SANTA CLARA, Calif.,
Nov. 25, 2019 /PRNewswire/ -- Palo
Alto Networks (NYSE: PANW), the global cybersecurity leader,
announced today financial results for its fiscal first quarter
2020, ended October 31, 2019.
Total revenue for the fiscal first quarter 2020 grew
18 percent year over year to $771.9
million, compared with total revenue of $656.0 million for the fiscal first quarter 2019.
GAAP net loss for the fiscal first quarter 2020 was $59.6 million, or $0.62 per diluted share, compared with GAAP net
loss of $38.3 million, or
$0.41 per diluted share, for the
fiscal first quarter 2019.
Non-GAAP net income for the fiscal first quarter 2020 was
$104.8 million, or $1.05 per diluted share, compared with non-GAAP
net income of $115.4 million, or
$1.17 per diluted share, for the
fiscal first quarter 2019. A reconciliation between GAAP and
non-GAAP information is contained in the tables below.
"Palo Alto Networks' multi-platform approach to security is
clearly resonating with our customers. Our Next-Gen Security
offerings performed extremely well in our first fiscal quarter,
bolstering our confidence in our long-term prospects for Prisma and
Cortex," said Nikesh Arora, chairman
and CEO of Palo Alto Networks. "At our recent Ignite conference, we
introduced significant product enhancements, including Cortex XDR
2.0, SD-WAN and DLP capabilities for Prisma Access and the
integration of Twistlock and PureSec into Prisma Cloud, that should sustain this momentum.
Additionally, we expect our proposed acquisition of Aporeto,
announced today, will further extend our leadership in cloud
security."
Financial Outlook
Palo Alto Networks provides guidance based on current market
conditions and expectations.
For the fiscal second quarter 2020, we expect:
- Total revenue in the range of $838 to $848
million, representing year-over-year growth between 18
percent and 19 percent.
- Total billings in the range of $985
million to $1.0 billion,
representing year-over-year growth between 16 percent and 17
percent.
- Diluted non-GAAP net income per share in the range of
$1.11 to $1.13, which incorporates net expenses related to
the proposed acquisition of Aporeto, using 100 to 102 million
shares.
For the fiscal year 2020, we expect:
- Total revenue in the range of $3.44 to $3.48
billion, representing year-over-year growth between 19
percent and 20 percent.
- Total billings in the range of $4.105 to $4.165
billion, representing year-over-year growth between 18
percent and 19 percent.
- Diluted non-GAAP net income per share in the range of
$4.90 to $5.00, which incorporates net expenses related to
the proposed acquisition of Aporeto, using 102 to 104 million
shares.
- Adjusted free cash flow margin of approximately 29 percent,
which includes net expenses and acquisition transaction costs
attributable to the proposed acquisition of Aporeto and one-time
items, such as cash flow associated with the additional investment
in our headquarters in Santa
Clara.
Guidance for non-GAAP financial measures excludes share-based
compensation-related charges, including share-based payroll tax
expense, acquisition-related costs, amortization expense of
acquired intangible assets, litigation-related charges, including
legal settlements, facility exit costs, non-cash charges related to
convertible notes, foreign currency gains (losses), and income and
other tax effects associated with these items, along with certain
non-recurring expenses. We have not reconciled diluted non-GAAP net
income per share guidance to GAAP net income (loss) per diluted
share because we do not provide guidance on GAAP net income (loss)
and would not be able to present the various reconciling cash and
non-cash items between GAAP net income (loss) and non-GAAP net
income, including share-based compensation expense, without
unreasonable effort. Share-based compensation expense is impacted
by the company's future hiring and retention needs and, to a lesser
extent, the future fair market value of the company's common stock,
all of which is difficult to predict and subject to constant
change. The actual amounts of such reconciling items will have a
significant impact on the company's GAAP net income (loss) per
diluted share.
Conference Call Information
Palo Alto Networks will host a conference call for analysts and
investors to discuss its fiscal first quarter 2020 results and
outlook for its fiscal second quarter and full fiscal year 2020
today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time.
Open to the public, investors may access the call by dialing
1-888-394-8218 or 1-720-452-9217 and using conference ID 3863128. A
live audio webcast of the conference call, along with supplemental
financial information, will also be accessible from the "Investors"
section of our website at investors.paloaltonetworks.com. Following
the webcast, an archived version will be available on our website
for one year. A telephonic replay of the call will be available
three hours after the call, will run for ten days, and may be
accessed by dialing 1-888-203-1112 or 1-719-457-0820 and entering
the passcode 3863128.
Forward-Looking Statements
This press release contains forward-looking statements that involve
risks and uncertainties, including statements regarding our
proposed acquisition of Aporeto and expectations that it will
extend our leadership in cloud security, the benefits and
effectiveness of our enhanced product offerings, and our financial
outlook for the fiscal second quarter and full fiscal year 2020.
There are a significant number of factors that could cause actual
results to differ materially from statements made in this press
release, including: our limited operating history; our ability as
an organization to acquire and integrate other companies, products
or technologies in a successful manner; risks associated with
managing our rapid growth; the risks associated with new products
and subscription and support offerings, including the discovery of
software bugs; our competitive position; our ability to attract and
retain new customers; delays in the development or release of new
subscription offerings, or the failure to timely develop and
achieve market acceptance of new products and subscriptions as well
as existing products and subscription and support offerings;
rapidly evolving technological developments in the market for
security products and subscription and support offerings; length of
sales cycles; and general market, political, economic and business
conditions.
Additional risks and uncertainties that could affect our
financial results are included under the captions "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in our Annual Report on Form 10-K
filed with the SEC on September 9,
2019, which is available on our website at
investors.paloaltonetworks.com and on the SEC's website at
www.sec.gov. Additional information will also be set forth in other
filings that we make with the SEC from time to time. All
forward-looking statements in this press release are based on
information available to us as of the date hereof, and we do not
assume any obligation to update the forward-looking statements
provided to reflect events that occur or circumstances that exist
after the date on which they were made.
Non-GAAP Financial Measures and Other Key Metrics
Palo Alto Networks has provided in this press release financial
information that has not been prepared in accordance with generally
accepted accounting principles in the
United States (GAAP). The company uses these non-GAAP
financial measures and other key metrics internally in analyzing
its financial results and believes that the use of these non-GAAP
financial measures and key metrics are useful to investors as an
additional tool to evaluate ongoing operating results and trends,
and in comparing the company's financial results with other
companies in its industry, many of which present similar non-GAAP
financial measures or key metrics.
The presentation of these non-GAAP financial measures and key
metrics are not meant to be considered in isolation or as a
substitute for comparable GAAP financial measures and should be
read only in conjunction with the company's consolidated financial
statements prepared in accordance with GAAP. A reconciliation of
the company's historical non-GAAP financial measures to their most
directly comparable GAAP measures has been provided in the
financial statement tables included in this press release, and
investors are encouraged to review these reconciliations.
Non-GAAP net income and net income per share, diluted.
Palo Alto Networks defines non-GAAP net income as net income (loss)
plus share-based compensation-related charges, including
share-based payroll tax expense, acquisition-related costs,
amortization expense of acquired intangible assets,
litigation-related charges, including legal settlements, facility
exit costs, non-cash charges related to convertible notes, and
intellectual property restructuring-related charges. The company
also excludes from non-GAAP net income the foreign currency gains
(losses) and tax effects associated with these items in order to
provide a complete picture of the company's recurring core business
operating results. The company defines non-GAAP net income per
share, diluted, as non-GAAP net income divided by the
weighted-average diluted shares outstanding, which includes the
potentially dilutive effect of the company's employee equity
incentive plan awards and the company's convertible senior notes
outstanding and related warrants, after giving effect to the
anti-dilutive impact of the company's note hedge agreements, which
reduces the potential economic dilution that otherwise would occur
upon conversion of the company's convertible senior notes. Under
GAAP, the anti-dilutive impact of the note hedge is not reflected
in diluted shares outstanding. The company believes that excluding
these items from non-GAAP net income and net income per share,
diluted, provides management and investors with greater visibility
into the underlying performance of the company's core business
operating results, meaning its operating performance excluding
these items and, from time to time, other discrete charges that are
infrequent in nature, over multiple periods.
Billings. Palo Alto Networks defines billings as
total revenue plus the change in total deferred revenue, net of
acquired deferred revenue, during the period. The company considers
billings to be a key metric used by management to manage the
company's business given the company's hybrid-SaaS revenue model,
and believes billings provides investors with an important
indicator of the health and visibility of the company's business
because it includes subscription and support revenue, which is
recognized ratably over the contractual service period, and product
revenue, which is recognized at the time of shipment, provided that
all other conditions for revenue recognition have been met. The
company considers billings to be a useful metric for management and
investors, particularly if sales of subscriptions continue to
increase and the company experiences strong renewal rates for
subscriptions and support.
Investors are cautioned that there are a number of limitations
associated with the use of non-GAAP financial measures and key
metrics as analytical tools. In particular, the billings metric
reported by the company includes amounts that have not yet been
recognized as revenue. Additionally, many of the adjustments to the
company's GAAP financial measures reflect the exclusion of items
that are recurring and will be reflected in the company's financial
results for the foreseeable future, such as share-based
compensation, which is an important part of Palo Alto Networks
employees' compensation and impacts their performance. Furthermore,
these non-GAAP financial measures are not based on any standardized
methodology prescribed by GAAP, and the components that Palo Alto
Networks excludes in its calculation of non-GAAP financial measures
may differ from the components that its peer companies exclude when
they report their non-GAAP results of operations. Palo Alto
Networks compensates for these limitations by providing specific
information regarding the GAAP amounts excluded from these non-GAAP
financial measures. In the future, the company may also exclude
non-recurring expenses and other expenses that do not reflect the
company's core business operating results.
About Palo Alto Networks
Palo Alto Networks, the global cybersecurity leader, is shaping the
cloud-centric future with technology that is transforming the way
people and organizations operate. Our mission is to be the
cybersecurity partner of choice, protecting our digital way of
life. We help address the world's greatest security challenges with
continuous innovation that seizes the latest breakthroughs in
artificial intelligence, analytics, automation, and orchestration.
By delivering an integrated platform and empowering a growing
ecosystem of partners, we are at the forefront of protecting tens
of thousands of organizations across clouds, networks, and mobile
devices. Our vision is a world where each day is safer and more
secure than the one before. For more information, visit
www.paloaltonetworks.com.
Palo Alto Networks, Prisma, Cortex and the Palo Alto Networks
logo are trademarks of Palo Alto Networks, Inc. in the United States and in jurisdictions
throughout the world. All other trademarks, trade names or service
marks used or mentioned herein belong to their respective
owners.
Palo Alto
Networks, Inc.
|
Preliminary
Condensed Consolidated Statements of Operations
|
(In millions,
except per share data)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
2019
|
|
2018
|
Revenue:
|
|
|
|
Product
|
$
|
231.2
|
|
|
$
|
240.5
|
|
Subscription and
support
|
540.7
|
|
|
415.5
|
|
Total
revenue
|
771.9
|
|
|
656.0
|
|
Cost of
revenue:
|
|
|
|
Product
|
65.1
|
|
|
73.2
|
|
Subscription and
support
|
152.6
|
|
|
110.3
|
|
Total cost of
revenue
|
217.7
|
|
|
183.5
|
|
Total gross
profit
|
554.2
|
|
|
472.5
|
|
Operating
expenses:
|
|
|
|
Research and
development
|
170.5
|
|
|
113.4
|
|
Sales and
marketing
|
365.7
|
|
|
314.6
|
|
General and
administrative
|
69.8
|
|
|
76.6
|
|
Total operating
expenses
|
606.0
|
|
|
504.6
|
|
Operating
loss
|
(51.8)
|
|
|
(32.1)
|
|
Interest
expense
|
(18.9)
|
|
|
(22.7)
|
|
Other income,
net
|
16.2
|
|
|
13.0
|
|
Loss before income
taxes
|
(54.5)
|
|
|
(41.8)
|
|
Provision for
(benefit from) income taxes
|
5.1
|
|
|
(3.5)
|
|
Net loss
|
$
|
(59.6)
|
|
|
$
|
(38.3)
|
|
Net loss per share,
basic and diluted
|
$
|
(0.62)
|
|
|
$
|
(0.41)
|
|
Weighted-average
shares used to compute net loss per share, basic and
diluted
|
96.6
|
|
|
93.8
|
|
Palo Alto
Networks, Inc.
|
Reconciliation of
GAAP to Non-GAAP Financial Measures
|
(In millions,
except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
October
31,
|
|
2019
|
|
2018
|
GAAP net
loss
|
$
|
(59.6)
|
|
|
$
|
(38.3)
|
|
Share-based
compensation-related charges
|
153.7
|
|
|
140.7
|
|
Acquisition-related
costs(1)
|
3.4
|
|
|
15.5
|
|
Amortization expense
of acquired intangible assets
|
16.7
|
|
|
9.3
|
|
Litigation-related
charges(2)
|
—
|
|
|
3.1
|
|
Non-cash charges
related to convertible notes(3)
|
15.5
|
|
|
21.6
|
|
Foreign currency gain
associated with non-GAAP adjustments
|
(0.5)
|
|
|
(0.5)
|
|
Income tax and other
tax adjustments related to the above
|
(24.4)
|
|
|
(36.0)
|
|
Non-GAAP net
income
|
$
|
104.8
|
|
|
$
|
115.4
|
|
|
|
|
|
GAAP net loss per
share, diluted
|
$
|
(0.62)
|
|
|
$
|
(0.41)
|
|
Share-based
compensation-related charges
|
1.56
|
|
|
1.44
|
|
Acquisition-related
costs(1)
|
0.04
|
|
|
0.17
|
|
Amortization expense
of acquired intangible assets
|
0.17
|
|
|
0.10
|
|
Litigation-related
charges(2)
|
0.00
|
|
|
0.03
|
|
Non-cash charges
related to convertible notes(3)
|
0.16
|
|
|
0.23
|
|
Foreign currency gain
associated with non-GAAP adjustments
|
(0.01)
|
|
|
(0.01)
|
|
Income tax and other
tax adjustments related to the above
|
(0.25)
|
|
|
(0.38)
|
|
Non-GAAP net income
per share, diluted
|
$
|
1.05
|
|
|
$
|
1.17
|
|
|
|
|
|
GAAP weighted-average
shares used to compute net loss per share, diluted
|
96.6
|
|
|
93.8
|
|
Weighted-average
effect of potentially dilutive securities(4)
|
3.5
|
|
|
5.2
|
|
Non-GAAP
weighted-average shares used to compute net income per share,
diluted
|
100.1
|
|
|
99.0
|
|
|
|
(1)
|
Consists of
acquisition transaction costs, share-based compensation related to
the cash settlement of certain equity awards, and costs to
terminate certain employment and operating lease contracts of the
acquired company.
|
|
|
(2)
|
Consists of the
amortization of intellectual property licenses.
|
|
|
(3)
|
Consists primarily of
non-cash interest expense related to the company's convertible
senior notes. Also includes a non-cash loss of $2.2 million
during the three months ended October 31, 2018, related to early
conversions of the convertible notes during the period.
|
|
|
(4)
|
Non-GAAP net income
per share, diluted, includes the potentially dilutive effect of
employee equity incentive plan awards and convertible senior notes
outstanding and related warrants. In addition, non-GAAP net income
per share, diluted, includes the anti-dilutive impact of the
company's note hedge agreements, which reduced the potentially
dilutive effect of the convertible notes by 1.1 million shares
for the three months ended October 31, 2018.
|
Palo Alto
Networks, Inc.
|
Calculation of
Billings
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
October
31,
|
|
2019
|
|
2018
|
Total
revenue
|
$
|
771.9
|
|
|
$
|
656.0
|
|
Add: change in total
deferred revenue, net of acquired deferred revenue
|
125.5
|
|
|
102.5
|
|
Billings
|
$
|
897.4
|
|
|
$
|
758.5
|
|
Palo Alto
Networks, Inc.
|
Preliminary
Condensed Consolidated Balance Sheets
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
October 31,
2019
|
|
July 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,263.7
|
|
|
$
|
961.4
|
|
Short-term
investments
|
1,597.5
|
|
|
1,841.7
|
|
Accounts receivable,
net
|
499.2
|
|
|
582.4
|
|
Prepaid expenses and
other current assets
|
289.4
|
|
|
279.3
|
|
Total current
assets
|
3,649.8
|
|
|
3,664.8
|
|
Property and
equipment, net
|
316.4
|
|
|
296.0
|
|
Operating lease
right-of-use assets
|
282.6
|
|
|
—
|
|
Long-term
investments
|
467.6
|
|
|
575.4
|
|
Goodwill
|
1,400.4
|
|
|
1,352.3
|
|
Intangible assets,
net
|
284.1
|
|
|
280.6
|
|
Other
assets
|
423.9
|
|
|
423.1
|
|
Total
assets
|
$
|
6,824.8
|
|
|
$
|
6,592.2
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
74.7
|
|
|
$
|
73.3
|
|
Accrued
compensation
|
125.7
|
|
|
235.5
|
|
Accrued and other
liabilities
|
192.3
|
|
|
162.4
|
|
Deferred
revenue
|
1,658.9
|
|
|
1,582.1
|
|
Total current
liabilities
|
2,051.6
|
|
|
2,053.3
|
|
Convertible senior
notes, net
|
1,445.5
|
|
|
1,430.0
|
|
Long-term deferred
revenue
|
1,357.1
|
|
|
1,306.6
|
|
Long-term operating
lease liabilities
|
371.6
|
|
|
—
|
|
Other long-term
liabilities
|
82.6
|
|
|
216.0
|
|
Stockholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
|
—
|
|
Common stock and
additional paid-in capital
|
2,477.5
|
|
|
2,490.9
|
|
Accumulated other
comprehensive loss
|
(0.6)
|
|
|
(3.7)
|
|
Accumulated
deficit
|
(960.5)
|
|
|
(900.9)
|
|
Total stockholders'
equity
|
1,516.4
|
|
|
1,586.3
|
|
Total liabilities
and stockholders' equity
|
$
|
6,824.8
|
|
|
$
|
6,592.2
|
|
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SOURCE Palo Alto Networks, Inc.