Greetings. Welcome to Check Point Software Technologies First Quarter 2020 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded.I will now turn the conference over to your host Kip E. Meintzer, Global Head of Investor Relations. Thank you. You may begin.

Thank you, Shiai. I'd like to thank all of you for joining us today to discuss Check Point's first quarter 2020 financial results. Joining me remotely today on the call are Gil Shwed, Founder and CEO; along with our CFO and COO, Tal Payne. As a reminder, this call is webcast live on our website and is recorded for replay. To access the live webcast and replay information, please visit the company's website at checkpoint.com. For your convenience, the conference call replay will be available through May 4th. If you'd like to reach us after the call, please contact Investor Relations by email at kip@checkpoint.com.Before we begin with management's presentation, I'd like to highlight the following. During the course of this presentation, Check Point’s representatives may make certain forward-looking statements. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 include, but are not limited to, statements related to Check Point's expectations regarding business, financial performance and customers; the introduction of new products, programs and the success of those products and programs; the environment for security threats and trends in the market; our strategy and focus areas; demand for our solutions; the impact of COVID-19 on our business including on our product development, sales and marketing efforts and then our financial condition and results of operations; the impact of COVID-19 on our customers, suppliers and business farmers and the macroeconomic as a whole.Because these statements pertain to future events, they are subject to risks and uncertainties. Actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences are contained in Check Point's earnings press release issued on April 27, 2020, which is available on our website; and other factors and risks including those discussed in Check Point's annual report on Form 20-F for the year ended December 31, 2019, which is on file with the Securities and Exchange Commission.Check Point assumes no obligation to update information concerning its expectations or beliefs except as required by law. In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results as well as the reasons for our presentation of non-GAAP information.Now, I'd like to turn the call over to Tal Payne for a review of our financial results.

Thank you, Kip. Good morning and good afternoon to everyone joining us on the call today. I hope you and your family stay healthy during these unprecedented times. During this period, our top priority is ensuring the health and safety of all of our employees around the globe as we continue to serve our customers. Today, Gil will elaborate on the COVID-19 effects on different aspects of our business, steps we're taking to operate during the pandemic and provide update to our guidance.During the quarter, we sustained elevated business activity levels and delivered results towards the upper half of our guidance. Revenues for the quarter increased by 3% year-over-year to $486 million and our non-GAAP EPS grew by 7% to $1.42. Before I proceed further into the numbers, let me remind you that our GAAP financial results include stock-based compensation charges, amortization of acquired intangible assets and acquisition related expenses, as well as the related tax effects. Keep in mind, as applicable, non-GAAP information is presented excluding these items.Now let's take a look at the financial highlights for the quarter. Products and security subscription revenues were $269 million, a 5% increase year-over-year. Our subscription revenues continued to be strong with 10% growth year-over-year reaching $159 million. Our software updates and maintenance revenues increased to $217 million, representing 1% growth year-over-year.On the product side, we saw an increase in remote access VPN solutions and rescaling up networks where needed. On the other hand, products are continuing to transition partially to the cloud solutions, which are included in the subscription line. The reduction in the product line is naturally driving lower support levels.The growth in our subscription revenues is driven by our advanced solutions, mainly cloud and Sandblast Zero-day threat prevention. Infinity consolidation solutions also started to flow into the revenues and…

Thank you, Tal, and hello to everyone joining us today. This is an unusual period and I really appreciate your time and attention today. Before I even begin to discuss the business, I'd like to wish all of you and your family good health and a quick return to your freedom.Now, let me start with my review of the quarter. As you heard from Tal, we had a good first quarter. We managed to meet almost every financial metrics despite the new challenge that the world has faced throughout the quarter. We began the year in our as usual manner, conducting our three major CPX 360 customer and partner events. We had the record level of attendance, around 9,000 people in all three locations, Bangkok, New Orleans and Vienna.Our messages were received with great enthusiasm and we received very high trades from the participants. Looking at the picture from the events, it is hard to believe that only three months ago we got thousands of people physically celebrating innovation and crowded together. Both the Vienna and the New Orleans convention center are now emergency hospitals for coronavirus patients. Just to illustrate how quickly the world has changed.Before I address these changes and how we dealt with them, let me provide some color on the business this quarter.As I said previously, we managed to close the quarter on a quite high note and exceeded almost every financial measure. We saw some strong signals in the traditional and emerging parts of our business. Our security appliances had a good quarter, and we saw nice momentum in our cloud technologies.Despite the lookdowns in many parts of the world, we've seen an active business environment. During the quarter, we had around 20% demand increase in our technical services driven by customers scaling up their…

Thank you. [Operator Instructions]. Our first question is from Karl Keirstead with Deutsche Bank. Please proceed.

Thank you. Good morning, Gil and Tal. Congrats on helping Check Point manage through this crisis as well as it sounds like you have. I wanted to just ask you about the decision not to provide guidance. It sounds like the Q1 actually came in relatively in-line if not slightly better than the midpoint. Gil you mentioned that April results are actually trending relatively well so far. So perhaps you could elaborate what -- it doesn't sound like you're experiencing new deal push-outs that some of your software peers are seeing. So what do you worry could change looking forward that reduces the visibility if things have actually tracked relatively well so far. Maybe you could just explain that for us? Thank you.

Thank you. First, I think, I am very pleased that we had the results that we had in the first quarter. But let's remember the corona pandemic had the big impact on most of the world only like in March and most of the world only in the last few days of March. And even then, we did see some deals in the last few days that were pushed, because people were moved to home lockdowns and things like that. We've seen many others by the way that went smoothly. I must say that I couldn't be -- I mean I had an amazing -- it's almost two months now, a month and a half, when we went through this crisis to see the commitment of everyone, including our partners, including customers where I didn't believe where customers were under lockdown and still insisted on doing the business.But as I said, it happened only in the last -- the real changes especially in the U.S. happened only in the last 10 days to a week of the quarter, when many of the orders were already signed, processed and it was a matter of the channel processing, it getting in us. So we enjoyed them. As I mentioned, we started April in a pretty good note and it’s not over, but up to this 2nd April trending, it's a nice month, as expected, actually even a slightly good one. But we're seeing an environment that’s constantly changing and the regulation and the changes in everything that's happening can turn every day.Again, I don't want to give anyone ideas, but the international shipping is changing every day. Government changes in what you're allowed to what not allowed to do are changing every single day. But most important, it's not just the external…

Our next question is from Shaul Eyal with Oppenheimer. Please proceed.

Two quick questions on my end. Gil, have you seen -- you just mentioned that the partners and the fact they provide you with a good color into what's happening out there. Have you seen in the early part -- probably the final two weeks, maybe even three weeks of March, as this thing --COVID-19 continued to unfold or began to unfold actually, have you seen a little bit of urgent spending from some of your customers?

Again, the question if we've seen some urgent spending on our customers?

Urgent spending, yes, for VPN access product for some of the high-end appliances as companies have been moving to a remote work environment, have you seen some of those all of a sudden coming with actually some accelerated spending?

Yes. I've seen two patterns on that, positive to our side. Yes, we've seen some customers that have purchased very quickly, expanded or even new VPN environment. And again, when I mentioned examples like moving from 8,000 users to 80,000 users and scaling up to 130,000, that’s concurrent users every day, they did involve some spending in expansion and buying equipment. By the way, in one case they actually took equipment which was planned for another project and used it for the VPN extension and hopefully they will buy more equipment for the other project. In some cases, we were really rushing equipments fast and shipping it even before we got the order, so we can help the customer get on time. Another phenomena that we saw in many customers is that they understood that something is changing in the world and things might happen. So IT managers, they seem to rush projects and they simply say let's complete the project before the environment will change, before we will have a hard time getting our budget or before we will need it in a critical manner. So some projects did accelerate in the first quarter.On the same time, by the way, we did have projects that got delayed and got cancelled in the first quarter. And I mentioned few countries like Italy, UK, China, where we did see an effect on the business, the business declined and business which should have arise, didn't arise. Again, for different patterns, different reasons, but all related to the situation. So again, in the first quarter we saw few factors that were more business than usual and few factors that were below. Overall, I must tell you we had a very good first quarter, especially in the Americas when we're saying that we're investing in the Americas is very important. The first quarter, it was the quarter that we've been proud with under any circumstances, not with corona in the Americas. In the rest of the world, it was a different pattern.

Tal maybe, maybe can you provide us with the number of seven digit transactions Check Point has had during the quarter?

So actually we didn’t disclose it. We said a few quarters ago that we don't believe it’s a material metrics. But just to make you feel comfortable, I will give it and it was 56 customers with transactions over $1 million compared to 47 in the year -- last year Q1.

Our next question is from Gregg Moskowitz with Mizuho. Please proceed.

I guess my first question is, I was wondering if there was any way to estimate the positive impacts to Americas’ revenue or billings from the increased remote access requirement, perhaps by looking at activity levels over that -- the last 10 days of the quarter, and comparing that with what you saw a year ago, or if there was any way -- other way to parse that?

Tal, do you have any specific numbers? I guess, overall, I don't think it has a huge effect on the quarter. Because again, we also did deals that were postponed and deals that were going down. And again, at least in one of the cases there was a large deal, the deal was planned -- anyways, it was planned for another use, but they used the equipment for VPN instead for another purpose that they wanted to. So I hope that we'll get the original deal again. But again, unguaranteed at this point, it’s planned but it's not yet in.I think overall the trend in the America which we saw wasn't a result of corona, it was a result of working hard with customers and partners. And again, we're saying that we're doing it for the long time. It's nice to see that it's bearing fruit and we're actually seeing some results.

And I would say -- I would tell -- I think America started the quarter strong and finished it strong, so it was across the quarter. We did see strength in verticals like the financial services and healthcare which might have some relations to the corona and the increase of the remote access of the [employees].

And then just as a follow-up, I did want to ask about the SD-WAN space. One of your competitors has a lot of momentum there and another one of your competitors sort of has recently followed suit with an acquisition. And I'd love to hear more Gil just kind of, if you could sort of elaborate on why you have a partnering strategy if you will in this space as opposed to perhaps going after the market more directly? And then also if you can just talk about demand expectations for SD-WAN going forward, I think that'd be very helpful.

Okay. First, it’s a very good subject and SD-WAN is a very interesting area. And we're looking into that like everyone else. I'm following it for the last two or three years. Historically it's in a networking area. And in networking, usually the networking guys and people are dedicated to doing better and that usually stays with them. In the past when, we look at things, to combine remote access or things like that with our security, I mean to provide security for remote access was always a great business, to do the remote access or the connectivity by ourselves was never a good business for us. And again, I'm talking about going 25 years back, if you look at our VPN product, for example, there started around 1995, I think. And so we have a lot of experience in that industry. We never replaced equipment or hardware from the big networking vendors. And that's why we -- and by the way, specifically on the SD-WAN front, that was one front that there weren’t clear leaders with high volume and leading the market, it was still relatively fragmented. That's why we chose to take the softer approach and to partner with several of them, Silver Peak, VMware and several others and provide the security to this environment.Right now, we're actually doing quite well with them and the fact that some of our competitors have made acquisition and provided products in that space actually helps us in some areas expand the relationship. What will happen in the long run? I wish I knew. I think it's going to be an interesting dynamics.

Our next question is from Brad Zelnick with Credit Suisse. Please proceed.

For those of us trying to better understand customer buying behavior during these unique times and maybe as well a bit, it's intuitive that what you provide is not discretionary. So what is the customer doing, who's deferring a purchase, especially when they're faced with some significant traffic, they’re working their existing appliances for longer, are they rerouting traffic to the cloud? And just based on your learnings from the past, do you feel what you saw in March is a net pull forward or push out of demand?

I think it varies a lot by customers. For example, our customers that are very -- that have huge challenge of moving to remote access, and therefore they shift all their attention to remote access and stop other security projects. Other customers, they just have difficulties in general and they slow down investment in IT projects. Let me tell you in the hospitality business that business we have some customers there, we support them. We work with them. Seeing their pain is heartbreaking, an industry that went from amazing years and unlimited demand to shutting down 90% to 99% of their business overnight. And first, I'll give you -- even in that industry, some of it, we supported, they’re moving to work from home. And we have some projects, they're not necessarily revenue generating but activities -- the main thing first we need to work with the customer on a project, and then it will lead to something. A week later and half the team is fired. Then three weeks later, the entire team is fired. We form a deal for the long run, how we support them and make the right concession to support them which is the right thing to do. And two weeks later or a week later, even the procurement team is not working anymore, because they have been laid, so this is heartbreaking, but this is reality unfortunately as we see.So again, I don't want to paint a negative picture here. Right now our business is moving. Most customers are trying to keep business alive. I'm actually -- I mean these were very -- for me it was very interesting month seeing how the world is coping, with some of the biggest changes we've ever seen in our lifestyle over such a short period of time and coping it and keeping business alive. So I don't want to sound negative. I'm just saying that we can’t ignore the situation around us. And we can't assume the fact that we managed to survive in this situation for let's say, it depends where you look at between the 5 to 9 weeks, without a change on the macroeconomy means that it's going to continue that way.In the bigger level, we've seen everything. We've seen companies accelerating, we've seen companies slowing. We've seen people that are hard to get and don't sign a deal because they’re not at the office. We've seen people that are making all the efforts to sign every deal even though they are in some of the worst countries and worst areas in the world. In the micro level, I have seen everything.On the macro level, I think assuming that the macro level will stay stable is the wrong assumption. And I hope that I'm wrong, I hope that we will see a smooth sailing moving forward and it's definitely a scenario that can happen based on what I've seen in the last 8 or 9 weeks.

If I can just follow up one for you. And I appreciate the business is very much -- can you give us an update on how April bookings have trended relative to bookings on March?

So as I've said, I’ve mentioned that we usually don't give update in the middle of the quarter. But this time I did go outside my way. April so far looks like a decent month, levels of business are slightly higher or higher than I mean the months if I am comparing it to January this year and April of last year. That's the right comparable in terms of seasonality. Right now, again, we're not over April. So we still have three more days to go. But up to this morning, April was better month than both of the months, slightly better. But -- and by the way that's what we expect. We expect to have -- but again, it's not a prediction for anything because I think what we're seeing in April is also slightly spillover from the end of the quarter. And again, what customers -- one pattern that I can see is customers understand that the world is changing, and they say, if I can complete a project now, I should complete it now and not wait. Customers are saying at the professional level. At the professional level, we've seen by the way, it's happening in demand of every area, in laptops, in servers. I mean I'm saying it not from the macro, what you're seeing as analysts, I am seeing it myself in the market. When the pandemic started, we were saying okay, we will need laptops when we have laptops. Months ago, let's buy all the laptops that we can.Now that doesn’t mean that long-term or even short-term, we would buy more laptops. It just means that I told to my suppliers give me the inventory that you can give me. And I've seen that I mean as I mentioned an anecdote. I met one day when I was still at the early pandemic when we worked really, really hard at the office to adjust the office environment and we worked very long hours. And I still hanged around and tried to meet as many people as I can. I went one day, I stopped by the entrance. I showed the delivery guy delivering a big cart with computers on it. I said impressive and so on. He says, how your business, is it still going? He says, you can't believe it. I'm working now until 2:00 AM every day. Every business in the country is buying -- by the way he was speaking about businesses is buying all the equipment which they can get, because they are getting ready for something. And that was -- again that was more than a month ago. At a certain point it stops and you say, I have the equipment, or the macroeconomic or the economics have changed, and I can't afford it anymore. So just to give you a small example from meeting the delivery guy, because he is the one actually that's doing the work.

I will just add just to make sure, we started the April growth but remember majority of the booking is coming in the last month and therefore it's a small portion of the numbers that are needed for any quarter including Q1.

Our next question is from Michael Turits with Raymond James. Please proceed.

Coming back to just VPN question and remote access. You did obviously state both in the press release and we’ve talked about it since that there was some increase for that. Do you have any sense whether people are now where they need to be in terms of capacity for VPN and remote access? However, they still need to add in order to get up to work from home requirements.

I think it varies a lot by industry and by country and I don't have good data. We might again -- we're starting to learn how to move to this new world and assess the new requirements, because these are -- now in the past we had a pipeline of projects that were planned a year in advance and the salespeople can plan for that. Now when you move into projects and saying my remote access is not working well, I need a solution now. In general by the way, one thing that did happen to our business and to the rest of the world, so things that used to take two months are now taking today -- things that used to take two days or two weeks are now taking six hours. And the planning in general, we still have long-term planning but we're moving to very local execution, execution that's measured by date. And the reason I'm saying that is because, I mean if you were in our business let’s say months ago, you said my workforce will go home and do whatever they can. Now you're saying, okay, how effective we are, is performance good, and let me revisit it. Maybe it's working and I'm fine and maybe now it's time to start a new project because if I'm going to stay that way I'd rather optimize and invest more. This is something by the way, even as we’re doing them on many of these areas.When you start a new project and maybe again, it's not six months projects, it's maybe now two weeks projects or two month project instead of what used to be an annual project. And having said all of that, and I don't think it's over. But again that's what I'm saying about…

Okay. Next call?

Our next question is from Walter Pritchard with Citi. Please proceed.

Tal, wondering if you could give us an update, I don't think we've had a number like this in a while, but it's relevant. How much of your business -- you’ve given us the $1 million deals. But how much of your business comes in from larger projects in your pipeline for a long time versus the sort of transactional piece that you sort of have less visibility when it comes to the channel?

So we didn’t provide this color before. As I said when we talked about the deal, there was a question before, how many transactions are coming in with the transactions over 1 million, or customers have purchased over 1 million and we saw a nice increase there. It’s probably from those transactions, we can get around -- it can fluctuate between quarters, right? So on the revenues, it’s very different than on the booking.On the revenue side, it's not that large, so it's -- we do have large transactions, but it's not going to be 20% or 30% or 40% of our book -- of our revenue, because it's spread over many, many transactions. The numbers of deals we saw, there's about, we said I think 57 transactions like this quarter. Remember when you have large deals, many times, because it's multi-years and therefore it affects the bookings and the deferred revenues but less affects revenues in a specific order.

And then Tal, just another question you brought up on the Quantum appliances. It sounds like you're deferring more revenue than you had in the past. Could you maybe -- I know it has been a probably decade long discussion here around more deferral of appliance revenue. Could you help us understand what has changed with Quantum and maybe if there's any sort of benchmark you can give us from a year ago or five years ago in terms of how much more of a sale you're deferring versus what you're seeing with this current generation?

Sure. So we just started to sell it. So I can’t tell you yet the amount but I can give you the feel to it. So it happens every time we launch a new product line and we bundle with it a subscription package which is a higher level than before. If you remember I think 2016 or '17, we bundled with a new family -- instead of next generation firewall, we bundled next generation threat prevention. And then we saw a shift from product revenues into the subscription. This launch we bundle on the Quantum, we bundle instead of NGTP, like the old family, we bundle with the Sandblast, which is a higher level. Hence higher dollar value is allocated into the subscription going through the deferred revenues and then recognized.So it is deferral of the revenues which instead of coming at the time of the selling of the product is being deferred over four quarters. So from a business perspective obviously it still is very, very good, because your customers are using higher level of security, they now have zero-day protection. And then a year after you also see they are using it and they are renewing it and therefore it will give another driver for the growth in the subscription. That’s the logic of doing it. Securing the customers and then a year after enjoying an additional dollars in the subscription.In order to estimate how much it is, we need to understand what the customer is -- what the customer will use in terms of appliance. And this is very hard to predict. If they go down, if they go up in the level of appliance, therefore it can end up having zero effect or we can end up maybe in a different scenario having an effect of a few percentage on the product, maybe $10 million to $20 million minus in the product and plus in the subscription over four quarters. And it can even do a different, and increase the product because they will choose to go to a higher appliance and we will enjoy both in the product and in the subscription.So I said in a few quarters, we will have much more visibility when I will see which route the customers are choosing to go. And based on that I will be able to give you more color in the next quarter.

We have reached the end of our question-and-answer session. I would like to turn the call back over to Kip E. Meintzer for closing remarks.

Thank you guys all for joining us today. We hope you're all safe. And we look forward to speaking to you during the quarter. Thank you. Bye, bye.

This concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.