How did the Corona Virus affect Check Point Software Technologies in Q1 2020?

CHKP today announced its financial results for the first quarter ended March 31, 2020. A solid performance, without major surprises, despite corona. I like!

Q1 Financial Highlights

• Total Revenues: $486 million compared to $472 million in the first quarter of 2019, a 3 percent increase year over year. Revenues were above the midpoint of our guidance.
• GAAP Operating Income: $201 million compared to $206 million in the first quarter of 2019, representing 41 percent and 44 percent of revenues in the first quarter of 2020 and 2019, respectively.
• Non-GAAP Operating Income: $231 million compared to $235 million in the first quarter of 2019, representing 48 percent and 50 percent of revenues in the first quarter of 2020 and 2019, respectively.
• GAAP Taxes on Income: $41 million compared to $45 million in the first quarter of 2019.
• GAAP Net Income and Earnings per Diluted Share: GAAP net income was $179 million compared to $180 million in the first quarter of 2019. GAAP earnings per diluted share were $1.23 compared to $1.15 in the first quarter of 2019.
• Non-GAAP Net Income and Earnings per Diluted Share: Non-GAAP net income was $206 million compared to $205 million in the first quarter of 2019. Non-GAAP earnings per diluted share were $1.42 compared to $1.32 in the first quarter of 2019, a 7 percent increase year over year.
• Deferred Revenues: As of March 31, 2020, deferred revenues were $1,349 million compared to $1,312 million as of March 31, 2019, a 3 percent increase year over year.
• Cash Balances, Marketable Securities and Short Term Deposits: $3,990 million as of March 31, 2020, compared to $3,949 million as of December 31, 2019.
• Cash Flow: Cash flow from operations of $359 million compared to $379 million in the first quarter of 2019. Year over year, currency-hedging transactions had a $20 million effect on our cash flow from operations with minimal impact on our financial income as intended. This quarter includes excess payments related to our currency hedging transactions in an amount of $12 million compared to $8 million of income in the first quarter of 2019.
• Share Repurchase Program: During the first quarter of 2020, the company repurchased approximately 3.0 million shares at a total cost of approximately $325 million.

Q1 results are well within my expectations and mostly better than the mid-points of Check Points 2020 guidance. Corona crisis seems not to be a big issue for the companys operations, so far.

Impact of Corona Virus

Operations affected below average. Most employees can work from home (remotely), as should be expected. Before corona, sales activity was mostly in-person, but transitioning to online events was rather smooth. A few components were missing due to broken supply chains, closed factories or distribution centers.

Regional performance: It was a “very good quarter in the Americas” for Check Point. But it is worth to keep in mind, that the corona virus hit the Americas later than other regions in the world.

As companies adapted to the situation demand for Check Points VPN products surged, driving some additional business. Customer gave very positive feedback regarding products and end-user restaints.

There are many corona-related cyber attacks these days. Giving Check Point the opportunity to prove its product quality once more.

Meanwhile, Check Point further improved its products and services offerings.

Comments

• I do not know, why the average price during Q1 for share buy backs was $110, seems a bit high for me?
• With shares up +5% on Monday, market participants seem to like the results as well.

FYI: Check Point will release Q2 2020 results on July 24.