SANTA CLARA, Calif.,
Feb. 22, 2021 /PRNewswire/ -- Palo
Alto Networks (NYSE: PANW), the global cybersecurity leader,
announced today financial results for its fiscal second quarter
2021, ended January 31, 2021.
Total revenue for the fiscal second quarter 2021 grew 25% year
over year to $1.0 billion, compared
with total revenue of $816.7 million
for the fiscal second quarter 2020. GAAP net loss for the fiscal
second quarter 2021 was $142.3
million, or $1.48 per diluted
share, compared with GAAP net loss of $73.7
million, or $0.75 per diluted
share, for the fiscal second quarter 2020.
Non-GAAP net income for the fiscal second quarter 2021 was
$154.2 million, or $1.55 per diluted share, compared with non-GAAP
net income of $120.3 million, or
$1.19 per diluted share, for the
fiscal second quarter 2020. A reconciliation between GAAP and
non-GAAP information is contained in the tables below.
"The momentum in the business continues to be strong, with
second quarter revenue growth of 25% year over year to over
1 billion USD, driven by strong
execution across the board," said Nikesh
Arora, chairman and CEO of Palo Alto Networks. "Events like
the SolarStorm attack highlight the importance of cybersecurity,
and Palo Alto Networks is well positioned to protect our customers
with best-of-breed solutions. We are excited about the bets that we
have made in SASE, Cloud and AI. Our three-platform strategy is
paying off."
Financial Outlook
Palo Alto Networks provides guidance based on current market
conditions and expectations.
For the fiscal third quarter 2021, the company expects:
- Total billings in the range of $1.22
billion to $1.24 billion,
representing year-over-year growth of between 20% and 22%.
- Total revenue in the range of $1.05
billion to $1.06 billion,
representing year-over-year growth of between 21% and 22%.
- Diluted non-GAAP net income per share in the range of
$1.27 to $1.29, which incorporates net expenses related to
the proposed acquisition of Bridgecrew, using 100 million to 102
million shares.
For the fiscal year 2021, the company is raising guidance and
expects:
- Total billings in the range of $5.13
billion to $5.18 billion,
representing year-over-year growth of between 19% and 20%.
- Total revenue in the range of $4.15
billion to $4.20 billion,
representing year-over-year growth of between 22% and 23%.
- Diluted non-GAAP net income per share in the range of
$5.80 to $5.90, which incorporates net expenses related to
the proposed acquisition of Bridgecrew, using 99 million to 101
million shares.
- Adjusted free cash flow margin of approximately 29%, which
includes net expenses and acquisition transaction costs
attributable to the proposed acquisition of Bridgecrew.
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 second quarter 2021
results as well as the outlook for its fiscal third quarter 2021
today at 4:30 p.m. Eastern
time/1:30 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 financial outlook for the fiscal third quarter 2021
and fiscal year 2021, including the expected impact of our proposed
acquisition of Bridgecrew, and our proposed acquisition of
Bridgecrew, including the timing of the closing and the benefits to
us and our end-customers once the transaction closes and we
integrate Bridgecrew into our operations. 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 November 19,
2020, 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 given the company's hybrid-SaaS revenue model, 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
|
|
Six Months
Ended
|
|
January
31,
|
|
January
31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue:
|
|
|
|
|
|
|
|
Product
|
$
|
254.7
|
|
|
$
|
246.5
|
|
|
$
|
492.0
|
|
|
$
|
477.7
|
|
Subscription and
support
|
762.2
|
|
|
570.2
|
|
|
1,470.9
|
|
|
1,110.9
|
|
Total
revenue
|
1,016.9
|
|
|
816.7
|
|
|
1,962.9
|
|
|
1,588.6
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
Product
|
75.6
|
|
|
68.7
|
|
|
137.8
|
|
|
133.8
|
|
Subscription and
support
|
232.0
|
|
|
164.4
|
|
|
447.6
|
|
|
317.0
|
|
Total cost of
revenue
|
307.6
|
|
|
233.1
|
|
|
585.4
|
|
|
450.8
|
|
Total gross
profit
|
709.3
|
|
|
583.6
|
|
|
1,377.5
|
|
|
1,137.8
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
266.7
|
|
|
185.4
|
|
|
504.1
|
|
|
355.9
|
|
Sales and
marketing
|
427.4
|
|
|
374.9
|
|
|
816.0
|
|
|
740.6
|
|
General and
administrative
|
104.0
|
|
|
76.2
|
|
|
190.7
|
|
|
146.0
|
|
Total operating
expenses
|
798.1
|
|
|
636.5
|
|
|
1,510.8
|
|
|
1,242.5
|
|
Operating
loss
|
(88.8)
|
|
|
(52.9)
|
|
|
(133.3)
|
|
|
(104.7)
|
|
Interest
expense
|
(40.7)
|
|
|
(19.0)
|
|
|
(80.9)
|
|
|
(37.9)
|
|
Other income
(expense), net
|
(0.5)
|
|
|
10.8
|
|
|
1.9
|
|
|
27.0
|
|
Loss before income
taxes
|
(130.0)
|
|
|
(61.1)
|
|
|
(212.3)
|
|
|
(115.6)
|
|
Provision for income
taxes
|
12.3
|
|
|
12.6
|
|
|
22.2
|
|
|
17.7
|
|
Net loss
|
$
|
(142.3)
|
|
|
$
|
(73.7)
|
|
|
$
|
(234.5)
|
|
|
$
|
(133.3)
|
|
Net loss per share,
basic and diluted
|
$
|
(1.48)
|
|
|
$
|
(0.75)
|
|
|
$
|
(2.45)
|
|
|
$
|
(1.37)
|
|
Weighted-average
shares used to compute net loss per share, basic and
diluted
|
95.9
|
|
|
98.3
|
|
|
95.7
|
|
|
97.5
|
|
Palo Alto
Networks, Inc.
|
Reconciliation of
GAAP to Non-GAAP Financial Measures
|
(In millions,
except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
January
31,
|
|
January
31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
GAAP net
loss
|
$
|
(142.3)
|
|
|
$
|
(73.7)
|
|
|
$
|
(234.5)
|
|
|
$
|
(133.3)
|
|
Share-based
compensation-related charges
|
238.6
|
|
|
177.0
|
|
|
450.1
|
|
|
330.7
|
|
Acquisition-related
costs(1)
|
20.6
|
|
|
7.0
|
|
|
33.7
|
|
|
10.4
|
|
Amortization expense
of acquired intangible assets
|
29.6
|
|
|
17.8
|
|
|
53.1
|
|
|
34.5
|
|
Litigation-related
charges(2)
|
1.8
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
Gain related to
facility exit(3)
|
—
|
|
|
(3.1)
|
|
|
—
|
|
|
(3.1)
|
|
Non-cash charges
related to convertible notes(4)
|
35.5
|
|
|
15.7
|
|
|
70.6
|
|
|
31.2
|
|
Foreign currency gain
associated with non-GAAP adjustments
|
1.7
|
|
|
1.0
|
|
|
1.6
|
|
|
0.5
|
|
Income tax and other
tax adjustments related to the above
|
(31.3)
|
|
|
(21.4)
|
|
|
(65.9)
|
|
|
(45.8)
|
|
Non-GAAP net
income
|
$
|
154.2
|
|
|
$
|
120.3
|
|
|
$
|
312.3
|
|
|
$
|
225.1
|
|
|
|
|
|
|
|
|
|
GAAP net loss per
share, diluted
|
$
|
(1.48)
|
|
|
$
|
(0.75)
|
|
|
$
|
(2.45)
|
|
|
$
|
(1.37)
|
|
Share-based
compensation-related charges
|
2.43
|
|
|
1.77
|
|
|
4.60
|
|
|
3.32
|
|
Acquisition-related
costs(1)
|
0.21
|
|
|
0.07
|
|
|
0.35
|
|
|
0.11
|
|
Amortization expense
of acquired intangible assets
|
0.31
|
|
|
0.18
|
|
|
0.55
|
|
|
0.35
|
|
Litigation-related
charges(2)
|
0.02
|
|
|
0.00
|
|
|
0.04
|
|
|
0.00
|
|
Gain related to
facility exit(3)
|
0.00
|
|
|
(0.03)
|
|
|
0.00
|
|
|
(0.03)
|
|
Non-cash charges
related to convertible notes(4)
|
0.37
|
|
|
0.16
|
|
|
0.74
|
|
|
0.32
|
|
Foreign currency loss
associated with non-GAAP adjustments
|
0.02
|
|
|
0.01
|
|
|
0.02
|
|
|
0.01
|
|
Income tax and other
tax adjustments related to the above
|
(0.33)
|
|
|
(0.22)
|
|
|
(0.69)
|
|
|
(0.47)
|
|
Non-GAAP net income
per share, diluted
|
$
|
1.55
|
|
|
$
|
1.19
|
|
|
$
|
3.16
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
GAAP weighted-average
shares used to compute net loss per share, diluted
|
95.9
|
|
|
98.3
|
|
|
95.7
|
|
|
97.5
|
|
Weighted-average
effect of potentially dilutive securities(5)
|
3.7
|
|
|
2.8
|
|
|
3.0
|
|
|
3.1
|
|
Non-GAAP
weighted-average shares used to compute net income per share,
diluted
|
99.6
|
|
|
101.1
|
|
|
98.7
|
|
|
100.6
|
|
|
|
(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 2.7 million and 1.4
million shares for the three and six months ended January 31, 2021,
respectively.
|
Palo Alto
Networks, Inc.
|
Calculation of
Billings
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
January
31,
|
|
January
31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Total
revenue
|
$
|
1,016.9
|
|
|
$
|
816.7
|
|
|
$
|
1,962.9
|
|
|
$
|
1,588.6
|
|
Add: change in total
deferred revenue, net of acquired deferred revenue
|
197.8
|
|
|
182.2
|
|
|
334.6
|
|
|
307.7
|
|
Billings
|
$
|
1,214.7
|
|
|
$
|
998.9
|
|
|
$
|
2,297.5
|
|
|
$
|
1,896.3
|
|
Palo Alto
Networks, Inc.
|
Preliminary
Condensed Consolidated Balance Sheets
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
January 31,
2021
|
|
July 31,
2020
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
2,113.2
|
|
|
$
|
2,958.0
|
|
Short-term
investments
|
1,058.0
|
|
|
789.8
|
|
Accounts receivable,
net
|
669.2
|
|
|
1,037.1
|
|
Prepaid expenses and
other current assets
|
435.4
|
|
|
344.3
|
|
Total current
assets
|
4,275.8
|
|
|
5,129.2
|
|
Property and
equipment, net
|
330.7
|
|
|
348.1
|
|
Operating lease
right-of-use assets
|
252.1
|
|
|
258.7
|
|
Long-term
investments
|
857.1
|
|
|
554.4
|
|
Goodwill
|
2,583.5
|
|
|
1,812.9
|
|
Intangible assets,
net
|
541.1
|
|
|
358.2
|
|
Other
assets
|
648.1
|
|
|
603.9
|
|
Total
assets
|
$
|
9,488.4
|
|
|
$
|
9,065.4
|
|
Liabilities,
temporary equity, and stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
44.7
|
|
|
$
|
63.6
|
|
Accrued
compensation
|
261.0
|
|
|
322.2
|
|
Accrued and other
liabilities
|
255.3
|
|
|
256.8
|
|
Deferred
revenue
|
2,289.7
|
|
|
2,049.1
|
|
Convertible senior
notes, net
|
1,525.6
|
|
|
—
|
|
Total current
liabilities
|
4,376.3
|
|
|
2,691.7
|
|
Convertible senior
notes, net
|
1,629.1
|
|
|
3,084.1
|
|
Long-term deferred
revenue
|
1,872.7
|
|
|
1,761.1
|
|
Long-term operating
lease liabilities
|
317.9
|
|
|
336.6
|
|
Other long-term
liabilities
|
93.9
|
|
|
90.1
|
|
Temporary
equity
|
161.2
|
|
|
—
|
|
Stockholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
|
—
|
|
Common stock and
additional paid-in capital
|
2,429.8
|
|
|
2,259.2
|
|
Accumulated other
comprehensive income
|
9.9
|
|
|
10.5
|
|
Accumulated
deficit
|
(1,402.4)
|
|
|
(1,167.9)
|
|
Total stockholders'
equity
|
1,037.3
|
|
|
1,101.8
|
|
Total liabilities,
temporary equity, and stockholders' equity
|
$
|
9,488.4
|
|
|
$
|
9,065.4
|
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/palo-alto-networks-reports-fiscal-second-quarter-2021-financial-results-301232681.html
SOURCE Palo Alto Networks, Inc.