Check Point Software Technologies Ltd Q1 FY2022 Earnings Call

Greetings. My name is Kip Meintzer, Global Head of Investor Relations for Check Point Software. I'd like to welcome everyone to our first quarter 2022 financial results video conference. Joining me remotely today on the call are Gil Shwed, Founder and CEO; along with our CFO and COO, Tal Payne. As a reminder, the video conference is live on our website and is recorded for replay. To access the live conference and replay information, please visit the company's website at checkpoint.com. For your convenience, the replay will be available on our website. If you would like to reach us after the call, please contact Investor Relations at email at kip@checkpoint.com. During the course of this presentation, Check Point's representatives may make certain forward-looking statements. These forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 include, but are not limited to, statements related to Check Point's expectations regarding our products and solutions, expectations regarding our customer adoption of our products and solutions, expectations related to cybersecurity and other threats, expectations regarding our 2022 initiatives, our ability to continue to develop platform capabilities and solutions, customer acceptance and purchase of our existing solutions and new solutions. The market for IT security continuing to develop competition from other product services and general market, political, economic and business conditions, including as a result of the impact of the COVID-19 pandemic. These forward-looking statements are subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission, including our annual report on Form 20-F filed with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to Check Point as of the date. Our Check Point disclaims any obligation to update any forward-looking statements, except as required by law. In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results as well as reasons for our presentation of non-GAAP information. Now I'd like to turn the call over to Tal Payne for a review of our financial results.

Thank you, Kip. I hope you can see the presentation. Good morning and good afternoon to everyone joining us on the call today. I'm excited to start the review of the first quarter. I will skip the safe harbor and forward-looking statements, which Kip has covered, and go straight to the results, beginning with our top two metrics, revenues and EPS, both of which are at the high end of our projections. Revenue reached $543 million, exceeding our guidance by $11 million. The earnings per share stood at $1.57, which is $0.04 above the midpoint and also at the upper end of our guidance. Before delving deeper into the numbers, I'll remind you that our GAAP financial results include stock-based compensation charges, amortization of acquired intangible assets, and acquisition-related expenses, along with the related tax effects. Non-GAAP information is presented excluding these items. Now, looking at the numbers, revenues grew by 7% from $508 million to $543 million, surpassing our plans. Deferred revenues increased by 14%, reaching $1.666 billion. When calculating billing, it grew by 4%. To clarify, our bookings were very strong, with double-digit growth in our annualized bookings across all regions and metrics. This quarter stands out as one of the strongest we remember, highlighted by significant booking growth, although much of this is still not reflected in billing. Remaining performance obligations, which reflect backlog and deferred revenues plus unbilled bookings, increased by over 20% year-over-year, indicating a robust quarter. Moving on to revenue by product, we observed exciting growth, with a 6% increase in product revenues, following negative growth in the prior two years. This represents an acceleration from Q4 and aligns with stronger booking trends. Security subscription revenue growth also increased, climbing from 10% to 14%. In terms of growth drivers, appliance product bookings and revenues were particularly strong, with increases across the entire appliance family. Both unit and dollar growth was noted in SMB, mid, and large appliances. Subscription revenue growth remained robust, driven by Harmony and CloudGuard, both experiencing double-digit revenue growth. Infinity revenues, which encompass several solution pillars, continued their strong performance with triple-digit year-over-year revenue growth. For the first time in several years, product and subscription revenues together reached our goal of double-digit growth in new business, increasing from 5% to 7%, and achieving 11% growth for the first time since 2017. Geographically, revenues also showed positive trends: America grew by 43%, EMEA by 44%, and APAC by 13%. I’m pleased to report double-digit growth in new business bookings across all regions, with America showing particularly strong growth under new leadership. As for the P&L, the gross profit margin remained strong at 88%. However, supply constraints have impacted costs, leading to a slight decline in margin. We are prioritizing delivery to our customers and maintaining top-line growth despite some delays, but we feel confident in our ability to deliver. Operating expenses rose by 15%, largely due to workforce growth in sales and R&D, aligning with our plans to drive investment in key areas like CloudGuard and Harmony. Our operating income, on a non-GAAP basis, was $239 million, representing a 44% margin, which remains strong even with headcount growth. Regarding cash flow, our balance stands at $3.8 billion with strong operating cash flow of nearly $400 million, reflecting a 6% year-over-year increase. We continued our buyback program, purchasing 2.5 million shares at an average price of $131, totaling $325 million, though this is slightly less than planned due to share price movements. In summary, we have delivered strong financial results, with revenues and EPS at the high end of our projections and growth evident across all geographies. Seeing double-digit growth in product and subscription revenues is a major milestone for us, and we remain focused on top-line growth. Now, I will turn the call over to Gil for his business review. Thank you.

Thank you, Tal, and hello, everyone. I hope everyone can see me clearly. I want to provide some insights into our performance during the quarter, the overall state of the industry, our observations in cybersecurity, and additional information about Check Point that Tal didn't cover. Let’s begin with the current state of cybersecurity, which I believe is also reflected in the financial markets. We are witnessing a continuous rise in cyber threats. As shown in the chart, we track the number of attacks targeting organizations globally every week, and there has been a 54% increase in those attacks. In the past quarter, one in 53 organizations faced ransomware attacks, which represents a 24% increase. Furthermore, we are observing an ongoing rise in more sophisticated attacks, what we refer to as fifth-generation cyber attacks, which is a concerning trend for all of us. Additionally, we are seeing Gen V attacks, specifically supply chain attacks, that infiltrate our systems through software components. Last quarter, the Log4j exploit emerged as one of the most damaging vulnerabilities we've encountered. This quarter, we faced a similar but slightly less severe issue with Spring4Shell, which targeted over 50% of corporate networks. Log4j was a component found in nearly every web server and web service, while Spring4Shell also affected one-third of corporate networks in less than a month. We are proud to say that Check Point's CloudGuard was the only solution to provide preemptive protection against these threats. Customers who implemented our Infinity architecture and the AI-based component in front of their web servers were shielded from attacks before they became widely recognized. This showcases our ability to effectively prevent attacks. Notably, President Joe Biden recently underscored the urgency to enhance domestic cybersecurity, emphasizing that vigilance today can lead to prevention or mitigation of future attacks. We strongly believe in prevention as the best strategy. I think the world has room to improve cybersecurity measures, and we are actively working to prevent the next significant attack. At Check Point, we are focused on managing advanced attacks and improving security through prevention and consolidation. Last quarter, we rolled out our five key initiatives for the year, and I believe we have made significant progress in each area. We have introduced a rebrand along with a new slogan reflecting our long-standing mission, "You deserve the best security." Our new go-to-market organization, Check Point Rockets, has launched innovative products like Quantum Light speed, and we are committed to growing our frontline sales team. I will provide an update on these initiatives in the following slides, as I believe we have accomplished a lot in the first quarter to support our goals. Many of you have seen our logo update, which has resonated well with audiences, alongside our message about the unique value of Check Point security. This differentiation is grounded not just in marketing but in the Check Point Infinity architecture, which integrates our network, cloud, user, and access security using advanced technologies to stop threats across all access points through our shared threat cloud that provides real-time threat prevention. Additionally, we have activated our new go-to-market organization under Rupal Hollenbeck, who brings a wealth of experience from her time as CMO at Oracle and her leadership of a $23 billion global data center sales organization at Intel. She has already made a positive impact, and we have relocated our headquarters to Silicon Valley, which we believe enhances our integration of sales and marketing and strengthens our relationships with partners across the ecosystem. We are focused on increasing our investment in the organization, particularly in building our sales team, aiming for a 25% growth rate soon. As depicted in the chart, we have made significant progress within just one quarter, and I anticipate reaching this target in the next few months. We have also continued hiring across other departments, particularly in R&D, where we have exceeded our growth targets despite challenging recruitment conditions globally. Although this has slightly increased our expense levels because we onboarded more personnel than anticipated, we are confident that this investment is essential for building the right foundation for our future. We also established the rocket organization to create tighter connections among R&D, sales, and marketing in specific growth areas, enhancing our agility and investment potential. Currently, this structure includes our cloud organization, the Harmony email segment, and the Managed Detection and Response (MDR) initiative, which I prefer to call Managed Prevention and Response, as we focus not just on detecting threats but on preventing them. We are optimistic about the progress of these initiatives and expect to see better results throughout the year. Overall, we are executing well across all our pillars and initiatives, which is reflected in the business momentum observed this quarter. While Tal presented the financials, we have enjoyed solid revenue growth over the last three quarters. As we previously noted, our performance in the APAC region has been strong, EMEA experienced a turnaround last year, and the U.S. is finally catching up with strong growth rates, which we're very proud of. Our new U.S. leadership has driven positive traction, and we hope this trend continues. A few examples highlight our progress: our Harmony email solution was adopted by a major government agency, quickly identifying 50,000 phishing attacks, leading to a switch from a previous vendor. Additionally, a large North American manufacturing firm found that Check Point's catch rate against zero-day malware was superior to their prior solution. These success stories demonstrate that our strength lies not in isolated capabilities but in our integrated Infinity architecture. A U.S. transportation client switched from Cisco and Fortinet to Check Point for our Quantum and Harmony solutions, noting our superior security and management. Furthermore, a European energy provider also transitioned to our products, highlighting that our security technology consistently stands out as the best choice. These are just a few successes among many, including significant deals with our established clients. In summary, we've had a very successful quarter, and I could not be more satisfied with the results. Our revenue and EPS metrics are at the high end of our expectations, and we have seen growth in all regions, particularly in the U.S. We achieved double-digit growth in product and subscription revenues, a key milestone. Despite facing global challenges, our market remains robust. I'm optimistic that our strategies will continue to yield positive results. As for projections, while there are always upsides and challenges, we had a strong start to the year, unlike in previous years when Q1 was usually slow. This year, we began impressively, and I hope this momentum will carry over into the rest of the year. For second-quarter projections, we expect revenues in the range of $545 million to $575 million, which is somewhat higher than analysts' models. Non-GAAP EPS is projected between $1.55 and $1.65, with GAAP EPS anticipated to be around $0.35 less. I remain optimistic but cautious not to raise expectations excessively. I hope that strong initial results will flow into our continued business growth, revenues, and EPS metrics. Thank you very much, and I'm happy to open the floor to your questions or, Tal, if you have any insights before we move to the Q&A regarding projections.

No, thanks, Shwed. We can start with the question.

All right. Our first question of the day is going to come from Saket Kalia, followed by Jonathan Ho from William Blair.

Okay. Great. Kip, can you hear me okay? Excellent. Great, everyone. Tal, maybe just to start with you. I appreciate you addressing the billings and bookings point upfront. I think you said double-digit growth in bookings and let's call it, 4% growth in billings. I was wondering if you could just dig into that divergence between bookings and billings a little bit more. Is that because of supply chain challenges as we've been hearing about? Is that because of Infinity? And related to that, when do you think those two metrics may start to converge a little bit more?

Good question. As you know, I've been discussing this for a while, and I’ve always mentioned that I prefer not to provide billing details because it can create confusion. After two quarters, it’s already clear that confusion exists. The reason for this is the persistent gap that can occur, which isn’t unusual; it has happened many times before. Over time, this gap does narrow, but in specific quarters, it might be higher or lower, and the reactions tend to be strong. I anticipated this and wanted to clarify, especially now that we’re discussing billing. Let me provide a couple of examples. Take Infinity, for instance. I can give you three examples to emphasize why gaps can arise. First, if there’s a deal booked quarterly, you’ll see just the first quarter reflected in the billing, while the full amount is present in the bookings. Secondly, in the case of Infinity, billing for the product occurs only when it’s pulled. We’ve mentioned that for Infinity, there’s a year, and if it’s not pulled yet, you won’t see the billing. Another simpler example involves product delivery; we issue invoices only once delivery is complete. Since the end of the quarter is often very back-end loaded, in a typical scenario, you might deliver in five hours after receiving an order. However, in our current situation, it can sometimes take a week or two or even three weeks, meaning you’ll only see the billing once the product is delivered. All these factors can lead to discrepancies between bookings and billings. This situation has always existed. There has always been a difference between billing and revenue. It works in three stages: bookings, then billings, and then revenues. So, at times you might see a lag between the two metrics and the revenue. It may not close completely, and there might be fluctuations, but overall, it should align over the course of the year.

Okay. Understood. Maybe I'll direct this next question to you, Gil. You've mentioned increasing investments in go-to-market strategies, and I believe some of the hiring metrics reflect that as well. You've also brought on new regional leadership to support this effort. Gil, could you elaborate further on the specific changes you would like to implement in go-to-market to ensure we maintain this level of growth?

I believe we have an outstanding team in our field, and they are performing well. However, we need to be much more proactive in engaging with our customers and building closer relationships with them. One challenge we face is that while we have very loyal customers who appreciate our services, they primarily interact with us on the firewall and network security fronts. We need to make a concerted effort to establish ourselves within the organization and get involved in other projects across different areas. We have to pursue more opportunities to attract new customers, and I am confident we can achieve this. In many instances, we should adopt a more aggressive stance, expand our methodologies, and focus on delivering top-notch security solutions. Our customers often take our security for granted; they don't always recognize the significant differences between our products and those of our competitors when it comes to security levels. We encounter scenarios where we replace a competitor's product, only to find their security features are very basic. Once we implement more advanced security options, we discover numerous threats that can be mitigated. These are significant changes we need to focus on. There are many tasks to address in the field, and we are making positive strides with the combination of sales and marketing efforts. I hope we can continue to enhance our performance in these areas.

Our next question is going to come from Jonathan Ho followed by Keith Bachman from BMO.

Congratulations on the strong quarter. I wanted to follow up on Saket's question about RPO and supply chain challenges. Do you expect RPO to keep growing from here, or could it potentially reverse? I’d like to get a sense of how we should think about normalization and what that pattern might look like this year, considering the impact of billings.

I think at the end I'll take that and Gil, you’re welcome to add. I'll just say, remember, all these measurements, including RPO, is basically a reflection of the backlog, which is affected by billing minus whatever you book, minus whatever you recognize as revenue. That's your remaining obligation. So if the booking is good, then it should increase. If the booking is not good, it will decrease, but I will always say you need to watch out for fluctuations between quarters that can happen very easily. If I get a very large multiyear contract, then your RPO will increase. That's why I'm actually not using that as a metric because I don't want to confuse you. I just tried to give you color from a few angles so you will feel comfortable understanding. That's why I didn't only tell you the RPO, which I never do and I don't intend to either. But just to give you a few years of comfort level, so you will have transparency, I also gave you the booking, and I told you annualized booking on purpose because annualized booking takes away the multiyear and they increased in double digits. So it was a really healthy quarter. When we look at the product, it was also double digits. So the business was really healthy across the board. What will happen in a specific quarter I don't think is the right metric to focus on. I always say this because it can fluctuate depending on large deals that may come in one quarter and move between quarters. So you need to look at the full picture typically.

That's helpful. Given some of the shorter delays in product availability and supply chain challenges compared to competitors, are you noticing this dynamic benefiting your business in terms of win rates? Also, are you seeing any early order activity from customers?

I didn't hear the end of the sentence. Can you repeat the end?

I think we secured some projects because we were able to supply products while some competitors could not, which is positive. However, we faced challenges as some customers were building data centers and we were unable to obtain their other necessary equipment like servers and networking gear from other vendors, causing delays in their projects even though we were ready to deliver. Our ability, or Tal's team's ability, to collaborate with our suppliers and provide products was crucial for us, and I believe it significantly boosted our business. There's a major impact; if customers can't receive their switches and routers, it also delays their orders for security equipment.

All right. Our next question comes from Keith Bachman, followed by Philip Winslow. And if we could keep the questions to one, that would be greatly appreciated.

Kip, can you hear me okay?

Yes, we can.

Great. Tal, I wanted to come back to you. On the last quarter, you had talked about as you look out over the course of calendar year '22, the opportunity to grow double digits. And I just want to hear based on a lot of questions on the difference between billings and kind of underlying fundamentals. But as you think about the opportunity for billings for the year, how should we be thinking about that? Or would you rather characterize that as the opportunity to reach double digits in revenue in terms of growth? So we're all just trying to filter the disparity between, I think, the solid revenue performance and underlying bookings versus the billings. And Kip, I know you asked me to keep it one, but was hoping also, Gil, you could just touch on any initial thoughts on Lightspeed would be great kind of traction and how we should be thinking about that over the course of calendar year '22.

Kip mentioned not to ask two questions, not because we mind, but because we don’t recall the first question. I think it was about our projections for the year. To clarify, one of our main milestones has been achieving double-digit growth in new business, particularly when we sell products like new Harmony or new Quantum, since that's how we grow, as renewals are quite strong. Our focus remains on new business, and we believe we are capable of reaching this target. Achieving this growth is essential for us to attain double-digit revenue growth over time. This quarter, we hit a key milestone in revenues, and I hope that sustains. The mix of product and subscription sales contributes significantly to this new business growth. While some subscriptions are renewals, fostering new business is critical to achieving double-digit growth; otherwise, relying solely on renewals would leave us with low single-digit growth, similar to support services. To summarize, we must achieve double-digit growth in new business to meet our revenue target.

Okay. Great.

And I think Lightspeed, I think is, in Lightspeed, we had good traction. We didn't have too many deliveries, but we do have some major customers that are big enthusiastic about that. And we do have a good pipeline and I think a good order book for Lightspeed in general. So I think it didn't have much impact on the first quarter in terms of revenues. But so far, the traction is pretty positive.

Our next question comes from Philip Winslow, followed by Patrick Colville.

Just had a question focusing on the pricing environment. Obviously, there are a lot of moving parts here. Just curious what you're seeing out there. Obviously, you've got component issues, component price increases, but also you generally do price in U.S. dollars and there's obviously been some FX fluctuations there. So I guess maybe if you could break down sort of just what you're seeing in terms of just, call it, like the product and the new subscription bookings and any sort of pricing impact there? And then also, just as you think about just the renewal side, maintenance and subscription, anything there as well.

Okay. I can say one thing is clear. The price of the component definitely moved up. One way street, okay? So you can see it in our cost of goods sold, it's moved up and it's part of the gross margin that you see. So that's the only thing that is clear. When it comes to the revenue side, then you have a lot of things moving, and it's very hard to know, of course. So we increased the price, if you remember, in 7%, which I think is the lowest from any other vendor. I think content increasing like 30% and the Palo Alto maybe in 8%, and we increased in 7%. But if you ask if it to reach the end user, I would say it depends, some it did, some it didn't. It depends on the project. It depends on the competition, just like any product. So it's harder to measure that. And when it comes to the expenses, then that's the only thing, again, clearly, you can measure. Year-over-year, we actually aligned. So the effect on the expenses of the currency, Q1 versus Q1 is very minor, maybe $1 million or $2 million. The real effect is the growth in the headcount, which is, again, you will see it also in Q2, you saw it as part of the guidance as well because we recruited them towards February, March. So you actually see the effect more fully in Q2.

Next up is Patrick Colville, followed by Shaul Eyal.

So I'm just going to ask about the kind of geographic segmentation. I mean, Check Point's business over the last four years has done extremely well in EMEA. I mean that's been the standout success for the company. And maybe Americas somewhat underperforming. If I look at the results this quarter, to me, actually, the trend is very much changed. And If I look at sequential growth, Americas was actually very healthy and above trend. I look at EMEA, it was somewhat disappointing versus recent trends. If my numbers are correct, it's a 19% sequential decline. So can we just talk about geographic segmentation?

Wait, wait. Let's stop here. I'm not sure I understand. All of them increased if you compare quarter-to-quarter, all of them increased in 6%, 7%, 8%. So all of them increased year-over-year.

Revenues may see a slight year-over-year increase due to projects we secured in previous quarters. Overall, results were strong. This quarter marked a significant improvement in America, which had the best performance. Europe also performed well despite challenges from reduced sales in Russia and Ukraine. Taking everything into account, Europe had a very solid quarter.

But you're right that the growth was slower than what you've seen in Q3 and in Q4.

Yes. The metric I was referring to was sequentially comparing the dollar amount in the fourth quarter to the dollar amount in the first quarter. There’s no doubt about that, but I just wanted to know if there's anything we should be aware of, especially regarding Russia, that we should consider in our analysis.

The main effect in Q1 is Russia. Of course, we have basically no revenues so that sits in Europe, of course.

But again, Europe is healthy, and I am very, very, very happy with what's going on for us in EMEA, Europe. I wish everything would behave like that.

All right. Next up is Shaul Eyal, followed by Matthew Hedberg.

Thank you. Good afternoon, good morning, everybody. So Gil, you're essentially keeping guidance intact for the year. You've accelerated your year-over-year growth to 7% as we've seen in the first quarter, sound very bullish, some of us who covered you for ages, like we haven't seen you as bullish as you are for some time now. But still, you're keeping your wide annual guidance intact and still at the bottom of it, it implies a decline. Why not narrow the bottom range of your guidance? And maybe also, I know you've just mentioned Russia, but kind of what's your view on holding business in China? Are you getting out? Are you still conducting business in Russia, I'm sorry?

I agree with your observation. We haven't delved deeply into updating our annual guidance and model analysis. I'm very optimistic about the future. It's important to acknowledge that there are still risks present, especially with ongoing global economic unrest. The impacts of inflation are uncertain, and we are unsure about the broader effects. We hope for peace in Europe, which would facilitate global business, but the situation between Russia and Ukraine has caused significant revenue losses for us. I'm uncertain if we will recover those losses by the end of the year or resume business there, but I remain hopeful for peaceful resolutions. Overall, I maintain a positive outlook. Under normal circumstances, I would consider raising the lower end of our guidance, as we experienced a stronger quarter. However, I recognize that conditions are unpredictable, and I hope to avoid jinxing our progress.

I would just say because when you think of where the sensitivity is in the range. It's typically in the product, right? Because support and subscription, you have slightly better visibility, much better visibility. The product is sort of every quarter as you go. And in a universe that's the situation and the supply chain is to be more prudent to keep a wider range.

Next up is Matthew Hedberg followed by Adam Tindle.

Tal, I had a question for you. We really do appreciate your comments on annualized bookings. That's super helpful. I guess I'm wondering, could you put a little bit more color on that? And maybe comment on bookings duration and maybe how it changed from 4Q to 1Q? And were there any very large sort of multiyear deals that impacted Q1 this quarter?

No, I eliminated that from the annualized bookings on purpose. Off the record, I can share that bookings were indeed in the double digits. My intention was to provide the annualized figures to avoid any follow-up questions about large multiyear deals. The annualized business run rate did see an increase in double-digit bookings, which was encouraging. To address your question, yes, we did have some significant deals in our bookings this quarter. We consistently see large deals every quarter, and this time we had an increase in both the number of transactions and the dollar amount for customers purchasing over $1 million. This is a positive indicator.

Next up is Adam Tindle, followed by Andrew Nowinski.

All right. Gil, I just wanted to ask on the go-to-market investments, particularly around the Americas region investors often compare this to a few years ago with the hiring of Chris Scanlan and others. And how the mixed feelings looking back at that period of time, and Chris has now moved on. This time, you're off to a very strong start with acceleration in metrics in the Americas. What did you learn from that period before? And maybe what's different this time with Grupo and the investments that you're doing?

I believe that everyone we hire is chosen because we see potential in them. In the past, we had many talented individuals, but not everyone was a great fit or able to perform at their best. This variation includes both field personnel and those at headquarters, where we sometimes fall short. Historically, I've focused on enhancing sales productivity, and I think there is still room for improvement. We can boost individual productivity, but I believe this should go hand in hand with larger investments. Instead of simply aiming to increase productivity by a certain percentage with our current team, we should also consider adding around 25% more personnel. If we succeed in both areas, we'll significantly enhance our capacity, and even if we're only successful in one aspect, we will still perform well. I've realized that I want to invest more in the business, and perhaps we could have done this earlier. Overall, as I reflect after three quarters in my role, our new leader in America has delivered an impressive quarter, and I hope this trend continues. It would have been better to see results sooner, and while we always strive for quicker outcomes, three quarters to effect change is commendable.

All right. Thank you, Adam. Our next question is from Andrew Nowinski, followed by our last question from Gregg Moskowitz.

I wanted to ask about your product revenue obviously, up 6% this quarter on the heels of the recent Lightspeed launch. I'm wondering given that there was an acceleration in light of the chip shortage that you're dealing with as well. Are you seeing any sort of perhaps cannibalization with the new Lightspeed appliances, maybe seeing growth there versus cannibalizing some of your other next-gen firewall solutions are both doing well. If you could just give us some color on the appliance growth you're seeing and how sustainable that is going forward?

Overall, I don’t have all the data in front of me, but we experienced very strong growth in appliance sales. Lightspeed didn't significantly affect our quarter results. We have a solid order backlog and several major customers have adopted it, yet we don’t believe it had any notable impact on the quarter results. When I assess the situation with appliance sales, it's extremely positive, as nearly all product families showed good growth. The number of units sold increased significantly. I'm uncertain if the average selling price increased or remained steady across different families, and variations in family mix might influence that. Tal, do you have any additional insights on this? But overall, it’s looking promising.

I think when you look at the product, except for anecdotes, it grew in unit, and grew in dollar by each family both in ASP, which was steady, didn't go down, again, except for anecdotes. But in general, it was healthy and the new product didn't affect it yet because it's small. We need to monitor it, of course, because I know why you asked. We talked about it in the beginning of the year. It's one of the reasons there might be some cannibalization there. So it didn't start and we're planning to try to avoid that part, right? So it's not there yet.

All right. Our last question is from Gregg Moskowitz. Go for it, Gregg.

I'll look at what some others said about appreciating the additional bookings and RPO disclosures on this call. From a booking perspective specifically, I just would love to hear kind of how you would characterize the linearity this quarter as compared with a typical Q1?

Slightly. First, our linearity is still very much back-end loaded, but I think this quarter looked well from the very beginning of the quarter. So again, still the majority of orders we get in the last few weeks of the quarter. But I think this quarter, it was slightly, I mean, actually, I don't know, I don't want to mislead us. I don't know if it was more or less backloaded, but from the beginning, it was very healthy. We had a very healthy growth of the booking from the first few weeks of the quarter.

All right. Thank you all for joining us today. We appreciate your participation. And we look forward to seeing you throughout the quarter. And if you would like to have a chat with us after the call, please reach out, send me an e-mail at kip@checkpoint.com. Thank you, guys. Have a great day.

Thank you.

Bye-bye.