Check Point CEO: ‘We Think That Our Business Can Grow Faster’

‘We have the highest profit margin in the industry. And we decided to take the money and make the right investment in growing further and changing the mode of operation into high-growth,’ says CEO Gil Shwed.

Check Point Software Technologies plans to implement a new organizational structure for its cloud security, email security and managed detection and response (MDR) businesses to accelerate growth.

The San Carlos, Calif.-based platform security vendor said these technology-focused “rockets” will be coupled with a 25 percent increase in the company’s sales force to capitalize on high-growth markets. Each rocket will have dedicated developers, sales personnel and marketing personnel working closely with one another to deliver a faster return on investment, according to founder and CEO Gil Shwed.

“We have the highest profit margin in the industry,” Shwed told investors Thursday. “And we decided take the money and make the right investment in growing further and changing the mode of operation into high growth.”

[Related: Check Point Acquires Developer Security Startup Spectral]

Each of the rockets is at a different level of maturity, Shwed said. Check Point’s CloudGuard business already has hundreds of employees and more than $100 million in annual revenue and will build upon five cloud security acquisitions the company has made over the past three years, according to Shwed.

Harmony Email is an emerging market with tens of millions of dollars of sales each year, and the practice will be largely centered around the company’s $234 million acquisition of email security startup Avanan in August. MDR, meanwhile, is a new market for Check Point with just a few employees and no revenue where the company wants to apply its prevention-centric approach and thwart irregularities earlier.

“This is automatically managing the customer asset so we detect things that are not working and immediately prevent the attacks,” Shwed said. “I think we can create a new industry or take on a new industry that we hadn’t been playing in before.”

The rockets represent a major organizational shift for Check Point, which historically has had its sales, marketing, and research and development organizations residing in just a single place, Shwed said. The rockets are intended to provide better resource alignment and give the company more agility and focus on technologies that are strategic and offer a high potential for growth, according to Shwed.

“We think that our business can grow faster,” Shwed said. “It’s not going to be easy. It will take time for all the initiatives to show results, but we are more optimistic than ever about what we think we can deliver here.”

Check Point’s revenue jumped to $599.1 million in the quarter ended Dec. 31, up 6.3 percent from $563.8 million the year prior. That beat Seeking Alpha’s earnings estimate of $586.4 million.

The company’s net income dipped to $259.7 million, or $1.98 per diluted share, down 4 percent from $270.8 million, or $1.95 per diluted share, the year prior. On a non-GAAP basis, net income fell to $294 million, or $2.25 per diluted share, down 2.3 percent from $301 million, or $2.17 per diluted share, last year. That crushed Seeking Alpha’s non-GAAP earnings estimate of $2.15 per share.

Check Point’s stock is up $5.10 (4.12 percent) to $128.77 in trading Thursday morning. That’s the highest the company’s stock has traded since Jan. 22, 2021.

On a full-year basis, Check Point’s sales surged to $2.17 billion, up 5 percent from $2.06 billion a year earlier. Net income slumped to $815.6 million, or $6.08 per diluted share, down 3.7 percent from $846.6 million, or $5.96 per diluted share, last year.

In the fourth quarter, Check Point’s software updates and maintenance revenue inched ahead to $228.6 million, up 2.2 percent from $223.7 million last year. The company’s security subscriptions revenue surged to $204.1 million, up 13.7 percent from $179.5 million the year prior. And Check Point’s products and licenses revenue climbed to $166.4 million, up 3.6 percent from $160.6 million last year.

The Americas accounted for 40 percent of Check Point’s revenue in the fourth quarter, down from 43 percent a year earlier, said CFO and COO Tal Payne. Bookings were up in the Americas, according to Payne.

For the quarter ending March 31, Shwed said Check Point expects non-GAAP net income of $1.48 to $1.58 per share on earnings of between $517 million and $547 million.