REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class |
Trading symbol |
Name of exchange on which registered | ||
|
|
Global Select Market |
☒ |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
• | our expectations for our business, trends related to our business and the markets in which we operate and into which we sell products; |
• | the effects of increased competition in our market; |
• | our ability to timely and effectively scale and adapt our existing technology and infrastructure to meet current and future market demands; |
• | our ability to develop or acquire new and more technologically advanced products, and to successfully commercialize these products; |
• | our ability to protect our proprietary technology and intellectual property; |
• | our ability to increase adoption of our products and to maintain or increase our market share; |
• | our ability to maintain our growth; |
• | future amounts and sources of our revenue; |
• | our future costs and expenses; |
• | the adequacy of our capital resources; |
• | our expectations with respect to share repurchases by us and dividend payments by us; |
• | the effects on our business of public health epidemics, including the strain of coronavirus known as COVID-19; |
• | the effects on our business of evolving laws and regulations, including government export or import controls and U.S. tax regulations, and the potential economic effects of “Brexit”; |
• | our ongoing relationships with our current and future customers and channel partners, suppliers, contract manufacturers and distributors; and |
• | our other expectations, beliefs, intentions and strategies. |
PART I |
||||||
Item 1. |
4 |
|||||
Item 2. |
4 |
|||||
Item 3. |
4 |
|||||
Item 4. |
19 |
|||||
Item 4A. |
29 |
|||||
Item 5. |
29 |
|||||
Item 6. |
37 |
|||||
Item 7. |
47 |
|||||
Item 8. |
48 |
|||||
Item 9. |
48 |
|||||
Item 10. |
48 |
|||||
Item 11. |
58 |
|||||
Item 12. |
59 |
|||||
PART II |
||||||
Item 13. |
59 |
|||||
Item 14. |
59 |
|||||
Item 15. |
60 |
|||||
Item 16. |
61 |
|||||
Item 16A. |
61 |
|||||
Item 16B. |
61 |
|||||
Item 16C. |
61 |
|||||
Item 16D. |
62 |
|||||
Item 16E. |
62 |
|||||
Item 16F. |
62 |
|||||
Item 16G. |
62 |
|||||
Item 16H. |
63 |
|||||
PART III |
||||||
Item 17. |
63 |
|||||
Item 18. |
63 |
|||||
Item 19. |
63 |
Year ended December 31, |
||||||||||||||||||||
2019 |
2018 |
2017 |
2016 |
2015 |
||||||||||||||||
(in millions, except per share data) |
||||||||||||||||||||
Consolidated Statements of Income Data: |
||||||||||||||||||||
Revenues |
$ | 1,994.8 |
$ | 1,916.5 |
$ | 1,854.7 |
$ | 1,741.3 |
$ | 1,629.8 |
||||||||||
Operating expenses (*): |
||||||||||||||||||||
Cost of revenues |
215.4 |
201.4 |
213.0 |
202.0 |
189.0 |
|||||||||||||||
Research and development |
239.2 |
211.5 |
192.4 |
178.4 |
149.3 |
|||||||||||||||
Selling and marketing |
552.7 |
500.9 |
433.4 |
420.5 |
359.8 |
|||||||||||||||
General and administrative |
105.7 |
88.9 |
92.0 |
88.1 |
92.0 |
|||||||||||||||
Total operating expenses |
1,113.0 |
1,002.7 |
930.8 |
889.0 |
790.1 |
|||||||||||||||
Operating income |
881.8 |
913.8 |
923.9 |
852.3 |
839.7 |
|||||||||||||||
Financial income, net |
80.6 |
65.1 |
47.0 |
44.4 |
34.1 |
|||||||||||||||
Income before taxes on income |
962.4 |
978.9 |
970.9 |
896.7 |
873.8 |
|||||||||||||||
Taxes on income |
136.7 |
157.6 |
168.0 |
171.8 |
187.9 |
|||||||||||||||
Net income |
$ | 825.7 |
$ | 821.3 |
$ | 802.9 |
$ | 724.9 |
$ | 685.9 |
||||||||||
Basic earnings per ordinary share |
$ | 5.48 |
$ | 5.24 |
$ | 4.93 |
$ | 4.26 |
$ | 3.83 |
||||||||||
Shares used in computing basic earnings per ordinary share |
150.6 |
156.6 |
162.7 |
170.2 |
179.2 |
|||||||||||||||
Diluted earnings per ordinary share |
$ | 5.43 |
$ | 5.15 |
$ | 4.82 |
$ | 4.18 |
$ | 3.74 |
||||||||||
Shares used in computing diluted earnings per ordinary share |
152.1 |
159.4 |
166.6 |
173.3 |
183.6 |
(*) | Including pre-tax charges for stock-based compensation, amortization of intangible assets and acquisition related expenses in the following items: |
Year ended December 31, |
||||||||||||||||||||
2019 |
2018 |
2017 |
2016 |
2015 |
||||||||||||||||
(in millions) |
||||||||||||||||||||
Amortization of intangible assets and acquisition related expenses |
||||||||||||||||||||
Cost of revenues |
$ | 5.6 |
$ | 2.8 |
$ | 2.2 |
$ | 2.2 |
$ | 1.8 |
||||||||||
Research and development |
6.9 |
5.8 |
7.6 |
7.6 |
6.1 |
|||||||||||||||
Selling and marketing |
1.8 |
3.3 |
3.3 |
3.4 |
3.3 |
|||||||||||||||
Stock-based compensation |
||||||||||||||||||||
Cost of revenues |
$ | 4.4 |
$ | 3.5 |
$ | 2.7 |
$ | 2.2 |
$ | 1.6 |
||||||||||
Research and development |
18.9 |
17.6 |
16.2 |
12.7 |
11.5 |
|||||||||||||||
Selling and marketing |
28.8 |
20.8 |
18.3 |
19.2 |
16.4 |
|||||||||||||||
General and administrative |
54.6 |
47.3 |
50.2 |
48.7 |
46.8 |
December 31, |
||||||||||||||||||||
2019 |
2018 |
2017 |
2016 |
2015 |
||||||||||||||||
(in millions) |
||||||||||||||||||||
Consolidated Balance Sheet Data: |
||||||||||||||||||||
Working capital |
$ | 737.5 |
$ | 990.0 |
$ | 757.5 |
$ | 726.6 |
$ | 679.0 |
||||||||||
Total assets |
5,764.9 |
5,828.2 |
5,462.9 |
5,217.6 |
5,069.9 |
|||||||||||||||
Shareholders’ equity |
3,568.8 |
3,772.4 |
3,600.1 |
3,491.1 |
3,531.9 |
|||||||||||||||
Capital stock |
1,771.1 |
1,598.6 |
1,305.9 |
1,140.4 |
988.1 |
• | the continued expansion of Internet usage and the number of organizations adopting or expanding intranets; |
• | the continued adoption of “cloud” infrastructure by organizations; |
• | the ability of the infrastructures implemented by organizations to support an increasing number of users and services; |
• | the continued development of new and improved services for implementation across the Internet and between the Internet and intranets; |
• | the adoption of data security measures as it pertains to data encryption and data loss prevention technologies; |
• | continued access to mobile API’s, APPs and application stores with Apple, Google and Microsoft; |
• | government regulation of the Internet and governmental and non-governmental requirements and standards with respect to data security and privacy; and |
• | general economic conditions in the markets in which we, our customers and our suppliers operate. |
• | issue equity securities which would dilute the current shareholders’ percentage of ownership; |
• | incur substantial debt; |
• | assume contingent liabilities; or |
• | expend significant cash. |
• | unanticipated costs or liabilities associated with the acquisition; |
• | incurrence of acquisition-related costs; |
• | diversion of management’s attention from other business concerns; |
• | harm to our existing business relationships with manufacturers, distributors and customers as a result of the acquisition; |
• | the potential loss of key employees; |
• | use of resources that are needed in other parts of our business; |
• | use of substantial portions of our available cash to consummate the acquisition; or |
• | unrealistic goals or projections for the acquisition. |
• | technology import and export license requirements; |
• | costs of localizing our products for foreign countries, and the lack of acceptance of localized products in foreign countries; |
• | varying economic and political climates; |
• | trade restrictions, including as a result of trade disputes or other disputes between countries or regions in which we sell and operate; |
• | imposition of or increases in tariffs or other payments on our revenues in these markets; |
• | greater difficulty in protecting intellectual property; |
• | difficulties in managing our overseas subsidiaries and our international operations; |
• | declines in general economic conditions; |
• | political instability and civil unrest which could discourage investment and complicate our dealings with governments; |
• | widespread health emergencies or pandemics, such as the coronavirus; |
• | difficulties in complying with a variety of foreign laws and legal standards and changes in regulatory requirements; |
• | expropriation and confiscation of assets and facilities; |
• | difficulties in collecting receivables from foreign entities or delayed revenue recognition; |
• | recruiting and retaining talented and capable employees; |
• | differing labor standards; |
• | increased tax rates; |
• | potentially adverse tax consequences, including taxation of a portion of our revenues at higher rates than the tax rate that applies to us in Israel; |
• | fluctuations in currency exchange rates and the impact of such fluctuations on our results of operations and financial position; and |
• | the introduction of exchange controls and other restrictions by foreign governments. |
• | Monetary liability imposed on the director or senior officer in favor of a third party in a judgment, including a settlement or an arbitral award confirmed by a court. |
• | Reasonable legal costs, including attorneys’ fees, expended by a director or senior officer as a result of an investigation or proceeding instituted against the director or senior officer by a competent authority; provided, however, that such investigation or proceeding concludes without the filing of an indictment against the director or senior officer and either: |
• | no financial liability was imposed on the director or senior officer in lieu of criminal proceedings, or |
• | financial liability was imposed on the director or senior officer in lieu of criminal proceedings, but the alleged criminal offense does not require proof of criminal intent. |
• | Reasonable legal costs, including attorneys’ fees, expended by the director or senior officer or for which the director or senior officer is charged by a court: |
• | in an action brought against the director or senior officer by us, on our behalf or on behalf of a third party, |
• | in a criminal action in which the director or senior officer is found innocent, or |
• | in a criminal action in which the director or senior officer is convicted, but in which proof of criminal intent is not required. |
• | Some programs may be discontinued, |
• | We may be unable to meet the requirements for continuing to qualify for some programs, |
• | These programs and tax benefits may be unavailable at their current levels, or |
• | We may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions. |
ITEM 4. |
INFORMATION ON CHECK POINT |
• | Proven, best threat prevention technologies across an organization’s entire IT infrastructure of networks, endpoints, cloud, workloads, IoT and mobile. |
• | Real-time sharing of threat intelligence across enterprises and within the enterprise. |
• | A single, consolidated security management framework. |
● |
Highest Security Effectiveness Score in NSS Breach Prevention Systems Test 2019 |
● |
Sandblast Agent Recommended Rating in NSS Advanced Endpoint Protection Test 2019 |
● |
Check Point CloudGuard Achieve Top Market Presence Score in Forrester Wave for Cloud Workload Security 2019 |
● |
Leader, Check Point Endpoint Protection Recognized |
• | Generation 1 – Late 1980s, virus attacks on stand-alone PCs affected all businesses and drove the rise of anti-virus products. |
• | Generation 2 – Mid 1990s, attacks from the internet affected all business and drove the creation of the firewall. |
• | Generation 3 – Early 2000s, exploiting vulnerabilities in applications affected most businesses and drove the rise in intrusion prevention systems (IPS) products. |
• | Generation 4 – Approximately 2010, rise of targeted, unknown, evasive, polymorphic attacks affected most businesses and drove the increase in behavior analysis technologies such as sandboxing products. |
• | Generation 5 – Approximately 2017, the large-scale and multi-vector mega attacks using advanced attack technologies. These are fast-moving attacks so detection-only is not enough. These attacks target traditional attack vectors and expanded to mobile and cloud. Advanced threat prevention is required. |
• | Generation 6 – 2019 and 2020 saw an increase in attacks on the potential billions of IoT devices with old firmware that has limited or no security. The next generation of security will be based on nano security agents. Nano agents are micro-plugins that can work with any device or operating system in any environment, controlling all data that flows to and from IoT devices, ensuring always-on security. |
• | Proven, best threat prevention technologies across an organization’s entire IT infrastructure of networks, endpoints, cloud, workloads, IoT and mobile. |
• | Real-time sharing of threat intelligence across enterprises and within the enterprise. |
• | A single, consolidated security management framework. |
1) | CloudGuard IaaS provides a unified management pane for cyber security policy enforcement across cloud and on-premise environments. CloudGuard IaaS integrates with a large number of public and private cloud infrastructure and workload platforms, including VMware NSX, Cisco ACI, Amazon Web Services (AWS), Microsoft Azure cloud, and the Google Cloud Platform (GCP). |
2) | CloudGuard SaaS supports cloud-based applications such as Salesforce, Office 365, and Box to work at protecting cloud services against the most sophisticated malware and zero-day attacks. CloudGuard Dome9, based on Dome9’s platform that we acquired in 2018, extends public cloud capabilities allowing enterprise organizations to easily manage network security and compliance automation at any scale across AWS, Azure and GCP. Log.ic, provides cloud security analytics within AWS, Azure and GCP, helping enterprises provide context and logic around log data. With CloudGuard Log.ic, enterprises are able to visualize cybersecurity anomalies and take action, remediating any regulatory violations or resolve incidence of compromise, where detected in the cloud. |
3) | CloudGuard Workload is a solution that is integrated in the DevOps CI/CD pipeline, providing you continuous application security runtime assessment for code in any type of workloads. |
4) | CloudGuard Connect, introduced in August of 2019, transforms branch cloud security by delivering enterprise grade security to branches as a cloud service, with top-rated threat prevention, quick and easy deployment in minutes, and unified management saving up to 40% in security operating expenses. |
5) | CloudGuard Edge, also introduced in August 2019, complements CloudGuard Connect by providing on-premise branch office security solution. CloudGuard Edge provides top-rated threat prevention running as a virtual machine (VM) seamless integrated into leading SD-WAN devices or universal Customer Premise Equipment (uCPE) servers. This enables enterprises who need an on premises security solution to satisfy data privacy, compliance, or data location requirements. |
Year Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
(in millions) |
||||||||||||
Category of Activity: |
||||||||||||
Products and licenses |
$ | 510.8 |
$ | 525.6 |
$ | 559.0 |
||||||
Security subscriptions |
610.3 |
542.3 |
480.4 |
|||||||||
Software updates and maintenance |
873.7 |
848.6 |
815.3 |
|||||||||
Total revenues |
$ | 1,994.8 |
$ | 1,916.5 |
$ | 1,854.7 |
||||||
NAME OF SUBSIDIARY |
COUNTRY OF INCORPORATION | |
Check Point Software Technologies, Inc. |
United States of America (Delaware) | |
Check Point Software (Canada) Technologies Inc. |
Canada | |
Check Point Software Technologies (Japan) Ltd. |
Japan | |
Check Point Software Technologies (Netherlands) B.V. |
Netherlands | |
Check Point Holding (Singapore) PTE Ltd. |
Singapore | |
Check Point Holding (Singapore) PTE Ltd. (1) |
Indonesia | |
Check Point Holding (Singapore) PTE Ltd. – U.S. Branch (2) |
United States of America (New York) | |
Israel Check Point Software Technologies Ltd. China (3) |
China | |
Check Point Holding AB (4) |
Sweden | |
Check Point Advanced Threat Prevention Ltd. |
Israel | |
Check Point Mobile Security Ltd. |
Israel | |
Check Point Software Technologies South Africa PTY. Ltd |
South Africa | |
Check Point Software (Kenya) Ltd. |
Kenya | |
Check Point Software Technologies B.V Nigeria Ltd. (5) |
Nigeria | |
Check Point Public Cloud Security Ltd. |
Israel | |
Check Point Web Applications and API Protection Ltd. |
Israel | |
Protego Labs, Inc. Check Point IOT Security Ltd. Check Point Serverless Security Ltd. (6) |
Delaware Israel Israel | |
Check Point Software Technologies (Sweden) AB. (7) |
Sweden | |
Zone Labs, L.L.C. (8) |
United States of America (California) |
(1) | Representative office of Check Point Holding (Singapore) PTE Ltd. |
(2) | Branch of Check Point Holding (Singapore) PTE Ltd. |
(3) | Representative office of Check Point Software Technologies Ltd. |
(4) | Subsidiary of Check Point Holding (Singapore) PTE Ltd. (former name: Protect Data AB) |
(5) | Subsidiary of Check Point Holding (Singapore) PTE Ltd. and Check Point Yazilim Teknolojileri Pazarlama A.S. |
(6) | Subsidiary of Protego Labs, Inc |
(7) | Check Point Holding AB |
(8) | Check Point Software Technologies Inc. |
NAME OF SUBSIDIARY |
COUNTRY OF INCORPORATION | |
Check Point Software Technologies S.A. |
Argentina | |
Check Point Software Technologies (Australia) PTY Ltd. |
Australia | |
Check Point Software Technologies (Austria) GmbH |
Austria | |
Check Point Software Technologies (Belarus) LLC |
Belarus | |
Check Point Software Technologies (Belgium) S.A. |
Belgium | |
Check Point Software Technologies (Brazil) LTDA |
Brazil | |
Check Point Software Technologies (Hong Kong) Ltd. (Guangzhou office) (1) |
China | |
Check Point Software Technologies (Hong Kong) Ltd. (Shanghai office) (1) |
China | |
Check Point Software Technologies (Czech Republic) s.r.o. |
Czech Republic | |
Check Point Software Technologies (Denmark) ApS |
Denmark | |
Check Point Software Technologies (Finland) Oy |
Finland | |
Check Point Software Technologies SARL |
France | |
Check Point Software Technologies GmbH |
Germany | |
Check Point Software Technologies (Greece) SA |
Greece | |
Check Point Software Technologies (Hungary) Ltd. |
Hungary | |
Check Point Software Technologies (Hong Kong) Ltd. |
Hong Kong | |
Check Point Software Technologies (India) Private Limited |
India | |
Check Point Software Technologies (Italia) Srl |
Italy | |
Check Point Software Technologies Mexico S.A. de C.V. |
Mexico | |
Check Point Software Technologies (Beijing) Co., Ltd. |
China | |
Check Point Software Technologies (New Zealand) Limited |
New Zealand | |
Check Point Software Technologies Norway A.S. Check Point Software Technologies (Philippines) Inc. |
Norway Philippines | |
Check Point Software Technologies (Poland) Sp.z.o.o. |
Poland | |
CPST (Portugal), Sociedade Unipessoal Lda. |
Portugal | |
Check Point Software Technologies (RMN) SRL. |
Romania | |
Check Point Software Technologies (Russia) OOO |
Russia | |
Check Point Software Technologies (Korea) Ltd. |
S. Korea | |
Check Point Software Technologies (Spain) S.A. |
Spain | |
Check Point Software Technologies (Switzerland) A.G. |
Switzerland | |
Check Point Software Technologies (Taiwan) Ltd. |
Taiwan | |
Check Point Yazilim Teknolojileri Pazarlama A.S. |
Turkey | |
Check Point Software Technologies (UK) Ltd. |
United Kingdom |
(1) | Representative office of Check Point Software Technologies (Hong Kong) Ltd. |
Location |
Space (square feet) |
|||
Israel |
379,000*) |
|||
Americas |
138,000 |
|||
Europe, Middle East and Africa |
67,000 |
|||
Asia Pacific |
35,000 |
*) | Our international headquarters are located in Tel Aviv, Israel. We occupy our headquarters pursuant to a long-term lease on the land with the City of Tel Aviv – Jaffa, which expires in August 2059. We made a prepayment for the entire term upon entering into this lease and we are not required to make any additional payments under the lease. Our international headquarters building contains approximately 332,000 square feet of office space. In addition, we lease approximately 47,000 square feet of additional space substantially all in Tel Aviv, Israel. |
Year Ended December 31, |
||||||||||||
2019 |
*2018 |
*2017 |
||||||||||
Region: |
||||||||||||
Americas, principally U.S. |
46 |
% | 47 |
% | 47 |
% | ||||||
Europe, Middle East and Africa |
42 |
% | 42 |
% | 41 |
% | ||||||
Asia-Pacific |
12 |
% | 11 |
% | 12 |
% |
* | Starting 2019, Middle East and Africa are part of the “Europe Middle East and Africa” region, while before it was part of “Asia Pacific, Middle East and Africa” region. 2018 and 2017 figures were reclassified to present the updated revenue distribution by geography. |
• | Revenue recognition (including sales reserves), |
• | Realizability of long-lived assets (including intangible assets), |
• | Accounting for income taxes, |
• | Allowances for doubtful accounts, |
• | Impairment of marketable securities; and |
• | Loss Contingencies. |
Year Ended December 31, |
||||||||
2019 |
2018 |
|||||||
(in millions) |
||||||||
Revenues: |
||||||||
Products and licenses |
$ | 510.8 |
$ | 525.6 |
||||
Security subscriptions |
610.3 |
542.3 |
||||||
Software updates and maintenance |
873.7 |
848.6 |
||||||
Total revenues |
1,994.8 |
1,916.5 |
||||||
Year Ended December 31, |
||||||||
2019 |
2018 |
|||||||
(in millions) |
||||||||
Operating expenses(*): |
||||||||
Cost of products and licenses |
90.7 |
92.0 |
||||||
Cost of security subscriptions |
24.6 |
17.7 |
||||||
Cost of software updates and maintenance |
94.5 |
88.9 |
||||||
Amortization of technology |
5.6 |
2.8 |
||||||
Total cost of revenues |
215.4 |
201.4 |
||||||
Research and development |
239.2 |
211.5 |
||||||
Selling and marketing |
552.7 |
500.9 |
||||||
General and administrative |
105.7 |
88.9 |
||||||
Total operating expenses |
1,113.0 |
1,002.7 |
||||||
Operating income |
881.8 |
913.8 |
||||||
Financial income, net |
80.6 |
65.1 |
||||||
Income before taxes on income |
962.4 |
978.9 |
||||||
Taxes on income |
136.7 |
157.6 |
||||||
Net income |
$ | 825.7 |
$ | 821.3 |
(*) | Including pre-tax charges for stock-based compensation, amortization of intangible assets and acquisition related expenses in the following items: |
Year Ended December 31, |
||||||||
2019 |
2018 |
|||||||
(in millions) |
||||||||
Amortization of intangible assets and acquisition related expenses |
||||||||
Amortization of technology |
$ | 5.6 |
$ | 2.8 |
||||
Research and development |
6.9 |
5.8 |
||||||
Selling and marketing |
1.8 |
3.3 |
||||||
Total amortization of intangible assets and acquisition related expenses |
$ | 14.3 |
$ | 11.9 |
||||
Stock-based compensation |
||||||||
Cost of products and licenses |
$ | 0.2 |
$ | 0.1 |
||||
Cost of software updates and maintenance |
4.2 |
3.5 |
||||||
Research and development |
18.9 |
17.6 |
||||||
Selling and marketing |
28.8 |
20.8 |
||||||
General and administrative |
54.6 |
47.3 |
||||||
Total stock-based compensation |
$ | 106.7 |
$ | 89.3 |
||||
Year Ended December 31, |
||||||||
2019 |
2018 |
|||||||
Revenues: |
||||||||
Products and licenses |
26 |
% | 28 |
% | ||||
Security subscriptions |
30 |
28 |
||||||
Software updates and maintenance |
44 |
44 |
||||||
Total revenues |
100 |
% | 100 |
% | ||||
Year Ended December 31, |
||||||||
2019 |
2018 |
|||||||
Operating expenses: |
||||||||
Cost of products and licenses |
5 |
5 |
||||||
Cost of security subscriptions |
1 |
1 |
||||||
Cost of software updates and maintenance |
5 |
5 |
||||||
Amortization of technology |
— |
*) | — |
*) | ||||
Total cost of revenues |
11 |
11 |
||||||
Research and development |
12 |
10 |
||||||
Selling and marketing |
28 |
26 |
||||||
General and administrative |
5 |
5 |
||||||
Total operating expenses |
56 |
52 |
||||||
Operating income |
44 |
48 |
||||||
Financial income, net |
4 |
3 |
||||||
Income before taxes on income |
48 |
51 |
||||||
Taxes on income |
7 |
8 |
||||||
Net income |
41 |
43 |
||||||
*) | Less than 1%. |
Payments due by period |
||||||||||||||||||||
Total |
Less than 1 year |
1-3 years |
4-5 years |
Over 5 years |
||||||||||||||||
(in millions) |
||||||||||||||||||||
Operating lease obligations |
$ | 30.9 |
$ | 10.4 |
$ | 12.7 |
$ | 6.4 |
$ | 1.4 |
||||||||||
Uncertain income tax positions(*) |
393.3 |
— |
— |
— |
— |
|||||||||||||||
Severance pay(**) |
10.1 |
— |
— |
— |
— |
|||||||||||||||
Total |
$ | 434.3 |
$ | 10.4 |
$ | 12.7 |
$ | 6.4 |
$ | 1.4 |
||||||||||
(*) | Accrual for uncertain income tax position under ASC 740 “Income Taxes,” is paid upon settlement and we are unable to reasonably estimate the ultimate amount or timing of settlement. See Note 12g of our Consolidated Financial Statements for further information regarding our liability under ASC 740. |
(**) | Severance pay obligations to our Israeli employees, as required under Israeli labor law, are payable only upon termination, retirement or death of the respective employee and there is no obligation for benefits accrued prior to 2007, if the employee voluntarily resigns. These obligations are partially funded through accounts maintained with financial institutions and recognized as an asset on our balance sheet. Of this amount, $5 million is unfunded. |
Name |
Position |
Independent Director (1) |
Outside Director (2) |
Member of Audit Committee |
Member of Compensation Committee |
Member of Nominating Committee | ||||||
Gil Shwed |
Chief Executive Officer and Director |
|||||||||||
Marius Nacht |
Chairman of the Board |
|||||||||||
Jerry Ungerman |
Vice Chairman of the Board |
|||||||||||
Tal Payne |
Chief Financial and Operations Officer |
|||||||||||
Dorit Dor |
Vice President of Products |
|||||||||||
Dan Yerushalmi |
Chief Customer Officer |
|||||||||||
Yoav Chelouche (3) |
Director |
✓ |
✓ |
✓ |
✓ |
|||||||
Irwin Federman (3) |
Director |
✓ |
✓ |
✓ |
✓ |
✓ | ||||||
Guy Gecht (3) |
Director |
✓ |
✓ |
✓ |
✓ |
|||||||
Dan Propper |
Director |
✓ |
||||||||||
Ray Rothrock (3) |
Director |
✓ |
✓ |
✓ |
✓ |
✓ | ||||||
Tal Shavit |
Director |
✓ |
✓ | |||||||||
Shai Weiss |
Director |
✓ |
✓ |
(1) | “Independent Director” under the Nasdaq Global Select Market regulations and the Israeli Companies Law (see explanation below). |
(2) | “Outside Director” as required by the Israeli Companies Law (see explanation below). |
(3) | “Financial expert” as required by the Israeli Companies Law and Nasdaq requirements with respect to membership on the audit committee (see “Item 16A – Audit Committee Financial Expert”). |
As of December 31, |
||||||||||||
Function |
2019 |
2018 |
2017 |
|||||||||
Research, development and quality assurance |
1,515 |
1,528 |
1,396 |
|||||||||
Marketing, sales and business development |
2,335 |
2,301 |
2,031 |
|||||||||
Customer support |
789 |
755 |
689 |
|||||||||
Information systems, administration, finance and operation |
513 |
486 |
460 |
|||||||||
Total |
5,152 |
5,070 |
4,576 |
|||||||||
As of December 31, |
||||||||||||
Function |
2019 |
2018 |
2017 |
|||||||||
Israel |
2,260 |
2,229 |
2,047 |
|||||||||
United States |
1,211 |
1,206 |
1,097 |
|||||||||
Rest of the World |
1,681 |
1,635 |
1,432 |
|||||||||
Total |
5,152 |
5,070 |
4,576 |
|||||||||
Name |
Number of shares beneficially owned (1) |
% of class of shares (2) |
Title of securities covered by the options |
Number of options and RSUs (3) |
Exercise price of options |
Date of expiration of options |
||||||||||||||||||
Gil Shwed |
29,163,983 |
19.7 |
% | Ordinary shares |
4,200,000 |
$ | 83.59 - $114.95 |
06/08/2022-06/18/2026 |
||||||||||||||||
Marius Nacht |
5,264,986 |
3.7 |
% | Ordinary shares |
50,000 |
$ | 114.81 - $114.95 |
06/06/2024-08/19/2025 |
||||||||||||||||
All directors and officers as a group (13 persons including Messrs. Shwed and Nacht) (4) |
36,384,232 |
24.3 |
% | Ordinary shares |
6,068,537 |
$ | 49.50 - $115.9 |
06/24/2020-06/18/2026 |
(1) | The number of ordinary shares shown includes shares that each shareholder has the right to acquire pursuant to stock options that are exercisable and restricted share units that vest within 60 days after February 29, 2020. |
(2) | If a shareholder has the right to acquire shares by exercising stock options (as determined in accordance with footnote (1)), these shares are deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the percentage owned by any other shareholder. |
(3) | Number of options immediately exercisable or exercisable and restricted share units that vest within 60 days from February 29, 2020. |
(4) | Each of Messrs./Mmes. Ungerman, Yerushalmi, Payne, Dor, Chelouche, Federman, Gecht, Propper, Rothrock, Weiss and Dr. Shavit beneficially owns less than one percent of our outstanding ordinary shares. |
Plan |
Outstanding options & RSUs |
Options outstanding exercise price |
Date of expiration |
Options exercisable |
||||||||||||
2005 United States Equity Incentive Plan |
1,573,322 |
$49.5-$116.88 |
06/24/2020-10/29/2026 |
560,500 |
||||||||||||
2005 Israel Equity Incentive Plan |
10,529,931 |
$49.5-$116.88 |
06/24/2020-07/17/2026 |
5,310,000 |
||||||||||||
Dome9 Equity Incentive Plan |
6,449 |
$4.98-$19.27 |
05/03/2026-06/27/2028 |
2,123 |
Name of Five Percent Shareholders |
No. of shares beneficially held (1) |
% of class of shares (2) |
No. of shares beneficially held (1) |
% of class of shares (2) |
No. of shares beneficially held (1) |
% of class of shares (2) |
||||||||||||||||||
December 31, 2019 |
December 31, 2018 |
December 31, 2017 |
||||||||||||||||||||||
Gil Shwed |
29,163,983 |
19.5 |
% | 27,811,458 |
17.6 |
% | 31,183,927 |
18.9 |
% | |||||||||||||||
Massachusetts Financial Services Company (3) |
8,764,230 |
5.76 |
% | 12,658,864 |
8.15 |
% | 11,989,070 |
7.54 |
% |
(1) | The amount includes ordinary shares owned by each of the individuals, directly or indirectly, and options immediately exercisable or that are exercisable within 60 days from December 31 st , of each of the years shown in this table. |
(2) | If a shareholder has the right to acquire ordinary shares by exercising stock options exercisable within 60 days from December 31 st , of each of the years shown in this table, these Ordinary shares are deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the percentage owned by any other shareholder. |
(3) | As of December 31, 2019, based on information contained in a Schedule 13G/A filed by Massachusetts Financial Services Company with the Securities and Exchange Commission on February 14, 2020, as of December 31, 2018, based on information contained in a Schedule 13G/A filed by Massachusetts Financial Services Company with the Securities and Exchange Commission on February 13, 2019, as of December 31, 2017, based on information contained in a Schedule 13G/A filed by Massachusetts Financial Services Company with the Securities and Exchange Commission on February 9, 2018. The address for Massachusetts Financial Services Company is 111 Huntington Avenue, Boston, Massachusetts 02199. |
• | any amendment to the articles of association, |
• | an increase of the company’s authorized share capital, |
• | a merger, or |
• | approval of interested party transactions that require shareholder approval. |
• | the majority includes at least a majority of the shares voted by shareholders other than our controlling shareholders or shareholders who have a personal interest in the adoption of the compensation policies; or |
• | the total number of shares held by non-controlling shareholders and disinterested shareholders that voted against the adoption of the compensation policies, does not exceed 2% of the aggregate voting rights of our company. |
• | Monetary liability imposed on the office holder in favor of a third party in a judgment, including a settlement or an arbitral award confirmed by a court. |
• | Reasonable legal costs, including attorneys’ fees, expended by an office holder as a result of an investigation or proceeding instituted against the office holder by a competent authority, provided that such investigation or proceeding concludes without the filing of an indictment against the office holder, and either: |
• | no financial liability was imposed on the office holder in lieu of criminal proceedings, or |
• | financial liability was imposed on the office holder in lieu of criminal proceedings, but the alleged criminal offense does not require proof of criminal intent. |
• | Reasonable legal costs, including attorneys’ fees, expended by the office holder or for which the office holder is charged by a court: |
• | in an action brought against the office holder by us, on our behalf or on behalf of a third party, |
• | in a criminal action in which the office holder is found innocent, or |
• | in a criminal action in which the office holder is convicted, but in which proof of criminal intent is not required. |
• | An individual citizen or resident (as defined for U.S. federal income tax purposes) of the United States; |
• | A domestic partnership; |
• | A corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any of its states; |
• | An estate, if the estates income is subject to U.S. federal income taxation; or |
• | A trust, if a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons (e.g., a U.S. citizen, resident, or corporation) have the authority to control all of its substantial decisions or the trust has a valid election in effect under U.S. Treasury Regulations to be treated as a “United States person”. |
• | Aspects of U.S. federal income taxation relevant to U.S. Shareholders by reason of their particular circumstances (including potential application of the alternative minimum tax); |
• | U.S. Shareholders subject to special treatment under the U.S. federal income tax laws, such as banks, financial institutions, insurance companies, broker-dealers or traders in securities; |
• | U.S. Shareholders that are tax-exempt organizations and pension funds; |
• | U.S. Shareholders that are former citizens or long-term residents of the United States; |
• | U.S. Shareholders that are partnerships or entities treated as partnerships or other pass-through entities and persons who own our shares through such entities, and non-U.S. individuals or entities; |
• | U.S. Shareholders that are real estate investment trusts or regulated investment companies; |
• | U.S. Shareholders who own 10% or more of our outstanding voting shares, either directly or by attribution; |
• | U.S. Shareholders who hold our shares as part of a hedging, straddle, integrated, or conversion transaction; |
• | U.S. Shareholders who acquire their shares of our capital stock in a “compensatory transaction”; |
• | U.S. Shareholders whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar; and |
• | Any aspect of U.S. estate, gift, state, or local tax law, or any non-U.S. tax law. |
• | 75% or more of our gross income in the taxable year is passive income, or |
• | 50% or more of the average percentage of our assets held during the taxable year produce or are held for the production of passive income. |
Maturity |
Total Amortized cost |
Fair Value at Dec. 31, 2019 |
||||||||||||||||||||||||||
2020 |
2021 |
2022 |
2023 |
2024 |
||||||||||||||||||||||||
(in millions) |
||||||||||||||||||||||||||||
Government and corporate debentures—fixed interest rates |
$ | 1,078.3 |
$ | 838.4 |
$ | 623.0 |
$ | 302.8 |
$ | 139.4 |
$ | 2,981.9 |
$ | 3,008.9 |
||||||||||||||
U.S. Agencies |
205.5 |
102.1 |
83.7 |
43.8 |
40.2 |
475.3 |
475.5 |
|||||||||||||||||||||
Government and corporate debentures—floating interest rates |
14.7 |
93.0 |
53.4 |
19.3 |
3.6 |
184.0 |
184.5 |
|||||||||||||||||||||
Money market instruments & cash |
279.2 |
- |
- |
- |
- |
279.2 |
279.2 |
|||||||||||||||||||||
Total |
$ | 1,577.7 |
$ | 1,033.5 |
$ | 760.1 |
$ | 365.9 |
$ | 183.2 |
$ | 3,920.4 |
$ | 3,948.1 |
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
ITEM |
16B. CODE OF ETHICS |
ITEM |
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Year Ended December 31, 2019 |
Year Ended December 31, 2018 |
|||||||||||||||
Amount |
Percentage |
Amount |
Percentage |
|||||||||||||
(in millions, except percentages) |
||||||||||||||||
Audit fees (1) |
$ | 0.8 |
67 |
% | $ | 0.8 |
75 |
% | ||||||||
Audit related fees (2) |
0.1 |
6 |
% | * |
) | 1 |
% | |||||||||
Tax fees (3) |
0.3 |
27 |
% | 0.2 |
24 |
% | ||||||||||
Total |
$ | 1.2 |
100 |
% | $ | 1.0 |
100 |
% | ||||||||
*) | Represents an amount lower than $0.1 million. |
(1) | “Audit fees” are fees for audit services for each of the years shown in this table, including fees associated with the annual audit (including audit of our internal control over financial reporting) and reviews of our quarterly financial results submitted on Form 6-K, consultations on various accounting issues and audit services provided in connection with other statutory or regulatory filings. |
(2) | “Audit-related fees” are fees for professional services related to information systems audits. |
(3) | “Tax fees” are fees for professional services rendered by our auditors for tax compliance, tax planning and tax advice on actual or contemplated transactions, tax consulting associated with international transfer prices and employee benefits. |
Period |
(1) Total Number of Ordinary Shares Purchased |
Average Price per Ordinary Share |
Approximate Dollar Amount Available for Repurchase under the Plans or Programs |
|||||||||
January 1 – January 31 |
0.9 |
$106 |
$1,560.0 |
|||||||||
February 1 – February 28 |
0.9 |
$118 |
$1,450.0 |
|||||||||
March 1 – March 31 |
0.8 |
$123 |
$1,355.0 |
|||||||||
April 1 – April 30 |
0.8 |
$121 |
$1,260.0 |
|||||||||
May 1 – May 31 |
1.4 |
$117 |
$1,095.1 |
|||||||||
June 1 – June 30 |
0.6 |
$113 |
$1,030.1 |
|||||||||
July 1 – July 31 |
0.9 |
$117 |
$924.3 |
|||||||||
August 1 – August 31 |
1.4 |
$109 |
$772.1 |
|||||||||
September 1 – September 30 |
0.6 |
$109 |
$707.1 |
|||||||||
October 1 – October 31 |
1.0 |
$109 |
$598.1 |
|||||||||
November 1 – November 30 |
1.3 |
$115 |
$446.1 |
|||||||||
December 1 – December 31 |
0.6 |
$114 |
$382.1 |
|||||||||
Total |
11.2 |
$114 |
||||||||||
(1) | All the Ordinary Shares were purchased as part of publicly announced plans or programs. |
1 |
||||
2.1 |
||||
4.1 |
||||
4.2 |
||||
4.3 |
||||
4.4 |
||||
4.5 |
||||
4.6 |
||||
4.7 |
||||
4.8 |
||||
4.9 |
||||
4.10 |
||||
4.11 |
||||
4.12 |
||||
8 |
12.1 |
||||
12.2 |
||||
13.1 |
||||
13.2 |
||||
15 |
||||
101 |
Inline XBRL (Extensible Business Reporting Language) The following materials from Check Point Software Technologies Ltd.’s Annual Report on Form 20-F for the fiscal year-ended December 31, 2019, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Shareholders’ Equity/(Deficit) and Comprehensive Income/(Loss) (iv) Consolidated Statements of Cash Flows, (v) Notes to the Consolidated Financial Statements, (vi) Schedule II — Valuation and Qualifying Accounts and Reserves, and (vii) Cover Page | |||
104 |
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
(1) | Incorporated by reference to Exhibit 1 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2005. |
(2) | Incorporated by reference to Exhibit 4.1 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2005. |
(3) | Incorporated by reference to Exhibit 4.7 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2005. |
(4) | Incorporated by reference to Exhibit 4.8 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2005. |
(5) | Incorporated by reference to Exhibit 4.1 of Check Point’s Registration Statement on Form S-8 (No. 333-207355) filed with the Securities and Exchange Commission on October 8, 2015. |
(6) | Incorporated by reference to Exhibit 4.5 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2017. |
(7) | Incorporated by reference to Exhibit 4.11 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2006. |
(8) | Incorporated by reference to Exhibit 4.7 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2013. |
(9) | Incorporated by reference to Exhibit 4.8 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2013. |
(10) | Incorporated by reference to Exhibit 4.9 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2018. |
(11) | Incorporated by reference to Exhibit 4.10 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2018. |
(12) | Incorporated by reference to Exhibit 4.2 of Check Point’s Registration Statement on Form S-8 (No. 333-228075) filed with the Securities and Exchange Commission on October 31, 2018. |
(13) | Incorporated by reference to Annex A of Check Point’s Report on Form 6-K filed with the Securities and Exchange Commission on May 16, 2019. |
(14) | Incorporated by reference to “Item 4 – Information on Check Point – Organizational Structure” in this Annual Report on Form 20-F. |
CHECK POINT SOFTWARE TECHNOLOGIES LTD. | ||
By: |
/s/ Gil Shwed | |
Gil Shwed | ||
Chief Executive Officer |
By: |
/s/ Tal Payne | |
Tal Payne | ||
Chief Financial Officer |
Page |
||||
F-2 - F- 6 |
||||
F- 7 - F- 8 |
||||
F- 9 |
||||
F- 10 |
||||
F- 11 |
||||
F- 12 - F- 13 |
||||
F- 14 - F- 45 |
Description of the Matter |
As described in Note 2 to the consolidated financial statements, the Company primarily derives revenues from sales of products and licenses, security subscriptions and software updates and maintenance. The Company’s contracts with customers often contain multiple performance obligations which are accounted for separately when they are distinct. The Company allocates the transaction price to the distinct performance obligations on a relative standalone selling price basis and recognizes revenue when control is transferred. For example, product revenue and license are recognized at a point in time; and subscription and support revenue are recognized over time as the services are performed. Auditing the Company’s revenue recognition is a critical audit matter area due to the effort required to analyze the high volume of transactions, significance of the total amounts recognized as revenue and subjective assumptions used in developing the fair value of distinct performance obligations. | |
How We Addressed the Matter in Our Audit |
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s revenue process, including controls over the development of standalone selling prices. Our audit procedures included reading the executed contract and purchase order to understand the contract, identify the performance obligations, evaluate management’s identification of the distinct performance obligations for a sample of contracts. To test the management’s determination of standalone selling prices for each performance obligation, we performed audit procedures, among others, including assessing the appropriateness of the methodology applied, tested mathematical accuracy of the underlying data and evaluated the sources of the historical data and assumptions that the Company used by considering their reliability. We evaluated whether revenue was recognized in the appropriate amounts and periods. We also performed sensitivity analyses over key assumptions to assess the impact on revenue recognition that could result from changes to the Company’s assumptions. We also evaluated the Company’s disclosures included in notes to the consolidated financial statements. |
Description of the Matter |
As discussed in Note 10 to the consolidated financial statements, the Company operates its business in various countries, and accordingly attempts to utilize an efficient operating model to structure its tax payments based on the laws in the countries in which the Company operates. This can cause disputes between the Company and various tax authorities in different parts of the world. The Company uses significant judgment , while considering inter alia, income tax opinions or other third-party advice, in (1) determining whether a tax position’s technical merits are more-likely-than-not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition.Auditing management’s analysis of the Company’s uncertain tax positions was especially subjective and complex due to the significant judgments made by management to determine the provisions for tax uncertainties. These provisions are based on interpretations of complex tax laws and determination of arm’s length pricing for certain intercompany transactions. The assumptions underlying the provisions for uncertain tax positions include the potential tax exposure resulting from management’s interpretations and the determination of the cumulative probability that the uncertain tax position will be upheld upon regulatory examination. | |
How We Addressed the Matte in Our Audit |
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to assess and review their uncertain tax positions. For example, we tested the controls over the review of assumptions used in the estimation calculation such as the Company’s review over existing and potential tax controversies and tax audit results, and the computation of the impact to uncertain tax positions and tax reserves. Our audit procedures included, among others, evaluating the assumptions the Company used to develop its uncertain tax positions and related unrecognized income tax benefit amounts by jurisdiction and testing the completeness and accuracy of the underlying data used by the Company to calculate its uncertain tax positions. Our audit procedures also included, with the assistance of our tax professionals, evaluating the technical merits of the Company’s tax positions and the amounts recorded for uncertain tax positions. This included assessing the Company’s correspondence with the relevant tax authorities and evaluating income tax opinions or other third-party advice obtained by the Company based on our knowledge of, and experience with, the application of international and local income tax laws by the relevant income tax authorities. We also evaluated the Company’s financial statement disclosures related to these tax matters. |
December 31, |
||||||||
|
2019 |
2018 |
||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | |
$ | |
||||
Marketable securities |
|
|
||||||
Trade receivables, net |
|
|
||||||
Prepaid expenses and other assets |
|
|
||||||
Total |
|
|
||||||
LONG-TERM ASSETS: |
||||||||
Marketable securities |
|
|
||||||
Property and equipment, net |
|
|
||||||
Deferred tax asset, net |
|
|
||||||
Other intangible assets, net |
|
|
||||||
Goodwill |
|
|
||||||
Other assets |
|
|
||||||
Total |
|
|
||||||
Total |
$ | |
$ |
|
||||
December 31, |
||||||||
|
2019 |
2018 |
||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Trade payables |
$ | |
$ | |
||||
Employees and payroll accruals |
|
|
||||||
Deferred revenues |
|
|
||||||
Accrued expenses and other liabilities |
|
|
||||||
Total |
|
|
||||||
LONG-TERM LIABILITIES: |
||||||||
Deferred revenues |
|
|
||||||
Income tax accrual |
|
|
||||||
Other liabilities |
|
|
||||||
Total |
|
|
||||||
Total |
|
|
||||||
SHAREHOLDERS’ EQUITY: |
||||||||
Ordinary shares, NIS issued at December 31, 2019 and 2018; 2018, respectively |
|
|
||||||
Additional paid-in capital |
|
|
||||||
Treasury shares at cost, |
( |
) | ( |
) | ||||
Accumulated other comprehensive income (loss) |
|
( |
) | |||||
Retained earnings |
|
|
||||||
Total |
|
|
||||||
Total |
$ |
|
$ |
|
||||
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Revenues: |
|||||||||||||
Products and licenses |
$ | |
$ | |
$ | |
|||||||
Security subscriptions |
|
|
|
||||||||||
Software updates and maintenance |
|
|
|
||||||||||
Total |
|
|
|
||||||||||
Operating expenses: |
|||||||||||||
Cost of products and licenses *) |
|
|
|
||||||||||
Cost of security subscriptions *) |
|
|
|
||||||||||
Cost of software updates and maintenance *) |
|
|
|
||||||||||
Amortization of technology |
|
|
|
||||||||||
Total cost of revenues |
|
|
|
||||||||||
Research and development |
|
|
|
||||||||||
Selling and marketing |
|
|
|
||||||||||
General and administrative |
|
|
|
||||||||||
Total operating expenses |
|
|
|
||||||||||
Operating income |
|
|
|
||||||||||
Financial income, net |
|
|
|
||||||||||
Income before taxes on income |
|
|
|
||||||||||
Taxes on income |
|
|
|
||||||||||
Net income |
$ | |
$ | |
$ | |
|||||||
Basic earnings per ordinary share |
$ | |
$ | |
$ | |
|||||||
Diluted earnings per ordinary share |
$ | |
$ | |
$ | |
|||||||
*) | Not including amortization of technology shown separately. |
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Net income |
$ | |
$ | |
$ | |
|||||||
Other comprehensive income (loss) |
|||||||||||||
Change in unrealized gains (losses) on marketable securities: |
|||||||||||||
Unrealized gains (losses) arising during the period, net of tax |
|
( |
) | ( |
) | ||||||||
L osses (gains ) reclassified into earnings, net of tax |
( |
) | |
|
|||||||||
|
( |
) | ( |
) | |||||||||
Change in unrealized gains (losses) on cash flow hedges: |
|||||||||||||
Unrealized gains (losses) arising during the period, net of tax |
|
( |
) | |
|||||||||
Losses (gains) reclassified into earnings, net of tax |
( |
) | |
( |
) | ||||||||
|
( |
) | * |
) | |||||||||
Other comprehensive income (loss), net of tax |
|
( |
) | ( |
) | ||||||||
Comprehensive income |
$ |
|
$ |
|
$ |
|
|||||||
*) | Represents an amount lower than $ |
Accumulated |
|||||||||||||||||||||||||
Additional |
Treasury |
other |
Total |
||||||||||||||||||||||
Ordinary |
paid-in |
shares |
comprehensive |
Retained |
shareholders’ |
||||||||||||||||||||
s hares |
c |
at cost |
income (loss) |
earnings |
equity |
||||||||||||||||||||
Balance as of January 1, 2017 |
$ | $ | $ | ( |
) | $ | ( |
) | $ |
$ | |||||||||||||||
Cumulative-effect adjustment from adoption of ASU 2016-09 |
- |
- |
- |
||||||||||||||||||||||
Issuance of treasury shares under stock purchase plans, upon exercise of and vesting of restricted stock units |
- |
- |
- |
||||||||||||||||||||||
Treasury shares at cost ( |
- |
- |
( |
) | - |
- |
( |
) | |||||||||||||||||
Stock-based compensation |
- |
- |
- |
- |
|||||||||||||||||||||
Other comprehensive loss, net of tax |
- |
- |
- |
( |
) | - |
( |
) | |||||||||||||||||
Net income |
- |
- |
- |
- |
|||||||||||||||||||||
Balance as of December 31, 2017 |
( |
) | ( |
) | |||||||||||||||||||||
Cumulative-effect adjustment from adoption of ASC 606 |
- |
- |
- |
- |
|||||||||||||||||||||
Cumulative-effect adjustment from adoption of ASU 2016-16 |
- |
- |
- |
- |
( |
) | ( |
) | |||||||||||||||||
Issuance of treasury shares under stock purchase plans, upon exercise of and vesting of restricted stock units |
- |
- |
- |
||||||||||||||||||||||
Treasury shares at cost ( |
- |
- |
( |
) | - |
- |
( |
) | |||||||||||||||||
Stock-based compensation |
- |
- |
- |
- |
|||||||||||||||||||||
Other comprehensive loss, net of tax |
- |
- |
- |
( |
) | - |
( |
) | |||||||||||||||||
Fair value of awards attributable to pre-acquisition services |
- |
- |
- |
- |
|||||||||||||||||||||
Net income |
- |
- |
- |
- |
|||||||||||||||||||||
Balance as of December 31, 2018 |
( |
) | ( |
) | |||||||||||||||||||||
Issuance of treasury shares under stock purchase plans, upon exercise of and vesting of restricted stock units |
- |
- |
- |
||||||||||||||||||||||
Treasury shares at cost ( |
- |
- |
( |
) | - |
- |
( |
) | |||||||||||||||||
Stock-based compensation |
- |
- |
- |
- |
|||||||||||||||||||||
Other comprehensive income , net of tax |
- |
- |
- |
- |
|||||||||||||||||||||
Fair value of awards attributable to pre-acquisition services |
- |
- |
- |
- |
|||||||||||||||||||||
Net income |
- |
- |
- |
- |
|||||||||||||||||||||
Balance as of December 31, 2019 |
$ |
$ |
$ | ( |
) | $ | $ |
$ |
|||||||||||||||||
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Cash flows from operating activities |
|||||||||||||
Net income |
$ | |
$ | |
$ | |
|||||||
Adjustments required to reconcile net income to net cash provided by operating activities: |
|||||||||||||
Depreciation of property and equipment |
|
|
|
||||||||||
Amortization of premium and accretion of discount on marketable securities, net |
|
|
|
||||||||||
Realized loss (gain) on sale of marketable securities, net |
( |
) | |
|
|||||||||
Amortization of intangible assets |
|
|
|
||||||||||
Stock-based compensation |
|
|
|
||||||||||
Deferred income tax expense |
|
|
|
||||||||||
Decrease (increase) in trade receivables, net |
( |
) | ( |
) | |
||||||||
Decrease in prepaid expenses and other assets |
|
|
|
||||||||||
Increase (decrease) in trade payables |
( |
) | |
( |
) | ||||||||
Increase (decrease) in employees and payroll accruals |
|
|
( |
) | |||||||||
Increase (decrease) in income tax accrual and accrued expenses and other liabilities |
|
|
( |
) | |||||||||
Increase in deferred revenues |
|
|
|
||||||||||
Other |
|
( |
) | |
|||||||||
Net cash provided by operating activities |
|
|
|
||||||||||
Cash flows from investing activities |
|||||||||||||
Proceeds from maturity of marketable securities |
|
|
|
||||||||||
Proceeds from sale of marketable securities |
|
|
|
||||||||||
Proceeds from short-term bank deposits |
|
- |
|
||||||||||
Investment in marketable securities |
( |
) | ( |
) | ( |
) | |||||||
Investment in short-term bank deposits |
- |
( |
) | - |
|||||||||
Cash paid in conjunction with acquisition s , net of acquired cash |
( |
) | ( |
) | - |
||||||||
Purchase of property and equipment |
( |
) | ( |
) | ( |
) | |||||||
Net cash provided by (used in) investing activities |
$ | |
$ | ( |
) | $ | ( |
) | |||||
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Cash flows from financing activities |
|||||||||||||
Proceeds from issuance of treasury shares upon exercise of options |
$ | |
$ | |
$ | |
|||||||
Purchase of treasury shares at cost |
( |
) | ( |
) | ( |
) | |||||||
Payments related to shares withheld for taxes |
( |
) | ( |
) | ( |
) | |||||||
Net cash used in financing activities |
( |
) |
( |
) |
( |
) | |||||||
Increase (decrease) in cash and cash equivalents |
( |
) |
|
|
|||||||||
Cash and cash equivalents at the beginning of the year |
|
|
|
||||||||||
Cash and cash equivalents at the end of the year |
$ |
|
$ |
|
$ |
|
|||||||
Supplemental disclosure of cash flow information |
|||||||||||||
Cash paid during the year for taxes on income |
$ | |
$ | |
$ | |
|||||||
Non-cash investing activity |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fair value of awards attributable to pre-acquisition services |
|
|
|
|
|
|
|
|
|
|
- |
| |
Right-of-use |
$ | |
$ | - |
$ | - |
|||||||
NOTE 1:- |
GENERAL |
a. | Check Point Software Technologies Ltd., an Israeli corporation (“Check Point Ltd.”), and subsidiaries (collectively, the “Company” or “Check Point”), develop, market and support wide range of products and services for IT security, by offering a multilevel security architecture that defends enterprises’ cloud, network and mobile device held information. |
The Company operates in |
b. | During 2019, 2018 and 2017, approximately $ |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES |
a. | Use of estimates: |
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
b. | Financial statements in United States dollars: |
Most of the Company’s revenues and costs are denominated in United States dollar (“dollar”). The Company’s management believes that the dollar is the primary currency of the economic environment in which the Company and each of its subsidiaries operate. Thus, the dollar is the Company’s functional and reporting currency. |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Accordingly, non-dollar denominated transactions and balances have been re-measured into the functional currency in accordance with Accounting Standard Code (“ASC”) No. 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measured monetary balance sheet items are reflected in the statements of income as financial income or expenses, as appropriate. |
c. | Principles of consolidation: |
The consolidated financial statements include the accounts of Check Point Ltd. and subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation. |
d. | Cash equivalents: |
Cash equivalents are short-term unrestricted highly liquid investments that are readily convertible to cash and with original maturities of three months or less at acquisition. |
e. | Short-term bank deposits: |
Bank deposits with maturities of more than three months at acquisition but less than one year are included in short-term bank deposits. Such deposits are stated at cost which approximates fair values. |
f. | Investments in marketable securities: |
The Company accounts for investments in marketable securities in accordance with ASC No. 320, “Investments - Debt and Equity Securities”. |
Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date. |
The Company classifies all of its debt securities as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sale of investments are included in financial income, net and are derived using the specific identification method for determining the cost of securities sold. de bt |
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net. |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
The Company’s securities are reviewed for impairment in accordance with ASC 320-10-35. If such assets are considered to be impaired, the impairment charge is recognized in earnings when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company’s intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities with an unrealized loss that the Company intends to sell, or it is more likely than not that the Company will be required to sell before recovery of their amortized cost basis, the entire difference between amortized cost and fair value is recognized in earnings. For securities that do not meet these criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while declines in fair value related to other factors are recognized in other comprehensive income (loss). |
g. | Property and equipment, net: |
Property and equipment are stated at cost, net of accumulated depreciation. |
% | ||
Computers and peripheral equipment |
| |
Office furniture and equipment |
| |
Building |
| |
Leasehold improvements |
useful life of the asset |
h. | Business combination: |
The Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to future expected cash flows from acquired technology and acquired trademarks and tradenames from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
i. | Goodwill: |
j. | Other intangible assets, net: |
k. | Impairment of long-lived assets including intangible assets subject to amortization: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
l. | Manufacturing partner and supplier liabilities: |
The Company purchases manufactured products from its original design manufacture (“ODM”). The Company generally does not own the manufactured products. ODM’s provide services of design, manufacture, orders fulfillment and support with a full turn-key solution to meet the Company’s detailed requirements. If the actual demand is significantly lower than forecast, the Company records a liability for its commitment in excess of the actual demand. As of December 31, 2019 and 2018, the Company has |
m. | Research and development costs: |
Research and development costs are charged to the statements of income as incurred. ASC No. 985-20, “Software - Costs of Software to Be Sold, Leased, or Marketed”, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. |
Based on the Company’s product development process, technological feasibility is established upon completion of a working model. Costs incurred by the Company between completion of the working models and the point at which the products are ready for general release, have been insignificant. Therefore, all research and development costs are expensed as incurred. |
n. | Revenue recognition: |
The Company derives its revenues mainly from sales of products and licenses, security subscriptions and software updates and maintenance. The Company’s products are generally integrated with software that is essential to the functionality of the product. The Company sells its products primarily through channel partners including distributors, resellers, OEMs (Original Equipment Manufacturers), system integrators and MSPs (Managed Service Providers), all of whom are considered end-users. |
The Company’s security subscriptions provide customers with access to its suite of security solutions and is sold as a service. |
The Company’s software updates and maintenance provide customers with rights to unspecified software product upgrades released during the term of the agreement and include maintenance services to end-user customers, through primarily telephone access to technical support personnel as well as hardware support services. |
The Company recognizes revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers”. As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance obligation. |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Balance at December 31, 2017 |
Adjustments due to Topic 606 |
Balance at January 1, 2018 |
||||||||||
Other Assets |
$ |
|
$ |
|
$ |
|
||||||
Deferred tax asset, net |
$ |
|
$ |
( |
$ |
|
||||||
Retained earnings |
$ |
|
$ |
|
$ |
|
o. | Cost of revenues: |
p. |
Severance pay: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
q. | Employee benefit plan: |
r. | Income taxes: |
s. | Advertising costs: |
t. | Concentrations of credit risk: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
u. | Derivatives and hedging: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
v. | Basic and diluted earnings per share: |
w. | Accounting for stock-based compensation: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Year ended December 31, |
||||||||||||
Employee Stock Options |
2019 |
|
2018 |
|
2017 |
|||||||
Expected volatility |
|
|
|
|||||||||
Risk-free interest rate |
|
|
|
|||||||||
Dividend yield |
|
|
|
|||||||||
Expected term (years) |
|
|
|
|||||||||
Employee Stock Purchase Plan |
||||||||||||
Expected volatility |
|
|
|
|||||||||
Risk-free interest rate |
|
|
|
|||||||||
Dividend yield |
|
|
|
|||||||||
Expected term (years) |
|
|
|
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
x. | Fair value of financial instruments: |
Level 1 - |
Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. |
Level 2 - |
Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
Level 3 - |
Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
y. | Comprehensive income: |
Year ended December 31, 2019 | |||||||||||||
Unrealized gains (losses) on debt securities |
Unrealized gains (losses) on cash flow hedges |
Total |
|||||||||||
Beginning balance |
$ | ( |
) | $ | ( |
) | $ |
( |
) | ||||
Other comprehensive gain before reclassifications |
|
|
|
||||||||||
Amounts reclassified from accumulated other comprehensive income |
*( |
) | **( |
) | ( |
) | |||||||
Net current-period other comprehensive gain |
|
|
|
||||||||||
Ending balance |
$ | |
$ | |
$ | |
|||||||
*) | The reclassification out of accumulated other comprehensive income during the year ended December 31, 2019 for realized losses on marketable securities are included within financial income, net. |
**) | The reclassification out of accumulated other comprehensive income during the year ended December 31, 2019 for realized gains on cash flow hedges are included mostly within research and development expenses as well as other operating expenses. |
z. | Treasury shares: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
aa. |
Legal contingencies: |
ab. |
Impact of recently issued accounting standards: |
NOTE 2:- |
SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
NOTE 3:- |
ACQUISITIONS |
NOTE 3:- |
ACQUISITIONS (Cont.) |
Amount |
||||
Goodwill |
|
|
||
Core technology |
|
|||
Net liabilities assumed |
( |
|||
Total |
|
|
NOTE 4:- |
MARKETABLE SECURITIES |
December 31, |
||||||||||||||||||||||||||||||||
2019 |
2018 |
|||||||||||||||||||||||||||||||
Amortized cost |
Gross unrealized gains |
Gross unrealized losses |
Fair value |
Amortized cost |
Gross unrealized gains |
Gross unrealized losses |
Fair value |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Government and corporate |
$ |
|
$ |
|
$ |
( |
) |
|
$ |
|
$ |
*) |
$ |
( |
$ |
|
||||||||||||||||
Government-sponsored |
|
|
( |
) |
|
|
*) |
( |
|
|||||||||||||||||||||||
Government and corporate debentures - floating interest rate |
|
|
- |
|
|
- |
*) |
|
||||||||||||||||||||||||
$ |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
$ |
*) |
$ |
( |
$ |
|
||||||||||||||||
*) |
Represents an amount lower than $ |
NOTE 4:- |
MARKETABLE SECURITIES (Cont.) |
December 31, | ||||||||||||||||||||||||||||||||
2019 |
2018 | |||||||||||||||||||||||||||||||
Amortized cost |
Gross unrealized gains |
Gross unrealized losses |
Fair value |
Amortized cost |
Gross unrealized gains |
Gross unrealized losses |
Fair value | |||||||||||||||||||||||||
Government and corporate debentures - fixed interest rate |
|
|
( |
) | |
|
$ | |
( |
) | $ |
|
||||||||||||||||||||
Government-sponsored enterprises debentures |
|
|
( |
) | |
|
|
( |
) | |
||||||||||||||||||||||
Government and corporate debentures - floating interest rate |
|
|
* |
) | |
|
* ) |
( |
) | |
||||||||||||||||||||||
|
$ |
|
$ |
( |
) | $ |
|
|
$ |
|
$ | ( |
) | $ |
|
|||||||||||||||||
*) |
Represents an amount lower than $ |
December 31, 2019 | ||||||||||||||||||||||||
Less than 12 months |
12 months or |
Total | ||||||||||||||||||||||
Fair value |
Unrealized losses |
Fair Value |
Unrealized losses |
Fair value |
Unrealized losses | |||||||||||||||||||
Government and corporate debentures - fixed interest rate |
$ |
|
$ | ( |
) | $ | |
$ |
( |
) | $ |
|
$ | ( |
) | |||||||||
Government-sponsored enterprises debentures |
|
( |
) | |
( |
) | |
( |
) | |||||||||||||||
Government and corporate debentures - floating interest rate |
|
* |
) | |
* |
) | |
* |
) | |||||||||||||||
$ | |
( |
) | $ | |
$ | ( |
) | $ | |
$ | ( |
) | |||||||||||
December 31, 2018 | ||||||||||||||||||||||||
Less than 12 months |
12 months or greater |
Total | ||||||||||||||||||||||
Fair value |
Unrealized losses |
Fair Value |
Unrealized losses |
Fair value |
Unrealized losses | |||||||||||||||||||
Government and corporate debentures - fixed interest rate |
$ |
|
( |
) | |
( |
) | |
( |
) | ||||||||||||||
Government-sponsored enterprises debentures |
|
( |
) | |
( |
) | |
( |
) | |||||||||||||||
Government and corporate debentures - floating interest rate |
|
( |
) | |
* |
) | |
( |
) | |||||||||||||||
$ | |
( |
) | |
( |
) | |
( |
) | |||||||||||||||
*) |
Represents an amount lower than $ |
December 31, 2019 |
||||||||||||
Fair value measurements using input type |
||||||||||||
Level 1 |
Level 2 |
Total |
||||||||||
Cash equivalents: |
||||||||||||
Money market funds |
$ | |
$ |
- |
$ | |
||||||
Marketable securities: |
||||||||||||
Government and corporate debentures - fixed interest rate |
- |
|
|
|||||||||
Government-sponsored enterprises debentures |
- |
|
|
|||||||||
Government and corporate debentures - floating interest rate |
- |
|
|
|||||||||
Foreign currency derivative contracts |
- |
|
|
|||||||||
Total financial assets |
$ | |
$ | |
$ | |
||||||
December 31, 2018 |
||||||||||||
Fair value measurements using input type |
||||||||||||
Level 1 |
Level 2 |
Total |
||||||||||
Cash equivalents: |
||||||||||||
Money market funds |
$ | |
$ |
- |
$ | |
||||||
Marketable securities: |
||||||||||||
Government and corporate debentures - fixed interest rate |
- |
|
|
|||||||||
Government-sponsored enterprises debentures |
- |
|
|
|||||||||
Government and corporate debentures - floating interest rate |
- |
|
|
|||||||||
Foreign currency derivative contracts |
- |
( |
) | ( |
) | |||||||
Total financial assets, net |
$ | |
$ | |
$ | |
||||||
NOTE 6:- |
PROPERTY AND EQUIPMENT , NET |
|
December 31, |
|||||||
|
2019 |
2018 |
||||||
Cost: |
||||||||
Computers and peripheral equipment |
$ |
|
$ |
|
||||
Office furniture and equipment |
|
|
||||||
Building |
|
|
||||||
Leasehold improvements |
|
|
||||||
|
|
|
||||||
Accumulated depreciation |
|
|
| |||||
Property and equipment, net |
$ | |
$ | |
||||
NOTE 7:- |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET |
a. |
Goodwill: |
2019 |
2018 |
|||||||
Balance as of January 1 |
$ |
|
$ |
|
||||
Acquisitions |
|
|
||||||
Balance as of December 31 |
$ |
|
$ |
|
||||
b. |
Other intangible assets, net: |
Useful |
December 31, |
|||||||||||
Life |
2019 |
2018 |
||||||||||
Original amount: |
||||||||||||
Core technology |
|
$ | |
$ | |
|||||||
Trademarks and trade names |
|
|
|
|||||||||
|
|
|||||||||||
Accumulated amortization: |
||||||||||||
Core technology |
|
|
||||||||||
Trademarks and trade names |
|
|
||||||||||
|
|
|||||||||||
Other intangible assets, net: |
||||||||||||
Core technology |
|
|
||||||||||
Trademarks and trade names |
|
|
||||||||||
$ |
|
$ |
|
|||||||||
NOTE 7:- |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (C ont.) |
20 20 |
$ | |
||
20 2 1 |
|
|||
20 2 2 |
|
|||
20 23 |
|
|||
20 24 |
|
|||
Thereafter |
|
|||
$ | |
|||
NOTE 8:- |
deferred revenues |
December 31, |
||||||||
2019 |
2018 |
|||||||
Security subscriptions |
$ |
|
$ |
|
||||
Software updates and maintenance |
|
|
||||||
Other |
|
|
||||||
$ |
|
$ |
|
|||||
NOTE 9:- |
ACCRUED EXPENSES AND OTHER LIABILITIES |
December 31, | |||||||
2019 |
2018 | ||||||
Accrued products and licenses costs |
$ |
|
$ |
| |||
Marketing expenses payable |
|
| |||||
Legal accrual |
|
| |||||
Other accrued expenses |
|
| |||||
| |||||||
| |||||||
$ |
|
$ |
| ||||
|
Litigations: |
a. |
Israeli taxation : |
1. |
Corporate tax: |
2. |
Foreign Exchange Regulations: |
b. |
Tax Reform in U.S: |
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which among other provisions, reduced the U.S. corporate tax rate from |
At December 31, 2017, the Company re-measured certain of its U.S. deferred tax assets and liabilities, based on the new rates at which they are expected to reverse in the future. |
The tax expense recorded in 2017 related to the re-measurement of the deferred tax balance was $ |
c. |
Income taxes of non-Israeli subsidiaries: |
Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence. |
The Company does not provide deferred tax liabilities when it intends to reinvest earnings of foreign subsidiaries indefinitely or if distributed, no tax liability will be imposed. Undistributed earnings of foreign subsidiaries that are not distributed amounted to $ |
d. |
Deferred tax assets and liabilities : |
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. |
December 31, | |||||||||
2019 |
2018 |
||||||||
Carry forward tax losses |
$ | |
$ | |
|||||
Employee stock based compensation |
|
|
|||||||
Deferred revenues |
|
|
|||||||
Other |
|
|
|||||||
Deferred tax assets before valuation allowance |
|
|
|||||||
Valuation allowance – mainly in respect to carryforward losses |
( |
) | ( |
) | |||||
Deferred tax asset |
|
|
|||||||
Intangible assets |
( |
) | ( |
) | |||||
Undistributed earnings of subsidiary |
( |
) | ( |
) | |||||
Other |
( |
) | ( |
) | |||||
Deferred tax liability |
( |
) | ( |
) | |||||
Deferred tax asset, net |
$ |
|
$ |
|
|||||
e. |
Income before taxes on income is comprised as follows: |
Year ended December 31, | |||||||||||
2019 |
2018 |
2017 |
|||||||||
Domestic |
$ | |
$ | |
$ | |
|||||
Foreign |
|
|
|
||||||||
$ |
|
$ |
|
$ |
|
||||||
f. |
Taxes on income are comprised of the following: |
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Domestic taxes: |
|||||||||||||
Current |
$ | |
$ | |
$ | |
|||||||
Deferred |
|
|
|
||||||||||
|
|
|
|||||||||||
Foreign taxes: |
|||||||||||||
Current |
|
|
|
||||||||||
Deferred |
|
|
|
||||||||||
|
|
|
|||||||||||
Taxes on income |
$ |
|
$ |
|
$ |
|
|||||||
g. | A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows: |
December 31, | |||||||||
2019 |
2018 |
||||||||
Beginning balance |
$ |
|
$ |
|
|||||
Increases related to tax positions taken during prior years |
|
|
|||||||
Decreases related to statute of limitations |
( |
) |
- |
||||||
Increases related to tax positions taken during the current year |
|
|
|||||||
Ending balance |
$ |
*) |
$ |
*) |
|||||
h. |
Reconciliation of the theoretical tax expenses: |
Reconciliation between the theoretical tax expenses, assuming all income is taxed at the statutory rate in Israel and the actual income tax as reported in the statements of income is as follows: |
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Income before taxes as reported in the statements of income |
$ |
|
$ |
|
$ |
|
|||||||
Statutory tax rate in Israel |
|
|
|
||||||||||
Decrease in taxes resulting from: |
|||||||||||||
Effect of “Preferred Enterprise” status *) |
( |
) | ( |
) | ( |
) | |||||||
Decrease in US deferred tax due to US tax rate change |
- |
- |
|
||||||||||
Others, net |
|
|
- |
||||||||||
Effective tax rate |
|
|
|
||||||||||
*) Basic earnings per share amounts of the benefit resulting from the “Technological preferred or Preferred Enterprise” status |
$ | |
$ | |
$ | |
|||||||
Diluted earnings per share amounts of the benefit resulting from the “Technological preferred or Preferred Enterprise” status |
$ | |
$ | |
$ | |
|||||||
a. |
General: |
Ordinary shares confer upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends if declared. |
Dividends declared on ordinary shares will be paid in New Israeli Shekels. Dividends paid to shareholders outside Israel will be converted into U.S. dollars, on the basis of the exchange rate prevailing at the date of payment. |
b. |
Share repurchase: |
On July 25, 2018, the Company announced an extension and increase to its share repurchase plan. Under the updated plan, the Company may repurchase up to an additional $ |
|
|
On February 3, 2020 the Company announced the expansion of the Company’s on-going share repurchase program by an additional $ |
As of December 31, 2019, the Company repurchased ordinary shares for an aggregate amount of $ |
c. |
Stock Options, RSU’s and PSU’s: |
In 2005, the Company adopted two new equity incentive plans, which were subsequently amended in January 2014 and in July 2018: the 2005 United States Equity Incentive Plan and the 2005 Israel Equity Incentive Plan together are referred to as the Equity Incentive Plans. |
Under the Equity Incentive Plans, the Company may grant options to employees, officers and directors at an exercise price equal to at least the fair market value of the ordinary shares at the date of grant and are granted for periods not to exceed |
Under the Equity Incentive Plans, the Company’s non-employee directors receive an automatic annual option grant. Following the amendments to the Equity Incentive Plans in July 2018, commencing December 31, 2018, on December 31st of each year, the number of Reserved and Authorized Shares (as defined below) under both Equity Incentive Plans together shall be automatically reset on such date to equal |
The number of “Reserved and Authorized Shares” under the Equity Plans shall equal the sum of (i) the number of ordinary shares reserved and authorized under the Equity Incentive Plans for outstanding options, RSUs, PSUs and other awards granted under the Equity Incentive Plans as of such date, and (ii) the number of ordinary shares reserved, authorized and available for issuance under the Equity Incentive Plans on such date. |
2019 |
|
| ||||
Stock Options outstanding |
|
|
|
|||
RSU outstanding |
|
|
||||
PSU outstanding |
* ) |
|
||||
Ordinary shares available for issuance under the Equity Incentive Plans |
|
|
||||
|
||||||
Total Reserved and Authorized Shares as of December 31, 2019 |
|
|
||||
|
Options |
Weighted average exercise price |
Aggregate intrinsic value |
||||||||||
2019 |
||||||||||||
Outstanding at beginning of year |
|
$ |
|
$ |
|
|||||||
Granted |
|
$ |
|
|||||||||
Exercised |
( |
) | $ |
|
||||||||
Forfeited |
( |
) | $ |
|
||||||||
Outstanding at December 31, 2019 |
|
$ |
|
$ |
|
|||||||
Exercisable at December 31, 2019 |
|
$ |
|
$ |
|
|||||||
|
The aggregate intrinsic value of the outstanding stock options at 31 December 2019 and 2018, represents the intrinsic value of in-the-money as of such dates. The remaining out-of-the-money as of 31 December 2019 and 2018, and their intrinsic value was considered as . |
A summary of the Company’s RSUs activity is as follows: |
Year ended December 31, |
||||
2019 |
||||
Unvested at beginning of year |
|
|||
Granted |
|
|||
Vested |
( |
) | ||
Forfeited |
( |
) | ||
Unvested, December 31, 2019 |
|
|||
The weighted average fair values at grant date of RSUs granted for the years ended December 31, 2019, 2018 and 2017 were $ and $ per share, respectively. |
The total fair value of shares vested during the years 2019, 2018 and 2017 was $ |
As of December 31, 2019, the Company had approximately $ non-vested stock options and non-vested RSU’s and PSU’s, expected to be recognized over a weighted average period of |
d. |
Employee Stock Purchase Plan (“ESPP”): |
In 1996, the Company adopted an ESPP, which was subsequently amended in 2015. According to the amendments, commencing the purchase period that begins February 1, 2017, |
As of December 31, 2019, |
Eligible employees may use up to single shares per participant on any purchase date. The ESPP is implemented through an offering every six months. The price of an ordinary share purchased under the ESPP is equal to |
During 2019, 2018 and 2017, employees purchased |
In accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation cost. For the years ended December 31, 2019, 2018 and 2017, the Company recognized $ |
e. |
Stock-Based Compensation: |
Stock-based compensation expense related to stock options, RSUs and PSUs is included in the consolidated statements of operations as follows: |
Year ended December 31, | |||||||||||||
2019 |
2018 |
2017 |
|||||||||||
Cost of revenues |
$ |
|
$ |
|
$ |
|
|||||||
Research and development |
|
|
|
||||||||||
Selling and marketing |
|
|
|
||||||||||
General and administrative |
|
|
|
||||||||||
$ |
|
$ |
|
$ |
|
||||||||
Year ended December 31, |
||||||||||||
2019 |
2018 |
2017 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ | |
$ | |
$ | |
||||||
Weighted average ordinary shares outstanding |
|
|
|
|||||||||
Dilutive effect: |
||||||||||||
Employee stock options, RSUs and PSUs |
|
|
|
|||||||||
Diluted weighted average ordinary shares outstanding |
|
|
|
|||||||||
Basic earnings per ordinary share |
$ | |
$ | |
$ | |
||||||
Diluted earnings per ordinary share |
$ | |
$ | |
$ | |
||||||
a. |
Summary information about geographical areas: |
The Company operates in one reportable segment (see Note 1 for a brief description of the Company’s business). The total revenues are attributed to geographic areas based on the location of the Company’s channel partners which are considered as end customers, as well as direct customers of the Company. |
1. | Revenues based on the channel partners’ location: |
Year ended December 31, | ||||||||||||
2019 |
2018 *) |
2017 *) |
||||||||||
Americas |
$ | |
$ | |
$ | |
||||||
Europe , Middle East and Africa |
|
|
|
|||||||||
Asia Pacific |
|
|
|
|||||||||
$ |
|
$ |
|
$ |
|
*) |
Starting 2019, Middle East and Africa are part of the “Europe Middle East and Africa” region, while before it was part of “Asia Pacific, Middle East and Africa” region. 2018 and 2017 figures were reclassified to present the updated revenue distribution by geography. |
2. |
Property and equipment, net: |
December 31, | ||||||||
2019 |
2018 |
|||||||
Israel |
$ |
|
$ |
| ||||
U.S. |
|
| ||||||
Rest of the world |
|
| ||||||
$ |
|
$ |
| |||||
b. |
Summary information about product lines: |
Year ended December 31, | ||||||||||||
2019 |
2018 |
2017 |
||||||||||
Product and licenses: |
||||||||||||
Network security Gateways |
$ | |
$ | |
$ | |
||||||
Other *) |
|
|
|
|||||||||
|
|
|
||||||||||
Security subscriptions |
|
|
|
|||||||||
Software updates and maintenance |
|
|
|
|||||||||
Total revenues |
$ | |
$ | |
$ | |
||||||
*) | Comprised of Endpoint security, Mobile security and Security management products, each comprising of less than |
c. | Financial income, net: |
Year ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Financial income: |
||||||||||||
Interest income |
$ | |
$ | |
$ | |
||||||
Financial expense: |
||||||||||||
Amortization of marketable securities premium and accretion of discount, net |
|
|
|
|||||||||
Realized loss (gain) on sale of marketable securities, net |
( |
) | |
|
||||||||
Foreign currency re-measurement loss |
|
|
|
|||||||||
Others |
|
|
|
|||||||||
|
|
|
||||||||||
$ |
|
$ |
|
$ |
|
|||||||