Greetings and welcome to the Check Point Software 2025 First Quarter Financial Results Video Conference. I'm Kip Meintzer, Global Head of Investor Relations, and joining me on the call today are our Chief Executive Officer, Nadav Zafrir; and our Chief Financial Officer, Roei Golan. Before we begin, I'd like to remind everyone this conference is being recorded and will be available for replay on our website at checkpoint.com. During the formal presentation, all participants are in listen-only mode, that will be followed by a Q&A session. During this presentation, Check Point's representatives may make forward-looking statements. Forward-looking statements generally relate to future events or future financial and/or operating performance. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Any forward-looking statements made speak only as of the date hereof and Check Point 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 email at [email protected]. Now it's my pleasure to turn the call over to Roei Golan.

Thank you, Kip, and thank you everyone for joining the call. In the first quarter of 2025, we did see continued strong demand for our Quantum Force appliances, which drove our revenues above the midpoint of our guidance. Our revenues grew by 7% to $638 million, $4 million above the midpoint of our projections, while our non-GAAP EPS was $2.21 per diluted share, $0.03 above the midpoint of our projection and represents 9% growth year-over-year. Moving into the deferred revenues, our deferred revenues grew by 5% to $1,915 million. Our calculated billing reached $553 million, which represents 7% growth year-over-year, while our current calculated billing grew by 5% year-over-year. Let me remind you that our billing is affected by duration and payment terms and I also want to remind you about the next quarter modeling, that in the second quarter last year, we did have a benefit of approximately 2 points from upfront billing from two large multi-year deals. If we were looking at our remaining performance obligation, the RPO, the RPO grew another quarter by double-digit, 11% and reached $2,424 million. As I mentioned, we did see another strong quarter of demand from our Quantum Force appliances. Since launching these appliances at the beginning of 2024, we have seen a strong trend of demand for these new appliances, and that was the main driver for the revenue growth in this quarter and resulted in 14% growth year-over-year in the product and license revenues. Moving into Infinity, we also had another strong quarter for Infinity. We continue to flow in an accelerated way to the revenues with a strong double-digit growth year-over-year. Same as in previous quarters, the revenues from Infinity will keep increasing and already exceeded 15% of our total revenues. We can see more and more customers adopting our platform, which answers their needs under one umbrella of products and services. Regarding our Global Revenues Distribution, 45% of our revenues came from EMEA, which represents 5% growth year-over-year, 42% came from America, with 6% growth year-over-year, while the remaining 13% came from Asia-Pacific with 12% growth year-over-year. Moving into our P&L, our revenues grew by 7%, while our gross profit grew by 5% to $564 million, representing an 88% gross margin. Our operating expenses increased by 7% to $305 million. This increase was mainly due to our recent acquisition of Cyberint, that was closed at the end of Q3 last year, and the continued investment in our workforce organically during the quarter. Our non-GAAP operating income continues to be strong at $259 million or a 41% operating margin. Our net income was $246 million, representing 5% growth year-over-year, while our non-GAAP EPS grew by 9% to $2.21. Regarding our cash flow, our operating cash flow was strong this quarter with $421 million, representing 17% growth year-over-year. If we exclude the reduction in the income tax paid, the growth was 14% year-over-year. Our cash balances as of the end of the quarter were $2.9 billion. During the quarter, we continued our buyback program and purchased approximately 1.5 million shares for $325 million at an average price of $211. To summarize our financial results, revenues and EPS were above the midpoint of our projections, and we saw another quarter with strong demand for Quantum Force appliances, strong operating cash flow, and maintaining high profitability margins. Now, I'm happy to turn the call over to Nadav.

Hey, folks. Great to be with you again. As Roei said, indeed a solid quarter. When we look at the demand for appliances, I think this shows a trajectory that's been going on for the last four or five quarters. It’s a continuous positive trend that makes us optimistic. If you remember, we met last time at the end of January, and I told you that I was going to focus on listening and learning with the target of meeting over 100 customers, partners, prospects, and hundreds of our own Check Pointers. So my first 100 days are over, plus 28 days and counting. I'm happy to report that I exceeded my target of meetings intended to listen to our partners, customers, etc. Regarding our strategy, which we articulated, our aim is to provide the leading platform for the hybrid mesh architecture, which resonates well with everyone I've met so far and is well received. I'm also pleased to say that in speaking to channel partners, there is a genuine desire to enhance partnership with Check Point and we definitely intend to double down on that. In February, we had our CPX, which is our user conference. We held it in various locations around the world, meeting thousands of customers and partners. In securing a hyperconnected world in the AI era, we must remind ourselves that security is fundamentally about safety. Our strategy is to provide a real platform for this hyperconnected reality, offering the best prevention available today. We believe the Infinity platform truly provides the best solution with its flexibility that integrates our three families of products: Quantum, CloudGuard, and Harmony. We recognize the importance of providing agility for security and a better user experience. When considering organizations and enterprises today, the second line item in their budget is cloud spending, and this flexible hybrid approach enables better control over these costs. In Q1, we announced our partnership with Wiz, which exemplifies our belief that a real platform must also be open, following an open garden approach and architecture. This is just one of the many partnerships that we are cultivating. We're also pleased with the recognition from industry analysts that acknowledges our efforts. Our focus areas include SASE and artificial intelligence, both front and center in our architecture. Looking at SASE, we are serving thousands of customers, which improves user experience significantly, as we have embedded Check Point security engines and approximately 100 AI agents supported from the cloud. We plan to scale this to larger enterprises as we continue to recruit top talent for our new R&D center in India. Beyond our hybrid mesh and SASE initiatives, artificial intelligence is transforming every industry. Enterprises should embrace this technology responsibly, and that’s our mission. In our CPX events, we focused on Gen AI security integration into our products. As of today, we have thousands of organizations around the globe utilizing it. Moving forward, our focus will be on securing AI and leveraging it for improvements in our operations, ultimately leading to AI-driven access control policies; this is our roadmap. Looking ahead, I'm thrilled to introduce Jonathan Zanger, who will be joining us as our new CTO. Jonathan is well known in the AI and cyber community, and his arrival is a testament to our strategy and future. Lastly, I want to recognize our current CTO, Dr. Dorit Dor. She has been instrumental in building Check Point and has agreed to remain with us as a Check Point fellow. I am proud to have her support going forward. I'm excited about our plans for a new division focused on securing the workforce in a hybrid modern environment, providing a single product experience. Our goal is to enhance our existing offerings and achieving $200 million in ARR within the next year. We believe this is a great way to secure new customers while enhancing our current services. We look forward to sharing more updates on our progress in Q1.

Thank you, Nadav. We're going to start out with a little commentary around our business outlook. Obviously, we're seeing a nice pipeline build for the second quarter and the second half of '25. We're very pleased with the customer response to the Infinity Platform and also our Quantum Force appliances. Security spending for us is healthy, but we recognize it's not immune to budget concerns, although history has shown it is insulated from most cuts. From a macroeconomic perspective, specifically around tariffs, we haven't seen any behavior so far—canceled projects, extended sales cycles, etc. However, we recognize that sales cycles usually extend towards the end of the quarter. Thus, we think it's prudent to take this into consideration while discussing our business outlook. Revenues are expected to be $642 to $682 million, representing 2% to 9% year-over-year growth. Non-GAAP EPS is anticipated to be between $2.32 to $2.42, which translates to year-over-year growth of 7% to 12%. GAAP EPS is expected to be approximately $0.55 lower. Our FY 2025 outlook remains unchanged, with a little modeling commentary reiterating what Roei said earlier: last year in Q2, we had three eight-figure deals totaling $130 million, two of which were paid upfront and contributed about 2% benefit to the calculated billings for the quarter. With that, we're going to open the call for Q&A. No need to raise your hands, folks. There’s a predetermined list of participants. First up is Robbie Owens from Piper Sandler, followed by Joseph Gallo from Jefferies.

Great. Thanks, Kip, and good afternoon, everybody. I was hoping you could drill down into the business outlook commentary slide that you just provided and share some insights into the forward pipeline. What do you view as the obvious puts and takes around the refresh cycle, which seemed to be reflected in the product revenue this quarter? Additionally, where do you perceive our conversations with customers around tariffs and their appetite to spend in this environment? I understand that security is typically resilient, but some situations can certainly push things out as they sweat assets. Any color from customer conversations would be appreciated. Thank you.

Yes, I'll start. As of today, after various discussions with our sales team, we don't see any impact from the current macroeconomic environment. We actually see the pipeline building nicely. Speaking specifically about Quantum Force appliances, the second quarter is looking very promising. Yet, we cannot avoid the volatility that exists in the market. Many businesses finalize most of their transactions in the last month of the quarter, specifically in the last two weeks. Every day brings news that can shift the landscape. Today, we don’t see any changes, but we built our guidance for the next quarter with a more cautious approach due to potential deals that may slip into the second half of the year.

I don’t have much to add. As Roei said, I speak to our channels, customers, and sales leaders frequently to understand the sentiment better. We haven't seen any significant changes. Reflecting on past uncertainties and volatility, especially with our adversaries arming themselves with sophisticated AI capabilities, I believe we may see an increased offensive effort. Accordingly, I expect the cybersecurity budget to remain resilient and prioritized, but we need to remain vigilant.

Thanks.

Next up is Joseph Gallo, followed by Adam Tindle of Raymond James.

Hey, guys, thanks for the question. Following up on products, how should we think about the runway left in the refresh and product versus subscription revenue growth this year? Also, is there any increased cost of goods sold from the tariffs? Thanks.

Yes, I'll start with the tariffs. Most of our manufacturing is currently done in Taiwan with third-party ODMs. We're collaborating closely with them to navigate the developments from the last few weeks. Even with the potential high tariffs that may be imposed, our maximum exposure is expected to be minimal, less than half a point to our total margin. We are actively adjusting our supply chain to mitigate these costs. Regarding product, we are starting to see the refresh cycle accelerating, which began in the second half of last year. We’ve had a good ramp-up in product revenues from our existing installed base, showing their positive reception of the new appliances launched last year. Looking ahead, we believe this refresh trend will continue through to 2026.

Thank you.

All right. Our next caller is Brian Essex, followed by Keith Bachman.

Thanks, Kip. Nadav, during CPX, it was evident that you're very engaged with customers, partners, and especially employees. Many employees mentioned that you're encouraging them to drive growth more assertively than in the past. Could you explain what incentives, initiatives, and benchmarks you are holding your management team to in order to accelerate growth?

Yes. My primary focus is on accelerating growth, which includes increasing our go-to-market investments and fostering a culture more attuned to customer relationships. I emphasize a sense of urgency and accountability across the team. Compensation will concentrate more on ARR, subscription, and achievement of ambitious targets among all employees, not just those on the front lines.

I made a mistake there. The next question is from Mr. Indiscernible and will be followed by Mr. Bachman.

Thanks, guys. I wanted to ask about the growth acceleration in product. On the flip side, Nadav, while EBIT margins approach 40%, sales and marketing is at record levels, and you're expanding corporate headquarters. This all seems justified if growth accelerates, but could you provide parameters around your thoughts on the operating model? What would need to happen to move margins into better territory? How do you balance growth versus investment?

I shared previously that our strategy has not changed. We aim to gradually improve growth responsibly, while also being mindful of margin impacts. We have some flexibility there, but any changes will need to be carefully inspected, as there's currently no significant change in Q1 margins. It is crucial to monitor how each dollar invested in go-to-market initiatives impacts our overall financial state.

We are focusing on strategic areas such as SASE and AI while moving budgets away from less critical investments. In terms of operating margins, we do not expect any significant changes in the near term as we look to accelerate top-line growth.

All right. Next question comes from Keith Bachmann, followed by Shaul Eyal.

Thank you, team. Can we get an update on Perimeter 81, your SASE solution? I want to break this down into a few parts. As you think about the year ahead, how do you see enhancements developing within the solution? You mentioned CPX, but could you elaborate on your go-to-market strategies? Also, what will success look like for you at the end of the year, and how can you quantify this with metrics related to ARR or customer pools?

Thank you. I believe that we are focused on enterprise customers, particularly challenging multi-cloud and geographically varied environments. Our advantage is in providing an extensive and flexible solution that doesn’t compromise on usability or security. Most incumbents in the market have cloud-only SASE strategies, which can present limitations, but our hybrid approach leverages both cloud and on-prem solutions. Regarding the go-to-market side, we are actively engaging and showcasing the hybrid architecture in existing large enterprises, aiming for strong uptake and satisfaction. As for success metrics, we are keen on positive user feedback and demonstrated improvement in user experience alongside measuring SASE as part of our Infinity platform, rather than in isolation. This journey is still in its early days, but so far, the response is encouraging.

Next up is Shaul Eyal, followed by Shrenik Kothari.

Thank you. Nadav, following your announcement with Wiz, we’ve received investor questions about whether Check Point is stepping back from CNAPP or reinforcing its commitment in that area. Can you clarify this? Roei, can you provide insights into the mix of new logos versus existing customers this quarter? Thank you.

To clarify, we are indeed doubling down on cloud security and using partnerships for observability and CNAPP while redirecting our internal resources toward SASE. We're transparent with our partners and customers regarding our transition to using Wiz, aligning this with our open platform philosophy.

Regarding our revenues, the majority has come from refreshing existing customers. However, new businesses from new logos are also on the rise, particularly from our appliances. The launch of new product families last year has increased the attractiveness of our offerings in the market.

One more point on new customers: the newly formed workforce division will help us attract new logos by addressing different buyer personas within enterprises.

Next up is Shrenik Kothari, followed by Andrew Nowinski from Wells Fargo.

Great. Can you all hear me? I want to address tariffs and global macro uncertainty regarding your Taiwan-based supply chain. To what extent has your relative tariff insulation or non-U.S.-based status been able to facilitate winning business from hardware-heavy competitors in Europe and Canada? Have you observed any uptick in your win rates in these dynamics? Additionally, Roei, I’d like to clarify your previous comments about tariff impact; could the sub-50 basis points exposure improve if conditions change?

Yes, the previously stated half a point effect stems from a potential 32% tariff, which is currently not in effect, but is the worst-case projection if imposed.

From my perspective, it's early days, and uncertainty is such that I'm not counting on an advantage over our peers at this point. However, I do believe that our prevention-first approach centered around security will resonate well, allowing us to gain market share.

Next is Andrew Nowinski, followed by Tal Liani of BofA.

Good morning. Nadav, your background gives you insight into cyber-attacks. Have you been able to leverage this experience with CISOs to drive new logo growth, given that it has historically been a challenge? Also, can you clarify the maintenance decline this quarter? Was it a lagging impact?

Yes, the decline in maintenance is lagging. We expect it to rebound in the second half of the year as we continue to see growth from the refresh cycle.

Indeed, my extensive background allows me to engage deeply with leaders across the enterprise landscape. Cybersecurity is a learning competition between offense and defense, and I leverage this experience to communicate effectively with CISOs. The aim is to guide them in navigating current vulnerabilities in an increasingly AI-driven world, which I find fulfills our commitment to supporting our customers.

Next is Tal Liani, followed by Patrick Colville.

Nadav, the stock price increased following your appointment, and we look for growth beyond 6-7%. We seek sustainable growth above 10%. How long will it take to achieve this level, and what is required to justify stock price upside? While I recognize that a refresh cycle will support growth temporarily, the overall portfolio needs to grow substantially to achieve sustained 10% growth. How do you plan to approach this?

I agree. New workforce division led by Gil Friedrich aims to contribute towards sustainable double-digit growth. While I don’t expect transformation overnight, there are clear paths to reach this goal, one of which involves refocusing on go-to-market strategies. Despite having great products, it's surprising how little our brand is known. We need to be more vocal and attentive to market needs. Strategic acquisitions to close capability gaps also manifest among considerations for growth.

Thank you. Next is Patrick Colville, followed by Jonathan Ho of William Blair.

Thank you for taking my question. I would like to refocus on the demand environment. Your prepared remarks indicated no macroeconomic impact. When did this current sentiment manifest? Are you referring to trends post-close of the quarter, including the last few weeks? I also remember that about five years ago, Check Point pulled fiscal year guidance. Was there a point where you considered doing this again? What factors influenced this decision?

Yes, those comments reflect our current observations and are based on today’s environment, not just what we experienced last quarter. Post the operating trends following Liberation Day and customer conversations show that, as of today, we have no observed changes in security demand. We have established a good building pipeline for our Quantum Force appliances for Q2 and beyond. We cautiously provide guidance while acknowledging potential changes from the broader macro environment.

Next is Jonathan Ho, followed by Brad Zelnick.

Good morning. Nadav, can you elaborate on the messaging around the hybrid mesh firewall and provide details on how it is resonating with customers? How do you envision changing the narrative around Check Point over time?

Certainly. The debates about operational environments are over; the future is hybrid. We understand that hyper-connectivity and the complexity of AI-driven threats will require robust security. Our hybrid mesh approach acknowledges this reality, and our platform aims to seamlessly weave together flexibility, user experience, and security benefits. This unified management brings security processes under one roof, optimizing costs as well. So far, we see encouraging resonance, but we understand it’s a journey that requires ongoing education and marketing to articulate our vision better.

All right. Next up is Brad Zelnick, followed by Saket Kalia.

Thank you, Kip. Nadav, Check Point is in a stronger position than we've seen in years. Everyone is enthusiastic, and it seems you’re poised for significant growth. Following 100 days in your role, how are you considering corporate development opportunities? What criteria do you apply when reviewing potential deals?

The criteria we use are straightforward; they align with our North Star strategy. Acquisitions should fit within this framework. It's not a broad scope, but focused primarily on areas like SASE, AI, and unified management. CEO Alan is in constant communication with me, tracking potential interests that may accelerate our roadmap or fulfill capability gaps. We're always open to exploring innovative solutions.

Next is Saket Kalia, followed by Roger Boyd.

Hey, thanks, guys. Nadav, back to the SASE discussion. How do you view the growing sub-segments in this market? You have established SASE vendors alongside other players providing varied solutions. How does Check Point plan to position itself in the SASE landscape moving forward?

Great question. We are focusing on enterprise customers facing complex operational environments. Our hybrid mesh approach allows us to meet their diverse needs, providing a balance of security and usability. Many incumbents offer cloud-only SASE solutions, but we see an advantage in combining both cloud and on-prem approaches. However, we're aware that our feature set is still maturing, and we will focus on completing this through internal developments and acquisitions, as this market is evolving rapidly.

Next up is Roger Boyd of UBS.

Awesome. Thanks, Kip. I’d like to revisit the macro assumptions and the potential for deal delays in Q2. Your revenue and EPS guidance look solid, but could you offer any forecast for billings or RPO in Q2 or any perspective on first-half versus second-half seasonality, especially after mentioning large deals from a year ago?

We’re not providing specific guidance on billings or RPO. However, we did have beneficial circumstances last year with three significant deals that provided quite an uplift. As it stands, billings should align closely with revenue growth, reflecting the positive outlook we see now. I want to reiterate that we don't currently see any shifts in demand from the macro environment based on our discussions with our sales leaders. As a result, we are cautiously optimistic about what the next quarter will bring.

Thank you all for joining us today, and we look forward to seeing you throughout the quarter. Have a great day. Bye for now.

Thanks.