I'd like to welcome everyone to our 2nd quarter 2021 financial results Video Conference. At this time, all participants are in a 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 Schwed, Founder and CEO along with our CFO and COO, Cal Payne. As a reminder, the video conference is live on our website and recorded for replay. To access the live conference and replay information, please visit the company's website at checkpoint.com.
For your convenience, the replay will be available on our website. If you'd like to reach out to us after the call, please contact Investor Relations by email atgipcheckpoint.com. Before we begin with management's presentation, I'd like to highlight the following. During the course of this presentation, Check Point's representatives may make certain forward looking statements. These forward looking statements within the meaning of Section 27A of the Securities and Exchange Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 include, but are not limited to, statements related to Check Point's expectations regarding business, financial performance and customers the introduction of new products, programs and success of those products and programs, the environment for security threats and trends in the market, our strategy focus areas and demand for our solution the impact of COVID-nineteen on our business, including on our product development, sales and marketing efforts and our financial condition and results of operations the impact of COVID-nineteen on our customers, suppliers, business partners and the macroeconomic environment as a whole and our business and financial outlook, including our guidance for Q3 2021.
Because these statements pertain to future events, they are subject to risks and uncertainty, actual results could differ materially from Check Point's current expectations and beliefs. Factors that could cause or contribute to such differences are contained in Check Point's earnings release issued on July 26, 2021, which is available on our website and other factors and risks, including those discussed in Check Point's latest annual report on Form 20 F, which is on file with the SEC. Check Point assumes no obligation to update information concerning its expectations or beliefs, except as were required by law. 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 our presentation of non GAAP information. Now it's my pleasure, I'd like to turn the call over to Tal Payne for a review of our financial results.
Thank you, Keith. Good morning and good afternoon to everyone joining us on the call today. I'm pleased to begin the review of the 2nd quarter. Revenues for the quarter increased by 4% to 526 $1,000,000 $4,000,000 above the midpoint of our guidance. Our non GAAP EPS increased by 2% to $1.61 per share, surpassing the top end of the guidance.
Before I proceed further into the numbers, let me remind you that our GAAP financial results includes corporate compensation charges, amortization of acquired intangible assets and acquisition related expenses as well as the related tax effects. Keep in mind that as applicable, non GAAP information is presented excluding these items. Now let's take a look at the highlights of the quarter. Revenues for the quarter reached $526,000,000 with 6% growth in product and security subscription revenues. Our subscription revenues continue to drive the growth with a strong 12% increase year over year, reaching $184,000,000 During the quarter, both CloudGuard and Harmony revenues continued to show great results with high double digit growth.
Also Infinity View gathered momentum as customers move to more holistic solution with subscription based pricing. We had double digit unit growth in appliance sales, mainly in the low end appliances and the Maestro that enable the scalable solution. At the same time, we continue to see the shift from product to the subscription revenues as larger portion of deals are allocated to subscription both in appliance deals and Infinity deal. Deferred revenues as of June 30, 2021 reached $1,472,000,000 A growth of $134,000,000 or 10% growth over June 30, 2020, calculated billing offer 9%, quite strong. Revenue distribution by geography for the quarter was as follows: 44% of revenues came from America, 44% of revenues the same came from Europe, Middle East and Africa region And the remaining 12% came from Asia Pacific.
So you can notice the strong strength in EMEA this quarter, And Gil will allude to that. Our non GAAP operating margin was healthy at 49%. Year over year, we had a headwind The weakening of the dollar as we discussed against different currencies around the world, the effect year over year was around $9,000,000 as planned in our budgeting and guidance. Our margin is higher than planned, as we are still ramping up on the recruiting effort. Travel costs while increasing are still not back to normal.
Our financial income for the quarter was $10,000,000 reflecting the reduction in the portfolio yield. As the portfolio is rotating and new investments are in slightly lower or significantly lower interest rates around 0.4% versus 2.5% before. Financial income will continue to reduce by $1,000,000 to $1,500,000 a quarter as we indicated before. Effective non GAAP tax rate for this quarter was around 19%. While tax rates remain unchanged, Our provisions are linked to the index in different countries.
Since the beginning of the year, we saw an increase in index in different countries, mainly in Israel, but also in the U. S, which led to slightly higher tax expenses. We expect similar tax rates next quarter. GAAP net income for the quarter was $186,000,000 or $1.38 per diluted share. Non GAAP net income was 2 $17,000,000 or $1.61 per diluted share, an increase of 2% year over year and above the top of our range.
Cash balances as of June 30 was $4,000,000,000 Our operating cash flow continues to be very strong increased by 4% to $264,000,000 Strength came mainly from our healthy collection from customers with DSO of During the quarter, we continued our buyback program and purchased 2,700,000 shares for $325,000,000 at an average price of $118 So that sums it up for me. And now I'll turn the call to Gil for his presentation.
Hi, everyone. Very happy to see you on our earning call. Actually, we are celebrating today. I think it's our my 101 Earning call 25 years as a public company. We went in Q2 of 1996 was our 1st quarter as a public company.
So I'm very pleased to see you. I'll go quickly I'll try to go through this presentation. I'll skip the first few slides that you So the forward looking statements, but I'll speak about the business highlights. This quarter, I chose to focus on case studies that will demonstrate our 3 pillars of So before I jump into that, a quick introduction. You've seen the data, you've In the numbers, the increase in revenues, the full data I can, so I won't stop on that.
But let's go to state of the business. First, think we've completed a pretty good actually a very good first half, especially in Europe and Asia. If you remember A couple of years ago, we've put some new leadership in Asia. 2 quarters ago, we have a new leader for Europe. And I must say that 2 quarters in, We had excellent Q2 in Europe, very good first half, nice momentum, new customers on all the pillars.
So I'm very, very pleased to see that in Europe, and I'm very pleased to see the first half in Asia that continues with a positive trend even with the few challenges that were being in Asia due to the corona in the Q2, especially in India. By the way, I hope that in the U. S. When we have now a new leader that was in the quarter for like 5 or 6 weeks during the quarter. I hope that within few quarters, we'll be able to see similar trends in the Americas as well.
In terms of technologies and product, the CloudGuard and Harmony product line doubled in the past 2 years, twice since 2019 And now account for 20% of our subscription revenues, almost doubling the amount that they were before. So we see it again pretty good, the same strategic trends that we're speaking about with the Infinity architecture. And last but not least is our Infinity program. The Infinity program includes Customers that are what I would call strategic customers, customers that we commit to for a multi year, they commit to us for a multi year. Usually, most of the time, they buy multiple pillars of our technology, not just one set of technologies.
And this business tripled in revenues and Also in deals that we win that will show in the future in since Q2 of last year, so which is a very, very good trend. So let me speak a little bit about our architecture and what does it mean. So the Infinity architecture includes 3 pillars: the Quantum, that's the network security family The harmony with our latest family securing users, securing access very relevant now as we are corona and post corona Time frame and the remote work is becoming more prevalent in our world. And last but not least is the CloudGuard family. I believe it's the most comprehensive cloud suite in our industry.
All of that is based on a unified threat intelligence, real time threat cloud, unified management and many, many, many other tools that can control the security across all the vectors of attacks. My belief is this is the unique architecture No one else in our industry has. And this is, I think, a very important bet for the future, the consolidation, the simplification and providing companies with the real ability to block threats and the prevention first architecture to block threats on every aspect. As I mentioned, what I chose this time is to give a few customer case studies, all deals that we won in the Q2. Some of them are very large, not necessarily the largest deals that we won in the quarter, but each one or each case study of the customer will demonstrate the use of our technology in the different pillars Quantum CloudGuard Harmony and the overall Infinity architecture.
So let me jump right in and start with the Infinity architecture. So the deal that I want to share with you here, it's a quite interesting deal. It's a Fortune 500 Financial Institution that went through a merger recently. And following the merger, they decided to revisit their security architecture. They had multiple vendors.
They were like many others shifting workloads to the cloud and decided to purchase Check Point Infinity, consolidate the portfolio around our network and cloud offerings, replacing several other vendors that we had there before, namely you can see here The overall is an 8 digit deal for multiple years, again, strategizing and picking the Infinity architecture is the core of our architecture. So this is a nice first example of a relatively large deal that we had this quarter. Let's shift gearing to Harmony. I mentioned Harmony is our newest family to secure users and access. And here the deal we picked It is actually also very interesting one.
It's around Harmony Mobile. Harmony Mobile is the software that runs on our mobile phones. A very underserved segment of the security is in the security landscape. And my belief, by the way, we started investing in mobile security many years ago. This is in many cases the weakest link in all of our security posture.
All of us carry these phones. They see everything we see. They know everything we know. They are connected to our personal life, but they are equally connected to our business life, both to the networks and just by seeing everything we see. And yet less than 3% of enterprises do something about mobile security.
In this example, we're talking about the Fortune 500 food and beverage company in North America. They are one of those that do see mobile security Element, I think, by the way, is one of the reasons is that their workforce also works in delivery, not really mobile people. And they decided to change their mobile security, say 30,000 mobile devices for employees. And each customer we ask why did you choose Check Point? So first, they wanted the complete protection for their mobile workforce.
In their checks and in their arguments, they thought that we have a superior threat prevention. And even more important, they found that the way we block malicious application and also address network traffic. So if you click on the wrong link, If you go to a phishing site, we will know how to block that. They found that technology also superior. In this account, we replaced Symantec that had a similar solution to mobile security.
So this is a good example of, I think, Harmony Mobile, a very important yet still very small part of our portfolio. Shifting gears to Quantum. Quantum is a very important part of our portfolio, the biggest part of our portfolio. In Quantum, we picked here 2 examples. And of course, this is out of thousands of customers that purchased Quantum during the quarter.
But let's look at these 2. First one is an energy company, actually mainly in energy delivery pipelines and stuff like that. They decided to consolidate security in 3 main sites, 36 remote sites And they put the full Check Point solution, 100 of I think it's close to 100 of devices of the Check Point Quantum family. And again, we ask them the question, why Check Point? So first and foremost, it's something we're very proud of it for many, many years is our superior management, the security management architecture and their experience with a single console.
2nd was the highest Malorie catch rate based on their test, based on what they saw. But the third one is also very interesting and you see the slide that impact It's not just the slide, it's everything behind them. They felt the Check Point is the vendor with the safest solution. And what you see here is the number of security or code issues that every vendor reported. You can see that we reported about 16 issues like that compared to over 200 and almost 300 with 2 of our competitors here.
But even more important also, they felt that our code is more stable, more mature, much safer and the product is much more secure, is how we how us, these vendors in the security industry treat our code security. So in the Check Point case, the average number of days to fix the security issues was 6 days, quite fast. In our competitor cases, you can see 4, 5 months to fix a security issue. I don't know how can you be a security vendor if it takes you almost 6 months to fix a security issue in your own code. But that's what the data says, which is by the way based on the reports of the vendors themselves.
So I mean, this is our own reports when what's called the CV is found, how many days later the vendor fixes it. So this impacted this customer decision to purchase Checkpoint and we are very proud of that. We replaced Palo Alto network and we standardize on Checkpoint for their network security. Which is a good example. And let's shift to the second one.
Here we're talking about the European government agency, a government office in one of the big European countries. Like everybody else, their experience is higher and higher workloads as more people government services, government information over the Internet. And we're looking to protect their data centers, their public services now and into the future. They chose the Quantum Maestro. Quantum Maestro, to remind all of us, is one of our biggest differentiator.
It's the solution that allows the customer to build basically a very scalable, agile, flexible solution simply by adding up It can be from a single digit number of gateways to dozens of gateways and yet basically Almost unlimited scalability in the solution and yet on the same time get redundancy reliability because each one of these solutions is part of the cluster that backs up each other. So And by the way, we see many, many examples. That's why we picked this example. Maestro is becoming a real game changer for our customers that are looking for reliability, scalability, performance and so on. So they scaled up, they can scale up now with security on demand.
They can find the flexible solution for their fast changing environment and
Did all of you lose deals for a sec? Yes. Okay. Yes.
Let's see if we get them back here. The problems with modern day technology. Let's see if he comes back here.
Yes. It's probably dropped in order to connect again.
Apologize guys, there was some issue here And I'm trying to resume the presentation. I don't know when till what place did you hear me?
It was the energy company deal. Okay. So I was So probably the next one right after the energy company would be where you want to start.
Yes.
Now let's see how quickly can I shift slides here? Great. So I was speaking about this customer. Here, I was speaking about Maestro. Just to I don't know if you heard it or not.
I was speaking about Maestro. Maestro is our scalable solution. It became a real game changer in the last year, year and a half in our solution. Basically Maestro allows the customer to get a cloud like environment in terms of scalability, redundancy, reliability for your data centers simply by stacking up many solutions and get one very high performance network security solution with high level Redundancy. So in this case, we're talking about a government agency in one of the largest European countries that needed to protect their public services and like everybody else, they see more services provided through the Internet in the last year and a half and we're looking for a solution that will not just meet the current requirement, but will be a future proof.
And Quantum Maestro was the winner here. The reason they quoted is the ability to scale up our security environment on demand, the flexibility of that solution in the fast changing environment and also very important is the EAL4 plus certification. That's one of the highest certification A product in our industry can get. Not many vendor have that certification. So they liked all this factor and replace Cisco with our solution.
This is a brand new customer to Check Point 7 digit deal. So this is a very, very nice win with our European team. And actually, by the way, completes like a winning streak in the same region But every quarter now we win a similar deal like that, major customer, new customer with a large deal. So this is something we're very proud of. Plus, let's move to CloudGuard.
I think we all know the importance of the cloud these days, the ability of companies to move workload to the cloud to support private cloud, public cloud and Cloudera, I think provides the most comprehensive solution for cloud customers. I think we have here 2 examples that demonstrate different aspects of our solutions in the cloud. First one is a technology company, a North American A technology company, like many others, they acquired several cloud startups and they realized that now they need to get more visibility, more control into their multi cloud environment, different companies, different cloud providers and so on. And they purchased CloudGuard Posture Management and Threat Intelligence to get that on this entire cloud. The reason they Quoted is the best visibility across the multiple cloud environment and the superior flexibility here, the ability to do automation, scripting.
Whenever a new asset is added to the cloud, it automatically joins the control panel. Whenever automatic actions are needed to be taken, our scripting ability, allow them to do it automatically. And again, 7 digit deal, new customer to us, a new customer to the cloud and competitive win over Palo Alto Networks. So this is a good example in the heart of Silicon Valley. And switching to the last example, which is a very large, many years Check Point customer on the network side.
It's a Fortune 500 media company. And what they had here is a complicated project. On one hand, they had a new data center, a new private cloud or physical data center. And on the other hand, they are moving more and more applications to the public cloud and they needed to connect the private cloud and the public cloud. And what we purchased here is both CloudGuard and the Quantum Maestro connected together.
And the reason they quoted for choosing Check Point was first unmatched scalability with Maestro, which I think is great and we talked about it earlier. The increased efficiency with the unified management and this sounds simple because I spoke about our management, but here it's another angle of We're the only vendor that have the same architecture, the same management for both the private cloud and the public cloud solution. It's the same management, the same solution that can secure the data on both ends and that can connect the data from the and data center to the public cloud. So that was a very important factor for them, the ability to control it from within the same panel. And last but not least, and I'm saying it here because they conducted very sophisticated tests, real life testing of us versus several other vendors and Check Point got the best results on the security side, on the performance side And you see we won here over Palo Alto Networks and Cisco.
So I mean we're very proud of this 7 digit deal that expands our footprint in this large Media company. So I think overall, I gave you some color about why the Check Point pillars win, and I think you can see some of these reasons. For the real time prevention. By the way, this is a result not just of these few cases, but of many, many other cases that we collect Interview, we asked customers why did you choose us and these are the reasons. First, our prevention first architecture, the real time prevention Sounds trivial, but it's not.
Most of our competitors rely on detection and remediation, which lets the which led to the attacks team, not very good. They liked our security management, something that I think we're winning for 27 years now. And they like the complete solution, and the Infinity and you saw here many, many examples that were part where the Infinity solution and part where multiple solutions from our 3 pillars that start to show the consolidation and the importance of that consolidation in the marketplace. So altogether, we really get that. We think that we can prevent the next cyber pandemic.
We can really protect against the Gen 5 attacks that are now becoming the new norm for Internet and cyber attacks. So this is This part about the customer, one slide maybe about what we are seeing in the overall marketplace with our research organization. For those of you follow and I recommend that you can follow our Check Point Research CPR blog. You'll see dozens of Researchers, dozens of different vulnerabilities that we found, but here I'm not going to go through them because that may deserve a full presentation of its own, just some of the trends we are seeing at a high level. So we've seen 93% increase in Gen 5 attack, namely Here, the example here is ransomware attacks.
Over 1200 organizations impacted by ransomware weekly based on our sensors. This is a 93% increase from June 2020. So this is huge and you can see that in the graph. The leading regions with the largest increases are in Latin America and Europe. But for those of you in North America after seeing the Colonial Pipeline and so on, I think you can definitely see that this is not just issue of someplace else.
This is an issue that attacks our critical infrastructure everywhere. And these attacks, Remember, we coined the term Gen 5 2 or 3 years ago, attacks that are multi vector, attacks that use 0 day multi vector means that they may start from one place, go through the different environments until they hit you, go through the different environments until they hit you. So it's very hard to detect them and very hard to understand where it comes from. In the last few months, we saw the supply chain as a vector for entrants that we haven't seen before. And I think this is becoming the new norm in Internet attacks now.
The good news, the attacks that we saw so far, customers that deployed the Checkpoint Infinity remained protected even though it was 0 day attacks, even though many of these attacks weren't known before. So we are very proud on what we delivered to our customers over many years and especially in the last couple of years with the Infinity architecture. So this is just what we should expect. To summarize and to leave some time for your question, we had a strong Q2 Financial results both in terms of meeting our projection and so on, but also in more and more internal metrics that we've seen internally, especially in Europe and Asia. The Infinity architecture both as a solution in selling to strategic customers, but also in the different pillars that we sell that are part of the overall architecture are gaining momentum with double digit growth in CloudGuard and Harmony and triple digit growth for the Infinity deals.
So overall, I think that we have good progress. There's plenty we still need to do. There's plenty we need to ramp up and get to where we need to get, but I think we are fulfilling on the strategy of providing the industry most secure, most comprehensive architecture. So that's kind of summarize my presentation. And actually, before I open it to your question, one more thing, projection For the Q3, so here our projection, revenues are expected to be between $515,000,000 to 5 $40,000,000 You know my regular caveat.
Projecting the future is always very challenging. Definitely these days that the world is turning upside down quite quickly and there's a high level of uncertainty. There's many reasons that can cause our results to be better or worse than our projection. Still the range year in revenues is $5.15 to $5.40 and the range of our EPS estimate is going to be between to $1.64 and GAAP EPS is expected to be approximately $0.24 less than that. So once again, thank you very much for listening.
I hope I gave you some good insight into what we are seeing into our business and we'd be happy to Hear your question now. Thank you.
All right, guys. Please keep it to one question at a time. And our first step is going to be Jonathan Ho from William Blair. And following him will be Rob Owens from Piper Sandler.
Hi, good morning. Congratulations on the 25th anniversary for the company. I just wanted to maybe get started with a little bit more color in terms of your recent sales leadership changes and new channel incentives. And maybe could you help us understand sort of what's making the most difference in terms of driving either improved productivity or channel engagement? Thank you.
I think first in terms of changes, in Asia, we have new leadership for quite few years. So I don't know if it's new anymore. In Europe, We've got in Thorsten, who's the new leader for Europe during Q4. So it's now is the 2nd full quarter, and I think we're very pleased with the results so far and a good momentum in the U. S.
We've got a new leader, Jeff. Jeff joined us halfway through the quarter. So I think during Q2, he's only been with us like for 6 weeks. So I think still needs to deliver the Q1 of leading the field. And I think I hope that within few quarters, we'll be able to see the changes We implemented the new hires that he brings and new spirit that he brings to America.
On top of that, I think that we have a large sales force That is doing a lot of different things. On the last few months, we've spent A lot of energy trying to accommodate more the channels, support the channel, even though I must say that I think most of our work is our I mean, I'm not putting the responsibility on the channel or an incentive program. I think it's our people that should work with the channel people. At the end, that's the that's what would lead the charge moving forward. We've done it better in some areas.
We can do better in other areas. And I think overall, as I mentioned, we had pretty good, very good first half in Europe and Asia, stable first half in the Americas, and I hope that the Americas will follow the suit with Europe in the next few quarters.
Jonathan, maybe I would just add that some we can talk about and some we can't, but we did quite a lot Changes in the partner program, be it MDF, which was introduced as a pilot last year and increased in the amount this year. So a lot of dollars have been poured into the working together and marketing efforts with the partners. We have different rebate programs in So there is quite a lot of changes in the marketing efforts with the partners and the direct marketing as well.
All right, next up is Rob Owen followed by Shaul Eyal.
Great. Good morning. Thanks for taking my question. Tal, I want to focus a little bit around the P and L. And you've seen strong billings, short term billings as well for the last year.
And revenue has been at this 4% mark. And I understand there is still is this transition which we've had for years of hardware to software and how that all plays out. So is there a point in time where we should begin to see then the revenue growth accelerate from the 4% and converge more towards the billing short term billing type of numbers that You've been putting up in the high single digits. Thanks.
So remember so that's just yes, there should be an Acceleration at a certain point. Remember that if you look at the P and L, the product revenue is about 30% And the rest is the subscription and the support. So and what you see in the defense is mainly the subscription and the support, right? The product Portion there is quite small. So over time, short term, of course, should be reflected as the growth of the support and the subscription together.
Subscription is at 12%, support is at 2%. So it's still not in the rate that you see in the billing or in the deferred revenues growth, but it should get there over time. Product is separate. This is what you see in the P and L is in line in high level with what you actually sell because it's not going to defend revenues typically except for the split portion of the bundles, of course. Another Point to mention is, well, we have an Infinity deal, a total protection Infinity where you have product, subscription and support.
The product portion, which is much better in the billing or in the deal, we need to wait until the customer pulls the product. Until we pull the product, we cannot recognize revenues. And that portion is still sitting in the deferred revenues. So as we have more Infinity deals, you might have Some delays also in the product portion, but once it will be pulled, you will see it in the P and L.
So is there a point in time then, Tal, that we can expect that?
The future, yes.
Fair enough. Thank you.
All right. Our next The question is going to come from Shaul Eyal followed by Patrick Colville.
Thank you. Good afternoon, guys. Tal, you've mentioned double digit growth in the lower end of the appliance product portfolio, I believe. Is that a new trend? Or have you seen that picking up a little bit in prior periods?
Why is that happening now?
So I have to say I see an improvement in the last 2, 3 quarters there in number of units. And that's why I told when I said to the previous question, I said we're losing some of the dollars to the subscription deferred revenues. But the number of units as a whole, It was a double digit growth, not only in the lower end. The total appliances grew in double digits. Double digits higher than 10%, higher than 15%, really healthy growth.
So that was nice. Low end grew even higher. And yes, it's a trend. When we launched a new product line, it's really catching nicely. It's not huge dollars, that's why I don't discuss it a lot, but it is growing very nicely because we succeed to penetrate to a few places that are MSPs and they're selling more of this type of product.
Maestro also is a big item because once you have Maestro, you can link to it the different appliances And you can start with small ones and then grow as you need more over time. So the trend in total appliance is quite nice to see. The storage is growing, the footprint is growing, the dollar has been allocated between so many lines, that's why you see the negative 3%, but units grew over double digits. Thank you.
All right. Our next question is coming from Patrick Colville followed by Adam Tindle.
Hey, thank you so much
for taking my question and congrats on impressive set results. I mean, do I see it? I think it's the fastest billings worth in 4 years, so Very impressive. Can I ask, were there any large deals this quarter that might have benefited results? Or was the kind of deal sizes Typical for any given quarter.
I think we had an increase in large deals and that was very good in terms of especially on the size of the deals. I'm not sure in that TALKB comment if we actually benefited them financially this quarter because many of these deals like Tal says are Infinity deals when even the products portion may be deferred over a period of time. So Tal, that's for you. Yes.
So I'll say first, it was a really nice quarter when it comes to large deals, but we've seen it for a few quarters. So that's a nice trend in general, which is in line with Selling more to customers and having more deals that have 2 pillars, 3 pillars and they're multi year. So that's nice phenomena, which we expect When we succeed in a specific quarter with the large infinity deal. So that's 1. In terms of the revenues, Most of it didn't get to the revenues yet because remember, let's take a typical Infinity deal.
Majority of the 1st, you have a nice increase in the annual run rate with the customer. So let's take a deal that has 30% growth in the run rate. The subscription will typically start to be recognized only the quarter after. Support will start to be recognized only the quarter after. Remember, we're very back end loaded.
So typically, the deal comes in the last week, last 2 weeks and so on. Product, now it depends When does the customer actually pull the appliance? So we will see it in the product revenues only once it will last for delivery. And he has like a bucket each year, like he signed 3 years deal. He has, let's say, a bucket of $2,000,000 for the 1st year, dollars 2,000,000 the 2nd year, dollars 2,000,000 for the 3rd year.
And you can take it immediately or over the quarters or only at the end of the year, just as an example. So there's less Correlation between the timing of the booking and the billing versus the timing that you actually see it in the P and L.
All right, our next question is going to come from Adam Tindle followed by Joel Fishbein.
Okay, thank you. I wanted to ask on investments, Gil. You entered this year with expectations of investments in R and D and sales and marketing. In Q1, OpEx was flat year over year and From Q1 to Q2, revenue grew faster than OpEx. I think I was just embracing for more investments year to date.
Wondering how this has played out versus your expectations entering this year. And maybe Tal can touch on how we can think about investments on a go forward basis. Is this going extend over a few quarters where margin is going to continue to trend down below 50? Thank you.
First, yes, we do want to invest heavily, especially in sales and marketing and in R and D. We've hired many, many people since the beginning of the year. So I mean the hiring is actually going very well. We received a lot of CVs. Our profile As an employer is actually also working very, very well and we see the huge increases on the same tire industry is also seeing Increase the attrition.
I must say that when I analyze the data, I'm happy to I mean, I don't I'm not happy with high level of attrition. I'm happy to see that amongst our high performer, amongst our leaders, it's still relatively low. But To match the 2 together, it's hard. So I think overall, we've like 100 people up in the past few months once we started investing more in the hiring. But there's still much more that we need to do.
For me, I would like to hire, I would say, probably another net, not gross, 300 more positions between now year end, maybe even more. I'm just trying to be realistic in what we think we can achieve. Tal, anything that I missed on the numbers here?
Yes. I would just say, Adam, you're absolutely right. It's we have a plan and we are ramping up. That's why I mentioned it Because I didn't want you to have an expectation that it's going to be in the 4 year now. We did recruit, but we did recruit all the plan because we are increasing the plans as well.
And the market is here, people coming in, people coming out. We see it all across the board, right? So we're ramping up to the mid single digit. So the recruiting Hopefully, you will see a reduction in the hopefully, you'll see a reduction in the margin in Q3 and in Q4 as we continue to recruit the people that we want in order to execute The growth on the revenues over the longer period.
All right. Our next question is coming from Joel P. Fishbein.
Hey, good morning, good afternoon. I just have a follow-up. Gil, you talked a little bit about Concerns about the macro environment, but obviously your win rates are very strong here. I'm curious about the funnel in the pipeline going into the back half of the year, if you can give us some color around that irrespective of your macro concerns.
So first, I think, by the way, the need for cyber is going to remain with us for a long time. So I mean, the long term projection with IFR Cyberspace is very positive. And I think the fact that companies I mean, right now, the competition is very tough. There is a lot of Good companies around us, but on the same time, I think the value proposition that we provide in terms of the level of security, in terms of consolidation, I think we'll win over the long run. In terms of the pipeline that we're getting with, I think the Q1 started with very positive pipeline, especially in the places that I say we're seeing the nice changes in the management.
So in Europe, In Asia, it's very positive. In the U. S, it's also improving. But for the U. S, I think it will take us a few more quarters Until we will see the effect of all the changes that we are implementing.
All right. Our next call our next question is going to come from Greg Powell followed by Greg Moskowitz.
Hey, thanks for taking the question.
So yes, it was good
to see the additional disclosures on CloudGuard and Army, 20 percent of revenue doubled since 2019. How should
we think about growth in
those products going forward? And how big do they become over the next, call it, 2 or 3 years?
Before Tal gives you a little bit more of the numbers, if she can, I don't know if we can or if we have specific projections I must tell you that there is a huge discussion in the marketplace about the potential for cloud and so on? And yet at the end, it's a pretty small market today. We're seeing the big vendors selling. I mean, I think I saw this week one of the analysts categorizing the big companies in cloud security companies with Over $50,000,000 in revenues, which is even if it goes to $100,000,000 or $200,000,000 it's still tiny compared to the other security sub segment. So I think we all bet on the cloud.
We all think that the cloud is going to be very important for the future, but we will see how quickly it will evolve and how big it will become. From my experience for 3 decades now, Some of these markets become real and become important and that's why we bet on them. Some of them become important, but not that big. So I mean, we are right now betting on the cloud, but it's still not a giant market. For us, I do expect that we will see consistent double digit, high double digit, not low double digit growth in cloud and in Harmony, And they will become a significant portion of our revenues and take share from the network security.
And Quantum, I also hope that the Quantum family will grow. But the quantum, I think the projection if we get everything right, that it will grow in, I mean, single digit or low double digit the percentages, if everything works perfectly well in the world. Tallinn, if you hit the core?
No, I think it's correct. At the end of the day, if you look at the way we build it, we will build a few growth engines in order to If one of them succeeds, we will be in a good shape. Think Harmony, it's a great potential and cloud is a great potential and Infinity is the combination, right? So it can be Quantum and Cloud, Quantum and Harmony, Cloud and DAS and Harmony. So it can be a combination.
But the whole philosophy is let's upsell So giving value to the customer of consolidated security, the best security and in affordable price. At the end of the day, The approach and most of those dollars will come into the subscription line. So hopefully you will see what you saw before where we had 9% growth in subscription and then it will 10, 11, 12 and hopefully it will continue. So that's where you will see. If 1 of the 2 or both of them will continue with the double digit, they will be a big portion and therefore Restriction growth will continue to grow.
That's what it will be pulled up because remember support is linked to the product. So and the product is the appliances. So I will say supporting products, there's potential there when you get bigger footprint in the customer quantum, But cloud and Harmony, majority of it is not all of it is already in the subscription and that's where you should see if we will succeed in the plan.
Got it. All right. Our next question is coming from Greg Moskowitz followed by Saket Kalia.
All right. Thank you for taking the question. So you outlined, Gil, some case studies that involve some new customers and or customers that have expanded in the cloud with Checkpoint. So now that we're halfway through 2021, I'd love to just hear how things are tracking with respect to your goals for sales to grow their new business by 20% this year?
I think in Europe and Asia, we are on track. Not sure if we'll hit the full 20%, but I think we had a very good first half. And in Europe, we had an excellent second quarter and we're tracking right. In U. S, we're seeing stability.
We've seen some good changes there. But again, it's still too early to say what we will see at year end.
All right. Thank you.
All right. Our next question is coming from Saket Kalia followed by Brian Essex.
Okay, great. Thanks for taking my question here, guys. Maybe just a broad question on guidance for you, Gil. I don't think we saw an update to the annual guide. And I was wondering if now that the first half is done and we have a Q3 guide, Was there any commentary that you wanted to make here on Q4 or just how you thought about the prior annual guide, just as we think about sort of fine tuning our models for the year?
No, I don't think that we have many changes for now. We're staying with our annual guidance. I think everything is tracking Okay. I wish I would have saying that things are tracking much better than what I think, and it may happen. You never know.
Again, in In all my experience, we sometimes had suddenly a huge wave of deals coming through the last quarter, and it ended up very well. In some years, We ended up very tough, I must say, but for all the years we finished them well, we finished them on plan. But I think so it's too not too early. I mean, I will know that answer probably somewhere in the end of December to vet your question.
But that's the reason why I understand why you're asking it because you see we are higher than the midpoint of our guidance, which I completely understand. But remember the biggest question to your question of the annual is the product booking of Q4 and it's such a low There's no point to play with the guidance before you finish the year, right?
Got it. Thank you.
All right. Our next question is coming from Brian Essex followed by Ben Bollin. Yes. Thanks, Kipp.
Gil, congrats on the results. It looks like solid billings growth for sure. I guess I wanted to ask if I'm told to get one question. So, I guess I'd like to ask about the channel and what you're seeing in the channel. We're hearing about greater competition among channel providers, Westcon in particular, more competitive on the margin.
How does that what are you seeing in your business? I noticed your margins are relatively stable with regard to impact on pricing relationship with channel and these new deals that you've done that you've kind of highlighted examples, how many of those were Checkpoint driven new relationships versus channel driven? Thanks.
I think what drives the channel, I mean, there's a lot of discussion About channel programs and margins and all of these, I think that has the least effect on the channel performance. And I'm sorry here that Salespeople would like to say increase margin, everything will follow. I don't think that works. First, we provide good margins to channels and it's a good business. But at the end of the day, at every deal, everybody wants to win.
So if we work together and everybody wants to win with something that we are familiar And they know and they feel that they can deal with. And I feel that for a long time, and again, I don't want to go into the past, We've taken more and more ownership of our deals. We worked more closely with customers and the channel role. The channel, by the way, is involved in all our I think we're the only vendor that's 100 percent channel, but the role of the channel became a little bit smaller in some of the deals. And I think one of our tasks is to actually make the channel roll bigger, which is actually make the channel work harder, which is get the channel to bring us customers, but also support the channel in a much better way because when people work together, we are committed.
They see how we win, they become motivated. Then again, when you win, you also I mean all the margins and all the programs take effect. And I think we are trying to invest more and more in that and a lot of education. It's a lot of working closely with I think we get a lot of good feedback recently on both the programmatic side and also the field side. In the programmatic part, I don't think again, we can do more, but I don't think that will create the big differences.
On the field side, we can do much, much more than what we are doing. We need to educate every field person, every channel person, every account manager person, how to work together with the channel. And I think if we'll do that, we can get a very, very nice yield an increase in the effects that we get from the channel. Again, I was born, I built A lot of the security channel that we see today, not a lot, all of it didn't exist when we started Check Point. Big part of it, I don't know if it's 60%, 70% or 80% of the channel partners that exist today in the marketplace were born and raised with Check Point.
And I think it's Our job now to win them again and to make them work with us and for us and for the customer, by the way. It's not for us. It's for the customer to bring them the best solutions.
All right. Our last question of the day is going to come from Sterling Audi. Please proceed.
Thanks guys. So I'm kind of
curious, Gil, I think there's a perception from investors that There is a surge in security spending because the increase in ransomware attacks and the SolarWinds breach, etcetera. How would you kind of characterize what you're seeing? Do you think that there is a surge maybe like we saw back in 2013 or 2014? Or is it a modest increase? How would you characterize it and how sustainable is it?
At least from what I've seen and again, I'm not sure that I'm following all the macro trends, there is a modest increase. There is not a surge. There is Trends, there is a modest increase. There is not a surge. There is not a huge increase.
And the main thing is, by the way, today is not the shortage of budget Or anything like that. The main thing is the confusion. Customers don't know what to do. There's way too many vendors. In large customers, there's way too many opinions within the account.
In small customers, we are overwhelmed by the spectrum of solutions. By the way, I saw some We had some I didn't talk about them here in the examples, but we have some customers that bought into the total Infinity Total Protection, the full Check Point architecture really doing 100% or close to 100% of their security. We had few deals like that with small companies, few 100 people in different areas in construction, in transportation, in finance, in law firms. We have a nice collection of deals like that with Infinity. These are amazing.
And when I meet with the person there saying, you see, You're telling me, you see, it's me alone. I can't deal with 12 vendors. I can't deal with 55 vendors, which is what companies like yours are dealing with. And for me, the Check Point Infinity is really saving me in terms of the ability to deliver the highest level of security. And by the way, business wise, here is the technology in terms of an account like that, that on normal days, the sales force Would look at him as a minor customer with potential for $10,000 $20,000 transaction and the sales people would like to focus on a bigger one and make this customer a few $100,000 customer because they now buy the full portfolio for 3 or 5 years and suddenly from $20,000 customers becomes $500,000 customer and now everybody pays attention.
So this is part of the potential. Again, most midsized companies are not there yet, but I have good examples of customers like that. And again, I gave some of the fields that we saw. So these are pretty good Makes sense. Thank you.
All right. Thank you all for joining us today. We appreciate you guys attending, And we look forward to speaking to you all throughout the quarter. And we'll see you next earnings call. So thank you and have a great evening or day.
Thank you very much.
Bye guys.