UPDATED 13:31 EDT / JULY 26 2021

SECURITY

Cybersecurity provider Check Point tops sales and profit estimates, ups guidance

Cybersecurity giant Check Point Software Technologies Ltd. today posted second quarter earnings that topped both revenue and profit projections, putting the company on track to reach more than $2 billion in sales this year.

Check Point is one of the world’s largest makers of cybersecurity software. The company provides a broad set of breach prevention products for protecting employee devices, corporate networks, cloud applications and other information technology assets.

In the three months through June 30, Check Point logged total sales of $526 million. That’s a 4% increase from the revenue the company posted the same time last year. It’s also better than the $523.8 million analysts polled by Refinitiv were anticipating.

Check Point said that the strong quarterly performance was fueled partially by fast growth across three of its product lines: the Harmony, CloudGuard and Infinity cybersecurity suites. The Infinity suite, which eases the task of managing a company’s cybersecurity systems, saw particularly strong growth in the quarter. Check Point told investors that sales rose triple digits year-over-year, without sharing absolute numbers. 

The challenge Infinity addresses is that at the large organizations where Check Point’s software is used, enforcing cybersecurity rules consistently can be a challenge. The reason is that enterprises typically use a large number of breach prevention systems. Implementing a new cybersecurity rule, for example to regulate access to sensitive applications, requires administrators to manually change the settings of several different systems, which is time-consuming and complicated. 

Check Point’s Infinity suite centralizes the process. Instead of individually updating multiple security tools, administrators can implement a new cybersecurity rule only once in Infinity and have it automatically update all the relevant systems. That not only saves time but potentially also lowers the risk of human error. 

Two other Check Point product lines that saw strong growth in the quarter were CloudGuard and Harmony. CloudGuard provides applications for blocking cyberattacks targeting a company’s public cloud environments, while Harmony includes tools that help protect employee devices.

“Strong execution drove double-digit growth across CloudGuard and Harmony, and triple-digit growth in Infinity platform sales,” said Check Point founder and Chief Executive Officer Gil Shwed. “Overall we grew our security subscription revenues by 12 percent.”

The growth in subscription revenue is important because Check Point, like other incumbent enterprise software providers, originally sold its software mainly via traditional licenses that customers would buy upfront. Check Point has in recent years worked to refocus on a subscription-based pricing model that allows customers to spread out costs over several years. The effort has proven successful: In the second quarter, subscriptions generated more revenue for Check Point than software licenses.

Thanks to a 49% operating margin, Check Point posted an adjusted operating income of $257 million on the $525 million in revenue it generated during the quarter. That represents  adjusted earnings of $1.61 per share, 2% more than last year and slightly above the Refinitiv consensus estimate.

Check Point’s earnings forecast for the current quarter exceeded expectations as well, suggesting its sales momentum is on track to continue. The company is anticipating adjusted earnings per share of $1.54 to $1.64 on revenues of between $515 million and $550 million. Analysts were looking for earnings per share of $1.58 and $527.9 million in revenue.

Another key measure of future growth for subscription-based software companies is deferred revenue. This term refers to future income from subscriptions that customers have already signed up for. Check Point’s deferred revenue stood at $1.47 billion in the second quarter, a notable 10% increase from the second quarter of 2020.

Check Point’s earnings report comes about a month after rival Palo Alto Networks Inc. posted quarterly results. The company also topped both profit and revenue expectations with earnings per share of $1.38 earnings per share on $1.07 billion in revenue. Like Check Point, Palo Alto Networks has assembled a broad portfolio of breach prevention products for protecting multiple parts of a company’s IT infrastructure, including cloud workloads and on-premises networks.

Image: Check Point 

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