“For 2023, we expect incremental financial income between $1 million to $2 million every quarter due to the higher yield pro forma investment yield.”

In context

“Roei Golan (Acting CFO): And to review our fourth quarter, so we had a strong quarter with revenues reaching $638 million, which is $5 million above the midpoint of our projections. Our non-GAAP EPS was $2.45, $0.03 above the top end of our projections. As we move to the full year, our revenue reached $2.33 billion, $42 million above the midpoint of our initial projections and non-GAAP EPS of $7.40, $0.20 above the midpoint of our initial projections. Yes, so we can see also here the accelerated growth that we had this quarter also and also for the full year, both on revenues and EPS. And before I proceed 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 that as applicable, non-GAAP information is presented excluding these items. So now let's dive into the detailed review of the quarter. As I mentioned, our revenues grew this quarter by 7%. This is compared to 6% last year. Our deferred revenues reached $1.878 billion representing 10% growth year-over-year. Our calculated billings reached $869 million. Let me remind you that our billing is affected by deal timing, duration and payment terms and can fluctuate. Now we'll see that our accelerated revenue growth is mainly driven by our subscription revenues that reached $231 million, representing 30% growth year-over-year. That was mainly driven by our CloudGuard and Harmony pillars that both delivered double-digit growth. Also, I want to remind you that Q4 2021 was the first full quarter with Avanan's impact on our subscription revenues. Another effect that had on our accelerated revenue growth was the strong adoption of our Infinity strategy, which had a great quarter, continuing to flow in an accelerated rate to the revenues with 140% growth year-over-year. If we move to our revenues by geography, we can see that 49% of our revenues came from EMEA, 39% from America, and the remaining 12% from APAC. It's important to note that we had growth across all geographies. Now if we are looking at the P&L highlights for this quarter, our gross profit reached $559 million with a strong gross margin of 88%. Those strong margins are impressive considering we continue to have some additional costs for raw materials and shipping as well as price increase by many vendors. While we still see supply chain challenges, there is some relief, and we expect to see modest improvement in 2023. Our operating expenses increased by 13% this quarter. This increase was mainly a result of the continued investment in our workforce, including compensation and increased travel. Offsetting this increase, we also benefited from the stronger U.S. dollar by approximately $10 million this quarter. Now we see that our operating income reached $289 million, representing a 45% operating margin this quarter. Our financial income this quarter reached $15 million as we invest in higher interest rates over time. Our non-GAAP tax rate for the quarter was around 1% mainly due to updates of our tax provision because of several tax assessments we have worldwide. Our non-GAAP net income was $301 million or $2.45 per diluted share, which is $0.03 above the top end of our projections, representing 9% growth year-over-year. Our GAAP net income was $270 million or $2.20 per diluted share. Now if we're going to move to the P&L highlights for the full year, so you can see again that our revenues had a nice growth of 8% to $2.33 billion. Our gross margin was strong at 88%. Our operating expenses increased by 15% this year mainly related to the increase in our workforce. Our headcount increased by 415 employees, a 7% increase year-over-year. The net effect on the P&L was higher mainly due to the fact that we hedged the compensation in Israel at the beginning of 2022 with lower U.S. dollar rates. We also had the highest travel and entertainment expenses as we returned to travel. Our non-GAAP operating margin was strong at 45% compared to 48% last year. As for 2023, a few factors about 2023. A significant part of our workforce increase was towards the end of the year. We started 2023 with a higher run rate. Let me remind you, when we discussed last year's plan for 2023, we planned to be around 42%, 43%. As the hiring took longer than anticipated, a significant portion of it was done in H2 2022. Also, during the second half of 2022, we returned to higher levels of travel. We expect that our travel and entertainment expenses will continue to grow and normalize at higher levels this year. As for the FX effects in 2023, more than 50% of our expenses are in local currency, and the strength of the U.S. dollar is expected to provide us a benefit. Based on the factors I just mentioned, we expect our operating margin for 2023 will be around 42%. Our financial income for 2022 was $44 million, reflecting the increased yield on the portfolio. For 2023, we expect incremental financial income between $1 million to $2 million every quarter due to the higher yield pro forma investment yield. As for the tax rate for 2023, we expect a similar tax rate this year compared to 2022 while for modeling purposes, we expect a 14% tax rate for all four quarters. Now let's move to our cash flow and our cash position. Our cash balances, marketable securities and short-term deposits were $3.5 billion as of the end of the year. We had a strong operating cash flow of $230 million. This quarter, payments increased as a result of elevated raw material costs and investments in the workforce as discussed. During the quarter, we continued our buyback program and purchased 2.6 million shares for $325 million at an average price of $124 per share. In addition, we generated a very strong cash flow with $1.08 billion for the year. While the cash flow from operation decreased by 9%, net of hedge taxes and acquisition-related costs, the operating cash flow was at the same level as in 2021. We repurchased 10.3 million shares for $1.3 billion at an average price of $126. For 2023, we expect our average diluted number of shares to be approximately 119 million shares for the year, starting with 121 million shares in Q1 and moving down to 115 million shares by Q4, assuming share repurchases of $325 million. In addition, we announced today an expansion of our buyback program in an amount of $2 billion. Under the program, we are authorized to continue repurchasing shares up to $325 million each quarter as we did in the last period. So if we summarize our results, we had strong revenues and EPS for Q4 and for the full year of 2022. Our revenues and non-GAAP exceeded our projections, with triple-digit growth for Infinity revenues. We will continue to focus on top-line growth while maintaining strong profitability.”