[Starts Abruptly] 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 representatives may make forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933 and Section 21 of the Securities and Exchange Act of 1934. These statements involve risk 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 may 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 the reconciliation of such results, as well as the reasons for presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Invest Relations by email at kip@checkpoint.com. Now I'd like to turn the call over to Gil Shwed.

Hi everyone, good morning and glad to see all of you here. Before I turn it into Roei to go through the financial, I want to make a short statement. I think as you all know, Israel gone through a very terrible terror attack three weeks ago. And first and foremost, our hearts go to all the people that are suffering from the situation and all the people that lost their loved ones in this situation. And unfortunately, here in Israel and around us, there are many of them. We all know people that have suffered and we all know people that got murdered in this terror attack. Over the past three weeks our employees proved that despite the Siren reserve military draft of few people around 5% of our entire headcount. We can continue to operate as planned uninterrupted. Over the last three weeks, we've been able to launch products, complete acquisitions, and of course, continue and support our customers partners exactly as planned. All of that is due to the fact that we're much more accommodated to work in a hybrid manner with our operations all around the world, and mainly due to our employees and their commitment to customers and partners. I want to thank all our employees for their resilience and for all our customers, partners and you in the investment community, because I did receive plenty of support, plenty of emails and calls from people that are standing behind us and are supporting us at this time. I really, really appreciate it. I really want to thank you. And with that, I think we can turn to business and try to continue with business plans. So, Roei, the floor is yours.

Thank you, Gil. And thank you for everyone for joining the call today. I'm excited to be with you and begin the review of the third quarter for 2023. We had another strong profitable quarter with 17% growth in EPS, both double digit growth in net income and EPS. In the net income for the second quarter in a row, in the EPS for the third quarter in a row, very strong results. In terms of revenues, the revenues reached $596 million, $9 million above the midpoint of our projection, while our EPS, as mentioned, reached $2.07 at the top end of our projection. Let's go now to the numbers. So deferred revenues grew by 4% to $1.709 billion. Our current deferred revenues, actually the short-term deferred revenue, grew by 6% to $1.246 billion. Our calculated billing reached $531 million, while our current calculated billing, the short term calculated billing reached $535 million. Important to note that the calculated billing includes $8 million related to the acquisition of Perimeter 81. Same as in the previous quarter, due to high interest rate environment, we saw fewer customers willing to pay upfront for multi-year deals, which was already in shorter billing duration year-over-year. In addition, the infinity is becoming more and more significant to our business and the billing terms in these deals are more flexible. Some of them are on a monthly basis, some of them on a quarterly basis. So that also affects our duration. It is important to note that we saw many positive indicators this quarter. We saw that it's something that we are monitoring, the annualized booking actually grew year-over-year. And our RPO grew by mid-single digital year-over-year. So I think in general, we saw very positive indicator Q3, and we see a positive momentum also going…

Hi, everyone. Once again, nice to see you all. I’m pleased to be here. I'd like to shed some more light about technology and the business and what we've seen during this quarter. First, if we start with some of the highlights and the things you've already heard from Roei. I think on the financial side, we had good financial results, exceeded our projections on the top end of the revenues, even beyond that on the EPS. We did experience strong renewals and we did see a lot of positive indicators of change, but I think we will mark higher growth with the economy and with all the efforts that the Check Point people do around all -- the entire world. And on the technology and the other activities that we've done this quarter. First, I think we've talked a lot [Technical Difficulty] getting into the SASE industry, I think the name is here several times on the slide. And during -- in the next few slides, I will explain what is SASE and why it's important and why is it such a big deal and I think a big opportunity for our business. But on top of it, we've launched several other products, especially during October, the Horizon Playblocks and several others, and I think we remain very, very active. So, let me start and drill down a little bit about some of the business activities that we've conducted during the last quarter. So, first and foremost is market expansion and our acquisitions that we've executed there. In the last actually 60 days, in the last actually 60 days we've acquired three companies, making it 20 total count for Check Point acquisitions. In several spaces, the biggest one was -- is Perimeter 81 for the Quantum SASE. And again…

As always, during question-and-answer period, please limit your questions to one so we can get to everybody. Today, we're going to start off with Gabriela Borges from Goldman Sachs, followed by Adam Borg of Stifel.

Good evening. And thank you. And our thoughts are with you and all of the Check Point employees on the ground in Israel. I wanted to ask a little bit about your 2024 planning assumptions as you think through what next year could look like. Maybe Gil, share with us some of the positive indicators that you mentioned in your prepared remarks that are leading you to perhaps think through -- help us think through what the implications are from the positive indicators through to billings growth. In other words, when do you think we'll see a more material inflection in billings growth? Thank you.

So I think -- first, thank you for that. And it's too early. We still don't have the 2024 projections. We're just starting to work on the 2024 plans, but we already have some thoughts about that and I would say there's three factors that contribute to that. One is the technology and the new area that we are in is one. Second is our customer engagement and the level of activity that we have in the field. And the third one is the market itself, which is a little bit beyond our controls. So from the -- and I think this year, we really -- we did -- our field did an amazing job in increasing the engagement that we do with customers, we've pretty much doubled our engagement rates with our customers, both with the existing customers and even more so with the prospect. And there's still plenty that we can do, we still can reach many more prospects for example and we still can do more in the qualitative side of the engagement, but we've made a real evolution and I think there is plenty of credit with our people on the ground in the different countries in the field that's done this year. So now all three things when you engage with the customer that you haven't met for a long time, when you start the conversation, it takes between, I would say, it depends on the situation. I would say between six to even 18 months until its fruitful. The reason I'm saying that, because usually the field will say I'm already engaged with the customers that have the current opportunities. Getting me to meet with somebody new, it's usually the one that's knocking on our door and doesn't have the current opportunity. So these…

Thank you for the detail.

All right. Next up we have Adam Borg from Stifel followed by Brad Zelnick of Deutsche Bank.

Awesome. Thanks guys for taking the question. And again, I'll echo my thoughts for [indiscernible] and your families. Maybe just for Gil on Perimeter 81, obviously, great to see your entry deeper into SASE with it. And I was hoping you can talk a little bit more about kind of the near-term integration priorities from a sales and marketing in R&D perspective. And how we should think about the CapEx impact as you look to [indiscernible] I'm assuming over time? Thanks so much.

I think in terms of the integration, we built them in Check Point a module that we call Rockets that we kind of let these businesses and one end to keep their little bit of their independence, their vision, their integration of activities. On the other end, work with the Check Point both R&D and sales and marketing organization to drive things more forward and move fast and integrate. I think Quantum SASE is going to be very tightly integrated into Check Point, because it's a network solution. And in many cases, it's integrated with our gateways and integrated with our projects and sales force. So, it's not necessarily different buyers within the organization, it's similar buyers. I think that's the synergy and that's extremely positive. We already see a high level of interest in the field. People are super positive and super optimistic about that. And it will take us some time to build all the bridges, but we are working very hard. I mean, the only -- there is kind of two caveats, on one hand, we want to create one product suite, integrate all the Check Point security technologies into the Perimeter 81 offering, connect the Perimeter 81 management with Check Point. So we have a very strong roadmap of what we want to develop. On the other hand, it's been growing very nicely on its own, and we don't want to disrupt that. So -- and I think by the way, with the Harmony E-mail, that's been a similar acquisition, we built the right bridges. For the first six months kind of most of the growth was driven by their pipeline. Six months later, we're already reporting that huge part of our pipeline has already driven and brought to them by the Check Point salespeople and by the Check Point channels. So, I hope we will see here even faster transition because unlike email this is even more central to our technology. And in terms of CapEx, I don't know if we have any --

In terms of CapEx [indiscernible]. I mean, we expect to invest in CapEx related to Perimeter 81 few million dollars a year or something, it's not significant in terms of --

Great. Thanks so much.

All right. Next up is Brad Zelnick from Deutsche Bank, followed by Tal Liani of BofA.

Great. Thanks so much for taking my question and best wishes to all the good people of Israel. Gil, I don't recall Check Point having a significant US Federal business, but we saw the DLA deal that you highlighted, which I think was a $6 million deal, which is -- which is really great win. Can you remind us, is there a broader opportunity that you're going after in US Federal? And is this also may be a reason why we don't necessarily see all of the success that you're having in billings, because we all know that the US Federal customer doesn't necessarily pay multi years in advance. Thank you.

I don't know [indiscernible] Roei can answer about the billing and so on. I think the opportunity on the US federal government is usual, even though the US federal government is a very, very -- is kind of -- it's a tough customer, especially for foreign companies. And foreign not just Israelis, it’s even Canadian companies. It's very hard to penetrate, very few are not in American. I think the fact that we have a good success there and hopefully it's a good sign moving forward, the opportunity is huge. I mean, the opportunity in the federal market is almost untapped. We are making good progress on our government business in the US, especially the local government and again the opportunity there. It is also very big and I think we still have plenty of potential and we are doing a lot of different things. The good news, again, we have many industries and many sectors that are still -- again, we are active in all of them. We have presence in all of them, but we are -- but in some cases, like US federal, we're too small. And Roei does it have much effect on --

Yes, on the federal side, it doesn't -- I mean it doesn't have any effect on billing. I would had about the billing as well, because I will assume that we get the questions on that. So, again, on the billing side, the timing and the duration really affect the billing. I can give you as an example, is something that they -- it wasn't in -- I didn’t mention it in the script, but for example, we have the large mega deals that was expected to be closed this quarter and was due to certain administrative delays was closed two days after and that's something like that affect the billing, it's the timing of billing, it's a classic timing of billing. And these kinds of things affect the billing. I understand that you are covering the bidding and it's important -- important measure for you to understand the business, but we can say that. Again, we saw this quarter in positive indicators. As I mentioned, the booking went up year-over-year. We see a very positive indicator for the pipeline for Q4. Again, we need to be cautious, it's still on the pipeline and not converted into business, but we see many positive indicators. And it's --

Thanks for the color.

All right. Next up is Tal Liani of BofA, followed by Joseph Gallo of Jefferies. Q – Tal Liani: Hey. Good morning, guys. Two questions. Gil, at the end of the day you are only growing 3%, and we talked about it -- like last year, you talked about Infinity and you talked about the year before about other products, but it's very evident that it's hard for the company to translate technology superiority into higher growth versus competition. And the question is, what other parts, do you need to invest in go to market, marketing, whatever it is, what other parts you need to go to and what are the challenges that you have in order to translate your technology into better growth here? The second question is kind of related, not related. Subscription, very nice growth, 15%, what are the trends in the non-subscription, it's down about 4%. So what is their substitution or what are the other trends that we see in non-subscription? Thanks.

So first, you're absolutely right, we need to do better, we should do better. I by the way believe that we were on the same -- in market trajectory that we've been a year ago. I think our results today would have been double digit growth. I think we faced double digit decline in the core market of buying new gateway, delay in -- what we call delay in refresh in a nice way. And I think we've shown it in our slides. And despite that, we've seen growth. And the growth comes from -- both from customers sticking with us and doing the renewals, both from the fact that we've been able to transition big part of the business from product purchased to subscription. And also from some of the -- some of it just comes from the Infinity deal with our multi architecture, both user cloud and other elements of the security elements. And some of it comes from the new technology like email and few others that are gaining traction. But a relatively still small, but they are gaining traction. So that's how we offset there. Again, if you just look to beat on the neutral basis of just selling gateways, it wouldn't been -- it wouldn't even been 3%. Now, again, I'm not happy with that percent. I think we should do much, much higher. I think we've made investment last year, for example, we are at a lot of certainty, we can still hire more. I think this year, my focus internally was on customer engagement, making sure that our people actually go and meet with their customers and prosper -- prospect. I think, I already mentioned that we have the great progress there, doubling the rate which is not trivial. And much more activity…

All right. Next up is Joseph Gallo from Jefferies, followed by Saket Kalia from Barclays.

Hey, guys. Thanks for the question. Congrats on another quarter of double digit EPS growth. You've started talked about top line drivers and product drivers as we think about putting 2024. How should we think about leverage in the face of these investments and the M&A integration and then what if any impact does FX has as we look out over the next 12 months? Thanks.

Roei, why don’t you start.

On their FX side. So I would say that on the next 12 months, of course, we're going to benefit probably from the shekel. I knew that we usually hedge our currencies between three to four quarters ahead. So some of it already hedged for next year, but some of it will be hedged. I mean, in the second half of the year will be hedged -- will be hedged in the next quarter or two. So there will be a benefit next year on the FX. Again, it's still early to say to quantify that, but there will be a benefit. As for this quarter, we also -- again, because this quarter was already hedged a year ago, three quarters ago. So we -- so the benefit was less than the FX cost that you see today, which is approximately around -- we benefited around 1.7 -- between $5 million to $6 million of FX benefit this year compared to last year.

What was the second part of the question? Q - Joseph Gall It just -- you talked a lot about drivers and trying to drive growth higher. But how should we think about the leverage your investment needed to drive that or the M&A integration cost?

I think we need investment, and we keep investing, but we also need to see more leverage from the investments we've already made. We are today many, many people that working driving new technologies. And again we need to see more results of it. We've been building and I think I'd like to see us seeing the fruits of all these efforts. Again, we are going to keep investing, but I think the main thing for me is seeing the investments which we already made -- make bear fruit. And then we can invest more in the areas that we've -- that we’ve been working with.

Thank you.

All right. Next up is Saket Kalia from Barclays, followed by Hamza Fodderwala from Morgan Stanley.

Okay. Great. Hey. Good morning, everyone. Same here by the way, thoughts to everyone on the Check Point team. Roei, maybe for you. Maybe just broader, can we talk about the M&A impact here on the model, both in terms of annualized revenue and just annualized margin impact as we start to incorporate these deals into our model for next year. And maybe just a quick clarification. I think you said that there was a large deal that signed two days after the end of the quarter. I mean, can you give us a sense for kind of what billings would have been, had that deals had closed on time?

Okay. So as for your first question on the M&A. So, I think we mentioned when we announced on Perimeter 81, we mentioned approximately [indiscernible] on the mid 20s. But that’s something that -- but when we acquire, then that was the annual recurring that the Perimeter had. The other acquisition doesn't have any significant effect. I mean, I'm talking Atmosec one, didn't have any significant revenue that. And the one that we just -- we recently-announced I think in the beginning -- in the middle of October, also will have a few millions of dollar effect, not significant effect on our total revenues. So that's on the topline -- on the topline. And again in terms of Perimeter, I mentioned the -- it start up to speed. I mean, right now it's losing money. I mean hopefully, again, in the long-term, I mean, the aim is to be profitable, they are going to be positive. But again in the next -- I would say for the -- in the short-term, it will be dilutive to our margins. So that's how you should think about it. What was your next -- the second one that you had? On the --

Yes, the large deal, you've had a large deal that closed two days after the impact of billings.

So the last deal is approximately two points. Approximately two points on our billings [indiscernible].

Very helpful. Thank you.

All right. Next up is Hamza Fodderwala from Morgan Stanley, followed by Patrick Colville from Scotiabank.

Thank you for taking my question. And I'd also like to offer my support to you and all your families. I'm sorry, we couldn't be there in person this year as well. So, I wanted to ask a question about sort of the product refresh and I think this was earlier, but maybe in a different way. I think if we look at your historical product cadence, it suggests there should be -- I think new hardware coming out, possibly early next year. What is your -- what are you seeing in terms of demand and sort of interest around that? And to what extent our customer's sweating their assets in anticipation of a new appliances that may be coming up from Check Point?

It's a good question. I wish I knew the answer. I think we are -- again, we are getting very good indicators about the price performance and about on products. Like every time, we are always looking to refresh and renew, but I don't see -- I don't know if there is a built in expectation in the market or not. And don't obviously can't speak about the timing of new solution. By the way, last week we did announce a small newer clients, but we didn't mention it here. Actually for ruggedized environment, for mission critical applications and so on, it's a small market, small sub market, but we have a very good offering. So we did come up with a new one already last week.

Thank you.

Our next question is from Patrick Colville from Scotia Bank, followed by Joshua Tilton from Wolfe Research.

Thank you so much for taking my question. Echoing as a analyst, our thoughts are with your family. Just wanted to ask a clarification question. And then there is a proper question. The clarification is, did you say that you thought 2Q was the bottom in terms of product demand and 3Q, you saw signs of improvement. And then I guess the other question I want to ask is, why Perimeter 81, because in our field work that traction was kind of really strong in the SMB space and maybe lower mid-market but not ready to enterprise and Check Point's as a business has had excellent success in the enterprise. So why that assets?

Okay. So first, you're correct about what we said about the market and Q2 being the bottom and Q3 seeing some turnaround and improvement in demand for firewall gateway. So that's correct. About why Perimeter 81, not only because the traction that we have, but because of the technology. I think they have a differentiated technology, they are a hybrid model of doing some work in the cloud and some work at the client side. I think is a very good one in terms of the right architecture, I believe in that. And then what we also found that in many cases -- and again, we looked at many companies in the SASE space. I can tell you that in the past, we've almost completed two acquisition in that space and somehow during the due diligence we decided to back off. And the main reason, but we've seen some companies that have nice numbers and so on, but the main challenge that we had with them that some of them didn't have, an offering that’s simple but straightforward to setup. That's critical. If you want to go big on the market, you can't be in a solution. Again, if you look at all these startups, many of them or almost all of them lose plenty of money. Now the question is, if you can really make money. And if you can make money is because it can scale, because you can take that and to sell it to 10 times more customers without decreasing the [indiscernible]. Every customer -- if every customer win means huge efforts, huge installations, very slow to deploy. Then you can scale it and getting it to the Check Point's installed base, getting into a 100,000 customer installed base means that the solution has to be simple, straightforward and scalable. And by the way, that in many cases when you take SMB technologies that have to be like that because otherwise you can’t support them and you can’t install them and add to them all the enterprise capabilities that we have in Check Point then you can get it [indiscernible] And I think we have a very, very good, by the way experience with the acquisition of the Email security that we have. We also took an SMB product and our largest installation archive of in 100,000 seats. So we took a solution from 200 systems and we are now making very nice progress, scaling it up. So again we've check that on the due diligence, we know what's our limitations, we know what we need to scale and so on, but we believe it's doable.

Terrific. Thank you, Gil. Thank you, Kip.

Kip, you're on-mute.

Can you guys hear me? Thanks. Thanks, Gil. Joshua Titlon on next, followed by Fatima Boolani as our last question of the day. Thank you.

All right. Great, guys. Thanks for squeezing me in. And I will just say my thoughts and prayers are with not only you and the team but with everyone in Israel. I just want to sneak two quick ones in. My first is just what is your guys' current expectation around a 4Q budget flush and do you feel like you need to see one in order to kind of hit out the numbers that you laid out for us? And then my second question is, do you guys view the Perimeter 81 acquisition as a way to kind of fill a hole that's sort of been left behind by weaker firewall appliances or do your customers kind of still view SASE as an incremental purchase to firewalls with the expectation being just firewall demand will come back at some point.

So let's start. First, I do hope to see budget flush in the fourth quarter, which usually happen. I think the only year that didn't happened in my experience was last year. And when you look at our growth model, it doesn't assume high growth, huge growth in product in Q4. So we kind of don't assume that there will be a big budget flush. If there will be a huge one that we didn't anticipate. I think it will all be upside for us. But again, every year except 2022, I believe, in my career, we've seen a budget flush at the end of the year, last year was the exception. And second part was about the Perimeter 81. I don't think it fills a hole, it fills a big hole which we didn't have because we weren't active in that space. I don't think that in the enterprise space where like 90 some percent of our sales are, people are going to shift to [indiscernible] traffic through the cloud. We will keep their data centers, they will -- they will do that but with plenty of opportunity. When we see a change when things going to happen is on the branch side. Branches are important part and there's, when you take a company with 300 branches or 20,000 branches, then an architecture like what we have with SASE can work very well. I think we incorporating branch offices, but some will have our appliance with SD-WAN and some were pure SASE is also a good architecture for network. I think in terms of remote user access, it's a good solutions. So, I think most of it augment what we do, they are directly in our industry. And I can paint it just a different industry, it's not different one, it's the connectivity. I think 80%, 90% of that is not a replacement for our products, but it's an addition, maybe 10% or 20% was an overlap between some products, but most of it is not an overlap from a dollar standpoint.

Super helpful. Thank you, guys.

All right. And last up, welcome back Ms. Fatima Boolani.

Thank you very much, Kip. And Gil and to your entire team just sending my thoughts and prayers in this very difficult tumultuous times. I wanted to ask Roei a question regarding the Security Subscription segment. So the 15% acceleration we saw this quarter. I wanted to get your thoughts on where that potentially could trend up towards over the next couple of quarters. And if you can help us with some very specific pieces on, are you seeing very strong expansion activity into other product pillars? Are you finding that is really making more meaningful impact in driving the acceleration there? So, any thoughts around where that 15% could go in the next quarter in the near-term and medium-term and some of the key components that you expect are going to drive that acceleration.

So, first of all , Again, we hope we will see the accelerate --I mean, acceleration of this growth. And again, I remind you that we also Perimeter 81 that awkwardly also help us with the accelerating this growth and the subscription because the revenues from the Quantum SASE will be part of this line, I mean, we will be including this in this line item. In terms [indiscernible] I would say, again in there -- hopefully, it will be higher than the 15%, that we see. But again, it's really depends on the execution. And where we see it today, I mean, the drive for 15% growth is mainly coming. I mean, it's coming first of all, from the Email security. It's becoming more and more significant for our business, it's growing and it's strong double digit growth, very strong double digit core. It's -- we don't disclose the numbers, but becoming more and more significant to the subscription revenues. And also it’s driven by expansion maybe under the Infinity platform that come customers are expanding , they are getting more services from us. So all this stuff together with the growth in the cloud also grew double digit in revenues this quarter. All of these came -- brought us to this 15% growth and hopefully we will be even higher in the next few quarters. But it's -- it's still too early to say.

All right. And with that, we'll conclude for the day. Thank you guys for joining us and we look forward to speaking with you after the call and throughout the quarter.

Thank you very much. I appreciate that. Thank you.

Good bye.