Original Source: FD (FAIR DISCLOSURE) WIRE
. Gregg Moskowitz, Susquehanna Financial Group, Analyst . Sarah Friar, Goldman Sachs, Analyst . Steve Mahedy, Banc of America, Analyst . Dino Diana, UBS, Analyst . Zenobia Austin, Morgan Keegan, Analyst
. Erik Suppiger, Pacific Growth, Analyst . Todd Raker, Deutsche Bank, Analyst . Katherine Egbert, Jefferies, Analyst . Ann Marie McCauley, Check Point Software Technologies, Director IR . Eyal Desheh, Check Point Software Technologies, EVP & CFO . Jerry Ungerman, Check Point Software Technologies, Vice Chairman . Gil Shwed, Check Point Software Technologies, Chairman & CEO
CHKP reported 1Q06 revenues of $134m, GAAP net income of $62m, and non-GAAP net income, excluding acquisition-related and equity-based compensation charges, of $75m. 1Q06 GAAP diluted EPS was $0.25. 2Q06 revenues are expected to be in the range of $137-145m, GAAP EPS in the range of $0.25-0.28, and non-GAAP EPS, excluding the effects of stock-based compensation and acquisition-related charges, to be in the range of $0.31-0.34.
A. Key Data From Call 1. 1Q06 revenues = $134m. 2. 1Q06 GAAP net income = $62m. 3. 1Q06 non-GAAP net income, excluding acquisition-related and equity-based compensation charges = $75m. 4. 1Q06 GAAP diluted EPS = $0.25. 5. 1Q06 non-GAAP EPS, excluding acquisition-related and equity-based compensation charges = $0.31. 6. 1Q06 operating margin = 56%. 7. 1Q06 OpEx = $72.9m. 8. 1Q06 DSO = 61 days. 9. Cash and investment balance at the end of 1Q06 = almost $1.8b. 10. Stock repurchases during 1Q06 = approx. 3m shares for a total cost of $64m. 11. 2Q06 expected revenues = $137-145m. 12. 2Q06 expected GAAP EPS = $0.25-0.28. 13. 2Q06 expected non-GAAP EPS, excluding the effects of stock-based compensation and acquisition-related charges = $0.31-0.34.
S1. 1Q06 Financial Review (E.D.) 1. Highlights: 1. 1Q06 results were in line with the Co.'s preliminary results. 2. The Co. was encouraged by the strength of its subscription business driven by customer loyalty, the success of its SmartDefense program, and the resulting strong operating cash flow and increase in deferred revenues. 3. In 1Q06, the Co. included for the first time the impact of FAS 123(R) in its GAAP financial results. 2. 1Q06 Results: 1. Revenues were $134m vs. $138m in 1Q05. 2. GAAP net income was $62m vs. $74m in 1Q05. 1. Equity-based compensation accounted for $11.1m. 2. This expense does not appear in the parallel qtr. 3. Non-GAAP net income, excluding acquisition-related and equity-based compensation charges, was $75m vs. $76m in 1Q05. 4. GAAP diluted EPS was $0.25 vs. $0.29 in 1Q05. 1. The impact of equity-based compensation expenses was approx. $0.05.
5. Non-GAAP EPS, excluding acquisition-related and equity-based
compensation charges, was $0.31, up 3% vs. $0.30 in 1Q05.
6. Deferred revenue was $179m, up $10m or 6% over 4Q05 and up 19%
over 1Q05. 1. This was the result of many annuity-based deals for subscription support and consumer products, which are expected to impact the Co.'s revenues in the coming quarters. 7. OpEx was $72.9m vs. $61.3m in 1Q05. 1. The difference was attributable mostly to equity-based compensation expenses, which are included for the first time this qtr. as a result of adopting SFAS 123(R). 2. Excluding equity-based compensation and acquisition-related
charges, OpEx was $58.8m, similar to 1Q05. 8. Total operating income, excluding acquisition-related charges, was $75m vs. $79m in 1Q05. 9. Operating margins were 56% vs. 57% in 1Q05.
10. Effective non-GAAP income tax rate was stable at 17%. 11. Cash collection and cash flow continued to be strong. 12. DSO was 61 days vs. 63 days in 1Q05, as the qtr. was back-end loaded.
13. The Co. generated strong cash flow from operating activities
of $112m. 14. Total cash flow without share buyback was $130m, a 26% increase over 1Q05. 15. Cash and investment balance at the end of 1Q06 was almost $1.8b. 16. During 1Q06, CHKP purchased approx. 3m shares for a total cost of $64m as part of its share repurchase program. 17. Revenues By Geography:
1. Americas contributed 47% of revenues. 2. EMEA contributed 41%. 3. Asia-Pacific and Japan region contributed 12% of revenues.
18. In 1Q06, large orders, which were greater than $50,000,
accounted for roughly 26% of total orders. 19. The Co. continued to grow its installed base bringing the total to over '480,000' security gateways. 3. Summary: 1. While revenues did not meet the Co.'s original expectation, it did see encouraging trends and results. 1. Good business in America, some growth in Asia, $10m increase in deferred revenues, and the largest cash flow in the Co.'s history.
S2. 1Q06 Business Review (J.U.) 1. Highlights: 1. During 1Q06, CHKP introduced new products and technologies across the various security segments it addresses to its expanding portfolio of security solutions. 2. The Co. enhanced Connectra, its …