Check Point Software Technologies Ltd. (CHKP) Earnings Call Transcript & Summary

Exactly.

But let's talk about the U.S. The U.S. business has historically lagged versus the overall business. What is the key reason for this? And now that you're on board and based here, I'm hoping this should help change things. How do you plan on revitalizing the U.S. market for Check Point?

Okay. Two sides. Let me first respond to your comments about having a member of the executive team here in the U.S. We have had members of the executive team here in the U.S. It's been some time. And so for the last several years, our executive team has been based in Tel Aviv exclusively. That's changed now. And so I'm thrilled to be based in the U.S. and a member of this important Israeli company. I think the spirit of innovation and what Israel brings to cybersecurity is just so significant, it can't be ignored. Having someone in my role based in the United States, I think it's also very strategically significant because of the balance of our business and just how much of our business is centered in the Americas and in Europe. And so that's exciting. Yes, I am based in San Carlos, our U.S. headquarters. I'm actually based on an airplane somewhere in between here in Tel Aviv or in parts in between. And I think this is important for a reason. I think that one of the things I bring to the table is not the fact that I'm located in the U.S. but more my global experience. I actually spent 10 years living in Singapore, 5 years living in China. I've lived in Japan. I work and live in the United States now. And so the thing that I really hope to bring and continue to bring every day to the conversation is a global perspective of the markets we serve. And it's not to say that, that doesn't exist in Tel Aviv. But having someone at sort of the outpost in California, as I call it, is actually a wonderful way to continue to bring that customer perspective and voice of the market on a daily basis back to Tel Aviv. And it's been wonderful. We operate as a great collaborative global unit. Now to your question on the United States. The Americas has been, for the last decade or so, going through some ups and downs. My being here hasn't changed that as much as our fortification and commitment to the market. So what I will tell you is, while I was a member of the Board, I had the opportunity to help interview and hire for President of the Americas Sales region. And it was so important to us that the Board of Directors actually got involved. And that is a testament to just how important the market is. We brought on board a great President of Americas Sales, Geoff Waters. He's been in the role now for a little bit over a year. And we are seeing the fruits of his labor, and we're seeing the fruits of his leadership. And that, coupled with our headquarters team's continued investment in the market, has really been the magic. And so I would say it's a combination of leadership and investment. That investment has been to the tune of approximately a 25% increase in our sales force, the size of our sales force in the Americas. That's not just a U.S. comment. It's actually a global comment. And we are realizing that in the Americas. And so our workforce is stronger than ever. We've got some wonderful talent that's coming from different places, not only from the network game, but from the cloud game, from the remote access and IoT game. And it's giving us a really nice diversity of talent. And then Geoff's leadership and what he's been able to accomplish in the last year. And so what I hope to do now -- and it's been about 6 months for me. But as I join forces with Geoff and the Americas team, I hope to be able to spend a lot of time with customers in this part of the world, and I've been doing just that.

And that's a great lead in my next question. In my observation over the years, to the extent that Check Point might have underperformed peers, in my own perspective, and I think shared by others, it was never about the technology. And I think, again, one person's opinion is that the company was outmarketed and outsold. I don't know if you would agree or disagree with that or maybe to some extent. But I would love to hear your perspective in your role as Chief Commercial Officer that if we're going to isolate go-to-market, what really do you see as -- and it's never going to be any one thing, but like from the top down, what are your impressions? And what's your -- on your agenda to help make that change and to really -- just to ensure that this great technology, this great product, this great company is being properly represented through the channel and in the face of customers?

I love the way you asked that question because that's exactly it. We are a company that is just -- it is built on and -- yes, I'm a little biased, but built on some amazing technology. And the wonderful bits of our legacy are going to propel us into the future, and as are our investments, the combination of organic and inorganic innovation. And so when you have amazing technology, when you're -- when the biggest challenges you have are in go-to-market, there's just -- there's nothing but opportunity in front of you, right? And so first, I want to -- what am I going to be focused on? What's my mandate? Well, if you think about what my role is, which I didn't mention earlier, it's presales and sales, the entire sales cycle. It is marketing, all aspects of marketing, from corporate field to product marketing, product positioning and telling the corporate story. It's also customer success and how we are invested in the success of our customers from the beginning to the very end and in the expansion into new technologies. And so what we've done in this organization is we've actually strung together every organization that is responsible for an aspect of the customer's journey. That in and of itself, I think, is a very powerful tool towards enabling accelerated growth. So what are the things that I'm focused on? There are 4 that I think about every day. The first is intimacy at our enterprise customers. We're not -- and I say this often. We're not sort of your dad's firewall company. We are the cybersecurity partner for the enterprise in the future. And to be that full-service cybersecurity partner for the enterprise, you have to establish a level of trusted advisorship at folks inside the enterprise who we haven't historically had a relationship with, right? And so as we expand our portfolio from network security, we fortify and continue to innovate there. We build our CloudGuard portfolio to secure the Internet and secure the cloud, excuse me. And then we build our Harmony portfolio to be able to secure the end user and access. We take those 3, and that involves a much greater level of intimacy at the enterprise to the extent that we have all the tools at our disposal to now be seen as a trusted adviser to the CISO. And so that is a very important mandate for me specifically as I think about how to enable that and continue that enterprise intimacy at a much broader level. Second area I think about is our partners. We are 100% channel go-to-market. Our model, we don't go around or undermine our channel partners. 100% of our business is through channel partners. As such, it's important for us to constantly reset and constantly think about what is going to bring value to our partners so together we win in the marketplace and how do we address new types of partners because business models are evolving. So the second area that I'm focused on is kind of the reset, recalibration and focus on our channel partners and what channel partners mean for our future because they mean something different for our future than they have in our past. The third area that I think about is the combination of sales and marketing, the integration of sales and marketing. And we have had -- we've done storytelling at the brand level, and then we've had a sales organization that's driving our business and our revenue. But by the integration of the 2, we can actually not just collaborate and connect, but we can optimize our investments for our customers and our partners much better than we've been able to in the past. So the third thing that I think about is that integration of sales and marketing so that we can tell one succinct and integrated story to the marketplace. And then the last thing that I think about is this area of customer success. Customer success for us is a complicated proposition. Why? Because we have a wonderful portfolio that's predicated on hardware. We have a growing portfolio in the area of software and services. And so customer success is a complex endeavor. When you think about hardware, support, services and then you think about the cloud and you think about IoT and remote access, bringing that all together to give customers an amazing experience is a much more complicated endeavor than, say, it was 10 years ago for us. And so the last thing that I'm focused on in those sort of 4 focus areas, the last of the 4 is really around this notion of one customer journey and how we serve our customers to deliver an amazing experience to multiple security constituents inside of an enterprise to deliver end-to-end value.

Helpful.

So no pressure, but those are kind of the 4 areas where I'm really focused. And when I'm making decisions and when I'm building the team, I really think about how it's going to help us against those 4 focus areas.

Very clear. I want to double-click on one of those because we've been hearing that Check Point is doing a much better job engaging the channel, and you've had a recent rebranding, which is really starting to resonate. Could you just talk to any key go-to-market initiatives in the works over the next 12 months? Maybe how do you expect to gain mind share in the channel, which is tough because you got a lot of competitors that are spending and spiffing and [ MDF-ing ] their way to gain mind share and incentivizing in all sorts of ways? And are you prioritizing partners in certain regions or in certain verticals or in certain expertise? How do you think about the channel and getting it right?

Yes. It was like 8 questions in one. I'll take...

That's what I get paid to do.

Is that what you're known for? But it's a really important question. And the bottom line is how do we expect to gain mind share, win the hearts and minds of our partners one partner at a time. I really believe in the partner relationship, first and foremost. I have spent an extraordinary amount of time with partners, and I continue do so because, as I mentioned, 100% channel. For me to be successful, I need my channel partners to be wildly successful too. And I'm not confused on that. So I think I -- the first -- and I don't mean that sort of flippantly. Quite literally, one partner at a time, one channel at a time. What I've learned over the course of the last couple of decades is that channel partners have unique personalities, and their value propositions -- the value proposition is not homogenous, and what they deliver to their customers is not homogenous. And I mean that inside of a particular kind of channel as well as across different kinds of channels. And so I believe that we need to be terribly specific and focused with different channel partners, whether those are system integrators that serve the government, whether that's global system integrators that serve a broad commercial audience, whether that's a traditional VAR, whether that's a managed service provider. And so I think we need to think about the uniqueness of each one of our channel partners first and foremost. So I'm very focused on those relationships. The second is you mentioned something very interesting. You said there are companies out there who kind of spiff their way to success. Our success will always, as a company, be predicated on our amazing technology. Always, always, always. We will start with the technology. You won't see our -- you won't see us spiff our way to success. What you will see us do is focus on our technology and give our partners something they can sink their teeth into. We want to give them something that is as easy and as straightforward to sell as possible. We want to give them clear value propositions. We want to give them clear tools so that they can be successful. Are incentives involved in that? Of course, that's the way -- we've been in technology for a long time. We understand that. However, our relationships with partners are never predicated on that. Our relationships with our channel partners are always predicated on helping them be successful with their customers and giving them the tools and the technology to do that. And then the rest sort of comes. At the scale level, of course, there are going to be partner programs. Of course, there are going to be things that, in general, help incentivize our channels to go faster and further with us. And our focus is absolutely in fortifying the foundation and really focusing our investment with our partners and the community at large on those new business areas.

Awesome. Makes perfect sense to me. I wanted to talk about just capacity in the field. At RSA, I actually ran into one of your mid-level sales leaders who was very clear, hey, we're hiring. And I believe you're still growing headcount at a fairly healthy clip, on track to increase quota-carrying heads by 25% this year. Just want to make sure that that's still the case. And also, where are the headcount additions focused? And why?

Yes. Not only is it the case, but anyone who knows someone, please send a resume. Please send a resume in checkpoint.com. But in all seriousness, absolutely. We know that the best way to sell is to have feet on street that are knocking on doors, that are calling on our customers, that are serving the customers we have to expand our business inside of those enterprises. And so we're absolutely committed to grow. Gil has said that -- our management team has said repeatedly that we're growing our frontline sales force to the tune of 25%. Absolutely, absolutely. I focus on it on an almost weekly basis or more where I am looking at the hiring. We're doing extraordinarily well, and I'm excited about it. We continue to hire. We have openings all over the world. And this is true, by the way, the growth in our sales force in the Americas across the EMEA region as well as across Asia Pacific, in mature markets, in emerging markets across the board. You're seeing us invest in the enterprise. You're seeing us invest as well in the public sector, both in federal capacities as well as in state, local municipalities as well as in education. So those are big focus areas for us as well on top of the key verticals that we serve today. And we continue to invest in headcount to serve our channel partners. So across the board, we're hiring both in commercial selling and in technical selling.

Well, if you're going to win in the channel one partner at a time, you certainly need the capacity to be out there covering them as well.

Absolutely, absolutely.

Awesome. I'd be curious, when you're out speaking to customers, everybody seems to think that security is amongst the more protected, insulated categories of spend within IT. But at the same time, the environment is pretty uncertain out there. I think we've heard that from Gil and Tal as it relates to the back half guidance and some of the things that I think every company is experiencing right now. What are you hearing on the front lines, from CISOs, from the dialogue that you're having and the intent that they have and what their priorities are over the next 6 to 12 months?

Yes. I'll answer your question in 2 ways: one as a Board member and one now at Check Point. And what I can tell you increasingly from what I hear in speaking to colleagues in my network who are on Board and having served on a public Board, there are 2 technology conversations that are repeatedly coming into the boardroom today. And those are investments in artificial intelligence and cybersecurity. And those investments, those value propositions and those dashboards are regularly coming into Board conversations. And specific to cybersecurity, those dashboards are now increasingly a part of subcommittee mandates. And so CISOs are being invited into the boardroom and expected to share complete threat assessments and have a plan against those threat assessments. And we know that for a fact. And so these conversations are very important in these. While these investments are scrutinized, they are absolutely 2 of the top priorities on Boards right now. Now having been at the company now for 6 months and so having much deeper conversations around cyber and the importance of cyber companies, almost every CEO who I speak to says there are 2 places where I am still -- if I can use the term writing checks. And those really are AI and cyber. Not AI and cyber because, hey, I've got AI as part of my IT shop and cyber is part of my IT shop. Not in that way. They're actually saying I'm not looking at -- there's a saying that every company is a technology company. And if every company doesn't think of itself as a technology company, it's sort of doomed to flatline, and I firmly believe that. And so what I think is happening at the C-suite right now is companies are looking at artificial intelligence and cybersecurity in the same way. They're looking at them as potential strategic competitive advantages and not necessary departments in the enterprise. And when we start thinking the more that the C-suite begins to think about cybersecurity as that opportunity for a strategic competitive advantage in their operations, the better off they're going to be. And I hear it more and more.

Helpful. Very, very good to hear. You said earlier, Rupal, that think of Check Point as not your father's firewall company. And clearly, Check Point is way more than a firewall company today. But firewall is still a very important platform. I'd be curious to hear your perspective, especially through coming out of COVID, now into recession or whatever environment we're in, what your perspective is on the health of next-gen firewall, the market. And then in particular, as we see cloud migrations accelerating, what does the future of that platform -- of the firewall as a platform look like in that environment?

Yes. Well, unfortunately, because of the world stage and what is happening in the world today, in the world of cyber attacks, that segment is secure in terms of the size of that market today and its growth opportunity in the future. You can just look at our threat intelligence reports that come out on a monthly basis, and you can see we see it in our own service that we have. We call it the ThreatCloud. And we can see network attacks all over the world every minute of every day. And what I can tell you is, unfortunately, it's not slowing down. Fortunately, we have the innovation, the organic innovation to be able to protect the enterprise in the best way possible. And when I say the future of firewalls is secure, I mean, the future of the physical firewall added with the virtual firewall in the cloud is a stable and growing market. Necessary but insufficient to be a full cybersecurity partner and innovator.

That makes a lot of sense. Maybe beyond the firewall, you got a much broader portfolio. Where are you seeing the greatest interest, excitement growth like -- or even as it relates to firewall and some of the subscription attach that goes with that, like where is the action? What are you most excited about?

Where is the action? Well, the action is everywhere, to be really honest with you, Brad. I think the -- but to get really specific for a moment, while we do see the network security business growing at a really healthy rate in a place where we feel really good about our organic innovation, there are some areas of growth that get me particularly excited. So in our CloudGuard portfolio, our CloudGuard portfolio, we began small and mighty years ago. We have really fortified that brand family, starting with posture management, but not just posture management, getting into the areas of API security and other areas. And what I see across the board in CloudGuard is a portfolio that's filling out, and we've got some exciting new things happening in the fall that actually fortify it even more. And so where I see wonderful opportunities with the enterprise and attach is as they begin looking at their most definitely multi-cloud and hybrid cloud strategy, we can be with them in the hybrid capacity where they need us. And so when you take our Quantum portfolio and you couple it with our CloudGuard portfolio, it's a really powerful combination, and being able to have that hybrid cloud, multi-cloud conversation with customers, whether they're in their private cloud or whether they're at AWS or Azure or Oracle Cloud. So I'm really excited about how that portfolio is filling out. We've had some wonderful acquisitions in that space as well, one of which is Spectral. And it's provided us with a wonderful opportunity to begin conversations in that cloud space. The other area that's really exciting is the things that we've been able to do both in IoT and in e-mail. So we have our third portfolio, which is our third family -- brand family called Harmony. Harmony is all about securing the user and securing access. And so we've done some wonderful acquisitions here. I mentioned Avanan about a year ago. Harmony, now called Harmony Email, which has just really been exciting for us. And just to use one illustrative example. We're a company that believes that detection and mitigation is table stakes, absolutely necessary but insufficient. The action is really at prevention. And so when you take a wonderful foundation of detection and mitigation and you add to that prevention, you have a really powerful combination. So in that Harmony portfolio with Harmony Email, a really big differentiator for us is we're not going to wait for that threat to get to your inbox or at the door of your inbox before we detect it. We're actually going to prevent it. And we have measures inside of Harmony Email to be able to do that. We -- that really differentiates us. And so when you're talking about not your dad's firewall company, the next generation, we want to be the cybersecurity provider, not just for us sitting in this virtual room, but for our children and their children. That's a generation that's increasingly in the cloud and increasingly in a whole set of diversified devices. And so now you talk about the Harmony portfolio that is securing your phone. It's securing distributed IoT devices for the enterprise, which is increasingly how people are engaging with the cloud. Contactless connectivity. There's a whole host of solutions inside the Harmony portfolio. So when you take Quantum, you add CloudGuard, you add Harmony, you now have elements that actually bring full-service protection to any enterprise, large or small. And our -- and the other -- the last thing I'll say is that the wonderful thing about this is we have a solution for the largest enterprises out there, and we have wonderful solutions in the small, medium business space as well. And so our solutions scale up and down to be able to meet CISOs where they are.

Rupal, with that, we are just out of time. Really, really grateful that you were able to join us for this year's conference and to have you present at this session. So thank you. Thank you, Kip.

My pleasure, Brad.

And this was great.

Yes.

Thanks very much.

Thank you.

Thank you.