Financial results video conference. I'm Kip E Meintzer, Global Head of Investor Relations. And joining me today are Founder and CEO, Gil Shwed; and our Chief Financial Officer, Roei Golan. Before we begin, I'd like to remind everyone that this conference call is being recorded and will be available for replay on our website at checkpoint.com. During the formal presentation, all participants are in listen. During this presentation, Checkpoint representatives may make forward-looking statements within the meaning of the Securities Act of the early 1900s. 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 include, but are not limited to those discussed in Check Point Software's latest filings with the Securities and Exchange Commission. Any forward-looking statements may be only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. 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 the reasons for our presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at [email protected]. Now I'd like to turn the call over to Roei Golan.

Thank you, Kip, it's great to see you here. One moment while I show my screen. Can you see it? Okay, great. I'm excited to be here with you. We started off strong, finishing Q1 with earnings per share of $2.04, which is a 13% increase from last year, and net income of $235 million, representing an 8% increase. Our revenues exceeded the midpoint of our estimates, growing by 6% to $599 million, which is $6 million above our projections. The earnings per share also exceeded the midpoint of our estimates by $0.04. Regarding revenues and deferred revenues, we experienced a 6% growth. Deferred revenues increased by 2% to $1.826 billion, and our short-term deferred revenues also grew by 2% to $1.347 billion. Our total calculated billing reached $570 million, showing a 7% year-over-year increase, while short-term billing reached $532 million, a 3% year-over-year growth. Remaining performance obligations stood at nearly $2.2 billion, also reflecting a 6% year-over-year growth. This growth was fueled by strong demand for our products in the quarter, highlighted by double-digit growth in total new business annualized bookings. The 6% revenue growth was primarily driven by subscription revenues, which saw a robust increase of 15% to $263 million, largely due to the strong performance of our Infinity consolidated platform and Harmony Email. The annualized new business booking growth returned to double digits, showing acceleration and higher growth compared to Q4, driven by healthy demand for our products. Infinity revenues also grew significantly, exceeding 13% of our overall revenues, and we anticipate this percentage will increase in the coming quarters. In terms of global revenue distribution, EMEA accounted for 46% of our revenues, the Americas contributed 42%, and APAC made up the remaining 12%. Revenue growth was recorded across all regions, with EMEA leading the way in new business growth. Looking at the P&L, our gross profit rose by 7% to $536 million, resulting in a gross margin of 90%, compared to 89% last year. Total operating expenses increased by 8% to $284 million, mainly because of our ongoing investment in workforce and the impact of three acquisitions made last year, along with investments in cloud infrastructure and sales and marketing efforts. Operating income finished at $252 million, growing by 6%, which reflects a 42% operating margin similar to last year. Our net income saw an 8% increase to $235 million. Financial income also rose due to higher market interest rates, and we maintained similar tax expenses and rates. We ended with earnings per share of $2.04, marking a 13% growth year-over-year. Moving to our cash flow and cash position. So we finished the quarter with more than $3 billion in cash, marketable securities, and short-term deposits. We purchased during the quarter $325 million of shares at an average price of $159 per share. Our operating cash flow was strong with $361 million. To summarize our financials. Revenue and EPS reached the top end of our projections. We did see acceleration in our quarterly revenues mainly came from the subscription that came from Infinity and Harmony Email performance. We do see strong acceleration in our new business annualized booking, another quarter with double-digit annualized new business bookings and with strong profitability, maintaining strong profitability, 6% operating income growth, 8% net income growth, and double-digit growth in EPS, 13% growth. And now I'll turn the call over to Gil.

I apologize, I muted myself. Sorry. So good morning, everyone, and thank you, Roei, for the presentation. And now that I'm unmuted, I hope you see the presentation. Ready to go for the business update. I'll start with a quick recap of what Roei already shared with you. I think we had a pretty good quarter in the first quarter. Great results, revenue, EPS at the top of the projection, double-digit subscription growth continues to be recurring revenue, which I think is an important factor because we are moving more and more of our business to be an annuity model. It now represents 83% of total revenues. So again, another good indicator. Overall, I think we are putting a huge focus on what we call new business activity. And new business activity includes everything from signing up new logos and new customers to new refresh cycles, expansion, upsell, everything for the existing customers. And we had double-digit new business growth, which I think is very, very important that our customers are growing with us, refreshing with us, becoming up to date, and getting the best security. Part of that is the overall Infinity platform, new customers, some major public sector wins. And I think Infinity just to be through the rest of the presentation, we use the terminology for several things. It's our overall architecture, our overall platform which is very important, but it's also a specific kind of what we call Infinity deals or Infinity contracts, and these are deals that customers are usually doing for long term, but including big parts of the platform and not just one product. So all of these are growing and growing very, very nicely. One of the key drivers of our business continues to be our security gateways, as the network is central to everything we do. This quarter, we completed a major refresh of our entire product line, now called Quantum Force. I will discuss this more later, but what is crucial for Check Point customers is to gain more value from our offerings. We have welcomed many new customers across various regions, including Europe, Asia, and the U.S. A significant area for us is the public sector, where we secured 19 new government agencies in 40 countries this quarter. These deals vary in size, from small to multimillion-dollar contracts that span several years. Our reach extends across industries such as manufacturing, telecommunications, infrastructure, and energy, all of which are very important to us. In the first quarter, we also held our CPX conference, which included our first sell-side analyst track in Las Vegas. This event is critical as it brings together our field employees, partners, and customers to share our annual goals and product launches. The conferences were held in Asia, Europe, and the U.S., attracting over 18,000 participants, both in-person and virtually, with almost equal attendance from both. It was great to return to a full-scale physical conference filled with energy, and all feedback was highly positive, achieving the highest scores in Check Point's history for this event. This success reflects the enthusiasm of our customers and partners for our new product launches and the value Check Point offers in security. And one of the key messages was our Infinity platform or Check Point as a platform company. Now I know that many people in the industry speak today about the platform. Everybody speaks today as the platform, and it looks like it’s part of the wave. But I think it’s very important to understand. We launched the Infinity architecture, the Infinity platform in 2018, 6 years ago or 5 and some years ago. And since then, we've been building it. We're building it to be a very, very unique platform, a platform that's now AI powered with more than 50 security engines that are delivered from the cloud and contain AI technology. That's part of an overall of over 80 different security engines that analyze and prevent all types of attacks. And one of the major values here is our 3Cs being a consolidated platform where you can manage everything together, a comprehensive one, addressing all the key attack vectors, and the one which we are putting a lot of emphasis this year being the strongest in the real platform, not the architecture but a true architecture, a collaborative platform. And that's where I put a lot of our focus in 2024, making sure that all the technologies and products work together to elevate the level of security. So this isn't just information sharing between different aspects of the security infrastructure. This is also proactive action. So if we see somebody poking around our network, scanning it, we can take that attacker and block it all over on the network, on the cloud and on many other places. If we identified an infected endpoint, we can quarantine that endpoint through the network and make sure we stop the damage, contain them, contain the risk, and stop the attack. And that’s the only platform where I think we truly do that and do it in a very, very effective manner. So this is, again, a true platform where all the elements are orchestrated and work together in a collaborative manner. And I think the value of collaboration is going to pay off with the highest level of security. So that's a big focus that we put in the conference. Another important element is our new product launches, and these are the three key products that we introduced. The AI copilot is designed to manage security using natural language, which simplifies many management tasks and enhances security. Tasks that previously took too long or were too complicated can now be completed in seconds with AI technology. We also launched a new technology for securing cloud applications, specifically SaaS. It should not be confused with SASE, which is the technology for remote access introduced through our Q3 acquisition. SaaS is based on some technology we acquired last year, alongside new innovations that aim to protect your cloud-based SaaS applications. This is an integral part of our platform. Lastly, I want to highlight our Quantum Force gateways, which are crucial as they significantly contribute to our business. The latest generation of Quantum appliances showcases impressive performance, ranging from two to three times optimization for AI, featuring over 50 AI engines and achieving the highest threat prevention ratio in the industry at 99.8%, according to Miercom results. We take pride in this, and it should empower us to attract new customers while upgrading and refreshing our existing customer base. While it takes time for customers to evaluate the new hardware and software, I believe we have a robust promise for the remainder of the year. Last but not least, I mentioned the Infinity AI copilot and you can see a simple demo here. We are trying to get a simple managerial task. Emily can't access the SAP server. Why can't she do that? Again, in the past, it was a long process, analyzing issues, analyzing things. Here, it's super simple. You asked the question. It tells you Emily actually attempted to do that but there was a rule blocking her. I asked you, 'Do you want to add there and change the rule base so she can actually access that server?' You say, yes, policy being installed, boom, it's done. These tasks, when you do them with our product, if you're an expert, I mean, it takes you a few minutes. If you're not an expert, it can take you much longer. If you're doing it with a competitive product, it can take you many, many hours to analyze the situation, to find the right place, especially for large enterprises that have hundreds of thousands of rules, and they need to diagnose the situation and so on. And again, our AI copilot is not limited just for the managerial tasks. It can do everything from asking, are we protecting against the latest threat? And again, it will go and pull the latest threat from the right databases, check the configuration of all the security installation, and will tell you, yes, you're protected or no. Click here to get updated. I believe, by the way, AI will play a major role in the world in general, but in our industry, it can make some big revolution. And what we're doing now is just the first step. We will see much more. So just before we finish speaking of AI, a major partnership we announced in the AI space is about securing the AI cloud infrastructure. So I'm sure you all know that some of the largest investments today are in building AI server farms in the cloud that provide significant value through AI, primarily utilizing NVIDIA chipsets. Last month, we announced the introduction of the first AI infrastructure firewall, enabling us to integrate the Check Point firewall to safeguard the AI servers in the cloud operating on NVIDIA chipsets. This partnership is built on years of collaboration with NVIDIA, even before the AI era, allowing our software to function on their chipsets. We plan to make this available later in the year, which I believe will open up a compelling market opportunity. Currently, much of the AI infrastructure in the cloud is vulnerable to the open Internet and lacks adequate protection, which is not where we aim to be. I see this as another business opportunity, with many more emerging as we transition to AI. To summarize my presentation on Q1, we had a strong start to 2024. The Infinity platform investments are delivering returns. We have various products with email growing along with many other offerings. The sales of the Infinity agreements for a sophisticated comprehensive security architecture for customers are increasing rapidly, which holds great potential for the future and is already generating 13% of our business. Revenues and EPS are at the top of our projections, with strong subscription growth and new business growth. Both quantitative and qualitative measures indicate that we have started the year well, and we are optimistic about the upcoming quarters as we hope to maintain this positive momentum. Before I finish and open the floor for your questions, I would like to discuss our projections for the second quarter. The projections are generally consistent with what we shared in the first quarter and at the beginning of the year. Revenues are expected to be between $607 million and $637 million. Earnings per share is anticipated to be between $2.10 and $2.20, with GAAP EPS approximately $0.44 less. This aligns with our consistent performance since the start of the year, and I hope we will continue to have a successful remainder of the year. Thank you very much, and I am happy to open the call for your questions.

All right. As always, please remember one question during your period. First up is going to be Joseph Gallo of Jefferies followed by Tal Liani of BofA.

Could you describe the business environment in the first quarter? What is included in your guidance? I didn't see any guidance for 2024. Given your relationships with customers, how are they perceiving their cybersecurity budgets? Which areas are being prioritized? Are you observing any signs of fatigue similar to what others have mentioned? You noted strength in the EMEA region. Is the U.S. budget lagging behind?

That was a comprehensive question, so I'll do my best to answer it. First, we had a strong quarter, which I believe I've already communicated. Regarding the surrounding environment, it's somewhat mixed, and I'm not as optimistic based on our results. On one side, the security marketplace is still healthy, and I expect it to remain that way for several years. However, I don't think customers have begun to open large budgets as they did before. They are being relatively cautious with their budgets, particularly in some of the sectors we operate in. Our industry is very competitive, and while we haven't experienced much of it in the first quarter, I expect to see increased competitive pressure moving forward. Overall, it's a good market, but we haven't fully recovered to the level I would prefer. Geographically, we've seen strong performance in Europe, while the U.S. has been good as well, with new business growth, though it's a bit tighter.

All right. Next up is Tal Liani.

Can you hear me?

Followed by A Tindle.

I don’t know why my video isn’t showing. I’m not sure if you can see me or not, but okay. Roei, I have a question. I look at the quarter and then I consider what could drive double-digit growth for next year. If I use your model and assume that product revenue remains flat, maintenance increases by about 2%, and subscriptions rise by 15%, which is what we have seen this quarter, I’m forecasting growth of 6% to 7%. I’m not reaching 10%. You mentioned previously the potential to grow total revenues by double digits, without a specified timeline, but to grow nonetheless. So what assumptions or conditions need to be in place for revenues to achieve double-digit growth? Is it necessary for product revenue to grow by double digits again? Or will it require a faster acceleration in subscriptions? What factors must align for you to reach double-digit growth? Again, I’m not asking for a timeline; I just want to understand how growth picks up from here.

That's a good question. There are several factors to consider. First, product revenue needs to grow, ideally at least in the high single digits. This is essential for better execution. We launched a new product, Quantum Force, in Q1, which can drive more refreshes and growth in product revenues. Additionally, the main driver for growth should be the SaaS acquisition of Perimeter 81, which we completed two quarters ago. While it's not yet a significant part of our business and integration takes time, it holds potential. Along with strong growth in Harmony and ongoing refreshes, I believe we can hopefully reach double-digit growth again.

All right. Up next is Adam Tindle from Raymond James, followed by Shaul Eyal from TD Cowen.

All right. I just wanted to start with a competitive environment question and observing that you're posting nearly 7% billings growth here. We'll see actual results, but that probably outpaces both Fortinet and Palo Alto this quarter based on their guidance. Your new business is growing double digits. Just wonder if you could maybe touch on the rationale and sustainability of that trend where you’re outperforming those competitors from a growth standpoint. And secondly, as we look forward, one of those competitors on their last earnings call announced an intent to pursue a very aggressive pricing strategy. I just wonder if you could maybe touch on your thoughts and expected response for that.

Thank you. You're right that there is some pressure on the industry. We experienced a significant part of this last year, while our competitors seem to be facing a slight delay. It's hard to determine how much of this delay is related to financial challenges versus market performance compared to their financial results, but the market pressure we noticed a year ago is substantial. I believe we are moving past that now, and our competitors seem to be lagging behind us in this recovery cycle. Our own pressures and the implementation of aggressive strategies indicate that we will have a more competitive market, which is clear. Customers need to invest in the best security solutions. Opting for a second-rate security product, even at no charge, isn't worthwhile. I don't want to disparage other companies, but if you look at the report now, you'll notice the superiority of Check Point technology—not only in blocking capabilities but also reflected in the high prevention rates we've achieved, as highlighted by Miercom's near-perfect score. Our competitors have product vulnerabilities and have failed to address these in a timely manner, which exposes critical parts of their infrastructure. These issues are not new; they're trends you can track, some of which are available publicly. We are committed to delivering the best security, and I urge every customer to recognize this. We also need to improve our efforts in educating the market about not compromising on security, even for free. This should be our primary message: let's secure the win with the best security.

All right. Our next person up is Shaul Eyal, followed by Gabriela Borges.

Gil, any word about the CEO search. And as we think about the new business or even the renewals that you've had. I think you've mentioned several multimillion dollar transactions, but did you guys have any 8-digit related transactions this quarter?

I will begin with the CEO search. We discussed our intentions last quarter, and since then we have commenced the process. It is a well-organized and carefully considered approach. We are still in the early stages, and it will take some time, as we mentioned previously, but progress is being made. Regarding large deals, we have a range of transactions. We’ve secured some new contracts that are worth 8-digit figures over several years. The impact for the first year will be, as Roei can confirm with the numbers, about 7 digits, but we have brought in a few significant new clients with 8-digit agreements. Roei?

Yes, I confirm we acquired a new customer with an 8-digit contract that spans multiple years. It's important to note that this doesn't imply the billing was also 8 digits, as billing can vary. However, regarding our bookings, we did secure 8-digit deals. Thank you.

All right. Our next speaker up is Gabriela Borges, followed by Jonathan Ho.

I would love to dig into the dynamics we're seeing around the refresh cycle, particularly as you see customers bring that product up for refresh, any observations on how they're thinking about their firewall footprint and their firewall budget versus their SASE budget? And then apples-to-apples, what do you see in terms of pricing as customers think about the box upgrade cycle?

That's a great question. I believe that all these markets will eventually merge. We will witness the formation of a mesh network that connects remote users, branch offices, data centers, and both private and public cloud data centers. This interconnection is a significant advantage that Check Point offers in the market. Currently, there are standalone vendors performing adequately in the SASE market, addressing various aspects like branch offices and remote users, but they don't integrate with the rest of the enterprise's data centers. Some companies focus on data center security but lack a SASE model. Others have both, yet they are not integrated as of now. We are developing a platform that will unify everything across the network. Regarding budgets, I anticipate that a considerable portion will come from the same allocation. Furthermore, the advantages extend beyond just the mesh architecture; we also refer to it as a hybrid architecture. Customers can apply the same policies and high security while achieving the most efficient deployment. Optimal deployment can occur on-premise, on-device, or in the cloud. It’s crucial to consider that when deploying networking solutions, considerable effort is made to achieve faster speeds and lower latency. For instance, in many situations, on-device or on-premises solutions yield significantly better outcomes compared to cloud solutions. While there can be situations where moving to the cloud is beneficial, having a hybrid structure that ensures not just superior security but also optimal performance is essential. I believe we will achieve both. Currently, we are seeing good traction in the SASE sector, primarily among small to medium-sized customers, which aligns with the product offering we acquired. We will integrate this offering this year into a cohesive architecture and platform that accommodates all sizes. On the refresh cycle related to our data center, which is fundamental to our business, I notice robust activity, especially at the high end of large data centers. However, budgets remain tight at this time. While I do anticipate some signs of improvement in the second half of the year and expect that our fourth product family will help open up some budget, the release of those funds has not yet occurred, and spending remains constrained.

All right. Next up is Jonathan Ho followed by Joshua Tilton.

Can you maybe help us understand how your Infinity contracts that you already have in place have been growing and specifically, what type of uplift do you see from customers that maybe have had these contracts in place for a while now?

So firstmost, I don't want to give too specific data because it is kind of confidential. I don't want it to fall into the wrong ears. But generally speaking, we do see that Infinity customers are not just committing for a longer period of time and getting more comprehensive security but are committing to us to a much bigger budget. And again, we've done that comparison because it's a simple trick to convert the customer for simple product buying into a longer-term contract when we actually don't increase the value or sometimes even the opposite. So we did a very fair analysis of our Infinity agreement customers. And almost all the cases, there is a significant growth in the customer's business that the customer does with us. Some of it also grows over time. And I think what I've seen generally, where you can comment, most of these contracts when they are being renewed, they are being renewed in a bigger way. I don't know what Roei consider?

Yes, yes. I mean we do see that most of the customers that are engaging with us in Infinity and also when they are engaging with Infinity, it’s usually with higher spending, higher annual spending. So that means they are taking more products of us, if it's e-mail or if it's a SASE. So I think, again, we see that the positive side on the Infinity agreement.

Next up is Joshua Tilton followed by Rob Owens.

Can you hear me?

Yes.

All right. Just one for me. I guess, any way you could just help us understand what was the impact of the quarter from some of these newer appliances? I know they started shipping in the quarter. But was there any benefit or maybe even a negative as people kind of just waited to buy some of this newer stuff? And then maybe just how should we think about the pace of growth throughout the rest of the year as you see some of your customers look to adopt the newer hardware?

I can begin, Gil. In regard to the transition with the Quantum Force, we have observed positive momentum, particularly with the high-end Quantum Force appliances. However, transitions can be time-consuming because many of our customers need to complete internal certification processes before implementing a new product, which can occasionally have a negative impact. In this quarter, we experienced a solid transition and secured several promising deals with the new product we launched. Looking ahead to the rest of the year, we expect to see increased adoption of the new product by our customers, particularly in the second half of the year, which we hope will contribute to our growth. As I mentioned, it may take a quarter or two for the certification process to be completed, but we are optimistic that it will help us grow our product offerings in the latter half of the year.

All right. Next up is Rob Owens followed by Brad Zelnick.

Great. Gil, in your prepared remarks, you talked about an AI infrastructure firewall. And I was hoping you can maybe build on those comments because that feels like a net new opportunity potentially for the space?

You're absolutely right. This represents a new opportunity where hundreds of thousands of AI servers have been deployed globally, mainly among a few hundred cloud AI service providers who are building this infrastructure. They are purchasing complex systems based on NVIDIA designs and chipsets. I have reviewed these designs, and they are quite intricate and distinct from traditional servers. In a traditional server, there is usually one CPU, while these setups have three or four different types of processors, each designed for specific tasks. Currently, these servers cost around $200,000 each, and in typical installations, there are usually thousands being set up, indicating substantial infrastructures. Regarding security, many of these servers remain accessible over the Internet due to high-speed connections. Given that they are located in cloud environments, this openness poses risks; if someone hacks into the network, they can jeopardize the infrastructure, including corrupting the AI model's learning process, which would require a complete retraining rather than a simple fix. Such breaches can lead to significant damages in terms of both cost and time. When referring to the design, which features various processors, we are installing our software on the network processor of these servers. This approach ensures that we do not affect the overall AI performance. By operating from the network processor, we can manage traffic and act as a firewall between the Internet and the AI server, ensuring secure communication while enabling additional security monitoring based on the current architecture. As I mentioned, this is a new product and market, and it has been challenging to estimate its potential because we've only begun engaging with these vendors last month. However, I believe the technology is in the near to mid-term timeframe. We've been utilizing these NVIDIA chipsets for quite some time, with some of this architecture being part of our light-speed product from two years ago. Therefore, while we are adapting our technology for specific implementations, we anticipate a relatively short development cycle and are starting to focus on understanding the supply chain and distribution channels to reach these customers. This could become a significant opportunity for us.

All right. Next up is Brad Zelnick, followed by Patrick Colville.

Great. Can you see me? Can you hear me?

We can hear you but don't see you.

Great to see you all. I have a question for Gil and one for Roei. Roei, I understand that cash flow will always be unpredictable from quarter to quarter. However, when we consider the full year, is there anything related to timing or duration that might keep cash flow growth aligned with net income growth? And for you, Gil, regarding M&A, Check Point has been very responsible with capital allocation and has taken a disciplined approach to acquiring some of the most innovative technologies. Yet, we now find ourselves in a situation where there seems to be dislocation in the private market. We've all noticed some alarming headlines indicating significant valuation drops. Why shouldn't we take this opportunity to be more aggressive and accelerate consolidation in the market through M&A?

I'll begin with the cash flow for Q1. It's important to note that Q1 cash flow was significantly influenced by billing from Q4, as most collections occurred then, particularly in December. Q1 saw most new billing come in March. While we did experience a 7% growth in billing, we did not collect much of it in Q1, and billing in Q4 was down by 1%, which impacted our cash flow for Q1. We can anticipate cash flow in Q2 to be more favorable. Looking at the full year, it will depend on our execution and billing. We have observed stability in billing duration since last year’s Q3, and with this already being low, I don't foresee any impact from duration on our billing. If billing continues to grow as it did in Q1 or even exceeds that, it will positively influence our cash flow as well.

In terms of mergers and acquisitions, you're right that there are opportunities in the marketplace. We are actively searching, and I come across intriguing options almost every week or two that we are assessing. However, the valuations are still not rational. For instance, recent acquisitions have involved companies with $10 million or $20 million in revenue, and some even less, being sold for hundreds of millions of dollars. This doesn't mean we can't pursue it; we completed several deals, including three M&A deals last year. Yet, it remains challenging to find quality companies. I haven't seen many interesting opportunities with companies that have a more significant revenue stream. There are a few distressed situations, but those companies are losing hundreds of millions of dollars. Our aim is to find opportunities that have growth potential, which is often absent in these scenarios. We're looking at companies with compelling technology that we can integrate into our platform, as that could present an opportunity even if the short-term valuation seems unjustifiable. We also seek more sizable opportunities, but we need a rationale for the valuations, which still isn't there. I believe it will improve in the future.

Next up is Patrick Colville, followed by Fatima Boolani.

Terrific. My question is about CPX compared to now. What stood out at the CPX conference last month were several favorable developments, including the launch of the Force firewalls and improved messaging regarding the platform and subscriptions. Additionally, a more streamlined partner approach was announced. However, your comments today suggest a more cautious view on these factors. Should we take away the message that the cycle is improving and these developments will have a later impact? Or were there changes in products, subscriptions, or partnerships that affected this quarter?

I believe there is an opportunity ahead. We've made significant progress with our new products, particularly the Quantum Force. However, the market isn't quite there yet, and the industry remains competitive. Sometimes, these things take time. What I'm conveying is a positive outlook. In Q4, we quietly launched some high-end appliances, targeting specific accounts, and we received great feedback. This momentum continued into the first quarter when we did a broader release of our entire appliance line, comprising 10 models from low-end to high-end. This less targeted approach is taking a bit longer to gain traction. Nonetheless, we achieved impressive numbers in Q1, including significant double-digit growth in new business, which are fantastic results. However, I recognize that customers are currently hesitant to spend, but there is hope that spending will increase in the second half of the year, especially with a larger refresh ahead. This extensive refresh will require customers to allocate their budgets for certification, testing, and implementation, and we are prepared to handle it all. We offer outstanding value in terms of price performance and security, along with the necessary services. Our services division, which aids customers in implementation and design, is also experiencing rapid growth, which is encouraging given the global skills shortage in cybersecurity. We have established a robust division called the Infinity Platform Services, capable of delivering excellent services to facilitate planning and deployment, and this segment is expanding quickly with our customers. We are well-positioned to leverage these opportunities, but I do observe some market tightening for now.

All right. Next up is for Fatima Boolani, followed by Joel Fishbein.

Roei, this one's for you. I wasn't 100% clear as to what were the driving forces behind another double-digit new business bookings growth performance? And I was hoping you could break that down between the four pillars of your business. And just, secondly, at a high level. For the last eight quarters or so, you've consistently been sort of around the 45%-ish operating margin envelope. And for us, for a lot of us who've known the business for a very long time, where you used to have maybe closer to 50% operating margin. So I'm curious, what's the path back to those levels from here? Is it you've been in almost a two-year sustained investment cycle?

Thank you. Regarding the first question about new business, the growth we've observed can largely be attributed to the increasing uptake of our Infinity global services, which has shown strong growth. Additionally, we've seen significant traction in high-end appliances, contributing to our new business expansion, alongside the consistently growing Harmony Email, which is increasing its annual recurring revenue each quarter. This has been a key factor behind our new business growth. As for the operating margin, I want to remind everyone that for this year, we expect the operating margin to range between 42% to 43% for bookings over the full year. This is primarily due to our ongoing investments and the acquisitions we completed last year, which are part of our expenses this year and were finalized at the end of the third quarter. This has had a temporary dilutive effect. We hope to improve our operating margin in the long term. To achieve double-digit revenue growth, we will focus on SASE, email services, and additional product growth, which can help us return to higher operating margins. Currently, we are in a strong operating margin position, but our main objective is to drive greater growth at the top line.

All right. Next up is Joel Fishbein followed by Ray McDonough.

Gil, could you provide us with more details about the partnership with NVIDIA? Specifically, will you be working directly with NVIDIA for payments, or will you need to engage with the customers individually? Will Check Point be shipping alongside the chips? This seems like a significant opportunity. While I understand you're being cautious about short-term expectations, can you elaborate on how this will function in the long term?

First, we are still working on this. The partnership and technology implementation with NVIDIA is progressing well, and they are very supportive. We announced it during their developer conference, which is significant. The business model is still being developed. I believe a lot of it will come from companies creating products using NVIDIA's chipset, or directly from the few hundred cloud service providers, which are the primary customers. This approach is very targeted. We still need to determine the best distribution model to reach these customers. The software may already be ready to use or integrated within the chipset, which is how we are designing it with NVIDIA.

All right. Next up is Ray McDonough followed by Dan Ives.

Great. Roei, I wanted to follow up on Brad and Fatima's questions. We've talked a lot about potential drivers for double-digit revenue growth and briefly discussed how we could return to around 50% operating margins in the long run. Considering the pressures from competitive dynamics and the operational expenditures you've made, how should we evaluate the medium to long-term growth in free cash flow and its relation to achieving double-digit revenue growth? I know that billings will play a significant role in that. But what level of OpEx investment will be necessary to support that revenue growth over time? Additionally, could you clarify how much of this quarter's billings came from inorganic contributions? And just to confirm, is the full-year revenue guidance still unchanged?

I'll start with the last point. There is no change to the full-year guidance; it's the same as before. Regarding the inorganic contribution, we completed the Perimeter 81 acquisition, which added about $7 million in revenue. This translates to roughly $7 million in billings, approximately 1.1 something. As for your question about the necessary investments, I don't want to disclose specific numbers. However, we have heavily invested in the past few years in both our go-to-market strategies and in our product development to enhance our portfolio significantly compared to what we had a few years ago. While we have seen a decline in our margins, I believe these investments will lead to growth. We are not stopping our investments; in fact, we plan to continue investing. With the improved portfolio we have today, we aim to achieve double-digit growth, which will also positively impact billings and cash flow. I believe all your questions are connected to this. I don’t want to commit to a specific margin, but we currently have a solid operating margin, and I am hopeful that it will improve in the mid to long term. Ultimately, our success depends on our execution, and I am optimistic that we can achieve higher growth and enhance our operating margin.

I’d like to approach this from a broader perspective. Since our IPO in 1996, I’ve been asked about our operating margin repeatedly. Initially, we maintained relatively high margins, and the question has always been whether we can sustain them. My answer remains consistent. My priority is not on increasing margins but on nurturing a healthy business, which we've successfully done for nearly 31 years. Right now, my main focus is on growth rather than profitability. We need to invest in growth. In recent years, we have made significant investments in our cloud initiatives and our email offerings, among other parts of our platform and our research. We've established various organizations to enhance our go-to-market strategy for better growth, all while maintaining high operating margins, which are among the best in the industry. I believe many of our investments will pay off in time, and we will continue to invest more. It’s also crucial to acknowledge how the landscape has shifted since the 90s and even 15 years ago. While growing a new business in the past involved high investment but reasonable margins, currently, much of our industry is operating at a loss. At a recent growth companies conference, I asked the audience of about 100 people how many were running profitable businesses. Only four hands went up, and those who did were quite proud, as there were none just two years prior. This illustrates that when we combine or acquire businesses and invest in new models, we're not just aiming to build a profitable business. Instead, we’re working with companies that need to be transitioned towards healthy business practices. We manage this responsibly, with a focus on fostering healthy growth rather than solely on margins. I hope this approach continues into the future.

Thank you all for joining us. It seems that Dan Ives had to step away to pick up a colorful outfit, so he won't be able to ask his question. Thank you once again, and we look forward to connecting with you during the quarter.

Thank you. Bye bye.

Thank you.