Palo Alto Networks Reports Fiscal First Quarter 2016 Financial Results
Total revenue for the fiscal first quarter 2016 grew 55 percent year-over-year to a record
Non-GAAP net income for the fiscal first quarter 2016 was
"We had a very strong start to fiscal year 2016 that included achieving our highest fiscal first quarter revenue and billings year-over-year growth rates since going public," said
Commenting on the company's financial results,
Recent Highlights
- Published cybersecurity book for C-suite and boards of directors – The book, "Navigating the Digital Age: The Definitive Cybersecurity Guide for Directors and Officers," was jointly published with the
New York Stock Exchange (NYSE) and underscoresPalo Alto Networks continued thought leadership by offering actionable, expert advice from lawyers, forensic professionals, consultants, academia, and government officials on a range of cybersecurity issues. AllNYSE member company executives and boards of directors will receive a copy of the book. - Introduced Aperture – This new security-as-a-service offering helps organizations safely enable and strengthen security for sanctioned SaaS applications, such as Box,
Dropbox ,Google Drive , and Salesforce. - Announced commercial availability of our AutoFocus threat intelligence offering – This new cloud service, initially made available in
April 2015 as a community access offering, is designed to provide users with the shared intelligence, analytics, and context required to understand which attacks require immediate response, as well as the ability to make threat indicators actionable and prevent future attacks. - Signed significant global managed security services agreements – These strategic alliances with
Telefonica and Trustwave®, the managed security services business unit ofSingapore Telecommunications Limited , extend our presence in the large and growing managed security services market and are designed to bring next-generation managed security services to global, multi-national businesses and government agencies. - Helped prove the power of information sharing – The collaborative
Cyber Threat Alliance effort that included cyberthreat information sharing and combined intelligence has resulted in the revelation of a pervasive ransomware threat and specific measures to prevent it. As a founding member of theCyber Threat Alliance , we believe this kind of collaboration across public and private industries is essential in the battle against cybercrime.
Financial Outlook
For the fiscal second quarter 2016, we expect:
- Total revenue in the range of
$314 to $318 million , representing year-over-year growth between 44 percent and 46 percent. - Diluted non-GAAP earnings per share in the range of
$0.38 to $0.39 using 91 to 92 million shares.
Guidance for non-GAAP financial measures excludes share-based compensation and related payroll taxes, acquisition related costs, amortization expense of acquired intangible assets, litigation related charges including legal settlements, non-cash interest expense related to our convertible senior notes, the foreign currency gains (losses) and tax effects associated with these items, and certain non-recurring expenses. We have not reconciled diluted non-GAAP earnings per share guidance to GAAP net income (loss) per diluted share because we do not provide guidance on GAAP net income (loss) or the various reconciling cash and non-cash items between GAAP net income (loss) and non-GAAP net income (loss). Items that impact these measures are out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.
Conference Call Information
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our financial outlook for the fiscal second quarter of 2016. 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; risks associated with managing our rapid growth, particularly outside of
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
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 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 the reconciliation.
Non-GAAP net income and net income per share, diluted.
Billings.
Free cash flow.
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, the billings metric reported by the company includes amounts that have not yet been recognized as revenue and the free cash flow measure does not represent the total increase or decrease in our cash balance for the period. In addition, 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
About
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Operations |
|||||||
(In millions, except per share data) |
|||||||
(Unaudited) |
|||||||
Three Months Ended October 31, |
|||||||
2015 |
2014 |
||||||
Revenue: |
|||||||
Product |
$ |
147.7 |
$ |
101.5 |
|||
Services |
149.5 |
90.8 |
|||||
Total revenue |
297.2 |
192.3 |
|||||
Cost of revenue: |
|||||||
Product |
38.8 |
29.1 |
|||||
Services |
40.4 |
24.3 |
|||||
Total cost of revenue |
79.2 |
53.4 |
|||||
Total gross profit |
218.0 |
138.9 |
|||||
Operating expenses: |
|||||||
Research and development |
59.7 |
37.3 |
|||||
Sales and marketing |
158.3 |
106.4 |
|||||
General and administrative |
30.8 |
19.0 |
|||||
Total operating expenses |
248.8 |
162.7 |
|||||
Operating loss |
(30.8) |
(23.8) |
|||||
Interest expense |
(5.8) |
(5.5) |
|||||
Other income, net |
2.2 |
0.4 |
|||||
Loss before income taxes |
(34.4) |
(28.9) |
|||||
Provision for income taxes |
4.3 |
1.2 |
|||||
Net loss |
$ |
(38.7) |
$ |
(30.1) |
|||
Net loss per share, basic and diluted |
$ |
(0.45) |
$ |
(0.38) |
|||
Weighted-average shares used to compute net loss per share, basic and diluted |
85.1 |
79.4 |
Palo Alto Networks, Inc. |
|||||||
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||
(In millions, except per share amounts) |
|||||||
(Unaudited) |
|||||||
Three Months Ended October 31, |
|||||||
2015 |
2014 |
||||||
GAAP net loss |
$ |
(38.7) |
$ |
(30.1) |
|||
Share-based compensation related charges |
75.2 |
39.5 |
|||||
Amortization expense of acquired intangible assets |
2.1 |
1.5 |
|||||
Litigation related charges |
3.1 |
3.1 |
|||||
Non-cash interest expense related to convertible notes |
5.8 |
5.5 |
|||||
Foreign currency gain associated with non-GAAP adjustments |
(0.8) |
— |
|||||
Income tax and other tax adjustments related to the above |
(15.1) |
(6.7) |
|||||
Non-GAAP net income |
$ |
31.6 |
$ |
12.8 |
|||
GAAP net loss per share, diluted |
$ |
(0.45) |
$ |
(0.38) |
|||
Share-based compensation related charges |
0.86 |
0.48 |
|||||
Amortization expense of acquired intangible assets |
0.02 |
0.02 |
|||||
Litigation related charges |
0.04 |
0.04 |
|||||
Non-cash interest expense related to convertible notes |
0.07 |
0.07 |
|||||
Foreign currency gain associated with non-GAAP adjustments |
(0.01) |
0.00 |
|||||
Income tax and other tax adjustments related to the above |
(0.18) |
(0.08) |
|||||
Non-GAAP net income per share, diluted |
$ |
0.35 |
$ |
0.15 |
|||
GAAP weighted-average shares used to compute net loss per share, diluted |
85.1 |
79.4 |
|||||
Weighted-average effect of potentially dilutive securities [a] |
5.6 |
5.3 |
|||||
Non-GAAP weighted-average shares used to compute net income per share, diluted |
90.7 |
84.7 |
|||||
Revenue |
$ |
297.2 |
$ |
192.3 |
|||
Change in deferred revenue |
90.8 |
48.2 |
|||||
Billings |
$ |
388.0 |
$ |
240.5 |
|||
Net cash provided by operating activities |
$ |
146.7 |
$ |
74.9 |
|||
Less: purchases of property, equipment, and other assets |
19.5 |
5.9 |
|||||
Free cash flow |
$ |
127.2 |
$ |
69.0 |
|||
Net cash used in investing activities |
$ |
(263.5) |
$ |
(201.1) |
|||
Net cash provided by financing activities |
$ |
16.8 |
$ |
16.1 |
___________ |
[a] Non-GAAP net income per share, diluted, includes the potentially dilutive effect of employee equity incentive plan awards and convertible senior notes outstanding. 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 for the fiscal first quarter ended October 31, 2015 by 1.8 million shares. The potentially dilutive effect of the convertible notes for the fiscal first quarter ended October 31, 2014 was nil. |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Balance Sheets |
|||||||
(In millions) |
|||||||
(Unaudited) |
|||||||
October 31, 2015 |
July 31, 2015 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
275.8 |
$ |
375.8 |
|||
Short-term investments |
485.5 |
413.2 |
|||||
Accounts receivable, net |
196.4 |
212.4 |
|||||
Prepaid expenses and other current assets |
82.2 |
72.6 |
|||||
Total current assets |
1,039.9 |
1,074.0 |
|||||
Property and equipment, net |
76.7 |
62.9 |
|||||
Long-term investments |
694.5 |
538.8 |
|||||
Goodwill |
163.5 |
163.5 |
|||||
Intangible assets, net |
51.0 |
52.7 |
|||||
Other assets |
68.8 |
73.3 |
|||||
Total assets |
$ |
2,094.4 |
$ |
1,965.2 |
|||
Liabilities, temporary equity, and stockholders' equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
17.5 |
$ |
13.2 |
|||
Accrued compensation |
52.8 |
79.8 |
|||||
Accrued and other liabilities |
38.3 |
28.2 |
|||||
Deferred revenue |
477.3 |
423.9 |
|||||
Convertible senior notes, net |
492.3 |
487.1 |
|||||
Total current liabilities |
1,078.2 |
1,032.2 |
|||||
Long-term deferred revenue |
327.2 |
289.8 |
|||||
Other long-term liabilities |
62.5 |
67.4 |
|||||
Temporary equity |
82.7 |
87.9 |
|||||
Stockholders' equity: |
|||||||
Preferred stock |
— |
— |
|||||
Common stock and additional paid-in capital |
1,083.6 |
988.7 |
|||||
Accumulated other comprehensive loss |
(0.4) |
(0.1) |
|||||
Accumulated deficit |
(539.4) |
(500.7) |
|||||
Total stockholders' equity |
543.8 |
487.9 |
|||||
Total liabilities, temporary equity, and stockholders' equity |
$ |
2,094.4 |
$ |
1,965.2 |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Cash Flows |
|||||||
(In millions) |
|||||||
(Unaudited) |
|||||||
Three Months Ended October 31, |
|||||||
2015 |
2014 |
||||||
Cash flows from operating activities |
|||||||
Net loss |
$ |
(38.7) |
$ |
(30.1) |
|||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||
Share-based compensation for equity based awards |
72.9 |
38.4 |
|||||
Depreciation and amortization |
9.2 |
6.1 |
|||||
Amortization of investment premiums, net of accretion of purchase discounts |
0.8 |
0.7 |
|||||
Amortization of debt discount and debt issuance costs |
5.7 |
5.5 |
|||||
Excess tax benefit from share-based compensation arrangements |
(0.2) |
(0.3) |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable, net |
16.0 |
19.3 |
|||||
Prepaid expenses and other assets |
5.0 |
3.4 |
|||||
Accounts payable |
5.2 |
(4.5) |
|||||
Accrued compensation |
(27.0) |
(12.8) |
|||||
Accrued and other liabilities |
7.0 |
1.0 |
|||||
Deferred revenue |
90.8 |
48.2 |
|||||
Net cash provided by operating activities |
146.7 |
74.9 |
|||||
Cash flows from investing activities |
|||||||
Purchases of investments |
(512.5) |
(247.9) |
|||||
Proceeds from sales of investments |
124.4 |
2.0 |
|||||
Proceeds from maturities of investments |
144.1 |
50.7 |
|||||
Purchases of property, equipment, and other assets |
(19.5) |
(5.9) |
|||||
Net cash used in investing activities |
(263.5) |
(201.1) |
|||||
Cash flows from financing activities |
|||||||
Proceeds from sales of shares through employee equity incentive plans |
16.6 |
15.8 |
|||||
Excess tax benefit from share-based compensation arrangements |
0.2 |
0.3 |
|||||
Net cash provided by financing activities |
16.8 |
16.1 |
|||||
Net decrease in cash and cash equivalents |
(100.0) |
(110.1) |
|||||
Cash and cash equivalents - beginning of period |
375.8 |
653.8 |
|||||
Cash and cash equivalents - end of period |
$ |
275.8 |
$ |
543.7 |
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SOURCE
Media, Jennifer Jasper Smith, Head of Corporate Communications, Palo Alto Networks, 408-638-3280, jjsmith@paloaltonetworks.com; or Investor Relations, Kelsey Turcotte, Vice President of Investor Relations, 408-753-3872, kturcotte@paloaltonetworks.com; or Chris Danne/Maria Riley, The Blueshirt Group, 415-217-7722, ir@paloaltonetworks.com