[Call Starts Abruptly] …Fourth Quarter and Full Year Financial Results Video Conference. I'm Kip Meintzer, Global Head of Investor Relations. And joining me today are Founder and CEO, Gil Shwed; and our Chief Financial Officer, Roei Golan. Before we begin, I'd like to remind everyone that this conference is being recorded and will be available for replay on our website at checkpoint.com. During the formal presentation, all participants are in listen only-mode to be followed by a Q&A session. During the presentation, Check Point's representatives may make 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. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited, to those discussed in Check Point Software's latest filings with the Securities and Exchange Commission. Any forward-looking statements made speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. 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. If you have any questions after the call, please feel free to contact Investor Relations by e-mail at kip@checkpoint.com. Now I'd like to turn the call over to Gil Shwed.

Hi, everyone, and I'm pleased to see you all. I want to start with this picture, and then I'll turn it into the financial results. But I've started my journey in Check Point exactly 31 years ago, just before we started the company in February of 1993. And since then, it's been an amazing journey and amazing growth, which is not over. And I just want to -- I think you've all read the announcement today that I intend to transition my role into an Executive Chairman, which means that I'm going to -- I want to be super involved in Check Point, super involved in the future of Check Point and shift a lot of my attention from the day-to-day management of the company into shaping the future of the cybersecurity market and Check Point, in particular. I think I've gone a long way. I didn't start quite that, but I started when I was 24 years old. I've grown a lot with Check Point. I think I’ve changed my -- I've learned a lot. I've changed my management style, and I think I'm ready for that next step, which is moving to an Executive Chairman role. So I want to thank you all for your support. It's on -- we are not doing anything today. We're actually starting the journey. And I think starting tomorrow, we will start a more thorough succession planning process. We will start search for replacement for my current role as CEO, which will take anything from -- again, we may be lucky and it will be very short, but to find the right person, to find the right women or men that can be the Check Point CEO, can take -- usually would take anything from six months to two years. We are all in Check Point super-energetic about 2024. I'll talk more about that in the slides later, and about what's going on. And I'm very excited to start the year and also start the journey into finding a replacement and -- in the future, and I hope it will be in the near future to step into the Executive Chairman role. So with that, I think I'm ready to move the torch to Roei that will take us through the numbers, and then I'll talk more about the vision, the business trends that we've seen this quarter -- this year.

Thank you, Gil, and thank you, everyone, for joining the call today. So I'm excited to be with you today and begin the review of the fourth quarter for 2023. We had a strong quarter, with operating income of $309 million, representing a growth 7% year-over-year, with a very strong operating margin of 47% -- non-GAAP operating margin of 47%. Our revenues reached $664 million, a $3 million above the midpoint of our projection, while our non-GAAP EPS was $2.57, $0.02 above the top end of our projection. As for the full year, our revenues -- as portfolio of 2023, our revenues reached $2,450 billion, representing a growth of 4% year-over-year, while our EPS reached $8.42, a 14% growth year-over-year. Actually it's the highest quarter to have an EPS since 2011. Moving to the revenues and other and deferred revenues and billings. As I have indicated, our revenues grew by 4%. Our deferred revenues reached $1,908 billion, representing an increase of 2% year-over-year, while our short-term deferred revenues reached $1,440 billion, a growth of 4% year-over-year. Our calculated billing reached $862 million, while our current calculated billings reached $831 million. And same as I mentioned in prior quarter, actually since, I think, the beginning of 2023, due to our interest rate environment, we saw also in this quarter a few customers that are willing to pay upfront for multiyear deals, which was already in short-term billing duration. Also in Infinity deals, our billing terms are more flexible. We have much more Infinity -- the Infinity becoming more and more significant business, and the billing terms are much more flexible there. So some of the annualized bookings that we'll show you in the next two slides are not built yet, and its -- but they are included in our backlog. The…

Thank you very much, Roei, and thank you, everyone, again, for joining me. Let me give you a slightly discussion of what we’ve achieved and mainly what's our strategy moving forward and the differentiator of Check Point. So just to recap some of the points we've talked about. I think, overall, we had great results in the fourth quarter, exceeded EPS, did the 15% growth in subscription, double-digit growth in revenues in Americas. And I think -- overall, I think for the year, I'm very proud that we had a very strong execution. We started here, I just want to be clear. It sounds like everything was amazing. But now we started the year. We actually ended 2022 with what we think was a very tough economy when customers held back on projects, postponed investments and actually the level of new business was going down. It lasted for four quarters, from Q4 2022 to Q3 2023. And I think last quarter, we told you that we are seeing the signs of a slight turnaround. I don't know how much of that turnaround is a result of the economy and how much of it is the result of the great execution of the Check Point team, with double customer engagement, which leads to an increased pipeline in all geos. And I'm very glad to say that in the fourth quarter, we've seen double-digit growth in our new business -- in our internal measures. I think Roei showed you the slides. I will have it again at the end. I think that's -- for me that's a very strong indicator of the change that's happened. And I truly hope that this change will continue in 2024, and that we'll get a tailwind, not headwind, from the economy. But let's speak a little…

All right. [Operator Instructions] So our first question is going to come from Adam Tindle at Raymond James, followed by Patrick Colville from Scotiabank.

Gil, I just wanted to start with your announcement, and congrats on many years of building such a strong, profitable company. But I guess I'd like to start asking why now? It sounds like, based on the initial guidance, we're at a point of acceleration at Check Point. So why was this the time to make that announcement? And secondly, the characteristics that you'd be looking for in a success or the key vision items that you and the Board would like to see?

Okay. So first, it's an excellent question. I think there's no good time to do these kinds of changes. And I'm struggling with that question. I mean, people ask me, when are we going to move on? When are we going to do something else for approximately 27 years now, almost since we went public? And I think my answer was pretty straightforward every single year. I like what I'm doing. I like Check Point. That's my life mission. I want to stay here and I want to make it successful. Of course, when times are tough, you always ask yourself, maybe I should do something else. But then -- again, it's a time -- you say, times are tough. Then I need to be here. I need to make sure Check Point is successful, and it's not the right time. And in the last few months, I would say, I've been struggling again with that question. Now again, I'm fully committed to Check Point. I intend to stay in Check Point and work at Check Point. So don't get me wrong. I'm not going away. Check Point remains my life mission, and I like what I'm doing. And I think you see in everything I'm doing and what we have. And I finally got to the decision to announce it now and start the process now, I think, last week when I saw that everything is working and everything is in its place. The products are delivering. The results are excellent. The trends that I've seen internally in the fourth quarter were excellent. And again, I got last week because I met the people in Bangkok in CPX, and I showed -- I've seen the level of enthusiasm. And customers -- actually I was even more encouraged when I…

All right. Our next questioner is Patrick Colville from Scotiabank, followed by Joseph Gallo of Jefferies.

Yes, just to reiterate that, I mean, Gil, it's been a real pleasure working with you. I think we can all agree, you're definitely one of the OGs of the acuity industry. And we wish you all the best in your new Exec Chairman role. Let me ask you about the guidance. The fiscal '24 guidance is no doubt impressive. My kind of quick math suggests it's a reacceleration. Can you just talk about the inputs to your guidance? I mean touching on the product line and the kind of the key subscription line as to how you got to that forecast.

So first, thank you very much. I'm -- Roei can add, once I finish. I'll give the high level. I think what we are basing that forecast is primarily on the projection from the sales force and the pipeline that we see. And I think the engagement that we did in 2023 -- if you remember in 2023, I spoke a lot about customer engagement and how much we need to go out and meet with our customers and prospects. We did extremely well on that, met we've doubled the amount of customers, met with 3x more prospects. And I think we want to continue with that trend. But I think what you should translate is increased pipeline, and we do have an increased pipeline. Now obviously, just to be -- to understand -- when you do more meetings and more customers, the pipeline doesn't grow in the same percentage because the sales force, usually what they do is the low-hanging fruit. And then it's an extra effort and lower success rate with the increased engagement, but we definitely see an increased pipeline across the board. And there is a very direct correlation between the engagement with customers to the size of the pipeline. So we are basing from that. We are looking at the trends and the industry growth rates and the economy. I think with the economy, we see some positive signs, but we are not -- I'm not sure it's the challenge that the market has seen last year is over. We've actually seen with some of our competitors that they are being hit by the slowdown that we've seen a year ago. So it's probably not over in that regard. So that balances that from being a more optimistic outlook. And yet, at the same time,…

I think you mentioned several of things. I think, again, we are looking -- we looked on the last quarter. We mentioned it's not only last quarter, but I think the real turnaround came last quarter. It started in Q3. See more demand to our product for appliances. We see a strong demand for our Infinity, to our subscription business. And again, we feel more optimistic. Still it's a wide range, but we believe that the guidance is good. And we hope that will be in the high end of the range.

All right. Next up is Joseph Gallo from Jefferies, followed by Jared Poland of Susquehanna.

Awesome. Gil, congrats on the 31 years of success, and glad you are staying involved with the company. Guys, great double-digit new business growth in 4Q. How should we think about it in calendar '24? And how does that correlate to billings growth in calendar '24? What is needed to drive billings growth to double digits? And can we expect that in '24?

I'll answer that, Gil. So I think -- again, first of all, Q1 was a great quarter in terms of double -digit growth in new business. In the end, it also will be transformed into billing. I remind you all that -- again, I mentioned it also in our presentation, we see more flexible billing terms. I think in the market, in general, we saw our competitors are offering more flexible terms in terms of -- more flexible billing terms. But in that, if we're going to see consistent growth in our new business as we've seen in Q4. And we -- I believe that also in the end, you’re going to see it also in the billing. I remind you also the billing duration that again, because of the high interest environment, 2023 was -- the billing duration in general was lower than compared to 2022. So it seems like it's been stabilized. So -- again, hopefully, also, we were going to see it also in the next few quarters. We're going to see also the growth from the billing, not only in the new business. And of course, we translate into revenues.

And I want to add that I think that we should use our financial power, and the fact that we are cash-rich to actually use that in a positive way, not just to win customers and to be -- but also to create more business models that are annuity-based, turn some capital investment business model into annuity one. Both because it can be -- by the way, which is a win-win because it benefits the customers that are now getting more and more used to subscription kind of model. And it's good for us because the more you create it, you get more predictable and long-lasting business. So I think -- and that again can have an impact on the short-term billings when you get things forward-looking like that.

All right. Next up is Jared Pomerantz from Susquehanna, followed by Tal Liani of BofA.

And congratulations to you Gil, as you begin the transition to our next role as the Executive Chairman. Maybe just one for me. You guys spent some time in the prepared remarks speaking to the Infinity platform and the strength that you're seeing there. Maybe if you could just dive in a bit further. How much of that new business strength that you pointed to would you attribute to Infinity? And how are you thinking about the go-to-market and potential shifts there down the road?

Roei, your comment?

Again, in terms of -- it's not something that we disturbed, but I can tell you that a significant part of our new business today is coming from Infinity. It's -- every quarter, the portion of the Infinity is higher. It's growing very fast. We are talking about strong double-digit growth in new business bookings. We showed you -- in the last few quarters, we are showing consistent -- a strong double-digit growth in revenues. So it's also we see consistent double-digit growth in -- strong double-digit growth in new business related to Infinity. So this -- so I think in the end, we expect the big portion on the new business that will be related to Infinity will grow every quarter based on the demand that we see today and the pipeline that we see today for the whole Infinity solution.

All right. Thank you. Next up is Tal Liani.

It’s Gil. And I want to be clear. It's still about 10% to 20% of our business and revenue. Just to be clear, it's not -- majority of the business in Infinity, and that means that there's plenty of room for growth as we extend the platform.

All right. Next up is Tal Liani, followed by Shaul Eyal of TD Cowen.

Two questions. One is, what are the trends of new customers versus existing customers? Are you able to grow with new customers more than in the past? Can you give us kind of even last few years kind of trends or contribution of new customers? And second, when I look at your numbers, the services are flat 2% growth a year, the maintenance piece. The subscription is growing very consistently about 15% a year, a little bit of acceleration. The real change what we're seeing is actually in the products and licenses that are going down less than before. So the question is, what are the underlying trends in products and licenses? And can you take us into kind of the numbers? Beneath the numbers, what -- how could this look like the next year, the next two years and what drives it?

So I'd like to try and give you an answer. First, as we said, I mean, it's -- first, we are getting every product in Check Point with subscription base is growing very fast. Harmony E-mail is a good example. It's sold as a subscription, and it's growing very, very fast. So that's a good example, but there's few others that are like that, and most of them are growing quite nicely. On top of that, each gateway that we sell, which is a product, comes with a bunch of subscriptions. And they are also growing and there is more services like that, that are being consumed -- subscription services that are being consumed with every gateway. As I mentioned, last year, we had a very tough three quarters at the beginning of the year, where actually new projects were delayed, postponed. And the new business and the products were going down. And despite that, because of the strength of the subscription and the fact that 80% of our business is already annuity, we've been able to meet the quarterly results every single quarter, which, again, don't take it lightly. It's not reveal, but I think that's the strength of what we have. Last quarter, it changed. In the last quarter, you were still seeing the product revenues go down, but the product orders went up, and went up double digits. So I think that's a good sign as we head into 2024. The indicators for the first quarter are positive, too. Keep in mind, in spite of an Infinity deal, the revenue recognition or the delivery of the product may take time because in Infinity deals -- in a regular deal, you buy a product, you get it. In Infinity deal, you sign up for three years and you get the product whenever you want. You don't have to get the product from day one. And actually when -- sometimes you even have the freedom to pick the products along the way. So some of that growth will take time. But the indicator is very positive. And if that trend will continue, that's a very important kind of vehicle to drive and push the growth higher into the future.

New customers, by the way?

Sorry, new customers. So new customers, we had a very nice jump of new customers, I think, in 2001 and -- 2021, sorry, 2021 and 2022, a big increase in new customers. Not enough. It's not a big enough percentage of our business, but it's still good numbers. And by the way, it's on all sectors. We get a lot of small customers, especially from some of our acquisitions, and we get hundreds of very large customers on our enterprise and very large enterprise business. In 2023, despite the tough economy and despite the fact that for three quarters, we had a decline in new business, we had it stable. So it didn't -- it grew a little bit, but not by a lot. And I hope and for 2024. First, I hope that, again, all the efforts that we are making and the investments that we are making are going to bear fruit on the new logos and new customers, and we are putting a lot of emphasis on that as a priority for the company. So we are focusing the sales force, not just grow the existing customers, which is always very important, but also win new logos. That's kind of one of our top two or three priorities for 2024.

All right. Our last question is going to come from Shaul Eyal.

Congrats, Gil. Maybe you can share with us some color on 7-digit transactions, government business, and with respect to the incoming CEO. Is there a prerequisite that he or she will be Israeli-based? Or could they also be U.S.-based?

Roei, do you want to start? You choose.

You're muted, Roei.

Actually about the 7-digit transaction in the government transactions?

7-digit transaction and also maybe a word about the government federal vertical this quarter and for Gil about the incoming CEO.

We did -- so I would say that when we are looking on our large deals, the mega deals about the 7-digits to that, we did see a nice growth this quarter compared to last quarter, actually double-digit growth, both in number of deals and in dollar value. So I think we did see a very nice trend there also in Q4. It was part of the positive momentum that we mentioned. As for the government, I think we did well in the government. Again, not -- still we can grow faster, we can do better there, but I think we are in a decent business also on the government side. And Gil, to your question around...

As I mentioned, first, I think we're in the beginning of the process, but I will share with you openly my requirements and my preferences. I do like to conduct a global search and look for the best possible person, she or he, around the world. It is very likely that we'd like it to be somebody that will reside in Israel. Our headquarters is in Israel. The main hub for operations of Check Point is in Tel Aviv. So I would like the person to be in Tel Aviv. That actually increases the chances that it will also be Israeli. But -- and of course, they will need to travel. I'd like them to spend a lot of time around the world, but that would be the preference. Again, global search, best person in the world, but most likely to -- will require to reside and be part of the team in the headquarters.

All right. Thank you all for joining us today. We appreciate you coming and spending the time with us, and we look forward to seeing you throughout the quarter. Thank you.

Thank you very much, everyone. Really appreciate it. Thank you.

Bye-bye.

Bye-bye.