Palo Alto Networks Reports Fiscal Second Quarter 2016 Financial Results
Total revenue for the fiscal second quarter 2016 grew 54 percent year-over-year to a record
Non-GAAP net income for the fiscal second quarter 2016 was
"We reported strong fiscal second quarter results across all metrics, including record revenue of
"During the quarter we saw broad adoption of all aspects of our Next-Generation Security Platform with particular strength in our subscription services," said
Recent Highlights
- Partnered with
Proofpoint –Palo Alto Networks andProofpoint teamed up to share intelligence on sophisticated attacks, enabling the creation of automated and coordinated protection across both Palo Alto Networks Next-Generation Security Platform and Proofpoint Targeted Attack Protection and Proofpoint SocialPatrol. Palo Alto Networks WildFire automatically generates new protections and distributes them to all WildFire subscribers globally. - Recognized by
J.D. Power and TSIA for exceptional support services – This recognition underscores the exceptional customer support we offer, including new certifications under the esteemed J.D. Power Certified Assisted Technical Support Program and TSIA "Outstanding Worldwide" rating.* - Expanded Common Criteria certifications – Adding to the validation of our products' security capabilities, these certifications of our newest firewall devices with the latest rigorous
National Information Assurance Partnership protection profiles set a consistent confidence bar for government and critical infrastructure customer organizations. - Extended our cloud ecosystem presence – To help organizations seamlessly secure an OpenStack cloud infrastructure with next-generation security, we announced a partnership with
Mirantis and made our platform available as a virtual network function within Mirantis OpenStack. - Appointed
Frank Calderoni to the Board of Directors – Mr. Calderoni joined our audit committee and brings a wealth of valuable experience cultivated from his previous and current executive and board positions at some of the world's leading technology companies.
Financial Outlook
For the fiscal third quarter 2016, we expect:
- Total revenue in the range of
$335 to $339 million , representing year-over-year growth between 43 percent and 45 percent. - Diluted non-GAAP earnings per share in the range of
$0.41 to $0.42 using 90 to 92 million shares. - Free cash flow margin of approximately 40 percent.
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). We have not reconciled non-GAAP free cash flow margin to GAAP cash provided by operating activities because we do not provide guidance on GAAP cash provided by operating activities or purchases of property, equipment, and other assets. Certain items that impact these measures are subject to variability that are not entirely within our control. 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 third quarter of 2016, our commitment to balancing high growth and profitability, as well as the increasing strength in free cash flow from our hybrid-SaaS model. 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 Quarterly Report on Form 10-Q 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 and free cash flow margin.
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
___________
*Claim:
Disclaimer:
Palo Alto Networks, Inc. |
|||||||||||||||
Preliminary Condensed Consolidated Statements of Operations |
|||||||||||||||
(In millions, except per share data) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
Revenue: |
|||||||||||||||
Product |
$ |
169.9 |
$ |
115.6 |
$ |
317.6 |
$ |
217.1 |
|||||||
Services |
164.8 |
102.1 |
314.3 |
192.9 |
|||||||||||
Total revenue |
334.7 |
217.7 |
631.9 |
410.0 |
|||||||||||
Cost of revenue: |
|||||||||||||||
Product |
44.9 |
30.7 |
83.7 |
59.8 |
|||||||||||
Services |
49.3 |
28.7 |
89.7 |
53.0 |
|||||||||||
Total cost of revenue |
94.2 |
59.4 |
173.4 |
112.8 |
|||||||||||
Total gross profit |
240.5 |
158.3 |
458.5 |
297.2 |
|||||||||||
Operating expenses: |
|||||||||||||||
Research and development |
74.0 |
47.0 |
133.7 |
84.3 |
|||||||||||
Sales and marketing |
187.6 |
122.8 |
345.9 |
229.2 |
|||||||||||
General and administrative |
34.2 |
27.0 |
65.0 |
46.0 |
|||||||||||
Total operating expenses |
295.8 |
196.8 |
544.6 |
359.5 |
|||||||||||
Operating loss |
(55.3) |
(38.5) |
(86.1) |
(62.3) |
|||||||||||
Interest expense |
(5.8) |
(5.5) |
(11.6) |
(11.0) |
|||||||||||
Other income, net |
2.5 |
0.3 |
4.7 |
0.7 |
|||||||||||
Loss before income taxes |
(58.6) |
(43.7) |
(93.0) |
(72.6) |
|||||||||||
Provision for (benefit from) income taxes |
3.9 |
(0.7) |
8.2 |
0.5 |
|||||||||||
Net loss |
$ |
(62.5) |
$ |
(43.0) |
$ |
(101.2) |
$ |
(73.1) |
|||||||
Net loss per share, basic and diluted |
$ |
(0.72) |
$ |
(0.53) |
$ |
(1.18) |
$ |
(0.91) |
|||||||
Weighted-average shares used to compute net loss per share, basic and diluted |
86.6 |
80.8 |
85.8 |
80.1 |
Palo Alto Networks, Inc. |
|||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||||||||||
(In millions, except per share amounts) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
GAAP net loss |
$ |
(62.5) |
$ |
(43.0) |
$ |
(101.2) |
$ |
(73.1) |
|||||||
Share-based compensation related charges |
106.9 |
60.6 |
182.1 |
100.2 |
|||||||||||
Amortization expense of acquired intangible assets |
2.1 |
1.8 |
4.2 |
3.3 |
|||||||||||
Litigation related charges |
3.0 |
3.0 |
6.1 |
6.1 |
|||||||||||
Non-cash interest expense related to convertible notes |
5.7 |
5.5 |
11.5 |
11.0 |
|||||||||||
Foreign currency gain associated with non-GAAP adjustments |
(0.7) |
— |
(1.5) |
(0.1) |
|||||||||||
Income tax and other tax adjustments related to the above |
(18.2) |
(11.0) |
(33.3) |
(17.7) |
|||||||||||
Non-GAAP net income |
$ |
36.3 |
$ |
16.9 |
$ |
67.9 |
$ |
29.7 |
|||||||
GAAP net loss per share, diluted |
$ |
(0.72) |
$ |
(0.53) |
$ |
(1.18) |
$ |
(0.91) |
|||||||
Share-based compensation related charges |
1.21 |
0.73 |
2.08 |
1.22 |
|||||||||||
Amortization expense of acquired intangible assets |
0.02 |
0.02 |
0.05 |
0.04 |
|||||||||||
Litigation related charges |
0.04 |
0.04 |
0.07 |
0.08 |
|||||||||||
Non-cash interest expense related to convertible notes |
0.07 |
0.07 |
0.13 |
0.14 |
|||||||||||
Foreign currency gain associated with non-GAAP adjustments |
(0.01) |
0.00 |
(0.02) |
0.00 |
|||||||||||
Income tax and other tax adjustments related to the above |
(0.21) |
(0.14) |
(0.39) |
(0.22) |
|||||||||||
Non-GAAP net income per share, diluted |
$ |
0.40 |
$ |
0.19 |
$ |
0.74 |
$ |
0.35 |
|||||||
GAAP weighted-average shares used to compute net loss per share, diluted |
86.6 |
80.8 |
85.8 |
80.1 |
|||||||||||
Weighted-average effect of potentially dilutive securities [a] |
5.1 |
5.8 |
5.4 |
5.7 |
|||||||||||
Non-GAAP weighted-average shares used to compute net income per share, diluted |
91.7 |
86.6 |
91.2 |
85.8 |
|||||||||||
Revenue |
$ |
334.7 |
$ |
217.7 |
$ |
631.9 |
$ |
410.0 |
|||||||
Change in deferred revenue |
124.3 |
65.1 |
215.1 |
113.3 |
|||||||||||
Billings |
$ |
459.0 |
$ |
282.8 |
$ |
847.0 |
$ |
523.3 |
|||||||
Net cash provided by operating activities |
$ |
153.8 |
$ |
76.9 |
$ |
300.5 |
$ |
151.8 |
|||||||
Less: purchases of property, equipment, and other assets |
17.4 |
6.2 |
36.9 |
12.1 |
|||||||||||
Free cash flow |
$ |
136.4 |
$ |
70.7 |
$ |
263.6 |
$ |
139.7 |
|||||||
Net cash used in investing activities |
$ |
(21.2) |
$ |
(286.3) |
$ |
(284.7) |
$ |
(487.4) |
|||||||
Net cash provided by financing activities |
$ |
4.8 |
$ |
8.7 |
$ |
21.6 |
$ |
24.8 |
[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 three and six months ended January 31, 2016 by 1.7 million shares and 1.8 million shares, respectively, and 0.6 million shares and 0.3 million shares, for the three and six months ended January 31, 2015, respectively. |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Balance Sheets |
|||||||
(In millions) |
|||||||
(Unaudited) |
|||||||
January 31, 2016 |
July 31, 2015 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
413.2 |
$ |
375.8 |
|||
Short-term investments |
551.4 |
413.2 |
|||||
Accounts receivable, net |
254.4 |
212.4 |
|||||
Prepaid expenses and other current assets |
88.1 |
72.6 |
|||||
Total current assets |
1,307.1 |
1,074.0 |
|||||
Property and equipment, net |
92.6 |
62.9 |
|||||
Long-term investments |
631.1 |
538.8 |
|||||
Goodwill |
163.5 |
163.5 |
|||||
Intangible assets, net |
48.7 |
52.7 |
|||||
Other assets |
73.6 |
73.3 |
|||||
Total assets |
$ |
2,316.6 |
$ |
1,965.2 |
|||
Liabilities, temporary equity, and stockholders' equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
32.5 |
$ |
13.2 |
|||
Accrued compensation |
71.2 |
79.8 |
|||||
Accrued and other liabilities |
44.0 |
28.2 |
|||||
Deferred revenue |
541.2 |
423.9 |
|||||
Convertible senior notes, net |
497.5 |
487.1 |
|||||
Total current liabilities |
1,186.4 |
1,032.2 |
|||||
Long-term deferred revenue |
387.6 |
289.8 |
|||||
Other long-term liabilities |
72.3 |
67.4 |
|||||
Temporary equity |
77.5 |
87.9 |
|||||
Stockholders' equity: |
|||||||
Preferred stock |
— |
— |
|||||
Common stock and additional paid-in capital |
1,195.4 |
988.7 |
|||||
Accumulated other comprehensive loss |
(0.7) |
(0.1) |
|||||
Accumulated deficit |
(601.9) |
(500.7) |
|||||
Total stockholders' equity |
592.8 |
487.9 |
|||||
Total liabilities, temporary equity, and stockholders' equity |
$ |
2,316.6 |
$ |
1,965.2 |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Cash Flows |
|||||||
(In millions) |
|||||||
(Unaudited) |
|||||||
Six Months Ended January 31, |
|||||||
2016 |
2015 |
||||||
Cash flows from operating activities |
|||||||
Net loss |
$ |
(101.2) |
$ |
(73.1) |
|||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||
Share-based compensation for equity based awards |
174.8 |
95.3 |
|||||
Depreciation and amortization |
19.5 |
12.9 |
|||||
Amortization of investment premiums, net of accretion of purchase discounts |
1.6 |
1.5 |
|||||
Amortization of debt discount and debt issuance costs |
11.5 |
11.0 |
|||||
Excess tax benefit from share-based compensation arrangements |
(0.5) |
(1.3) |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable, net |
(42.0) |
0.3 |
|||||
Prepaid expenses and other assets |
(8.3) |
(32.4) |
|||||
Accounts payable |
13.6 |
(1.9) |
|||||
Accrued compensation |
(8.6) |
4.4 |
|||||
Accrued and other liabilities |
25.0 |
21.8 |
|||||
Deferred revenue |
215.1 |
113.3 |
|||||
Net cash provided by operating activities |
300.5 |
151.8 |
|||||
Cash flows from investing activities |
|||||||
Purchases of investments |
(610.2) |
(587.2) |
|||||
Proceeds from sales of investments |
134.4 |
2.0 |
|||||
Proceeds from maturities of investments |
228.0 |
109.9 |
|||||
Purchases of property, equipment, and other assets |
(36.9) |
(12.1) |
|||||
Net cash used in investing activities |
(284.7) |
(487.4) |
|||||
Cash flows from financing activities |
|||||||
Proceeds from sales of shares through employee equity incentive plans |
21.1 |
23.5 |
|||||
Excess tax benefit from share-based compensation arrangements |
0.5 |
1.3 |
|||||
Net cash provided by financing activities |
21.6 |
24.8 |
|||||
Net increase (decrease) in cash and cash equivalents |
37.4 |
(310.8) |
|||||
Cash and cash equivalents - beginning of period |
375.8 |
653.8 |
|||||
Cash and cash equivalents - end of period |
$ |
413.2 |
$ |
343.0 |
Logo - http://photos.prnewswire.com/prnh/20150527/218856LOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/palo-alto-networks-reports-fiscal-second-quarter-2016-financial-results-300226415.html
SOURCE
Media Contact: Jennifer Jasper Smith, Head of Corporate Communications, Palo Alto Networks, 408-638-3280, jjsmith@paloaltonetworks.com, or Investor Relations Contact: Kelsey Turcotte, Vice President of Investor Relations, Palo Alto Networks, 408-753-3872, kturcotte@paloaltonetworks.com