“We expect revenue to be in the range of $1.955 billion to $1.985 billion, an increase of 18% to 20%.”

In context

“Dipak Golechha (Chief Financial Officer): Thank you, Nikesh, and good afternoon, everyone. I'll cover the specifics of our Q1 results, additional details on drivers behind the results, and our Q2 and fiscal year 2024 guidance. For Q1, revenue was $1.88 billion and grew 20%. Product revenue grew 3%, total service revenue grew 25%, with subscription revenue of $988 million, growing 29%, and support revenue of $549 million, growing 17%. We saw consistent revenue contribution across all theaters, with the Americas growing 20%, EMEA up 19%, and JPAC growing 23%. The strength of our next-generation capabilities continues to drive our results. We delivered total billings of $2.02 billion, up 16%, total deferred revenue in Q1 was $9.4 billion, an increase of 32%. Remaining performance obligation or RPO was $10.4 billion, increasing 26%, with current RPO just under half of our IPO. As Nikesh mentioned, we saw the rising cost of money have an important and incremental impact on customer behavior in Q1. We're responding to this in the ways we have discussed previously, including using annual billing plans, financing through PANFS, and partner financing. In Q1, this had a negative impact on our billings; although, as you can see, we saw strength in NGS ARR and revenue. Our non-GAAP earnings per share was significantly ahead of our guidance, growing 66%. This was driven primarily by the significant increase in our non-GAAP operating margins, which expanded 760 basis points year-over-year. We continue to benefit from the scale inherent in our business, especially as some of our next-generation security offerings scale. We again delivered strong cash flow in Q1 with trailing 12-month adjusted free cash flow of $3 billion, achieving trailing 12-month free cash flow margins of 41%. Moving beyond the top line, the gross margin for Q1 of 78% increased 370 basis points year-over-year. We again saw year-over-year improvements in product margins with the normalization of the supply chain environment. Service gross margin improved to 78% as our new offerings continue to gain scale. Our operating margin expanded by 760 basis points in Q1 as we saw higher gross margins and efficiencies across our three operating expense lines. We are pleased with our operating efficiency progress against our medium-term targets. We continue to make significant investments to support our top-line growth expectations, including investments in product and engineering, building sales capability, and supporting our ecosystems in our go-to-market organization. Turning to the balance sheet and cash flow statements, we ended Q1 with cash equivalents and investments of $6.9 billion. Q1 cash flow from operations was $1.526 billion with the total adjusted free cash flow of $1.489 billion this quarter. As is typical for our Q1, this cash flow performance was primarily driven by strong collections in the prior quarter based on the strength of our Q4 bookings—sorry, collections in the quarter but based on the strength of our Q4 bookings. Over the last several weeks, we announced that we have entered into definitive agreements to acquire two companies. On October 31, we announced our intent to acquire Dig Security Solutions for approximately $232 million in cash, excluding the value of replacement equity awards. On November 6, we announced our intent to acquire Talon Cyber Security for approximately $435 million, excluding the value of replacement equity awards and including cash on Talon's balance sheet at closing. We expect both transactions will close in our second quarter of fiscal year '24. During Q1, we repurchased approximately 300,000 shares on the open market at an average price of approximately $227 per share for a total consideration of $67 million. As a reminder, our share repurchase program is opportunistic, and we're committed to returning cash to shareholders over the medium-term. Stock-based compensation expense declined by 250 basis points as a percent of revenue year-over-year. As expected, stock-based compensation ticked up slightly as a percent of revenue quarter-over-quarter with the issuance of a portion of our fiscal year '24 grants. On a year-over-year basis, we continue to manage our SBC down as a percent of revenue in line with our long-term plans. Before turning to guidance, I want to frame some of the impacts that we're seeing in our billings. As Nikesh noted, we see strong demand in the market and continue to see customers make a technical selection of offerings across our portfolio. From here, we see more customers asking for deferred payment terms either with annual billings, financing through PANFS, or pursuing external financing. Some customers are looking for additional discounts for upfront payments as they grapple with the cost of money. Our strong financial position, which includes $7 billion in cash, cash equivalents, and investments, combined with our many options in dealing with this dynamic, gives us significant flexibility. This can impact our billings trends quarter-to-quarter and we are reducing our billings guidance to account for this through fiscal year 2024. RPO and cRPO have more of a direct impact on future revenue this quarter with duration towards the low-end of the range we've seen over the last several quarters, and we saw strong trends in cRPO. As we see low customer churn, we're confident that independent and specific billing terms and contract lengths will allow us to continue to grow RPO at levels that support our forward revenue growth ambitions. Now moving on to our guidance for Q2 and the year. For the second quarter of 2024, we expect billings to be in the range of $2.335 billion to $2.385 billion, an increase of 15% to 18%. We expect revenue to be in the range of $1.955 billion to $1.985 billion, an increase of 18% to 20%. We expect non-GAAP EPS to be in the range of $1.29 to $1.31 per share, an increase of 23% to 25%. For the fiscal year 2024, we expect billings to be in the range of $10.7 billion to $10.8 billion, an increase of 16% to 17%. We expect NGS ARR to be in the range of $3.95 billion to $4 billion, an increase of 34% to 35%. We expect revenue to be in the range of $8.15 billion to $8.2 billion, an increase of 18% to 19%. We expect our fiscal year '24 operating margins to be in the range of 26% to 26.5%, up 190 basis points to 240 basis points versus fiscal year '23. We expect non-GAAP EPS to be in the range of $5.40 to $5.53, an increase of 22% to 25%. And we expect adjusted free cash flow margin to be 37% to 38%. Additionally, please consider the following modeling points. We expect our non-GAAP tax rate to remain at 22% for the second quarter and fiscal year 2024, subject to the outcome of future tax legislation. We also expect cash taxes in the range of $230 million to $280 million. For the second quarter, we expect net interest and other income of $55 million to $60 million. We expect second quarter diluted shares outstanding of 339 million shares to 342 million shares. We expect fiscal year 2024 diluted shares outstanding of 338 million shares to 343 million shares. And we expect fiscal year 2024 capital expenditures of $175 million to $185 million and $40 million to $45 million in Q2. With that, I'll pass it back to Walter for the Q&A portion of the call.”