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Check Point Delivers With In-Line Expectations

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By on Technology & Software

For the April quarter, Check Point delivered revenue of $342.2 million, in line with expectations, and slightly exceeded consensus for pro forma earnings per share by $0.01 at $0.84. However, the biggest factor on quarterly commentary involved management’s more conservative outlook in the near term; it guided to a wider range of top- and bottom-line figures than it typically would for the June quarter.

Bookings for the March quarter were below our expectations, at $330.4 million (versus our projection of $336.2 million), also justifying increased caution. Much of the strength for the quarter was attributed to the company’s software blades, which grew 25.9% year-over-year. Uncertainty in the broader macroeconomic environment led Check Point to provide a wider-than-typical range for its second-quarter guidance—$340 million to $375 million. However, the company maintained its full-year guidance; thus, management now expects a stronger second half of the year, similar to 2013.

The company experienced strength in its recently refreshed low-end and high-end product lines, as well as high interest in its next-generation threat prevention suite of blades. The Asia-Pacific region was affected by currency headwinds and macro headwinds, which led to disappointing results. Europe also showed some softness due to macro factors, according to management. However, this effect was largely offset by the performance in North America, which grew by 20%. The company spent $183 million to buy back 2.8 million shares during the quarter.

While we are encouraged by the 10% growth in combined product and subscription revenue, the company posted some persistent weakness in both Europe and Asia, which increases uncertainty regarding outlook for the second quarter. We believe Check Point continues to have significant opportunities in terms of software blade growth, which should sustain mid- to upper-single-digit revenue growth over the long term.

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