Palo Alto Networks Reports Fiscal First Quarter 2015 Financial Results
Total revenue for the fiscal first quarter grew 50 percent year-over-year to a record
"We had a strong start to fiscal year 2015, outperforming expectations across all of our reported metrics. As the leading provider of the next-generation enterprise security platform, we delivered 52 percent billings growth and 50 percent revenue growth on a year-over-year basis," said
"We are very pleased with our first quarter performance. Once again robust new customer acquisition and expansion within our existing customer base drove record billings, revenue and deferred revenue," said
Recent Highlights
- Discovered WireLurker malware – Underscoring our thought leadership in cybersecurity, this finding by our Unit 42 threat intelligence team marks a new era in both Mac OS and iOS malware.
- Extended
VMware partnership – Building on our strategic partnership withVMware , we announced our VM-Series support forVMware vCloud® Air™, enabling customers to apply the same rich next-generation security policies across their private and public virtualized infrastructure, whether an application is virtual, physical, on- or off-premise. - Launched Advanced Endpoint Protection offering – Further extending our technology leadership, we announced availability of Traps, our revolutionary preventative approach to stop cyber threats on the endpoint, sparing IT security teams from cumbersome remediation, patching, and often futile recovery measures.
- Honored as a customer support leader – Recognizing our effective use of process and technology to achieve excellent customer satisfaction, we were given by the
Technology Services Industry Association the STAR Award for innovation in the delivery of support services. - Announced Stanley J. Meresman to the Board of Directors – He joined our audit committee and serves as an audit committee financial expert. Mr. Meresman brings a wealth of valuable experience cultivated during current and previous positions on a number of public and private companies' boards, such as
LinkedIn and Zynga.
Financial Outlook
For the fiscal second quarter of 2015,
- Total revenue in the range of
$200 to $204 million , representing year-over-year growth between 42 percent and 45 percent. - Diluted non-GAAP earnings per share in the range of
$0.16 to $0.17 using 85 to 87 million shares.
Guidance for non-GAAP financial measures excludes share-based compensation, amortization of acquisition-related intangible assets, acquisition expenses, discrete tax benefits, non-cash interest expense related to the company's convertible senior notes, and other non-recurring expenses. The company has not reconciled diluted non-GAAP earnings per share guidance to net income (loss) per diluted share because the company does not provide guidance on net income (loss) or the various reconciling cash and non-cash items between GAAP net income (loss) and non-GAAP net income (loss). As items that impact these measures are out of the company's control and/or cannot be reasonably predicted, the company is unable to provide such guidance. 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 the company's financial outlook for the fiscal second quarter of 2015, the company's expectations regarding gross margins, seasonality, revenue growth, future investment in Traps, capital expenditures and non-GAAP operating margin, the company's ability to accelerate growth in its market share, growth trends, demand for and adoption of the company's products and services, expected availability and efficacy of new products, the company's competitive position, and 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.
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, 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 October 31, |
|||||||
2014 |
2013 |
||||||
Revenue: |
|||||||
Product |
$ |
101,476 |
$ |
75,485 |
|||
Services |
90,870 |
52,695 |
|||||
Total revenue |
192,346 |
128,180 |
|||||
Cost of revenue: |
|||||||
Product |
29,141 |
17,954 |
|||||
Services |
24,320 |
15,853 |
|||||
Total cost of revenue |
53,461 |
33,807 |
|||||
Total gross profit |
138,885 |
94,373 |
|||||
Operating expenses: |
|||||||
Research and development |
37,305 |
19,893 |
|||||
Sales and marketing |
106,366 |
67,366 |
|||||
General and administrative |
18,977 |
14,125 |
|||||
Total operating expenses |
162,648 |
101,384 |
|||||
Operating loss |
(23,763) |
(7,011) |
|||||
Interest expense |
(5,489) |
(8) |
|||||
Other income, net |
341 |
405 |
|||||
Loss before income taxes |
(28,911) |
(6,614) |
|||||
Provision for income taxes |
1,157 |
1,247 |
|||||
Net loss |
$ |
(30,068) |
$ |
(7,861) |
|||
Net loss per share, basic and diluted |
$ |
(0.38) |
$ |
(0.11) |
|||
Weighted-average shares used to compute net loss per share, basic and diluted |
79,388 |
71,681 |
Palo Alto Networks, Inc. |
|||||||
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||
(In thousands, except per share amounts) |
|||||||
(Unaudited) |
|||||||
Three Months Ended October 31, |
|||||||
2014 |
2013 |
||||||
GAAP net loss |
$ |
(30,068) |
$ |
(7,861) |
|||
Share-based compensation expense |
38,475 |
14,411 |
|||||
Share-based payroll tax expense |
1,054 |
265 |
|||||
Amortization expense of acquired intangible assets |
1,544 |
— |
|||||
Litigation related charges [a] |
3,065 |
1,889 |
|||||
Non-cash interest expense related to convertible notes |
5,478 |
— |
|||||
Income tax and other tax adjustments related to the above |
(6,711) |
(2,534) |
|||||
Non-GAAP net income |
$ |
12,837 |
$ |
6,170 |
|||
GAAP net loss per share, diluted |
$ |
(0.38) |
$ |
(0.11) |
|||
Share-based compensation expense |
0.47 |
0.20 |
|||||
Share-based payroll tax expense |
0.01 |
0.00 |
|||||
Amortization expense of acquired intangible assets |
0.02 |
0.00 |
|||||
Litigation related charges [a] |
0.04 |
0.03 |
|||||
Non-cash interest expense related to convertible notes |
0.07 |
0.00 |
|||||
Income tax and other tax adjustments related to the above |
(0.08) |
(0.04) |
|||||
Non-GAAP net income per share, diluted |
$ |
0.15 |
$ |
0.08 |
|||
GAAP weighted-average shares used to compute net loss per share, diluted |
79,388 |
71,681 |
|||||
Weighted-average effect of potentially dilutive securities [b] |
5,341 |
5,518 |
|||||
Non-GAAP weighted-average shares used to compute net income per share, diluted |
84,729 |
77,199 |
|||||
Revenue |
$ |
192,346 |
$ |
128,180 |
|||
Change in deferred revenue |
48,142 |
29,726 |
|||||
Billings |
$ |
240,488 |
$ |
157,906 |
|||
Net cash provided by operating activities |
$ |
74,928 |
$ |
38,881 |
|||
Less: purchases of property, equipment, and other assets |
5,935 |
15,680 |
|||||
Free cash flow |
$ |
68,993 |
$ |
23,201 |
|||
Net cash used in investing activities |
$ |
(201,093) |
$ |
(93,959) |
|||
Net cash provided by financing activities |
$ |
16,100 |
$ |
10,646 |
[a] |
Litigation related charges during the three months ended October 31, 2014 and 2013 includes the amortization of intellectual property licenses entered into as part of the settlement with Juniper and expenses for legal services, respectively. |
[b] |
Non-GAAP net income per share, diluted, includes the potentially dilutive effect of our options and restricted stock units outstanding. The potentially dilutive effect of the convertible notes for the three months ended October 31, 2014 and 2013 was nil. |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Balance Sheets |
|||||||
(In thousands) |
|||||||
(Unaudited) |
|||||||
October 31, 2014 |
July 31, 2014 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
543,747 |
$ |
653,812 |
|||
Short-term investments |
227,752 |
118,690 |
|||||
Accounts receivable, net |
116,224 |
135,518 |
|||||
Prepaid expenses and other current assets |
45,844 |
50,306 |
|||||
Total current assets |
933,567 |
958,326 |
|||||
Property and equipment, net |
49,823 |
48,744 |
|||||
Long-term investments |
289,011 |
201,880 |
|||||
Goodwill |
155,033 |
155,033 |
|||||
Intangible assets, net |
47,451 |
47,955 |
|||||
Other assets |
65,471 |
66,528 |
|||||
Total assets |
$ |
1,540,356 |
$ |
1,478,466 |
|||
Liabilities and stockholders' equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
10,497 |
$ |
14,526 |
|||
Accrued compensation |
35,935 |
48,727 |
|||||
Accrued and other liabilities |
27,852 |
25,000 |
|||||
Deferred revenue |
286,682 |
259,918 |
|||||
Total current liabilities |
360,966 |
348,171 |
|||||
Convertible senior notes, net |
471,856 |
466,875 |
|||||
Long-term deferred revenue |
184,038 |
162,660 |
|||||
Other long-term liabilities |
30,285 |
32,177 |
|||||
Stockholders' equity: |
|||||||
Preferred stock |
— |
— |
|||||
Common stock |
8 |
8 |
|||||
Additional paid-in capital |
859,010 |
804,406 |
|||||
Accumulated other comprehensive loss |
(13) |
(105) |
|||||
Accumulated deficit |
(365,794) |
(335,726) |
|||||
Total stockholders' equity |
493,211 |
468,583 |
|||||
Total liabilities and stockholders' equity |
$ |
1,540,356 |
$ |
1,478,466 |
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) |
|||||||
(Unaudited) |
|||||||
Three Months Ended October 31, |
|||||||
2014 |
2013 |
||||||
Cash flows from operating activities |
|||||||
Net loss |
$ |
(30,068) |
$ |
(7,861) |
|||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||
Share-based compensation for equity based awards |
38,443 |
14,383 |
|||||
Depreciation and amortization |
6,115 |
3,146 |
|||||
Amortization of investment premiums, net of accretion of purchase discounts |
667 |
386 |
|||||
Amortization of debt discount and debt issuance costs |
5,478 |
— |
|||||
Excess tax benefit from share-based compensation |
(346) |
(56) |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable, net |
19,294 |
(3,978) |
|||||
Prepaid expenses and other assets |
3,409 |
(1,707) |
|||||
Accounts payable |
(4,460) |
(205) |
|||||
Accrued compensation |
(12,792) |
1,614 |
|||||
Accrued and other liabilities |
1,046 |
3,433 |
|||||
Deferred revenue |
48,142 |
29,726 |
|||||
Net cash provided by operating activities |
74,928 |
38,881 |
|||||
Cash flows from investing activities |
|||||||
Purchase of investments |
(247,849) |
(122,238) |
|||||
Proceeds from sales of investments |
1,999 |
— |
|||||
Proceeds from maturities of investments |
50,692 |
43,959 |
|||||
Purchase of property, equipment, and other assets |
(5,935) |
(15,680) |
|||||
Net cash used in investing activities |
(201,093) |
(93,959) |
|||||
Cash flows from financing activities |
|||||||
Proceeds from exercise of stock options |
7,963 |
4,610 |
|||||
Proceeds from employee stock purchase plan |
7,791 |
5,988 |
|||||
Excess tax benefit from share-based compensation |
346 |
56 |
|||||
Repurchase of restricted common stock from terminated employees |
— |
(8) |
|||||
Net cash provided by financing activities |
16,100 |
10,646 |
|||||
Net decrease in cash and cash equivalents |
(110,065) |
(44,432) |
|||||
Cash and cash equivalents - beginning of period |
653,812 |
310,614 |
|||||
Cash and cash equivalents - end of period |
$ |
543,747 |
$ |
266,182 |
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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