you and good.
Good afternoon, so I.
I wanted to ask about your guidance for the year. It does seem a little bit more backend loaded now in Q4, given the modest guide below in Q3, so maybe.
Why not take down the annual guidance a bit in case some of those deals in the pipeline.
Our customers decide to delay their firewall refreshes, even further and rely more on the cloud.
I will start and maybe <unk> would like to add first where there's no reason for us to take anything because we are think we well well reveal our range wherever will be in the upper part or the middle part or on the lower part of the range, we will be well within the range. So I don't see any reason.
<unk> changed the range what will happen in Q4 wherever it will be.
Pleasantly surprised with an uptick which we have some good signs. That's why we are there in the pipeline or whatever will be slightly more in the mid to low part of the of the range I still don't know, but that's why it's basis why we provided the range to start with.
Oh, yeah yeah.
Yeah, and I'll add.
We don't see any risk here that we won't be in the range that Paul we didn't change we did didn't change.
Guidance and we also I again I was powerful fuel second I'm not sure. If you already mentioned it but we do see a very I would say very positive.
Is the pipeline for the last quarter of deal. So again, we need to be cautious here, because we see the macro environmental exceeded all yourself being delayed but still and we do see that there might be a backend loaded year in terms of privileged projects. So again, so that says something that 12 talks to have them again, no we don't see.
Anyhow any raise 12 items so I.
I mean, it's not it won't be outside the range.
Okay.
Alright.
Next step is chablis <unk>, followed by <unk> co sorry.
We can't hear you John .
Sure.
So you talked about targeting double digit growth in all metrics. So I'm trying to figure out what needs to happen to make that happen for.
For example, you need a better economy, you need SaaS fee momentum has been a growing to 25% of revenue just what are some reasonable scenarios that get you to double digit topline growth.
There are many many factors that can contribute to that but it's mainly better traction by adding more customers and winning more projects with existing customers now again, where it can come from that can come from quantum from our network security, we have plenty of potential there and the <unk>.
Cash cycle Kim addressed it can come from converting even more customers to infinity and winning new infinity customers plenty of potential it can come from.
Our increased success in the cloud with which also has the potential.
And I didn't mentioned harmonia email, because that's already growing quite fast, but that can be from there. So I think in almost every aspect of the business can have a contribution to that.
Most of the aspects of the business have the ability to even you know network security by itself, we see better win rates better refresh cycle can can.
Can get to work on its own it's not with the.
There is no potential where it's actually the opposite has plenty of potential there.
And when you look at our competitors some are showing.
Challenger full network security and they're growing elsewhere, and some are actually going very very well in network security, which means that the potential is there and the yes the economies.
Kind of put in the surprising pressure on us in the last two and a half quarters or the last three quarters, but.
I think we can overcome that and resume where we want to be.
Alright.
Next step is <unk>.
Followed by Joshua Tilton.
Hey, Thanks for taking my question and congrats on a on a 30 yards. So Gil you mentioned of course about the harmony attraction and you gave some examples you might have checkpoint is the only one that the doctor in real time.
They attract.
You mentioned are examples of some customer wins at a large bank as well as a large pharma. So I mean, given the recent challenges experienced by Microsoft, especially on the email security space. I mean, just curious has there been a factor.
Harmony, gaining traction are you guys trying to capitalize on that with your offering and and really going forward like how do you expect or what do you expect in terms of.
The impact.
Microsoft challenges on market share and.
How you guys are planning to capitalize yep.
So first Microsoft is.
Actual investing and getting more and more into security in the case of hardware most of most of what we're doing is not in the core of our market and is complementary to what we do and by the way Microsoft has been a good partner with us and we do things together, we do a lot of go to market together and we also compete on some areas in particular on the email.
In the email part in most of our email security sales today or into office 365 environment.
On every office 365 environments, Microsoft offers basic security for free and they offer advanced security for a fee and we try to get it to every council every account with buys our armani email.
It's actually augmenting what Microsoft does.
You can call it competition, which may be the right assumption, but also I think more generically about Microsoft.
We start our job security word the platform vendor and so I mean, we are trying to augment the capabilities with an operating system, there, but the network with them.
Any platform would even start with there and provide the advanced security.
And for the last 30 years that strategy worked very very well there has been a big market with wants better security more than just what the basic platforms, whether it's the routing and switching network security or the operating systems can do and Thats pretty much all the security industry not just tough.
We are augmenting what we do.
And I see no reason why we would change I mean, when we look at the macro.
Factors of cyber Securities veteran cyber security is needed now more than ever.
And the platform needs to be augmented by the way. That's also why we put so much.
Our focus on creating an architecture or creating the free <unk> comprehensive consolidated and collaborative the collaborative aspect is.
It's something that most platform vendors cannot do.
I think for the most part it works.
Got it. Thank you Alright next step is Joshua Tilton, followed by Greg Moscowitz.
Thank you guys can you hear me yes.
Yes.
Great.
I wanted to follow up on Andy's question.
It does seem that well it seems that things did get better from <unk> for you guys. So my question is two things need to keep getting better in order to meet the back half guidance or if the environment kind of stays as it is are you still going to fall within the range that you are reiterating today.
Right now we are within the range and we are not happy, but we are not growing faster I want to grow faster than I think we deserve to grow faster, but we are executing on vet wherever we want things to improve we are doing everything that we can again.
<unk> changed the economy.
But on our execution I think that there is so much we can do.
To improve our results and as much as I think I kind.
Kind of.
A lot of what's happened for us depends on the economy. There is so much more we can do and I think and then we should do to.
To deliver better security to more customers and that will be translated to the financial results.
Yeah.
Alright, Thank you very much.
Alright next step is Gregg Moscowitz, followed by Gabrielle aboard yes.
Alright, Thank you and congrats as well on the 30 year. So Gail on the network refresh delays do you have confidence that these are in fact purely delayed and that these deals will get it done.
I understand the point that renewables have remained strong but does that mean that this is only a timing issue from your perspective as it relates to our client purchases.
I think some of it is purely timing, but we see it but the customer says I average project in delaying it from Q1 to Q2 and sometimes he says well now it's from Q2 to Q3 and sometimes the delays keep being delayed but the project is well identified some of the delays are not things that are identified for adjusted the trend, but in you know in a typical quarter.
X number of customers would refresh and this quarter, it's less customers with a refreshed we're watching very very carefully to see whoever it is.
Kind of.
A loss or a refresh and that's why we see the trend between the renewal and the refresh so we are seeing that.
The retention rate of customers that we have a strong the renewal rate is actually stronger because in our model, we calculate that X percent of customers want to renew and instead refresh and what we see is the phenomenon of win win less refreshed more renew so we see that phenomena.
And again some of it is identified opportunity and can take these X deal then the customer can say this is the customer they decided to postpone the projects and some of it is just the pace of the market, let's say well.
The product works I'm happy with it.
Titan ups by the way tighten up spending we see with every customer.
Almost all the customers are now like we've seen couple of years when.
<unk>.
Couple of years, where customers who are spending again, it's not all the country universal, but we've almost no limits and just spending more and more in 2020 free we see with customers started having more financial discipline more tight control over the budget and where are areas with customer choose to invest more but many areas, especially.
In the more general infrastructure computing servers, and so on we're seeing very tight spending and even decline in spending in many many aspects of the market.
That's helpful. Thank you.
Alright next step is Gabrielle board.
Load by urban Lou.
Alright. Thank you I wanted to follow up on the comments on net retention to better understand how deal sizes are changing and so when you look in the pipeline and when you think about year on year all activity year to date wed love to have some color on how much the firewall footprint changing and how is the cross sell footprint changing.
You've got a hard deal sizes changing thank you.
Do you have any data on that any insights.
No I think again, so I would tell like that.
If I understood correctly. Your question. So we don't see I mean in terms of we see that some of the customer the three new they didn't do any refresh to renew and actually they even upgrading their services, sometimes theyre getting taking more services from us I would say not only the newly to renew it they don't let dwarfed by any appliances, but they expand those services.
More Celsius multi gigabit services.
Armani email or if it's small even on under the network security.
This naturally feel okay. So so that said if I understood correctly. Your question that thats something with CNN as for the pipeline. So we do see that some of the projects that being postponed from this quarter, we do see them push to the beds to the second absolutely most of them to Q4, so and therefore.
For this I mentioned that we see I would say a positive pipeline for Q4, because it includes many of these deals that were postponed from from this quarter, even from Q1, so and hopefully they will be closed and won't be any of the any deferral additional deferral in there to next year, but.
That's that's my Julien.
The deals in the pipeline.
If you take the average deal size or the deal size is getting bigger compared to what you might've expected trainers like al or last year.
Where we have both both of them and we have also allows deal size I mean I'm talking now we don't we see we see also allows deal size, we see we see from all of it but we don't its not we don't many around infinity by the way, we see very large deal sizes in the opportunities with large enterprises all over I mean, it's not something that we don't see we see that.
We just don't see we see less customer wants to pay upfront for more than a year, but that's more kind of on the BD side on the booking side on the pipeline because infinity is the flexibility and debate the flexibility around the business. We do see a very large deal sizes in the pipeline, but it doesn't mean that youll see in the billing go into revenues.
I actually see a nice win especially in the second quarter, we saw an increase in the number of large deals where ISO.
Again, its not I don't want people to go out with the wrong feeling of that modify so some weakness summary towards more mid size deals and mid market and less than the high end the high touch customers.
That's helpful. Thank you alright, our last call of the SaaS. It is going to our last question of the session is going to come from Irving Lou.
Alright, Thank you for the question.
It's great to see harmony email continue to do well are you able to parse out how many of your email customers are stand alone E mail customers versus historical checkpoint customers and do you see a compelling opportunity to upsell the infinity platform too. So some of these single solution kind of how many customers there.
It came by way of the Avalon acquisition.
I'm not sure I got all the questions, but generally speaking in the harmonium and we have a combination of a free parts. We have small mid sized customers. We have MSP is customers that are served by managed security providers and we have enterprise customers that are more similar to the checkpoint installed base in the last year by the way we did.
Double the.
The higher ammonia email installed base, which is huge we've added the.
Huge number of customers I mean, if you look at net additional customers to checkpoint or it's a very very big number of it came from that again big numbers are from the small and the MSP, but the number of large enterprise customers that were added is also decent the good news about that is that all of these.
Elements are kind of working.
And there is more and more business with us coming not from the high ammonia email standalone sales, but coming from the checkpoint field in the checkpoint channels that are saying well that's a great solution. We loved to include it for our customers and yes. It does add to US a lot of customers that were in checkpoint customers before but equally important customers with <unk>.
Check point customers are happy too.
Two by Venezuela.
Got it thank you alright.
Alright, so thank you for joining us today, we'll look forward to seeing you throughout the quarter.
And ER.
Here's tuition for another 30 more years.
Success. Thank you guys have a great day. Thank you very much I appreciate it thank you.
Q.