Greetings. Allow me to introduce myself. My name is Kip E Meintzer, Global Head of Investor Relations for Checkpoint Software. I'd like to welcome you to our second quarter 2020 financial results video conference at this time all participants are in listen only mode during the formal presentation, which will be followed by a question and answer session. Joining me remotely today on the call are Gil Shwed, founder, and CEO, along with our CFO and COO, Town pain.
As a reminder, the video conferences live on our website Please visit the company's website at checkpoint.com. For your convenience, the replay will be available through August 1st. If you'd like to reach us after the call, please contact Investor Relations by email at kippcheckpoint.com. Before we begin with management's presentation, I'd like to highlight the following. During the course of this presentation, checkpoints 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 Checkpoint's expectations regarding business, financial performance, and customer the introduction of new products and 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 solutions, the impact of COVID-nineteen on our business, including on our product development and sales and marketing efforts and our financial condition and results of operations. The impact of COVID 19 on our customers, suppliers, business partners, and the macroeconomic environment as a whole. Because these statements pertain to future events, they are subject to risks and uncertainties. Actual results could differ materially from Checkpoint's current expectations and beliefs.
Factors that could cause or contribute to such differences are contained in Checkpoint's earnings press release issued on July 22, 2020. Which is available on our website. And other factors and risks, including these discussed in Checkpoint's annual report on Form 20F for the year ended December 31, 2019, which is on file with the Securities And Exchange Commission. Checkpoint 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 results as the reasons for the presentation of non GAAP information. Now I'd like to turn the call over to Tal Payne for a review of our financial information.
Hi, everyone. Okay. Thank you, Keith. Good morning, and good afternoon to everyone joining us on the call today. I hope you and your families are safe during these times.
Through this crisis, our top priority remains our employees' health and safety around the globe. Serving our customers and ensuring business continuity. The resiliency and flexibility of our employees has been amazing, and we are proud of our transition to this new reality. We are pleased with our 2nd quarter performance and our financial results which were ahead of earlier expectations against the backdrop of the challenging COVID 19 environment. Revenues for the quarter increased by 4% year over year, to $506,000,000, and our non GAAP EPS grew by 15% to $1.58.
Before I proceed further into the numbers, let me remind you that our GAAP financial results include stock based compensation charges, amortization required 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 take a look at the financial highlights for the quarter. Product and security subscription revenues were $287,000,000, a 6% increase year over year. Our subscription revenues continued to be strong with 10% growth year over year, reaching $164,000,000.
So to update the maintenance revenues increased to $219,000,000. During the quarter, we have seen strength in our strategic area. Our cloud solutions, both cloud SaaS and Yas, had strong results and continued to have high double digit growth. Our work from home related solutions, mobile access and sunglass agents, which is the complete advanced endpoint security solution, continue to see strong demand with over 300% 90% growth, respectively. In the beginning of the quarter, we launched the vast majority of our quantum appliances use.
We have seen a healthy transition of over 50% this quarter. This quarter, we have strengthened strength in financial Services, Healthcare And Technology Verticals, with significant increase in transactions over $1,000,000. Discount rates increased this quarter, driven by the larger deals currency effect in certain locations and COVID-nineteen. Deferred revenues as of June 30, 2020 reached $1,338,000,000, a growth of 52000000 dollars or 4% year over year. In Q2, while all geographies were impacted by COVID 19, we were pleased with sales execution in these times.
The growth was led by EMEA and APAC. Revenue distribution by geographies in the quarter was as follows. 46% of revenues came from America, 42% of revenues came from Europe, Middle East and Africa region, and the remaining 12% came from Asia Pacific. We delivered strong non GAAP operating margin of 50%. This margin is significantly higher than the sequential quarter as a result of the strong revenue execution and the operating expenses decline.
The operating expenses saving relates mainly to employees moving to work from home. The lower travel and entertainment and the transition to virtualized events versus in person ones. Those expenses are expected to return gradually as more countries are returning to somewhat normalized business practices like travel face to face meeting and partial return to office work. Our financial income this quarter was $19,000,000. Interest rates in the US sharply dropped during the quarter.
As a result, the newly purchased marketable security yield is around half a percent, while previous yields were above 2%. In addition, as a result of the interest rate decline, we see many bonds being prepaid ahead of the scheduled maturity date. The full effect this quarter was a gain of $2,000,000 from prepaid and sold bonds, offset by a reduction of $2,000,000 in interest income. Going forward, as more bonds mature, prepaids are sold, interest income will continue to reduce. Next quarter financial income is expected to be around $14,000,000 to $15,000,000 and continue to drop in about 1 to $2,000,000 a quarter.
Actual results obviously depend on future prepayment and sales of the bond, which is impossible to predict at this point of time. Effective non tax rates for this quarter was 17%, in line with our expectations. GAAP net income was 190 $6,000,000 or $1.38 per diluted share. Non GAAP net income was $225,000,000 or $1.58 per diluted share, an increase of 15% from the second quarter last year. The growth is related to the higher net income on the one hand and the reduction in our diluted outstanding shares.
This quarter, our outstanding shares were 142,000,000 6, lower than planned. As share price decreased during the quarter, we were able to buy more shares in our repurchase program and fewer options added to the outstanding shares. Going forward, we expect the diluted outstanding number of shares to be around $142,000,000 in Q3 and $140,000,000 in Q4 as share price increased in the last few weeks. Our cash balances as of June 30 were $3,096,000,000. Sorry.
$3,960,000,000. Operating cash flow this quarter was very strong reaching $252,000,000 representing 8% increase year over year. The increase is attributed to strong collection, lower expense levels due to the COVID nineteen, and the hedge on our balance sheet. Consistent with the microeconomic trends, we see some increase in some when customers request, for billing or payment concessions. We are committed to helping our customers to navigate this pandemic and use our financial strength to aid in their success.
As a reminder, we hedge our balance sheet against currency fluctuations, hedge effect our cash flow with minimal effect on our P and L as intended. During the quarter, the dollar weakened against the Israeli shekel resulted in a hedge income of $9,000,000 in the cash flow versus $3,000,000 last year. Again, no material effect on the P and L. Our operating cash flow net of tax and hedge increased by 6%. We had $46,000,000 unrealized gain on our marketable securities during the quarter.
The gain was a result of lower spreads, and the reduction in the US interest rates. In February, we approved an expansion of our buyback program for additional $2,000,000,000 and up to $325,000,000 per quarter. During the quarter, we purchased 3,100,000 shares for $325,000,000, which is the cap. On a in an average price of $106 per share. Now let's turn the call over to Gio for his comments.
Okay. Thank you. And now I'm muted. And thank you, Tal, and hello to everyone joining us today. It's great to see you all on Zoom for the 1st time moving, to the new era of technology and to the new era of business.
I would like to begin by wishing you all good health and prosperity during these unprecedented times. Q 2 was probably the most unusual quarter we could ever imagined. Let's start with what we achieved during the quarter. Results were very good. Our revenues were higher than planned, thanks to the good execution by our sales teams, Earning and EPS were much higher than anticipated, 15% increase from last year, but this was mainly due to the very low level of travel expenses that occurred during the economic crisis.
Overall, results were very good, but it only starts there. We continued to expand and strengthen our infinity platform. Infinity provides the highest level of security across the entire landscape network, cloud, mobile, data center, and IoT. During the quarter, we refreshed the majority of our infinity portfolio We began in April with the introduction of the quantum appliances. These appliances spend the entire range of security gateways and now incorporate the highest level of security with better performance, add to that our hyperscale solutions, that provide unmatched scalability and redundancy, and we believe they are the best network security solutions in the industry.
Transitioned by our customers to the quantum families on the way and working according to plan. During the quarter, most of our appliances were already from the new family. In June, we launched our expanded cloudguard family of products. The new cloudguard is the most comprehensive cloud security suite. Cloudguard enables organization to take full advantage of multi cloud environments enabling cloud threat prevention, cloud posture management, and 0 trust access to cloud resources.
In Q2, we added support for cloud workloads. Specifically we introduced the best technology for serverless protection. Serverless and let me expand what it is. Serverless is a new computing model that allows running column demand. We found that the security of this code is quite challenging.
The code is usually built with multiple components that in many cases show high level of vulnerability. Securing it is also a challenge given that you cannot secure the underlying platforms such as server or network on which it runs. Therefore, it requires a new paradigm for security which we now provide. During the past few months, we saw an increased risk and higher number of attacks on critical infrastructure, needless to say how important it is to secure these environments. We introduced a new and unique member to our appliance family, strange name, the 15 70 r, which I like to call the meaning monster.
This small device has been designed to provide everything that is required to secure industrial or ruggedized equipment. It can sustain severe working condition and be installed in quick environments easily. In July, we continued the expansion of the Infinity Infinity family with a new subfamily called Infinity SOX. SOX stands for Security Operation Center. Infinity SOX provides our customers with the tools that are used by checkpoint research to identify, analyze, and prevent sophisticated attack inside and outside the organization.
Last and not least, we introduced last week the Infinity extension for IoT protection that is built to prevent IoT security incident in almost every IoT environment from smart office, smart building, medical, industrial, and critical infrastructure environments. So you can see that during the quarter, we refreshed a big portion of our infinity portfolio, quantum and cloud guard for network and cloud. We developed and launched new additions with the Infinity SOC and IoT, and we continue to work at full force. We managed to land some very nice deals, met more customers and expanded our customer reach to more sea levels, conducted new forms of marketing events, All of that were not leaving the house and not taking flights for almost 4 months now. Before I dive in and continue, I'd like to once again thank the commitment of everyone that makes this possible.
Our partners went out of their way to keep things working. Our employees have shown a level of work, commitment, and creativity to support our partners and customers during these times. I'm sure that this is part of what keeps the world float, but it is not a trivial task. Talking about customer wins, we had some nice customer wins, this quarter. We continue to see shrank in our regular segments such as financial services.
But to surprise me is the success we've seen from our customer segments. We had some major deals in the health care, government, technology, transportation, communication, and even hospitality. Lending 7 and 8 digit deals during this period in these sectors is clearly not trivial. Overall, we've seen a healthy increase in large deals this quarter. We've also seen some correlation between the coronavirus and the business in the viral geography.
For example, in the first quarter, we saw some weakness in Europe as they struggled with Corona in March. This quarter, we've seen Europe join some recovery signs, a large part of Europe has been able to deal with the pandemic effectively and get back to a more normalized business towards the second half of the quarter. Overall, Europe had a very good quarter. Cyber activity similarly has also shown some links to the corona. We've seen attacks that are, taking advantage of the situation and are adapting to the environment in different countries When the corona started, we saw a huge increase in malicious websites that are imitating health related websites when government started to provide financial aid packages There was dangerous activity focused on stealing that money.
We've seen when people are trying to find work, we're seeing a lot of CDs that become at our leisure and are very, very dangerous types of malware. And in general, our research team is focused on exposing and helping to prevent these attacks. Customers all over the world need to adapt to the new environment. The attack surfaces and customer exposure is now much bigger and broader than it to be. The work from home environment creates a huge risk where more entry points, 100 or 1000 times more remote uncontrolled session, unmanaged computer that are accessing the network.
And in many cases, they're also accessing critical system. That were not accessible before. Many of these external users are not secured. A recent survey we did showed close to 40% of people working from home or doing so from computers that collect basic security control. There are more voices that are calling to take action and get ready for a cyber pandemic that will come.
Now that we are all much more aware of the implication of a pandemic, we have realize that a cyber pandemic can expand much faster than a biological one. A single patient can infect not 2 patients in a matter of days, but hundreds of additional computer in matters of minutes or second. Part of our job and opportunity now is to elevate the level of readiness of the world to address a cyber pandemic. Our researchers have been featured in almost every publication and media outlet with some major findings. I can give many examples, but in the interest of time, I'll just focus on our largest findings this quarter.
Publish last week by Microsoft, the new vulnerability our researchers have exposed is called named Sigred. It was rated 10 out of 10 in terms of its criticality and security exposure by Microsoft, which call it warvable. Meaning that it can behave like a warm and expand from one computer to another. Almost every enterprise is exposed to cigarette which attacks the DNS Windows servers and is accessible from the outside, not just from the inside. In my career, I haven't seen many vulnerabilities like this one.
I heard you to check with your IT teams to make sure they've taken the steps to patch and block this attack vector. It is critical. The good news is that our gateways can block this attack, and we have provided some easy instruction on how to stop this exposure without major upgrades. Now switching back from technology and cyber to business, our business environment remains quite active The number of challenges and opportunities in the cyber world remains high. We have a strong focus on increasing our sales performance and sales productivity.
I believe at the past few quarters, well, being the opposite of business as usual, demonstrated we're making good progress in our sales execution. Looking forward, most of the assumptions we talked about last quarter regarding the business model in Corona times remain valid. While the second quarter has proven to be a good one, the level of uncertainty isn't going down. We see high levels of volatility and uncertainty. Countries in Europe and Asia are opening up, but are far from being business as usual.
Some countries start to see a second wave of the virus. Some are still in the midst of the first wave. Some are in euro can be proven challenging. And in the US, the situation is far from normal. I also believe that the economic situation around us is bound to affect our business at one point or another.
There are some factors that can drive increased business activity in cyber, such as the increased dependence on the network, the increasing cyber security risks shift to cloud and more, but there are also factors that can be quite negative such as the overall economy and the fact that the unemployment reduction of personal spend around the world will translate to different levels of business activity. And most important, the corona pandemic has showed us with the rate of change and the assumptions we make can change overnight. Just like the previous quarter, I'll refrain from giving you a range for the third quarter or for the year. I will remind you that the big part of our revenues is coming from annuity revenues and most of that is already in for the quarter. Our pipeline for the quarter remains healthy, but the situation remains very fragile.
On the expense side, this quarter, we had much lower travel expenses that drove profits and earnings. Travel is not expected to resume its previous levels soon. But Europe is starting to open up and expenses will increase. Also, we are learning how to utilize some of these budget in other activities that can drive business such as marketing and investment in future projects and infrastructure. So I'd like once again to thank you for joining this Zoom session today, and thank all our customers, partners, employees, and new investors and analysts that are making the impossible happen and helping us deliver our vision of living in a connected and safe world.
Now we will turn the call over to Keith for your thoughtful questions. Thank you very much, everyone.
Thank you, Gil. Before we begin the Q and A session, due to time constraints and the consideration of other participants, please limit your outs to one question and one question only. Our first question today will be coming from Sterling Auty at JP Morgan followed by Saket Kalia and Barclays.
Alright. Thanks, Kip. Thanks, everyone. I really appreciate you doing the call on this format. I think it's very helpful.
So my question really is centered around probably the obvious, which is any sense how much of the strength and demand in the quarter was actually driven directly by COVID and perhaps might not be as a sustainable. So things like capacity expansion for remote access versus drivers that might actually be more sustainable, as you mentioned, the annuity revenue or other factors?
I'm not sure that I have good data for that. Even though I can say that in general, there was a tough quarter I could have mentioned few projects that were very much an immediate increase to capacity. Again, they did a huge effect, but they were still there. This quarter, I think the projects were projects that are needed, Again, some of them may have been affected by Corona. By the way, some of them may have been affected negatively.
For example, one of the largest deals that we did this quarter it is an amazing deal that we're very proud of in a health care sector was under a lot of pressure because this, anti is suffering like the health care industry in many parts of the world, specifically this was in the U S, suffering from a major, pressure on the on their spend level through the infinity model through Many of that were able to tailor a deal that's very good for them and also very good for us or pretty good for us. I wouldn't say very good for us. Actually, I can say that if it wasn't for Corona, the deal might have been even bigger for us, at least. So I think overall what you're seeing is, is a reasonable healthy demand, I think demand shouldn't stop. But again, with corona, you can never know because, as they said, I mean, so far, I must say, again, you're you're the experts, in this, but I haven't seen the impact of the general economy employment, the consumer spending still on our business sector.
Again, I don't know about other business sectors, but at least on the technology sector, from everything I hear, people try to remain, to behave almost like its business as usual and Unfortunately, it's not fully business as usual now. Got it. Thank you.
Our next question is coming from Sakai Calya at Barclays, followed by Walter Pritchard at Citibank.
Great. Thanks for taking my question here. Can you can you hear me okay by the way, Kev?
Yep.
Okay. Excellent. Okay. Great. I echo my, my thanks for holding in this format.
Gil, maybe for you, seems like a lot of early success with the quantum family. I think I think it was mentioned about 50% sort of transition to that new family and really just the first quarter of availability. Do you feel like it's the sandblasted agent that's differentiating in the family versus prior ones, or is it something with hardware that you feel like is driving that early success?
I think it's both. I mean, generally speaking, I don't understand why I'm not all the customers are moving to the new family because, generally speaking, you get better cost performance from day 1, and at least with me, if there's a new model, I would never buy the old one. I would always buy the new one and it provides, again, everything from 30% to a 100 or 200% more performance for the same dollars. It also includes the additional security with the standard of activity into every appliance. So for me, it's a no brainer that people are moving.
So I
would ask the opposite question. Why people are not always moving to the newer family? And I think in many cases, customers have issues like certification, bids that are already out, and, and things that preventing them from jumping ahead to the, to the new model. The fact that between the 1 quarter, the majority standard already from the new family, I think mean that we did all the things right this time. I mean, the performance is right.
The security level is right. Price is reasonable and so on, and I think that's that's that's a good sign. And, I hope that things will remain that way.
Got it. Thank you.
Walter Pritchard from Citi is next, followed by Saul Yeal of Oppenheimer. Go ahead, Walter.
Thanks. Tal, question for you, you gave some growth rates on the on the various cloud products. I'm wondering when you might be in a position to give us a sense of to the percentage of revenue exposure there. And how important is that segment of the business growing and becoming meaningful to your your overall, revenue growth rate accelerating?
Well, I think I would say it's probably well, well, it will be above 10%. That's the answer. I think it's more, but it's growing very nicely. Actually, I didn't give you the percentage, but it grew year over year around 70%. Cloudguardias and SAS, so it still continue to grow in a very fast space.
So when it will become more than 10% or probably get more data, but it but it's growing very nicely. And the nice thing to see is not coming only from, our EAS or Dome9, which we acquired the EAS the SaaS, it's really all of them growing very healthy.
Okay. Thanks.
Kelly Al from Oppenheimer is our next question followed by Fatima Boolani from UBS.
Thank you.
Thank you.
Hi, everybody. Hope everybody is doing well. Guil Tal, question on the billings front. When we look at the healthy billings, numbers you provide us with and you've showed us. Is there a good linearity between the billings performance and your geographic breakdown?
Meaning to say, did you have good billings coming out of the euro, versus old key billings in the US or could it be the other way around?
So you see that the first you can calculate the implied booking don't relate to it, but you can see it was a healthy implied booking stronger than previous quarters. It's it's it's called it it goes hand in hand with the booking, so it's not like there's a mismatch year. It was a a strong booking. All of the positive, of course, but the the main strength we seen was EMEA and 8 bucks. So it's almost in line with the amount.
It was slightly weaker in Q1 and Q2. It was very strong. We saw a lot of, healthy large bills we saw increased both in the total dollar and in the number of transactions. So it was a very healthy quarter when it comes to deals over $50,000 deals over $1,000,000, since strength in, in large deals, by the way, also in the US was quite strong. But the strength, the main strength came from the U.
S. From EMEA.
Thank you.
Our next question is for Fatima Boliani from UBS, followed by Greg Moskowitz at Mizuho. Go ahead, Fatima.
Thanks, Ted Buck. Question for you, Tal, you were pretty explicit about the software carve out, related to quantum. So I'm wondering with the momentum that you saw with the quantum appliances this quarter, how did that impact, product, growth rates to the extent, you know, product was more dehydrated as you refer to it, relative to the past. And if you can give us some incremental color around shipment volumes and ASPs and ASP trends relative to the predecessor family, that would be really helpful. Thank you.
Sure. So if you recall, we talked about the the risk involved when you launch a new product and we said there's 2 risks, of course. One is because the performance is higher than people might move, to lower level, lower cost appliances. And the second risk was relating well, that wasn't a risk that effect, that because we bundle NGT NGTX or the sunglass versus the NGT, which was a lower value than because now we bundle higher volume, more dollars will go into the subscription. So I will say the following, both happen, but in a muting, in a, in a muted way, in the sense that SP in some areas moved down, in some areas move up in January, it kept the same area on the average.
So that was good, good phenomena. So we didn't pay a price there. And and when it comes to the sunglasses, it had more. But again, because of the mix of the appliances, the increase was lower than than I anticipated. It doesn't mean by the way that it'll continue that way because as you know, it depends on the mix of the appliance that we sell in the quarter.
So for this quarter, with 50 percent transition, not 100%. And the mix of the appliances, it was actually breakeven in a way.
Our next question is from Greg Moskowitz of Mizuho followed by Ben Bollin at Cleveland Research. Go ahead, Greg.
Right. Thanks, Kip. Hi, everyone. So, Gil, you've been making some good improvements to your cloud security portfolio. And you also highlighted that in your prepared remarks.
The question is, are you seeing success success there primarily by selling into your installed base? Or are you also seeing a a genuine impact with regard to landing, new customers as well?
I think we're seeing both, we're seeing a lot of new customers coming from the cloud. And I think in general, by the way, what we're seeing with our advanced technologies, like beyond the perimeter, the endpoint mobile cloud, the overall infinity platform are great door openers for new customers. And then actually, by the way, our statistics shows that new customers are more likely to buy the advanced technologies with existing customers. So, so it is very helpful. Keep in mind, but again, we have a large number of, very important customers.
So these customers, we're always trying to, spend and break into a traditional segment. By the way, not always is. It sounds trivial, but remember, the network security guys that are buying our solutions and are very good and loyal checkpoint customers are not always the ones that, talk about different security technology. And things like our infinity stock, for example, that we launched just last week. Again, I don't know how big is the addressable market there if huge or if it's small, what I do know that it can open as the door to many more important influencers in the security decision, making in companies.
So, I think we are selling both to existing and new customers. I think we have, like, I don't know exactly, but like 4000 cloud customers by now, which is a huge number, I think, by any means, comparing to any company in the marketplace that a nice number of enterprise customers. Thank you.
Thank you. I just did your question, sorry, just in the chat, Keith. Says, can you talk about the hiring trends in the quarter? What are the hiring plans for the year looking like now?
You wanna answer it now?
You can answer that deal. Yes. I
think overall, we are, keep hiring people. Unlike other companies, we haven't made any hiring freeze. We've hired about 100 more employees this quarter. So our headcount is almost exactly 5400 people around the world. We're not too aggressive on that.
We're also not letting many people go. I think this point of time, I'm trying to give every opportunity and reemployee the maximum opportunity to prove himself and stay in checkpoint. I don't it's a good time to let people go. I'm talking about, I mean, their own performance. So we are trying to give people the maximum opportunity to stay and prove himself at the company.
But overall, we grew by around 2% headcount just this quarter alone to roughly 54100 employees.
Alright. Our next question is from Ben Bollin of Cleveland Research followed by Rob Owens of Piper Sandler. Please go ahead, Ben.
Thanks, Chip. Good afternoon. Thank you. I appreciate you guys taking the time to do this. I wanted to ask about the channel strategy that's been developing in particular in the Americas.
You've got some new management, program keeps evolving. Could you talk a little bit about your assessment on how that has developed? Maybe talk a little bit about how you see contributing to pipeline, new partners, new customers. And I'd be interested in your thoughts on how you see it, you know, playing out next 1 to 2 years. What's the long game here?
You know, what are you seeing today? You know, where does this go? Thanks.
So So first, I want to say we've always been a 100% channel partner company, even though there's a shift of who controls the deals and who brings the deals as opposed to, the the the other roles of the checkpoint as the vendor and the channel. But partnership and channels have always been very, very important for us. I'm proud, I think I've started the security cyber security channel 26 years ago, and I'm very proud that it's still with us and still exist. Having said that, we can do much more today with the channel. I think, we can leverage the channel much more.
We can bring new customers with the channel. And I think what we're dealing with now is, a, creating the right business environments for the tunnels to, to succeed. 2nd, to identify new partners where they are needed, and it's not one place. It can be national partners in the U S. It's can be specific partners that specialize in cloud.
It can be very, very different things. I think we brought new leadership to the channel area and checkpoint, both worldwide and the the US 1, all are based in the US. Think we're proving to, to work hard and to be very committed to that. I I can't say that, that I have today a huge drive of business that's new from the channel yet, but I hope that it will come. I mean, we are very committed to that.
I think our channels are committed And I think eventually that can lead to a business extension and more new customers and more opportunities.
Rob Owens. Your next question, Rob Owens from Piper Sandler followed by Brad Zelnick of Credit Suisse. Go ahead, Rob. Off. Can we unmute?
Thank you.
There we go. Thanks, Kip. Thanks, Kip, and good afternoon, everyone. I wanna talk a little bit about your new new appliance, the 15 70 R, and really the convergence between IT and OT networks. And I think the OT side had traditionally been service by other sets of vendors, either cyber related or or some others.
So, maybe you could elaborate, Gil, a little bit on the convergence potentially. And is this an opportunistic solution, or will we see you develop further things to address OT opportunities?
No. It's actually not an opportunistic solution. It's a very strategic one in terms of what we do. I mean, first, the security technology that we have can address all these environments, investments that we make on the, not just on the IT, but on the Altice either for many years. Now by the way, are expanding more onto that with the IoT solutions.
And IoT and OT in many cases are, are not the same, but we are related. And, I think and by the way, the new appliance that we have is the 2nd generation of, ruggedized appliances we had the previous generation, 1200 R was a terrific one too, and the new one is even more impressive. If you look at the picture on our website, you see It's equipped with all kinds of communication. It can be a real stand alone with a Wi Fi, with a components of different wireless communication that can be attached to that. It can sustain any weather condition.
And again, we have installations of that on the boats, on the trucks, on on the power stations when you don't have a server room and it's extreme weather conditions, it's pretty high performance. And it's very low in form factor and relatively low in price. So I think it's quite unique in the industry. And again, it's part of the fact that we want to be everywhere on the network. And the not, again, it's packing the technology that we have for years with the right package for these environments.
And I think very, very important for us and we will see more and more expansion in these areas.
Great. Thanks. Our next question is from Brad Zelnick of Credit Suisse. Followed by Philip Winslow of Wells Fargo.
Great. Thank you. Can you guys hear me? Yeah. Oh, excellent.
Thanks so much. Nice to see everybody and congrats on a on a nice quarter. Gail and or Tal. I I wanted to about refresh cycles, and I appreciate in the past, you've always told us it's hard to distinguish because they're always customers buying new boxes and replacing old we're at different points in time. But are there any observations you can share from a refresh, fresh perspective?
Specifically, is there any reason think that just given the disruption in the world, that customers might be sweating their assets and taking longer to to update their hardware. Thanks.
I I would say first, I mean, the the again, as you can see, the demand remains healthy. The results are good. They are on plan and some and some place is actually ahead of plan, I mean, in terms of internally in our my internal measures, many things that are slightly ahead of plan, which is great. I would say that in general, in this corona day, these customers are trying to do anything to avoid changing something physical. Think about most of our companies, most of companies, where no people in the buildings.
And again, people do go into the data center. People do to go to do maintenance, but they are not futuristic about that. So we try to minimize the number of changes that you make to to the physical infrastructure. So the fact that business remains almost as usual means that there is some nice, need or nice demand, with that regard. That's what I would say.
Again, I can't say what if maybe what if there wasn't corona, there was much higher demand, maybe it's the other way around. But in general, if you just think of the sense an IT department or on the general, we're trying to do everything without touching something physically. So people are not rushing now to bridge due to huge installation. We are trying to postpone it, not to accelerate those.
Thank you. Our next question is from Phil Winslow Wells Fargo, followed by Taliani of BofA. Go ahead.
Great, thanks. Thanks, And I appreciate you all doing doing this call in this format. I'm glad to see you all are well and, and, Kipp, congratulations on the haircut. The, a question for, for, for Gail. Gail, obviously, you mentioned cloud native security, you know, checkpoint, you know, cloud guard, for example, serverless products.
You things we're hearing about is obviously an acceleration in digital transformation sort of due to COVID that need to be more agile to develop faster, to iterate faster in terms of software development, where are we in your opinion in just the adoption lifecycle of cloud native development? I mean, is this sort of an RFI year and next year RFP year or is COVID accelerating then? How does security play into that sort of the decision making process?
I mean, in general, COVID through the accelerates that. But most of these technologies are fairly new. I mean, if you go, our companies that are called born to cloud and they are using all these technologies and big businesses, most of them are not giant companies, few are, but, most of them are not. And most of them, by the way, are using their own home built security. If I look at the general market, the big companies like the one you're working for or the one most of the people here work here are investing a lot in the cloud, but still 90, ninety five percent of their application are in their private cloud, not in serverless function, not in the public cloud, and so on.
We do see a shift. We do see an investment. We do see that people need that. And, I think right for many companies, this is seen in RFI, RFP stage and not law large deployments. I think in my mind, these technologies are essential and unnecessary.
That's why we invest in them. So I mean, we are seeing a high level of interest. We're good things that we are doing with the technologies. They are cloud native, by the way, the ease of using that, this is a huge shift and maybe a year from now or maybe quarters when I will speak about it.
Keith, can you unmute yourself? Unmute yourself. Try unmuting. There you go. Yeah.
Can you hear me? There you go.
Okay. I'm having a little audio connection in Hopefully. Okay. Let me try again. This is to Gil.
Gil, BMO a large checkpoint customer. And when COVID hit, we actually, increased our purchases to firewalls in March and April. And normally, we have a fairly steady cadence associated with our purchases of checkpoint firewalls. And so in order to increased capacity and enable work from home, we, we really had to, go out and purchase some incremental firewalls, but what going back to Sterling's first question, are you not seeing that from other customers, or you just don't
I didn't hear the last part of the question, but I'll try to answer based on the first part. As I mentioned in March, and we saw some nice deals that were driven by increased capacity for, for the Internet based on the corona crisis. I must say with the deal I saw in the second quarter, especially the large run. I haven't seen many of these large deals, almost all the large deals that we saw had, good reasoning, that we're not Corona related. It's maybe very possible, but there are some deals that we haven't seen.
Remember, we process, north of 20,000 orders every quarter. And it's very possible that we have, some mid sized deals that are, more corona driven. Again, on the same token, we have a lot of business maybe have been postponed due to corona in many places, based on multiple reasons. So I I'm sure that we did it like that, but but again, in Q1, I could have mentioned we had this and this and this and those deals, and I could have quantified that in Q2, It seems to be like it was less, of a of a driver to the business. And Tal, I don't know if you want to add to that.
You all analyze the number very well. Yeah.
Of course, I didn't see it in the large deals, actually. But when I looked at the mobile access as an example, which is a VPN access from mobile devices like laptop, then we see some increase and I gave you the percentage by small numbers. So if I'll have to quantify it, which is hard, based on what I see, I would say a few low millions. I didn't see anything dramatic there.
Alright. Our next question is from Jonathan Ho, of William Blair. Jonathan, can you unmute you go. Great.
Just given the performance this quarter and now that you have, you know, a little bit of coronavirus, experience behind you, is why not provide guidance at this point? And what are some of the main concerns that you have, you know, related, now that you have a bit more experience sort of working through these environments? Thank you.
And I think it's in the next question, and we are debating with that also internally. As I mentioned, the level of uncertainty is still very, very high. Fact that we had, no huge surprises up or down this quarter, slightly up. Again, the end of the date was reasonable, doesn't mean that it's not coming. And again, if I look at the world today, we're still struggling with supply chain issues, every day.
It's not over. I mean, we are still, the level of demand is changing all the time. Again, we're in countries in Europe open, but then again, with some increased activities, some countries are going into a second wave and they're putting a new lockdown. I'm I've already so, I mean, the level of uncertainty still remains huge. So that's one one element.
And the second element is, of course, unrelated is the whole effect of the micro economy. Up to now, we haven't we know that the macro economy in most countries around the world is being hurt in a really bad way. With the level of unemployment, consumer spend is not going to be the same. Businesses are not going to get everything they used to get before. So far, we haven't seen a big, meaningful impact on that on our business, maybe except a few small sectors.
But I'm sure that I'm not sure. It is a very high likelihood. I'm not sure at anything at this point. I must say, but it's, in my mind, there's a high likelihood that some of that will have effect. Now the effects may be 3 months delay, maybe 6 months delay, maybe 9 months delay, And, again, I can't predict that.
And once that happens, things will start to impact again. It's not just checkpointed everything. So that's why I'm saying our sort of next quarter, annuity revenues are relatively predictable. But beyond that, the level of predictability in my mind is very low. And again, I would like to think that we have upside.
I would like to think things will be heading well. I've mentioned it in my, in my, comments earlier, and I'll mention it again. Our pipeline now looks positive, actually giving more feedback on what we've seen so far. So the pipeline that we have for the quarter looks healthy, but everything can change in, in a minute in our world. And the last thing you want to hear from me is, you know, all the good cases or all the bad cases that can happen was, and I'm sure that if there are, at least 10 cases, I won't find the right case that will happen because the world has proven to be completely unpredictable at this point.
Thank you. Our next question is from Gray Powell of BTIG followed by our last question from Mandeep Singh from Bloomberg. Go ahead, Greg.
Great. Thanks for taking the questions. Can can you hear me okay?
Yep.
Okay. So so, yeah, it sounds like you're seeing pretty good traction on the cloud guard product set. Can you maybe talk about the advantages that you have there, particularly cloud guard connects, versus some of your cloud native competitors? Just why customers choose checkpoint over peers?
So first, I mean, it's a broad question. We don't have much time. I would love to, by the way, provide you if you want get you with our product experts that can give the full pitch, which may take more than 2 minutes. But in general, I think that no other company has a cloud as an umbrella for the cloud like we have. I mean, the solution that we have is Broadhub and anything I know in the marketplace, By the way, it's one architecture controlled from one portal.
There are other companies that have, I don't know, 50% of the components we have or 70% of the components that we have, but I don't think that we're at the right quality. We are not providing prevention and they are not, and they are not connected and managed from the same infinity portal or the same tools. So overall, I think what we have Amazing. Now again, now go tool by tool and, the cloud posture management, what we have is amazing. The cloud connect that we have ability to connect.
For example, the CloudGuard Connect enables you to both connect to cloud resources and also connect to traditional, network. So connecting the price, by the way, that's been a huge issue connecting both to the public cloud into the private cloud. When you are a customer, you are, or you're an employee, you want to connect both to the cloud resources and the and the cloud native solution provide just one. And some of our competitors provide only the other one. We provide both.
So I think these are some of the elements that we have. So it's coverage, it's manageability, its level of security, and the fact that everything revolves around prevention. And last but not least is the fact that it's integrated and you can get it from one vendor. And again, when you're thinking about the cloud, We have so many technology, and now you think that we need another dozen technologies there to secure this cloud. That's almost mission impossible.
If you go with CloudGuard, I think it becomes mission very possible that one suite can give you the highest level of security.
All right. Thank you. And our last question is going to come from Mandeep Singh. Please make it a quick one. Thank you, sir.
Sure. Thanks, Gabe. Gail and North Hall, can you give us a sense of what percentage of your customer is shifting from MPLS to SD WAN? And how does it affect your outlook and product mix expectations?
That's a very good question. I don't know the answer to that. I must tell you that there is a level of interest in SD WAN. It's still a relative small market, but the market that's evolving and interesting, we are both developing capabilities in our own products and are also partnering with some of the best vendors in the So far, it works fine with strategy for us. Moving forward, we're going to keep this strategy, but we're going to evaluate it all the time.
And again, I I'm still don't know whether SD WAN will develop into a security related market segment or to a networking market segments. And given my experience from the past, we've been technologies with networking technologies found themselves centerpiece to the security and there's been technologies that we invested in, and we were participating thing in 5 years ago or 25 years ago, but turned out to be complete networking technologies and left the security vendors outside. So it's for me, it's too early to say whether SD WAN will trend to be cyber or security related or networking related. I don't know, Tal, if you want to go for some of the questions still in the chat room. Yeah.
I think they will like if I looked at it there, 2, one was the digital transformation. When we look at the outside of the greater capacity related spending, could you frame the most substantial digital transformation efforts driving security spend, and how do you think about the sustainability of those efforts? Deal, go ahead.
I think that in general, the digital transformation, we're very, very needs cyber security. And what I think the challenge now is that we're it's a very fragmented market. I wish there was, like, one technology that we can say, that's the future. Let invest in it and vets. Hopefully, we'll find the silver bullet that will win the market.
Today it's divided into, again, as I said, dozens of subsegments These segments, sub segments are very much related to different things. Customers are very confused about the level of security and there is much more security that's needed. So I think long term for the market, I have no doubt in my mind that security will be essential and the market will grow. Which submarket of digital transformation, cloud, whether it's serverless containers, cloud posture management, and I can name probably, another dozen names of, of technologies will will become the winning one. I don't know.
And by the way, that's one of the reasons we we have this portfolio of cloudguard that we believe addressing most of the important elements.
Alright. I think our conference has come to an end. Thank you guys for joining us today. We appreciate, your participation, and we look forward to speaking to you throughout the quarter. And if you would like to speak with us after the call, just send us an email, and we'll try and fit you in in the coming days.
Thank you guys, and have a great day.
Thank
you very much. Really appreciate you take into time. Thank you.
Bye.