Check Point’s turnaround remains stuck as revenue stagnates and cash flow plunges
The Israeli cybersecurity giant delivered another weak quarter, raising questions over how quickly CEO Nadav Zafrir can revive growth after taking the helm.
Expectations for a stronger second quarter, following a disappointing first quarter that sent Check Point’s stock tumbling, have been dashed. The cybersecurity company is reporting another weak quarter, marked by stagnant revenue, alongside erosion in profitability and operating cash flow.
Check Point’s revenue totaled $674 million, in the middle of the range of the reduced forecast it provided last April. Net income per share came in at $2.55, slightly above expectations, but the result was largely influenced by a reduction in the number of outstanding shares. During the quarter, Check Point spent $325 million repurchasing 2.5 million shares.
Excluding one-time items, earnings were $1.87 per share, unchanged from the same period last year. Reported operating profit totaled $185 million, while adjusted operating profit, excluding one-time items, reached $260 million. For comparison, in the previous quarter, when revenue totaled $668 million, operating profit stood at $265 million.
The sharpest deterioration came in operating cash flow, which fell significantly below its usual levels and totaled just $170 million. By comparison, operating cash flow was $262 million in the corresponding quarter last year and exceeded $400 million in the previous quarter.
In the previous quarter, Check Point attributed its weakness mainly to declining sales of legacy firewall products and the gap created while integrating technologies acquired since Nadav Zafrir took over as CEO. This time, Zafrir struck a more optimistic tone, saying: “The results were in line with our expectations, and we continue to strengthen the foundation for growth and the execution of our marketing and sales strategy.”
Check Point’s main source of strength remains its massive cash position, which stands at $4.2 billion. The company bolstered its reserves earlier this year by raising nearly $2 billion through convertible bonds, the first such move in its history.
