Did Check Point profit from WFH in Q2?

Today, Check Point released its Q2 results and presented solid financial trends.

Highlights of results for Q2 were

  • Total Revenue: $506 mn compared to $488 mn in Q 2019
    • a +3.7% increase year over year.
    • the security subscriptions segemnt grew at 10% yoy
  • GAAP Operating Income: $221 mncompared to $213 mnin the second quarter of 2019, representing 44 percent of revenue in Q2 of 2020 and 2019.
    • Update: Higher margins (and cashflow) resulted primarily from lower expenses, mostly driven by reduced travel expenses
  • GAAP Net Income: $196 mn up from $186 mn in Q2 2019.
  • Non-GAAP Net Income: $225 mn up from $211 mn in Q2 2019.
  • GAAP Earnings per Diluted share: $1.38 compared to $1.21 in the second quarter of 2019, a 14 percent increase year over year.
  • Deferred Revenues: As of June 30, 2020, deferred revenues were $1,338 million compared to $1,286 million as of June 30, 2019, a 4 percent increase year over year.
    • Indicating stronger underlying long-term revenue growth
  • Cash equivalents stay at high level with $3,959 mn as of June 30, 2020 ($4,110 mn as of June 30, 2019).
  • Cash Flow: Cash flow from operations of $252 million compared to $233 million in the second quarter of 2019, an 8 percent increase year over year.

Share buybacks proceeded during the second quarter of 2020: The company repurchased approximately 3.1 million shares at a total cost of approx. $325 mn. Buying back an annualized 12m shares would reduce total shares outstanding (140m) by ~8.5%. Though, current share prices are a bit higher now, so that these numbers can be expected to be somewhat lower.

To answer the above question: Yes, Check Point did profit from developments in Q2 with higher demand for cyber security produts and services. I believe this trend to continue.

The COVID-19 pandemic has accelerated organizations’ rapid migration to the cloud.

I do not update my last Check Point valuation from February and keep my fair value per share estimate of $ 213.

I own shares of the discussed company. Pleas read the disclaimer.

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