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01/11 04:03
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company maintains strong guidance and confidence in meeting targets, with positive developments in subscription growth and strategic investments. The Q&A reveals management's optimism about future growth, despite some uncertainties like FX impacts. The reiteration of guidance and strategic focus on expanding enterprise customer base, along with no significant negative factors, supports a positive sentiment.
Revenue Revenue grew by 7% to $678 million, exceeding the midpoint by $6 million. The growth was driven by strong demand across the portfolio.
Non-GAAP EPS Non-GAAP EPS reached $3.94 per diluted share, exceeding guidance. This includes a one-time tax benefit of $1.47 due to a tax settlement. Excluding the one-time benefit, EPS exceeded the midpoint of the projection by approximately $0.02.
Deferred Revenue Deferred revenues grew by 8% to $1.887 billion, driven by strong demand across the portfolio and geographies.
Calculated Billings Calculated billings totaled $672 million, reflecting a robust 20% growth year-over-year. This was driven by strong demand across the portfolio and geographies, with additional contributions from deals slipped from the previous quarter (3 points) and a large early renewal deal (2 points).
Current Calculated Billings Current calculated billings grew by 14% to $642 million.
Remaining Performance Obligation Remaining performance obligation grew by 9% to $2.4 billion.
Services Calculated Billings Services calculated billings grew by 21% compared to 7% last year, driven by products like Quantum Firewall, Harmony Email, and Harmony SASE.
Emerging Technology ARR Emerging technology ARR grew organically by more than 40% year-over-year, driven by products like Harmony SASE, Harmony Email and Collaboration, and External Risk Management.
Global Revenue Distribution America grew by 10% (42% of revenues), EMEA grew by 3% (45% of revenues), and APAC grew by 8% (13% of revenues).
Gross Profit Gross profit increased from $563 million to $602 million, representing a gross margin of 89%, similar to last year.
Operating Expenses Operating expenses increased by 11%, mainly due to continued organic investment and the impact of Cyberint and Veriti acquisitions.
Non-GAAP Operating Income Non-GAAP operating income was $282 million, with a 42% operating margin. The weaker U.S. dollar against the Israeli shekel negatively impacted the margin by approximately 1 point ($0.06).
Operating Cash Flow Operating cash flow was $241 million, including a $66 million one-time tax payment. Excluding this, operating cash flow grew by 23%.
Total Cash Total cash, marketable securities, and deposits amounted to $2.8 billion.
Share Repurchase $325 million worth of shares were repurchased at an average price of $198.
Acquisition of Veriti: Integrated Veriti into exposure management organizations, expanded integrations across endpoint, firewall, and cloud providers, reaching over 100 deployments, and delivering automated remediation.
Acquisition of Lakera: Acquired Zurich-based AI native security leader Lakera to enhance AI security, protect large language models, and address emerging AI threats.
FedRAMP Authorization: Achieved FedRAMP authorization for the Infinity platform for government, positioning as a trusted partner for federal environments.
Global Revenue Growth: Double-digit growth in America (10%), EMEA (3%), and APAC (8%).
Revenue Growth: Revenue grew by 7% to $678 million, exceeding midpoint by $6 million.
Calculated Billings: Calculated billings totaled $672 million, reflecting 20% growth year-over-year.
Operating Cash Flow: Operating cash flow grew by 23%, excluding a one-time tax payment.
AI-Powered Security Platform: Building a full-stack AI-powered security platform to address AI adoption and threats.
Leadership Appointments: Appointed new leaders in sales and marketing to strengthen market presence and customer engagement.
Foreign Exchange Rate Impact: The weakening of the U.S. dollar against the Israeli shekel has negatively impacted the company's profit margins. Despite hedging efforts, this resulted in a 1-point margin reduction in Q3 and is expected to continue affecting margins in Q4 and beyond, potentially increasing annual expenses by $50-$60 million in 2026.
Acquisition Costs: The recent acquisition of Lakera will result in a 0.5-point margin headwind in Q4. Additionally, the company paid $160 million for land for a new campus in Israel, which could strain cash flow.
Heavy Hardware Dependency in Q4: Q4 is expected to be heavily back-end loaded with significant hardware refresh projects. This dependency on hardware could introduce variability and risk to revenue projections.
AI-Driven Threats: The rapid adoption of AI exposes the company to new cybersecurity threats, including prompt injections, data leakage, and model manipulation. Attackers leveraging AI could outpace the company's defensive measures.
Operational Costs: Operating expenses increased by 11% due to organic investments and recent acquisitions, which could pressure profitability.
2025 Revenue Guidance: The midpoint for 2025 revenue guidance has been raised, reflecting confidence in the company's trajectory.
AI Security Platform Development: The company is building a comprehensive AI-powered security platform to address emerging AI threats and enable secure AI adoption. This includes securing employee usage of AI tools, protecting AI applications and agents, and strengthening model robustness.
Lakera Acquisition Impact: The acquisition of Lakera, an AI-native security leader, will result in a 0.5 point headwind for margins in Q4 2023.
Q4 2023 Revenue Guidance: Revenue is projected to range between $724 million and $764 million, representing 6% growth at the midpoint.
Q4 2023 Non-GAAP EPS Guidance: Non-GAAP EPS is expected to range between $2.70 and $2.80.
2023 Annual Revenue Guidance: The updated revenue guidance for 2023 is between $2.705 billion and $2.745 billion, with a midpoint of $2.725 billion, representing 6% growth year-over-year.
2023 Annual Non-GAAP EPS Guidance: Non-GAAP EPS for 2023 is expected to range between $11.22 and $11.32.
Q4 2023 Margin Headwinds: Margins in Q4 2023 will face a 1-point headwind due to foreign exchange rates and a 0.5-point headwind from the Lakera acquisition.
2026 Expense Projections: Based on current foreign exchange rates, annual expenses in 2026 could increase by approximately $50 million to $60 million.
Share Repurchase: We continue to do our buyback, and we purchased our share repurchased approximately $325 million of shares at an average price of $198.
The company maintains strong guidance and confidence in meeting targets, with positive developments in subscription growth and strategic investments. The Q&A reveals management's optimism about future growth, despite some uncertainties like FX impacts. The reiteration of guidance and strategic focus on expanding enterprise customer base, along with no significant negative factors, supports a positive sentiment.
The earnings call indicates strong financial performance with revenue and EPS growth, a positive outlook on new product lines, and strategic investments in AI and marketing. The Q&A session reveals confidence in overcoming short-term challenges and highlights growth in key areas like SASE and Harmony Email. Despite some concerns about discounting and margins, the overall sentiment is optimistic, suggesting a positive stock price movement in the short term.
The earnings call highlights strong financial performance with revenues and EPS exceeding guidance, driven by high demand for Quantum Force appliances. Infinity platform and RPO growth are also positive indicators. The share buyback program further supports stock price. However, competitive pressures and regulatory issues pose risks. The Q&A section shows cautious optimism and a lack of specific guidance on billings and RPO, which slightly tempers the overall sentiment. Given the balance of positive growth metrics and strategic initiatives against the backdrop of competitive and regulatory challenges, a positive stock price movement is expected.
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