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Check Point's (CHKP) Q3 Earnings and Revenues Beat Estimates

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Check Point Software Technologies Ltd. (CHKP - Free Report) reported strong third-quarter 2021 results, wherein both the top and bottom lines not only surpassed the respective Zacks Consensus Estimate but also improved year over year.

The IT security solutions provider reported non-GAAP earnings of $1.65 per share beating the Zacks Consensus Estimate of $1.59 per share. The bottom line improved a penny from the year-ago quarter’s earnings of $1.64 per share.

Check Point’s quarterly revenues increased 5% year over year to $534 million, which outpaced the Zacks Consensus Estimate of $529.4 million.

Prioritizing secure connectivity in the work from anywhere environment, Check Point continued to enhance its endpoint protection capabilities. During the third quarter, the company expanded capabilities of its Infinity Platform through the acquisition of Avanan to protect the workforces from phishing across emails, malicious URLs and files, collaboration suites, web, network, and endpoint.

Quarterly Details

Subscription revenues were $190 million, climbing 13% year over year on double-digit revenue growth in CloudGuard and Harmony solutions, and triple-digit sales increase in Infinity platform.

Products and licenses revenues declined 0.9% year over year to $119.1 million. Products are currently in the process of transitioning to cloud solutions, which are included in the subscription line.

Total revenues from product and security subscriptions were $309.1 million, up 7% year on year.

Software update and maintenance revenues increased to $224.9 million from $220 million reported in the year-ago quarter.

Region-wise, the America region accounted for 44% of the third-quarter revenues, the Asian-Pacific region generated 12%, and the Europe, Middle East and Africa region made up the rest 44%.

As of Sep 30, 2021, deferred revenues were $1.46 billion, up 12% year over year.

Non-GAAP operating income for the third quarter of 2021 totaled $261 million, down 1.4% year over year. Non-GAAP operating margin contracted 300 bps to 49%.

Balance Sheet & Other Details

Check Point exited the third quarter with cash and cash equivalents, marketable securities, and short-term deposits of $3.84 billion compared with the prior quarter’s $4 billion. The company paid net cash worth $234 million for the Avanan acquisition.

The company generated cash worth $251 million from operational activities during the third quarter. During the first nine months of 2021, it generated $888.8 million of operating cash flow.

It repurchased 2.6 million shares for about $325 million during the third quarter. The company’s board of directors announced a $2 billion expansion of the current share repurchase program. In the first nine months of 2021, it bought back shares worth $974.6 million.

Guidance

For the fourth quarter, Check Point is expecting total revenues between $560 million and $605 million. Non-GAAP earnings are estimated in the range of $2.02 to $2.22 per share.

For the full year 2021, the company expects revenues between $2.12 billion and $2.17 billion. Non-GAAP earnings are likely to be $6.81-$7.01 per share.

Zacks Rank & Key Picks

Check Point currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader computer and technology sector are Salesforce (CRM - Free Report) , HP Inc. (HPQ - Free Report) and Kyocera Corporation (KYOCY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rates for Salesforce, HP Inc. and Infineon are currently pegged at 16.8%, 12.7% and 11.5%, respectively.