Check Point Software Technologies Ltd. Q1 FY2025 earnings call

• Nadav Zafrir completed his first 100 days as CEO, exceeding his target of meeting over 100 customers, partners, etc. - Focus on providing the leading platform for hybrid mesh architecture, well-received by partners and customers. - CPX user conferences held globally in February, re-energizing the strategy. - Partnership with Wiz to enhance cloud security, repurposing resources to core areas like SASE. - Jonathan Zanger joining as new CTO, bringing AI and cyber expertise. - Newly formed division led by Gil Friedrich to focus on workforce security, aiming to cross $200 million ARR within a year. - Focus on SASE and AI, with efforts to improve unified policy across hybrid mesh networks and leverage AI for security.

In the first quarter of 2025, Check Point's revenues grew by 7% to $638 million, with $4 million above the midpoint of projections. Product and license revenues grew 14% year-over-year, driven by strong demand for Quantum Force appliances. Infinity revenues had double-digit growth year-over-year and exceeded 15% of total revenues. Regional revenue distribution: 45% from EMEA (5% growth YOY), 42% from America (6% growth YOY), and 13% from Asia-Pacific (12% growth YOY). Gross profit grew by 5% to $564 million, with a 88% gross margin. Operating expenses increased by 7% to $305 million, mainly due to the acquisition of Cyberint and workforce investment.

• Q2 revenues expected to be $642 to $682 million (2% to 9% YOY growth). - Non-GAAP EPS expected to be $2.32 to $2.42 (7% to 12% YOY growth). - FY 2025 guidance unchanged. - Mention of last year's second quarter benefit of ~2 points from upfront deals, which will impact this year's modeling.

• Macro-economic uncertainties, including tariffs, which could potentially affect sales cycles and project cancellations. - Offense side uptick with sophisticated AI capabilities, which may impact cyber budgets and security spending dynamics.

Q: Robbie Owens asked about customer conversations and tariffs, seeking color on customer sentiment and sales cycles.

A: Roei Golan stated no effect seen from macroeconomy as of today, but pipeline for Quantum Force appliances in Q2 looks good, though macro volatility could affect deals. Nadav Zafrir added no significant changes seen in customer sentiment but noted offense side may see uptick.

Q: Joseph Gallo inquired about product runway and tariffs.

A: Roei Golan said max tariff exposure to margin is less than half a point, and product revenue growth from refresh of existing installed base is accelerating with potential for further refresh opportunities.

Q: Brian Essex asked about incentives and initiatives for management to reaccelerate growth.

A: Nadav Zafrir mentioned focus on urgency, compensation tied to ARR, and setting ambitious, achievable targets for all employees.

Q: Unidentified Analyst questioned margin and growth balance.

A: Nadav Zafrir said strategy is to gradually improve growth responsibly, with flexibility in margin but careful consideration of investment impact. Roei Golan added focus on reallocating budgets to strategic areas like SaaS and AI.

Q: Keith Bachman asked about Perimeter 81 SASE solution.

A: Nadav Zafrir discussed focus on product features, go-to-market showcasing, and success metrics tied to large enterprise adoption and Infinity platform integration. Roei Golan noted product revenue growth from new logos and existing customers.

Q: Shaul Eyal asked about Check Point's stance on CNAPP and logo mix.

A: Nadav Zafrir clarified doubling down on cloud with partnerships and repurposing resources, while Roei Golan mentioned majority product revenue from existing customers but growth from new logos in appliances.

Q: Shrenik Kothari asked about tariff insulation and win rates.

A: Roei Golan clarified tariff impact, and Nadav Zafrir expressed optimism in Check Point's prevention-first approach resonating despite volatility.

Q: Andrew Nowinski asked about leveraging background for new logo growth and maintenance lag.

A: Nadav Zafrir discussed leveraging 30 years of experience and data, while Roei Golan noted maintenance lag expected to pick up in H2.

Q: Tal Liani asked about reaching 10% growth.

A: Nadav Zafrir mentioned newly formed workforce division as a vector, emphasizing sustainable growth and reinvigorated messaging.

Q: Patrick Colville asked about macro comments timing and guidance change.

A: Roei Golan stated comments based on current demand, no change to full-year guidance as of today, but caution due to macro volatility.

Q: Jonathan Ho asked about messaging around hybrid mesh firewall.

A: Nadav Zafrir explained hybrid mesh architecture as the reality, focusing on security, user experience, and cost optimization, needing marketing investment to showcase.

Q: Brad Zelnick asked about corporate development criteria.

A: Nadav Zafrir said acquisitions focus on strategy areas like SASE, AI, and unified management, with appetite for relevant opportunities.

Q: Saket Kalia asked about Check Point's SASE position in the market.

A: Nadav Zafrir discussed focus on complex enterprise customers, hybrid approach's advantage over cloud-only SASE, and need to mature features.

Q: Roger Boyd asked about macro assumptions and billings.

A: Roei Golan said no billing/RPO guidance, but pipeline for Quantum Force appliances strong in Q2 and H2, expecting acceleration in H2 despite macro uncertainties.