Check Point Software Technologies Ltd. (CHKP) Q1 2021 Earnings Call Transcript

Check Point Software Technologies Ltd. (NASDAQ: CHKP) Q1 2021 earnings call dated Apr. 26, 2021

Corporate Participants:

Kip E. Meintzer — Global Head of Investor Relations

Tal Payne — Chief Financial Officer and Chief Operating Officer

Gil Shwed — Founder and Chief Executive Officer

Analysts:

Gregg Moskowitz — Mizuho Securities — Analyst

Patrick Colville — Deutsche Bank — Analyst

Jonathan Ho — William Blair & Company — Analyst

Fatima Boolani — UBS — Analyst

Keith Weiss — Morgan Stanley — Analyst

Saket Kalia — Barclays — Analyst

Rob Owens — Piper Sandler — Analyst

Gray Powell — BTIG — Analyst

Benjamin Bollin — Cleveland Research Company — Analyst

Brian Essex — Goldman Sachs — Analyst

Sterling Auty — J.P. Morgan — Analyst

Presentation:

Kip E. Meintzer — Global Head of Investor Relations

Greetings. My name is Kip E. Meintzer, Global Head of Investor Relations for Check Point Software. I’d like to welcome everyone to the First Quarter 2021 Financial Results Video Conference. [Operator Instructions] Joining me remotely today on the call are Gil Shwed, Founder and CEO, along with our CFO and COO, Tal Payne.

As a reminder, the video conference is live on our website and recorded for replay. To access the live conference and replay information, please visit the Company’s website at checkpoint.com. For your convenience, the replay will be available on our website. If you’d like to reach us after the call, please contact Investor Relations by email at kip@checkpoint.com.

Before we begin with management’s presentation, I’d like to highlight the following. During the course of this presentation, Check Point’s representatives may make certain forward-looking statements. These forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 include, but are not limited to, statements related to Check Point’s expectations regarding business, financial performance and customers, the introduction of new products, programs, and success of those products and programs; the environment for security threats and trends in the market, our strategy, focus areas, demand for our solution, the impact of COVID-19 on our business, including our product development, sales, marketing efforts, and our financial condition and results of operation; the impact of COVID-19 on our customers, suppliers, business partners and macroeconomic environment as a whole; and our business and financial outlook, including our guidance for Q2 2021. Because these statements pertain to future events, they are subject to risks and uncertainty. Actual results could differ materially from Check Point’s current expectations and beliefs. Factors that could cause or contribute to such differences are contained in Check Point’s earnings press release issued on April 26, 2021, which is available on our website and other factors and risks, including those discussed in Check Point’s latest Annual Report on Form 20-F, which is on file with the SEC. Check Point assumes no obligation to update information concerning its expectations or beliefs, except as required by law.

In our press release, which has been posted on our website, we present GAAP and non-GAAP results, along with a reconciliation of such results, as well as the reason for our presentation of non-GAAP information.

Now, I’d like to turn the call over to Tal Payne for a review of our financial results.

Tal Payne — Chief Financial Officer and Chief Operating Officer

Right. Thank you, Kip. Good morning. Good afternoon to everyone joining us on the call today. I’m pleased to begin the review of our first quarter results. Revenues for the quarter increased by 4% to $508 million and our non-GAAP EPS grew by 9% to $1.54. Both revenues and EPS are in the upper part of our guidance.

Before I proceed further into the numbers, let me remind you that our GAAP financial results, including stock-based compensation charges, amortization of acquired intangible assets and acquisition-related expenses, as well as the related tax effects. Keep in mind that as applicable, non-GAAP information is presented excluding these items.

Now, let’s take a look at the financial highlights. Revenues for the quarter reached $508 million, $8 million above the midpoint of our guidance. Products and security subscription revenues were $287 million, a 7% increase year-over-year. Our security subscription revenues continue to be the driver of the growth with strong 12% increase year-over-year, up from 10% before, reaching $177 million. Our software update and maintenance revenue increased to $221 million, representing 2%, up from 1%.

In January, we announced three main pillars: Quantum, the most complete network security solution; Harmony, driving highest level of security for the remote workforce; and CloudGuard family, which drives cloud-native security to prevent threats and managed posture across all cloud workloads in the multiple cloud — in multi-cloud environment. Our CloudGuard family continues to show great results with a high-digit growth — high-double-digit growth. As customers move to more holistic solution with subscription-based pricing like Infinity, CloudGuard and Harmony, more of the business is allocated to subscription and support and less to the product portion.

Deferred revenues as of March 31, 2021 reached $1,458 million, a growth of $109 million, or 8% over March 31, 2020, this quarter. For you — for all of you that calculate the implied booking, implied booking was 8%.

Revenue distribution by geography for the quarter was as follows: 44% of revenues came from Americas; 43% of revenues came from Europe, Middle East and Africa region; and 13% came from Asia Pacific, sorry.

Our non-GAAP operating margin was healthy at 49%. The margin was higher as a result of our higher level of revenues on the one hand and as some expenses remain low due to COVID continued effect worldwide on the other hand.

Our financial income for the quarter was $13 million, reflecting the reduction in the portfolio yield as a result of the interest rate drop in the US last year as we guided. Effective non-tax rate for this quarter was 18%, in line with our expectation, which was 17%, 18%. We had some indexation effect this quarter versus the quarter last year.

GAAP net income for the quarter was $183 million, or $1.33 per diluted share. Non-GAAP net income was $211 million, or $1.54 per diluted share, an increase of 9% year-over-year and towards the high-end of our guidance. The accelerated growth is related to the growth in the revenues and the continued reduction in our diluted outstanding shares.

Moving to our cash flow. Our cash balance for the quarter increased — our cash balance increased to $4,100 million — $4.1 billion. Operating cash flow for the quarter increased by 4% to $375 million with a strong collection from customers. During the quarter, we continued our buyback program and purchased 2.7 million shares for $325 million at an average price of $120 per share.

Now, let’s turn the call over for Gil.

Gil Shwed — Founder and Chief Executive Officer

Thank you, Tal, and hello, everyone. I’m pleased to have you. This time we’re going to have a slightly different format than usual. We’re moving along to the 21st century. So instead of just talking about our written comments, I want to share with you a presentation. And the focus this time won’t be just general comments about the quarter, but we’ll share a little bit more about our strategy, the Infinity 2021 that Check Point is carrying. There is a lot of slides here that we shared with our customers and partners.

So let me jump right in and go ahead with that. Hope it will work well for the first time on an investor call. So, let’s start with the forward-looking statement you heard from Kip. So we don’t need to go through that. So I’ll speak a little bit about — three, four slides about business highlights and the main focus here will be about the Infinity strategy, the Check Point — and the Check Point strategy around that. So, to results, I think you’ve all heard from Tal, I’m actually quite pleased that we are continuing to execute on our plan, increase the EPS by 9%, increase revenue by 4%, ended [Phonetic] you’ll see it later in the presentation and achieved a lot in our strategic area.

On the financial side, again, the number you heard from Tal, $22 million more in revenues, $0.12 more in EPS, and $109 million increase in deferred revenues. So we did increase our installed base and our contract long-term and short-term.

A little bit about news from Check Point. Over the past few years, we did started the transformation in our sales force, reenergizing a bit. We have amazing people and we want to reenergize and move the sales force to a much more proactive and higher growth mode. Around two years ago, we started with APAC with Sharat. He is now with us for almost two years and actually the last few quarters the results in APAC were amazing. This quarter, specifically were very good. About six months ago, we had Thorsten joining us to run Europe. I think it’s too early to say how it will work. But the initial signs are very good. And again, we had a very decent quarter in Europe. And just today we have Geoff joining us to run the Americas. He will join whenever he wakes up in the West Coast, and that will be his first day today and we are looking forward for accelerated growth in Americas. I think we have plenty of potential in the Americas market.

We also had, in the first quarter, our conferences. Every year we start with employee and customers and partner conference. This year was no exception, even though, we did hold all these conferences in a virtual way, in a very different way. I won’t share much about the employees and so on. But you can see here the results about the partners and customers. We’ve much more than doubled the attendance of customers and partners and that’s a great achievement. We got amazing reviews from all the participants about the content, about the ability to participate. So, at least the virtual model here generated some positive results for us and moving forward, we’ll have to find, like everything else, the right balance between the hybrid model between physical and virtual conferences, so which is a very good one. And by the way, the biggest increase was the customers from the US, which is — I think, as I mentioned, the highest potential for us moving forward. So that’s a little bit about some of the highlights of the first quarter.

But let me share more about our strategy for 2021. Again, I won’t do the full presentation that we shared with customers and partners, that takes a little bit longer, so I’ll jump right in without much background. But just to start, we started 2020 with an amazing architecture — 2021 with the Infinity architecture. This is really, I think, the most comprehensive set of security technologies that any company has with unified architecture that combines all the elements together. And if you look what it means, it’s over 80 different products and technologies in all areas of the network, the cloud, the users and access. Our goal is to make that simpler, more accessible, more consolidated and elevate the level of security.

So we decided into focus Infinity 2021 on an architecture in three pillars, which are far — much simpler and will elevate the level of security. So the three pillars, and I think Tal already shared first is, Quantum, the — our network security architecture and later in the presentational I’ll talk — I’ll show two or three slides on every one of the pillars, Quantum, to secure the networks. CloudGuard, to secure the cloud. And the new one, which we launched in the CPX in February, right after our earnings call for Q1 is Harmony, and that’s something new that focuses about securing user access, which is especially important in today’s hybrid work model. These three pillars: Quantum, CloudGuard and Harmony are based on — are using the Infinity-Vision shared management infrastructure with a lot of tool for stock management, XDR and a lot of our advanced security tool and are all based on the threat cloud, the single infrastructure that collects, analyzes and makes security decision in real-time and share them for real-time threat prevention across all attack vectors and across all products and technologies. And I think that’s the uniqueness of the Check Point architecture. So the architecture now looks much, much simpler.

And let me dive right in and speak a little bit about the different elements and what’s new in each one of them for 2021. So Quantum. Quantum is our core business securing the network. It’s far more than these the clients’ gateways versus the SMB product family, versus [Phonetic] the perimeter gateways, versus the data center gateway, versus I think what’s unique to Check Point and winning a lot of mindshare in the marketplace and actually, a lot of growth is the hyperscaling technology, the Maestro technology. We have tons of IoT technologies that we’ve introduced over the last two years. And we are introducing more and more to handle IoT devices and to make the network secure from the malware that they can catch. All of that powered by our unified management and all of that contains more than 60 threat prevention engine that provides the highest level of network security.

So that’s the overview of the Quantum family. What changed in Q1 in the Quantum family? So first, we launched a new family called Quantum Spark, that’s our SMB security family based on few existing products. But extending that actually the higher to the broadest and the biggest market segments in terms of dollars on the branch office and SMB and again, that’s a great place to be. We’ve modeled that deliver 2 gigabits per second. I think the highest in that segment. Very easy to use, very intuitive, set up in a minute or a few minutes, on-the-go management, including mobile app that can give anyone the alerts and the management capabilities. So, Quantum Spark has been a great addition to our family. We are updating the management platform for the network security, the Quantum Smart-1, new set of management appliances that can manage double the number of gateways, almost double the amount of log processing in the latest version.

And last and not the least, I talked about Maestro. Maestro actually takes the cluster of gateways, any size and make them behave like one virtual gateway. Actually, bringing a lot of benefit. That means that they can all behave as one but provide resiliency, provide high reliability, provide elasticity. If you need more bandwidth, you don’t need to buy a new system, you just plug in on-the-go another one and you get more capacity. So, in Maestro, we introduced a new model that pretty much doubles the capacity of the Maestro gateways to 3.2 terabits per second. The previous model high-end was 1.5 terabit. Now, it’s up to 3.2 terabits per second, I think it’s probably the highest performance. And again, that can scale any security operation to the hyperscaling that Maestro provides. So I think we’ve had a very nice addition just in the first quarter to Quantum. Remember that last year, last Q2 introduced a whole new set of Quantum appliances that I think resulted in pretty good results so far and actually customers are pretty happy with them and see a lot of performance with them. So I think we’re pretty pleased about that.

A few just reminder or highlights about what is the Quantum family doing in the marketplace. We are 21 years in the leadership quadrant of the Gartner Magic Quadrant for network firewall. I think that’s a big achievement, keeping the leadership for so many years, and I think we’ll keep going. Over the years, more than 60% of the Global 2000 have purchased Quantum appliances. So, again, that’s also I think on one hand, there is potential to the ones that didn’t buy, and there’s plenty of potential for the ones who did buy to expand and do more with them. But I think it has the huge footprint and the huge impact on the world. And if you look at almost every sector, the majority, in some cases, 90% of the leading companies are using the Check Point Quantum family of products. So that’s for Quantum and that’s our core business.

Let’s speak a little bit about the Harmony family and that’s the newest one. Here that we’ve actually connecting to a need that emerged now in the pandemic era. We are seeing that more and more employees are working from mobile devices or working from their non-corporate devices from their PCs, personal computers, not the company provided computers and on the same time, people work for the office and the access now is not to a single data center like it used to be in the past. The access needs to occur to cloud application, to SaaS application, to web application, to the data center, even things that we didn’t do before, like remote desktop access because we now work on our development or trading or any other environment from home and so on. And we need to secure all these connections. And that’s a pretty big miss. If you look at the set of technologies that company needs, it’s a lot of technologies. Technologies for remote connectivity, from all VPNs to new SaaS-based connections, technologies for device posture to verify that our home computers are working well. Technologies, of course, to secure the mobile and the endpoint devices from the next-generation AV to the traditional one and so on and so forth. This is becoming quite complicated.

And if you look at what the company needs to achieve that, it’s a combination of few dozen technologies that don’t always work together. And that’s the revolution that Harmony provide. One family provides all of that to all users from everywhere to everywhere with the highest level of security. One solution for the hybrid world. And if two years ago you ask CSOs on their priority and end user security was quite low on the priority list did become the number one priority now with the pandemic that we’ve seen. And likely to stay that with the hybrid model we will say it. And by the way, with the level of the sophistication of attacks that we’re seeing in the recent months. So, that’s Harmony combining at least six different categories of products. I don’t think that anyone can deliver that because this is again dozens of different technologies that I think no one else has those technologies except for Check Point. We’ve built them. We invested in them over two decades. And we are now I think it’s ready for prime time as the unified platform that will roll into the market gradually. So that’s Harmony.

You can see some of the market recognition that Harmony is already receiving. AV-TEST Top Product in Corporate Endpoint Security. IDC already put back in leader in Mobile Threat Management. By the way, across our competitors, we’re the only one that also have anything to do with mobile and we have the best mobile device security suite here.

And last and not least, from last week, this is something we’re very proud of, the MITRE in-depth security analysis, we came very, very high on the list with a 100% detection. I think that we have the best prevention capabilities here. And I think that’s something we should all be proud way ahead of our competitors, many of the new emerging one and almost all the traditional competitors in this category.

Last and not least, let me run quickly, CloudGuard. CloudGuard is all about securing the cloud and the cloud again is a pretty big creature. It includes the private cloud. It includes things like workloads and containers. It includes, of course, the Google Cloud, the Azure Cloud and, of course, the AWS Cloud. We have one platform that can secure all the cloud, provides highest level of security, connect at all the levels, doing everything from fixing the cloud and ensuring that you don’t make configuration error with cloud security posture management, which I think we have the best protecting workload, for example, server-less, I think is we are way ahead of everything else. Network threat prevention in the cloud, everything that has to do with the cloud, I think we are evolving this platform. But I think we already have the broadest platform for cloud security.

In this quarter what we’ve added in the CloudGuard family is what we call the CloudGuard AppSec, which is sort of, but again very, very advanced next-generation WAF or Web Application Firewall. But this time it’s not just protecting the web servers, which are important by themselves but the interconnection between cloud application, the different APIs that work on the web and connects them. It’s using a new, what we call, contextual AI architecture, which means that customers can put it in prevent mode. Again, it sounds obvious, but most of these technologies in the marketplace are not working in prevent mode or working in detection-only, which, as you know, our religion is everything needs to be prevention. Very quick deployment. You can measure it in hours instead of months. And as you can see, I think we are starting to see the results, even though, this is very, very new.

Few highlights about our cloud, that’s not just the CloudGuard AppSec, but our CloudGuard family in general. This quarter, we had 50% increase in ARR compared to a year ago, and we had very, very good internal foundation for the CloudGuard family. I think we have one of the largest installed bases for the CloudGuard family, over 4,000 customers protect their cloud with CloudGuard. And one in five of the Global 2000 is already a CloudGuard customer. So, we’re very proud of that achievement. We have plenty of potential here to grow, but I think we have one of the most advanced and most successful cloud security businesses today in the marketplace.

So, altogether, these create the new Infinity architecture, Quantum, CloudGuard, Infinity-Vision, the foundation for advanced security analysis and management and the threat cloud in the middle. That’s the Infinity 2021. We are big believers in that, but before I go to the summary and finish, I want to challenge myself and maybe the marketplace in terms of, is there another way? We need — let’s remember, we need to secure this new world when people are everywhere, data is everywhere, digital transformation to the cloud is there. We need to fight the cyber pandemic and on the last few months we’ve seen emergence in, what we call, Gen V security attack. If you remember, we’ve been speaking about the fifth generation of cyber attacks for almost two years. And it’s now a reality. Not a reality that happens once a year, a reality that happens every week. A new Gen V sophisticated attacks that threatens our fundamentals of the network.

So, what’s the way to secure against that? Is there another way beyond Infinity? So, if you’re a customer and you can try and build your own security stack, we have a simplified version here, but this is how it will look like. You’ll need to choose the different network vendors, network firewalls, advanced threat prevention, IoT and OT and several more categories, maybe even two platforms to manage that. Cloud security, plenty of alternatives. How to secure workloads? How to secure applications on the cloud? How to secure the cloud infrastructure? How to do the cloud posture management? And you’ll need to select the right vendor.

Then on the users and access, endpoint security, mobile security, remote access and SASE security and you’ll need to take all these elements and start connecting them. And guess what? It doesn’t work. We don’t connect well. This is not just the work of getting this solution is very, very hard and the deployment is complicated, but they don’t work together. And what you’ll end up if I’ll compare it to my analogy here is, which car should I buy? You’ll buy a lot of nice, cool cars, but what you’ll end up is a big, big traffic jam. They will all — each one will go to a different direction, and you won’t necessarily achieve the level of security that you wanted. It won’t fly [Phonetic]. So this is the analogy of building your own stack. What it will be like to build it with the new Infinity 2021? I think the analogy is much better. Quantum, CloudGuard, the Harmony, I believe it’s like three super cars. Each one of them excel in its category. They all drive together. They all drive the highway and they will take us to the security of the future of what we need. This is the difference between Infinity and building your own.

So, to summarize, I believe that we started the year with a strong first quarter with good financial results, revenues and EPS towards the high end of our range, good momentum in Europe, excellent result in Asia, and not less important, double-digit growth CloudGuard, the Harmony and even more on the total Infinity platform. On the same time, we’re in the new world, there are new opportunities and I believe that we have the right platform to build the best security for the future of the marketplace and secure all your organization and every organization around the world with Harmony, CloudGuard and Quantum. So I think that there’s plenty of potential ahead of us. There’s plenty for us to do. And I think we will continue to lead with the highest level of security as being found in every — almost every industry benchmark that checks that.

Thank you very much. And actually I want to open it for your Q&A. But before I open to Q&A, it’s actually also a good time to speak about our projection for the second quarter. You know my regular caveats for — let me stop the sharing. You know my regular caveats about projections and forecast. Very challenging. There is always a high level of uncertainty. Results can be better. Results can be worse. But still we are doing our best to collect the information that we have around the market. And our forecast for the second quarter, with that being said, revenues are expected to be in the range of $510 million to $535 million. And non-GAAP EPS in the range of $1.50 to $1.60. So, again, $510 million to $535 million for the revenues and $1.50 to $1.60 for second quarter EPS. GAAP EPS is expected to be approximately $0.22 lower than that.

So, with that in mind, I hope you’ve learned something from the presentation, and I hope you like our vision. I know that it works. And I’d love to open the call for your Q&A, for your questions. Thank you.

Questions and Answers:

Kip E. Meintzer — Global Head of Investor Relations

Thank you, Gil. Before we begin with the Q&A session, due to time constraints and the consideration of other participants, please limit yourself to one question and one question only. If you have any difficulties just type that question into the chat. Today, we’re going to start with Matthew Hedberg from RBC, followed on by Gregg Moskowitz of Mizuho. Go ahead, Matthew. Mr. Hedberg, unmute yourself.

All right. Let’s move on to Gregg Moskowitz from Mizuho.

Gregg Moskowitz — Mizuho Securities — Analyst

Hey. Thanks, Kip. Hi, everybody. So, Gil, you mentioned that 60% of the Global 2000 have bought Quantum. But my question is, how significantly do you think that you can cross-sell CloudGuard and/or Harmony into your enterprise installed base, because if you can do that, clearly, it can drive expansion rates quite a bit higher?

Gil Shwed — Founder and Chief Executive Officer

I think there is opportunities on both sides, and yes, I think we can leverage it. We’ve actually, by the way, divided now some of our installed base into three categories, what we think are developed accounts, which are buying their fair share, but almost all of them can buy some of the new technologies, the Harmony and the CloudGuard. What we call development accounts, that accounts that purchase Check Point products and our good customers, but there is plenty of potential on all three pillars. And what we call prospect and these are accounts that are either very small ones or non-accounts at this moment and we can develop them. I think the potential is there.

I think we need to invest a lot in getting higher in the organization and getting to the CSOs. I think the CSOs loves to hear our story. My experience almost every CSO likes Check Point and likes to hear about our story. We need to develop a lot of our own cut on discipline in going to work [Phonetic] and not being doing a good job with the people that we already work with at the network level and not expanding. So the potential is there. And by the way, we’re seeing more and more in that. We’ve actually seen a very good growth in the Infinity platform when we sell customer, not just individual products, but the entire platform. And then, generally speaking, the Infinity customers are showing the high level of satisfaction. They like the fact that they can buy more than pillars and we’re building more and more Infinity program to address them and let customers expand.

Gregg Moskowitz — Mizuho Securities — Analyst

Okay. That’s helpful. Thank you.

Kip E. Meintzer — Global Head of Investor Relations

Our next question is with Patrick Coleville. Patrick?

Patrick Colville — Deutsche Bank — Analyst

Hey. Thank you so much for taking the time to answer my question. So, the one I have here is around, I guess, the go-to-market. So you got these three new pillars: Quantum, Harmony and CloudGuard. Is — yeah. So how are the sales team incentivized to sell these products? I mean, is there a change versus the kind of previous motion of selling them individually? Just kind of any color there would be very grateful.

Gil Shwed — Founder and Chief Executive Officer

The fact that we’ve consolidated them around these three pillars give us a lot of ability to manage it better. Each one of them, I mean, the Harmony and the CloudGuard, they’re what we call an overlay sales force that supports the sales team, that provides the technical expertise, so getting into new technologies becomes a little bit easier for the sales force. The existing sales force has very clear measurements about what’s their targets in each pillar and what they need to do.

And I think the main issue is really the — our own education and our own openness about being out there and being a — I mean, it’s not aggressive, it’s being assertive enough on expanding our presence with existing customers and with new customers. And I think it’s there and we are seeing now in some areas and some salespeople have already cracked the code and they are doing great and many, many others have the potential to learn how to do it.

Tal Payne — Chief Financial Officer and Chief Operating Officer

And Patrick, to your question, of course, what gives us the important part but, of course, also the commission plan is aligned with these incentives to sell more of the new dollars, the new customers, the new cloud and so on. So, it’s aligned also with the compensation plan around it.

Patrick Colville — Deutsche Bank — Analyst

So, just clarification, did you say there is an overlay sales team or is it you said — was that correct?

Gil Shwed — Founder and Chief Executive Officer

Yes. For CloudGuard and for Harmony. And again, now that we’ve combined a lot of the technologies makes things very, very focused. It’s not now an overlay for specific technology or an expert. But the overlays are organized according to these pillars.

Kip E. Meintzer — Global Head of Investor Relations

Thanks, Patrick. Our next question is with Jonathan Ho, followed by Fatima Boolani and Keith Weiss. Please go ahead, Jon.

Jonathan Ho — William Blair & Company — Analyst

Hi. Good morning. I just wanted to get a sense of what you’re saying maybe Geoff can bring to the Americas market that could reaccelerate the growth there and what changes did Thorsten make in Europe that maybe had a similar impact in EMEA in the past couple of quarters? Thank you.

Gil Shwed — Founder and Chief Executive Officer

First, I wouldn’t like to share all our tactics and secrets inside, so I’ll try to briefly touch on that. I think Geoff brings — I mean, Geoff is a very good fit because he’s more than just leading sales forces. He dealt with many, many other professions. And I would say a more — a little bit more sophisticated than the typical sales leads because he comes from different background. He came from VMware, where he built the cloud overlay and the cloud business. So, if we look to focus on the cloud, it definitely brings the expertise and the understanding about penetrating new markets, understanding the cloud and having all the contacts and the relationship, whether it’s the cloud customers or the cloud partners. So, I think that has the huge value to the scheme.

And a little bit about Thorsten, as I said, I think we are very enthusiastic about what we see in Europe. But I think one and a half quarters, it’s still too early to judge. So, I don’t want to be carried away. But I think Thorsten gave us a lot of good insight for somebody that comes from the outside. A lot of it is the focus with our people should pay to focus on new business. Lot of times a big huge part of our business in the renewal business. Renewal of support contract, renewal of this advanced security subscription contract and the salespeople are doing a great job serving their customers, which is obviously very, very important.

I think Thorsten brought a lot of defaults that it’s really, really important to, of course, keep your customers happy but focus about what’s new business. And now the way we look at that in many cases for the sales guys, how many — it’s not just what’s your total pipeline and your total deal size, it’s what’s the — how many new opportunities we have. New, by the way, with existing customers and with new customers equally, but still new is not just renewing the old contracts or expanding it by a little bit, but about providing more security and doing more for the customer and winning new projects. And I think that’s the big focus that we have right now. And I think when people start to focus on that and internalize that, they’ll focus on the right thing because if we take good care of the customers the renewals will happen. It’s not the focus should be on how do we expand.

Kip E. Meintzer — Global Head of Investor Relations

Thank you, Jonathan. Our next question is from Fatima Boolani, followed by Keith Weiss and Saket Kalia.

Fatima Boolani — UBS — Analyst

Good morning and thank you for taking the questions. Tal, this one’s for you. I want to focus on the deferred revenue specifically, and just a two-part question. Can you talk to us about some of the drivers and the factors behind the acceleration in the long-term mix this quarter, and to the extent, there is anything unique or one-time in nature? And also maybe a bigger picture in terms of the deferred revenue mix, especially as you see the Infinity business build very quickly, can you share with us the mix of the deferred revenue today between subscription revenue or blade revenue versus traditional maintenance? That detail would be very helpful. Thank you.

Tal Payne — Chief Financial Officer and Chief Operating Officer

Well, the first one is easy. If long-term increases because we get more long-term contract that you can invoice. So it’s really depend. And that’s why always when people ask me, why we don’t provide billing, I say because of that. You can’t really predict that. So, it really depends many times on customer budget, sometimes they want to pay the whole three years in advance. If they make a long-term contract. So you invoice for it and then you will see it in deferred revenues. And sometimes three-year contract, but paid annually. So you will see only the first year in the short-term, which means that this quarter specifically you had some that also wanted to pay in advance and, therefore, you see it in the long-term because we have to invoice. So you see it in the long-term. It doesn’t mean that the total is different. So I think when you look at the big picture, it’s still reflecting, it’s in line with what you expect. And so, some quarters it can be affected by a large deal, there wasn’t a huge deal here. It was a few deals that were healthy and good and also been invoiced. That’s all.

Your second question about the mix, so actually in the Annual Report, we provide the split between the product support and subscription, the deferred revenues. So, in general, I would say, I don’t expect a major change this quarter. It’s very similar. On the bigger picture, I would say, we see subscription growing, of course, faster, products is quite small because typically majority of it is recognized in the same quarter, except for things that depend on other items and, therefore, you wait, expect majority of it is the subscription. And the support is typically in line with what you see in the revenues. So the acceleration that you see is typically in the subscription.

Fatima Boolani — UBS — Analyst

Very helpful. Thank you, Tal.

Kip E. Meintzer — Global Head of Investor Relations

Thanks, Fatima. Our next call — our next question is coming from Keith Weiss, followed by Saket Kalia and Rob Owens.

Keith Weiss — Morgan Stanley — Analyst

Excellent. Thank you, guys, for taking the question. I want to talk about sort of the breadth of the product portfolio. You guys had a really nice breadth of solutions. And some of the numbers being presented at CloudGuard 50%-plus ARR growth is very striking. Any chance we could get a kind of break out of the relative sizing of these businesses of Quantum, Harmony versus CloudGuard or kind of how they fit within the overall portfolio? Number one.

And number two, maybe you could talk a little bit about the upsell potential into the base? How far into the base have we gotten with some of the newer stuff like CloudGuard and Harmony? And what’s the opportunity on a go-forward basis to get existing customers to take on more of this portfolio? Thank you.

Gil Shwed — Founder and Chief Executive Officer

So I’ll start from the second part and Tal, maybe will expand a little bit more on the financial side. I think the potential is definitely there. And I think customers love that and there is a lot of value. It’s not just the value of the — of being a customer of one company, it’s the fact that things connect. And I think that’s what we have to sometimes educate the customers about the fact that having different silos in cyber security usually means systems that are not just more complicated but systems that don’t provide the high enough level of security because it’s now — if I got a system that analyzes that that you’ve got an infected file. The job of security now is just — not just to block the file. By the way, pretty much all of our competitors’ if you receive an infected file by email, which is the number one vector, you’ll receive the file but later on you’ll find that you’ve been infected. Our job is to block it, which we do, which is unique. And then make sure that this file doesn’t go and doesn’t exist on any of the other vectors. So you can download it from the web. If it exist on any endpoint, we recognize that. So we found it twice and we can deal with it everywhere. So yes, the potential is there to sell it to more customers.

We do have several thousand. I have quoted over 4,000 customers, for example, for CloudGuard, and most of these are — have been Quantum customers before. There’s few that haven’t. So, I mean, the entrance sometimes is also from the other direction, but we get new customers with CloudGuard or Harmony and then they adopt our Quantum family, but most of it is our installed base that’s being open up to learn more about the Check Point vision here.

Numbers, Tal, do you want to give some color on that?

Tal Payne — Chief Financial Officer and Chief Operating Officer

I think, I’ll say, first I want to refresh your dress code. I think there is a change from you working at home, good for you.

Keith Weiss — Morgan Stanley — Analyst

I had the Gil Shwed T-shirt on the — let’s say, official black T-shirt of Check Point conference call.

Tal Payne — Chief Financial Officer and Chief Operating Officer

Oh, yeah. Okay. I would say the following. The potential is huge because Gil — I don’t want to provide additional information to what Gil shows on the slide, but when Gil was referring to out of the Global 2000 in the cloud, I think he said one out of five. So it shows one out of five already purchased from us that solution. There is a huge potential because on the one hand, it’s very early days, both in Harmony and the Cloud. I will even say in Quantum, if you look at the SandBlast, which is the advanced threat protection, even that didn’t pass the 50%. So the potential to upsell is massive in all of these pillars, both in the Quantum, in the Cloud, and in the Harmony, all of them needed, and Infinity give them, I’ll say, the best tool to do it. How quick it will happen? It’s really up to us and the execution of the field. So the potential is very large there.

Keith Weiss — Morgan Stanley — Analyst

That’s all. Thank you so much.

Kip E. Meintzer — Global Head of Investor Relations

Thank you, Grizzly Adams. Our next caller is Saket Kalia, followed by Rob Owens and Gray Powell.

Saket Kalia — Barclays — Analyst

Okay, great. Can you hear me okay, Kip?

Kip E. Meintzer — Global Head of Investor Relations

Yes, we can.

Saket Kalia — Barclays — Analyst

Okay. Excellent. All right. Thanks, folks, for taking my question here. I’ll just keep it to one housekeeping question. Gil or Tal, thanks for the Q2 guide. Apologies if I missed it, but did we mention anything about the full-year guide? And are there any assumptions about the full-year that have changed from the last time that you provided that?

Tal Payne — Chief Financial Officer and Chief Operating Officer

As far as I’m concerned, no. It stays the same. If you remember when we talked in the beginning of the year about the margin that we said about the fact that we expect the world to come out of COVID. In Q1, it still didn’t. So, it was slightly better as a result of that, but nothing dramatic because we already embedded in the plan proportionately [Phonetic]. And when you think year-over-year from the next quarter, last year is fully under COVID. Therefore, in the next quarter, we expect to be in line with the margin that we did indicate, which is we’re returning to COVID — to out of COVID over time, while the comparable have full effect of COVID saving in the expenses. So we pretty much in line and you can those in our guidance for next quarter.

Saket Kalia — Barclays — Analyst

Got it. Very helpful, Tal. Thanks.

Kip E. Meintzer — Global Head of Investor Relations

Thanks, Saket. Our next caller is Rob Owens, followed by Gray Powell and Ben Bollin.

Rob Owens — Piper Sandler — Analyst

Thanks, Kip, and good afternoon, guys. In and around Infinity 2021 just wanted to get your thoughts around marketing spend and whether you would lead into this with incremental programs, MDF or anything and the like? And then, Tal, you kind of answered it before, but relative to a reopening, how are you thinking about spend and timing?

Gil Shwed — Founder and Chief Executive Officer

So first, we are trying to be as aggressive as we can in marketing. We’re also trying to be smart because the most important thing is to touch customers and get to a smooth — and get their attention, not just to get — and now there is a lot of nice achievement in terms of our marketing. For example, you’ve seen the reach of our virtual conferences. We had a great increase in participants and that’s again after, if you remember, last Q2 or Q3, we were all locked at home, people didn’t have — I mean, the only way to connect to the world was participating in some conferences, that’s past. Now that we get people to attend the conference, that means that they are really interested and it’s important, and we love the fact with more customers are now participating in our Virtual CPX, for example.

There’s a lot of other achievements that we have even — I mean, we have continued to maintain C-Level forums, which is by the way — again, it’s a great way to create a community that we need to expand and it’s going very well in getting to C-Level. We’ve really, really improved our — which — it’s actually not just we improved, the level of interest that customers have in our technology. If you go to Google, we are now on the first or even positioned zero in many cases on most of the keywords that you search. Search for cloud security, we’re number one on the search. Search for cyber attacks, we are also, I think — I believe it’s changing all the time, position zero on cyber attacks. Zero is even before the first search. It’s explanation of the term. So we are getting the mindshare. And again, look at many of these cyber attacks, cloud security, network security, endpoint security, we are number one or number zero in Google — in almost all these Google searches. I think that drives more traffic to our site. So, I think we’re making a lot of progress on almost everything. The SEO part, which I just say, by the way, I’m very proud of because that means that the content we provide to the world is being recognized.

Tal Payne — Chief Financial Officer and Chief Operating Officer

And maybe I would just add that I think the main — remember, majority of our expenses are really in the headcount or in our people. There I would — we would like to see an accelerated growth in the headcount. We want more people. So we’re working on that. So to your question, Rob, more people, more expenses. It’s part of our plan and guide, but that’s what we’re aiming for. That’s the main one.

More marketing, of course, is just good. We would love to. But the main focus is headcount, headcount, headcount now. And also when you relate to the return to normal, T&E is very hard to know how it will return, because I think many people realize that can be very productive also without the slides. So, how much we’ll return, in 20%, in 50%, in 70%? It’s a bit early to say. My intuition is this won’t grow all the way back to 100%. Will it be 50% or 60% or 70%? I really don’t know. We would need to go out, like the rest of the world and see what is needed and what’s best serve our customers and employees.

Rob Owens — Piper Sandler — Analyst

All right. Thank you.

Kip E. Meintzer — Global Head of Investor Relations

Thanks, Rob. Our next call — our next question is coming from Gray Powell, followed by Ben Bollin and Brian Essex.

Gray Powell — BTIG — Analyst

Okay, great. Thanks. Can you hear me okay?

Kip E. Meintzer — Global Head of Investor Relations

Yeah.

Gil Shwed — Founder and Chief Executive Officer

Sure.

Tal Payne — Chief Financial Officer and Chief Operating Officer

Yes.

Gray Powell — BTIG — Analyst

Cool. Yeah. So, I guess, how should we think about the mix of product revenue in subscription trends within the context of guidance this year? And then — and I think you hit on this in the prepared remarks, but is there anything going on like a shift towards Infinity or bundled offerings that can impact that mix and cause product revenue to be recognized more ratably?

Tal Payne — Chief Financial Officer and Chief Operating Officer

So I’ll say, it’s really in line with what I said in the script. It’s a great question. It’s something that we’re dealing with for the last few years as the rest of the world when more and more people moving into subscription model. I think Infinity is full subscription, although it provides products and support and subscription and it’s full subscription in terms of the pricing model. The same with Harmony, the same with Cloud. So — and if somebody buys just the appliance then it’s a product. So, of course, the product line for the last few years is under pressure. It’s not surprising. It can have shifts. You can see some quarters it’s better than the other. But in general, we always look at the total. As I keep saying, look at the total growth. Subscription takes longer to get into the P&L, but it’s over time you see it also in the profit and loss before it. You see the subscription ticked up this quarter, which is nice to see. I think it was 10% moving up to 12%. We also had a tick up with support coming from a lot from the professional service, which more customers also needed, they implement more robust solution.

So my intuition I can’t guarantee it, but our first recommend, look, at the total picture and not only on the product spend only because product can be plus 2% or minus 3% or anyway, depends how bundle it is. The more bundle they went, the more pressure it will put on the product line.

Gray Powell — BTIG — Analyst

Understood. Okay. Thank you very much.

Kip E. Meintzer — Global Head of Investor Relations

Thanks, Gray. Our next call — our next question is coming from Ben Bollin, followed by Brian Essex and Sterling Auty, which will most likely be our last question for the day. Go ahead, Ben.

Benjamin Bollin — Cleveland Research Company — Analyst

Good morning. Good afternoon. Thanks for taking the question. Fairly specific, but I’m interested if you’ve seen or are you’re thinking about component availability concerns for your appliances, did you have free availability throughout the quarter or are you anticipating any tightness as you look forward? That’s it. Thanks.

Tal Payne — Chief Financial Officer and Chief Operating Officer

So, actually, we — since COVID started you have that, meaning every quarter is something else that has an allocation issues, we dealt with all of them very well. Also, the recent one we are dealing very well. I hope it’s going to be developed to be bigger, but we are so far in line with our planning and expectations. By the way, there can be some increase in pricing, but I think that would be very apparent to you. So — but some component prices are moving up as a result of allocation. It’s all around the market.

Kip E. Meintzer — Global Head of Investor Relations

All right. Thanks, Ben. Our next call — our next question is coming from Brian Essex. Hey, Brian.

Brian Essex — Goldman Sachs — Analyst

Hey, Kip. Thank you. Gil, just a — first question for you and then I have a follow-up. You mentioned that you wanted to move your sales force into a more proactive high growth mode. I mean, if you take a step back what are your expectations for high growth mode, so to speak? And what that — what might that translate to for revenue growth if — as you consider where some of the core maintenance and potential appliance revenue may track over the next few years versus some of the newer initiatives that you have driving subscription growth? What — like if you had to set a range, like, I would like Check Point to be like this level of growth that’s my goal? How would you frame that?

Gil Shwed — Founder and Chief Executive Officer

So first, the market will change over the next few years and we want to grow at least with the industry and may be faster. But this year, I’ll share with you some internal, I hope Tal won’t be made at me, but we have a very clear goal for our salespeople, they need to grow the new business that they generate by 20%. That’s the overarching target. Again, it might be few variances depending on the salesperson but that’s the overall goal for every salesperson. Now, again, it depends on the mix. And over the years it’s the new businesses growing by 20%, it will follow the rest — the subscription will eventually follow that. And the new business, by the way, everything, it includes the new subscription, new support, new products, new everything. So — but the focus to grow the new business by 20% for the entire sales force. And I think, I don’t know what will be the target for 2022 or 2023. That depends on market, but at least this year that’s the target.

Brian Essex — Goldman Sachs — Analyst

Great. That’s super helpful. And maybe just a follow-up. You obviously have some fantastic domain expertise around threat intelligence and research. And we’re seeing some of your peers kind of work towards maybe establishing a practice around that, monetizing that. How do you think about potentially enhancing the monetization of that threat intelligence and domain expertise in the future?

Gil Shwed — Founder and Chief Executive Officer

First, it’s an excellent point, and I think we’ve started thinking about it long ago. We’ve actually, by the way, did few projects or are doing few projects on that level with our kind of more boutique projects of, let’s say, I’ll give you an example, looking at the Company up-store when they have applications and analyzing all these applications with our dedicated tools. So, it’s actually several projects, which we are doing in that domain. I can’t reveal to whom.

We have a very good incident response team that exists for many, many years. And again, has a lot of work these days with all the new supply chain attacks, and I think they have amazing tools to provide that. Still most of our research today is around finding the things that are common to the world. You see we have almost 100 publication from our incident response team over the last year. We found some unbelievable vulnerabilities, like last summer, where it [Phonetic] was. I mean, we found since then many more, but one of it got like 10 out of 10 score was the Microsoft Exchange — not Exchange, sorry, the Active Directory one, that showed how you can get into the DNS server, the wind DNS server and get into Active Directory. So, I mean, this is an interesting area for us, but I think keeping that not just as for higher but keeping the research, the openness is also very important aspect which we intend to keep.

Brian Essex — Goldman Sachs — Analyst

Helpful. Thank you.

Kip E. Meintzer — Global Head of Investor Relations

Thanks, Brian. Our last question is going to come from Sterling Auty from J.P. Morgan. Hey, Sterling.

Sterling Auty — J.P. Morgan — Analyst

Hey, guys. Thanks. Appreciate it. So the changes are taking place here in North America, you mentioned Mr. Waters’ first day. But I think there may have been one or two other changes as well. I’m just wondering, how much disruption did that cause to the quarter looking at the results in the Americas? And how do you anticipate trying to minimize any disruption as you go through kind of those sales transition in North America?

Gil Shwed — Founder and Chief Executive Officer

I think we have the — first, I think overall if I’ll just say — again, I don’t want to provide too much inside data. But I think in general, what we’ve seen is that the level of attrition in Check Point in general is quite stable. There was a decline in attrition, second and third quarter last year due to the corona. But the market pretty much got back to the old mode than the usual mode. I think we have some people that we don’t like to lose that are excellent people. Remember, our industry is very hot, companies are raising tons of money and many people are looking for the opportunity, whether it’s in the another large company. And in many cases, in some hot start-up, when they have a dream about being part of the next unicorn. Some of it is unwanted, undesired. And some of it is desired because there are people that we — again, we have a lot of very, very good people. So, I don’t easily let go anyone. But some people, it is time to refresh and take a new look and new view of the world. Even for people that contributed very well to Check Point. So I think overall we have a good level of change. I think initially, we will — I will expect more change because we need that change. But long-term we definitely want to keep our good people and I think we do bring some good new leadership that will bring new ways of managing and thinking and so on.

Sterling Auty — J.P. Morgan — Analyst

Thank you.

Kip E. Meintzer — Global Head of Investor Relations

Thank you, guys. Thank you for all of you joining us today. Later, we’ll have the presentation posted on the website for any of you that like to download it and review it further. Other than that, we look forward to seeing you during the quarter at the conferences and look forward to next quarter’s earnings call. Thank you, guys.

Tal Payne — Chief Financial Officer and Chief Operating Officer

Yeah. And I’ll appreciate if you have any feedbacks on the presentation, we will appreciate to get it and get better.

Gil Shwed — Founder and Chief Executive Officer

On the format, on the call, we’d love to hear your feedback as well. Thank you.

Kip E. Meintzer — Global Head of Investor Relations

Thank you. Bye-bye.

Tal Payne — Chief Financial Officer and Chief Operating Officer

Have a nice day.

Operator

Goodbye.