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Check Point Software Technologies Ltd (NASDAQ:CHKP)
Q2 2019 Earnings Call
Jul 24, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to Check Point Software Technologies Second Quarter 2019 Earnings Call. [Operator Instructions] I will now turn the conference over to your host, Kip E. Meintzer, Head of Global Investor Relations. Thank you, you may begin.

Kip E. Meintzer -- Head of Global Investor Relations

Thank you. I'd like thank all of you for joining us today for Check Point Second Quarter 2018 Financial Results. Joining me today on the call are Gil Shwed Founder and CEO, along with our CFO and COO Tal Payne. As a reminder, this call is webcast live on our website and is recorded for replay. To access the live webcast and replay information, please visit the company's website at checkpoint.com. For your convenience, the conference call replay will be available through July 31. 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 and programs, and the success of those products and programs; the environment for security threats and trends in the market; our strategy and focus areas; demand for our solutions; our business and financial outlook, including our guidance for Q3 2019. Because these statements pertain to future events, they are subject to various risks and uncertainties. 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 July 24 2019, which is available on our website, and other risk factors, which are included in Check Point's annual report on Form 20-F for the year ended December 31, 2018, which is on file with the Securities and Exchange Commission. 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 the reconciliation of such results, as well as the reasons for our presentation of non-GAAP information. Now with that, I'd like to turn the call over to Tal Payne for a review of the financial results.

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Thank you Kip. Good morning, good afternoon to everyone joining us on the call today, I'm pleased to begin the review of the second quarter Revenues for the quarter increased by 4% year-over-year to $488 million and our non-GAAP EPS reached $1.38, both slightly above the mid of our guidance. Before I proceed further into the numbers, let me remind you that our GAAP financial results include stock-based compensation charges, amortization of acquired intangible assets and acquisition related expenses, as well as the related tax effects. Keep in mind, as applicable, non-GAAP information is presented excluding these items.

Now let's take a look at the financial highlights for the quarter. Product and security subscription revenues was $270 million, a 5% increase year-over-year. Our subscription revenues continue to be strong with 13% growth reaching $149 million. Our software update and maintenance revenues increased to $218 million, representing 4% growth year-over-year.

The growth in our subscription revenues is driven by our advanced solutions, mainly SandBlast Zero-Day threat prevention, clouds, and Infinity solutions. Deferred revenues as of June 30, 2019 reached 1 billion $286 million, a growth of $128 million, or 11% year-over-year. Revenue distribution by geography for the quarter was as follows : 48% of revenues came from Americas; 40% of revenues came from Europe, Middle East and Africa region; and the remaining 12% came from Asia-Pacific. Since the beginning of the year, I remind you, Middle East and Africa is our part of the Europe, Middle East and Africa region, while before it was part of Asia-Pacific, Middle East and Africa region.

The revenue distribution by geography for Q2 last year, after the reclassification, would have been 48% of the revenues from Americas, 41% of revenues from Europe, Middle East and Africa region, and the remaining 11% from Asia Pacific. You can see our region had growth this quarter. We continue to invest in our sales force and marketing in order to execute our growth strategy. As a result, non-GAAP operating margins for the quarter were 50%, same as previous quarter Q1, and in line with our plans. Our financial income this quarter was $21 million. Since the beginning of the year, we see a change in trends, with a decrease in our portfolio yield as a result of lower interest rate expectations in the US, hence our financial income for the next quarter is expected to be around $20 million. Effective non-GAAP tax rate for this quarter was 19%, similar to the first quarter of this year. GAAP net income for the quarter was $186 million, or $1.21 per diluted share. Non-GAAP net income for the quarter was $211 million, or $1.38 per diluted share, $0.02 above the midpoint of our guidance. Our cash balances as of June 30, 2019, were $4.110 million compared to $4.42 million last year. Our operating cash flow was $233 million, compared to $213 million in the second quarter of 2018, and 9% increase year-over-year. Collections from customers continues to be very strong. Our operating cash flow includes tax and balance sheet hedge transaction, which can fluctuate from quarter-to-quarter. Excluding these items, our operating cash flow increased by 4%. During the quarter we utilize the maximum quarterly buyback authorized and purchased 2.8 million shares for $325 million.

Now let's turn the call over to Gil for his comments.

Gil Shwed -- Chief Executive Officer, Founder, Director

Thank you, Tal, and hello everyone for joining us today, I'm pleased with our second quarter financial results. There is just about the mid point of our projection. But more importantly, our execution and transformation continue to improve. When I speak about transformation. I am addressing the modernization of IT security environment, protecting the IT infrastructure against Gen V attacks, and expanding the security coverage into the cloud, mobility and IoT spaces. In the second quarter, we made good progress around IT modernization. Our cloud business has grown quite significantly, more than doubling in size this quarter.

We've introduced new solutions for security and data analysis with the new Log.ic cloud security solution that takes information from cloud providers and processes that into meaningful insights and actions. In the first quarter, we introduced Maestro solution enabling cloud-like elasticity for customer security environment, using our Hyperscale technology. In the second quarter, Maestro demonstrated solid traction with many new projects. We've continue to modernize and upgrade our core product line, with the introduction of the mid range 6500 and 6800 security appliances in the first quarter, and continued in the second quarter we've been introduction of the high-end 16,000 and 26,000 security appliances. These security appliances are optimized for Gen V security operation. Today, we're launching our highest-end model of the 26,000 series that delivers performance of over 300 gigabits of raw firewall and 30 gigabits of Gen V security, a 50% increase from previous models. The 16,000 and 26,000 security appliances are powered by our latest version of security software [indecipherable] , which features many new and unique capabilities, including advanced threat prevention for web downloaded content and the ability to process SSL security with higher levels of security and performance. While our progress this quarter primarily reflects technology advancements for the cloud and network environment, we also made good progress with our execution in the field. For example, in Asia Pacific, we had a terrific quarter with double-digit growth and we've substantially increased field and marketing activities. This success can be largely attributed to our new APAC leader who joined us at the beginning of the year.

In the US, we saw quite healthy trends this quarter. Product growth in the US resumed, and the majority of region demonstrated healthy growth rates. We've also significantly increased our marketing activities. In the first quarter, we had almost 10,000 participants at our free global CPX 360 conferences across Asia, America, and Europe. In the second quarter, we took the Check Point Experience Program locally we 37 events in different cities around the world, tripling the number of participants to almost 11,000.

Our headquarters hosted many Chief Information Security officers, including two large events, each attended by over 100 seats sold, including major global Fortune 100 companies. Our research team continued to generate grateful findings regarding malware and when there abilities in mobile and cloud. In the mobile space, we found a vulnerability in Xiaomi mobile devices, which may affect over 100 million devices. We also found malware named Agent Smith that actually affected hundreds of applications and over 25 million Android users. Additionally, we discovered a vulnerability in Electronic Arts, Apex Legends game that could have affected over 300 million online users, another vulnerability which is a result of the security challenges associated with cloud infrastructure. Our research team is exposing a lot of vulnerabilities, enabling customers and vendors to fix them and stay out of trouble.

However, there are many other cases where enterprises don't secure themselves that well, and the quality of security does matter. To make things worse, in addition to the cost of business operation, technology, confidence and reputation, which are part of being breached, companies are now being fined pretty hefty amounts by regulators. Just in the past few weeks, more than $1 billion in combined fines were given out to three companies that suffered major breaches. I believe that these cases could have been prevented in real time by using the right technology at the right place, instead of being detected months after the damage has already occurred. We have a big mission to educate the market with real-time prevention of cyber attacks is possible. Our Infinity architecture is unique in that sense, and can really make a difference.

So overall, I'm quite pleased with the progress we made in the second quarter. We have produced good financial results and are on track to improve our operation and potentially generate even better results. We continue to bolster our management team with the addition of new leadership for Telco initiatives, and we intend to further augment our management team. For the third quarter, my usual caveat continues to hold true, with the predicting the future is always a challenge and there may be surprises, lower or higher. With that in mind, I'd like to share the forecast for the third quarter. Revenues are expected to be between $480 million to $500 million, and non-GAAP earnings per share are expected to be between $1.36 to $1.44. GAAP EPS is expected to be approximately $0.19 lower. Now, we are happy to take your insightful questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Brad Zelnick with Credit Suisse. Please proceed.

Brad Zelnick -- Credit Suisse -- Analyst

Great, thanks so much for taking my question. My first one is for Gil, and I've got a follow-up for Tal. Gil, it seems your commentary would suggest you're seeing evidence of improvement in sales execution. But at the same time, it would also seem you're growing a bit less than the overall market. And I know you generally always tell us that the environment for cyber security spending remains robust. But is there any reason to believe that if we look at it today or in Q2 versus Q1, or perhaps even a year ago, that there has been a change in the spending backdrop in the category?

Gil Shwed -- Chief Executive Officer, Founder, Director

I don't know if there is any change in the overall spending. I think the market is healthy. Now it's not the market which shows signs of weaknesses. There are many changes in the marketplace and I think we're very well equipped to handle them from a technological perspective. From a field perspective, we definitely need to go through some changes, and we are going and we are investing in them, and I think it shows. We need -- we are going higher up in the organization to cover a broader spectrum of solution. We are selling more architectural approaches that requires sometimes people that our train differently, different sales cycles. And I think we are making all the right investments. You can see that in our sales and marketing spend, but it's not just the spend, it's really the change in the education and the expertise that we are learning as we are bringing to market. And what I'm saying, but I'm optimistic, I think it's because I'm seeing a lot of internal trends in activities in measuring other managerial measurements that I'm very, very focused on, and I think that in the first half of this year and definitely in the second quarter we saw some big internal changes.

Brad Zelnick -- Credit Suisse -- Analyst

Thanks very much, Gil, and Tal, just to follow up. We're seeing Check Point step up in sales and marketing investment this year, which given the market opportunity and your strong technology, seems a very rational move. And I know you think more in dollars than percentages, but we've seen op margin tick down, even if slightly again this quarter. Where should we expect it to inflect or perhaps asked differently, how are these investments beginning to pay off versus your original plan heading into the year?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

It's actually completely in line with our plan. We said that our margin will be this year around 49% to 50%. So it's in line with our plan. The main expense is a result of the continued increase in our headcount, continued increase in our marketing efforts. We had many, just as an example, providing the CPX. Historically we used to have 3 CPXs, now we had more than 40, we had 40 CPXs, locally and globally. So we are stepping on the gas when it comes to digital marketing, event marketing, and we start to see results and leads coming out of that. So that's nice to see. It takes longer than -- it's not one quarter investment and then the quarter after you see it, it's over time you should see the fruits of that translating into growth in the revenues. Remember also that the trend of the move from product into subscriptions, from product into cloud, all of those cloud is also subscription for us creating a lot of pressure on the product lines.

So at the end of the day, it should to translate into our growth in the booking and in the revenue.

Brad Zelnick -- Credit Suisse -- Analyst

Thank you so much for taking the questions.

Operator

Our next question is from Michael Turits with Raymond James. Please proceed.

Michael Turits -- Raymond James -- Analyst

Hey guys, good morning, good afternoon. Quickly Gil and Tal, you didn't comment on the full-year guidance. Is the preceding, the prior full-year guidance, still in place?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Yes, we are keeping the guidance, absolutely.

Michael Turits -- Raymond James -- Analyst

Thanks, Tal. And then, I wonder if you could be specific at all about some of the trends relative to the hiring and productivity of the sales force. Where are you in terms of sales attrition, if we just say 2017, 2018, and 2019? And where are you over that three-year period in terms of the percentage of the sales force this is that full quota productivity? Just so we can get a sense of where we are in terms of the transition?

Gil Shwed -- Chief Executive Officer, Founder, Director

First, it's hard to deduct from attrition if it\s good or bad. I think Attrition this year was lower than the previous year, and but depends where in the world, especially in the US. Some of it is very good. Some of it we should do more attrition to handle cases where we need to improve, but overall there is no -- I mean, it's stable with some positive trends around that.

Michael Turits -- Raymond James -- Analyst

Okay, and can you comment on the level of productivity? In other words, what percentage of your sales force was that full productivity this year, where it might bottom, and when do you expect that to improve?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Actually remember the productivity is a result of the target provided. We provide targets that are not easy to reach. So I will say productivity is probably similar to last year. We see, think about it -- the way we look at it is in order to see at the end of the day the booking, it starts with much earlier measurements. Meaning in there we start to see a significant improvement. It starts from meeting customers meeting new customers, all the way to building pipeline, moving from pipeline to best case, from best case to commit, and commit to bookings. So that's the whole cycle, and the more complicated the transactions are and more holistic, then the longer it takes to close the deal. So with tracking those trend when it comes to meetings and the pipeline before you get into the bookings, and there we start to see a nice improvement.

Michael Turits -- Raymond James -- Analyst

Okay, thanks guys.

Operator

Our next question is from Shaul Eyal with Oppenheimer & Company. Please proceed.

Shaul Eyal -- Oppenheimer & Company -- Analyst

Thank you. Good afternoon, everybody. One for Gil. one for Tal. Gil, the the new Check Point reward plan, any preliminary view? How is it being viewed by the sales force, by the channel partners? It is somewhat different from what some of your competitors are doing. So just interested in understanding how it's being perceived out there.

Gil Shwed -- Chief Executive Officer, Founder, Director

Okay, so I'll just to recap with we launched last quarter a new partner program called Engage, and I think a big part of the partner program is to base the rewards and all of that on activity level. It's done through an app. Sales reps of the partners collect points by doing sales activities like marketing activities, like meeting with the customers. And through the point system, just like in [indecipherable], we can reward and give more points to things, to activities that we feel are more important, I think that's a quite a unique approach and I haven't seen a lot of similar things in our marketplace. We just started with that. I can tell you that a nice percentage of our partners have already signed up, and they're using the app. The top partners that we have, the real top tier of partners. More than 70% of the companies have signed up for the program and have started using the application. For the reps that are using the application, we are seeing activity level like we expected for the niche when you launch something new. Like how do you said the reward targets, how many points you give, I mean how to estimate how many activities people are actually doing. So we are seeing good activity level, but it is just the beginning. I think that we will have a lot of learning during the implementation of it because it is a novel approach, that at least we didn't try before. And I think it is based on my belief that what we should focus on is on the activities. If we do the right activities, if we will work together with our partners, then we will achieve the results together.

Shaul Eyal -- Oppenheimer & Company -- Analyst

Got it, got it. And one for Tal, then maybe Gil if you want to comment about it, and maybe also building on Brad and Michael's prior productivity-related questions. So if you're bringing today, if you're hiring a new sales rep, whether you brought in from a competitor or from another organization, how many quarters does it take until he or she are up and running and already providing revenues, and hence commissions?

Gil Shwed -- Chief Executive Officer, Founder, Director

It really varies in the region of the world that the rep himself is bringing with him, the set of the connections that is already involved, but mainly in the type of the accounts. So for a global account, it can take -- by the way, global accounts in general, the sales cycle can be multiple years. For a smaller transaction, it can be three months. So I would say that the average is around six months, but there is a big variance between the person, the type of accounts, and the specific situation. Like if somebody is stepping into a region, which is with healthy activity and everything works well, it picks up where the previous rep left. And somebody stepping in into a region when the rep, when the previous wasn't doing a good job, or when there wasn't a previous rep and we need to build everything from scratch, it will take longer.

So, I don't think that a clear answer, but I would say the average is somewhere north of six months.

Shaul Eyal -- Oppenheimer & Company -- Analyst

Understood. Thank you very much.

Operator

Our next question is from Phil Winslow with Wells Fargo. Please proceed.

Phil Winslow -- Wells Fargo -- Analyst

Yeah, thanks guys for taking my question. A question to Gil first, just on the pricing environment. If you think about actually by tiers of customers, kind of Telco's large enterprise, mid-sized businesses, anything that you'd want to call out there from a price environment, but also just from a demand perspective too, that'd be great.

Gil Shwed -- Chief Executive Officer, Founder, Director

I think there is the pricing environment, and the whole environment remains competitive. We haven't seen any major trends in the discounting environment , and all of it remains quite stable, which is a good sign because for years it did change and I think now it's a little bit more stable.

Phil Winslow -- Wells Fargo -- Analyst

Got it, and then also if you think about just that environment, sort of across the tiers too, anything you'd kind of highlight, especially now that we're six months through the year, versus last year? Any changes?

Gil Shwed -- Chief Executive Officer, Founder, Director

Not really. I think that we have we have plenty of opportunity. I think we're not missing opportunity. I think a lot of it is up to us, to our execution. For example, I mentioned that with growth last quarter a new leader for global telco activities we brought in, because we think that there is a much higher potential in telcos, even though we are doing quite well with some telcos. But I think the potential is really much higher, but on the same time, I can't say that there is a single sector that I would say is kind of saturated. We have plenty of opportunities, we have plenty of new customers to win, and we have plenty of existing customers where we can expand.

Phil Winslow -- Wells Fargo -- Analyst

Great, thanks guys.

Operator

Our next question is from Shebly Seyrafi with FBN Securities. Please proceed.

Shebly Seyrafi -- FBN Securities -- Analyst

Yes, thank you. So, I saw that your billings growth was flat year-to-year, and it decelerated for the past two quarters. Can you talk about the strength of your pipeline going forward?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

It's actually not really relating to the pipeline. The pipeline actually grew, especially when we talk about the product pipeline, which is very important to us as well. It's really relating to the fact that in the first half of last year we had a few very, very, very large transactions. We talked about some of them. You can see in Q2 we had two large transactions last year of 10s of millions of dollars, which typically do not repeat. It's a multi-year typically. I always say that when it's a multi-year, you need to look at the year-over-year.

So when you look at the deferred revenue growth, the year-over-year, you see 11%, and when you look at the implied booking -- which again, we don't report booking because there can be a big variation between implied booking and booking in revenues because of the multi-year, which is the math you just did. Multi-year has a huge effect on booking in our industry. And lastly, we had a few very large multi-year transactions, which obviously they were signed in Q2 last year. Now for two years, we will not see. So for example, if you had a $50 million, $60 million multi-year for 3 years, then you got last year a big pick and this year, you will see minus 20, basically, from the potential. So I would be cautious when looking at the implied booking.

Shebly Seyrafi -- FBN Securities -- Analyst

Okay, and just to be clear, you didn't have those large transactions in the back half of last year or so. Are you suggesting that headwind goes away in the back half of this year?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Actually, to admit I don't remember if we had in the back half. I need to go and look into the numbers. I know clearly about Q2 just because when we analyzed the numbers we saw two very large transactions they were tens and millions, and obviously it's created that pressure on the booking this quarter, naturally.

Gil Shwed -- Chief Executive Officer, Founder, Director

And of course, there is nothing bad in this transaction, it just skews the measurements year-over-year.

Shebly Seyrafi -- FBN Securities -- Analyst

Okay. Separately, it looks like according to my math, your EMEA revenue growth decelerated to 2% roughly, from 9% in Q1. You did well in Asia, but what happened in Europe?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Actually, Europe, where we had the strongest one in Q1. So sometimes you need to look at the year-to-date in order to see the full effect. So you're right, Europe had a weaker quarter this quarter and they had a very strong quarter in the previous one.

Shebly Seyrafi -- FBN Securities -- Analyst

No, it is just lumpy, is what you're saying?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Yeah. It can happen.

Shebly Seyrafi -- FBN Securities -- Analyst

Okay, thank you.

Operator

Our next question is from Andrew Nowinski with Piper Jaffray. Please proceed.

Andrew Nowinski -- Piper Jaffray -- Analyst

Great, thank you. I was just wondering if you could provide any color on how you think Check Point is positioned in security for cloud-based applications relative to Palo Alto's GlobalProtect cloud services and Zscaler?

Gil Shwed -- Chief Executive Officer, Founder, Director

I think it's the many different ways. I think first, this area is an area that we are addressing, we are building the solution, and I think we'll see some nice solutions there. I think you look at the overall cloud services that we provide, we have a much more integrated and comprehensive approach to cloud security. Again, what you asked about is one aspect of security, about remote access and some small branch offices, which is an area which is right now not the key focus of what we did. But I think we are addressing it, and we'll have some nice solutions to that. Overall in the cloud, I think we are making great progress in cloud security management and in building the future cloud architecture with what we call Infinity 2.0, which will provide very robust and comprehensive cloud security architecture, one that I think nobody has and nobody is actually building at the moment. So I think that in general on the overall cloud we are positioned quite nicely.

Andrew Nowinski -- Piper Jaffray -- Analyst

Okay. Thank you. And then I just had a question on your product revenue growth, or lack thereof. You had some new product launches this quarter at the high end, and I know you said you're going through a big mix shift to subscriptions, but I'm just wondering, when do you think revenue will perhaps return to growth, given some of the new appliances you launched? Thanks.

Gil Shwed -- Chief Executive Officer, Founder, Director

It's a very good question. I think first of this quarter, we had some positive trends around that. So internally the metrics that I'm seeing is actually quite positive. I did mention in my comments that in the US, for example, when we had the challenge with product growth, we did see appropriate growth this quarter, which is a very good sign. I think overall I would say that my main focus is looking at the business growth overall. I think moving to subscription is a very positive thing, and then I think that part of the business is growing, and unsteady, and we're developing more and more methods to understand, to analyze, to understand the real impact of that because sometimes it can be confusing. Like when you signed a multi-year deal, it looks like subscriptions are growing, but they are not really growing. So we actually have good metrics for that and we are positive this quarter from everything I've analyzed, and I've seen the trends are positive. And hopefully if we do the right thing, then also product growth will be stronger. And when all of that comes together, we will have even better results.

Tal Payne -- Chief Financial Officer and Chief Operating Officer

I would just add, though, when you look at the longer term, our goal is to grow in products naturally. We focused on it, we have a lot of focus on that, and we saw like you said, nice trends this quarter. But I will say when you look at the long-term trends, it's clear that the entire industry, and we cannot ignore it in the background, is putting a lot of pressure on product by choice and moving all of it into subscription, support type of revenues, which is recurring. Infinity is recurring model, cloud is recurring, virtual licensing now is recurring revenues, also in subscription. So all the new products have been launched as a subscription. Now historically, you had the gateway as the product, and all of the add-on security solutions as subscription. Now, even the product itself, which is the license for the firewall if you want to call it that way, is built on the cloud or as a virtual in the private cloud, is now being the subscription as well from two years ago.

So it's naturally putting a lot of pressure on that line that is called product, and that's why our focus is on the total growth.

Andrew Nowinski -- Piper Jaffray -- Analyst

Understood. Thank you very much.

Operator

Our next question is from Dan Ives with Wedbush Securities. Please proceed.

Dan Ives -- Wedbush Securities -- Analyst

Yeah, thanks. To the prior question, when you think about cloud and the dynamics going on there, do you continue to think you can get there organically, building out sales and obviously the product portfolio? Or just maybe talk about M&A and obviously you've done some M&A, but just maybe talk about that philosophically, how you're thinking about out organically versus M&A?

Gil Shwed -- Chief Executive Officer, Founder, Director

First, we've already made a couple of acquisitions in the cloud. So it's not a theoretical question. We do think that we can use our technologies in the domain as an example, and the ForceNock that we made at the beginning of the year is another example. I think overall my belief with the strength of what we provide -- and not just the strength of what we provide, but the real value of security -- is not having a supermarket of few dozen products, each one addressing a slightly different niche of security from a different standpoint, but sold from the same vendor. The value of security is really combining it to one architecture. At this point, from what I see in the marketplace, we remain the only vendor that is actually implementing this approach.

Our competitors are not doing well in terms of providing unified architecture, and the ones which are expanding are doing it with, again, many different fragmented solutions that don't really connect to each other and don't provide one high level of security for all the different needs. And I think in the long run, I'm a big believer that that approach is a must, and will win. And I think, I mean, so the combination of one, what we have the FRED cloud, one set of technologies that are very strong in security and multiple delivery methods -- delivery on the cloud, delivery on the network, within-the-cloud delivery for a SaaS cloud application, and so on and so forth, is critical. That's the only way to deliver the security level that the world needs, and that's what we have today, and that's what we are expanding and building.

Dan Ives -- Wedbush Securities -- Analyst

Thank you.

Operator

Our next question is from Gregg Moskowitz with Mizuho Securities. Please proceed. Greg, please check and see if your line is muted.

Gregg Moskowitz -- Mizuho Securities -- Analyst

Thanks very much and good afternoon, guys. Gil, I didn't hear much commentary on Infinity in your prepared remarks this quarter. And so, just wondering how demand for Infinity is tracking relative to your expectations thus far?

Gil Shwed -- Chief Executive Officer, Founder, Director

So actually, we're doing fine with Infinity. Revenues from Infinity were better this quarter, basically because we've got deals both from this quarter and previous quarters. And new deals, we signed pretty much the same amount of deals that we signed in the first quarter, which is good. Much more than, of course, what we've done in the previous years when we just started. And the overall pipeline Infinity keeps growing, and keeps growing in pretty big numbers. So I think overall, I'm pleased with what we're doing with Infinity. T the potential is high. The execution, actually, the nice things to see is that it scales from small businesses to medium businesses to few even very large deals. So we have potential in all the different market segments. So I think we're making good progress on that.

Gregg Moskowitz -- Mizuho Securities -- Analyst

Okay. Thanks, Gil and then you also talked about R80.30 I know it has enhanced SSL inspection, as well as threat extraction in some other capabilities. Do you see R80.30 though as something that can drive incremental revenue per customer on a go-forward basis? How are you thinking about that?

Gil Shwed -- Chief Executive Officer, Founder, Director

I think we [indecipherable] potential for more revenues more customers, more potential with the new features that customer needs. On the same time, keep in mind and not that I'm saying that there is any other option on the same time when you come with the new version that means that the customers have to spend the time upgrading and investing in the upgrade process itself, but sometimes slows them down from expanding because upgrade in our marketplace is still -- especially by the way, the large customers, for them doing an upgrade cycle is a very long and resource-intensive process. So overall I think in our market, the right thing to do and what we must and I think we are the strongest in one is upgrading the customer base, bringing them all the time with the best security with the highest level of security I think that's where we excel and from an operational standpoint to upgrade our time consuming for everyone.

Gregg Moskowitz -- Mizuho Securities -- Analyst

Okay, thank you very much.

Operator

Our next question is from John DiFucci with Jefferies. Please proceed.

John DiFucci -- Jefferies -- Analyst

Thank you. I have a two-part question. And I think the first one sort of a follow-up to Shebly's, so Tal, I think even even the short-term or current billings were a little bit below our expectations. They were up less than a percent year-over-year. I guess can you provide any more commentary on that? That's not affected by duration. And perhaps the product launches at the end of the quarter could have delayed some purchases and thinking, but it sounds like sales execution has seen some progress, so that's the first part. And the second part is what follow-through have you seen after those launches over the last, it's only been 3.5 weeks since the end of the quarter, especially as Gil said, that you've announced the highest-end 26,000 Series model launched today. So just kind of trying to get a sense here because business looks stable, but it just feels like you could be doing a little better?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Sure. First, also, when you calculate the implied booking it's also affects the multi-year, even in the short run, because if you would have got each year and the right time. The deal of that year, then you would have seen the growth because the deal that was signed last year was not just a renewal, it was a significant growth. So you missed that growth in the calculation of the implied this year. But putting that discussion aside, you're absolutely right when we talk about the launch of the new products Typically when you have a new product line, then it takes time for the customers to check it, and when you talk about the high-end, then high end need to get an approval for this new products, what you call certify the new product, and that can delay some transactions. Remember that the launch of the high-end was toward the end of the quarter. So it's still within the reflecting the numbers almost. Also remember that when you launch a new product, you can have some cannibalization between families, when people get much more throughput in a new product and they can choose to go one level down get more throughput and pay less. It's a short-term but phenomena. But it's good for the business because it increases throughput of the customers. When they're more throughput than they can adopt new technologies and new subscriptions in the later stage. So it's good for the longer, but sometimes in the short run, it's creates pressure and it definitely creates pressure, yes.

John DiFucci -- Jefferies -- Analyst

Any commentary over the last three and half weeks? I mean I'd, let's say, that's a very short time. I know, since the end of the quarter. But we sort of expect to see some benefit after the launch of these products.

Gil Shwed -- Chief Executive Officer, Founder, Director

It's very high. I haven't seen since updated numbers. The quarter started strong and very well, which we never say. But even if I say, it doesn't matter, some quarters start strong and end weak, some quarters start weak and end strong. So I just think I look this morning on my dashboard all the lights were green and I was very happy. But it's not an indication to how we will end the quarter, just to be just to be clear.

John DiFucci -- Jefferies -- Analyst

Okay. But we like to hear when you're happy, Gil. So thanks a lot.

Operator

Our next question is from Walter Pritchard with Citibank. Please proceed.

Walter Pritchard -- Citibank -- Analyst

Thanks. I guess, Tal, just to clarify the comment before on the product side, it sounds like it's too early to tell the impact of the new products. Any sense as to whether or not some of those impending product launches impacted negatively product sales in Q1 and Q2, just given customers new those were probably coming and might have been waiting and not purchased in front?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

It's absolutely impossible to calculate it, but we can you can theoretically see what was things that were in commit or in best case and didn't happen, and been delayed to a quarter after. But it's too theoretical to calculate. It's obvious because we've been doing this refreshes for a while, we know when we come with the new product line, the market is evaluating it, it takes time to go through the channel. Many times their partners want to sell the old until they learn about the new. It takes time, right? So it's typically -- but the high-end, what I recall from the last time, and the high-end typically take slightly longer because it's sometimes required, if it's a very large customer, then it requires internal certification from their end.

Kip E. Meintzer -- Head of Global Investor Relations

I would also add that we use the new product to make some more Just, replacing your model with a faster model. We did use that opportunity to make slight changes to the business model. For example, how we do subscription for the new models, so we are trying a new model for subscription, which we think is very competitive. And any change like that kind of positive effects, and can have some negative effects because the changes business behavior. That's for the model that we launched the to 16.000 and 26,000. We are trying to, we are applying the same changes now for the 6500 which we introduced in the first quarter. And again, there we also been some changes to how we conduct business, with for example, it came up with models with are more competitive and have much better price performance. So we try to limit the level of discounting that are given to them. I think it was successful, but again it sometimes delays things in sometimes caused some disruption. So it's not just technical changes in the product. We are using the new product launches to try some new business changes that hopefully in the long run will have positive effect.

Walter Pritchard -- Citibank -- Analyst

And then, Tal, on the sales investments, can you talk about, as you move into the second half and then looking at next year, how are you determining and especially how could we, in terms of us looking at the financial statements, get a sense as to whether not it makes sense for you to be investing incrementally more into sales and marketing in 2020?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

I think it's way too early. I mean, you know everything happens in Q4. I think we don't look at that yet. We need to see how the year is closed, we need to look at the productivity, we need to look at everything in Q3, and specifically in Q4, in order to make the plan for 2020. Typically we start our planning in Q3, but it stands there and waits until the results of Q4 enough to, that we do, we have the final budgeting. So it's a bit early to talk about it now.

Walter Pritchard -- Citibank -- Analyst

Okay, great. Thanks for taking my questions.

Operator

Our next question is from Ken Talanian with Evercore ISI. Please proceed.

Ken Talanian -- Evercore ISI -- Analyst

Hi, thanks for taking the question. First off, I was wondering, were there any changes to your renewal rates on either maintenance or software blades?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Not really, no.

Ken Talanian -- Evercore ISI -- Analyst

Okay. And then, are you seeing any sales cycles extend as Infinity is presented as a purchase option?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Can you repeat the question please?

Ken Talanian -- Evercore ISI -- Analyst

Are you seeing sales cycles extend as Infinity is presented as a purchase option to customers?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Infinity, by definition, basically offers the customer the entire product portfolio -- from the network, to the endpoint, to the cloud, to the mobile. So when customers are interested in that, it can take longer time having that I saw some transactions that closed really fast, and I saw some transactions that closed longer than we felt. So it really depends on the size of the customer and his readiness.

Ken Talanian -- Evercore ISI -- Analyst

Maybe as a quick follow-up to that, are you giving an incentive to sales reps or channel partners to push Infinity? Are they getting an extra benefit if they are able to close a deal there?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Yes, they do. But again, it's more, I think, about the customer. The customer is the one who is supposed to take all these technologies and implement them over the next few years. So the answer is yes, we give more incentive, but it's an incentive there is in proportion to the potential for us and the growth opportunity for us.

Gil Shwed -- Chief Executive Officer, Founder, Director

And by the way, there's an inherent incentive because Infinity deals are much, much larger than point product deals. But still I think the main value is not -- especially on a strategic deal for the customer, the customer is the one to determine if they need to get convinced and they need to do the due diligence. And by the way, in many cases, they need to combine different forces from different sub-departments of security, networking, and operation to make the decision, so yes.

Ken Talanian -- Evercore ISI -- Analyst

Thanks very much.

Operator

Our next question is from Keith Bachman with Bank of Montreal. Please proceed.

Keith Bachman -- Bank of Montreal -- Analyst

Hi, thank you. I had two related questions, I'll ask concurrently. The first is per the previous question. I just want to try to clarify, do you believe that you're seeing an impact, or the market impact, from offload capabilities like Zscaler? Is that impacting firewalls, in your judgment? And the second is, as you think about today, you've talked about the move to subscriptions and Infinity, but as you think about your portfolio how much do you think, or could you give us some estimation about how much your revenues are non-firewall today? And how do you think about that over the next two to three years? How do you feel like you want to, or seek to, diversify your revenue streams? Thank you.

Gil Shwed -- Chief Executive Officer, Founder, Director

So first, I don't think that right now technologies like what Zscaler has, has much impact or direct competition with what we're doing. It may be a marginal one, but not in the mainstream market and we don't see a lot of, I mean, a real head-to-head competition between the two areas. It's definitely an area for expansion for us, at least. As for how to classify the revenue, that's a very interesting question. It really depends what you classify as firewall, what you classify as non-firewall. For example, take all over subscription revenues, which is a advanced technology which is way beyond the basic firewall and with today, bigger than the basic firewall sales. So that's one example. So I think it's -- I don't have the number from the top of my head, but if I look at the beyond the maintenance and support that we sell, the portion of advanced technology, advanced security technologies and capabilities today, it is probably bigger than the basic network firewall portion of our sales.

Tal Payne -- Chief Financial Officer and Chief Operating Officer

I would have said as a rule of thumb, it's exactly what Gil said in the sense that what you have right now in the product line, and that's why it's such a tough line to grow, is basically the appliance or the initial license, which includes the architecture and the firewall. And everything else is in the line of the subscription, meaning the antivirus, anti-spam, advanced threat protection, and Next Generation Threat Protection, our SandBlast, our cloud licensing, and our mobile, and the endpoints. The majority of the rest, which is the add-on technologies is not all, but in a high-level, I would say is in that line. And as you can see, even if you look at this quarter, you will see that the product realizes what was $122 million and the subscription was already $149 million. So it's, bypass that.

Keith Bachman -- Bank of Montreal -- Analyst

All right, thanks very much, team.

Operator

Our next question is from Sterling Auty with JPMorgan. Please proceed.

Sterling Auty -- JPMorgan -- Analyst

Hi guys, this is Matt, on for Sterling. Thanks for taking the question. So I know someone was asked previously about the Europe performance. I just wanted to ask if there are any changes happening in the sales force similar to what was done in the US, and if there are other factors that contributed to the result? Thanks.

Gil Shwed -- Chief Executive Officer, Founder, Director

No, I think in Europe, we are quite stable, management structure is good. We did have a very good Q1. I think Q2 figs continue to happen, but wasn't the strongest Q1. And hopefully we began will see few more quarters that are strong very later in the year.

Sterling Auty -- JPMorgan -- Analyst

Great, thanks.

Operator

Our next question is from Karl Keirstead with Deutsche Bank. Please proceed.

Karl Keirstead -- Deutsche Bank -- Analyst

Well, thank you. I just had two clarifications. Gil, your comment that product growth resumed in the US, I thought was interesting and encouraging. Just to put it in context, when was the last time you saw US product growth? Was it the first half 2017, when Check Point's overall product growth was last positive? And then I've got a followup.

Gil Shwed -- Chief Executive Officer, Founder, Director

I don't remember exactly, but I think you're in pretty much the right, the right time frame. Your calculations, I think, are in the right framework.

Karl Keirstead -- Deutsche Bank -- Analyst

Okay, helpful. And then the second clarification again for you, Gil. In response to a previous question, you used the phrase that there were "big internal changes at Check Pointy" you mentioned in Q1, and especially in 2Q. Just to be super clear, what were you referring to? And assuming you are referring to leadership changes, were there one or two that were particularly significant? I just want to be clear on what you meant by that. Thanks a lot.

Gil Shwed -- Chief Executive Officer, Founder, Director

First, I'm doing a lot of changes in getting, not just me. I mean, the entire team here focused on a lot of changes in inflecting sales measurement, sales discipline, and being much more clear, and about the activity levels of people in the field. In terms of management changes, we're also filling a lot of positions and sometimes replacing a lot of places. We think we can have more potential. I mentioned Telcos as one. I think we are making more and more changes in the US sales leadership, and you will see some more changes around that pretty soon. We're doing a lot of training to people in the field. At the beginning of the year we brought a new leader for channels worldwide, a position we didn't have before. I don't remember when was the last time we put so much emphasis on working with the channel and doing it in a global level from the highest level to the lowest level. I mentioned the new leader for Asia that we brought in the beginning of the year.

So again, if I'm trying to recall from my memory, we are doing a lot of changes. We just promoted somebody internal to run the sales enablement and sales planning and promote somebody else to take her position in another department. So there are a lot of changes. We are OK. Most of these are not big revolutions that effect things negatively, it's growth with a few new people from the outside. And I think the most important one is, I think, we're very, very focused on the things we're trying to achieve -- activity management, new customers, working with the partners, and the whole growing higher level in the food chain, Infinity consolidation, and all with family of attributes that I think are one big focus area.

Karl Keirstead -- Deutsche Bank -- Analyst

All right, OK. Thank you, Gil. That's very helpful.

Operator

Our next question is from Saket Kalia with Barclays. Please proceed.

Saket Kalia -- Barclays -- Analyst

Hi guys, thanks for fitting me in here and taking my questions. I'll just keep it to one, just in the interest of time for you, Tal. Tal, can you just give us a quick refresh on ITP and its impact to billings? Specifically, can you just remind us if these deals are largely annual and advance for multi-year commitments, and how do you sort of think about how we should look at billings as that business grows? Because it clearly sounds healthy, and so I wonder if billings is really capturing all of that as that billings kind of duration changes?

Tal Payne -- Chief Financial Officer and Chief Operating Officer

So, the answer is the opposite. The billing doesn't catch it because it's typically a multi-year deal. And typically the -- let's say the customer signs for three years, he has a commitment for three years. But you see in the billing typically only the first year because they pay annually, unless the chose to pay everything in advance, but in many of the cases, they pay annually. So it hurts your billing, although I got the bookings, which you can't see, so that's one point. Second, I will say -- and it's quite if it can be quite large deals that you can't see in the implied booking. The second, I would say, the accounting. You're absolutely right. When you look at those deals it is split between all the lines -- product, support, and subscription -- but a small portion of the deal is recognized as product revenue, as well as the majority of the deal is recognized as recurring revenues over the life of the contract. Because the way the deals are is that the customer gets everything Check Point can offer. So I gets all the subscription, all the endpoints, all the mobile, it gets everything. So when you do a fair value split of the deal, the majority of the dollars have been sucked into the subscription lines. Although it can get quite a lot of products, but in the product, you will see a smaller portion. So, it will be all the lines, but the majority will go through the recurring, and specifically to the subscription.

Saket Kalia -- Barclays -- Analyst

That's very helpful. Thanks very much.

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Thank you.

Operator

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Kip E. Meintzer -- Head of Global Investor Relations

Thank you all for joining us today. Obviously we'll catch-up with you throughout the quarter, and if you guys would like to talk after the call, please send me an email and we'll fit you in. If not, we'll catch-up with you during the quarter at the conferences or on the road during an NDR. Thanks,and have a great summer if we don't talk to you. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Kip E. Meintzer -- Head of Global Investor Relations

Tal Payne -- Chief Financial Officer and Chief Operating Officer

Gil Shwed -- Chief Executive Officer, Founder, Director

Brad Zelnick -- Credit Suisse -- Analyst

Michael Turits -- Raymond James -- Analyst

Shaul Eyal -- Oppenheimer & Company -- Analyst

Phil Winslow -- Wells Fargo -- Analyst

Shebly Seyrafi -- FBN Securities -- Analyst

Andrew Nowinski -- Piper Jaffray -- Analyst

Dan Ives -- Wedbush Securities -- Analyst

Gregg Moskowitz -- Mizuho Securities -- Analyst

John DiFucci -- Jefferies -- Analyst

Walter Pritchard -- Citibank -- Analyst

Ken Talanian -- Evercore ISI -- Analyst

Keith Bachman -- Bank of Montreal -- Analyst

Sterling Auty -- JPMorgan -- Analyst

Karl Keirstead -- Deutsche Bank -- Analyst

Saket Kalia -- Barclays -- Analyst

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