“The new revenue guidance is between $2.770 billion to $2.850 billion.”

In context

“Roei Golan (Chief Financial Officer): Thank you, Nadav. And thank you, everyone, for joining the call. As Nadav mentioned, the first quarter was a solid quarter with 5% growth in revenues, driven by 11% growth in our subscription revenues. Our total revenues reached $668 million and were $2 million below the midpoint of our projection as a result of lower revenues from firewall appliances that impacted our product revenues. Subscription revenues grew by 11% to $323 million and were at the midpoint of our projections. Our adjusted free cash flow was very strong and reached $457 million, $70 million above the midpoint of our projection and grew by 11%. Our non-GAAP EPS was $2.50 and exceeded our guidance with 13% growth year-over-year. As mentioned, we had 5% growth in revenues, while our deferred revenues grew by 8% to $2.06 billion. Our calculated billings totaled $548 million reflecting a 1% decline year-over-year, while our current calculated billings grew by 2%. Our remaining performance obligations grew by 7% and reached $2.592 billion. As Nadav indicated earlier in the call, we had lower-than-expected product revenues, mainly as a result of the disruption affected by the changes we made in the go-to-market organization. Looking into the second quarter, we do expect this disruption to impact product revenue. But based on the finance metrics that we see, we expect to see an improvement in the second half of the year. It is important to note that our new business continues to be stable, and our firewall subscription ARR continues to grow year-over-year. Regarding subscription revenue, we do see a trajectory for reacceleration, and we expect to see acceleration in our subscription revenues in the second quarter and for the full year driven by strong demand for emerging pillars, mainly CTEM, e-mail security and SASE. As indicated, our total subscription business continues to be strong. We continue to experience strong demand for our emerging products, which remains the primary driver of our revenue growth. In Q1, our e-mail security, SASE and CTEM in total exceeded 45% growth in calculated billings year-over-year. It is important to note that although these revenues are still not a large portion of the total business, we see significant growing momentum for our AI security offering and that, together with CTEM, we expect to drive subscription revenue growth in the next few quarters. When we look at revenues by geography, 46% of our revenues came from EMEA, which had 6% growth year-over-year, 42% of the revenues came from the Americas and saw 4% growth year-over-year, and the remaining 12% came from Asia Pacific and had 2% growth. Looking at the P&L for this quarter, gross profit increased from $564 million to $586 million, representing a gross margin of 88%. Our operating expenses, excluding R&D grants, increased by 14%, while on a constant currency basis, our OpEx increased by 12%. Q1 results include approximately $27 million of benefit from R&D grants to be received under the new Israeli incentive program law, which was ratified during the period, and that's reflecting the positive impact in our financial results. Our operating expenses, net of R&D grants, were $321 million and increased by 5% year-over-year. We expect to have an approximately $100 million benefit for the full year on our operating income, reflecting the new law that was just approved. The increase in our OpEx is primarily the result of our increase in workforce as a result of investments in our AI security efforts and investments in sales and marketing programs. Looking at our non-GAAP operating income, it continues to be strong at $265 million or a 40% operating margin. Our non-GAAP net income increased by 8% and reached $265 million, while our GAAP net income reached $192 million, similar to last year. Our non-GAAP EPS grew by 13% and reached $2.50 while our GAAP EPS was $1.81, representing a 5% increase. Moving into our cash flow and cash position, our cash balances as of the end of the quarter, together with marketable short-term deposits, reached $4.4 billion. During February, we completed the acquisition of a small company for approximately $92 million of net cash consideration. Our adjusted free cash flow increased by 11% and reached $457 million. In addition, we continued our buyback program and purchased 1.9 million shares for a total of $325 million at an average price of $170 per share. To summarize: strong double-digit growth in non-GAAP EPS and adjusted free cash flow; we see continuous strong demand for our emerging technologies CTEM, SASE and e-mail security. On the other hand, we did see in the near term lower new business for firewall appliances that affected our product revenues. Now I'll go into guidance for the second quarter and for the full year. For the second quarter, our total revenues are expected to be between $660 million to $690 million. Our subscription revenues are expected to be between $328 million to $338 million and non-GAAP EPS is between $2.40 to $2.50 while our GAAP EPS is expected to be around $0.70 less. Our adjusted free cash flow is expected to be between $145 million to $175 million. Regarding cash flow, there are some significant payments that moved from Q3 to Q2, but again, that's mostly a timing shift between quarters. For the full year guidance, as indicated, we are adjusting the revenue guidance and cost of revenues guidance for the full year. The new revenue guidance is between $2.770 billion to $2.850 billion. That's a reflection of expected lower revenues on firewall appliances mainly in the second quarter. Our subscription guidance is not changing; we see strong demand for emerging products and expect to finish in the upper end of the range. We are keeping the same range for non-GAAP EPS, which remains between $10.05 to $10.85. GAAP EPS will be slightly higher mainly because of lower share count and slightly higher acquisition-related costs. Our adjusted free cash flow guidance is not being updated and remains as previously communicated. I'll stop sharing now.”