Check Point Software 2024 first quarter financial results video conference. I'm Kip Meintzer, Global Head of Investor Relations, and joining me today are Founder and CEO Gil Shwed and our Chief Financial Officer Roei Golan. Before we begin, I'd like to remind everyone that this conference call is being recorded and will be available for replay on our website at checkpoint.com. During the formal presentation, all participants are in listen-only mode to be followed by a Q&A session. During this presentation, Check Point representatives may make forward-looking statements within the meaning of the Securities Acts of the early 1900s. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those discussed in Check Point Software's latest filings with the Securities and Exchange Commission. Any forward-looking statements may speak only as of the date hereof, and Check Point Software undertakes no obligation to update publicly any forward-looking statements. In our press release, which has been posted on our website, we present GAAP and non-GAAP results along with a reconciliation of such results, as well as the reasons for our presentation of non-GAAP information. If you have any questions after the call, please feel free to contact Investor Relations by email at kip@checkpoint.com. Now I'd like to turn the call over to Roei Golan. Thank you, Kip, and great to see you here with us. One moment, I'll share my screen. Let me know if you can see that. Can you see my screen? We can. Okay, great. So thank you, Kip. I'm excited to be with you. Actually, we started the year very strong. We finished the quarter, Q1, with an EPS of $2.04, a 13% increase year-over-year, and net income of $235 million, representing an 8% increase year-over-year. Also, our revenues were above the midpoint of our projections. They actually grew by 6% to $599 million, $6 million above the midpoint of our projection, while the EPS, as mentioned, grew by 13% and was $0.04 above the midpoint of our projections. So let's move to the revenues and deferred revenues and billing. So as indicated on the revenue side, we grew by 6%. The deferred revenues grew by 2% to $1,826 million, while our current deferred revenues, short-term deferred revenues, grew by 2% also to $1,347 million. Our calculated billing reached $517 million, which represents a 7% growth year-over-year, while our short-term calculated billing reached $532 million, a 3% growth year-over-year. Our remaining performance obligation reached almost $2.2 billion with 6% growth year-over-year. That growth was driven by strong demand for our product this quarter. In the first quarter, we double-digit growth in total new business annualized booking. I'm going to show you also in the next few slides the reflection. The revenues growth of the 6% was driven mainly by subscription revenues. Another strong quarter for the subscription revenue that grew by 15% to $263 million. That is mainly driven by strong performance of our Infinity consolidated platform and the Harmony Email. Both of them contributed significantly to this growth. In terms of, as mentioned, the new business acceleration, the annualized new business booking growth, that's something that we showed you last quarter also. We did see the turnaround in Q4. We presented to you that we grew double-digit in Q1. So we saw the new business annualized booking grew double-digit again in an accelerated way and higher growth than in Q4. So I think, again, that's because of healthy and strong demand to our product during the quarter. In terms of Infinity, Infinity revenues grew by double-digit revenue growth and becoming more and more significant to our business. From revenues perspective, it's already exceeded 13%, 1.3%, 13% of our revenues. And in terms of annualized booking, it's even higher. So we expect that this portion from the revenues will be bigger in the next few quarters. As we move to the global revenue distribution, so we can see here that 46% of our revenues came from EMEA. 42% of the revenues came from Americas, while the remaining 12% came from APAC. Important to note that the revenues grew in all geographies. We did see an increase in all geographies. Also in the new business growth that I mentioned in the previous slide, we did see this growth in all geographies. Important to note that it was led by EMEA with very strong new business growth in EMEA. Now let's move to the P&L this quarter. Our gross profit grew by 7% to $536 million, representing a 90% gross margin compared to 89% gross margin last year. Our total operating expenses increased by 8% to $284 million. This was mainly as a result of our continuing investments in our workforce. I remind you that we did the Perimeter acquisition last year. So we have the full Perimeter acquisition here in the operating expenses. We keep investing in the cloud infrastructure and, of course, the sales and marketing. So all of that drove the 8% growth increase in the operating expenses. We finished with operating income of $252 million, a 6% growth, which represents a 42% operating margin, similar to last year. Now let's move to the net income. Our net income grew by 8% to $235 million. We can see here that the financial income we did see an increase in the financial income as a result of higher interest rates in the market and similar tax expenses and tax rates. We finished with an EPS of $2.04, a 13% growth year-over-year. Moving to our cash flow and cash position. So we finished the quarter with more than $3 billion in cash, marketable securities and short-term deposits. We purchased during the quarter $325 million of shares at an average price of $159 per share. Our operating cash flow was strong with $361 million. To summarize our financials, so revenues and EPS reached the top end of our projections. We did see acceleration in our quarterly revenues. Mainly came growth from the subscription that came from Infinity and Harmony email performance. We do see strong acceleration in our new business annualized booking. Another quarter with double-digit annualized new business booking and with strong profitability, maintaining strong profitability, 6% operating income growth, 8% net income growth, and double-digit growth in EPS, 13% growth. And now I'll turn the call over to Gil. We can't hear you, Gil. Apologize. I muted myself. Sorry. Good morning, everyone. Thank you, Roei, for the presentation. Now that I'm unmuted, I hope you see the presentation. Ready to go for the business update. I'll start with a quick recap of what Roei already shared with you. I think we had a pretty good quarter in the first quarter. Great results, revenue, EPS, top of the projection, double-digit subscription growth continues to be. Recurring revenue, which I think is an important factor because I think we're moving more and more of our business to be an annuity model, represents now 83% of total revenues. Again, another good indicator. Overall, I think we are putting huge focus on what we call new business activity. New business activity includes everything from signing up new logos and new customers to new refresh cycles, expansion, upsell, everything for the existing customers. We had double-digit new business growth, which I think is very, very important that our customers are growing with us, are refreshing with us, are becoming up to date, and are getting the best security. Part of that is the overall Infinity platform, new customers, some major public sector wins. I think Infinity, just to be through the rest of the presentation, we use the terminology for several things. It's our overall architecture, our overall platform, which I think is very important, but it's also a specific kind of what we call Infinity deals or Infinity contracts. These are deals that customers are usually doing for long-term, including big parts of the platform and not just one product. All of these are growing and growing very, very nicely. And last but not least, one of the key drivers of our business remains our security gateways, the network in the center of everything. And this quarter, we did the major refresh of our entire product line, the Quantum Force. That's the new name of the new line of appliances. I'll talk more about that, but that should be important and significant for the Check Point customers and gaining more value from what we do. So just if we look at customers that have been with us—sorry, let's switch to it quickly. So you see many new customers on our platform, all geographies, Europe, Asia, US. And a very important area is the public sector. We booked 19 new government agencies in 40 countries just in the first quarter. And that's also a very nice—some very small, some huge, some multimillion-dollar deals for many years. So, again, all industries, manufacturing, telcos, infrastructure, energy, so on, very, very important. In the first quarter, we also held our CPX conference. I think some of you attended that with the first sell- side analyst track that we had in Las Vegas. And that's important because that's where we gather together our field employees, our partners, our customers, and share all our news for the year. So we did all our product launches. These are free conferences, one in Asia, one in Europe. And the last one was in Las Vegas, in the US. We had overall over 18,000 participants, both physical and virtual, almost half and half. So that was great. For the first time, we returned to full force, physical conference, tons of energy. I think everything was very, very well received. And I think you see it here. We get the highest scores ever on this conference. We measure the performance of the conference on every aspect. This year, we got the highest score in Check Point history. We're very happy about that. I think it indicates something also for the enthusiasm of the customers and partners for the new launches and the relevancy and the importance of the value that Check Point provides to their security. One of the key messages was our Infinity platform or Check Point as a platform company. Now, I know that many people in the industry speak today about the platform. Everybody speaks today about the platform, and it looks like it's part of the wave. I think it's very important to understand. We launched the Infinity architecture, the Infinity platform in 2018, 6 years ago or 5 and some years ago. And since then, we're building it. We're building it to be a very, very unique platform, a platform that's now AI-powered, more than 50 security engines that are delivered from the cloud and contain AI technology that's part of overall of over 80 different security engines that analyze and prevent all types of attacks. And one of the major values here is our 3 Cs, being a consolidated platform where you can manage everything together, a comprehensive one, addressing all the key attack vectors. And the one that we are putting a lot of emphasis this year being the strongest and the real platform, not the architecture, but a true architecture, a collaborative platform. And that's where I put a lot of our focus in 2024, making sure that all the technologies and products work together to elevate the level of security. So this is not just information sharing between different aspects of the security infrastructure. This is also proactive action. So if we see somebody poking around our network, scanning it, we can take that attacker and block it all over on the network, on the cloud, and on many other places. If we identify an infected endpoint, we can quarantine that endpoint through the network and make sure we stop the damage, contain them, contain the risk, and stop the attack. And that's the only platform where I think we truly do that and do it in a very, very effective manner. So this is, again, a true platform when all the elements are orchestrated, work together in a collaborative manner. And I think the value of collaboration is going to pay off with the highest level of security. So that's a big focus that we put in the conference. Another important element is, as I mentioned, our new product launches. And these are the three key products that we launched, the AI Copilot that lets you manage security with natural language, again, simplifying many management tasks and, once again, elevate the level of security because things that people didn't do before because they took too much time, because they were too complicated, they can do now in a matter of seconds with AI technology. A new technology for securing cloud applications, SaaS. Don't confuse that with SASE. That's the technology for remote access that we went into the market with in the acquisition we did in Q3. But SaaS is a different one, also based on some acquired technology from last year. And Quantum technology and the products that will come later in the year that actually protect your SaaS applications on the cloud. Again, part of the platform, part of everything. And last and not least, and I mentioned that, is our Quantum Force gateways. This is very, very important because that drives a big part of our business. So if we see that's the previous generation of Quantum appliances. And you can see here the new line of appliances, amazing line. You can see the performance ranges here between 2x and 3x performance, optimized for AI, mentioned the over 50 AI engines, and with the highest threat prevention ratio in the industry, 99.8%, based on the Miercom results. So we are very proud of that. And I think that should give us a lot of power to go to the market, win new customers, to upgrade and refresh the existing customers. And again, it starts. It takes time for a customer to evaluate the new hardware and the new software. But I think it's a very big promise for the rest of the year. Last and not least, I mentioned the Infinity AI Copilot. You can see a simple demo here. We are trying to get a simple managerial task. Emily can't access the SAP server. Why can't she do that? Again, in the past, it was a long process, analyzing logs, analyzing things. Here, it's super simple. You ask the question. It tells you, Emily, actually attempted to do that. There was a rule that's blocking her. It asks you, do you want to enter and change the rule base so she can actually access that server? You say yes. Policy being installed. Boom. It's done. These tasks, when you do them with our product, if you're an expert admin, it takes you a few minutes. If you're not an expert, it can take you much longer. If you're doing it with a competitive product, it can take you many, many, even hours to analyze the situation, to find the right place, especially for large enterprises that have hundreds of thousands of rules, and they need to diagnose the situation, and so on. Again, our AI Copilot is not limited just for these managerial tasks. It can do everything from asking, are we protecting against the latest threat? Again, it will go and pull the latest threat from the right databases, check the configuration of all the security installation, and will tell you, yes, you're protected or no, click here to get updated. I believe, by the way, that AI will play a major role in the world in general, but in our industry, it can make some big revolutions. What we're doing now is just the first step. We will see much more. So just before we finish, speaking of AI, a major partnership we announced in the AI space is about securing the AI cloud infrastructure. As I'm sure you all know and you all follow, some of the biggest investments in our world today are building AI server farms in the cloud that delivers all this wonderful value of AI. These are based primarily on NVIDIA chipsets. And what we announced last month was the first AI infrastructure firewall, which means that we can now embed the Check Point firewall to protect the AI servers in the cloud on the AI chipsets from NVIDIA. We launched this partnership based on work that we are doing for many years, several years with NVIDIA, even before the AI generation. But based on that, we have a lot of our software that can run on the NVIDIA chipsets. Later in the year, we will make it available. I hope that we will present a very interesting market opportunity and very, very important, because right now, much of the AI infrastructure that's up there in the cloud remains exposed to the open Internet, and its level of protection is far from being sufficient from where we want to be. I think this represents another business opportunity. There are many, many more around the transformation to AI. To summarize my presentation and Q1, we had the strong start to 2024. The Infinity platform investment is delivering returns with different products, with email growing, with many other products growing, with the sales of the Infinity agreements for a sophisticated, comprehensive security architecture for customers growing quite fast, which is a great potential for the future, but already generating 13% of our business revenues, EPS at the top of our projection, subscription growth, new business growth. So both on the quantitative and the qualitative measures, I think we've done pretty well to start the year. And we're looking forward to the next few quarters and hope that we keep that good start for the year. And before I finish and open it for your questions, maybe speak a little bit about our projections for the second quarter. Sorry, the projections disappeared. No, they didn't disappear. They will be right here. So projections are generally in line with what we've talked about in the first quarter and the beginning of the year. Revenues are going to be between $607-$637 million. Earnings per share is expected to be between $2.10-$2.20. GAAP EPS approximately $0.44 less than that. I think this is kind of where we've been very consistent with where we started. And I hope that we will go on to have a good remainder for the year. So thank you very much. And I'll be very happy to open the call for your questions. All right. As always, please remember one question during your period. First up is going to be Joseph Gallo of Jefferies, followed by Tal Liani of B of A. Awesome. Thanks for the question. I wanted to start high level. How would you characterize the business environment in one Q? And then what's embedded in guidance? I'm not sure if I saw a calendar 2024 guidance. And then, given your convos with customers, how are they viewing their cyber budgets? What areas are being prioritized? Any sense of fatigue seen by others? I know you called out strength in EMEA. Is the U.S. budget lagging relatively? Thanks. So that was a very comprehensive question. I'll try to answer it. First, we had a good quarter. So I think I've already conveyed that in terms of the environment around us. It was kind of mixed. I'm not as positive as I've seen from our results. On one hand, the security marketplace remains healthy. So I don't have any. I mean, I think that's going to be good and going for several years. But I don't think that customers started opening big budgets like we've been before. They are keeping relatively tight on some of their budgets, especially for some of the areas that we are in. Our industry remains very competitive. And I think that, again, well, we haven't seen much of that in the first quarter. I do anticipate we'll see more competitive pressure moving forward. So I think overall, it's a good market, but it's not, you know, we haven't. We've definitely returned from the down market that we've been in to a year ago, into a more stable, healthy market. But we're still not at the market I like it to be. And from the geography standpoint, our strength that we've seen was very strong in Europe. US was good. New business grew, but a little bit more tight. Thank you. All right. Next up is Tal Liani. Hey, can you hear me? Followed by Kendall. I don't know why my video doesn't show up. I don't know if you can see me or not, but here I am. Now you're big. Good. Thank you. Okay, Roei, I have a question. I look at the quarter, and then I look at what could drive double-digit growth for next year. And if I work with your model, and I assume that products are flat, maintenance is like +2%, and subscription is up 15%, which is what we have seen this quarter, I'm getting 6%, 7% growth. I'm not getting 10%. And you talked in the past about the opportunity to grow total revenues by double digits. No timeline, but to grow. So what are the assumptions, or what needs to happen for revenues to grow double digits? Is it about product revenue growing again, double digits, or is it about subscription accelerating? What are the components that need to happen for you to grow double digits? And again, no timeline on it. I just want to understand how growth accelerates from here. So I think we have, first of all, it's a good question. I think there are several factors. First of all, of course, product revenue needs to grow. I mean, it doesn't need to grow, by the way, double digit, but it needs to grow at least, I think, a single digit. It's something that we need to execute better. I think we have a new product in the Quantum Force that we launch in Q1. I think that definitely can drive refresh, more refresh, and can drive growth in product revenues. In terms of what else, I think that the main driver for the growth should be the SASE, the Perimeter 81 acquisition that we just acquired 2 quarters ago. It's still not significant to our business. We just acquired them. We talked about the integration that it takes time. But I think that that's the potential. This is together with the continued strong growth in the Harmony email and the refresh. I think that can bring us, hopefully, to double digit, again, without any timeline. But I think that's the potential. Great. I love your background flowers. Thank you. All right. Up next is Adam Tindle from Raymond James, followed by Shaul Eyal from TD Cowen. All right. Thank you, Gil. I just wanted to start with a competitive environment question. Observing that you're posting nearly 7% billings growth here, we'll see actual results, but that probably outpaces both Fortinet and Palo Alto this quarter, based on their guidance. Your new business is growing double digits. Just wonder if you could maybe touch on the rationale and sustainability of that trend where you're outperforming those competitors from a growth standpoint. Secondly, as we look forward, one of those competitors on their last earnings call announced an intent to pursue a very aggressive pricing strategy. I just wonder if you could maybe touch on your thoughts and expected response for that. Thank you. Thank you. So first, you are right. There is some pressure on the industry. I think we saw a big part of it last year. Our competitors are seeing it in a little bit of delay. I don't know how much of that delay is about financial issues and how much of it is worth the market versus worth their financial results. But we've seen a huge pressure in the market a year ago. I think we're getting out of it. They seem to be based on, again, the report you're talking about a little bit behind us in that cycle. I think the fact that they are under pressure and seeing and pursuing aggressive strategies means that we will have a more competitive market. That's evident. I do think that customers need to buy the best security. I think if you buy second-best security for free, it's not very good. Guys, I think it's not. I hate to speak about other companies and bash about them. But if you open now the reports, you'll see the superiority of the Check Point technology, not just in blocking in a higher prevention rate, like we've seen with Miercom and almost perfect score, but with product vulnerabilities, and even failing to fix these product vulnerabilities in a timely manner, in exposing big parts of our infrastructure based on some of our competitors' products. By the way, these are not new trends. These are things you can see that you can track. Some of it is published publicly, and you can see that we do commit to the best security. I urge every customer, and I think we definitely can do a better job in educating the market of it, not compromising on security, not even for free. That's, I think, should be our key message. Let's win with the best security. All right. Our next person up is Shaul Eyal, followed by Gabriela Borges. Thank you. Hey, good afternoon, guys. Gil, any word about the CEO search? And as we think about the new business or even the renewal that you've had, I think you've mentioned several multimillion-dollar transactions. But did you guys have any 8-digit-related transactions this quarter? Yes. Okay. So I think I'll start with the CEO search. I think we talked about the intention last quarter. Since we started the process, it's going to be a good, structured, well-thought-out process. And we're within the beginning of the process. It will take time, I think, like we've said last time. And it's moving on. In terms of large deals, we had deals all sizes. We have some new wins that are 8-digit deals. It's 8-digit for multiple years. So the impact on the first year is going to be, again, Roei is better than me on the numbers. But I think for the first year, it's only 7-digit. But we had a few large new customers with an 8-digit contract. Roei? Yes. Yeah, I can confirm. We had several new logos with dates. I mean, one new logo, I would say, with 8-digit contract, again, multi-year. And we had several. It doesn't mean that the billing was 8-digit. I mean, remind you, because the billing can be flexible. But in terms of the bookings, yeah, we had 8-digit deals. Thank you. All right. Our next speaker up is Gabriela Borges, followed by Jonathan Ho. Hi, and thank you for taking the question. I would love to dig into the dynamics you're seeing around the refresh cycle, particularly as we see customers bring their product up for refresh. Any observations on how they're thinking about their firewall footprint and their firewall budget versus their SASE budget? And then apples to apples, what do you see in terms of pricing as customers think about the box upgrade cycle? Thank you. That's an excellent question. I think, first, overall, these two markets, or all these markets, will converge. And what we'll see is kind of a mesh network where it includes the remote users, the branch offices, the data centers, the cloud, the private and public cloud data centers. All of this needs to be interconnected. And I think that's one of the great benefits that Check Point can provide in the marketplace. There are today, if you look at the market, there are today standalone vendors that are doing a decent job in the SASE market, some in branch offices, some in remote users, but not converged with the rest of the enterprise, with the data centers, and so on. There are companies that do more of the data center security, but again, don't have the SASE model. There are companies that have both, but they are not today integrated. We are working on a platform when everything is going to be integrated over the network. And in terms of budget, I expect a lot of it to come from the same budget. And by the way, the benefit is not just the mesh architecture. We call it also a hybrid architecture. It's also that customers can use the same policies, the same high level of security, but get the most optimized deployment. And the most optimized deployment can be sometimes on-premise, can be sometimes on-device, and can be sometimes in the cloud. It's very important, by the way, when you think about it, when people deploy networking solutions, they invest a ton of energy to get the fastest speeds, to get the lowest latency. So, for example, in all these cases, doing things on-device or on-premise delivers 100 times better results than doing it in the cloud. In some areas, shifting away to the cloud may also make sense. But that's what's important, that you have the hybrid structure that delivers the optimal, not just the best security, but also the optimal performance. And I think we will have both. In terms of the budgets, right now, we are seeing good traction on the SASE side. But it's still, at least in our business, still in the small, mainly small, medium customers. That's also the right now, the product offering that we acquired. We will integrate it this year to be this kind of overall architecture and platform that works together at any size. So that is important. On the refresh cycle of our data center, the core of our business, I see good and healthy activity, especially on the high end, on the big data centers. But I don't see today that budgets are opened up. Budgets are still relatively tight there. So while I do expect, and we do see some signs for improvement in the second half of the year, and while I do think that our fourth product family will open some of that, it still hasn't happened. And budgets are still tight for these spendings. Thank you for the call. All right. Next up is Jonathan Ho, followed by Joshua Tilton. Hi, good morning. Can you maybe help us understand how your Infinity contracts that you already have in place have been growing? Specifically, what type of uplift do you see from customers that maybe have had these contracts in place for a while now? Thank you. So first, most, I don't want to give too specific data because it is kind of confidential. I don't want it to fall into the wrong ears. But generally speaking, we do see that Infinity customers are not just committing for a longer period of time and getting more comprehensive security, but are committing to us to a much bigger budget. And again, we've done that comparison because it's a simple trick to convert a customer for a simple product buying into a longer-term contract when we actually don't increase the value, or sometimes even the opposite. So we did a very thorough analysis of our Infinity agreement customers. And in almost all the cases, there is a significant growth in the customer, the amount of customer business that the customer does with us. Some of it also grows over time. I think what I've seen generally, Roei, you can comment, most of these contracts, when they are being renewed, they are being renewed in a bigger way. I don't know, Roei, is that considered? Yeah, yeah, yeah, yeah. Yeah, yeah, considered. I mean, we do see that most of the customers that engage with us in Infinity, and also when they are renewing the Infinity, it's usually with higher spending, higher annual spending. So that means they are taking more product of us, if it's email or if it's a SASE. So I think, again, I think that we see the positive side from the Infinity agreements. Excellent. Thank you. Next up is Joshua Tilton, followed by Rob Owens. Hey, guys. Can you hear me? Yes. Yes. All right. Just one for me, I guess. Any way you could just help us understand what was the impact of the quarter from some of these newer appliances? I know they started shipping in the quarter, but was there any benefit or maybe even a negative as people kind of just waited to buy some of this newer stuff? And then maybe just how should we think about the pace of growth throughout the rest of the year as you see some of your customers look to adopt the newer hardware? So I can start, Gil. And then, okay, so I think in terms of the transition, the allowance that we have with the Quantum Force, we did see positive traction, mainly on the high-end side of these Quantum Force appliances. But again, the transition, it takes time. It takes time because a significant part of our customer needs to do certification, internal certification, in order to implement a new product. So that might sometimes have a negative effect. In this quarter, I think we did see a healthy transition. We did see some nice deals also with the new product that we launched. As your question for the remaining of the year, so I think, again, we hope to see that mainly on the second half of the year, we're going to see more and more of our customers taking the new product that hopefully will drive growth to our product. Because, as I mentioned, it might take a quarter or two until the certification process is going on. Hopefully, it will help us to grow our product also in the second half of the year. Thank you, guys. Have a good day. All right. Next up is Rob Owens, followed by Brad Zelnik. Great. Thanks, Kip. Gil, in your prepared remarks, you talked about an AI infrastructure firewall. I was hoping you could maybe build on those comments because that feels like a net new opportunity, potentially, for the space. Thanks. Well, you're absolutely right. That's a net new opportunity. There are hundreds of thousands of AI servers now deployed around the world, mainly with a few hundred cloud AI service providers that are building that infrastructure. They're buying pretty complicated systems that are based on the NVIDIA designs and the NVIDIA chipsets. I've looked into these designs. They are pretty complicated, very different, by the way. I'm sure that you follow the AI industry. But when looking into the architecture design, these are very different than traditional servers. If in traditional servers, there is mainly one CPU here, there's like three or four different types of processors, each one in charge of different activities. And where we are, and these are, as you probably know, these cost close to $200,000 per server. And usually, in a typical installation, there are thousands of these that are being installed. So these are pretty big infrastructures. First, in terms of the security challenge, most of these remain open to the internet because they utilize high-speed links, because they are installed on the cloud environment. They are relatively open to the internet, which means that if people hack through that and get through their network link to the internet, they can do all kinds of bad stuff to the infrastructure, from poisoning the learning process of the AI model, and if that happens, you need to retrain it. You can't even fix the error. You need to do the training again to hacking into the box and taking over it. And these are pretty big damages today because of the cost of the time on that infrastructure. Where we are sitting, if I'm going back to the design, that design has different types of processors. We are actually installing our software on the network processor of these boxes. So we don't impact the performance of the entire AI. But we will be sitting on the network processor. We can control the flow or make it a true firewall for the traffic between the internet and the cloud or the AI server itself, the way I call it, at least. And make sure that that communication remains clean. There are a few more things, a few more features or interesting technological approaches, like monitoring more security on its entire device that we will be able to implement too based on the current architecture. As I said, this is a new product, brand new market, which I have a hard time estimating because we've just started talking to these vendors last month. Though I think in terms of technology, it is in the near mid-term timeframe. And the reason for that, that it's not just an idea. We are running on these chipsets from NVIDIA for quite a long time. Some of its architecture has been part of our Lightspeed product that's like two years old. So we didn't start the development of technology today. We're making it a little bit differently based on the specifics of the implementation. But that means that we expect a relatively short development cycle. And we are starting the business development cycle in terms of understanding the structure of the kind of the supply chain and the distribution chain here to get to these customers. And this can be pretty big. Absolutely. All right. Next up is Brad Zelnick, followed by Patrick Colville. Great. Can you guys see me, hear me? I can hear you. I don't see you. Okay. My video is on. Now you can see me. Yes. Great to see you guys. I've got one for Gil and one for Roei. Roei, cash flow, I know, is always going to be lumpy from quarter to quarter. But as we think about the full year, is there anything to consider, maybe timing or duration-wise, that would keep directionally, at least, cash flow growth somewhat in line with net income growth? And then just for you, Gil, M&A, Check Point has always been very responsible in capital allocation, and M&A in particular, very disciplined buying some of the most innovative technology out there. But we're now at a moment where it seems like there's dislocation in the private market. I think we've all seen some shocking headlines suggesting serious valuation compression. Why is this not a time to finally get aggressive to accelerate consolidation in the market through M&A? Thanks. Okay. So I'll start with the cash flow. So first of all, regarding the cash flow, first of all, for Q1. So Q1, we've seen our cash flow. You need to remember that Q1 cash flow has been affected by the billing in Q4 because most of the collection in Q1 is coming from the billing in Q4. Because most of it is in December, same thing in Q1, that most of the billing is coming in March. So although you did see 7% growth in billing, most of it we didn't collect in Q1. And in Q4, our billing was down by 1%. So that's affected the cash flow in Q1. So you can expect the cash flow in Q2. I think if we're looking for the full year, it really depends on the execution and the billing. I think that we do see a stability in the duration. We did see it. I mentioned it also in Q4. I saw that the duration is pretty stable since Q3 last year. So I think, again, it's already low. So I think that the comparables are already so I don't think that there will be a duration effect on the billing. And hopefully, if the billing will grow, same as in Q1 and even higher, that will affect also, of course, our cash flow. In terms of M&A, first, you're absolutely right. There should be opportunity in the marketplace. We are aggressively looking. And I'm seeing probably every week or two some interesting opportunity that we are evaluating. The valuations are still not there in terms of being more rational. What you see, if you look at the latest acquisition, you see companies with $10 million, $20 million in revenue, some even less, that are being sold for hundreds of millions of dollars. So again, it doesn't mean that we can't do it. We did several deals like that. We did three M&A deals last year. And we did some deals like that last year. But it's hard to find really quality companies. Opportunities when companies that have more significant revenue stream, I haven't seen some really interesting one. There are a few in distressed situations when they are, but they are losing hundreds of millions of dollars. Again, our hope here is not to get, is to get something that has a, and they don't have the growth momentum, usually. They have the growth momentum when valuation is not very rational. So we are looking at the ones that either have super interesting technology that we can tuck into our platform. I think that would create an opportunity, even if the valuation is hard to justify in the short term, at least, or opportunities that will be more sizable. But then, at least, the way I look at it, we will need some rationale for the valuations. I think it's still not there. I think it will get there in the future. All right. Next up is Patrick Colville, followed by Fatima Boolani. Terrific. So my question is about, I guess, CPX versus now. So what was interesting to me at the CPX conference last month was there was a lot of interesting tailwinds. The launch of the Quantum Force firewalls, in my opinion, must improve messaging around the kind of platform and subscriptions. A new partner motion was announced. But in your remarks today, you're definitely kind of playing it down in terms of these factors. It seems like the messaging you want us to take away is the cycle is getting better, and these things are coming later. I guess, is that how I should interpret it? Or were there product, subscription, or kind of partner changes that impacted this quarter? I think the opportunity is there. I think we've done what we've done the right. I mean, I think we have super exciting new products in terms of the Quantum Force. In terms of budget increase and refresh and so on, the market is still not there. The industry is competitive. By the way, sometimes it takes time. Now, again, what I'm saying is not a very positive message. In Q4, we launched some of the super high-end appliances. We did a very silent launch. We didn't do a public launch. We went for specific accounts. We saw great acceptance of these new models. This continued in the first quarter. In the first quarter, we did a more general release of the entire appliance line, 10 models from the low end to the high end. This is less targeted. We see that it takes a little bit more time for the uptake. Now, again, we had the amazing numbers in Q1. Don't get me wrong. I think we've talked about the double-digit growth in new business and so on. So all of these are amazing results. But you are right. I am trying to calm me down a little bit because I don't see that customers are opening their pockets, at least not now. Maybe, I mean, the expectation is that more of that will happen in the second half of the year. We'll do a more massive refresh. Now, again, a more massive refresh requires the customers to free budget, to do the certification, the testing, the implementation. I think we are set up to do all of it. We have amazing price performance. We have great value in terms of the best security. We have everything that they know and they need. We have the services. And by the way, our services business, the ones that help customers implement and design, is growing very, very fast. So that's a good sign because there is a huge shortage of skills in the entire cyberspace worldwide. And we've built an amazing army, what we call it, the Infinity Platform Services or the Infinity Global Services that can deliver amazing services to ease that planning and deployment. And this is growing very fast with our customers. So I think we're set up to take advantage of that. But at least for now, I do see some tightening in the market. Yes. All right. Next up is Fatima Boolani, followed by Joel Fishbein. Good morning. Good afternoon. Thank you for taking my questions. Roei, this one's for you. I wasn't 100% clear as to what were the driving forces behind another double-digit new business bookings growth performance in order. And I was hoping you could break that down between the four pillars of your business. And just really at a high level, for the last 8 quarters or so, you've consistently been sort of around the 45%-ish operating margin envelope. And for a lot of us who've known the business for a very long time, we're used to having maybe closer to 50% operating margin. So I'm curious, what's the path back to those levels from here? You've been in almost a 2-year sustained investment cycle. Thank you. Thank you. So as for the first question regarding the new business, I think what we did see, what drove this growth is, I think, first of all, Gil mentioned the services. We do see more and more customers taking our Infinity Global Services. It's something we did see a very nice growth there in terms of new business. So that's one of the factors. Second, we mentioned we did see a very nice traction for the high-end appliances. So that also drove our new business growth together with the Harmony Email, which is consistently growing and increasing its ARR every quarter. That was the main driver for the new business that we've seen. As for the operating margin, so I remind you again, in terms of, first of all, this year, the operating margin is still, I think, we guided between 42%-43% for looking on the full year operating margin. And that's mainly because of, again, we are keep investing. And it's mainly because the acquisition that we've done last year that are part of our expenses this year. And we just acquired them in the end of Q3. So that's had a dilutive effect on the short term. Hopefully, we'll be able to increase this operating margin in the long term if this acquisition together, as I mentioned, I was asked about how we can reach double-digit growth in revenue. I think the double-digit growth in revenue, if we're going to drive it by the SASE and the email and more product growth, I think that can drive us back to higher operating margin. Although I think we're also today in a very good operating margin. I think that the main driver here is to drive higher growth of the top line. Thank you. All right. Next up is Joel Fishbein, followed by Ray McDonough. Thanks for taking my question. I guess, Gil, for you, follow up on Rob Owens's question with regard to the partnership with NVIDIA. Could you just give us a little bit more color on how that would work? From will you be working through NVIDIA and getting paid through NVIDIA? Or will you have to work with the customer itself? Will Check Point be shipping with the chips? Just a little bit more color on that. It sounds like a very big opportunity. I know you're trying to mute our expectations in the near term. Just from a longer-term perspective, how will that work? Thank you. Well, first, that's still a work in progress that we're doing. The partnership and the technology implementation is done through with NVIDIA. And I think they really are supportive of it. We launched it on their developer conference on stage. So this is big. In terms of the business model, it's still a work in progress. My guess is that a lot of it will come either through the companies that are building the boxes based on the NVIDIA chipset. Or it will come directly with the customers and the customers being this cloud service provider, which is not a huge number of customers in the world. It's a few hundred customers overall. So it's a very direct approach or a very targeted approach through that. And I think we still need to find the right distribution model to get into the customers. The software might be already ready to use or available within the chipset. That's the design that we're doing with NVIDIA. Thank you. All right. Next up is Ray McDonough, followed by Dan Ives. Great. Thanks for taking the question. Roei, I just wanted to follow up on both Brad and Fatima's question. I mean, we spoke a lot about the drivers of potential drivers, I should say, of double-digit revenue growth. And we touched a little bit about how we get back to 50% operating margins or so over the long run. But when we think about the incremental pressures due to competitive dynamics and the OpEx investments you guys have made, and we think about what it might take from a channel perspective and go to market perspective in terms of investments in those channels to help drive some of the new boxes and refresh activity, how should we think about medium-term to long-term free cash flow growth and how that might relate to double-digit revenue growth if you get there? I understand billings is going to be a big portion of that. But how much OpEx investments are going to be needed to drive that double-digit revenue growth over time, right? And then just a clarification question. Can you help us understand how much inorganic contribution there was to billings this quarter? And another clarification, just the full-year revenue guide. I just want to make sure that's unchanged. So I'll start with the last one. The full-year guide is not changed. Same one. In terms of the second question regarding the inorganic, so I think with the Perimeter 81, I think the other ones are not significant at all. But the Perimeter 81 acquisition that helped us, it had approximately $7 million of revenue, so $7 million of billing. So I mean, that's approximately 1.1 and something points. So that's in terms of that. Your question about the required investments. So again, I don't want to go into the numbers. I think that we invested a lot in the last few years, both in the go-to-market and in the product side, to have a much better, much broader portfolio than what we used to have a few years ago. I think, of course, you saw our margin went down from one side. But I think that this investment, hopefully, will drive our and it's not that we are stopping investing. We are keeping investing. And hopefully, we're going to continue to invest. And with the much better portfolio that we have today, we'll be able to drive double-digit growth. And of course, that if we drive double-digit growth, it's going to affect also the billings and the cash flow. So I think all the questions are linked to the same thing that, again, I don't see. I don't think that we're going to stop to invest. I don't think that we're going to—I don't want to promise any specific margin. But I think we have a very good margin today. Operating margin, hopefully, will be even better in the mid-term or even the long-term future. But again, it really depends on our execution. Hopefully, we'll be able to drive higher growth and higher operating margin. Maybe I'll take it a little bit differently here, giving you a very long perspective. I've been asked about our operating margin since our IPO in 1996. And since I think back then, we started with also a relatively high margin. And people say, "Can we sustain them?" And my answer, by the way, hasn't changed. My focus is not in growing the margin. My focus is in growing a healthy business. And I think we've done that over now for almost 31 years, growing a healthy business. Now, the number one priority that I have right now is not on the profitability. It's actually on the growth. And I think we need to invest in growth. Over the last few years, we've invested a lot in building a cloud rocket. And we've invested a lot in building the Harmony Email, the email offerings. We've invested a lot in other parts of the platform and in our research and in many, many of our capabilities. In the go-to-market, we've built many different organizations to support that and to support a much better growth. I think we still did that while preserving, I think, industry record and not just industry, very high operating margins. I think many of these things will come to fruition in the future. Then we will invest more. Now, one thing that did change between now to the 1990s or between now to even 15 years ago, and I think that is important to take into account, that when you grow a new business and when you compete with a new business, if in the past it was high investment but decent margins, today, almost our entire industry is at loss. I spoke last week in a conference, growth companies conference. I've talked about that, that the industry needs to rationalize and grow into a profitable business model. I asked in the room, let's say there were about 100 people, "How many businesses here are profitable?" Four people raised their hands, maybe three. They were so proud because they said, "If you ask that question two years ago, it was zero in the room." We need to understand that when we combine businesses, when we acquire businesses, and when we invest in new business models, we are not competing in the terms of, "Let's build a profitable business and do that." We are struggling with businesses that need to be brought into that healthy business mode. I think we're doing it very responsibly. The focus is not the margin. The focus is healthy growth. I hope that this will remain that way also in the future. All right, folks. Thank you very much for participating. Looks like Dan Ives had to go pick up a nice, colorful outfit. So he's not going to be able to ask his questions. So with that, we'll thank you all. And we'll see you during the quarter. Thank you. Bye-bye. Thank you. Very much. Thank you.