I’d like to welcome everyone to our Fourth Quarter and Full Year 2021 Financial Results Video Conference. At this time, all participants are in listen-only mode during the formal presentation, which will be followed by question-and-answer session. 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 video conference is live on our website and is recorded for replay. To access the live conference and replay information, please visit the company’s website at checkpoint.com. For your convenience, the replay will be available on our site. If you’d like to reach us after the call, please contact Investor Relations by mail at kip@checkpoint.com. 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 our products and solutions, expectations related to cybersecurity and other threats expectations regarding our 2022 initiatives, our ability to continue to develop platform capabilities and solutions, customer acceptance and purchase of our existing solutions and new solutions, the market for IT, security, continuing to develop competition from other products and services and general market, political and economic and business conditions, including as a result of the impact of COVID-19 pandemic. These forward-looking statements are subject to risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission, including our annual report on Form 20-F filed with the SEC. The forward-looking statements in this presentation are based on information available to checkpoint as of the date hereof, and Check Point disclaims any obligation to update any forward-looking statements, 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 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.

Can you hear me?

Yeah.

Can you see the presentation?

Wonderful.

Wonderful. Okay. Great. Thank you, Kip. Good morning and good afternoon to everyone joining us on the call today. I'm pleased to begin the review of the fourth quarter. Revenues for the quarter $599 million, which is above the midpoint of our guidance is $17 million, quite nice. Earnings per share reached $2.25 above the top end of our guidance, which was $2.22, $0.03 above the top end of our guidance. 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 that as applicable, non-GAAP information is presented excluding these items. Now let's dive more into the numbers, and I will start with the revenues. Revenues for the quarter, as you can see, $599 million, 6% increase year-over-year. On the right side, you can see the billing. Billing grew to $851 million, 14% growth in our billing, very significant acceleration from the 8% you see in Q4 last year. Deferred revenues is some kind of a mirror of the billing. We can see growth very strongly as well, 15% growth, reaching $1.77 billion. Moving into the drivers. So first, let's talk about products and security subscription continued to accelerate, reaching $371 million and 9% year-over-year, product increased nicely with Maestro continued to be differentiator and drives wins with customers. We've seen strength in many product categories in SMB all the way to large enterprise this quarter. So that was a nice quarter for the products as well. Subscription revenues in line with our expectations, continue to accelerate, reaching 14% versus last year, we can see 10%. So it's already $204 million a quarter. We were the main drivers are, we can…

Thank you very much, Tal, and I'm very pleased to see everyone here and share, especially as we had this amazing quarter. I really, really mean that this was a very, very unusual quarter, probably our strongest quarter ever, and I'm not just speaking about the external financial results, but about the internal measures that we see internally. Now every quarter, I usually speak about the last quarter achievement. This presentation, I'm actually going to dedicate primarily to speak about our strategy getting into 2022. We're entering -- I mean, on the foothills of this amazing quarter that showed really business growth, real business turnaround in all three pillars, by the way, the Cloud, in the Harmony and even some very, very good metrics of our core business, the Quantum Network Security business that's probably contributed a lot of growth last quarter. All the regions, EMEA, APAC and the Americas showed very good internal metrics. So on top of that, we're entering a new year with a renewed strategy, a lot of energy, a lot of investment. And what I wanted to do here is share with you the key initiatives with which we start 2022. So I mean that's where we start. I picked here four of our major initiatives, and there will be more. The number one objective, of course, is continue with accelerating our growth. We start that and for the next 20 slides will go into each of these four initiatives with a new message, new logo, new branding that I'll speak about in a second. We are continuing with a lot of innovation. And I think we're starting the year with new products and leapfrogging the industry with unprecedented price performance. We're going to create a new structure that we call the Check Point Rocket,…

Well, we're waiting for Kip, he’s probably going to do that.

My apologies for that. Please, everyone that's going to be asking your question, don't raise your hand. We already have a list, and you'll be selected. I will call out your name and also call out the person who’s in the hall. Please limit your question to one, so we can get as many of the panellist in for Q&A as possible. Our first question is going to come from Patrick Colville of Deutsche Bank, will be followed by Gregg Moskowitz from Mizuho.

Thank you, Kip, and thank you for having me on. I mean, congratulations on already excellent set of results. I guess, the standout was the guidance you just gave, very impressive, no doubt. Can you just kind of pick apart the factors behind that I guess the contributive factors are probably the cybersecurity spending environment, the product mix and suites and then any changes around pricing? So can you just kind of give us some colour around how those factors are playing into that guidance?

Tal, it's for you.

Okay. So I'll say the following. We see -- we've seen last year when we came into the year with an expectation of 3%, but we have seen through the year an acceleration. If you look at the billing both short-term and long-term, but even if you look at the short-term, you see billing growing. So it's starting to translate into the P&L. So we start to see our revenues increasing from 3% to 3.5% to 4% to 4.5% to 5%, even higher in the Q4. So we came in more optimistic because we see a really nice business. You see in the revenues, that's why I talked about it some regions look weaker than the other, but actually billing three of them finished strong. So hopefully, it's an indication that we're starting to see the results of some of our investments. We invest in CloudGuard and in Harmony. So while starting from small numbers, it's starting to have also an effect on our revenues. So that's nice to see that as well. So taking all of that into account, we feel that the midpoint is moving up to the area of that whatever it was the 6%, right? So that's the beginning point. The range you take into account, and that's something very hard to calculate. And I think Gil was very open about it, how much each risk translates, very hard to know. But we do know that we're going into a year that there's higher risk when it comes to the supply chain because we see like Q2, Q3, Q4, we see more and more issues. We sold all of them. We're working on them daily, closing items, new problems opening, solving them. So it's a very fast run with the shortages. We assume it will continue probably in the first half of the year and start to elevate towards the second half. I'm not sure it will happen, but I'm hoping it will happen. So that's really relating to the shortages. Macroeconomic, I don't know what will happen. I hope it will continue to be strong. COVID, travel is going back, more and more people travel, how much it will affect. We took an assumption midpoint, we didn’t assume a full return to 2019 level. We assume stronger levels of travel in this year hopefully, but we don't know. We see different waves showing up in different regions and different reaction. So travel is somewhere in the middle. Currency, we took the current rates. So if it will change dramatically, I'm not talking only about the expenses. It also changed customers' behaviour with their budgets. So I'm assuming that what we know right now about the currency would stay. So it affects the expenses, but hopefully no effect on the revenues. So the assumption there is no additional shift there. Growth in the CloudGuard, growth in Harmony, growth in Infinity, definitely part of the assumptions there. I hope that answered your question.

Yeah. I mean, that’s excellent. Thank you so much.

All right. Next up, we have Gregg Moskowitz from Mizuho followed by Adam Tindle of Raymond James.

All right. Thank you Kip. Nice to see the great results. Just terrific to see the improved growth and execution at Check Point. I have two related questions, if I may. So from what we've heard some of your competitors are also doing pretty well. And I guess my question for you, Gil, is within network security, is there anything that you can pinpoint that perhaps is driving stronger demand? And then for Check Point specifically, I believe you said that internally, you're expecting double-digit billings growth for 2022. Now obviously, there's a sales productivity ramp. But my question there is how reliant is your growth projection on your ability to expand your frontline sales force by 25% this year?

So that's an excellent question. First, -- but I mean, I think that many of the initial numbers that we enter based on the existing sales force, but we are pushing very, very hard for the sales force to hire fast and actually even higher at the beginning of the year. Usually, when we say 25% growth or 5% growth, we do that growth along the year. This one, my message to the sales force is higher sales people as fast as you can in the first quarter. Again, I'm not sure that we'll be able to make it. It's hard to recruit people these days. And such growth is not a trivial growth to an organization our size, but still that's the message. I think if everything works, we are set to very nice numbers, but I think not everything will work. I think we won’t be able to recruit all the people we want to all be productive. But I think that we can get to the numbers that we've said to the range that we put in based on what we have now and based on the productivity we have now. So that's the kind of the general. And again, I can tell you, we just finished our CPX conference, CPX conferences for customers, partners and employees, we had free in APAC in Europe and in the Americas. Today, the European one is going to end, and it went very, very well, 25% increase in attendees, excellent scores, excellent feedback, excellent energy. So I think we're starting the year on the right track.

Thank you.

If I can highlight for everybody also, if you'd like to see the CPX event, you can actually sign-up and register and we'll have video-on-demand. Next up, we have Adam Tindall, followed by Gray Powell from BTIG. Go ahead Adam.

Thanks Kip. Just a clarification for Tal and then a question for Gil. Tal, six consecutive quarter with accelerated billings, you're now approaching mid-teens growth in the billings metric. Just want to dispel any scepticism there. You've talked before how billings can be impacted by duration. Was there anything notable in the quarter on that? And I think you also implemented some price increases here in the early part of 2022. Any sense of pull-forward in Q4 ahead of that price increase based on what you're seeing here for billings trends in early February? And Gil, if you could just talk about that broader decision for price increases in any customer or partner response based on your conversation? Thanks.

Okay. That was a long question. I'm not sure I remember it, but I’ll try. So first on the building, the billing was strong. You can see also when you calculate the short-term billing, you see a double-digit growth, right? I think it was 10% or 11%, which is also an acceleration from, I think, 6% last quarter. I can't find the numbers, but you can calculate them. So the growth is -- if you look at total billing or even short-term being you see that it grows. So even if some of it came from OTA , which it always does, you can see that it accelerated also in the short-term. Long-term is a good phenomenon. It's not the focus, but it's a good phenomenon because customers are going with you for the long run, so that's always good, but both of them increased. The second part of the question, I don't remember -- if there was maybe an effect on the price increase. Remember, we sell to the distributor, sales to partner or sell to the end users. So it's very hard to know what cause the billing. I will say, probably there was an effect. I don't think it was hundreds of millions, right? But it might have been maybe $10 million, yeah, there probably was some effect of trying to avoid the increase in the pricing.

And remember that our price increases will start from January 1st. So again, the impact is that maybe some of the people did the purchases or the renewals a little bit earlier. But again, I think we wouldn't be proud of the billing growth unless we felt it's meaningful. Let's we put it that way. As you know, every quarter, we are trying to play down the billing number because again, in many cases, it doesn't represent. This quarter, I think we've seen some very good indicators. So we are not just showing these numbers because they are impressive. But because at least last quarter, I don't know if you predict the next quarter, but last quarter, we've seen very good internal metrics.

Thank you.

All right. Next up, we have Gray Powell from BTIG, followed by Matthew Hedberg from RBC.

All right, great. Thanks for taking the question, and congratulations on the good numbers. So, yeah, how should we think about the upsell opportunity with Avanan? Did that acquisition contribute meaningfully to the improved billings growth in Q4? And then just how should we think about that acquisition in the context of your 2022 outlook?

Just look at the total number. Now, they had an effect, but a very small one. Of course, it's a very small company. But we definitely believe in them and believe that they will grow significantly next year. And that's why Gil said, we announced it as one of other Rockets, the Harmony Email Security. They are a major part of it. Also, we consolidated it, of course, with Check Point Email Security. So we believe it's a fast growing and we want to invest in it. If anything, it's actually increased our investment, which is different profit profile than Check Point, which is part of the margin plan for next year because we want to invest in it as we believe we say it's a very nice and fast-growing market.

Okay. Thank you very much.

Next up is Matthew Hedberg from RBC Capital Markets, followed by Sterling Auty of JPMorgan.

Hey, thanks a lot Kip. Congrats guys on the results. And by the way, I love the new -- the logo and branding is great. Gil, what reached out to me is the 25% sales force growth expectation, I'm curious, how does that relate to maybe prior targets that you've had? Because it seems like it's a substantial uptick from what you've done historically? And then can you talk about the challenge of finding good sales talent these days? And is that maybe an inhibiting factor as well, but the number -- the target looks really, really strong.

First, you're right. It's much, much bigger than what we had before. In the last few years, the numbers were all single-digit growth. And in many cases, we didn't achieve them. And some of them, we didn't achieve them because we weren't investing. And some of them because the general tendency of the sales force is actually the salespeople, they like to keep their territories very big, so they keep the opportunity for themselves. And if they got the budget for hiring, they like to hiring support people that will help them. So over the last few years, it actually analyzed our growth in the sales, big part of it came in the form of creating overlays that can support our strategic products in more technical help to the salespeople. But in some areas, and particularly in Americas, we didn't -- we almost didn't increase the capacity, the salespeople, and we need more salespeople. So this investment is not just an investment from -- it's a big change internally in the mindset of people. Yes, we want to go and an attack. Yes, we want to go and find new customers. Yes, we want to go and serve our big customers and not only the big customers in all segments better, and it's a big change internally. Now I think it's doable. I think the target I've set for the people is that you can hire all the people in the first quarter. I don't think that we will necessarily achieve all of that in the first quarter. But I think there are good people. Many people do want to work for Check Point. We understand that sometimes working for our company, I mean, there's a lot of promise, for example, working for many start-ups, but on the other hand, trying to build your reputation and establish yourself in the marketplace is not as easy as it sounds. So I think that we do have a good cadence. We do have a good pipeline of salespeople, it will probably take us some time to hire that, but I think the change should be meaningful. Some of it this year, some of it we may rely this year and a lot of it next year.

Thank you.

Thanks Matthew. Next up is Sterling Auty from JPMorgan, followed by Joel P. Fishbein, Jr. from Truist Securities.

I want a full name like that, Kip. Thanks guys. So Tal, can you help us -- I wasn't completely clear what was the magnitude of the price actions that you took? What was instituted during the December quarter, what was instituted after? And how should we think about that impacting the gross margins in light of the EPS guidance that you gave?

Actually included as part of that, right? So let's talk about it one second. First, the price increase was in the beginning, and now it's December or maybe in October for the beginning of 2022. That's one.

Price increase in the fourth quarter, it starts on January 1st, just to be clear.

Yeah. So that's one. Secondly, we didn't do an increase. I know many people increased significantly more. We increased, I think, only in 7%. So it's not a huge increase. So that's not -- so that's part of the next year, you will start to see that. And that's why to the question, maybe some of them put it before. It's not like 30% more increase, so it might have shifted millions, but not -- this was -- I don't expect it to be $50 million, $60 million increase, right? So it might be have been $10 million, right, just doing an expectation, but it's very hard to know. For next year guidance, we too into account everything, so on the one hand, you have that. On the other hand, you have, price competition is regular. You have Lightspeed, which might pull the ASP actually down, and you have the higher costs. The increase -- the cost is higher than 7%. So it's included as part of the margin, right?

Got it. All right. Thank you.

All right. Our next caller is from Junior, and then it will be followed by Philip Winslow from Credit Suisse.

Thanks Kip. Gil, this one’s for you Log4j has made a lot of noise, but we really haven't seen a lot of breaches from it right now. What do you think the potential impact is of that for the overall market? And then also you hit on it a little bit in your prepared remarks, but I'd love to hear how that could be an accelerator for you guys to the overall results?

We are not relying on any specific break as an accelerator for our growth. But it will have an effect on the market. It's one of the most challenging vulnerabilities ever found, not only because it's easy -- for a few reasons. First, it's easy to exploit. Second, it's on interfaces that are open. Many vulnerabilities are on interfaces that are behind closed doors that are internal to the data center, but there's a higher level of protection. But Cloud4J is almost on every web server and every -- and many, many web services outside there, and it's really easy to exploit. One string causes a remote code execution. So that's the worst part. Now I think the industry created a lot -- and by the way, that's evident. Usually, you see vulnerabilities every day. We see that inside the industry. But most of them, you don't find an exploit and maybe there are exploits that are being used rarely, so we don't see them but you don't see the exploits. In Cloud4J, within 48 hours, we saw like 60 different variants of exploitations. So it was very, very easy to understand how to use that to attack systems. I think with enterprises around the world do the right thing and patched it and try to fix things and so on, and that's great. But I think there remain tens of millions of servers out there that nobody touched, because nobody knows that they're there because nobody is managing or nobody in handling. And they will be the source of infections for probably many years because, again, the attackers are not just on day one. On day one, they showed that they know how to do it, but -- and maybe I'll explain when you look at the attack there's multiple steps. There's model, the Maestro model, which shows how it works. So first is collecting intelligence. Second is finding the entry point and very inflecting it with the malicious the malware. So this is the new entry point. It's an easy entry point and this can be used in the future by many hacking groups, whether it's by many criminals, and I'm sure it will be used, and it will have impact on the industry.

Thank you.

All right. Our next question is from Philip Winslow, followed by Jonathan Ho of William Blair & Company.

Great. Thanks for taking my question. Great to see you’re all are doing well. Gil, a question for you on cloud security. If you think about the commentary we've seen from the hyperscalers in the past couple of quarters, you had accelerating shift workloads to the cloud. But also just the mission criticality of the workloads that are shifting, not just through a single cloud, but multiple clouds. When you think about the impact of that the Check Point and just call it attach rates of security in the cloud, what are you hearing from customers? And maybe if you could give us some just more colour on CloudGuard in particular that would be great?

I think cloud security is a very high priority for every customer. We see that every conference, or every interaction. It's not a giant industry at the moment, and it's unclear, by the way, how it will shake up. There is plenty of start-ups that are targeting it for multiple directions. The big cloud providers, Microsoft, Google and Amazon are investing in that. I think we shouldn't be blind to that. They are investing in creating -- on top of the -- by the way, one of the big confusions. The big cloud providers are investing in making and are doing good job in making their platform secure. They are not usually taking care of the customer application. That's the customer responsibility. But now we are making investment in securing the whole thing and making security also part of their business. Even in some cases, in multi-cloud environments because one of the arguments for our industry is that we will deal with everything. So there is an investment there. I think it still remains a very important area for us to protect, a very important opportunity in the marketplace, how it will shake up? I still don't know. I mean, we've seen markets that have taken I'll give you another example. Mobile security is a good example of a market that I think for me it's evident that people need to invest, but companies are not investing in mobile security enough. I think that cloud will change that because the structural impact of it is much, much bigger. It's not an individual device. It's the whole company. It's the whole assets. And I think the benefits of Check Point remain very important. The fact that we are connecting the private cloud to the public cloud, the fact that we are connecting all the different elements. But it's still a very interesting and a very challenging market. And so I mean, we'll continue to invest in that. And I think we're expecting some good evolution in that marketplace.

Great. Thank you.

Thank you Philip. Last question is going to come from Jonathan Ho of William Blair. Go ahead, Jonathan.

Thank you for squeezing me in. And let me echo my congratulations as well on a strong quarter. I wanted to touch on the Lightspeed comments around cannibalization that you made. And one thing I did want to understand a little bit better, I don't think I've ever Check Point play, the price performance game. And so does this shift -- signal shift in your own strategy going forward? And how do you think about the potential impact, just given that the ratio dramatically changes with something like Lightspeed? Thank you.

So first, we've been competing in that and not necessarily on our lease price, but we are -- but we have been very competitive. And by the way, we win many of the big data centers, especially of the big financials, when we compete head-to-head with other companies that are making price performance for only business. So I think that's the reason that we feel the Lightspeed can change with dynamics. Again, there is some risk and we have -- we put in place the measures to try and contain it for cannibalization because, again, when you sell 10 times more or 10 times to 20 times more performance for the same price or for a much lower price. It can change the behavior. But I think overall, it's the right move for us, and we want to win that, and there's many, many hundreds of -- let's put it that way. The opportunity in the data center is far bigger today, then, for example, cloud security. In five years from now, I don't know, but in 2022, the data center market is bigger than the cloud security market. And it's a market that ours. We know the customers, they love us, they use us and so on. So expanding our market share in the data center is an important opportunity.

All right, guys. Thank you very much. We appreciate you attending today. We'll look forward to speaking with you after the call and in the coming days and weeks. Again, if you guys would like to revisit CPX, go ahead and sign-up. We have it on video-on-demand for those of you that missed it, and we'll see you in the coming weeks. Thank you.

Thank you very much.

Thank you.