SANTA CLARA, Calif.,
May 20, 2021 /PRNewswire/ -- Palo
Alto Networks (NYSE: PANW), the global cybersecurity leader,
announced today financial results for its fiscal third quarter
2021, ended April 30, 2021.
Total revenue for the fiscal third quarter 2021 grew 24% year
over year to $1.1 billion,
compared with total revenue of $869.4 million for the fiscal third quarter
2020. GAAP net loss for the fiscal third quarter 2021 was
$145.1 million, or $1.50 per diluted share, compared with GAAP
net loss of $74.8 million, or
$0.77 per diluted share, for the
fiscal third quarter 2020.
Non-GAAP net income for the fiscal third quarter 2021 was
$139.5 million, or $1.38 per diluted share, compared with
non-GAAP net income of $114.6 million, or $1.17 per diluted share, for the fiscal
third quarter 2020. A reconciliation between GAAP and non-GAAP
information is contained in the tables below.
"The work-from-home shift earlier in the year and recent
cybersecurity issues have increased the focus on security. Coupled
with good execution, this has driven great strength across our
business, with Q3 billings growth accelerating to 27% year over
year. In particular, we saw a number of customers make large
commitments to Palo Alto Networks across our three major
platforms," said Nikesh Arora,
chairman and CEO of Palo Alto Networks. "We are pleased to be
raising our guidance for fiscal year 2021 as we see these trends
continuing into our fiscal fourth quarter, bolstering our
confidence in our pipeline."
Financial Outlook
Palo Alto Networks provides guidance based on current market
conditions and expectations.
For the fiscal fourth quarter 2021, the company expects:
- Total billings in the range of $1.695
billion to $1.715 billion,
representing year-over-year growth of between 22% and 23%.
- Total revenue in the range of $1.165
billion to $1.175 billion,
representing year-over-year growth of between 23% and 24%.
- Diluted non-GAAP net income per share in the range of
$1.42 to $1.44, using 101 million to 103 million
shares.
For the fiscal year 2021, the company is raising guidance and
expects:
- Total billings in the range of $5.28
billion to $5.30 billion,
representing year-over-year growth of 23%.
- Total revenue in the range of $4.20
billion to $4.21 billion,
representing year-over-year growth between 23% and 24%.
- Diluted non-GAAP net income per share in the range of
$5.97 to $5.99, using 99 million to 101 million
shares.
- Adjusted free cash flow margin of approximately 30%.
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, gains (losses) related to facility exit,
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.
Earnings Call Information
Palo Alto Networks will host a video webcast for analysts and
investors to discuss the company's fiscal third quarter 2021
results as well as the outlook for its fiscal fourth quarter 2021
today at 5 p.m. Eastern time/2 p.m.
Pacific time. Open to the public, investors may access the
webcast, supplemental financial information and earnings slides
from the "Investors" section of the company's website at
investors.paloaltonetworks.com. A replay will be available three
hours after the conclusion of the webcast and archived for one
year.
Forward-Looking Statements
This press release contains forward-looking statements that involve
risks, uncertainties, and assumptions including statements
regarding our belief that third quarter trends will continue into
the fourth quarter, and our financial outlook for the fiscal fourth
quarter 2021 and fiscal year 2021. There are a significant number
of factors that could cause actual results to differ materially
from statements made in this press release, including: developments
and changes in general market, political, economic, and business
conditions; the duration and global impact of COVID-19, including
the timeframes for and severity of social distancing and other
mitigation requirements, the impact of COVID-19 on our customers'
purchasing decisions; our ability as an organization to acquire and
integrate other companies, products or technologies in a successful
manner; risks associated with managing our 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; shift in priorities or 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; and length of sales cycles.
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 SEC on February 23, 2021, 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, gains
(losses) related to facility exit, 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 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 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
|
|
Nine Months
Ended
|
|
April 30,
|
|
April 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue:
|
|
|
|
|
|
|
|
Product
|
$
|
288.9
|
|
|
$
|
280.9
|
|
|
$
|
780.9
|
|
|
$
|
758.6
|
|
Subscription and
support
|
785.0
|
|
|
588.5
|
|
|
2,255.9
|
|
|
1,699.4
|
|
Total
revenue
|
1,073.9
|
|
|
869.4
|
|
|
3,036.8
|
|
|
2,458.0
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
Product
|
81.9
|
|
|
73.3
|
|
|
219.7
|
|
|
207.1
|
|
Subscription and
support
|
248.7
|
|
|
185.0
|
|
|
696.3
|
|
|
502.0
|
|
Total cost of
revenue
|
330.6
|
|
|
258.3
|
|
|
916.0
|
|
|
709.1
|
|
Total gross
profit
|
743.3
|
|
|
611.1
|
|
|
2,120.8
|
|
|
1,748.9
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
311.0
|
|
|
196.3
|
|
|
815.1
|
|
|
552.2
|
|
Sales and
marketing
|
448.0
|
|
|
388.4
|
|
|
1,264.0
|
|
|
1,129.0
|
|
General and
administrative
|
94.7
|
|
|
82.9
|
|
|
285.4
|
|
|
228.9
|
|
Total operating
expenses
|
853.7
|
|
|
667.6
|
|
|
2,364.5
|
|
|
1,910.1
|
|
Operating
loss
|
(110.4)
|
|
|
(56.5)
|
|
|
(243.7)
|
|
|
(161.2)
|
|
Interest
expense
|
(41.0)
|
|
|
(19.4)
|
|
|
(121.9)
|
|
|
(57.3)
|
|
Other income,
net
|
1.0
|
|
|
8.1
|
|
|
2.9
|
|
|
35.1
|
|
Loss before income
taxes
|
(150.4)
|
|
|
(67.8)
|
|
|
(362.7)
|
|
|
(183.4)
|
|
Provision for
(benefit from) income taxes
|
(5.3)
|
|
|
7.0
|
|
|
16.9
|
|
|
24.7
|
|
Net loss
|
$
|
(145.1)
|
|
|
$
|
(74.8)
|
|
|
$
|
(379.6)
|
|
|
$
|
(208.1)
|
|
Net loss per share,
basic and diluted
|
$
|
(1.50)
|
|
|
$
|
(0.77)
|
|
|
$
|
(3.95)
|
|
|
$
|
(2.14)
|
|
Weighted-average
shares used to compute net loss per share, basic and
diluted
|
96.9
|
|
|
96.7
|
|
|
96.1
|
|
|
97.2
|
|
Palo Alto
Networks, Inc.
|
Reconciliation of
GAAP to Non-GAAP Financial Measures
|
(In millions,
except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April 30,
|
|
April 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
GAAP net
loss
|
$
|
(145.1)
|
|
|
$
|
(74.8)
|
|
|
$
|
(379.6)
|
|
|
$
|
(208.1)
|
|
Share-based
compensation-related charges
|
247.2
|
|
|
173.5
|
|
|
697.3
|
|
|
504.2
|
|
Acquisition-related
costs(1)
|
11.7
|
|
|
4.9
|
|
|
45.4
|
|
|
15.3
|
|
Amortization expense
of acquired intangible assets
|
32.0
|
|
|
19.2
|
|
|
85.1
|
|
|
53.7
|
|
Litigation-related
charges(2)
|
1.8
|
|
|
1.8
|
|
|
5.4
|
|
|
1.8
|
|
Gain related to
facility exit(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.1)
|
|
Non-cash charges
related to convertible notes(4)
|
35.9
|
|
|
15.8
|
|
|
106.5
|
|
|
47.0
|
|
Foreign currency
(gain) loss associated with non-GAAP adjustments
|
0.6
|
|
|
(0.6)
|
|
|
2.2
|
|
|
(0.1)
|
|
Income tax and other
tax adjustments related to the above
|
(44.6)
|
|
|
(25.2)
|
|
|
(110.5)
|
|
|
(71.0)
|
|
Non-GAAP net
income
|
$
|
139.5
|
|
|
$
|
114.6
|
|
|
$
|
451.8
|
|
|
$
|
339.7
|
|
|
|
|
|
|
|
|
|
GAAP net loss per
share, diluted
|
$
|
(1.50)
|
|
|
$
|
(0.77)
|
|
|
$
|
(3.95)
|
|
|
$
|
(2.14)
|
|
Share-based
compensation-related charges
|
2.49
|
|
|
1.78
|
|
|
7.10
|
|
|
5.10
|
|
Acquisition-related
costs(1)
|
0.12
|
|
|
0.05
|
|
|
0.47
|
|
|
0.16
|
|
Amortization expense
of acquired intangible assets
|
0.33
|
|
|
0.20
|
|
|
0.89
|
|
|
0.55
|
|
Litigation-related
charges(2)
|
0.02
|
|
|
0.02
|
|
|
0.06
|
|
|
0.02
|
|
Gain related to
facility exit(3)
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(0.03)
|
|
Non-cash charges
related to convertible notes(4)
|
0.37
|
|
|
0.16
|
|
|
1.11
|
|
|
0.48
|
|
Foreign currency
(gain) loss associated with non-GAAP adjustments
|
0.01
|
|
|
(0.01)
|
|
|
0.02
|
|
|
0.00
|
|
Income tax and other
tax adjustments related to the above
|
(0.46)
|
|
|
(0.26)
|
|
|
(1.15)
|
|
|
(0.73)
|
|
Non-GAAP net income
per share, diluted
|
$
|
1.38
|
|
|
$
|
1.17
|
|
|
$
|
4.55
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
GAAP weighted-average
shares used to compute net loss per share, diluted
|
96.9
|
|
|
96.7
|
|
|
96.1
|
|
|
97.2
|
|
Weighted-average
effect of potentially dilutive securities(5)
|
4.1
|
|
|
1.1
|
|
|
3.3
|
|
|
2.5
|
|
Non-GAAP
weighted-average shares used to compute net income per share,
diluted
|
101.0
|
|
|
97.8
|
|
|
99.4
|
|
|
99.7
|
|
|
|
(1)
|
Consists of
acquisition transaction costs, share-based compensation related to
the cash settlement of certain equity awards, and costs to
terminate certain employment, operating lease, and other contracts
of the acquired companies.
|
(2)
|
Consists of the
amortization of intellectual property licenses and covenant not to
sue.
|
(3)
|
Consists of a gain
related to the early termination of our previous headquarters
leases.
|
(4)
|
Consists primarily of
non-cash interest expense related to the company's convertible
senior notes.
|
(5)
|
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 2.3 million and
1.7 million shares for the three and nine months ended
April 30, 2021, respectively.
|
Palo Alto
Networks, Inc.
|
Calculation of
Billings
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April 30,
|
|
April 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Total
revenue
|
$
|
1,073.9
|
|
|
$
|
869.4
|
|
|
$
|
3,036.8
|
|
|
$
|
2,458.0
|
|
Add: change in total
deferred revenue, net of acquired deferred revenue
|
212.5
|
|
|
146.0
|
|
|
547.1
|
|
|
453.7
|
|
Billings
|
$
|
1,286.4
|
|
|
$
|
1,015.4
|
|
|
$
|
3,583.9
|
|
|
$
|
2,911.7
|
|
Palo Alto
Networks, Inc.
|
Preliminary
Condensed Consolidated Balance Sheets
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
April 30,
2021
|
|
July 31,
2020
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,886.1
|
|
|
$
|
2,958.0
|
|
Short-term
investments
|
1,059.3
|
|
|
789.8
|
|
Accounts receivable,
net
|
766.8
|
|
|
1,037.1
|
|
Prepaid expenses and
other current assets
|
428.7
|
|
|
344.3
|
|
Total current
assets
|
4,140.9
|
|
|
5,129.2
|
|
Property and
equipment, net
|
322.7
|
|
|
348.1
|
|
Operating lease
right-of-use assets
|
258.7
|
|
|
258.7
|
|
Long-term
investments
|
885.4
|
|
|
554.4
|
|
Goodwill
|
2,713.1
|
|
|
1,812.9
|
|
Intangible assets,
net
|
530.3
|
|
|
358.2
|
|
Other
assets
|
711.0
|
|
|
603.9
|
|
Total
assets
|
$
|
9,562.1
|
|
|
$
|
9,065.4
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
71.8
|
|
|
$
|
63.6
|
|
Accrued
compensation
|
252.8
|
|
|
322.2
|
|
Accrued and other
liabilities
|
261.5
|
|
|
256.8
|
|
Deferred
revenue
|
2,421.2
|
|
|
2,049.1
|
|
Total current
liabilities
|
3,007.3
|
|
|
2,691.7
|
|
Convertible senior
notes, net
|
3,190.6
|
|
|
3,084.1
|
|
Long-term deferred
revenue
|
1,953.8
|
|
|
1,761.1
|
|
Long-term operating
lease liabilities
|
317.7
|
|
|
336.6
|
|
Other long-term
liabilities
|
95.5
|
|
|
90.1
|
|
Stockholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
|
—
|
|
Common stock and
additional paid-in capital
|
2,541.1
|
|
|
2,259.2
|
|
Accumulated other
comprehensive income
|
3.6
|
|
|
10.5
|
|
Accumulated
deficit
|
(1,547.5)
|
|
|
(1,167.9)
|
|
Total stockholders'
equity
|
997.2
|
|
|
1,101.8
|
|
Total liabilities and
stockholders' equity
|
$
|
9,562.1
|
|
|
$
|
9,065.4
|
|
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SOURCE Palo Alto Networks, Inc.