Palo Alto Networks Reports Fiscal Second Quarter 2014 Financial Results
(Logo: http://photos.prnewswire.com/prnh/20130508/SF04701LOGO )
Total revenue for the fiscal second quarter grew 46 percent year-over-year to a record
"We reported very good Q2 results, driven by strong customer demand for our integrated and automated enterprise security platform," said
"Our business model is benefitting from higher attach rates of our SaaS-based subscription services, which, combined with continued strong product growth, contributed to record billings, revenue and deferred revenue," said
Recent Highlights
- Awarded Global Partner of the Year by
VMware , which underscores the nature of the strategic partnership we have developed withVMware to transform security for the software-defined data center. - Completion of our first acquisition: Morta Security, which brings to our portfolio a team of cybersecurity experts and technologies that will enhance the detection and prevention capabilities of our platform.
- Delivery of PAN-OS 6.0, which raises the bar on helping our customers protect their networks from sophisticated cyber attacks with advanced threat detection and prevention capabilities, among 60+ additional feature enhancements.
- Unveiling of the PA-7050, which supports up to 120 Gbps, representing the most powerful next-generation firewall in the industry designed from the ground up to safely enable applications throughout enterprise networks – from the edge of the enterprise to the data center.
Conference Call Information
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding continued momentum in the company's business. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including:
Additional risks and uncertainties that could affect
Non-GAAP Financial Measures
Non-GAAP financial measures 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 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 the reconciliation.
Non-GAAP net income and diluted net income per share.
Billings.
Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, 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. Share-based compensation is an important part of
About
Palo Alto Networks, Inc. |
|||||||||||||||
Preliminary Condensed Consolidated Statements of Operations |
|||||||||||||||
(In thousands, except per share data) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Revenue: |
|||||||||||||||
Product |
$ |
80,823 |
$ |
61,944 |
$ |
156,308 |
$ |
117,458 |
|||||||
Services |
60,245 |
34,555 |
112,940 |
64,975 |
|||||||||||
Total revenue |
141,068 |
96,499 |
269,248 |
182,433 |
|||||||||||
Cost of revenue: |
|||||||||||||||
Product |
20,221 |
16,636 |
38,175 |
31,052 |
|||||||||||
Services |
17,283 |
10,982 |
33,136 |
20,756 |
|||||||||||
Total cost of revenue |
37,504 |
27,618 |
71,311 |
51,808 |
|||||||||||
Total gross profit |
103,564 |
68,881 |
197,937 |
130,625 |
|||||||||||
Operating expenses: |
|||||||||||||||
Research and development |
24,253 |
15,495 |
44,146 |
28,807 |
|||||||||||
Sales and marketing |
76,734 |
45,796 |
144,100 |
88,403 |
|||||||||||
General and administrative |
39,733 |
9,747 |
53,858 |
18,703 |
|||||||||||
Total operating expenses |
140,720 |
71,038 |
242,104 |
135,913 |
|||||||||||
Operating loss |
(37,156) |
(2,157) |
(44,167) |
(5,288) |
|||||||||||
Interest income |
187 |
116 |
347 |
214 |
|||||||||||
Other expense, net |
(371) |
(60) |
(134) |
(230) |
|||||||||||
Loss before income taxes |
(37,340) |
(2,101) |
(43,954) |
(5,304) |
|||||||||||
Provision for income taxes |
2,606 |
512 |
3,853 |
824 |
|||||||||||
Net loss |
$ |
(39,946) |
$ |
(2,613) |
$ |
(47,807) |
$ |
(6,128) |
|||||||
Net loss attributable to |
$ |
(39,946) |
$ |
(2,613) |
$ |
(47,807) |
$ |
(6,128) |
|||||||
Net loss per share attributable to |
$ |
(0.55) |
$ |
(0.04) |
$ |
(0.66) |
$ |
(0.09) |
|||||||
Weighted-average shares used to compute stockholders, basic and diluted |
72,854 |
67,651 |
72,260 |
67,225 |
Palo Alto Networks, Inc. |
|||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||||||||||
(In thousands, except per share amounts) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
GAAP net loss |
$ |
(39,946) |
$ |
(2,613) |
$ |
(47,807) |
$ |
(6,128) |
|||||||
Share-based compensation expense |
21,000 |
8,754 |
35,411 |
17,096 |
|||||||||||
Share-based payroll tax expense |
2,355 |
— |
2,620 |
— |
|||||||||||
Acquisition related costs |
3,864 |
— |
3,864 |
— |
|||||||||||
Payment for mutual release of claims |
20,000 |
— |
20,000 |
— |
|||||||||||
Litigation expense [a] |
2,653 |
390 |
4,542 |
1,039 |
|||||||||||
Income tax related to the above |
(2,156) |
(2,413) |
(4,690) |
(4,568) |
|||||||||||
Non-GAAP net income |
$ |
7,770 |
$ |
4,118 |
$ |
13,940 |
$ |
7,439 |
|||||||
GAAP net loss per share, diluted |
$ |
(0.55) |
$ |
(0.04) |
$ |
(0.66) |
$ |
(0.09) |
|||||||
Share-based compensation expense |
0.29 |
0.12 |
0.47 |
0.24 |
|||||||||||
Share-based payroll tax expense |
0.03 |
— |
0.04 |
— |
|||||||||||
Acquisition related costs |
0.05 |
— |
0.05 |
— |
|||||||||||
Payment for mutual release of claims |
0.27 |
— |
0.28 |
— |
|||||||||||
Litigation expense [a] |
0.04 |
— |
0.06 |
0.01 |
|||||||||||
Income tax related to the above |
(0.03) |
(0.03) |
(0.06) |
(0.06) |
|||||||||||
Non-GAAP net income per share, diluted |
$ |
0.10 |
$ |
0.05 |
$ |
0.18 |
$ |
0.10 |
|||||||
GAAP weighted-average shares used to compute net loss per share, diluted |
72,854 |
67,651 |
72,260 |
67,225 |
|||||||||||
Weighted-average effect of potentially dilutive securities |
5,329 |
9,833 |
5,427 |
10,430 |
|||||||||||
Non-GAAP weighted-average shares used to compute net income per share, diluted |
78,183 |
77,484 |
77,687 |
77,655 |
|||||||||||
[a] IP litigation expenses are attributed to ongoing IP litigation with Juniper |
|||||||||||||||
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Revenue |
$ |
141,068 |
$ |
96,499 |
$ |
269,248 |
$ |
182,433 |
|||||||
Change in deferred revenue |
45,635 |
27,775 |
75,361 |
52,375 |
|||||||||||
Billings |
$ |
186,703 |
$ |
124,274 |
$ |
344,609 |
$ |
234,808 |
|||||||
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Balance Sheets |
|||||||
(In thousands) |
|||||||
(Unaudited) |
|||||||
January 31, 2014 |
July 31, 2013 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
261,867 |
$ |
310,614 |
|||
Short-term investments |
176,345 |
109,007 |
|||||
Accounts receivable, net |
86,090 |
87,461 |
|||||
Prepaid expenses and other current assets |
30,985 |
22,617 |
|||||
Total current assets |
555,287 |
529,699 |
|||||
Property and equipment, net |
45,735 |
32,086 |
|||||
Long-term investments |
63,105 |
17,314 |
|||||
Other assets |
24,899 |
6,507 |
|||||
Total assets |
$ |
689,026 |
$ |
585,606 |
|||
Liabilities and stockholders' equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
10,341 |
$ |
15,544 |
|||
Accrued and other liabilities |
20,425 |
14,609 |
|||||
Accrued compensation |
29,713 |
22,004 |
|||||
Deferred revenue |
202,330 |
153,945 |
|||||
Total current liabilities |
262,809 |
206,102 |
|||||
Deferred revenue – non-current |
122,261 |
95,285 |
|||||
Other long-term liabilities |
19,512 |
11,799 |
|||||
Stockholders' equity: |
|||||||
Common stock |
7 |
7 |
|||||
Additional paid-in capital |
441,475 |
381,703 |
|||||
Accumulated other comprehensive gain (loss) |
43 |
(16) |
|||||
Accumulated deficit |
(157,081) |
(109,274) |
|||||
Total stockholders' equity |
284,444 |
272,420 |
|||||
Total liabilities and stockholders' equity |
$ |
689,026 |
$ |
585,606 |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) |
|||||||
(Unaudited) |
|||||||
Six Months Ended January 31, |
|||||||
2014 |
2013 |
||||||
Cash flows from operating activities |
|||||||
Net loss |
$ |
(47,807) |
$ |
(6,128) |
|||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||
Depreciation and amortization |
7,082 |
4,468 |
|||||
Amortization of investment premiums, net of accretion of purchase discounts |
747 |
822 |
|||||
Share-based compensation for equity based awards |
38,729 |
17,030 |
|||||
Excess tax benefit from share-based compensation |
(674) |
(106) |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable, net |
1,371 |
(22,944) |
|||||
Prepaid expenses and other assets |
(6,207) |
(7,290) |
|||||
Accounts payable |
(4,387) |
1,716 |
|||||
Accrued and other liabilities |
16,062 |
17,640 |
|||||
Deferred revenue |
75,361 |
52,375 |
|||||
Net cash provided by operating activities |
80,277 |
57,583 |
|||||
Cash flows from investing activities |
|||||||
Purchase of property, equipment, and other assets |
(25,483) |
(10,236) |
|||||
Purchase of investments |
(249,803) |
(252,633) |
|||||
Proceeds from sales of investments |
6,630 |
13,491 |
|||||
Proceeds from maturities of investments |
129,096 |
57,150 |
|||||
Acquisitions, net of cash |
(10,102) |
— |
|||||
Net cash used in investing activities |
(149,662) |
(192,228) |
|||||
Cash flows from financing activities |
|||||||
Excess tax benefit from share-based compensation |
674 |
106 |
|||||
Proceeds from exercise of stock options |
14,085 |
2,554 |
|||||
Proceeds from employee stock purchase plan |
5,988 |
— |
|||||
Repurchase of restricted common stock from employees |
(109) |
(35) |
|||||
Payments of initial public offering costs |
— |
(2,698) |
|||||
Net cash provided by (used in) financing activities |
20,638 |
(73) |
|||||
Net decrease in cash and cash equivalents |
(48,747) |
(134,718) |
|||||
Cash and cash equivalents - beginning of period |
310,614 |
322,642 |
|||||
Cash and cash equivalents - end of period |
$ |
261,867 |
$ |
187,924 |
SOURCE
Media Contact: Jennifer Jasper Smith, Head of Corporate Communications, Palo Alto Networks, 408-638-3280, jjsmith@paloaltonetworks.com; Investor Relations Contact: Kelsey Turcotte, Vice President of Investor Relations, 408-753-3872, kturcotte@paloaltonetworks.com; Chris Danne/Maria Riley, The Blueshirt Group, 415-217-7722, ir@paloaltonetworks.com