Check Point Software Technologies Ltd. reports 3.5% revenue growth in FY2020 and 0.86 pp EBITDA Margin decline from 46.0% to 45.1%
02/03/2021 • About Check Point Software Technologies Ltd. (
$CHKP) • By InTwits
Check Point Software Technologies Ltd. reported FY2020 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 1.2%. At the same time it's a lot of higher than industry average of 3.7%.
- CAPEX is quite volatile: $44m in 2020, $54m in 2019, $153m in 2018, $78m in 2017, $53m in 2016
- The company has highly profitable business model: ROIC is 25.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Check Point Software Technologies Ltd.'s Revenue increased on 3.5%. Revenue growth showed acceleration in FY20Q4 - it increased 3.7% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.5 pp from 10.4% to 11.9% in 2020. EBITDA Margin followed a declining trend at -1.4 pp per annum in FY2016-FY2020.
Gross Margin showed almost no change in FY2020. During the last 5 years Gross Margin topped in FY2018 at 89.6% and was declining since that time. SG&A as a % of Revenue showed almost no change in FY2020. SG&A as a % of Revenue stuck to a growing trend at 1.2 pp per annum in the last 5 years.
Net Income margin showed almost no change in FY2020. During the last 5 years Net Income margin topped in FY2017 at 43.3% and was declining since that time.
Investments (CAPEX, working capital and M&A)
Check Point Software Technologies Ltd.'s CAPEX/Revenue was 0.93% in FY2020. CAPEX/Revenue decreased slightly on 0.62 pp from 1.6% in FY2017 to 0.93% in FY2020. For the last three years the average CAPEX/Revenue was 1.0%.
Return on investment
The company operates at high and attractive ROIC (25.6%) and ROE (24.1%). ROIC increased slightly on 1.4 pp from 24.2% to 25.6% in FY2020. ROE increased slightly on 1.6 pp from 22.5% to 24.1% in FY2020. ROE grew at 0.67 pp per annum in the last 5 years.
Leverage (Debt)
The company paid down all the debt in FY2020. Cash decreased on 8.4%.
Valuation and dividends
Check Point Software Technologies Ltd.'s trades at EV/EBITDA 17.2x and P/E 19.2x.
Management team
The company's CEO is Gil Shwed. Gil Shwed has 27 years tenure with the company. Tal Payne is a Check Point Software Technologies Ltd.'s CFO. Tal Payne has spent 6 years at the company.
Financial and operational results
Check Point Software Technologies Ltd. ($CHKP) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,741 | 1,855 | 1,916 | 1,995 | 2,065 | 3.5% |
| Gross Profit | 1,541 | 1,644 | 1,718 | 1,785 | 1,845 | 3.4% |
| SG&A | 509 | 525 | 590 | 658 | 681 | 3.5% |
| EBITDA | 867 | 941 | 935 | 917 | 931 | 1.6% |
| EBIT | 852 | 924 | 914 | | | |
| Tax | 172 | 168 | 158 | | | |
| Net Income | 725 | 803 | 821 | 826 | 847 | 2.5% |
| Stock Based Compensation | 65 | 87 | 89 | | | |
Balance Sheet
|
|---|
| Cash | 187 | 245 | 304 | 279 | 256 | -8.4% |
| Accounts Receivable | 479 | 472 | 495 | | | |
| Accounts Payable | 20 | 12 | 21 | | | |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 29 | 0 | -100.0% |
Cash flow
|
|---|
| Capex | 24 | 29 | 17 | 26 | 19 | -25.5% |
Ratios
|
|---|
| Revenue growth | 6.8% | 6.5% | 3.3% | 4.1% | 3.5% | |
| EBITDA growth | 1.6% | 8.5% | -0.6% | -1.9% | 1.6% | |
|
|---|
| Gross Margin | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% | -0.1% |
| EBITDA Margin | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% | -0.9% |
| EBIT Margin | 48.9% | 49.8% | 47.7% | | |
| SG&A, % of revenue | 29.2% | 28.3% | 30.8% | 33.0% | 33.0% | -0.0% |
| SBC, % of revenue | 3.8% | 4.7% | 4.7% | | |
| Net Income Margin | 41.6% | 43.3% | 42.9% | 41.4% | 41.0% | -0.4% |
| CAPEX, % of revenue | 1.4% | 1.6% | 0.9% | 1.3% | 0.9% | -0.4% |
|
|---|
| ROIC | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% | 1.4% |
| ROE | 20.6% | 22.6% | 22.3% | 22.5% | 24.1% | 1.6% |
| Net Debt/EBITDA | -0.2x | -0.3x | -0.3x | -0.3x | -0.3x | -0.0x |
People
|
|---|
| Insider ownership | 20.5% | 20.5% | 20.5% | | | |
| Employees | 1,842 | 2,064 | 5,070 | | | |
| Revenue/Employee, th. $ | 945 | 899 | 378 | | | |
Check Point Software Technologies Ltd. ($CHKP) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 487 | 506 | 509 | 564 | | 3.1% | 3.6% | 3.7% | 3.7% |
| EBITDA | 207 | 227 | 238 | 259 | | -2.0% | 4.3% | 8.2% | 1.0% |
| Net Income | 179 | 196 | 201 | 271 | | -0.7% | 5.9% | 6.8% | -0.6% |
Balance Sheet
|
|---|
| Cash | 407 | 342 | 248 | 256 | | 31.7% | 37.3% | -17.9% | -8.4% |
| Short Term Debt | 0 | 0 | 0 | 0 | | - | - | - | - |
| Long Term Debt | 0 | 0 | 0 | 0 | | - | - | - | -100.0% |
Ratios
|
|---|
| Gross Margin | 89.6% | 89.6% | 89.8% | 88.5% | | -0.3% | 0.0% | 0.2% | -0.4% |
| EBITDA Margin | 42.6% | 45.0% | 46.8% | 45.9% | | -2.2% | 0.3% | 2.0% | -1.2% |
| Net Income Margin | 36.7% | 38.8% | 39.4% | 48.0% | | -1.4% | 0.8% | 1.2% | -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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | - | 56.5% | 51.3% | 59.2% | 42.4% |
| ServiceNow, Inc. ($NOW) | - | 38.0% | 36.0% | 32.6% | 30.6% |
| SailPoint Technologies Holdings, Inc. ($SAIL) | - | 40.5% | 33.8% | 15.9% | 26.6% |
| Rapid7, Inc. ($RPD) | - | 27.6% | 21.5% | 33.9% | 25.9% |
| Tenable Holdings, Inc. ($TENB) | - | 50.9% | 42.4% | 32.6% | 24.2% |
| |
|---|
| Median (23 companies) | 12.9% | 16.6% | 20.4% | 19.4% | 15.1% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | - | 6.5% | 3.3% | 4.1% | 3.5% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Progress Software Corporation ($PRGS) | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% |
| Varonis Systems, Inc. ($VRNS) | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% |
| Vmware, Inc. ($VMW) | 85.2% | - | 85.5% | 83.9% | 83.4% |
| Tenable Holdings, Inc. ($TENB) | 88.6% | 86.4% | 83.9% | 82.8% | 82.4% |
| CyberArk Software Ltd. ($CYBR) | 86.1% | 84.0% | 85.9% | 85.6% | 82.2% |
| |
|---|
| Median (23 companies) | 73.1% | 73.9% | 73.5% | 75.4% | 76.5% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Qualys, Inc. ($QLYS) | 23.8% | 25.1% | 28.4% | 36.5% | 40.3% |
| SolarWinds Corporation ($SWI) | -8.0% | 44.0% | 44.8% | 44.7% | 39.8% |
| Progress Software Corporation ($PRGS) | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% |
| Fortinet, Inc. ($FTNT) | 7.2% | 11.1% | 15.9% | 19.8% | 23.9% |
| Vmware, Inc. ($VMW) | 25.2% | - | 28.8% | 26.3% | 22.9% |
| |
|---|
| Median (23 companies) | -9.8% | -5.4% | -4.7% | -1.4% | -1.1% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% |
| ServiceNow, Inc. ($NOW) | 7.6% | 7.8% | 8.6% | 7.7% | 9.3% |
| Qualys, Inc. ($QLYS) | 11.7% | 16.4% | 8.2% | 8.6% | 8.3% |
| Zuora, Inc. ($ZUO) | 3.4% | 3.3% | 2.8% | 5.7% | 7.8% |
| Proofpoint, Inc. ($PFPT) | 9.2% | 9.0% | 4.1% | 4.0% | 6.9% |
| |
|---|
| Median (23 companies) | 2.1% | 2.4% | 2.6% | 3.8% | 3.4% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 1.4% | 1.6% | 0.9% | 1.3% | 0.9% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Fortinet, Inc. ($FTNT) | 5.3% | 15.0% | 28.0% | 29.0% | 46.3% |
| Qualys, Inc. ($QLYS) | 13.7% | 12.3% | 14.3% | 18.7% | 22.0% |
| Vmware, Inc. ($VMW) | 15.9% | - | - | 18.1% | 19.6% |
| Progress Software Corporation ($PRGS) | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% |
| A10 Networks, Inc. ($ATEN) | -24.4% | -11.3% | -27.2% | -13.0% | 13.0% |
| |
|---|
| Median (23 companies) | -4.3% | -4.7% | -1.9% | -6.4% | -6.4% |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SolarWinds Corporation ($SWI) | - | 6.2x | 4.1x | 4.4x | 4.1x |
| Proofpoint, Inc. ($PFPT) | - | - | - | -27.4x | 2.5x |
| Progress Software Corporation ($PRGS) | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x |
| Vmware, Inc. ($VMW) | -0.7x | - | -0.8x | 0.3x | 1.5x |
| CyberArk Software Ltd. ($CYBR) | -4.1x | -5.7x | -4.5x | -3.6x | 0.9x |
| |
|---|
| Median (11 companies) | -1.5x | -0.8x | -0.5x | -0.3x | 0.9x |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | -0.2x | -0.3x | -0.3x | -0.3x | -0.3x |
