Check Point Software Technologies Ltd. reports 3.3% revenue growth in 2018 and 1.9 pp EBITDA Margin decline from 50.7% to 48.8%
01/30/2019 • About Check Point Software Technologies Ltd. (
$CHKP) • By InTwits
Check Point Software Technologies Ltd. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Check Point Software Technologies Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.1%. At the same time it's in pair with industry average of 7.4%
- CAPEX is quite volatile: $112m in FY2018, $163m in FY2017, $73m in FY2016, $34m in FY2015, $36m in FY2014
- The company has highly profitable business model: ROIC is 25.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 3.3%. Revenue growth showed acceleration in 18Q4 - it increased 3.9% YoY. During the last 5 years Revenue growth topped in 2015 at 9.0% and was decelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.9 pp from 50.7% to 48.8% in 2018. EBITDA Margin declined at -1.3 pp per annum in 2014-2018.
Gross Margin increased slightly on 1.0 pp from 88.6% to 89.6% in 2018. Gross Margin pursued a growing trend in the last 5 years. SG&A as a % of Revenue increased on 2.4 pp from 28.3% to 30.8% in 2018. SG&A as a % of Revenue followed a growing trend at 1.1 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue stuck to a growing trend at 0.37 pp per annum in the last 5 years.
Net Income margin showed almost no change in 2018. The efficient tax rate was 16.1% in 2018 while the average for the last five years was 18.8%.
Investments (CAPEX, working capital and M&A)
In 2018 Check Point Software Technologies Ltd. had CAPEX/Revenue of 0.89%. Check Point Software Technologies Ltd.'s CAPEX/Revenue showed almost no change from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 1.3%. During the last 5 years CAPEX as a % of Revenue topped in 2017 at 1.6%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Accounts payable as a % of Revenue increased on 4.7 pp from 5.8% to 10.5% in 2018.
Return on investment
The company operates at high and attractive ROIC (25.5%) and ROE (22.3%). ROIC decreased slightly on 1.3 pp from 26.8% to 25.5% in 2018. ROE showed almost no change in 2018. ROIC grew at 0.96 pp per annum in 2014-2018. ROE stuck to a growing trend at 1.2 pp per annum in 2014-2018.
Leverage (Debt)
The company has no debt. Cash jumped on 23.9%.
Valuation and dividends
Check Point Software Technologies Ltd.'s trades at EV/EBITDA 19.0x and P/E 22.0x.
Management team
The company's CEO Gil Shwed is a founder and has spent 3 years with the company. CEO total compensation was
$28,800 in 2018 which included
$15,600 salary. Check Point Software Technologies Ltd.'s CFO is Tal Payne. Tal Payne has 4 years tenure at the company.
At the end of financial year the company had 20.5% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 5,070 employees. The number of employees jumped on 146%. Average revenue per employee in 2018 was
$378,003 and it dropped on 57.9%.
Financial and operational results
FY ended 12/31/2018
Check Point Software Technologies Ltd. ($CHKP) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,496 | 1,630 | 1,741 | 1,855 | 1,916 | 3.3% |
| Gross Profit | 1,320 | 1,443 | 1,541 | 1,644 | 1,718 | 4.5% |
| SG&A | 385 | 452 | 509 | 525 | 590 | 12.3% |
| EBITDA | 812 | 854 | 867 | 941 | 935 | -0.6% |
| EBIT | 801 | 840 | 852 | 924 | 914 | -1.1% |
| Tax | 170 | 188 | 172 | 168 | 158 | -6.2% |
| Net Income | 660 | 686 | 725 | 803 | 821 | 2.3% |
| Stock Based Compensation | 52 | 57 | 65 | 87 | 89 | 2.1% |
Balance Sheet
|
|---|
| Cash | 262 | 192 | 187 | 245 | 304 | 23.9% |
| Accounts Receivable | 367 | 411 | 479 | 472 | 495 | 4.9% |
| Accounts Payable | 13 | 18 | 20 | 12 | 21 | 69.9% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 13 | 17 | 24 | 29 | 17 | -40.4% |
| Acquisitions | | 97 | | | | |
Ratios
|
|---|
| Revenue growth | 7.3% | 9.0% | 6.8% | 6.5% | 3.3% | |
| EBITDA growth | 5.2% | 5.1% | 1.6% | 8.5% | -0.6% | |
|
|---|
| Gross Margin | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% | 1.0% |
| EBITDA Margin | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% | -1.9% |
| EBIT Margin | 53.6% | 51.5% | 48.9% | 49.8% | 47.7% | -2.1% |
| SG&A, % of revenue | 25.7% | 27.7% | 29.2% | 28.3% | 30.8% | 2.4% |
| SBC, % of revenue | 3.4% | 3.5% | 3.8% | 4.7% | 4.7% | -0.1% |
| Net Income Margin | 44.1% | 42.1% | 41.6% | 43.3% | 42.9% | -0.4% |
| CAPEX, % of revenue | 0.9% | 1.1% | 1.4% | 1.6% | 0.9% | -0.7% |
|
|---|
| ROIC | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% | -1.3% |
| ROE | 18.2% | 19.1% | 20.6% | 22.6% | 22.3% | -0.4% |
| Net Debt/EBITDA | -0.3x | -0.2x | -0.2x | -0.3x | -0.3x | -0.1x |
People
|
|---|
| Insider ownership | 20.5% | 20.5% | 20.5% | 20.5% | 20.5% | 0.0% |
| Employees | 3,158 | 2,568 | 1,842 | 2,064 | 5,070 | 145.6% |
| Revenue/Employee, th. $ | 474 | 635 | 945 | 899 | 378 | -57.9% |
Check Point Software Technologies Ltd. ($CHKP) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 452 | 468 | 471 | 526 | | 3.9% | 2.0% | 3.6% | 3.9% |
| EBITDA | 218 | 229 | 231 | 256 | | 1.6% | 1.5% | 0.9% | -5.6% |
| Net Income | 187 | 198 | 198 | 238 | | 2.5% | 5.0% | 2.9% | -0.4% |
Balance Sheet
|
|---|
| Cash | 213 | 236 | 324 | 304 | | -7.5% | -15.3% | 24.3% | 23.9% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 90.3% | 89.7% | 89.7% | 88.9% | | 1.5% | 1.2% | 0.9% | 0.4% |
| EBITDA Margin | 48.3% | 49.0% | 49.1% | 48.7% | | -1.1% | -0.2% | -1.3% | -4.9% |
| Net Income Margin | 41.4% | 42.3% | 42.1% | 45.3% | | -0.5% | 1.2% | -0.3% | -2.0% |
Peers in Systems Software
Below we provide Check Point Software Technologies Ltd. benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 20.6% | 14.7% | 16.6% | 20.4% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | | 9.0% | 6.8% | 6.5% | 3.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| Dell Technologies Inc. ($DVMT) | | | | 87.6% | 87.5% |
| |
|---|
| Median (53 companies) | 76.1% | 74.5% | 73.1% | 73.9% | 73.5% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| Progress Software Corporation ($PRGS) | 28.9% | 14.9% | 2.4% | 28.6% | 32.9% |
| |
|---|
| Median (47 companies) | -2.4% | -6.6% | -9.8% | -5.4% | -4.7% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.9% | 2.2% | 2.1% | 2.4% | 2.6% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 0.9% | 1.1% | 1.4% | 1.6% | 0.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| GlobalSCAPE, Inc. ($GSB) | 21.9% | 27.0% | 18.9% | 8.5% | 19.9% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | -4.3% | -4.7% | -1.9% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (22 companies) | -2.7x | -1.5x | -1.5x | -0.8x | -0.5x |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | -0.3x | -0.2x | -0.2x | -0.3x | -0.3x |
