Q3 2023 Check Point Software Technologies Ltd Earnings Call

Kip E <unk> global head of Investor Relations and joining me today are founder and CEO Gil Sweat and our Chief Financial Officer, Roy Golan before we begin I'd like to remind everyone that the conference is being recorded and will be available for replay on our website at checkpoint dot com during the former placentation all participants are in a listen.

And only mode to be followed by a Q&A session. During the presentation check point Representatives may make forward looking statements within the meaning that two.

<unk> 27, a of the Securities Act of $19 33, and section 21 of the Securities and Exchange Act of $19 34. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward looking statements factors that could cause actual results to differ materially.

These include but are not limited to those discussed in check point software as latest filings with the Securities and Exchange Commission any forward looking statements may speak only as of the date hereof and checkpoint software undertakes no obligation to update publicly any forward looking statements in our press.

<unk>, 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 presentation of non-GAAP information. If you have any questions. After the call. Please feel free to contact Investor relations by E Mail at <unk> checkpoint Dot Com now I would like to turn the call over to Gil.

Flat.

Hi, everyone. Good morning.

Glad to see Youre looking at here.

Before I turn it into a to go through the financials I want to make a sports station and I think as you all know Israel going through a very terrible tariff talk three weeks ago.

First and foremost our hearts go to all the people who are suffering from this situation and all the people that closer.

In this situation and unfortunately here in Israel and around US. We are many listening we all know people listings have suffered and we all know people good pickup murdering these terror attack.

Over the past three weeks our employees prove the despite the staggering reserve military dropped a few people around 5% performing type of head count.

We can continue to operate as planned uninterrupted over the last three weeks, we've been able to launch product complete acquisition.

And of course, continuing to support our customers' Arthur was exactly on plan.

All of that is due to the fact that we are much more accommodated to work in a hybrid manner with some operations are all around the world and mainly due to our employees and their commitment.

Customers at Martin I want to thank all our employees for their resilience and for all our customers partners and you in the investment community because they did receive plenty of support plenty of E. Mails and calls from people that are standing behind us and are supporting us at this time I really really appreciate it.

We want to thank you and with that I think we can turn to business and try to weigh.

Continue with business plans for where we hit the floor is yours.

Thank you again and thank you for everyone for joining the call today.

I think you'll be able to do and it begins the review of the first quarter of 2020 free we had another strong pushed a bit positive in quarter with 17% growth in EPS, both double digit growth in net income and EPS and net income for the second quarter and our role in the EPS for the first quarter in a row very strong results in terms of revenue.

Our revenues reached $596 million.

9 million above the midpoint of our projection, while EPS as mentioned bleeds.

<unk> seven <unk> at the top end of our projection.

And going out today. It will then on bill so deferred revenues grew by 4% to one be on $790 million.

Our current deferred revenue is actually the short term deferred revenue grew by 6% to $1.246 billion or at all our calculated billing reached $531 million, while all calling calculated beating the shoulder and calculated billings reached $535 million in.

Important to note that the calculated billing include $8 million related to the acquisition of <unk>.

Hey.

Same again in the previous quarter due to high interest rate environment, we saw fewer customer willing to pay up front for multi year deals and which was already being shorter billing duration. <unk>. In addition, <unk> is becoming more and more significant all business and the billing terms in these deals more flexibility some of the O&M monthly basis some of them.

On a quarterly basis, so that also picked out duration.

It is important to note that we saw many positive indicators this quarter and we saw that is something that we have.

Monitoring the annualized bookings actually grew EUR 1 billion and our <unk> grew by mid single digit deal.

I think in general we saw very positive indicators Q3, and we see a positive momentum also going to a new full.

Okay. So I'll, just keep doing it and revenues.

Grew by 15% actually the highest growth that we had since 2017.

This growth was driven by strong demand for Harmony Board Assembly and mainly for <unk> security you keep seeing a very strong demand for many products and man that's doing this growth.

Conference.

Kip Meintzer: I'm Kip Meintzer, Global Head of Investrelations, and joining me today are founder and CEO Gil Shwed and our chief financial officer, Roy Golan. Before we begin, I'd like to remind everyone that the conference is being recorded and will be available to replay on our website at checkpoint.com. During the former presentation, all participants are in listen only mode to be followed by a Q&A session.

On the product side, we still see delays in executing refresh projects projects that Phil.

Lumping in decline of product revenues by 14%. The Obelial. It is important to note that we did see stronger and you won't be strong enhancing yarn business as our customers continue to benefit from our security and simple.

We do see stronger pipeline for Q4 for Q4 that include also leafless spotted this local sponsel prior quarters. So we hope that we are going to see that.

Kip Meintzer: During the presentation, checkpoint representatives may make forward-looking statements within meaning section 27A of the Steerties Act of 1933 and section 21 of the Steerties and Exchange Act of 1934. These statements involve risk and uncertainties that could cause actual results to give for materially from those projected in the forward-looking statements, factors that could cause actual results to differ materially include, but are not limited to those discussed in checkpoint software's latest filings with the Securities and Exchange Commission.

Does it extend out one day in Q4.

In terms of Infinity Infinity had another great quarter continue to flowing extended like you'd wait to the revenues with strong double digit growth.

In the first quarter of 11 years from Infinity exceeding the 10% of the total revenue and we can see more and more customers are adopting our platform, which ancillary their needs under one umbrella of products and services.

As for the revenues by geography, so 46% of revenue came from EMEA, 33% of revenues came from the Americas, while the remaining 11% came from Asia Pacific.

Kip Meintzer: Any forward-looking statements may speak only as of the date hereup and checkpoint software undertakes no obligation to update publicly any forward-looking statement. In our press release, which has been posted on our website, we present gap and non-gap results, along with the reconciliation of such results, as well as the reasons for presentation of non-gap information.

Now, let's move to our to the P&L. So our gross profit increased from $5 $7 million to $534 million, representing a gross margin of 19% compared to 88% margin last year. This is a significant improvement in our supply supply chain this year, which had been challenging in <unk>.

Kip Meintzer: If you have any questions that's a call, please feel free to contact Invest Relations by email at kiffetcheckpoint.com.

'twenty two.

Operating expenses increased by 9% and do you think it is mainly the result of our continued investment in our workforce cloud infrastructure marketing and travel costs.

Gil Shwed: Now I'd like to turn the call over to Gil's Web.

Gil Shwed: Hi everyone, good morning and glad to see you all looking here. Before I turn it into a way to go through the financial, I want to make a short statement. I think as you all know, Israel gone through a very terrible terror attack three weeks ago, and the first and foremost are hearts go to all the people that are suffering from the situation and all the people that lost their loved ones in the situation.

And those have been not been told that our non-GAAP operating income continues to be strong at $269 million.

Gil Shwed: And unfortunately, here in Israel and around us, there are many of them. We all know people that there's a suffered and we all know people that stood up to murder in this terror attack. Over the past three weeks, our employees prove that despite the cyber and reserving military draft of few people around 5 percent of our entire account, we can continue to operate this plan uninterrupted. Over the last three weeks, we've been able to prolongs products, complete acquisitions, and of course, continuing support over customers, the partners executive plan.

Our 45% margin and same as we had last year very strong stability.

Financial income and.

This quarter it was $80 million is it keeping invest in a higher interest rate overtime.

non-GAAP tax rate for this quarter was around 15%, mainly due to indexation and updating tactical vision because of several tax assessments, we edge worldwide.

Our non-GAAP net income increased to $242 million or $2 <unk>.

The diluted share, reaching the top end of our position in 17% growth in mobile our GAAP net income was $205 million or $1.75 per diluted share 19% royalty liability.

Moving to our cash flow and cash position saw cash balances as of the end of the quarter was $3 billion. Our operating cash flow was strong at $222 million. This quarter and it includes 22 million rollout founder all baked in connection with <unk>.

Gil Shwed: All of that is due to the fact that we're much more accommodated to work in a hybrid manner. The operations are all around the world, and mainly due to our employees than their commitment to customers and partners. I want to thank all our employees for their resilience and for all our customers, partners and you in the investment community because they did receive plenty of support, plenty of emails and calls from people that are standing behind us and are supporting us at this time. I really, really appreciate it. I really want to thank you.

The acquisition that we did this quarter, excluding this effect our cash flow grew by 2% to $244 million.

During the quarter weak, while it's telling me till 81 in asthma with total net cash amount of $477 million.

We also continued our buyback program and purchased two 5 million shares.

On the $25 million at enabling buyers of $131.

Gil Shwed: And with that, I think we can turn to business and try to continue with business plans or in the floor of New Jerseyers.

Now on to some out of that for our financial this quarter very strong subscription revenues of 15% grow <unk> growth. Since 2017 continued strong adoption of our infinity platform and why do we see relief was project that has ever experienced delay, we see very strong and healthy annual business and against strong profitability.

Roei Golan: Thank you, Gil. And thank you for everyone joining the call today.

Roei Golan: I'm excited to be with you and begin the review of the third quarter of 2023, where the NADL's length of the fourth quarter with 70 percent growth in EPS, both WDG's growth in net income and EPS in the net income for the second quarter in a row, or in the EPS for the first quarter or in a row, very strong results. In terms of revenues, the revenues reached $596 million, 9 million above the midpoint of our projection, while our EPS has mentioned reached $2.7 at the top end of our project.

And we had 17% growth in EPS and now I'll turn the call over to Jim.

Yeah.

Hi, everyone.

Again nice to see.

It seems to be here I'd like to schedule more light about technology in the business and what we've seen there during this quarter first if we start with some of the highlights one of the things you've already heard from Murray I think on the financial side, we had good financial results.

Roei Golan: Let's go now to the numbers. So, the third revenues grew by 4% to $1,790,000. Our current third revenue is actually the short and the third revenue grew by 6% to $1,246,000. Our calculated billing reached $531,000, while our current calculated billing, the short and calculated billing reached $535 million. Important to note that the calculated billing includes $8 million related to the acquisition of perimeter 81. Same as in the previous quarter, due to our interest rate environment, we saw fewer customers that were willing to pay upfront from Wiltier this, which resulted in shorter billing duration, e-o-village.

Our projections on the top end of the revenues, even beyond where two bps. We did experienced strong renewals and we did see a lot of positive indicators of change.

Change, which I think will mark higher growth, we'd be a columbia, new with all the efforts with the chip when people do around the entire world.

On the technology and the other activities that we've done this quarter first I think we've talked a lot about the acquisition of perimeter 81, new industry Morgan pre salt the newer customers.

Getting into the SaaS industry, I think the navy or several times on the fly them. During in the next few slides I will explain what is thought to be and why it's important and why is it such a big deal and I think a big opportunity for our business, but on top of it we've launched several other products, especially during October the horizon play blue blocks and several others.

Roei Golan: In addition, the infiniity is becoming more and more significant to our business and the billing terms in these days are more flexible. Some of them on a monthly basis, some of them on a quarterly basis, so that also affects our duration.

I think we remain very very active so let me start and drill down a little bit about some of the business activities that we.

Roei Golan: It is important to note that we saw many positive indicators this quarter. We saw that it's something that we are monitoring in the annualized booking actually grew e-o-village, and our opioid group by missing a digital available. So, I think in general, we saw very positive indicators of Q3 and we see a positive momentum also going to $8.04.

Conducted during the last quarter.

So first and foremost is market expansion and our acquisitions that we've executed the.

In the last actually 60 days the last actually 60 days, we've acquired three companies, making it 20 total count for checkpoint acquisition.

Roei Golan: Okay. So, our security and revenues were a group by 15%, actually the ice growth that we had since 2017. This growth was driven by strong demand for our harmony product family and mainly for our own human security. We keep seeing a very strong demand for the harmony product and that's doing this growth.

Several spaces.

Biggest one was the in these.

One is the perimeter 81 for the quantum starting again will explain about the fees and secondly to $3 $4 billion market, which is very adjacent and very complementary to our customer base and I think it's a must for us to play and be strong in this market.

Roei Golan: On the product side, we still see delays in executing research projects. That's resulting in decline of production revenues by 14% in over the year. It is important to note that we see strongly in our business as our customers continue to benefit from all security and support. We do see stronger pipeline for Q4 that includes also research projects that will support for part of the portal, so we hope that we can see the positive turnaround in Q4.

Jim.

In addition to that we've extended our technology with a small acquisition of utmost deck, a small Israeli startup.

Let us provide better technologies for the SaaS security market.

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Providing better technology to secure application that are being run from the cloud and lots of most least if you remember at the beginning of the year, we launched our Infinity Global services, an organization with the aim to complete the set of services that the customer can get from checkpoint basically augment.

Roei Golan: In terms of infinity, so infinity and another great portal continue to flow in an accelerated way to the revenues with a strong double digit goal or value. In the first quarter, the revenues from infinity exceeded the 10% of the total revenue and we can see more and more customer adapting our platform, which answering the need and the one umbrella of product and services. So, the revenues by geography, so 46% of revenue came from email. 43% of revenues came from the Americas, while the remaining 11% came from Asia Pacific.

The capabilities with each customer has infinity global services is today more than 30 different services you provide for around 400 security consultant its excrete Big organization and what we've done now with few additional services. The main one is actually minutes firewood service. It plays very well into our installed based in vessels the.

Some of our in source I think of them who've completed just the weekend of optical. So this is a number of additional important addition to our market space and again, we've done all operate in a very short period of time and continue to work.

Roei Golan: Now, let's move to the PNL. So, our growth profit increased for $5.7 million to $534 million, presenting a growth margin of 90% compared to 88% margin last year. This is a lot of significant improvement in our supply in DCL, which had been challenging in 2022. Our operating expenses increased by 9%. And this increase is mainly the growth of our continued investment in our workforce, cloud infrastructure, marketing and travel. In total, the non-gap operating income continues to be strong and $269 million or 45% margin same as last year. Very strong stability.

Even during these days.

So let me jump right in and speak a little bit about the challenge of subsea once it starts it starts it mean secure access service edge and that's actually.

A big name to the new types of connectivity with enterprises need. These days, so if youre trying to understand what does that mean.

For example, if in the past and enterprises was mainly remote users and data center or a corporate or few corporate offices today, an enterprise network is far more of them that has such a bleak itself application application with our delivered from the cloud because cloud applications that are delivered from a private or public cloud.

Roei Golan: Financial income, this quarter reaches $18 million as we keep investing higher interest rate over time. Our non-gap tax rate for this quarter was around 15% made due to indexation of the end-updating tax provision because of several tax assessments we had worldwide. Our non-gap net income income increased to $242 million or $2.7 per diluted share reaching the top end of our position and 17% growth in oblivion. Our guap net income was $25 million or $1.75 per diluted share, 19% growth in oblivion.

It has many many branch offices talking about what we call SD Wan branch office security and retrofits traffic optimization, we need to secure the access of the remote users not just when they access the data center, but also when we access the internet access the cloud application and we don't go through the traditional enterprise gateways.

So the connectivity becomes a little bit more.

Challenging we're a little bit more complicated because each element of that adds another layer of connectivity in the lager element of security.

Roei Golan: Moving to our cash flow and cash position, so our cash balances for as of the end of the quarter was $3 billion. Our operating cash flow was strong in $222 million or this quarter and it includes $22 million found in connection with the acquisition that we did this quarter, excluding this effect our cash flow grew by 2% over to $244 million. During the quarter, we acquired perimetre 81 and had a total net cash amount of $477 million. We also continued our buyback program and purchased 2.5 million shares for $325 million at an average price of $131.

One approach to doing that is running a big part of it from the cloud and many solutions today by the way with very do it's Tom.

They'll all be user traffic today, when we speak about SaaS, it's mainly about taking remote user traffic and tunneling through a cloud service that opens that communication inspect it and security.

We've been trying and we've been active in this space for a long time, but I think now we made a very important step with the acquisition of perimeter empty one to build the industry best what we call a game changing.

Architectural solution that addresses all the elements most of the remote user and not just the brand drug inflation the other vendors.

Roei Golan: Now to sum up our financial discord, there are very strong subscription revenues with 15% growth. As goes since 2017, continuous strong adoption of our infinity platform. And while we see this response is that we have experienced delay, we see very strong and healthy annual business and again strong profitability with 17% growth in EPS.

But addressing all the elements of subsequent activity in one sweep I think where we've started by launching the quantum suski Las Vegas, the week of actually October eight.

Tim.

And we will continue in building that architecture and making it the industry's.

And most complete <unk> solution. So let me describe what it is and what are the benefits for.

Gil Shwed: And now I'll turn the call over to Gil. Hi everyone. Once again, nice to see you all.

For example, if we speak about the current solution.

Channel all the traffic through the cloud so on one hand, you want to get more security on the other end by tunneling through the cloud to slow it down and mainly jeopardize the private because you take all your communication with you want to keep private and secure and opened 18 a single entity.

Gil Shwed: I'd like to say some more light about technology and the business of what we've seen there during this quarter. First, if we start with some of the highlights and the things you've already heard from Roy, I think on the financial side, we had good financial resides, exceeded our projections on the top end of the revenues, even beyond that on the EPS. Yes, we did experience strong renewals and we did see a lot of positive indicators of change, change that I think will mark higher growth with the economy and with all the efforts that the check when people do around all the entire world. And on the technology and the other activities that we've done with quarter first, I think we talked a lot about the acquisition of perimeter 81 new industry Morgan 3000 new customers.

All the customers in the world sure. So basically we're taking a huge risk to the privacy of the communication.

What we do we want to start the first we provide twice as fast in the security because we are operating in what we call the hybrid manner with one device and cloud network protection again, it's controlled from the cloud, but most of in most cases, we cannot we don't actually need to go through opening and jeopardizing the privacy, but we can do it.

From the user device.

Much faster and much more secure connectivity and secondly, the consolidation I described the challenges of today, if you look at the industry.

Gil Shwed: Getting into the sassy industry, I think the name is here several times on the slide and during in the next few slides, I will explain what is sassy and why it's important and why is it such a big deal and I think a big opportunity for our business. But on top of it, we've launched several other products, especially during October, they arrived in table blocks and several others. And I think we remained very, very active.

These customers are using if they want to get the full SaaS the architecture of full connectivity architecture or indeed the round.

For a different solution.

Usually from free plus vendors in some cases much more what we want to do is create a fool me mesh integrated connectivity from one vendor one ability to manage its one ability to deploy and get the highest level of zero Trust security with actually works Zero Trust means that we have Mike <unk>.

Gil Shwed: So let's start and drill down a little bit about some of the business activities that we've conducted during the last quarter. So first and foremost is market expansion and our acquisitions that we've executed the in the last actually 60 days in the last 60 days with acquired three companies making it 20 total count for checkpoint acquisition. In several spaces, the biggest one was and is a quant is a perimeter 81 for the quantum sassy and again, I'll explain what's in the second is a 3.4 billion dollar market that is very adjacent and very complimentary to our customer base and I think it's a must for us to play and be strong in that.

<unk> far more granular far more.

Transaction to transaction or user application, great solution security, so making security at a higher level.

And last but not least is optimizing the communication when we speak about branch of its communication and what's the sector, let's called SD Wan.

And that's the one not just by optimizing dropping but by getting the appropriate level of security and I think we are going to integrate it with launched our SD Wan technology at the beginning of the year and we will make it a very important part of our entire software architecture.

Gil Shwed: Market. In addition to that, we've expanded our technology with a smaller position of Atmosek, a small Israeli startup that will let us provide better technologies for the SaaS security market, providing better technology to secure applications that are being run from the cloud. And last and not least, if you remember at the beginning of the year, we launched our Infinity Global Services and organization that aims to complete the set of services that the customer can get from Check Point and basically augment the capabilities that each customer has.

As part of its solution. So overall I think we do have a game changer.

We will be able to connect the data center gateway or quantum gateways or quantum firewall. We've the branch office with the cloud with the end users with the remote access and make both internet access and data access everywhere at the highest level of security and the highest level of performance I think we really are.

The game changer.

So that's about the quantum sofie and let me switch to work towards a different technology that we launched last week and Thats.

Gil Shwed: Infinity Global Services has today more than 30 different services it provides, around 400 security consultants. It's a pretty big organization and what we've done now is added to its few additional services. The main one is actually managed firewall service. It plays very well into our install base and that's with the acquisition of our source. I think that we've completed just a week and a half ago. So this is another edition, important edition to our market space. And again, we've done all of it in a very short period of time and continue to vet even during these days.

The horizon Playbooks, I think with horizon Playbooks can be a real game changer.

Maybe I should use the game changer may be a breakthrough technology here that really may take security to the next level and I think you've heard me speak even at the beginning since the beginning of the year about the three CS of.

Of security solutions with our.

<unk>.

Comprehensive consolidated and collaborative and I think the element is if we can.

Get so many security technologies, and we actually don't work do we ever actually even where some of them even within the same domain don't works together, let me give you. An example, let's say that we spot.

Gil Shwed: And so let me jump right in and speak a little bit about the challenge of the SaaSy on what is SaaSy. So SaaSy means secure access service edge. And that's actually a big name to the new types of connectivity that enterprises need these days. So if you're trying to understand what does that mean, for example, if in the past an enterprise was mainly remote users and data center or a few corporate offices, today an enterprise network is far more than that.

Gil Shwed: It has SaaSy application that are delivered from the cloud. It has cloud applications that are delivered from a private or public cloud. It has many many branch offices talking about what we call SD1, branch office security and branch office traffic optimization. We need to secure the access of the remote users, not just when they access the data center, but also when they access the internet, when they access the cloud application. And these don't go through the traditional enterprise gateways.

NTT or someone with scanning our network that is doing what is called technically port scanning to our network. So our gateway will stop the port scan or not to stop the accessing different ports.

And these are we'll keep trying to do the port scan and then they might even find their stomach location, but its open and they might find the vulnerability and better application and get inside the network, we actually might even do it from a different location.

Playbooks, even within the Gateway security, we can see somebody is doing in Portugal, let's put.

That entity in the penalty box and let's not have them, even the chance to ask us even places that there but are allowed access because maybe they are trying to exploit the vulnerability now you can do it on the same gateway you can do it in all the gateways in the company again, we spotted one NTT trying to get into our network lets not get them in and then you can do.

Gil Shwed: So the connectivity becomes a little bit more challenging or a little bit more complicated because all these are each element of that at the Navro layer of connectivity and a lot of elemental security. One approach to doing that is running a big part of it from the cloud. And many solutions today, by the way, what they do is tunnel all the user traffic. Today, when we speak about SaaSy, it's mainly about taking remote user traffic and tunneling it through a cloud service that opens that communication inspects it and security.

It was multiple products not just with the network security, but also doing it across products. So for example, if we are seeing.

Suspicious activity by one of the endpoints in the company, we block access to <unk>.

And point by all the gateways and by all the other security means.

So that.

The 10 point cannot compromise any other places in the network.

And again the list goes on and vessel to be called.

And play blocks.

Gil Shwed: We've been trying and we've been active in this space for a long time, but I think now we made a very important step with the acquisition of CurivatorNT1 to build the industry best, what we call a game-changing architecture or solution that addresses all the elements, not just the remote user and not just the branch office, like in the other examples, but addressing all the elements of SaaSy connectivity in one suite. I think where we've started by launching the Quantum SaaSy last week of October 8th, and we will continue in building that architecture and making it the most complete sassy solution.

The story blocks.

Cryptic scenarios and turn them into automatic.

People out of the box Playbooks that can work and can turn security to be collaborative I believe that this is a breakthrough our solutions today in the industry that talks about rather in a slightly different category Super complicated requires a huge investment required.

Yes.

Training and the building different scenarios and don't always address the issues. What we are being able to do here is the real breakthrough in taking that idea of collaborative security of automated security and make it super simple and Super effective when you see a customer quote from one of the early customers are choosing that technology if it says.

Gil Shwed: So let me describe what it is and what are the benefits. For example, if we speak about current solutions, they channel all the traffic through the cloud. So on one hand, you want to get more security on the other hand, by tunneling it through the cloud, you slow it down and mainly jeopardize the privacy because you take all your communication that you want to keep private and secure and open it in a single entity with all the customers in need.

The level of security that they get here was previously unattainable. So I'm very proud of the technology that is the first step and thats going to be included.

All the checkpoint gateways of all the checkpoint product and again incorporate many of referred party product into that game and in the future even more so I think it's a very very good start to a breakthrough technology.

Gil Shwed: In the world share, so basically you're taking a huge risk to the privacy of the communication. What we do with quantum sassy first, we provide twice as fast internet security because we are operating at what we call the hybrid manner with on device and cloud network protection. Again, it's control from the cloud. But most of, in most cases, we can, we don't actually need to go through opening and jeopardizing the privacy, but we can do it from the user and device.

And we've talked again theres. Many many more technologies that we launched mainly by the way in the last three weeks.

And I think Roy already described the success that we have with Infinity and infinity, becoming not just an important part of our strategy, but the bigger part of our business and you can see here a few examples of wins, we have been <unk>. One is in Asia financial and insurance services company full Infinity architecture with quantum cloud guard hard.

Gil Shwed: And get a much faster and much more secure connectivity. Second, it's the consolidation, I described the challenge and today if you look at the industry, customers are using, if they want to get the full sassy architecture, full connectivity architecture, we need around four different solutions, usually from three plus vendors. And in some cases much more, what we want to do is create a full me mesh integrated connectivity from one vendor, one ability to manage this, one ability to deploy and get the highest level of zero trust security that actually works zero trust means that we might security far more granular far more transaction to transfer action or user to application grain solution security, so making security as the higher level.

Mooney single management solution and facilitate that all the security consolidation and number one is Woodward and aerospace manufacturing in the Americas again, if they are using here both the Src, which is very nice to see the deployment with our quantum gateways. They get the scalability of the like the ease of deployment that we're really really.

Differentiators because that's a very important part we do do security in the large scale and they are utilizing our infinity global services for optimizing the security policy and delivering better security.

And last one and these examples and again you can imagine, but we have many many examples of different customer wins and customer scenarios that we sorted out.

To get to this list is a very important customer for us.

Gil Shwed: And last and not least is optimizing the communication will we speak about branch office communication and that's the sector, it's called sd1 and sd1 not just by optimizing traffic, but by getting the proper level of security. And I think we are going to integrate it with launched our sd1 technology at the beginning of the year, and we will make it a very important part of our entire sassy architecture.

The U S. DLA the defense logistic agency, that's kind of the procurement army of the U S Department of Defense American Federal government using both the quantum and our cloud guard so gateway in cloud and like the flexibility.

And the ability to deploy more and more technology with infinity agreements with each site. So these are few important and interesting when theres. Many many more.

Gil Shwed: A part of a solution, so overall I think we do have a game changer with which we will be able to connect the data center gateway or quantum gateway that are quantum firewalls with the branch office with the cloud with the end users with the remote access and make both internet access and data access everywhere at the highest level of security and the highest level of performance, I think we really have a game changer here.

And other revenue of the business is the technology leadership, and how it's being recognized by analysts.

You can see here I won't go through the list some of the awards and some dimensions that we got in different analysts mentioned Frost <unk> Sullivan Giggled for us there.

Gartner and several more but they didn't include <unk>.

Gil Shwed: So that's about the quantum sassy and let me switch to that to a different technology that we launched the last week and that's the horizon play blocks, I think that horizon play blocks can be a real game changer, maybe I should use the game changer, maybe a breakthrough technology here that really may take security to the next level. And I think you've heard me speak even at the beginning of the year about the free seed of security solutions that are comprehensive, consolidated and collaborative.

Zinc is about more than 10.

Just here on the slide most of them seven or eight are just from the last quarter shows the leadership on that again.

I don't remember even know how many years in the Gartner Magic quadrant for network firewalls.

But everything we are stepping more and more even in new areas like the horizon.

For the security consolidation the harmony for the user security for the cloud Guard, we're making more and more pro growth and winning more and more into the leader quadrant or the center of the circle, which may have or the leadership of the waves.

Gil Shwed: And I think the element is we get so many security technologies and they actually don't work together, actually even worse, some of them even within the same domain don't work together, let me give you an example. Let's say that we spot. Some entity or someone that's scanning our network that is doing what's called technically port scanning to our network. So our gateway will stop the port scanning or not to stop the accessing different ports.

In terms of the leadership before it technology I think it's something we should be very proud that we should all understand which we're able to lead in many different markets and especially consolidates them.

Gil Shwed: And the user will keep trying to do the port scan and then they might even find the some application that's open and they might find the vulnerability in that application and get inside the network. We actually might even do it from a different location. Security we can see somebody's doing a port scan. Let's put that entity in a penalty box and let's not even even the chance to access even places that are allowed access because maybe we are trying to exploit the vulnerability.

Last but not least here we were also recognized by a few publication the Forbes 2023 World Best employers.

Very proud to be here at the forefront of year in a row seem to be the leading company in our industry.

For our employees for choosing us for voting for US. These are by the way both through surveys with our unaided. We don't know how we are being <unk>.

<unk>, we don't contribute to them. So this is independent starting in the second one for the first time, we were surprised to see us the Newsweek world's most trustworthy companies again, leading in the industry, so customers and partners and many people trust the checkpoint brand and I think that's a very very important thing, especially when you.

Gil Shwed: Now, you can do it on the same gateway. You can do it in all the gateways in the company. Again, we spotted one entity trying to get into our network. Let's not get them in. And then you can do it with multiple products, not just with the network security, but also doing it across products. For example, if we're seeing suspicious activity by one of the end points in the company, we block access to that end point by all the gateways and by all the other security means.

Think about the brand that's important for cyber security.

Complete kind of respect through more technology.

And innovation users and when analysts recognize that.

Our employees and general public.

Let's recognize the potential and the leadership of the checkpoint brain.

So to summarize my part.

Gil Shwed: So that end point cannot compromise any other places in the network. And again, the list goes on and that's what we call in play blocks the story blocks that take scenarios and turn them into automatic simple out of the box playbooks that can work and can turn security to be collaborative. I believe that this is a breakthrough. Our solutions today in the industry that they're talking about that are in a slightly different category.

I think we had a pretty good quarter.

Very good financial results strong profitability with 17% EPS growth, 15% growth in subscription highest growth since 2017, I think we have a game changing innovation free acquisition, the quantum Southsea horizon Playbooks for collaborative security and I think like Roy mentioned, we are seeing a lot of side.

<unk> four positive change if you remember last November we started with.

I think what we've seen is a major slowdown in our industry I think it continued throughout the first and second quarter and I think now in the first quarter I am seeing some good signs of turnaround I think part of it is the economy and the industry and parts of it is the action of our people in checkpoint.

Gil Shwed: Super complicated requires huge investment requires years of training and the building different scenarios and don't always address the issues. What we're being able to do here is a really breakthrough in taking that idea of collaborative security of automated security and make it super simple and super effective. And you see a customer quote from one of the early customers that using that technology that says the level of security that I get here was previously unattainable.

Especially our people in the field that are working very hard and I think we're starting to see that and I'm very very positive about the signs for the future, which will get out of it.

So before I open the call for a question and answer maybe it's the right time to speak about our projections for the fourth quarter. So in general our projections.

Gil Shwed: So I'm very proud of that technology that's the first step and that's going to be included with all the checkpoint gateways and all the checkpoint products and again incorporate many other shared party products into that game and in the future even more. So I think it's a very, very good start to a breakthrough technology.

I'm actually first very positive I think <unk> shared the positive sign but we've seen we've seen more positive signs in our internal indicators and when you can see on the external.

<unk> numbers.

Gil Shwed: And we've talked again, there's many, many more technologies that we launched mainly by the way in the last three weeks. And I think Roy already described the success that we have with infinity and infinity becoming not just an important part of our strategy but bigger part of our business. And you can see here, a few examples of wins with infinity, one is the nation financial and insurance services company full infinity architecture with quantum cloud guard, harmony, single management solution and facilitated all the security consolidation.

We have decent in the healthy.

Pipeline and projections by our field and so we've had I think we can we can move to bet I think in terms of revenue, we expect revenues to be in the range of $636 million to $686 million to wide range, because I think there's a lot of possibilities.

Our field actually is even more positive and more optimistic than I do.

No I mean, you know my regular caveat projecting the future is very challenging there is a very high level of uncertainty and results can be better or worse. So I think there are some good signs, but it can be better.

Gil Shwed: And everyone is woodward and aerospace manufacturing in the Americas. Again, they are using here both the sassy which is very nice to see the deployment with our quantum gateways. They get the scalability, they like the ease of deployment that were really, really differentiators because that's a very important part when you do security in the large scale and they are utilizing our infinity global services for optimizing the security policy and delivering better security.

Okay.

On the EPS side, I think we're expecting very healthy EPS between $2 35 to $2 55, GAAP EPS is expected to be approximately 42 cents less and I think overall with projections play very much well into the ranges that we provided in the beginning of the year. So the next one.

Gil Shwed: And last one in these examples, and again, you can imagine that we have many, many examples of different customer wins and customers scenarios that we sorted out. To get to this list is a very important customer for us. The US DLA, the Defense Logistic Agency, that's kind of the procurement army of the US Department of Defense. American federal government using both the quantum and our cloud guards, gateway and cloud, and like the flexibility and the ability to deploy more and more technology with the infinity agreement that we have signed. So these are few important and interesting winters, many, many more.

I will show you how it plays into the ranges that we get in the beginning of the year and the beginning of our original range for revenues.

Between two three or $4 billion to $2 five $1 billion in revenues you can see with this fourth quarter now the range is narrowed I mean, we have three quarters behind us already.

And I think youll see its right in the middle So I'm actually.

It's pretty good to see that especially as we had the year, but it wasn't easy the first.

Two or three quarters.

non-GAAP EPS is we're actually even revising the range here and taking the range up.

<unk> was $7 70.

<unk> $8 30, the new range is already start at $8 20, and goes up all the way to $8 40, and so this is already expected to be at the top end and maybe even over the original range that we provided I think visa.

Gil Shwed: Another avenue of the business is the technology leadership and how it's being recognized by analysts. You can see here, and I won't go through the list, some of the awards, and some of the mentions that we got in different analysts mentioned, Frost and Sullivan, Giga, all forest there, a gardener, and several more, but I didn't include the rivers, I think about more than 10, just here on this slide. Most of them seven or eight are just from the last water shows the leadership on that again, I don't remember even how many years in the gardener magic quadrant for network firewalls, I think that, but everything we are stepping more and more even in new areas like the horizon for the security consolidation, the harmony for the user security for the cloud guard, we're making more and more progress and winning more and more wins into the leader.

Very good projection I think they show a lot of I think positivity on our side with a little bit cautious on the revenue side, which I think is always a good thing to do.

So overall I think that we had very good result, I think we're having decent projections and I would be very happy to hear your questions.

And comments about our business. Thank you very much and let's open the call to your questions.

As always during our question and answer period. Please limit your questions to one so we can get through everybody today, we're going to start off with Gabriela Borges from Goldman Sachs, followed by Adam Borg of Stifel.

Gil Shwed: We're going to go through quadrant or the center of the circle that they have or the leadership of the wave in terms of the leadership of our technology, I think it's something we should be very proud that we should all understand that we're able to lead in many different market and especially consolidate them.

Good evening, Thank you and I talked about with you and all of the checkpoint in place on the ground and Israel.

Wanted to ask a little bit about E. Our 2020 for planning assumptions as you think through what next year could look like maybe.

Gil Shwed: Last and not least here, we were also recognized by a few publications, the Forbes 2023 World Best Employers, very proud to be here the fourth year in a row, to be the leading company in our industry, thank you for employees for choosing us and for voting for us, these are, by the way, both two services are unaided, we don't know how we are being managed, we don't contribute to them. So this is independent studies and the second one for the first time we were surprised to see us on the news week, we're all the most trustworthy companies, again, leading in the industry, so customers and partners and many people trust the checkpoint brand and I think that's a very, very important thing, especially when you speak about the brand that's important for cybersecurity.

Maybe can you share with us some of the positive indicators that you mentioned in your prepared remarks that are leading you to perhaps help.

Help us think through what the implications are from the positive indicators Tricia filling scratch in other words when do you think we'll see a more material inflection in billing Scott. Thank you sorry.

So I think first thank you for that and it's too early we still don't have the 2024 projections. We're just starting to work on the 2024 planned, but we already have some thoughts about that and I would say, there's three factors that.

That contribute to that one is the technology in the new area that we are in and so on and second is our customer engagement and the level of activity that we have in the field and the first one is the market itself, which is a little bit beyond our control so from that and I think this year, we really we did our team did an amazing job.

Gil Shwed: So this is just a complete kind of a spectrum of technology and innovation, users and women, analysts that recognize that and our employees in general public that recognize the potential and the leadership of the checkpoint brand.

Increasing the engagement that we do with customers would pretty much double our engagement rates with our customers both with.

Existing customers and even more so with the prospects and we're still plenty, but we can do we still can reach many more prospects for example, and we still can do more in the qualitative side of the engagement that we've made the real Revolution and I think there is a plenty of credit with our people on the ground in the different countries in the field has done this.

Gil Shwed: So to summarize my part, I think we had the pretty good quarter, very good financial results from profitability with 17% EPS growth, 15% growth in subscription, highest growth since 2017. I think we have game changing innovation, free acquisition, the quantum sassy or rising playblocks or collaborative security and I think like Roy mentioned, we are seeing a lot of signs for positive change, to remember last November we started with, I think what we've seen is a major slowdown in our industry.

Year. So now all of these things when you engage with the customer, but you haven't met for a long time when you start the conversation it takes between I would say.

It depends on the situation I would say between six to 18 months until we pay truthfully. The reason I'm, saying that because usually the people say I'm already engaged with the customers that have the current opportunity getting me to meet with somebody new it's usually the one that's not knocking on our door and doesn't have the current opportunity. So these are a little bit longer term customers.

Gil Shwed: I think it continued throughout the first and second quarter and I think now in the third quarter, I'm seeing some good signs of turnaround, I think part of it is the economy and the industry and parts of it is the action of our people in checkpoint, especially where people in the field that are working very hard and I think we're starting to see that and I'm very, very positive about the signs for the future that we get out of.

Think of it we will see the results.

<unk> and I think we've seen a bigger evolution in this engagement in the second and third quarters of it means that we can be optimistic about some of these engagements turn into deals in pipeline in next year, we already see the correlation I mean the more.

Meeting the more engagement with the customers the bigger the pipeline we've had customer it's a very direct correlation.

Gil Shwed: So, before I open the calls for a question and answer, maybe it's the right time we've had to speak about our projections for the fourth quarter. So, in general, our projections, I'm actually first very positive, I think Roei shared the positive signs that we've seen, we've seen more positive signs in our internal indicators than you can see on the external numbers. So, with that, I think we can move to that, I think in terms of revenues, we expect revenues to be in the range of 636 to 686 million dollars into wide range, because I think there's a lot of possibilities.

I think that's one sign of vets about our activity second in technology, we are much more than we've seen with some of our new technologies are sticking and are working well I think we will see a lot of demand for SaaS solution, it's a healthy market with high growth. So I expect.

We're just in the first few weeks in that market. So I don't have indicators that are too strong, but I'm very optimistic on their for example on the email side of things, but we've got into like three.

Two years ago, I think a year and a half ago decades, we already see a very healthy not just pipeline, we see very good results and very high growth. So I hope that we will can repeat.

Gil Shwed: Our field actually is even more positive and more optimistic than I do. I know, I mean, you know my regular caveat that projecting the future is very challenging, there is a very high level of uncertainty. The better or worse, so I think there are some good signs that it can be better. On the EPS side, I think we're expecting very healthy EPS between $2.35 to $2.55, gap EPS is expected to be approximately 32 cents less, and I think overall these projections play very much well into the ranges that we provided in the beginning of the year.

<unk> success with the SaaS the industry same thing with our overall vision overall architecture, which I think is the most important thing with the infinity umbrella and I think we've infinity, we're seeing very nice growth and again, it's of course ties to our engagement. We've hired enough people in the organization are we do we buy into our vision the answer.

Yes, the more qualitative engagements, we have with the customer the more likely they are.

To choose us as an architectural solution with the Infinity architecture. So if I'm talking about these two I think that we have a good pipeline of technologies a lot of innovation and.

Turnaround in the engagements that we have the first element, which is the market itself and especially our large market for.

Gil Shwed: So, the next slide will show you how it plays into the ranges that we get in the beginning of the year, in the beginning or regional range for revenues was between $2.34 billion to $2.51 billion in revenues. You can see with the fourth quarter now, the range is narrow, I mean, we have three quarters behind us already, and I think you see it right in the middle. So, I'm actually, it's pretty good to see that, especially as we had the year that wasn't easy, the first two or three quarters.

Firewall gateways.

The market is.

Went all the way to the bottom I think in the second quarter, which was the bottom and in the first quarter started showing signs of improvement if that improvement is changing and if we combine it with the other two we have reasons to be optimistic.

Customers are going to keep.

Hi, Tom refreshing and by the way the fact that we don't refresh and.

I mean, we want them to refresh their installed base and buy more but that means that we stick to us and they love our solution and they just pay the renewals it doesn't generate enough growth.

Gil Shwed: Non-Gap EPS is that we are actually even revising the range here and taking the range up. So, if the regional rate was $7.70 to $8.30, the new range is already started at $8.20 and goes up all the way to $8.40. And so, this is already expected to be at the top end and maybe even over the original range that we provided. I think these are a very good projection. I think they show a lot of, I think positivity on our side with a little bit cautious on the revenue side, which I think is always a good thing to do.

In general the rates that we have of renewal are very high and we have a good renewal business, so that wins with customers like our product and we keep working through events and so if that would change that would be a big big change in May hope and this is a little bit beyond our control.

It's a long answer but I think we've covered many thank you for that.

Uh huh.

All right next up we have Adam Borg from Stifel, followed by Brad Zelnick Deutsche Bank.

Awesome. Thanks, guys for taking the question and again I'll Echo my thoughts for parents to you and your families.

Gil Shwed: So, overall, I think that we had a very good result. I think we're having decent projections, and I would be very happy to hear your questions and comments about our business. Thank you very much.

Maybe just for Gil on permit 81, obviously.

Operator: And let's open the call to your question. As always, during the question and answer period, please limit your questions to one so we can get through everybody.

To see your entry deeper into SaaS fee.

I was hoping can talk a little bit more about kind of the near term integration priorities from a sales and marketing and R&D perspective, and how we should think about the capex impact that as you look to build that pop I'm assuming over time. Thanks, so much.

And.

I think in terms of the integration, we built immune checkpoint to model, what we call rocket that we kind of slipped. These businesses. They are on one hand keep there little bit of their independence their vision very integration of activities on the other hand work with the checkpoint.

Gabriela Borges: Today, we're going to start off with Gabriella Borgas from Goldman Sachs, followed by Adam Borg of people. Good evening, thank you.

Adam Borg: And I'll start with you and all of the checkpoint employees on the ground in Israel. I wanted to ask a little bit about your 2024 planning assumptions as you think through what next year could look like. Maybe you'll share with us some of the positive indicators that you mentioned in your prepared remarks that are leading you to perhaps think through, help us think through what the implications are from the positive indicators through to billing scrolls.

R&D and sales and marketing organization to drive things forward and move fast and integrated I think quantum SaaS is going to be very tightly integrated.

Check point, because it's a network solution.

And in many cases, it's integrated with our gateways and integrated with our <unk>.

Project and sales force so its not necessarily different buyers within the organization at similar buyers I think thats, the synergy and that's extremely positive.

Adam Borg: In other words, when do you think we'll see a more mature and functioned billing scroll. So I think first, thank you for that, and it's totally, we still don't have the 2024 projections, we're just starting to work on the 2024 plan, but we already have some folks about that, and I would say there's three factors that contribute to that. One is the technology and the new area that we are in, and so on.

Adam Borg: Second is our customer engagement and the level of activity that we have in the field, and the third one is the market itself, which is a little bit beyond our control. And I think this year, we really, we did our field did an amazing job in increasing the engagement that we do with customers, we pretty much double our engagement rate with our customers, both with existing customers and even more so with the prospect, and we're still plenty, but we can do, we still can reach many more prospects, for example, and we still can do more in the qualitative side of the engagement, but we've made a real revolution, and I think there's a plenty of credit for our people on the ground in the different countries.

We already see a high level of interest in the field people are super positive and Super optimistic about that.

And it will take us some time to build all the bridges, but we're working very hard I mean, the only kind of two caveats on one hand, we want to create one product suite integrate all the checkpoint security technologies into the perimeter 81, offering connecting the perimeter 81 management with checkpoints. So we have a very strong road map of what we want to develop on the other end it's been.

Adam Borg: In the field has done this year, so now all of these things when you engage with the customer that you haven't met for a long time, when you start the conversation, it takes between, I would say, it depends on the situation, I would say, between six to even 18 months until it takes fruitful, and the reason I'm saying that, because usually the field will say, I'm already engaged with the customers that have a current opportunity, getting me to meet with somebody new, it's usually the one that's not knocking on our door and doesn't have a current opportunity, so these are a little bit longer term customers. I think that we will see the results from there, and I think we've seen a bigger evolution in this engagement in the second and third quarter, so that means that we can be optimistic about some of these engagement turn into deals and pipeline in next year.

Growing very nicely on its own and we don't want to disrupt that so and.

And I think by the way with the harm on the email.

Been a similar acquisition, we built the right regions for the first six months kind of most of the growth was driven by their pipeline. Six months. Later, we are already reporting that huge part of our pipeline has already driven and brought to them by the checkpoint salespeople and by the checkpoint channel. So I hope, we will see here, even a faster transition.

Unlike chemo, which is even more central to our technology and in terms of Capex I don't know if we have any say network capex not topics here and we expect to invest in capex related to Paramount AT&T few millions of dollars.

Or something more significant at Delta.

Alright, thanks, so much.

Alright next step as Brad Zelnick from Deutsche Bank, followed by <unk> of Bofa.

Great. Thanks, so much for taking my question and best wishes to all the good people of Israel.

Gil I don't recall checkpoint, having a significant U S federal business, but we saw the DLA deal that you highlighted which I think was a $6 million deal, which is which is really great win can you remind us is there a broader opportunity that youre going after and U S. Federal and is this also may be a reason why we don't necessarily see all of the success that you are.

Adam Borg: We already see the correlation, the more meeting the more engagement with the customers, the bigger the pipeline with that customer, it's a very direct correlation. So I think that's one sign and that's about our activity. Second, in technology, we have much more, and we've seen that some of our new technologies are sticking and are working well. I think we will see a lot of demands for such a solution, it's a healthy market with high growth, so I expect, again, in the first few weeks in that market, so I don't have indicators that are too strong, but I'm very optimistic.

Having in billings, because we all know that the U S federal customer doesn't necessarily pay multi years in advance.

I don't know if it adds to the battery can answer about the billing and so on I think the opportunity on the U S. Federal government is Europe, even though the U S. Federal government is the very very.

Is it kind of it's a tough customer, especially for foreign companies and <unk> been a Canadian company.

Very hard to penetrate very few are not.

Adam Borg: On there, for example, on the email side of things that we've got into like two years ago, I think here and a half ago, we already see a very healthy, not just pipeline, we see very good results and very high growth, so I hope that we can repeat that success with the disaster industry. Same thing with our overall vision or overall architecture, which I think is the most important and that's the infinity umbrella.

In America, and I think the fact that we have had good success. There hopefully it's a good sign moving forward the opportunity is huge and the opportunity in the federal market is almost untapped we are making good progress on other government business in the U S, especially the local government and again the opportunity. There. It is also very big and I think we still have.

Plenty of potential and we're doing a lot of different things, but the good news again, we have many industries and many sectors that are still.

Adam Borg: And I think with infinity we're seeing very nice growth. And again, it's of course ties to our engaging with high enough people in the organization, are we, I do be buying to our vision, the answer is yes, the more qualitative engagement with the customer, the more likely they are to choose us as an architectural solution with the infinity architecture. So I'm talking about these two, I think that we have a good pipeline of technologies, a lot of innovation and turn around in the engagement that we have.

Again, we are active in all of that we have a presence in all of them, but we are but in some cases like U S. Federal were too small.

And does it have much effect on that on the federal side it doesn't mean.

It doesn't have any effect on billings I would had about the billings because I would assume that though to get questions on that so again on the bidding side, the timing and the duration really affect beginning I can't give you as an example talking debate wasn't and I didn't mention it in the script, but for example, where the large mega deal that was expected to be closed this quarter and.

Adam Borg: The first element, which is the market itself, and especially our large market for firewall gateways, and the market has went all the way to the bottom, I think in the second quarter, which was the bottom. And in the third quarter started showing signs of improvement, if that improvement is changing and if we combine it with the other two, we have reasons to be optimistic. If customers are going to keep tight on refreshing, and by the way, the fact that we don't refresh.

Due to certain administrative delays was closed two days after and thats something like that effectively the timing of billing. It's a classic timing of billing these kind of things affect there being I understand that you are covering the billing any important or reporting metric for you to understand the business, but we can say that again, we saw this quarter.

Positive indicators as I mentioned, the bookings went up <unk>, we see very positive indicators for the pipeline for Q4 again, we need to be cautious in only pipeline.

Adam Borg: We wanted to refresh our install base and buy more but that means that we stick to us and we love our solution and we just pay the renewals. Doesn't generate enough growth but in general the rates that we have of renewal are very high and we have a good renewal business so that means that customers like our product and they keep working for them. So if that will change that would be a big big change and I hope and this is a little bit beyond our control. It's a long answer but I think we've covered many things.

Operator: Thank you for the detail. All right.

Well be via two business, but.

We see many positive indicators.

Okay.

Thanks for the color.

Alright next step as Sally Ani of Bofa, followed by Joseph Gallo of Jaffray.

Hey, good morning, guys two questions.

Brad Zelnick: Next up we have Adam Borg from Steve Foll followed by Brad Zilnick, George Bank. Awesome. Thanks for taking the question and again I like all my thoughts for prepare us for you and your families.

At the end of the day, you're only growing 3%.

And we talked about it like last year, you talked about Infinity and you talked about the year before about other products, but it's it's it's very evident that it's hard for the company to translate technology superiority into higher growth versus competition.

Adam Borg: Maybe just for Gil on Premiere 81 obviously great to see your entry deeper into sassy with it and I hope you can talk a little bit more about kind of the near term integration priorities from a sales and marketing and R&D perspective and how we should think about the capex impact as you as you look to do about. I'm assuming over time. Thanks so much. I think in terms of the integration we built them when checkpoint the model that we call rockets that we kind of let these businesses on one hand keep their little bit of their independence, their vision, their integration of activities on the other end work with the checkpoint both R&D and sales and marketing organization to drive things more forward and move fast and integrated.

And the question is what other parts do you need to invest in go to market marketing wherever it is what other parts do you need to go to and what are the challenges that you have in order to translate their technology into better growth rates.

The second question is kind of related not related.

Subscription very nice growth, 15% what are the trends in the non subscription it's down about 4%. So what is their substitution or what are the other trends that we see not subscription.

Okay. So first youre, absolutely right, we need to do better we should do better I by the way I believe that we're on the same bid market trajectory that we've been a year ago I think our results today would have been double digit growth I think we've faced as double digit decline in the core market of buying new gateway delaying new what we call delayed refresh in <unk>.

Adam Borg: I think one tomb sassy is going to be very tightly integrated to check point because it's a network solution and in many cases it's integrated with our gateways and integrated with our project and sales force or it's not necessarily different buyers within the organization it's similar buyers. I think that's the synergy and that's extremely positive. We already see a high level of interest in the field if all are super positive and super optimistic about that.

In a nice way and I think we've shown it in our slides and despite that we've seen we've seen growth and the growth comes from both from customers sticking with us and doing the renewals both from the fact that we've been able to transition a big part of the business from products purchased tools subscription and also from <unk>.

Adam Borg: And it will take us some time to build all the bridges but we're working very hard I mean the only very kind of two caveats on one hand we want to create one product suite integrate all the checkpoint security technologies into the perimeter 81 offering. Connect the perimeter 81 management with checkpoint so we have a very strong road map of what we want to develop on the other end it's been growing very nicely on its own and we don't want to disrupt that so.

Some of it comes from the Infinity deal with our multi architecture both.

The user cloud and other elements of the security elements and some of it comes from the new technology like E Mail and few others that are gaining traction.

Relatively still small, but they are gaining traction. So that's how we all sit today again, if you just looked at it on a neutral basis of just selling gateways.

Adam Borg: And I think by the way with the harmony email that's been a similar acquisition we built the right bridges for the first six months kind of most of growth was driven by their pipeline six months later they're already reporting that huge part of her pipeline is already driven and grow to them by the checkpoint sales people and by the checkpoint channel. So I hope we will see here even a faster transition because unlike email which is even more central to our technology.

It wouldn't be invest it wouldn't even been 3% now again I'm not happy with that percent I think we should a much much higher I think we've made the investment last year. For example, we added a lot of sense, because we can still hiring more I think this year my focus internally wasn't customer engagement, making sure that the repeat will actually go and meet with them.

Customers in Prost or prospect I think I already mentioned that we had this great progress there doubling the rates, which is not trivial.

Adam Borg: And in terms of topics I don't know if we have any notes of topics and not topics and I mean we expect to invest in topics related to perimeter beyond few millions dollars or something. Nothing to be done with that. Great thanks so much.

And much more activity by the field next step by the way is two fold one is to elevate the level of quality, making sure but we.

Reaching the right people, but we go broader in the organization and so on.

Brad Zelnick: All right next up is Brad Zelmick from Deutsche Bank followed by Tallyani of BFA.

And second I think you'd see the translation effect again, you engage with the customer doesn't always comes with all sure. We give you. The next orders that well if we had the projects will come to you, but what we'd like to have happen is once this project comes in I would say every enterprise will ever project within a year. Then we will have a very much higher chance of winning.

Brad Zelnick: Great thanks so much for taking my question and best wishes to all the good people of Israel. Gil I don't recall checkpoint having a significant US federal business but we saw the DLA deal that you highlighted which I think was a six million dollar deal which is which is really great when. Can you remind us is there a broader opportunity that you're going after in US federal and is this also maybe a reason why we don't necessarily see all of the success that you're having in buildings because we all know that you you know the US federal customer doesn't necessarily pay multi years in advance.

That project because they are there because we know that we're presented unfortunately and again I would meet our shortcomings.

The feedback I get from when I meet with the CIO and seasonal they all tell me we know checkpoint the leader checkpoint. He is a very good brand for US we knew checkpoint many years ago. When we started our carrier and we love your stores. That's the main thing that we're telling me we love what you're what the architecture and the vision that's the positive side the negative.

Gil Shwed: Thank you. I don't know if it has the veterinary can answer about the billing and so on. I think the opportunity on the U.S, federal government is huge, even though the U.S, federal government is a very, very, is the kind of tough customer, especially for foreign companies. And foreign, not just Israeli, even Canadian companies. Very hard to penetrate, but if you are not an American. I think the fact that we have a good success there, hopefully it's a good sign moving forward.

Depending on how come we didn't hear for you for so many years and that's what I want to fix because if we sell all these good things that we have a good technology very good brand recognition that we have a good story today.

And what we need to fix is making sure that they know we know it because we need to be in front and I think by the way as I said, we have the people we have the bandwidth we just need to execute on that and I think we're making progress there.

Gil Shwed: The opportunity is huge. I mean, the opportunity in the federal market is almost untapped. We are making good progress on other government business in the U.S., especially the local government. And again, the opportunity there is also very big. And I think we still have plenty of potential. And we are doing a lot of different things. The good news, again, we have many industries and many sectors that are still, again, we are active in all of them.

I truly hope that it will bear fruit.

Alright next step as Joseph Gallo from Jefferies, followed by <unk> Kalia from Barclays.

Hey, guys. Thanks for the question congrats on another quarter of double digit EPS growth, you've talked a ton about topline drivers and product drivers as we think about 2024, how should we think about leverage in the face of these investments and the M&A integration and then what if any impact is FX half as we look out over the next 12 months. Thanks.

Gil Shwed: We have presence in all of them, but we are, in some cases, like U.S, federal, we are too small. And we're even, it has much effect on the federal side. It doesn't, I mean, it doesn't have any effect on billing. I would head about the billing because I would assume that I would get questions on that. So, again, on the billing side, the timing and the duration really affect the billing. I can give you as an example, something that I wasn't in, I didn't mention it in the script, but for example, where the large mega deal that was expected to be closed this quarter and was due to certain admins to take delays was closed two days after.

We wanted to start on the FX side, So I would say that on the next 12 months and of course, we're going to benefit probably from the shekel.

Mind, you that we usually edge our currencies at between three to four quarters that so some of it's already edge for next year, but some of it will be hedged in the second half of deal we'd be edge.

And we'd be adding the next quarter or two so there will be a benefit next year from the FX again.

Gil Shwed: And there's something like that effect the billing. It's a timing of billing. It's a classic timing of billing. The these kinds of things affect the billing. I understand that you are covering the billing and it's important, probably for the measure for you to understand the business. But we can say that, again, we saw this quarter very, I mean, positive indicators, as I mentioned, the booking went up. We see very positive indicator for the pipeline for Q4. Again, we need to be cautious. It's still only pipeline and not converted yet to business. But, but we see many positive indicators.

Brad Zelnick: Thanks for the color.

Early to say to quantify that but there would be a benefit.

Operator: All right.

Therefore, this quarter, we also again because this quarter was already hedged.

Or like what are the goals. So we so the benefit was less than the <unk> contract that you see today, which is approximately around we benefit around one point of time.

Between $5 million to $6 million of FX benefit this year compared to last year.

What was the second part of the question.

Just.

You talked a lot about drivers and trying to drive growth higher but how should we think about the leverage your investment needed to drive that where the M&A integration costs.

Tal Liani: Next up is Tallyani of B.A.V, followed by Joseph Gallo of Jeff Ray. Hey, good morning guys. Two questions.

So I think we need investment and we keep investing but we also need to see more leverage from the investments. We've already made we are today. Many many people with working drive driving new technologies and again, we need to see more results offset we've been building and I think I'd like to see us.

Gil Shwed: Gil, at the end of the day, you're only growing 3% and we talked about it like last year, you talked about infinity and you talked about the year before about other products, but it's very evident that it's hard for the company to translate technology superiority into higher growth versus competition. And the question is, what other parts do you need to invest in, go to market, marketing, whatever it is, what other parts do you need to go to and what are the challenges that you have in order to translate your technology into better growth.

Seeing the fruits of all these efforts.

Hum.

Again, we are going to keep investing but I think the main thing for me is seeing the investments which were already made make bear fruit and when we can invest more in the areas that we visit that they've been working with.

Thank you.

Alright next step as <unk> Kalia from Barclays followed by far.

Gil Shwed: The second question is kind of related, not related. Subscription, very nice growth 15%, what are the trends in the non-subscription? It's down about 4%. So, what is their substitution or what are the other trends that we see non-subscription? Thanks.

<unk> from Morgan Stanley.

Okay great.

Good morning, everyone.

I'm here by the way it thoughts to everyone on the checkpoint team.

Right maybe for you.

Maybe maybe just broader can we talk about the M&A impact here on the model both in terms of annualized revenue and just annualized margin impact as we start to incorporate these deals and tower model for next year.

Gil Shwed: So first, you're absolutely right. We need to do better. We should do better. I, by the way, believe it, we were on the same bit market trajectory that we've been a year ago. I think our results today would have been double digit growth. I think we've faced a double digit decline in the core market of buying new gateway delaying what we call delaying refresh in a nice way. And I think we've shown it in our slide.

And maybe just a quick clarification I think you said that there was a large deal that sign two days. After the end of the quarter. I mean can you give us a sense for kind of what billings would have been had that deal had closed on time.

Gil Shwed: And despite that, we've seen, we've seen growth and the growth comes from both from customers sticking with us and doing the renewals, both from the fact that we've been able to transition big part of the business from product purchase to subscription. And also from some of the some of it is comes from the infinity deal with our multi architecture, both user cloud and other elements of the security elements. And some of it comes from the new technology, like email and few others that are gaining traction, but relatively still small, but they're gaining traction.

So that's for your first question on the M&A. So I think we mentioned when we when we announced one parameter AQR, we mentioned approximately out underneath when is that.

Talking that.

When we acquired and that was the annual recurring revenue that that probably meant that I had the data acquisition doesn't have any significant.

I mean, I'm talking about the apples decline, which didn't have anything again revenue then and then one that we just recently announced that engage in the begin going to meter October also will have a few minutes of dollar effect not significant effect on our total revenues. So that's one of the top line.

Gil Shwed: So that's how we often, again, it just looked at it on a neutral basis of just selling gateway. It wouldn't been, it wouldn't been, it wouldn't even been 3%. Now again, I'm not happy with that percent. I think we should a much, much higher. I think we've made investment last year, for example, we are at a lot of service, we can still hire more. I think this year my focus internally was on customer engagement, making sure that our people actually go and meet with their customers and prospect.

The top line.

And again in terms of <unk> I mentioned that at the start of the speed I mean, right now, including mining I mean, hopefully again in the long term I mean, the aim is to be booked a bit are there going to be positive, but again in the next while.

I'd say that for the <unk> on in the short term it will be dilutive to <unk>.

Gil Shwed: I think I already mentioned that we have the great progress there, doubling the rates, which is not trivial, and much more activity by the field. Next step, by the way, is to fold what is to elevate the level of quality, making sure that we reach the right people, that we go, broader in the organization and so on. Every enterprise will have a project within a year, then we will have a very much higher chance of winning that project, because they are there, because we know that we are present and unfortunately, and again, I would admit our shortcomings.

Margins. So that's how you should think about it and what was your next ended the second wanted to add on that.

These are large deals they are the large deal that closed two days after that impacted billings, but the last year's approximately two point approximately two points on our billing.

Did I get that.

Very helpful. Thank you.

Alright next step as Hans Peter <unk> from Morgan Stanley followed by Patrick Colville from Scotiabank.

Thank you for taking my question and I'd also like to offer my support to you and all your families Im sorry, we couldnt be there in person this year as well.

So.

I wanted to ask a question about sort of the the product refresh and I think this was hit on earlier, but maybe in a different way I think if we look at your historical productivity.

Gil Shwed: That's the feedback I get from when I meet with CIOs and CISO, they all tell me, we know Check Point is a leader, Check Point is a very good brand for us. When you check Point many years ago, when we started our career and we love your story, that's the main thing that they tell me, we love what you're from the architecture and the vision. That's the positive side, the negative side, and how come we didn't hear for you for so many years.

This suggests there should be I think new hardware coming out possibly early next year.

What is your what are you seeing in terms of demand and sort of interest around that.

And to what extent our customers sweating their assets in anticipation of of new appliances that may be coming up.

Gil Shwed: And that's what I want to fix, because if they say all these good things, that we have good technology, very good brand recognition, that we have a good story today, then what we need to fix is making sure that they know it. And we know it because we need to be in front of it, and I think, by the way, as I said, we have the people we have the bandwidth, we just need to take the cut on that, and I think we're making progress there. I truly hope that it will bear fruit.

It's a good question I wish I knew the answer.

Yeah, I think we are again, we are getting very good indicators about the price performance at about a product like every time, we are always looking to refresh and renew but they don't see I don't know if there is a built in an expectation in the market or not and obviously can speak about the timing of new solution by the way last week, we did announce a small newer clients.

But we didn't mention it here, but it's actually for ruggedized environments or mission critical application and so on it's a small market small sub market, but we have a very good offering. So we did come up with a new one already last week.

Joseph Gallo: All right, next up is Joseph Gallo from Jeffrey is followed by second Kalea from Barclays. Hey guys, thanks for the question, congrats on another quarter of double digit EPS for you've talked a ton about top line drivers and product drivers as we think about 2024. How do you think about leverage and the face of these investments and the MNA integration, and then what if any impact is effects have as we look out of the next 12 months, thanks.

Thank you.

Our next question is from Patrick Colville from Scotiabank, followed by Joshua Tilton from Wolfe Research.

Thank you so much for taking my question I'm echoing of anonymous thoughts with you and your family.

Joseph Gallo: We will start on the effect side, so I would say that on the next 12 months, of course, we're going to benefit probably from the schedule. I mean, I remind you that we usually edge our currency between three to four quarter of that. To some of it already edge on next year, but some of it will be edge, I mean, the second half of the will be edge with the edge in the next quarter or two.

Just wanted to ask a clarification question and then a question. The clarification did you say that.

You talked to <unk> was the bottom in terms of product demand and in <unk> you saw signs of improvement and then I guess the other question I asked because why premier safety, one because an off field work.

Joseph Gallo: So there will be a benefit next year from the effect. Again, it's still early to say to quantify that, but there will be a benefit. And for this quarter, we also again, because this quarter was already edge a year ago or three quarter ago, so we. So the benefit was less than the what the effects country that you see today, which is approximately around. We benefit around one point. It will take between five to six million dollars of that benefit.

That traction was kind of really strong in the SMB space and maybe lower mid market minority of the enterprise.

Checkpoints as the business has had excellent success in the enterprise So why bad assets.

Okay. So first you're correct about what we said about the market in Q2 being the bottom in Q3, seeing some turnaround and improvement in demand for firewood gateway. So that's correct about Dwight perimeter 81.

Joseph Gallo: This is for the last year. What was the second part of the question? It just you talked a lot about drivers and trying to drive growth higher, but how should we think about the leverage your investment needed to drive that or the MNA integration costs? I think we need investment and we keep investing, but we also need to see more leverage from the investment we already made. We had today many, many people that were working drive driving new technologies.

Not only because the traction that we have but because of the technology I think they are a differentiator technology or a hybrid model of doing some work in the cloud and some work at the client side I think is a very good one in terms of the right architecture I believe in that and then what we also found that in many cases and again again, we looked at many companies in the subsea space.

<unk> I can tell you with in the past, we've almost completed two acquisitions in that space and somehow during the due diligence we decided to back off.

Joseph Gallo: And again, we need to see more results of that will be building. And I think I'd like to see us. I think the the fruits of all these efforts. Again, we are going to keep investing, but I think the main things for me is seeing the investments that are already made, make their fruit, and then we can invest more in the areas that have been working with.

Roei Golan: Thank you.

Operator: All right.

And then.

And the main reason, but we've seen some companies that they are nice numbers and so on but the main challenge that we had with them, but some of them didn't have an offering with <unk>.

Simple straightforward to setup and Thats critical if you want to go back on the market you can't be in a solution again, you look at all with all the startups. Many of them are almost all of them lose plenty of money now. The question. If you can really make money and if you can make money because it can scale because you can take very tend to sell it to.

Saket Kalia: Next up is Saket Kalia from Barkley, followed by Hamza Fodderwala from Morgan Stanley.

Operator: Okay, great.

Patrick Colville: Hey, good morning, everyone. Same here, by the way. Thoughts to everyone on the Check Point. [inaudible] Thank you very much. Thank you very much. [inaudible] Thank you very much. Thank you very much. [inaudible] Week. Thank you.

10 times more customers without increasing DSO every customer and every customer we mean huge airports huge installation very slow to deploy when you can scale it and getting it to the checkpoint installed base getting it to a 100000 customer installed base means the solution has to be simple and straightforward.

And scalable and by the way that in many cases, when you take SMB technology.

It has to be like that because otherwise we tend to support so I mean, you can install them and add to them all the enterprise capabilities, but we havent checkpoint when you can get it through.

And I think we have a very very good by the way experience with that.

The acquisition of the email security that we have we also took an SMB product in our largest installations are kind of in the 100000 seats. So we took a solution from 200 system. We're now making very nice progress scaling it up so again, we've checked that on the due diligence we know what our limitations, we know what we need to scale and so on.

But we believe it's doable.

Okay.

Perfect. Thank you Gil Thank you Kent.

Okay.

Okay.

Yes.

Keep your mute.

Can you guys hear me okay.

Thanks Gil.

Joshua Tilton, our next followed by a team of <unk> is our last.

The question of the day. Thank you.

Alright, great guys. Thanks for squeezing me in and I will just say my thoughts and prayers are with not only the team but everyone in Israel.

I just want to sneak two quick ones then.

My first is just what is your guys' current expectation around a <unk> budget flush and do you feel like you need to see one in order to kind of hit the numbers that you laid out for us.

And then my second question is do you guys view, the perimeter 81 acquisition as a way to kind of fill a hole that sort of been left behind by weaker firewall appliances or do your customers kind of still view SaaS isn't incremental purchase.

Higher walls with the expectation being that just firewall demand will come back.

At some point.

So, let's let's start first I do hope to see budget flush in the fourth quarter of its usually happen I think the leather all year that he deemed happened in my experience was last year and when you look at our growth model. It doesn't assume high growth huge growth in products. In Q4. So we kind of don't assume that there will be a big budget flush if there will be a huge one but we didn't.

Dissipate I think it will all be.

The upside for us, but again every year, except 2022 I believe in my career, we've seen the budget flush at the end of at the end of the year last year was the exception.

Second part was about the parameter 81.

Think it fills in whole it feels the big OLED, which we didn't have because we weren't active in that space I don't think that in the enterprise space. We're like 90. Some percent of our sales are people are going to shift to tunnel over traffic through the cloud we will keep their data centers they will they will.

But there is plenty of opportunity when we see a change where things can happen on the branch side branches are important part in there is when you take a company with 300 branches or 20000 branches than an architecture like like what we have we started can work very well.

Gil Shwed: Our next question is from Patrick Colville, from Scotia Bank, followed by Joshua Tilton from Wolf Research. Thank you so much for taking my question echoing the other analyst's thoughts with you and your family. I just want to ask a clarification question, and then it's a proper question. The clarification is did you say that you thought 2Q was the bottom in terms of product demand and 3Q you saw signs of improvement? And then I guess the other question I want to ask is why primates 81?

I think we're incorporating branch offices with Tom Wheeler.

Our clients have with SD Wan and some of them have pure softly is also a good architecture for a network I think in terms of remote user access. It's a good solution. So I think most of it augment what we do they are directly in our industry and I can take it to different industry. It's not a different one is the connectivity.

<unk>, 8090% of that is not a replacement for our product, but that's in addition, maybe 10 or 20%. There is an overlap between some product, but most of it is not an overlap from a dollar standpoint.

Gil Shwed: Because in our field of work, their traction was kind of really strong in the SMB space and maybe lower mid market but not really the enterprise and Check Point as a business has had excellent professional enterprise. So why that assets? Okay, so first you are correct about what we said about the market and Q2 being the bottom and Q3 seeing some turnaround and improvement in demand for a firewall data. So that's correct.

Super helpful. Thank you guys.

Alright, and last up welcome back Miss the TMO Boulanger.

Thank you very much cats and gallon to your entire team just sending my thoughts and prayers are with Syria <unk> time.

I wanted to ask a really a question regarding the securities subscription segment.

Gil Shwed: About why primates are 81 and not only because of the traction that we have but because of the technology. I think they have a differentiated technology, a hybrid model of doing some work in the cloud and some work at the client side. I think it's a very good one in terms of the the right architecture I believe in that. And what we also found that in many cases and I hear again, we looked at many companies in the status space.

So the 15% acceleration we saw this quarter I wanted to get your thoughts on where that potentially could trend up towards over the next couple of quarters and if you can help us with some very specific pieces on.

Are you seeing very strong expansion activity in other product pillars are you finding that.

Gil Shwed: I can tell you that in the past we've almost completed 2Q in that space and somehow during the due diligence we decided to back off. And the main reason that we've seen some companies that have nice numbers and so on, but the main challenge that we had with them that South of them didn't have an offering that's simple, that's straightforward to set up and that's critical. If you want to go big on the market, you can't be in a solution.

Okay.

Really making a more meaningful impact in driving the acceleration there so.

Any thoughts around where that 15% could go in the next quarter in the near term and medium term and some of the key components that you expect are going to drive that acceleration.

So that's about.

Again, we hope you will see the excellent acceleration of these broke on me and I remind you that we also bolt.

Mid to late July that hopefully will also help us lead to accelerating this growth into subscription because.

Gil Shwed: Again, you look at all these startups, many of them, almost all of them lose plenty of money. Now the question if you can really make money and if you can make money because it can scale because you can take that and to sell it to 10 times more customers without increasing the effort. Every customer, if every customer wins, means huge efforts, huge installation, very slow to deploy, then you can scale it and getting it to the checkpoint install base, getting it to 100,000 customer install base means that the solution have to be simple, straightforward and scalable.

The revenues from that.

Quantum starts it will be part of this plan will be included in this line item.

In Denver, where from where the growth is so I will take any day offer it would be higher than the 15% that we see but again it depends on the execution.

On where we see today.

The drive was 50% go it's mainly coming I mean first of all from the email security is becoming more and more significant for our business.

It's growing at strong double digit growth.

Very strong double digit growth.

Gil Shwed: And by the way, that in many cases when you take SMB technology that has to be like that because otherwise you can support them and you can't install them and add to them all the enterprise capabilities that we have in checkpoints when you can get it through. And I think we have a very, very good, by the way, experience with that with the acquisition of the email security that we have. We also took an SMB product and now our largest installation, our kind of in the 100,000 six.

Yeah.

We don't disclose the numbers, but becoming more and more significant into this.

But to the subscription revenues and also driven by by expansion mainly around under the Infinity platform that company customers.

Expanding and get a bang getting more services from us. So all this stuff together with the growth in the cloud guidance also grew double digits in revenues. This quarter all of these came in.

To this 15% Gulf monopoly would be even higher and in next few quarters, but it's.

Gil Shwed: So we took a solution from 200 seats and we're now making very nice progress, scaling it up. So again, we've checked that on the due diligence, we know what our limitations, we know what we need to scale and so on, but we believe it's doable.

Still too early to.

Joshua Tilton: Perfect. Thank you, Gil. Thank you, Kate. If you keep your unmute.

To say it.

Alright, and with that we'll conclude for the day.

Thank you guys for joining us and we look forward to speaking with you after the call and throughout the quarter.

Thank you very much I appreciate that thank you.

Goodbye.

Joshua Tilton: Joshua Tilton's are next, followed by Fatima Boolani as our last question of the day. Thank you. All right, great guys. Thanks for squeezing me in, and I will just say my thoughts and prayers are with not only you and the team, but with everyone in Israel. I just want to sneak two quick ones in. My first is just what is your guide card? There's an expectation around a four key budget flush, and you feel like you need to see one in order to kind of hit out the numbers that you laid out for us.

Joshua Tilton: And then my second question is, do you guys view the perimeter 81 acquisition as a way to kind of fill a hole that sort of been left behind by weaker firewall appliances, or do your customers kind of still do sassy as an incremental purchase to firewalls with the expectation being that just firewall demand will come back at some point. So let's start first. I do hope to see budget flush in the fourth quarter, but usually happen.

Joshua Tilton: I think the only year that he didn't happen in my experience was last year. And when you look at our growth model, it doesn't assume high growth, huge growth in products in huge force. So we kind of don't assume that there will be a big budget flush. If there will be a huge one, but we didn't anticipate. I think it will all be an upside for us. But again, every year, except 2022, I believe in my career, we've seen a budget flush in the end of the end of the year, last year was the exception.

Joshua Tilton: And second part was about the perimeter 81. I don't think it's filled an hole. It's filled a big hole with what we didn't have because we weren't active in that space. I don't think that in the enterprise space, we're like 97% of our sales are people are going to shift to a tunnel of traffic through the cloud. They will keep their data centers, they will, they will do that, but there's plenty of opportunity when we see a change where things can happen is on the branch type, branches are important part.

Joshua Tilton: And there's, you know, when you take a company with 300 branches or 20,000 branches. Then an architecture like, like what we have with sassy can work very well. I think incorporating branch offices, but some will have. Our appliances with SD one and some will have pure sassy is also a good architecture for a network. I think in terms of remote user access, it's a good solution. So I think most of it augment what we do.

Joshua Tilton: They are directly in our industry. And I can thank you to the different industries, not a different one is this connectivity. I think 80 90% of that is not a replacement for our product, but it's an addition, maybe 10 or 20% for an overlap between some products, but most of it is not an overlap from a dollar standpoint. Super helpful. Thank you, guys.

Gil Shwed: All right, and last up, welcome back, miss the team of Blue Lonnie. Thank you very much, tips and Gil and your entire team, just sending my thoughts and prayers in this area at difficult time, which was time. I wanted to ask a really a question regarding the security subscription segment. So the 15% acceleration we saw this quarter. I wanted to get your thoughts on where that potentially could trend up towards over the next couple of quarters.

Gil Shwed: And if you can help us with some very specific pieces on, you know, are you seeing very strong expansion activity into other product pillars. Are you finding that is really making more meaningful impact in driving the acceleration there? So, you know, any thoughts around where that 15% could go in the next quarter in the near term and medium term and some of the key components that you expect are going to drive that acceleration.

Gil Shwed: So, first of all, again, we hope we will see the acceleration of this growth. I mean, I remind you that we're also both parameter 81 that hopefully will also help us with accelerating this growth and the subscription because the revenues from the quantum study will be part of this line. I mean, we'll be including this line item. In terms of where from where the growth is, so I will say again, hopefully it will be higher than the 15% but we see, but again, it really depends on the execution.

Gil Shwed: On where we see today, I mean, the drive for the 15% growth is mainly coming. I mean, it's coming first of all from the email security. It's becoming more and more significant for our business. It's growing in a strong double digit growth, very strong double digit growth. And it's, we don't disclose another but becoming more and more significant to the subscription revenues. And also it's driven by expansion, maybe around under the infinite platform that come by customers are expanding and getting getting more services from us.

Gil Shwed: So, all this stuff together with the growth in the cloud, that's also good double digit revenues. This quarter, all of this came in, both up to this 15% growth and hopefully it will be even higher in the next quarter, but it's still too early to see.

Operator: All right.

Operator: And with that, we'll conclude for the day. Thank you guys for joining us and we look forward to speaking with you after the call and throughout the quarter. Thank you very much. I appreciate it. Thank you.

Operator: Goodbye.