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Check Point Software Technologies Reports Fourth Quarter and Fiscal Year-End Financial Results

Check Point Software Technologies Reports Fourth Quarter and Fiscal Year-End Financial Results

Business Editors

REDWOOD CITY, Calif.–(BUSINESS WIRE)–Jan. 22, 2003

Check Point Software Technologies Ltd. (Nasdaq:CHKP), the worldwide leader in securing the Internet, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2002.

The fourth quarter of 2002 showed an upward trend in the business. Net income was $64.5 million or $0.26 per share (diluted), an increase of 4% over the third quarter of 2002. Revenues for the quarter were $110.3 million, a 6% increase over the third quarter. Deferred revenues increased by $4.6 million to a total of $99.2 million. During the fourth quarter, the company generated net cash flow of $74 million, an increase from $58 million in the third quarter, bringing total net cash flow for the year to $286 million. Total cash and interest bearing investments as of December 31, 2002 was $1.3 billion.

Net income for the year was $255 million or $1.00 per share (diluted). Revenues for the fiscal year ended December 31, 2002 were $427 million.

“Check Point finished the year with strong momentum in the fourth quarter,” said Gil Shwed, chairman and chief executive officer of Check Point Software Technologies. “We experienced strength in all geographical areas, markets and product lines. Enormous progress was made in 2002 as we continued to grow our market lead, introduced numerous industry firsts and technological breakthroughs, established new partnerships with industry leaders and most importantly, continued to satisfy our customers.”

Highlights for 2002 included:

— Technology Innovations

— Active Defense – introduced a new security category with

SmartDefense(TM). SmartDefense will serve as the first

comprehensive intelligence solution to combat cyber

attacks. Active Defense incorporates type-based attack

blocking, intelligent classification of security attacks

and real-time updates of security policy and handles both

known and unknown network attacks.

— Application Intelligence – extended Check Point’s patented

Stateful Inspection with the new Application Intelligence

technology that enables enforcement of corporate policy

and in-depth vulnerability protection for applications

such as Web Services (XML/SOAP), Peer-to-Peer

applications, Instant Messaging and DNS attacks.

— Wireless Infrastructure – FireWall-1 GX(TM) – introduced

the first solution to protect GPRS 2.5G and 3G wireless

infrastructures from the threats of untrusted networks.

— Virtualized Systems Security – VSX(TM) – introduced

multi-platform support for virtualized security system for

data centers, Internet carriers and enterprises’ virtual

LAN (VLAN) environments.

— SecurePlatform(TM) – expanded the choice of deployment

options for security services by enabling unparalleled

cost of ownership and price/performance for implementing

security services on open servers. Utilizes One-Click

technology to enable instant deployment.

— VPN-1(R) SecureClient(TM) – expanded the market leading

VPN client with integrated personal firewall with support

for the Pocket PC OS on handheld PDA devices.

— Market Leadership – During the year we expanded our market

leadership:

— Grew VPN/firewall market lead from 61% to 65% (IDC July,

2002, Enterprise firewall/VPN software).

— #1 Market Share for VPN/firewall appliances with 36% with

“Secured by Check Point” appliances (IDC November, 2002).

— Visionary and leader in both VPN and firewall reports in

the prestigious Magic Quadrant from Gartner Group

(September, 2002).

— Highest levels of government security certifications:

Common Criteria (EAL4), Federal Information Processing

Standard (FIPS 140-1) and IT Security Evaluation Criteria

(ITSEC).

— #1 Performance – Independent tests by Tolly Group showed

that Check Point solutions deliver 5x more performance at

a fraction of the cost of competing solutions.

— Industry Accolades – Check Point continued to lead the

market and win recognition within the industry, for

example:

— New SmartDefense Technology won “Hot Pick” spotlight

from Information Security Magazine.

— PC Magazine applauded Check Point VPN-1 SmallOffice as

extremely easy to deploy with the simplest and

best-designed interface.

— Forbes Magazine named Check Point the Best Performing

Internet Company and featured Check Point on the cover

of its March issue.

— PC Magazine gave Safe@ software solution a four-star

rating for its robust firewall capabilities and ease

of installation.

— CIO Magazine named CEO Gil Shwed a 2002 winner of the

CIO 20/20 Vision Awards.

— CRN Magazine named President Jerry Ungerman among the

Top 25 Executives in 2002.

— NASA/Marshall Space Flight Center presented a special

commendation to Check Point for outstanding support in

implementing Internet security solutions.

— The American Academy of Achievement bestowed its

Golden Plate Award upon CEO Gil Shwed for his

innovative contribution to business and technology.

— Network World magazine awarded Check Point VPN-1(R) a

“World Class Winner” for client deployment and

manageability, multi-platform client support and the

suitability for enterprise use.

— Partnerships – expanded global partnerships with more than 325

OPSEC technology partners, including over 20 appliance

partners. New and expanded partnerships include:

— New “Secured by Check Point” appliances with Sun

Microsystems Inc.

— Expanded range of appliance offerings with Nokia – our

Premier Partner.

— New “Secured by Check Point” appliances available from IBM

and Siemens.

— Shipped some of the world’s highest performing security

platforms through expanded partnerships with Nortel

Networks and Crossbeam Systems.

— New global partnership with Hewlett-Packard.

— Continued the OPSEC momentum with the introduction of the

OPSEC Manager – multi-vendor security suite management

software and with over 175 “OPSEC Certified” partner

products.

Mr. Shwed continued: “In 2002, Check Point managed to extend its market and technology leadership while maintaining strong financial performance and unparalleled levels of profitability. Our team continues to focus on expanding this lead with the best and broadest range of solutions for securing the internet.”

Conference Call Information

The Company will host a conference call with the investment community on January 22 at 5:00 PM ET/2:00 PM PT. To listen to the live webcast, please visit Check Point’s web site at http://www.checkpoint.com/ir. A replay of the conference call will be available through Wednesday, February 5, 2003, at the Company’s website or by telephone at (973) 341-3080, confirmation code 3673476.

Safe Harbor Statement

Certain statements in this press release are forward-looking statements. Because such statements deal with future events, they are subject to various risks and uncertainties and actual results could differ materially from Check Point’s current expectations. Factors that could cause or contribute to such differences include, but are not limited to: the impact on revenues of economic and political uncertainties and weaknesses in various regions of the world, including the commencement or escalation of hostilities or acts of terrorism; the inclusion of network security functionality in third-party hardware or system software; any unforeseen developmental or technological difficulties with regard to Check Point’s products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; a shift in demand for products such as Check Point’s; unknown factors affecting third parties with which Check Point has formed business alliances; timely availability and customer acceptance of Check Point’s new and existing products, and other factors and risks discussed in Check Point’s Report on Form 20-F for the year ended December 31, 2001, which is on file with the Securities and Exchange Commission. Check Point assumes no obligation to update information concerning its expectations.

About Check Point Software Technologies

Check Point Software Technologies is the worldwide leader in securing the Internet. It is the market leader in both the worldwide VPN and firewall markets. The company’s Secure Virtual Network (SVN) architecture provides the VPN and security infrastructure that uniquely enables secure and reliable Internet communications. SVN solutions, as delivered in the company’s Next Generation product family, secure business communications and resources for corporate networks, remote employees, branch offices and partner extranets. Extending the power of SVN is Check Point’s Open Platform for Security (OPSEC), the industry’s framework and alliance for integration and interoperability with “best-of-breed” solutions from over 325 leading companies. Check Point solutions are sold, integrated and serviced by a network of 2,500 certified partners in 149 countries. For more information, please call us at (800) 429-4391 or (650) 628-2000 or visit us on the Web at http://www.checkpoint.com or at http://www.opsec.com.

Check Point, the Check Point logo, ClusterXL, ConnectControl, FireWall-1, FireWall-1 GX, FireWall-1 SecureServer, FireWall-1 SmallOffice, FireWall-1 VSX, FireWall-1 XL, FloodGate-1, INSPECT, INSPECT XL, IQ Engine, Open Security Extension, OPSEC, Provider-1, SecureKnowledge, SecurePlatform, SecureXL, SiteManager-1, SmartCenter, SmartCenter Pro, SmartDashboard, SmartDefense, SmartLSM, SmartMap, SmartUpdate, SmartView, SmartView Monitor, SmartView Reporter, SmartView Status, SmartView Tracker, SVN, UAM, User-to-Address Mapping, UserAuthority, VPN-1, VPN-1 Accelerator Card, VPN-1 Net, VPN-1 Pro, VPN-1 SecureClient, VPN-1 SecuRemote, VPN-1 SecureServer, VPN-1 SmallOffice, and VPN-1 VSX are trademarks or registered trademarks of Check Point Software Technologies Ltd. or its affiliates. All other product names mentioned herein are trademarks or registered trademarks of their respective owners. The products described in this document are protected by U.S. Patent No. 5,606,668 and 5,835,726 and may be protected by other U.S. Patents, foreign patents, or pending applications.

CHECK POINT SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

Three Months Ended Year Ended

Dec. 31, Sept. 31, Dec. 31, Dec. 31, Dec. 31,

2002 2002 2001 2002 2001

—————————- —————–

(unaudited) (audited)

Revenues:

Products 65,478 60,424 82,194 256,113 374,026

Subscriptions and

upgrades 35,326 33,362 31,360 130,879 110,236

Services 9,456 9,773 8,976 39,997 43,381

————————— ——————

Total Revenues $110,260 $103,559 $122,530 $426,989 $527,643

————————— ——————

Operating expenses:

Cost of revenues 5,513 5,676 4,661 20,693 26,571

Research and

development 6,939 6,988 7,341 28,709 33,221

Sales and marketing 27,083 24,625 26,490 104,606 109,086

General and

administrative 4,553 4,215 4,442 17,969 22,002

————————— ——————

Total operating expenses 44,088 41,504 42,934 171,977 190,880

————————— ——————

Operating income 66,172 62,055 79,596 255,012 336,763

Financial income, net 12,479 12,276 11,645 49,314 44,760

————————— ——————

Income before income

taxes 78,651 74,331 91,241 304,326 381,523

Income taxes 14,157 12,015 14,105 49,246 59,603

————————— ——————

Net income $64,494 $62,316 $77,136 $255,080 $321,920

=========================== ==================

Earnings per share

(basic) $0.26 $0.25 $0.32 $1.04 $1.34

=========================== =================

Number of shares used in

computing earnings per

share (basic) 245,503 244,739 242,353 244,097 240,008

=========================== =================

Earnings per share

(fully diluted) $0.26 $0.25 $0.30 $1.00 $1.25

=========================== =================

Number of shares used in

computing earnings per

share (fully diluted) 252,807 253,336 258,893 254,772 258,075

=========================== =================

CHECK POINT SOFTWARE TECHNOLOGIES LTD.

SELECTED CONSOLIDATED BALANCE SHEET DATA

(In thousands)

December 31, December 31,

2002 2001

————————-

(audited)

ASSETS

Assets:

Cash and cash equivalents, deposits and

marketable securities $1,314,752 $1,028,317

Trade receivables, net 73,165 74,294

Other receivables and prepaid expenses 18,354 21,290

Property and equipment, net 10,453 13,248

Deferred income taxes 4,963 5,759

———— ———–

Total assets $1,421,687 $1,142,908

============ ===========

LIABILITIES AND

SHAREHOLDERS’ EQUITY

Liabilities:

Deferred revenues $99,227 $95,703

Trade payables and

other accrued liabilities 135,418 131,477

———– ———-

Total liabilities 234,645 227,180

———– ———-

Shareholders’ Equity:

Share capital 740 735

Additional paid-in capital 163,045 146,816

Retained earnings 1,023,257 768,177

———– ———-

Total shareholders’ equity 1,187,042 915,728

———– ———–

Total liabilities and shareholders’ equity $1,421,687 $1,142,908

========== ===========

CHECK POINT SOFTWARE TECHNOLOGIES LTD.

SELECTED CONSOLIDATED CASH FLOWS DATA

(In thousands)

Three Months Ended Year Ended

December 31, December 31,

———————— ——————-

2002 2001 2002 2001

———————— ——————-

(unaudited) (audited)

Cash flows from operating

activities:

Net income $64,494 $77,136 $255,080 $321,920

Adjustments to reconcile

net income to net cash

provided by operating

activities:

Depreciation and

amortization 1,887 2,231 7,390 8,068

Decrease/(increase) in

trade and other

receivable, net (3,767) 1,317 968 11,855

Increase/(decrease) in

trade payables and

other accrued

liabilities 6,604 (1,057) 7,464 (1,176)

Other adjustments 2,597 813 5,393 5,105

———————— ——————-

Net cash provided by

operating activities 71,815 80,440 276,295 345,772

———————— ——————-

Net cash invested in

property and equipment (990) (2,197) (4,596) (9,678)

———————— ——————-

Net cash provided by

issuance of shares upon

exercise of options 3,133 5,826 14,736 36,271

———————— ——————-

Increase in cash and cash

equivalents, deposits

and marketable

securities 73,958 84,069 286,435 372,365

Cash and cash

equivalents, deposits

and marketable

securities at the

beginning of the period 1,240,794 944,248 1,028,317 655,952

———————– ———————

Cash and cash

equivalents, deposits

and marketable

securities at the

end of the period $1,314,752 $1,028,317 $1,314,752 $1,028,317

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