All right, thank you. Good morning, everyone. My name is Brian Essex. I'm JP Morgan's Security Software Analyst. Thank you all for joining us. Today, I'm really excited to have the new CEO of Check Point, Nadav Zafrir, and their CFO, Roei Golan. Before we get started, one thing is I'll leave 10-15 minutes at the end of the session for Q&A if anyone has any questions. Before we kick it off, we'll throw it to Kip in the back to do our safe harbor.
Hey, thanks, Brian. During the course of the presentation, there may be forward-looking statements made. As with all forward-looking statements, there's lots of risks and uncertainties. If you'd like a full list and want to get a good night's sleep, take a peek at our risk factors in our 20-F. As with all forward-looking statements, there's no duty to update except where required by law. Back to you, Brian.
All right, great. Thanks, Kip. And Nadav, Roei, thank you very much for joining us this morning. Maybe to start, Nadav, I think at breakfast we talked about you're 149 days in. That's the number.
Yeah.
Would love to get a sense of, and I know you spoke with Gil for a long period of time before you took on the role, but would love to get an understanding of your expectations going into the role and then how that's matched with what you've experienced over the past 149 days.
Yeah, thanks, Brian, and thanks for having us. Good morning, all. 149 days in, I spent about 50% of my time on the road speaking to probably close to 200 customers, over 150 channels, trying to speak to the relevant people, whether it's the leadership or the people on the floor. Met with probably over 1,000 check pointer s. It is a good time to sort of reflect where I think the state of the union is. I don't think I have major surprises. After 149 days, I think we have a solid and, in some areas, superior product. I'm convinced that we can block and tackle more than anybody else in the industry.
I am not surprised that in terms of our voice in the market, our marketing effort, our funnel creation, our ability to put out a narrative there that is more about the attackers and our customers rather than our own products is something that we need to improve, and we need to improve imminently. Beyond that, our vision about a hybrid mesh flexible platform, a platform or an IT infrastructure that is the reality of most of our customers, and how we solve that with the Infinity platform, I think is resonating, which is encouraging. There is a lot more to do there. Finally, we have made substantial changes, and so far, so good in terms of pulling more go-to-market leadership into the C-suite, starting to infuse new talent into the organization. Some we have announced. Some will come in the next few months.
All in all, I think a good start. I told you over breakfast there's a cut [guess] Israeli movie that when they ask, how do you run an Australian marathon? The answer is you start with a sprint and then you constantly accelerate. I think that's what we need to do. We need to move fast with a sense of urgency, and we're just at the beginning of the journey.
Got it. You sound like a very competitive person. I wanted to ask, if you take a step back and you look at where Check Point was 10 years ago, measured by revenue, Check Point was number one, right, within your primary peer group. Now you have a few peers ahead of you from a revenue perspective. Is the goal to get back to the top of that podium? What is the, I guess, what is your strategy for getting there and what needs to happen in terms of what you accomplish in a given time frame?
Yeah, I mean, looking forward, I think we have different levers to accelerate our growth and our market share. Lever number one, which we're already doing, is focus. Our strategy is a little bit different or somewhat different than some of our competition. We don't think we can be everything for everyone. It is a focus strategy as one example of how you use that lever. We announced that we're not going to be focusing on CNAP, on cloud observability capabilities and posture management. We joined forces with Wiz under the umbrella of our philosophy of an open guard and open platform. That's one lever. Those folks that were working on CNAP are now being repurposed to work on where we want to be a podium player. That's the first lever. The second lever we spoke about is culture.
We need to go out there with a sense of urgency. We need to be more vocal. We need to understand that being an engineering company at heart is not enough. The idea of you'll build it, they'll see it, and they'll come is not necessarily enough. We need to build it, but we also need to explain what's different about it, why it matters. Third is infusing new talent. Fourth, obviously, is thinking about the ratio or the balance between our profitability and our growth. We're using all these four levers. The last one is probably the last lever, that is the profitability lever, because activating it is very easy. Deactivating it is much harder.
Right. Maybe we'll touch on one of those points. I think I've had several investors ask me, and then another one this morning asked me on the culture piece. You've made a number of changes at the executive level. What are the steps you're going to take from a cultural perspective? I think you touched on it a little bit, but how would you describe the culture, maybe what it was the past few years, and how are you going to make it what you want it to be?
Yeah, I think number one is from a predominantly engineering company, we need to be more focused on our go-to-market, all the way from our narrative, our funnel creation through marketing, and where we spend our time. Most of our competition is here in the center of the market, whether it's in Boston or in New York or in the Silicon Valley or in Texas. Our headquarters is far, far away. To be here, we needed to get on a plane and cross the Atlantic. It is what it is. We need to do it more and more. That is a real cultural change. The way to do that is to bring the right people on board. The way to do that is to lead from the front, and that's what we're doing. Beyond that, it's instilling a sense of urgency.
I'm trying to at least two customers a day meetings for me personally. In those meetings, we learn things and we share them. Very openly, very candidly. It's not to criticize any specific person, but it's to learn together. On the marketing side as an example, how do we talk more about the attackers and the challenges that our customers are facing every day rather than talking about our own products and their feature list and why we're doing something better than someone else's. To give you an example, one of our ethos at Check Point is prevention. We block 99.9% of zero plus ones. Now, raise your hand if that means a lot to you. It's hard. Also for practitioners, it's hard because that means that we are saying, listen, give us a premium because we are helping you prevent suffering. It's hard to prove that.
What does it mean that we block 99.9% and our closest runner-up blocks 80%? What does that delta mean in real life? Now, I do not want to walk away from that ethos because I think it is the right ethos. In fact, when I look at where the world is going in the next few years, especially around AI, I think that prevention first is going to be more relevant than it was before because without getting into the nitty-gritty details, AI is going to make some of the detection and response capabilities. When you look at cyber, you are always talking about your hygiene, prevention, detection, response. Detection and response will become less relevant. I think we have an advantage here. It is not enough that we understand it. We need to be able to have the right narrative.
That narrative should go across 7,000 check pointers and another 10,000 people with our channels. It needs to be crisp. It needs to be direct. It needs to be relevant to the people that are making decisions. They need to understand why it makes a difference. I do not think we are doing a good enough job in doing that. I think it is imminent to change that. Now, I am not naive to think that you can sort of flip the culture overnight, but we are seeing good signs so far.
How have things been throughout the company in terms of retention, enthusiasm? Are there quantifiable things that you can point to to at least understand how stable and happy your employee base is as you kind of go through these changes?
I'll be very candid. I don't think we have a retention problem. We do intend to infuse new talent into the company. We don't necessarily plan to have a much larger company. It is imminent to get new talent. It is our job to identify the great experience that we have and our experienced folks who have the passion, the hunger, the capability, the flexibility, the propensity to actually change because it is a changing market. Those that do are a great asset. Those that don't, we need to be very empathetic and compassionate. We need to move forward. We owe it to our customers. We owe it to our channels. We owe it to our investors. That is what we are going to be doing.
Got it. Maybe really the fourth lever that Nadav mentioned was balancing the ratio of profitability and growth. Can you help us understand how we might be able to, I guess, understand how you're going to manage that going forward? Clearly, everyone from the top down wants the company to grow faster, but you have to be aware of what you're doing in your margins. How is this going to play out over the next few years?
I think Nadav mentioned it, that we are trying to focus on areas that we believe that we have the opportunity to be a podium player or we're already a podium player, or we want to be leaders there. We mentioned the Wiz partnership that we had a few months ago that we moved resources, I mean, resources from CNAP to other areas that we believe that we can focus more. I think we're doing more of that in the company. You are looking on profitability. We have today already, I think also Nadav mentioned that we are not aiming now to increase significantly the size of the company because we have already today 7,000 employees.
I think the steps that are being done in the last few months, like bringing new talent, moving resources from areas that we want to less focus to areas that we want to focus more, I think that will help us also to show accelerate growth with minimal, I would say, with sacrificing some of the margin, but not significantly.
I will add one more lever. How long does it take any of us to craft a thoughtful, important, sensitive email? Two, three years ago, it could take us half an hour. If this is like a really important, you want to make sure that every word, throw it into copilot. It will happen in 30 seconds. We are becoming more efficient. The same is happening with coders. That is another lever. We can really do more with less. That is one of the races that all of us are racing. It has nothing to do with the attackers. It has nothing to do with the product itself. I think we can do more with less. That is going to be one of our tasks going forward. We need to be an AI-first company everywhere.
Have you made any progress on that front yet? I referenced IBM at their event last week, talked about 40% improvement in productivity just in their FP&A group, right?
Yeah.
Things like automating journal entries, things that are repetitive, but there's a lot of opportunity there. Customer service could be another one. Anything that you've done so far where you have quantifiable results of deploying AI to become more efficient and productive?
Yeah. You need to separate that to what we've done for our customers to make them more efficient. We have a product within our hybrid mesh platform like AI Ops. You go out there and you measure the health of your posture within the network, and you start doing things preemptively. Not only do you do it preemptive for the customer, but we can also see stuff that's happening with other customers and translate that into a scenario. That's one thing that we've already introduced. We have Playblocks, which allows you to save a tremendous amount of time with policy enforcement and changes. Policy enforcement and changes in large enterprise is a really, really, really hairy problem. It's very complicated. It could be 10,000 lines of Excel that have a history of 20 years. AI is really good at solving those problems.
That we are doing for our customers. Inside, I do not want to say that we have quantifiable metrics yet. We will. Anecdotally, we are seeing it all the time. You are seeing a certain group come up with a new product in two days instead of two months. To be candidly, it is still anecdotal for us.
Got it. Maybe we can hit on the first lever, focus and not being everything to everyone. Where are you drawing the lines in terms of where you're going? I think at CPX, you called out a few segments like micro-segmentation. You mentioned the partnership with Wiz for the segmentation piece. You partnered with Illumio. As you kind of build the company, what areas are you going to move adjacently into? And then where are you going to draw the line and say, well, that's not something that we're a best-of-breed vendor, and so we're going to put it there.
Yeah. Right now, three different areas. The main and most important is hybrid mesh. Within that, the most important thing is SASE. We're looking to see where we need to augment that. If it's not organically, where we can make acquisitions to supplement what we already have in terms of feature lists, et cetera. In our Cloud Guard, you mentioned segmentation. That's another area which I think we need to look at. That's the partnership with Illumio. We're looking at other things within the hybrid mesh. We always have the opportunity to either build it, buy it, or partner. The partner is real. It's a part of our open garden philosophy. Illumio, Wiz, you'll see more. The second area that we're looking at is workspace. At the end of the day, today, you're buying disparate products. You have your laptop security.
You have your mobile security. You have your browser security. You have your email security. At the end of the day, from a practitioner solution based, you can look at it as one problem. You have your connected infrastructure. That is the hybrid mesh. Now you have personas, humans, using that connectivity to get their job done. We want to bundle that. Over here, we are sort of launching that on the heels of the success of our email product, which we announced is going to cross $200 million within a year. It is not a huge number, but it is already becoming substantial. On the heels of that, we want to add endpoint, mobile, browser. Stuff that will augment that, stuff that will complement that is on our radar. Finally, external risk management on the heels of the acquisition of Cyberint.
The nice thing about those three areas is that not only they're complementary, they're also looking at different buying personas. The hybrid mesh is still more around the traditional infrastructure engineering IT folks. Workspace is a more straightforward security sort of buying persona. Actually, it is also something that is more of a top-down approach because looking at the organization from the outside in could be something that's interesting for the Chief Risk Officer, for the General Counsel. Different buying personas. It allows us to approach our customers from different angles, not necessarily just from the IT infrastructure engineering side.
Got it. Maybe a touch on one of those points on SASE. Now that preliminary one is generally available, scale up to, I think, what, 60,000 seats. Where are you in the go-to-market process with SASE, particularly because we are now hearing about a lot of demand in that space?
Yeah.
From a competitive perspective, it's very competitive. Just want to see how you're positioning the company to compete in that SASE market and how effective you think that's going to be.
Yes. I'll say three things and what's our claim to fame and why we think we have the right to win here. Number one, it's looking at this not as a SASE solution, but as a hybrid mesh Infinity Platform solution. So something which is sort of fully integrated into other connectivity tissues within the network, such as our firewalls, WAFs, SD-WAN, et cetera, as one infrastructure. That's number one. The second thing is the unique architecture. We have a flexible architecture. It allows you to consume your security in different ways. It's not cloud-only. If you look at some of the incumbents like Zscaler, for example, yes, a good solution, but it's cloud-only. That has its limitations. It has its limitations on prevention. It has its limitation on usability and latency.
It has its limitation on cloud cost because if you're cloud-only, you're always going to the cloud even when it doesn't make sense from a cost performance perspective. That is our second angle. The third angle is this is an open platform. You can use it with different products. You're not confined into one platform. You can have multiple platforms that work together. I think those three angles is sort of our play here. As an example, we have 32 years of experience. We have almost 100,000 customers. What that means is that we also have a Threat Cloud AI intelligence feed that we can actually feed into each one of the nodes in this hybrid mesh environment.
From a philosophical perspective, this is the way to approach uncertainty about the future through the idea of a complex adaptive system where every node in this hybrid mesh, and sometimes we're talking about millions of nodes, has the same intelligence, the same capabilities as the whole central system. Every node can connect to every other node. Every node can import and export data and knowledge. The whole system as a system is constantly adapting to what's happening in the outside world and to the threat level.
Got it. If we think about how the partnership with Wiz is rolling out, relatively new, and if we think about what is going on with your customers within Cloud Guard migrating over versus new customers coming in because of Wiz, where are we in each of those processes and how meaningful can this be?
I think it's early innings. We just announced this a couple of months ago, and there's a lot of work still to do there. Number one, it's the integration. Number two is the migration. Number three is the cross-selling. We're working on all three. I think positive signs are all. Time will tell if we can actually fulfill all the potential there. When you think about cross-sell, there are different options, right? We can go to a customer and say, "Hey, here's why you should migrate from our CNAP to the Wiz platform. Here's why it makes sense to you." That is a very, we're getting very positive stuff. The other thing is, "Hey, you're using a third party. This is why you should think about Wiz." And vice versa, Wiz customers that don't have our hybrid mesh, here's why you should consider our hybrid mesh.
The one-plus-one here gives you real value.
Does that lead into a situation where your customer only needs to manage one relationship? What is it from the customer perspective? Because now you're going to have two different vendors in that cloud security market.
You want to address that?
Yeah. In the end, today, I mean, it's not done yet. But today, Wiz, I mean, if someone would like to buy CNAP of Wiz, so he can buy it through our Infinity Platform. In the end, they will get the support from both us and Wiz. It's going to be integrated together. I mean, the goal is that one person would be able to support both CNAP and Wiz because we built a team that will be designated specifically to this integration in all areas, in the R&D, in the go-to-market, in the support, that we will work together with Wiz and see how we can. In the end, we don't want the customer to be in a position that we need to call two separate companies in order to get the support. Again, it's still not something to it's still not done yet.
The disintegration is something in process, but that's the goal.
Got it. Got it. I think we have about 10 minutes left. I wanted to open up for questions. If anyone has a question, please raise your hand and wait for a mic, and we will get you a mic. Otherwise, I have more questions. Okay. Nadav, I wanted to dig in on preliminary one a little bit as well. I think now that it is at scale, what are the next steps for that platform as we kind of go through the rest of the year? In the short run, it is three things. I think we are already in a position where everything that we can add to the preliminary one SASE solution is in. When you roll out SASE from Check Point today, you are not just getting the connectivity layer, but you are also getting the policy that can be propagated into every node.
You're getting the threat intelligence into every node. I think that's already done. What we still need to do, and this is a process that we're putting a lot of effort on, is two things. Number one is some of the feature parity that we still have, especially when you look at enterprise. Some of the features that are necessary for some of the enterprises are still not there. We're looking to close most of these gaps by the end of the year. The second thing that we still need to do is scale. You mentioned some numbers. I think today for enterprise, we are ready. For very large enterprise, we are still in a process of finalizing some of the R&D that we need to do for preliminary one. The last thing is the incorporation of preliminary one and SASE into our large sales force.
Not just as a standalone sales force, but as a part of the general sales motion at Check Point. Instead of having 100 sellers, they'll have 1,000.
Great. The next one to ask about your Quantum product cycle. Last year, which was pretty exciting, at CPX, you announced 10 new Quantum firewall engines. Now those have gone through the certification processes at enterprises. I think we saw in 4Q nice acceleration in product revenue growth. In 1Q, even better. How much of that was product cycle driven? How much of that was refresh cycle driven? Are you seeing any refresh benefit from peers that are talking about it in the market?
I think if I'm looking since we launched these new appliances, I think still most of this product refresh is coming from existing customers that are replacing all the appliances with our new appliances. Definitely, we see more and more competitive replacement with these new appliances. I have to say still not enough. Definitely, our position ourselves with these new appliances is much more attractive compared to the peers with much better performance. The pricing is much more attractive. I think we do see the results, and we see more competitive replacement. I think we can do even better there. I think every refresh, this kind of refresh cycle, is also a significant opportunity for us to do more cross-sell because every opportunity that we are doing today, refresh even of existing customers, ourselves, our field, we'll try to sell the email security.
We'll try to sell together with the SASE. It's a huge opportunity that's coming with this refresh cycle. That's definitely an opportunity that we need to leverage. That on the long term should affect positively. If it will work well, it should work positively. It will affect positively our subscription, our AR.
You mentioned price per performance. Who are you typically seeing competitively? And what is that pricing environment like? I mean, I think some of your peers being relatively aggressive on price. How do you manage that competitive situation when something like that happens?
I think the competition is there for many of us on the firewall. I don't think that we did see any significant change in the last, I would say, 12 months. I know that we held the announcement of our competitors about platformization and might be more aggressive around the discount. I do have to say that when I'm looking on our specifically on the refresh cycle, I didn't see any significant change in the discounts there. Again, I think we also launched it with much better performance. In the end, our customer wants the best product. They want the best security. I think that's why, I mean, when you are looking on our install base, which is enterprise and large enterprise, they care about the security.
They want to get the best security, and they're willing even to pay a little bit more if they can get the best security. On the refresh cycle, I don't see any significant change on the pricing.
Okay. Maybe I did not ask the macro question. From a macro perspective, are you seeing any pressure year- to- date? Maybe part B of that question is, what about beginning of April to now, past month and a half or so?
I can start, and then Nadav can end. I do not see any change since what we announced when we announced the earnings, I think, three weeks ago. I do not see any change that is coming from the macro. I mean, just last week, we had our sales leadership in Israel, and we had discussion around, of course, this quarter. They do not see any as of now, we do not see any change in the behavior. Again, it might be changed in the next few weeks. I also remind us all that most of the deals are coming in the last week of the quarter. Again, right now, they do not see any change. It is something that we took into account in our guidance because of some kind of uncertainty that we see in the market. As of today, we do not see any change there.
Nothing from your end in terms of conversation?
Really, look, we're in volatile times. We wake up every morning to bad news, good news, changes. It's just the nature of the times we're living in right now. We don't see any significant impact yet. In fact, volatile times, usually cyber becomes even more imminent. So far, we've been insulated, I think, from some of the effects of this. Obviously, we're going to be affected from macro just like anybody else. Keeping our eyes wide open, but haven't seen anything dramatic so far.
Got it. Thank you. Any last questions from the audience? Maybe if you'll wait for a mic. She's coming up right behind you. Otherwise, I'll have to repeat the question. Just going back to SASE, how cannibalistic is the SASE opportunity, or do you see it being to your firewall market over the next few years? As customers are going through the refresh cycle, maybe for campus or for your enterprise firewalls, are people just replacing that with SASE instead? I'm just curious of what you're seeing.
Yeah, no. SASE for a hybrid mesh platform vision is critical. I do not think that people are replacing their firewalls, but they are looking at an infrastructure solution. That is where this idea of a hybrid mesh comes in. A hybrid mesh has data centers, branch offices, multi-cloud, remote workforce, and you need to provide an infrastructure for all of that. That is where SASE comes in. I do agree that it does make sense for customers that are looking to migrate into SASE from their traditional solutions. They are thinking about what kind of vendor relationship do they want. Do you want to get a different SASE provider than your firewall provider. The answer is it might make sense to bundle it. Although I am not a fan of one-size-fits-all consolidation, there are areas, and this is one of them, where you do want to consolidate.
That's one of the reasons that SASE is so important for us, not just for accelerating growth, but also for our existing install base.
That was super helpful. With that, I think we're about out of time. Thank you, everyone, for joining us. And thank you, Nadav and Roei.
Thank you.
Really appreciate it.
Thanks, folks.
Thanks, Brian.
Thanks.