|
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-2530195
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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4401 Great America Parkway
Santa Clara, California 95054
(Address of principal executive office, including zip code)
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
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¨
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|
|
|
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Page
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PART I - FINANCIAL INFORMATION
|
|
Item 1.
|
||
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||
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||
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||
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||
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Item 2.
|
||
Item 3.
|
||
Item 4.
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||
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PART II - OTHER INFORMATION
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Item 1.
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||
Item 1A.
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||
Item 6.
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||
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ITEM 1.
|
FINANCIAL STATEMENTS
|
|
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 of allowance for doubtful accounts of $0.8 and $0.7 at October 31, 2015 and July 31, 2015, respectively
|
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
|
|
||
Commitments and contingencies (Note 5)
|
|
|
|
|
|
||
Temporary equity
|
82.7
|
|
|
87.9
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock; $0.0001 par value; 100 shares authorized; none issued and outstanding at October 31, 2015 and July 31, 2015
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital; $0.0001 par value; 1,000 shares authorized; 85.9 and 84.8 shares issued and outstanding at October 31, 2015 and July 31, 2015, respectively
|
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
|
|
|
Three Months Ended
|
||||||
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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
|
|
|
Three Months Ended
|
||||||
|
October 31,
|
||||||
|
2015
|
|
2014
|
||||
Net loss
|
$
|
(38.7
|
)
|
|
$
|
(30.1
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Change in unrealized gains (losses) on investments
|
(0.3
|
)
|
|
0.1
|
|
||
Comprehensive loss
|
$
|
(39.0
|
)
|
|
$
|
(30.0
|
)
|
|
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
|
|
•
|
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
|
•
|
Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
|
|
|
October 31, 2015
|
|
July 31, 2015
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. government and agency securities
|
|
$
|
—
|
|
|
$
|
14.8
|
|
|
$
|
—
|
|
|
$
|
14.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total cash equivalents
|
|
—
|
|
|
14.8
|
|
|
—
|
|
|
14.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Certificates of deposit
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
||||||||
Corporate debt securities
|
|
—
|
|
|
111.6
|
|
|
—
|
|
|
111.6
|
|
|
—
|
|
|
97.8
|
|
|
—
|
|
|
97.8
|
|
||||||||
U.S. government and agency securities
|
|
—
|
|
|
372.9
|
|
|
—
|
|
|
372.9
|
|
|
—
|
|
|
314.4
|
|
|
—
|
|
|
314.4
|
|
||||||||
Total short-term investments
|
|
—
|
|
|
485.5
|
|
|
—
|
|
|
485.5
|
|
|
—
|
|
|
413.2
|
|
|
—
|
|
|
413.2
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
—
|
|
|
180.3
|
|
|
—
|
|
|
180.3
|
|
|
—
|
|
|
92.9
|
|
|
—
|
|
|
92.9
|
|
||||||||
U.S. government and agency securities
|
|
—
|
|
|
514.2
|
|
|
—
|
|
|
514.2
|
|
|
—
|
|
|
445.9
|
|
|
—
|
|
|
445.9
|
|
||||||||
Total long-term investments
|
|
—
|
|
|
694.5
|
|
|
—
|
|
|
694.5
|
|
|
—
|
|
|
538.8
|
|
|
—
|
|
|
538.8
|
|
||||||||
Total assets measured at fair value
|
|
$
|
—
|
|
|
$
|
1,194.8
|
|
|
$
|
—
|
|
|
$
|
1,194.8
|
|
|
$
|
—
|
|
|
$
|
952.0
|
|
|
$
|
—
|
|
|
$
|
952.0
|
|
|
October 31, 2015
|
||||||||||||||
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Certificates of deposit
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.0
|
|
Corporate debt securities
|
292.1
|
|
|
0.1
|
|
|
(0.3
|
)
|
|
291.9
|
|
||||
U.S. government and agency securities
|
902.1
|
|
|
0.2
|
|
|
(0.4
|
)
|
|
901.9
|
|
||||
Total
|
$
|
1,195.2
|
|
|
$
|
0.3
|
|
|
$
|
(0.7
|
)
|
|
$
|
1,194.8
|
|
|
July 31, 2015
|
||||||||||||||
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Certificates of deposit
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.0
|
|
Corporate debt securities
|
190.9
|
|
|
—
|
|
|
(0.2
|
)
|
|
190.7
|
|
||||
U.S. government and agency securities
|
760.2
|
|
|
0.3
|
|
|
(0.2
|
)
|
|
760.3
|
|
||||
Total
|
$
|
952.1
|
|
|
$
|
0.3
|
|
|
$
|
(0.4
|
)
|
|
$
|
952.0
|
|
|
Amortized Cost
|
|
Fair Value
|
||||
Due within one year
|
$
|
500.2
|
|
|
$
|
500.3
|
|
Due between one and three years
|
695.0
|
|
|
694.5
|
|
||
Total
|
$
|
1,195.2
|
|
|
$
|
1,194.8
|
|
•
|
if the last reported sale price of our common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to
130%
of the conversion price for the Notes on each applicable trading day (the “sale price condition”);
|
•
|
during the
five
business day period after any
five
consecutive trading day period, in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than
98%
of the product of the last reported sale price of our common stock and the conversion rate for the Notes on each such trading day (the “trading price condition”); or
|
•
|
upon the occurrence of specified corporate events.
|
|
October 31, 2015
|
|
July 31, 2015
|
||||
Liability:
|
|
|
|
||||
Principal
|
$
|
575.0
|
|
|
$
|
575.0
|
|
Less: debt discount, net of amortization
|
82.7
|
|
|
87.9
|
|
||
Net carrying amount
|
$
|
492.3
|
|
|
$
|
487.1
|
|
|
|
|
|
||||
Equity (including temporary equity)
|
$
|
(109.8
|
)
|
|
$
|
(109.8
|
)
|
|
Three Months Ended October 31,
|
||||||
|
2015
|
|
2014
|
||||
Amortization of debt discount
|
$
|
5.2
|
|
|
$
|
5.0
|
|
Amortization of debt issuance costs
|
0.5
|
|
|
0.5
|
|
||
Total interest expense recognized
|
$
|
5.7
|
|
|
$
|
5.5
|
|
|
|
|
|
||||
Effective interest rate of the liability component
|
4.8
|
%
|
|
4.8
|
%
|
|
Amount
|
||
Fiscal years ending July 31:
|
|
||
Remaining 2016
|
$
|
16.9
|
|
2017
|
25.1
|
|
|
2018
|
28.2
|
|
|
2019
|
41.9
|
|
|
2020
|
45.9
|
|
|
2021 and thereafter
|
350.5
|
|
|
Committed gross lease payments
|
508.5
|
|
|
Less: proceeds from sublease rental
|
7.4
|
|
|
Net operating lease obligation
|
$
|
501.1
|
|
|
Options Outstanding
|
|||||||||||
|
Number
of Shares |
|
Weighted-
Average Exercise Price Per Share |
|
Weighted-
Average Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value |
|||||
Balance—July 31, 2015
|
3.3
|
|
|
$
|
13.74
|
|
|
6.2
|
|
$
|
562.9
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Options forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|||
Options exercised
|
(0.4
|
)
|
|
11.46
|
|
|
|
|
|
|||
Balance—October 31, 2015
|
2.9
|
|
|
$
|
14.06
|
|
|
5.9
|
|
$
|
420.2
|
|
Options vested and expected to vest—October 31 2015
|
2.9
|
|
|
$
|
14.04
|
|
|
5.9
|
|
$
|
419.6
|
|
Options exercisable—October 31, 2015
|
2.5
|
|
|
$
|
12.89
|
|
|
5.9
|
|
$
|
364.2
|
|
|
RSUs Outstanding
|
|||||||||||
|
Number
of Shares |
|
Weighted-
Average Grant-Date Fair Value Per Share |
|
Weighted-
Average Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value |
|||||
Balance—July 31, 2015
|
7.2
|
|
|
$
|
95.66
|
|
|
1.2
|
|
$
|
1,334.8
|
|
RSUs granted
|
0.4
|
|
|
171.01
|
|
|
|
|
|
|||
RSUs vested
|
(0.6
|
)
|
|
66.60
|
|
|
|
|
|
|||
RSUs forfeited
|
(0.2
|
)
|
|
82.45
|
|
|
|
|
|
|||
Balance—October 31, 2015
|
6.8
|
|
|
$
|
103.05
|
|
|
1.1
|
|
$
|
1,101.0
|
|
RSUs vested and expected to vest—October 31, 2015
|
6.5
|
|
|
$
|
102.49
|
|
|
1.1
|
|
$
|
1,046.0
|
|
|
Three Months Ended October 31,
|
||||||
|
2015
|
|
2014
|
||||
Cost of product revenue
|
$
|
1.3
|
|
|
$
|
0.7
|
|
Cost of services revenue
|
7.0
|
|
|
3.5
|
|
||
Research and development
|
25.0
|
|
|
14.0
|
|
||
Sales and marketing
|
27.2
|
|
|
15.8
|
|
||
General and administrative
|
12.4
|
|
|
4.5
|
|
||
Total
|
$
|
72.9
|
|
|
$
|
38.5
|
|
|
Three Months Ended
|
||||||
|
October 31,
|
||||||
|
2015
|
|
2014
|
||||
Net loss
|
$
|
(38.7
|
)
|
|
$
|
(30.1
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
85.1
|
|
|
79.4
|
|
||
Net loss per share, basic and diluted
|
$
|
(0.45
|
)
|
|
$
|
(0.38
|
)
|
|
October 31,
|
||||
|
2015
|
|
2014
|
||
Options to purchase common stock
|
2.9
|
|
|
5.2
|
|
RSUs
|
6.8
|
|
|
6.2
|
|
Convertible senior notes
|
5.2
|
|
|
5.2
|
|
Warrants related to the issuance of convertible senior notes
|
5.2
|
|
|
5.2
|
|
Total
|
20.1
|
|
|
21.8
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Overview.
A discussion of our business and overall analysis of financial and other highlights in order to provide context for the remainder of MD&A.
|
•
|
Key Financial Metrics.
An analysis of our generally accepted accounting principles (GAAP) and non-GAAP key financial metrics, which management monitors to evaluate our performance.
|
•
|
Results of Operations.
A discussion of the nature and trends of the components of our financial results and an analysis of our financial results comparing the
three months ended
October 31, 2015
to the
three months ended
October 31, 2014
.
|
•
|
Liquidity and Capital Resources.
An analysis of changes in our balance sheets and cash flows, and a discussion of our financial condition and our ability to meet cash needs.
|
•
|
Contractual Obligations and Commitments.
An overview of our contractual obligations, contingent liabilities, commitments, and off-balance sheet arrangements outstanding as of
October 31, 2015
, including expected payment schedule.
|
•
|
Critical Accounting Policies and Estimates.
A discussion of accounting policies that require critical estimates, assumptions, and judgments.
|
•
|
Recent Accounting Pronouncements.
A discussion of expected impacts of impending accounting changes on financial information to be reported in the future.
|
|
October 31, 2015
|
|
July 31, 2015
|
||||
|
(in millions)
|
||||||
Total deferred revenue
|
$
|
804.5
|
|
|
$
|
713.7
|
|
Cash, cash equivalents, and investments
|
$
|
1,455.8
|
|
|
$
|
1,327.8
|
|
|
Three Months Ended October 31,
|
||||||
|
2015
|
|
2014
|
||||
|
(dollars in millions)
|
||||||
Total revenue
|
$
|
297.2
|
|
|
$
|
192.3
|
|
Year over year percentage increase
|
54.5
|
%
|
|
50.1
|
%
|
||
Gross margin percentage
|
73.3
|
%
|
|
72.2
|
%
|
||
Operating loss
|
$
|
(30.8
|
)
|
|
$
|
(23.8
|
)
|
Operating margin percentage
|
(10.4
|
)%
|
|
(12.4
|
)%
|
||
Billings (non-GAAP)
|
$
|
388.0
|
|
|
$
|
240.5
|
|
Cash flow provided by operating activities
|
$
|
146.7
|
|
|
$
|
74.9
|
|
Free cash flow (non-GAAP)
|
$
|
127.2
|
|
|
$
|
69.0
|
|
•
|
Deferred Revenue.
Our deferred revenue consists of amounts that have been invoiced, but have not been recognized as revenue as of the period end. The majority of our deferred revenue balance consists of subscription and support and maintenance revenue that is recognized ratably over the contractual service period. We monitor our deferred revenue balance because it represents a significant portion of revenue to be recognized in future periods.
|
•
|
Cash Flow Provided by Operating Activities.
We monitor cash flow provided by operating activities as a measure of our overall business performance. Our cash flow provided by operating activities is driven in large part by sales of our products and from up-front payments for both subscriptions and support and maintenance services. Monitoring cash flow provided by operating activities enables us to analyze our financial performance without the non-cash effects of certain items such as depreciation, amortization, and share-based compensation costs, thereby allowing us to better understand and manage the cash needs of our business.
|
•
|
Free Cash Flow (non-GAAP).
We define free cash flow, a non-GAAP financial measure, as cash provided by operating activities less purchases of property, equipment, and other assets. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the purchases of property, equipment, and other productive assets, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. A limitation of the utility of free cash flow as a measure of our financial performance and liquidity is that it does not represent the total increase or decrease in our cash balance for the period. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure. A reconciliation of free cash flow to cash flow provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, is provided below:
|
|
Three Months Ended October 31,
|
||||||
|
2015
|
|
2014
|
||||
|
(in millions)
|
||||||
Free cash flow (non-GAAP):
|
|
|
|
||||
Cash flow provided by operating activities
|
$
|
146.7
|
|
|
$
|
74.9
|
|
Less: purchases of property, equipment, and other assets
|
19.5
|
|
|
5.9
|
|
||
Free cash flow (non-GAAP)
|
$
|
127.2
|
|
|
$
|
69.0
|
|
Net cash used in investing activities
|
$
|
(263.5
|
)
|
|
$
|
(201.1
|
)
|
Net cash provided by financing activities
|
$
|
16.8
|
|
|
$
|
16.1
|
|
•
|
Billings (non-GAAP).
We define billings, a non-GAAP financial measure, as total revenue plus the change in deferred revenue during the period. Billings is a key measure used by our management to manage our business because billings drive deferred revenue, which is an important indicator of the health and visibility of our business. We consider billings to be a useful metric for management and investors, particularly if we continue to experience increased sales of subscriptions and strong renewal rates for subscriptions and support and maintenance services, and as we monitor our near term cash flows. We believe that billings provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management. However, it is important to note that other
|
|
Three Months Ended October 31,
|
||||||
|
2015
|
|
2014
|
||||
|
(in millions)
|
||||||
Billings (non-GAAP):
|
|
|
|
||||
Total revenue
|
$
|
297.2
|
|
|
$
|
192.3
|
|
Add: change in total deferred revenue
|
90.8
|
|
|
48.2
|
|
||
Billings (non-GAAP)
|
$
|
388.0
|
|
|
$
|
240.5
|
|
|
Three Months Ended October 31,
|
||||||||||||
|
2015
|
|
2014
|
||||||||||
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
||||||
|
(dollars in millions)
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||
Product
|
$
|
147.7
|
|
|
49.7
|
%
|
|
$
|
101.5
|
|
|
52.8
|
%
|
Services
|
149.5
|
|
|
50.3
|
%
|
|
90.8
|
|
|
47.2
|
%
|
||
Total revenue
|
297.2
|
|
|
100.0
|
%
|
|
192.3
|
|
|
100.0
|
%
|
||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||
Product
|
38.8
|
|
|
13.0
|
%
|
|
29.1
|
|
|
15.2
|
%
|
||
Services
|
40.4
|
|
|
13.7
|
%
|
|
24.3
|
|
|
12.6
|
%
|
||
Total cost of revenue
|
79.2
|
|
|
26.7
|
%
|
|
53.4
|
|
|
27.8
|
%
|
||
Total gross profit
|
218.0
|
|
|
73.3
|
%
|
|
138.9
|
|
|
72.2
|
%
|
||
Operating expenses:
|
|
|
|
|
|
|
|
||||||
Research and development
|
59.7
|
|
|
20.1
|
%
|
|
37.3
|
|
|
19.4
|
%
|
||
Sales and marketing
|
158.3
|
|
|
53.3
|
%
|
|
106.4
|
|
|
55.3
|
%
|
||
General and administrative
|
30.8
|
|
|
10.3
|
%
|
|
19.0
|
|
|
9.9
|
%
|
||
Total operating expenses
|
248.8
|
|
|
83.7
|
%
|
|
162.7
|
|
|
84.6
|
%
|
||
Operating loss
|
(30.8
|
)
|
|
(10.4
|
)%
|
|
(23.8
|
)
|
|
(12.4
|
)%
|
||
Interest expense
|
(5.8
|
)
|
|
(1.9
|
)%
|
|
(5.5
|
)
|
|
(2.9
|
)%
|
||
Other income, net
|
2.2
|
|
|
0.7
|
%
|
|
0.4
|
|
|
0.2
|
%
|
||
Loss before income taxes
|
(34.4
|
)
|
|
(11.6
|
)%
|
|
(28.9
|
)
|
|
(15.1
|
)%
|
||
Provision for income taxes
|
4.3
|
|
|
1.4
|
%
|
|
1.2
|
|
|
0.5
|
%
|
||
Net loss
|
$
|
(38.7
|
)
|
|
(13.0
|
)%
|
|
$
|
(30.1
|
)
|
|
(15.6
|
)%
|
|
|
|
|
|
|
|
|
||||||
Number of employees at period end
|
2,998
|
|
|
|
|
1,900
|
|
|
|
•
|
Product Revenue
.
Product revenue is derived primarily from sales of our appliances. Product revenue also includes revenue derived from software licenses of Panorama, GlobalProtect, and the VM-Series. We recognize product revenue at the time of shipment, provided that all other revenue recognition criteria have been met. As a percentage of total revenue, we expect our product revenue to vary from quarter to quarter based on seasonal and cyclical factors.
|
•
|
Services Revenue
.
Services revenue is derived primarily from sales of our subscriptions and support and maintenance. Our contractual subscription and support and maintenance terms are typically one year, although we also offer three to five year terms. We recognize revenue from subscriptions and support and maintenance over the contractual service period. As a percentage of total revenue, we expect our services revenue to vary from quarter to quarter and increase over the long term as we introduce new subscriptions, renew existing services contracts, and expand our installed end-customer base.
|
|
Three Months Ended October 31,
|
|
|
|
|
|||||||||||||||
|
2015
|
|
2014
|
|
Change
|
|||||||||||||||
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
%
|
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
$
|
147.7
|
|
|
49.7
|
%
|
|
$
|
101.5
|
|
|
52.8
|
%
|
|
$
|
46.2
|
|
|
45.5
|
%
|
Services
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Subscription
|
73.6
|
|
|
24.8
|
%
|
|
43.7
|
|
|
22.7
|
%
|
|
29.9
|
|
|
68.5
|
%
|
|||
Support and maintenance
|
75.9
|
|
|
25.5
|
%
|
|
47.1
|
|
|
24.5
|
%
|
|
28.8
|
|
|
60.9
|
%
|
|||
Total services
|
149.5
|
|
|
50.3
|
%
|
|
90.8
|
|
|
47.2
|
%
|
|
58.7
|
|
|
64.6
|
%
|
|||
Total revenue
|
$
|
297.2
|
|
|
100.0
|
%
|
|
$
|
192.3
|
|
|
100.0
|
%
|
|
$
|
104.9
|
|
|
54.5
|
%
|
Revenue by geographic theater:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Americas
|
$
|
211.3
|
|
|
71.1
|
%
|
|
$
|
131.8
|
|
|
68.6
|
%
|
|
$
|
79.5
|
|
|
60.3
|
%
|
EMEA
|
53.7
|
|
|
18.1
|
%
|
|
38.5
|
|
|
20.0
|
%
|
|
15.2
|
|
|
39.6
|
%
|
|||
APAC
|
32.2
|
|
|
10.8
|
%
|
|
22.0
|
|
|
11.4
|
%
|
|
10.2
|
|
|
46.3
|
%
|
|||
Total revenue
|
$
|
297.2
|
|
|
100.0
|
%
|
|
$
|
192.3
|
|
|
100.0
|
%
|
|
$
|
104.9
|
|
|
54.5
|
%
|
•
|
Cost of Product Revenue.
Cost of product revenue primarily includes costs paid to our third-party contract manufacturer. Our cost of product revenue also includes amortization of intellectual property licenses, product testing
|
•
|
Cost of Services Revenue.
Cost of services revenue includes personnel costs for our global customer support and technical operations organizations, amortization of acquired intangible assets, allocated costs, and uniform resource locator (URL) filtering database service fees. We expect our cost of services revenue to increase as our installed end-customer base grows.
|
|
Three Months Ended October 31,
|
|
|
|||||||||||||||||
|
2015
|
|
2014
|
|
Change
|
|||||||||||||||
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
%
|
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
$
|
38.8
|
|
|
13.0
|
%
|
|
$
|
29.1
|
|
|
15.2
|
%
|
|
$
|
9.7
|
|
|
33.0
|
%
|
Services
|
40.4
|
|
|
13.7
|
%
|
|
24.3
|
|
|
12.6
|
%
|
|
16.1
|
|
|
66.6
|
%
|
|||
Total cost of revenue
|
$
|
79.2
|
|
|
26.7
|
%
|
|
$
|
53.4
|
|
|
27.8
|
%
|
|
$
|
25.8
|
|
|
48.3
|
%
|
Includes share-based compensation of:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
$
|
1.3
|
|
|
|
|
$
|
0.7
|
|
|
|
|
$
|
0.6
|
|
|
71.8
|
%
|
||
Services
|
7.0
|
|
|
|
|
3.5
|
|
|
|
|
3.5
|
|
|
99.2
|
%
|
|||||
Total share-based compensation included in cost of revenue
|
$
|
8.3
|
|
|
|
|
$
|
4.2
|
|
|
|
|
$
|
4.1
|
|
|
94.4
|
%
|
|
Three Months Ended October 31,
|
|
|
|||||||||||||||||
|
2015
|
|
2014
|
|
Change
|
|||||||||||||||
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
$
|
108.9
|
|
|
73.8
|
%
|
|
$
|
72.4
|
|
|
71.3
|
%
|
|
$
|
36.5
|
|
|
2.5
|
%
|
Services
|
109.1
|
|
|
72.9
|
%
|
|
66.5
|
|
|
73.2
|
%
|
|
42.6
|
|
|
(0.3
|
)%
|
|||
Total gross profit
|
$
|
218.0
|
|
|
73.3
|
%
|
|
$
|
138.9
|
|
|
72.2
|
%
|
|
$
|
79.1
|
|
|
1.1
|
%
|
•
|
Research and Development.
Research and development expense consists primarily of personnel costs. Research and development expense also includes prototype related expenses and allocated costs. We expect research and development expense to increase in absolute dollars as we continue to invest in our future products and services, although our research and development expense may fluctuate as a percentage of total revenue.
|
•
|
Sales and Marketing
.
Sales and marketing expense consists primarily of personnel costs, including commission costs. We expense commission costs as incurred. Sales and marketing expense also includes costs for market development programs, promotional and other marketing costs, travel costs, professional services, and allocated costs. We continue to increase the size of our sales force and have also substantially grown our sales presence internationally. We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our sales and marketing organizations to increase touch points with end-customers and to expand our international presence, although our sales and marketing expense may fluctuate as a percentage of total revenue.
|
•
|
General and Administrative
.
General and administrative expense consists of personnel costs for our executive, finance, human resources, legal, and information technology organizations, professional services, and certain non-recurring general expenses. Professional services consist primarily of legal, auditing, accounting, and other consulting costs. We expect general and administrative expense to increase in absolute dollars due to additional costs associated with accounting, compliance, insurance, and investor relations, although our general and administrative expense may fluctuate as a percentage of total revenue.
|
|
Three Months Ended October 31,
|
|
|
|
|
|||||||||||||||
|
2015
|
|
2014
|
|
Change
|
|||||||||||||||
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
%
|
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research and development
|
$
|
59.7
|
|
|
20.1
|
%
|
|
$
|
37.3
|
|
|
19.4
|
%
|
|
$
|
22.4
|
|
|
60.1
|
%
|
Sales and marketing
|
158.3
|
|
|
53.3
|
%
|
|
106.4
|
|
|
55.3
|
%
|
|
51.9
|
|
|
48.8
|
%
|
|||
General and administrative
|
30.8
|
|
|
10.3
|
%
|
|
19.0
|
|
|
9.9
|
%
|
|
11.8
|
|
|
61.9
|
%
|
|||
Total operating expenses
|
$
|
248.8
|
|
|
83.7
|
%
|
|
$
|
162.7
|
|
|
84.6
|
%
|
|
$
|
86.1
|
|
|
52.9
|
%
|
Includes share-based compensation of:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research and development
|
$
|
25.0
|
|
|
|
|
$
|
14.0
|
|
|
|
|
$
|
11.0
|
|
|
78.3
|
%
|
||
Sales and marketing
|
27.2
|
|
|
|
|
15.8
|
|
|
|
|
11.4
|
|
|
72.2
|
%
|
|||||
General and administrative
|
12.4
|
|
|
|
|
4.5
|
|
|
|
|
7.9
|
|
|
180.9
|
%
|
|||||
Total share-based compensation included in operating expenses
|
$
|
64.6
|
|
|
|
|
$
|
34.3
|
|
|
|
|
$
|
30.3
|
|
|
88.8
|
%
|
|
Three Months Ended October 31,
|
|
|
|
|
|||||||||
|
2015
|
|
2014
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
|
(dollars in millions)
|
|||||||||||||
Other income, net
|
$
|
2.2
|
|
|
$
|
0.4
|
|
|
$
|
1.8
|
|
|
510.2
|
%
|
|
Three Months Ended October 31,
|
|
|
|
|
|||||||||
|
2015
|
|
2014
|
|
Change
|
|||||||||
|
(dollars in millions)
|
|||||||||||||
Provision for income taxes
|
$
|
4.3
|
|
|
$
|
1.2
|
|
|
$
|
3.1
|
|
|
264.0
|
%
|
Effective tax rate
|
(12.2
|
)%
|
|
(4.0
|
)%
|
|
|
|
|
|
October 31, 2015
|
|
July 31, 2015
|
||||
|
(in millions)
|
||||||
Working capital
(1)
|
$
|
(38.3
|
)
|
|
$
|
41.8
|
|
Cash, cash equivalents, and investments:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
275.8
|
|
|
$
|
375.8
|
|
Investments
|
1,180.0
|
|
|
952.0
|
|
||
Total cash, cash equivalents, and investments
|
$
|
1,455.8
|
|
|
$
|
1,327.8
|
|
(1)
|
The net carrying amount of the Notes was classified in current liabilities in our condensed consolidated balance sheets as of
October 31, 2015
and
July 31, 2015
. Refer to Note
4
. Convertible Senior Notes of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
|
Three Months Ended October 31,
|
||||||
2015
|
|
2014
|
|||||
|
(in millions)
|
||||||
Cash provided by operating activities
|
$
|
146.7
|
|
|
$
|
74.9
|
|
Cash used in investing activities
|
(263.5
|
)
|
|
(201.1
|
)
|
||
Cash provided by financing activities
|
16.8
|
|
|
16.1
|
|
||
Net decrease in cash and cash equivalents
|
$
|
(100.0
|
)
|
|
$
|
(110.1
|
)
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less Than 1
Year |
|
1 - 3 Years
|
|
3- 5 Years
|
|
More Than 5
Years |
||||||||||
|
|
|
(in millions)
|
|
|
||||||||||||||
0.0% Convertible Senior Notes due 2019
(1)
|
$
|
575.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
575.0
|
|
|
$
|
—
|
|
Operating lease obligations
(2) (3)
|
508.5
|
|
|
23.3
|
|
|
57.5
|
|
|
90.6
|
|
|
337.1
|
|
|||||
Purchase obligations
(4)
|
46.3
|
|
|
46.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
(5)
|
$
|
1,129.8
|
|
|
$
|
69.6
|
|
|
$
|
57.5
|
|
|
$
|
665.6
|
|
|
$
|
337.1
|
|
(1)
|
As of
October 31, 2015
, holders may convert their Notes at any time during the fiscal quarter ending January 31, 2016. Refer to Note
4
. Convertible Senior Notes of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
(2)
|
Consists of contractual obligations from our non-cancelable operating leases, including the lease agreement executed in October 2015 for additional corporate office space in Santa Clara, California. Refer to Note
5
. Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
(3)
|
Excludes contractual sublease proceeds of
$7.4 million
, of which
$3.0 million
will be received in less than one year and
$4.4 million
will be received in one to three years.
|
(4)
|
Consists of minimum purchase commitments of products and components with our independent contract manufacturer and original design manufacturers. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.
|
(5)
|
No amounts related to income taxes are included. As of
October 31, 2015
, we had approximately
$41.8 million
of tax liabilities recorded related to uncertainty in income tax positions.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
our ability to attract and retain new end-customers;
|
•
|
the budgeting cycles, seasonal buying patterns, and purchasing practices of end-customers;
|
•
|
changes in end-customer, distributor or reseller requirements, or market needs;
|
•
|
price competition;
|
•
|
the timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of our industry, including consolidation among our competitors or end-customers;
|
•
|
changes in the mix of our products and services, including increases in multi-year subscriptions and support and maintenance;
|
•
|
changes in the growth rate of the enterprise security market;
|
•
|
deferral of orders from end-customers in anticipation of new products or product enhancements announced by us or our competitors;
|
•
|
our ability to successfully expand our business domestically and internationally;
|
•
|
the timing and costs related to the development or acquisition of technologies or businesses;
|
•
|
lack of synergy, or the inability to realize expected synergies, resulting from recent acquisitions;
|
•
|
our inability to complete or integrate efficiently any acquisitions that we have completed, or that we may undertake;
|
•
|
our ability to increase the size and productivity of our distribution channel;
|
•
|
decisions by potential end-customers to purchase security solutions from larger, more established security vendors or from their primary network equipment vendors;
|
•
|
changes in end-customer attach rates and renewal rates for our services;
|
•
|
timing of revenue recognition and revenue deferrals;
|
•
|
our ability to manage production and manufacturing related costs, global customer service organization costs, inventory excess and obsolescence costs, and warranty costs;
|
•
|
insolvency or credit difficulties confronting our customers, which could adversely affect their ability to purchase or pay for our products and services, or confronting our key suppliers, including our sole source suppliers, which could disrupt our supply chain;
|
•
|
any disruption in our channel or termination of our relationships with important channel partners, including as a result of consolidation among distributors and resellers of security solutions;
|
•
|
our inability to fulfill our end-customers’ orders due to supply chain delays or events that impact our manufacturers or their suppliers;
|
•
|
increased expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we consummate;
|
•
|
the cost and potential outcomes of litigation, which could have a material adverse effect on our business;
|
•
|
seasonality or cyclical fluctuations in our markets;
|
•
|
future accounting pronouncements or changes in our accounting policies, including the potential impact of the adoption and implementation of the Financial Accounting Standards Board’s new standard regarding revenue recognition;
|
•
|
the impact on our overall effective tax rate caused by any reorganization in our corporate structure or any changes in our valuation allowance for domestic deferred assets;
|
•
|
increases or decreases in our expenses or fluctuations in our sales cycle caused by fluctuations in foreign currency exchange rates, as an increasing amount of our expenses is incurred and paid in currencies other than the U.S. dollar;
|
•
|
political, economic and social instability, including continued hostilities in the Middle East, terrorist activities, and any disruption these events may cause to the broader global industrial economy; and
|
•
|
general macroeconomic conditions, both domestically and in our foreign markets.
|
•
|
large networking vendors such as Cisco Systems, Inc. (“Cisco”) and Juniper Networks, Inc. (“Juniper”) that incorporate security features in their products;
|
•
|
large companies such as Intel Corporation, International Business Machines Corporation, and Hewlett Packard Enterprise Company that have acquired large network and endpoint security specialist vendors in recent years and have the technical and financial resources to bring competitive solutions to the market;
|
•
|
independent security vendors such as Check Point Software Technologies Ltd. (“Check Point”), Fortinet, Inc., and FireEye, Inc., that offer a mix of network and endpoint security products; and Symantec Corporation, that offers endpoint security products; and
|
•
|
small and large companies that offer point solutions that compete with some of the features present in our platform.
|
•
|
greater name recognition and longer operating histories;
|
•
|
larger sales and marketing budgets and resources;
|
•
|
broader distribution and established relationships with distribution partners and end-customers;
|
•
|
greater customer support resources;
|
•
|
greater resources to make acquisitions;
|
•
|
lower labor and development costs;
|
•
|
larger and more mature intellectual property portfolios; and
|
•
|
substantially greater financial, technical, and other resources.
|
•
|
competition from larger competitors, such as Cisco, Check Point, and Juniper, that traditionally target larger enterprises, service providers, and government entities and that may have pre-existing relationships or purchase commitments from those end-customers;
|
•
|
increased purchasing power and leverage held by large end-customers in negotiating contractual arrangements with us;
|
•
|
more stringent requirements in our worldwide support and maintenance service contracts, including stricter support response times and penalties for any failure to meet support requirements; and
|
•
|
longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our products and services.
|
•
|
expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or work-around errors or defects or to address and eliminate vulnerabilities;
|
•
|
loss of existing or potential end-customers or channel partners;
|
•
|
delayed or lost revenue;
|
•
|
delay or failure to attain market acceptance;
|
•
|
an increase in warranty claims compared with our historical experience, or an increased cost of servicing warranty claims, either of which would adversely affect our gross margins; and
|
•
|
litigation, regulatory inquiries, or investigations that may be costly and harm our reputation.
|
•
|
political, economic and social uncertainty around the world, in particular, macroeconomic challenges in Europe, terrorist activities, and continued hostilities in the Middle East;
|
•
|
greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;
|
•
|
the uncertainty of protection for intellectual property rights in some countries;
|
•
|
greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;
|
•
|
risks associated with trade restrictions and foreign legal requirements, including the importation, certification, and localization of our products required in foreign countries;
|
•
|
greater risk of a failure of foreign employees, channel partners, distributors, and resellers to comply with both U.S. and foreign laws, including antitrust regulations, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, U.S. or foreign sanctions regimes and export or import control laws, and any trade regulations ensuring fair trade practices;
|
•
|
heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;
|
•
|
increased expenses incurred in establishing and maintaining office space and equipment for our international operations;
|
•
|
greater difficulty in recruiting local experienced personnel, and the costs and expenses associated with such activities;
|
•
|
management communication and integration problems resulting from cultural and geographic dispersion;
|
•
|
fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business; and
|
•
|
general economic and political conditions in these foreign markets.
|
•
|
announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;
|
•
|
price and volume fluctuations in the overall stock market from time to time;
|
•
|
news announcements that affect investor perception of our industry, including reports related to the discovery of significant cyber attacks;
|
•
|
significant volatility in the market price and trading volume of technology companies in general and of companies in our industry;
|
•
|
fluctuations in the trading volume of our shares or the size of our public float;
|
•
|
actual or anticipated changes in our operating results or fluctuations in our operating results;
|
•
|
whether our operating results meet the expectations of securities analysts or investors;
|
•
|
actual or anticipated changes in the expectations of securities analysts or investors;
|
•
|
litigation involving us, our industry, or both;
|
•
|
regulatory developments in the United States, foreign countries or both;
|
•
|
major catastrophic events;
|
•
|
sales of large blocks of our stock;
|
•
|
departures of key personnel; or
|
•
|
economic uncertainty around the world, in particular, macroeconomic challenges in Europe.
|
•
|
a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
|
•
|
the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;
|
•
|
the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
|
•
|
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
|
•
|
the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors, our president, our secretary, or a majority vote of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
|
•
|
the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquiror to effect such amendments to facilitate an unsolicited takeover attempt;
|
•
|
the ability of our board of directors, by majority vote, to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquiror to amend the bylaws to facilitate an unsolicited takeover attempt; and
|
•
|
advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
|
ITEM 6.
|
EXHIBITS
|
PALO ALTO NETWORKS, INC.
|
|
By:
|
/s/ S
TEFFAN
C. T
OMLINSON
|
|
Steffan C. Tomlinson
|
|
Chief Financial Officer
|
|
(Duly Authorized Officer and Principal Financial and Accounting Officer)
|
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
Incorporated by Reference
|
|
Filing Date
|
||
|
File No.
|
|
Exhibit
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Lease by and between the Company and Santa Clara Campus Property Owner I LLC, dated October 7, 2015.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
October 19, 2015
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Amendment No. 1 to Lease by and between the Company and Santa Clara Phase I Property LLC, dated November 9, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Amendment No. 1 to Lease by and between the Company and Santa Clara Campus Property Owner I LLC, dated November 9, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1†
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2†
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Schema Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Labels Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Presentation Linkbase Document.
|
|
|
|
|
|
|
|
|
†
|
The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10‑Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Palo Alto Networks, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10‑Q, irrespective of any general incorporation language contained in such filing.
|
“Intended Commencement Date:
|
February 1, 2016, with respect to the fourth (4
th
) floor of the Leased Premises (the “4
th
Floor Intended Commencement Date”), and, May 1, 2016 with respect to the second (2
nd
) and third (3
rd
) floors of the Leased Premises (the “2
nd
and 3
rd
Floor Intended Commencement Date”), in each case subject to Paragraph 2.3 hereof.”
|
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
By: _
/s/ Mark D. McLaughlin
_______________________________
Printed Name: __
Mark D. McLaughlin
_______________________
Title: President
By: _
/s/ Steffan Tomlinson
________________________________
Printed Name: __
Steffan Tomlinson
_________________________
Title: Chief Financial Officer
|
|
|
|
LANDLORD:
SANTA CLARA PHASE I PROPERTY LLC
, a Delaware limited liability company
|
|
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Sole Member
By: Menlo Equities Development Company IX LLC,
a California limited liability company,
its Manager
By: Menlo Equities V LLC,
a California limited liability company,
its Manager
By: Menlo Legacy Holdings L.P.,
a California limited partnership,
its Managing Member
By:_
/s/ Henry D. Bullock
________
Henry D. Bullock, President
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1.
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PALO ALTO NETWORKS TENANT IMPROVEMENTS – B4 ISSUED FOR PERMIT, DATED 10/30/15
|
2.
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PALO ALTO NETWORKS TENANT IMPROVMENTS – SPECIFICATIONS ISSUED FOR PERMIT, DATED 10/30/15
|
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TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
By: __
/s/ Mark D. McLaughlin
____________________________
Printed Name:
Mark D. McLaughlin
_______________________
Title: President
By: _
/s/ Steffan Tomlinson
_______________________________
Printed Name: _
Steffan Tomlinson
__________________________
Title: Chief Financial Officer
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LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
|
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Sole Member
By: Menlo Equities Development Company IX LLC,
a California limited liability company,
its Manager
By: Menlo Equities V LLC,
a California limited liability company,
its Manager
By: Menlo Legacy Holdings L.P.,
a California limited partnership,
its Managing Member
By:
/s/ Henry D. Bullock
______
Henry D. Bullock, President
|
/s/ MARK D. MCLAUGHLIN
|
Mark D. McLaughlin
|
President, Chief Executive Officer and Director
|
/s/ STEFFAN C. TOMLINSON
|
Steffan C. Tomlinson
|
Chief Financial Officer
|
/s/ MARK D. MCLAUGHLIN
|
Mark D. McLaughlin
|
President, Chief Executive Officer and Director
|
/s/ STEFFAN C. TOMLINSON
|
Steffan C. Tomlinson
|
Chief Financial Officer
|