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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)
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Smaller reporting company
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¨
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|
|
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Page
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PART I - FINANCIAL INFORMATION
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|
Item 1.
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||
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||
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||
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Item 2.
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Item 3.
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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 2.
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||
Item 6.
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||
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ITEM 1.
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FINANCIAL STATEMENTS
|
|
January 31, 2017
|
|
July 31, 2016
|
||||
|
|
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(As Adjusted)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
761.4
|
|
|
$
|
734.4
|
|
Short-term investments
|
593.0
|
|
|
551.2
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $0.5 and $2.4 at January 31, 2017 and July 31, 2016, respectively
|
386.1
|
|
|
348.7
|
|
||
Prepaid expenses and other current assets
|
139.9
|
|
|
139.7
|
|
||
Total current assets
|
1,880.4
|
|
|
1,774.0
|
|
||
Property and equipment, net
|
154.1
|
|
|
117.2
|
|
||
Long-term investments
|
790.5
|
|
|
652.8
|
|
||
Goodwill
|
163.5
|
|
|
163.5
|
|
||
Intangible assets, net
|
39.5
|
|
|
44.0
|
|
||
Other assets
|
146.6
|
|
|
106.7
|
|
||
Total assets
|
$
|
3,174.6
|
|
|
$
|
2,858.2
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
28.0
|
|
|
$
|
30.2
|
|
Accrued compensation
|
78.8
|
|
|
73.5
|
|
||
Accrued and other liabilities
|
58.8
|
|
|
39.2
|
|
||
Deferred revenue
|
828.0
|
|
|
703.9
|
|
||
Total current liabilities
|
993.6
|
|
|
846.8
|
|
||
Convertible senior notes, net
|
512.3
|
|
|
500.2
|
|
||
Long-term deferred revenue
|
670.6
|
|
|
536.9
|
|
||
Other long-term liabilities
|
127.5
|
|
|
79.4
|
|
||
Commitments and contingencies (Note 6)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock; $0.0001 par value; 100.0 shares authorized; none issued and outstanding at January 31, 2017 and July 31, 2016
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital; $0.0001 par value; 1,000.0 shares authorized; 92.0 and 90.5 shares issued and outstanding at January 31, 2017 and July 31, 2016, respectively
|
1,613.3
|
|
|
1,515.5
|
|
||
Accumulated other comprehensive income (loss)
|
(5.1
|
)
|
|
1.0
|
|
||
Accumulated deficit
|
(737.6
|
)
|
|
(621.6
|
)
|
||
Total stockholders’ equity
|
870.6
|
|
|
894.9
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,174.6
|
|
|
$
|
2,858.2
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
(As Adjusted)
|
|
|
|
(As Adjusted)
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
168.8
|
|
|
$
|
169.9
|
|
|
$
|
332.6
|
|
|
$
|
317.6
|
|
Subscription and support
|
253.8
|
|
|
164.8
|
|
|
488.1
|
|
|
314.3
|
|
||||
Total revenue
|
422.6
|
|
|
334.7
|
|
|
820.7
|
|
|
631.9
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
45.8
|
|
|
44.9
|
|
|
88.0
|
|
|
83.7
|
|
||||
Subscription and support
|
67.4
|
|
|
49.3
|
|
|
126.4
|
|
|
89.7
|
|
||||
Total cost of revenue
|
113.2
|
|
|
94.2
|
|
|
214.4
|
|
|
173.4
|
|
||||
Total gross profit
|
309.4
|
|
|
240.5
|
|
|
606.3
|
|
|
458.5
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
89.9
|
|
|
74.0
|
|
|
174.1
|
|
|
133.7
|
|
||||
Sales and marketing
|
226.7
|
|
|
182.4
|
|
|
446.8
|
|
|
341.9
|
|
||||
General and administrative
|
47.2
|
|
|
34.2
|
|
|
88.8
|
|
|
65.0
|
|
||||
Total operating expenses
|
363.8
|
|
|
290.6
|
|
|
709.7
|
|
|
540.6
|
|
||||
Operating loss
|
(54.4
|
)
|
|
(50.1
|
)
|
|
(103.4
|
)
|
|
(82.1
|
)
|
||||
Interest expense
|
(6.1
|
)
|
|
(5.8
|
)
|
|
(12.1
|
)
|
|
(11.6
|
)
|
||||
Other income, net
|
2.7
|
|
|
2.5
|
|
|
5.2
|
|
|
4.7
|
|
||||
Loss before income taxes
|
(57.8
|
)
|
|
(53.4
|
)
|
|
(110.3
|
)
|
|
(89.0
|
)
|
||||
Provision for income taxes
|
2.8
|
|
|
3.9
|
|
|
7.2
|
|
|
8.2
|
|
||||
Net loss
|
$
|
(60.6
|
)
|
|
$
|
(57.3
|
)
|
|
$
|
(117.5
|
)
|
|
$
|
(97.2
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.67
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(1.30
|
)
|
|
$
|
(1.13
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.7
|
|
|
86.6
|
|
|
90.2
|
|
|
85.8
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
(As Adjusted)
|
|
|
|
(As Adjusted)
|
||||||||
Net loss
|
$
|
(60.6
|
)
|
|
$
|
(57.3
|
)
|
|
$
|
(117.5
|
)
|
|
$
|
(97.2
|
)
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
||||||||
Change in unrealized gains (losses) on investments
|
(2.9
|
)
|
|
(0.3
|
)
|
|
(4.7
|
)
|
|
(0.6
|
)
|
||||
Change in unrealized gains (losses) on cash flow hedges
|
(0.3
|
)
|
|
—
|
|
|
(1.4
|
)
|
|
—
|
|
||||
Comprehensive loss
|
$
|
(63.8
|
)
|
|
$
|
(57.6
|
)
|
|
$
|
(123.6
|
)
|
|
$
|
(97.8
|
)
|
|
Six Months Ended
|
||||||
|
January 31,
|
||||||
|
2017
|
|
2016
|
||||
|
|
|
(As Adjusted)
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net loss
|
$
|
(117.5
|
)
|
|
$
|
(97.2
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Share-based compensation for equity based awards
|
240.6
|
|
|
174.8
|
|
||
Depreciation and amortization
|
28.0
|
|
|
19.5
|
|
||
Amortization of investment premiums, net of accretion of purchase discounts
|
1.4
|
|
|
1.6
|
|
||
Amortization of debt discount and debt issuance costs
|
12.1
|
|
|
11.5
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(37.3
|
)
|
|
(42.0
|
)
|
||
Prepaid expenses and other assets
|
(41.6
|
)
|
|
(12.9
|
)
|
||
Accounts payable
|
0.2
|
|
|
13.6
|
|
||
Accrued compensation
|
5.3
|
|
|
(8.6
|
)
|
||
Accrued and other liabilities
|
68.8
|
|
|
25.6
|
|
||
Deferred revenue
|
257.8
|
|
|
215.1
|
|
||
Net cash provided by operating activities
|
417.8
|
|
|
301.0
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of investments
|
(562.7
|
)
|
|
(610.2
|
)
|
||
Proceeds from sales of investments
|
—
|
|
|
134.4
|
|
||
Proceeds from maturities of investments
|
384.0
|
|
|
228.0
|
|
||
Purchases of property, equipment, and other assets
|
(65.6
|
)
|
|
(36.9
|
)
|
||
Net cash used in investing activities
|
(244.3
|
)
|
|
(284.7
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Repurchases of common stock
|
(170.1
|
)
|
|
—
|
|
||
Proceeds from sales of shares through employee equity incentive plans
|
23.6
|
|
|
21.1
|
|
||
Net cash provided by (used in) financing activities
|
(146.5
|
)
|
|
21.1
|
|
||
Net increase in cash and cash equivalents
|
27.0
|
|
|
37.4
|
|
||
Cash and cash equivalents—beginning of period
|
734.4
|
|
|
375.8
|
|
||
Cash and cash equivalents—end of period
|
$
|
761.4
|
|
|
$
|
413.2
|
|
|
January 31, 2017
|
|
July 31, 2016
|
||||||||||||||||||||
|
Computed under Prior Method
|
|
Impact of Commission Adjustment
|
|
As Reported
|
|
As Previously Reported
|
|
Impact of Commission Adjustment
|
|
As Adjusted
|
||||||||||||
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prepaid expenses and other current assets
|
$
|
83.2
|
|
|
$
|
56.7
|
|
|
$
|
139.9
|
|
|
$
|
84.8
|
|
|
$
|
54.9
|
|
|
$
|
139.7
|
|
Other assets
|
94.8
|
|
|
51.8
|
|
|
146.6
|
|
|
64.6
|
|
|
50.1
|
|
|
114.7
|
|
||||||
Accumulated deficit
|
$
|
(846.1
|
)
|
|
$
|
108.5
|
|
|
$
|
(737.6
|
)
|
|
$
|
(726.6
|
)
|
|
$
|
105.0
|
|
|
$
|
(621.6
|
)
|
|
Three Months Ended January 31, 2017
|
|
Three Months Ended January 31, 2016
|
||||||||||||||||||||
|
Computed under Prior Method
|
|
Impact of Commission Adjustment
|
|
As Reported
|
|
As Previously Reported
|
|
Impact of Commission Adjustment
|
|
As Adjusted
|
||||||||||||
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales and marketing
|
$
|
232.7
|
|
|
$
|
(6.0
|
)
|
|
$
|
226.7
|
|
|
$
|
187.6
|
|
|
$
|
(5.2
|
)
|
|
$
|
182.4
|
|
Operating loss
|
(60.4
|
)
|
|
6.0
|
|
|
(54.4
|
)
|
|
(55.3
|
)
|
|
5.2
|
|
|
(50.1
|
)
|
||||||
Provision for income taxes
|
2.8
|
|
|
—
|
|
|
2.8
|
|
|
3.9
|
|
|
—
|
|
|
3.9
|
|
||||||
Net loss
|
$
|
(66.6
|
)
|
|
$
|
6.0
|
|
|
$
|
(60.6
|
)
|
|
$
|
(62.5
|
)
|
|
$
|
5.2
|
|
|
$
|
(57.3
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.73
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.66
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.7
|
|
|
—
|
|
|
90.7
|
|
|
86.6
|
|
|
—
|
|
|
86.6
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Condensed Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss
|
$
|
(66.6
|
)
|
|
$
|
6.0
|
|
|
$
|
(60.6
|
)
|
|
$
|
(62.5
|
)
|
|
$
|
5.2
|
|
|
$
|
(57.3
|
)
|
Comprehensive loss
|
$
|
(69.8
|
)
|
|
$
|
6.0
|
|
|
$
|
(63.8
|
)
|
|
$
|
(62.8
|
)
|
|
$
|
5.2
|
|
|
$
|
(57.6
|
)
|
|
Six Months Ended January 31, 2017
(1)
|
|
Six Months Ended January 31, 2016
|
||||||||||||||||||||
|
Computed under Prior Method
|
|
Impact of Commission Adjustment
|
|
As Reported
|
|
As Previously Reported
|
|
Impact of Commission Adjustment
|
|
As Adjusted
|
||||||||||||
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales and marketing
|
$
|
450.2
|
|
|
$
|
(3.4
|
)
|
|
$
|
446.8
|
|
|
$
|
345.9
|
|
|
$
|
(4.0
|
)
|
|
$
|
341.9
|
|
Operating loss
|
(106.8
|
)
|
|
3.4
|
|
|
(103.4
|
)
|
|
(86.1
|
)
|
|
4.0
|
|
|
(82.1
|
)
|
||||||
Provision for income taxes
|
7.3
|
|
|
(0.1
|
)
|
|
7.2
|
|
|
8.2
|
|
|
—
|
|
|
8.2
|
|
||||||
Net loss
|
$
|
(121.0
|
)
|
|
$
|
3.5
|
|
|
$
|
(117.5
|
)
|
|
$
|
(101.2
|
)
|
|
$
|
4.0
|
|
|
$
|
(97.2
|
)
|
Net loss per share, basic and diluted
|
$
|
(1.34
|
)
|
|
$
|
0.04
|
|
|
$
|
(1.30
|
)
|
|
$
|
(1.18
|
)
|
|
$
|
0.05
|
|
|
$
|
(1.13
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.2
|
|
|
—
|
|
|
90.2
|
|
|
85.8
|
|
|
—
|
|
|
85.8
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Condensed Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss
|
$
|
(121.0
|
)
|
|
$
|
3.5
|
|
|
$
|
(117.5
|
)
|
|
$
|
(101.2
|
)
|
|
$
|
4.0
|
|
|
$
|
(97.2
|
)
|
Comprehensive loss
|
$
|
(127.1
|
)
|
|
$
|
3.5
|
|
|
$
|
(123.6
|
)
|
|
$
|
(101.8
|
)
|
|
$
|
4.0
|
|
|
$
|
(97.8
|
)
|
(1)
|
Amounts reflect an adjustment for the three months ended October 31, 2016, due to our early adoption of new share-based payment accounting guidance in our second quarter of fiscal 2017. Refer to “Recent Accounting Pronouncements” below for more information.
|
•
|
Income tax accounting
- We adopted the guidance related to the timing of when excess tax benefits are recognized on a modified retrospective basis. As a result, we recorded the cumulative effect of the change as a
$3.5 million
reduction to accumulated deficit as of August 1, 2016, to reflect the recognition of excess tax benefits in prior years, with a corresponding adjustment to deferred tax assets and long-term tax liabilities. We adopted the guidance related to the recognition of excess tax benefits and deficiencies as income tax expense or benefit on a prospective basis.
|
•
|
Cash flow presentation of excess tax benefits
- We elected to adopt the guidance related to the presentation of excess tax benefits in our condensed consolidated statements of cash flows on a retrospective basis, which increased net cash provided by operating activities by $0.5 million for the six months ended January 31, 2016, with a corresponding decrease to net cash provided by financing activities.
|
•
|
Forfeitures
- We elected to account for forfeitures when they occur and adopted this change on a modified retrospective basis. As a result, we recorded the cumulative effect of the change as a
$2.0 million
increase to accumulated deficit as of August 1, 2016.
|
|
October 31, 2016
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
||||||
Other assets
|
$
|
102.0
|
|
|
$
|
1.7
|
|
|
$
|
103.7
|
|
Other long-term liabilities
|
85.8
|
|
|
(5.6
|
)
|
|
80.2
|
|
|||
Common stock and additional paid-in capital
|
1,542.2
|
|
|
0.9
|
|
|
1,543.1
|
|
|||
Accumulated deficit
|
$
|
(683.4
|
)
|
|
$
|
6.4
|
|
|
$
|
(677.0
|
)
|
|
Three Months Ended October 31, 2016
|
||||||||||
|
As Previously Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
||||||
Total cost of revenue
(1)
|
$
|
101.3
|
|
|
$
|
(0.1
|
)
|
|
$
|
101.2
|
|
Total operating expenses
(1)
|
346.7
|
|
|
(0.8
|
)
|
|
345.9
|
|
|||
Provision for income taxes
|
8.4
|
|
|
(4.0
|
)
|
|
4.4
|
|
|||
Net loss
|
$
|
(61.8
|
)
|
|
$
|
4.9
|
|
|
$
|
(56.9
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.69
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.63
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
89.8
|
|
|
—
|
|
|
89.8
|
|
|||
|
|
|
|
|
|
||||||
Condensed Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
||||||
Net loss
|
$
|
(61.8
|
)
|
|
$
|
4.9
|
|
|
$
|
(56.9
|
)
|
Comprehensive loss
|
$
|
(64.7
|
)
|
|
$
|
4.9
|
|
|
$
|
(59.8
|
)
|
|
|
|
|
|
|
||||||
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
203.3
|
|
|
$
|
0.2
|
|
|
$
|
203.5
|
|
Net cash used in financing activities
|
$
|
(27.1
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(27.3
|
)
|
(1)
|
Adjustments consist of share-based compensation, which was impacted by our policy election to account for forfeitures when they occur. The impact of adoption on each cost and expense line item within these subtotals was not significant.
|
•
|
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.
|
|
|
January 31, 2017
|
|
July 31, 2016
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. government and agency securities
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total cash equivalents
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commercial paper
|
|
—
|
|
|
17.9
|
|
|
—
|
|
|
17.9
|
|
|
—
|
|
|
3.0
|
|
|
—
|
|
|
3.0
|
|
||||||||
Corporate debt securities
|
|
—
|
|
|
99.7
|
|
|
—
|
|
|
99.7
|
|
|
—
|
|
|
121.4
|
|
|
—
|
|
|
121.4
|
|
||||||||
U.S. government and agency securities
|
|
—
|
|
|
475.4
|
|
|
—
|
|
|
475.4
|
|
|
—
|
|
|
426.8
|
|
|
—
|
|
|
426.8
|
|
||||||||
Total short-term investments
|
|
—
|
|
|
593.0
|
|
|
—
|
|
|
593.0
|
|
|
—
|
|
|
551.2
|
|
|
—
|
|
|
551.2
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Certificates of deposit
|
|
—
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
||||||||
Corporate debt securities
|
|
—
|
|
|
229.6
|
|
|
—
|
|
|
229.6
|
|
|
—
|
|
|
166.1
|
|
|
—
|
|
|
166.1
|
|
||||||||
U.S. government and agency securities
|
|
—
|
|
|
555.5
|
|
|
—
|
|
|
555.5
|
|
|
—
|
|
|
481.3
|
|
|
—
|
|
|
481.3
|
|
||||||||
Total long-term investments
|
|
—
|
|
|
790.5
|
|
|
—
|
|
|
790.5
|
|
|
—
|
|
|
652.8
|
|
|
—
|
|
|
652.8
|
|
||||||||
Total assets measured at fair value
|
|
$
|
—
|
|
|
$
|
1,385.5
|
|
|
$
|
—
|
|
|
$
|
1,385.5
|
|
|
$
|
—
|
|
|
$
|
1,204.0
|
|
|
$
|
—
|
|
|
$
|
1,204.0
|
|
Accrued and other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign currency forward contracts
|
|
$
|
—
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total accrued and other liabilities
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total liabilities measured at fair value
|
|
$
|
—
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
January 31, 2017
|
||||||||||||||
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Certificates of deposit
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.4
|
|
Commercial paper
|
17.9
|
|
|
—
|
|
|
—
|
|
|
17.9
|
|
||||
Corporate debt securities
|
330.0
|
|
|
0.2
|
|
|
(0.9
|
)
|
|
329.3
|
|
||||
U.S. government and agency securities
|
1,035.3
|
|
|
0.1
|
|
|
(2.5
|
)
|
|
1,032.9
|
|
||||
Total
|
$
|
1,388.6
|
|
|
$
|
0.3
|
|
|
$
|
(3.4
|
)
|
|
$
|
1,385.5
|
|
|
July 31, 2016
|
||||||||||||||
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Certificates of deposit
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.4
|
|
Commercial paper
|
3.0
|
|
|
—
|
|
|
—
|
|
|
3.0
|
|
||||
Corporate debt securities
|
286.7
|
|
|
0.8
|
|
|
—
|
|
|
287.5
|
|
||||
U.S. government and agency securities
|
907.3
|
|
|
0.9
|
|
|
(0.1
|
)
|
|
908.1
|
|
||||
Total
|
$
|
1,202.4
|
|
|
$
|
1.7
|
|
|
$
|
(0.1
|
)
|
|
$
|
1,204.0
|
|
|
Amortized Cost
|
|
Fair Value
|
||||
Due within one year
|
$
|
595.2
|
|
|
$
|
595.0
|
|
Due between one and three years
|
793.4
|
|
|
790.5
|
|
||
Total
|
$
|
1,388.6
|
|
|
$
|
1,385.5
|
|
•
|
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; or
|
•
|
upon the occurrence of specified corporate events.
|
|
January 31, 2017
|
|
July 31, 2016
|
||||
Liability:
|
|
|
|
||||
Principal
|
$
|
575.0
|
|
|
$
|
575.0
|
|
Less: debt discount and debt issuance costs, net of amortization
|
62.7
|
|
|
74.8
|
|
||
Net carrying amount
|
$
|
512.3
|
|
|
$
|
500.2
|
|
|
|
|
|
||||
Equity
|
$
|
109.8
|
|
|
$
|
109.8
|
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Amortization of debt discount
|
$
|
5.5
|
|
|
$
|
5.2
|
|
|
$
|
10.9
|
|
|
$
|
10.4
|
|
Amortization of debt issuance costs
|
0.6
|
|
|
0.6
|
|
|
1.2
|
|
|
1.1
|
|
||||
Total interest expense recognized
|
$
|
6.1
|
|
|
$
|
5.8
|
|
|
$
|
12.1
|
|
|
$
|
11.5
|
|
|
|
|
|
|
|
|
|
||||||||
Effective interest rate of the liability component
|
4.8
|
%
|
|
4.8
|
%
|
|
4.8
|
%
|
|
4.8
|
%
|
|
Amount
|
||
Fiscal years ending July 31:
|
|
||
Remaining 2017
|
$
|
14.0
|
|
2018
|
27.6
|
|
|
2019
|
46.9
|
|
|
2020
|
50.6
|
|
|
2021
|
55.0
|
|
|
2022 and thereafter
|
316.3
|
|
|
Committed gross lease payments
|
510.4
|
|
|
Less: proceeds from sublease rental
|
3.6
|
|
|
Net operating lease obligation
|
$
|
506.8
|
|
|
Options Outstanding
|
|||||||||||
|
Number
of Shares |
|
Weighted-
Average Exercise Price Per Share |
|
Weighted-
Average Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value |
|||||
Balance—July 31, 2016
|
2.1
|
|
|
$
|
13.42
|
|
|
5.2
|
|
$
|
244.9
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Options forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|||
Options exercised
|
(0.4
|
)
|
|
15.48
|
|
|
|
|
|
|||
Balance—January 31, 2017
|
1.7
|
|
|
$
|
12.99
|
|
|
4.7
|
|
$
|
232.5
|
|
Options exercisable—January 31, 2017
|
1.7
|
|
|
$
|
12.99
|
|
|
4.7
|
|
$
|
232.5
|
|
|
RSAs and PSAs Outstanding
|
|
RSUs Outstanding
|
||||||||||||||||
|
Number
of Shares |
|
Weighted-
Average Grant-Date Fair Value Per Share |
|
Number
of Shares |
|
Weighted-
Average Grant-Date Fair Value Per Share |
|
Weighted-
Average Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value |
||||||||
Balance—July 31, 2016
|
1.1
|
|
|
$
|
170.97
|
|
|
6.5
|
|
|
$
|
130.14
|
|
|
1.1
|
|
$
|
852.7
|
|
Granted
(1)
|
0.3
|
|
|
148.54
|
|
|
2.4
|
|
|
147.47
|
|
|
|
|
|
||||
Vested
|
(0.2
|
)
|
|
170.97
|
|
|
(1.9
|
)
|
|
116.72
|
|
|
|
|
|
||||
Forfeited
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
138.69
|
|
|
|
|
|
||||
Balance—January 31, 2017
|
1.2
|
|
|
$
|
164.82
|
|
|
6.7
|
|
|
$
|
139.77
|
|
|
1.3
|
|
$
|
989.0
|
|
(1)
|
The number of PSAs granted represents the aggregate maximum number of shares that may be earned and issued with respect to these awards over their full terms.
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
(1)
|
|
2016
|
||||||||
Cost of product revenue
|
$
|
2.0
|
|
|
$
|
1.6
|
|
|
$
|
3.7
|
|
|
$
|
2.9
|
|
Cost of subscription and support revenue
|
15.0
|
|
|
10.5
|
|
|
27.3
|
|
|
17.5
|
|
||||
Research and development
|
41.3
|
|
|
34.9
|
|
|
79.3
|
|
|
59.9
|
|
||||
Sales and marketing
|
49.7
|
|
|
39.4
|
|
|
93.5
|
|
|
66.6
|
|
||||
General and administrative
|
19.3
|
|
|
15.5
|
|
|
36.8
|
|
|
27.9
|
|
||||
Total share-based compensation
|
$
|
127.3
|
|
|
$
|
101.9
|
|
|
$
|
240.6
|
|
|
$
|
174.8
|
|
(1)
|
Amounts reflect an adjustment for the three months ended October 31, 2016, due to our early adoption of new share-based payment accounting guidance. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies for more information.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net loss
|
$
|
(60.6
|
)
|
|
$
|
(57.3
|
)
|
|
$
|
(117.5
|
)
|
|
$
|
(97.2
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.7
|
|
|
86.6
|
|
|
90.2
|
|
|
85.8
|
|
||||
Net loss per share, basic and diluted
|
$
|
(0.67
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(1.30
|
)
|
|
$
|
(1.13
|
)
|
|
Three and Six Months Ended
|
||||
|
January 31,
|
||||
|
2017
|
|
2016
|
||
RSUs
|
6.7
|
|
|
7.5
|
|
Convertible senior notes
|
5.2
|
|
|
5.2
|
|
Warrants related to the issuance of convertible senior notes
|
5.2
|
|
|
5.2
|
|
Options to purchase common stock
|
1.7
|
|
|
2.5
|
|
RSAs and PSAs
|
1.2
|
|
|
1.1
|
|
ESPP shares
|
0.1
|
|
|
0.1
|
|
Total
|
20.1
|
|
|
21.6
|
|
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.
A summary 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 in our financial results and an analysis of our financial results comparing the
three and six months ended
January 31, 2017
to the
three and six months ended
January 31, 2016
.
|
•
|
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.
|
•
|
Critical Accounting Estimates.
A discussion of our 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.
|
|
January 31, 2017
|
|
July 31, 2016
|
||||
|
(in millions)
|
||||||
Total deferred revenue
|
$
|
1,498.6
|
|
|
$
|
1,240.8
|
|
Cash, cash equivalents, and investments
|
$
|
2,144.9
|
|
|
$
|
1,938.4
|
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(dollars in millions)
|
||||||||||||||
Total revenue
|
$
|
422.6
|
|
|
$
|
334.7
|
|
|
$
|
820.7
|
|
|
$
|
631.9
|
|
Total revenue year-over-year percentage increase
|
26.3
|
%
|
|
53.8
|
%
|
|
29.9
|
%
|
|
54.1
|
%
|
||||
Gross margin
(2)
|
73.2
|
%
|
|
71.9
|
%
|
|
73.9
|
%
|
|
72.6
|
%
|
||||
Operating loss
(1)(2)
|
$
|
(54.4
|
)
|
|
$
|
(50.1
|
)
|
|
$
|
(103.4
|
)
|
|
$
|
(82.1
|
)
|
Operating margin
(1)(2)
|
(12.9
|
)%
|
|
(15.0
|
)%
|
|
(12.6
|
)%
|
|
(13.0
|
)%
|
||||
Billings
|
$
|
561.6
|
|
|
$
|
459.0
|
|
|
$
|
1,078.5
|
|
|
$
|
847.0
|
|
Billings year-over-year percentage increase
|
22.4
|
%
|
|
62.3
|
%
|
|
27.3
|
%
|
|
61.9
|
%
|
||||
Cash flow provided by operating activities
(2)
|
|
|
|
|
$
|
417.8
|
|
|
$
|
301.0
|
|
||||
Free cash flow (non-GAAP)
(2)
|
|
|
|
|
$
|
352.2
|
|
|
$
|
264.1
|
|
(1)
|
Amounts have been adjusted for the
three and six months ended
January 31,
2016
, as a result of our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
(2)
|
Certain amounts reflect adjustments as a result of our early adoption of new share-based payment accounting guidance. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
•
|
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 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.
|
•
|
Billings.
We define billings as total revenue plus the change in total deferred revenue during the period. We consider billings to be a key measure used by management to manage our business given our hybrid SaaS revenue model, and believe billings provides investors with an important indicator of the health and visibility of our 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 revenue recognition criteria have been met. 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 subscription and support offerings, and as we monitor our near term cash flows. While 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, it is important to note that other companies, including companies in our industry, may not use billings, may calculate billings differently, may have different billing frequencies, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of billings as a comparative measure. We calculate billings in the following manner:
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in millions)
|
||||||||||||||
Billings:
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
422.6
|
|
|
$
|
334.7
|
|
|
$
|
820.7
|
|
|
$
|
631.9
|
|
Add: change in total deferred revenue
|
139.0
|
|
|
124.3
|
|
|
257.8
|
|
|
215.1
|
|
||||
Billings
|
$
|
561.6
|
|
|
$
|
459.0
|
|
|
$
|
1,078.5
|
|
|
$
|
847.0
|
|
•
|
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 subscription and support offerings. 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 profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. 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:
|
|
Six Months Ended January 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Free cash flow (non-GAAP):
|
|
|
|
||||
Net cash provided by operating activities
(1)
|
$
|
417.8
|
|
|
$
|
301.0
|
|
Less: purchases of property, equipment, and other assets
|
65.6
|
|
|
36.9
|
|
||
Free cash flow (non-GAAP)
(1)
|
$
|
352.2
|
|
|
$
|
264.1
|
|
Net cash used in investing activities
|
$
|
(244.3
|
)
|
|
$
|
(284.7
|
)
|
Net cash provided by (used in) financing activities
(1)
|
$
|
(146.5
|
)
|
|
$
|
21.1
|
|
(1)
|
Amounts reflect adjustments as a result of our early adoption of new share-based payment accounting guidance. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
|
Amount
|
|
% of Revenue
|
|
Amount
(1)
|
|
% of Revenue
(1)
|
|
Amount
|
|
% of Revenue
|
|
Amount
(1)
|
|
% of Revenue
(1)
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
$
|
168.8
|
|
|
39.9
|
%
|
|
$
|
169.9
|
|
|
50.7
|
%
|
|
$
|
332.6
|
|
|
40.5
|
%
|
|
$
|
317.6
|
|
|
50.3
|
%
|
Subscription and support
|
253.8
|
|
|
60.1
|
%
|
|
164.8
|
|
|
49.3
|
%
|
|
488.1
|
|
|
59.5
|
%
|
|
314.3
|
|
|
49.7
|
%
|
||||
Total revenue
|
422.6
|
|
|
100.0
|
%
|
|
334.7
|
|
|
100.0
|
%
|
|
820.7
|
|
|
100.0
|
%
|
|
631.9
|
|
|
100.0
|
%
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
45.8
|
|
|
10.8
|
%
|
|
44.9
|
|
|
13.4
|
%
|
|
88.0
|
|
|
10.7
|
%
|
|
83.7
|
|
|
13.2
|
%
|
||||
Subscription and support
|
67.4
|
|
|
16.0
|
%
|
|
49.3
|
|
|
14.7
|
%
|
|
126.4
|
|
|
15.4
|
%
|
|
89.7
|
|
|
14.2
|
%
|
||||
Total cost of revenue
(2)
|
113.2
|
|
|
26.8
|
%
|
|
94.2
|
|
|
28.1
|
%
|
|
214.4
|
|
|
26.1
|
%
|
|
173.4
|
|
|
27.4
|
%
|
||||
Total gross profit
|
309.4
|
|
|
73.2
|
%
|
|
240.5
|
|
|
71.9
|
%
|
|
606.3
|
|
|
73.9
|
%
|
|
458.5
|
|
|
72.6
|
%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
89.9
|
|
|
21.3
|
%
|
|
74.0
|
|
|
22.1
|
%
|
|
174.1
|
|
|
21.2
|
%
|
|
133.7
|
|
|
21.2
|
%
|
||||
Sales and marketing
|
226.7
|
|
|
53.6
|
%
|
|
182.4
|
|
|
54.5
|
%
|
|
446.8
|
|
|
54.4
|
%
|
|
341.9
|
|
|
54.1
|
%
|
||||
General and administrative
|
47.2
|
|
|
11.2
|
%
|
|
34.2
|
|
|
10.3
|
%
|
|
88.8
|
|
|
10.9
|
%
|
|
65.0
|
|
|
10.3
|
%
|
||||
Total operating expenses
(2)
|
363.8
|
|
|
86.1
|
%
|
|
290.6
|
|
|
86.9
|
%
|
|
709.7
|
|
|
86.5
|
%
|
|
540.6
|
|
|
85.6
|
%
|
||||
Operating loss
|
(54.4
|
)
|
|
(12.9
|
)%
|
|
(50.1
|
)
|
|
(15.0
|
)%
|
|
(103.4
|
)
|
|
(12.6
|
)%
|
|
(82.1
|
)
|
|
(13.0
|
)%
|
||||
Interest expense
|
(6.1
|
)
|
|
(1.4
|
)%
|
|
(5.8
|
)
|
|
(1.7
|
)%
|
|
(12.1
|
)
|
|
(1.5
|
)%
|
|
(11.6
|
)
|
|
(1.8
|
)%
|
||||
Other income, net
|
2.7
|
|
|
0.6
|
%
|
|
2.5
|
|
|
0.7
|
%
|
|
5.2
|
|
|
0.7
|
%
|
|
4.7
|
|
|
0.7
|
%
|
||||
Loss before income taxes
|
(57.8
|
)
|
|
(13.7
|
)%
|
|
(53.4
|
)
|
|
(16.0
|
)%
|
|
(110.3
|
)
|
|
(13.4
|
)%
|
|
(89.0
|
)
|
|
(14.1
|
)%
|
||||
Provision for income taxes
|
2.8
|
|
|
0.6
|
%
|
|
3.9
|
|
|
1.2
|
%
|
|
7.2
|
|
|
0.9
|
%
|
|
8.2
|
|
|
1.3
|
%
|
||||
Net loss
|
$
|
(60.6
|
)
|
|
(14.3
|
)%
|
|
$
|
(57.3
|
)
|
|
(17.2
|
)%
|
|
$
|
(117.5
|
)
|
|
(14.3
|
)%
|
|
$
|
(97.2
|
)
|
|
(15.4
|
)%
|
(1)
|
Certain prior period amounts have been adjusted as a result of our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
(2)
|
Includes share-based compensation as follows:
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of product revenue
|
$
|
2.0
|
|
|
$
|
1.6
|
|
|
$
|
3.7
|
|
|
$
|
2.9
|
|
Cost of subscription and support revenue
|
15.0
|
|
|
10.5
|
|
|
27.3
|
|
|
17.5
|
|
||||
Research and development
|
41.3
|
|
|
34.9
|
|
|
79.3
|
|
|
59.9
|
|
||||
Sales and marketing
|
49.7
|
|
|
39.4
|
|
|
93.5
|
|
|
66.6
|
|
||||
General and administrative
|
19.3
|
|
|
15.5
|
|
|
36.8
|
|
|
27.9
|
|
||||
Total share-based compensation
|
$
|
127.3
|
|
|
$
|
101.9
|
|
|
$
|
240.6
|
|
|
$
|
174.8
|
|
|
Three Months Ended January 31,
|
|
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Product
|
$
|
168.8
|
|
|
$
|
169.9
|
|
|
$
|
(1.1
|
)
|
|
(0.6
|
)%
|
|
$
|
332.6
|
|
|
$
|
317.6
|
|
|
$
|
15.0
|
|
|
4.7
|
%
|
|
Three Months Ended January 31,
|
|
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Subscription
|
$
|
134.3
|
|
|
$
|
84.3
|
|
|
$
|
50.0
|
|
|
59.3
|
%
|
|
$
|
255.5
|
|
|
$
|
157.9
|
|
|
$
|
97.6
|
|
|
61.8
|
%
|
Support
|
119.5
|
|
|
80.5
|
|
|
39.0
|
|
|
48.4
|
%
|
|
232.6
|
|
|
156.4
|
|
|
76.2
|
|
|
48.7
|
%
|
||||||
Total subscription and support
|
$
|
253.8
|
|
|
$
|
164.8
|
|
|
$
|
89.0
|
|
|
54.0
|
%
|
|
$
|
488.1
|
|
|
$
|
314.3
|
|
|
$
|
173.8
|
|
|
55.3
|
%
|
|
Three Months Ended January 31,
|
|
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Americas
|
$
|
295.0
|
|
|
$
|
229.7
|
|
|
$
|
65.3
|
|
|
28.4
|
%
|
|
$
|
575.2
|
|
|
$
|
441.0
|
|
|
$
|
134.2
|
|
|
30.4
|
%
|
EMEA
|
78.8
|
|
|
62.1
|
|
|
16.7
|
|
|
26.9
|
%
|
|
149.5
|
|
|
115.8
|
|
|
33.7
|
|
|
29.1
|
%
|
||||||
APAC
|
48.8
|
|
|
42.9
|
|
|
5.9
|
|
|
13.8
|
%
|
|
96.0
|
|
|
75.1
|
|
|
20.9
|
|
|
27.8
|
%
|
||||||
Total revenue
|
$
|
422.6
|
|
|
$
|
334.7
|
|
|
$
|
87.9
|
|
|
26.3
|
%
|
|
$
|
820.7
|
|
|
$
|
631.9
|
|
|
$
|
188.8
|
|
|
29.9
|
%
|
|
Three Months Ended January 31,
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Cost of product revenue
|
$
|
45.8
|
|
|
$
|
44.9
|
|
|
$
|
0.9
|
|
|
2.0
|
%
|
|
$
|
88.0
|
|
|
$
|
83.7
|
|
|
$
|
4.3
|
|
|
5.1
|
%
|
Number of employees at period end
|
92
|
|
|
82
|
|
|
10
|
|
|
12.2
|
%
|
|
92
|
|
|
82
|
|
|
10
|
|
|
12.2
|
%
|
|
Three Months Ended January 31,
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Cost of subscription and support revenue
|
$
|
67.4
|
|
|
$
|
49.3
|
|
|
$
|
18.1
|
|
|
36.7
|
%
|
|
$
|
126.4
|
|
|
$
|
89.7
|
|
|
$
|
36.7
|
|
|
40.9
|
%
|
Number of employees at period end
|
623
|
|
|
457
|
|
|
166
|
|
|
36.3
|
%
|
|
623
|
|
|
457
|
|
|
166
|
|
|
36.3
|
%
|
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||
Product
|
$
|
123.0
|
|
|
72.9
|
%
|
|
$
|
125.0
|
|
|
73.5
|
%
|
|
$
|
244.6
|
|
|
73.5
|
%
|
|
$
|
233.9
|
|
|
73.6
|
%
|
Subscription and support
|
186.4
|
|
|
73.4
|
%
|
|
115.5
|
|
|
70.2
|
%
|
|
361.7
|
|
|
74.1
|
%
|
|
224.6
|
|
|
71.5
|
%
|
||||
Total gross profit
|
$
|
309.4
|
|
|
73.2
|
%
|
|
$
|
240.5
|
|
|
71.9
|
%
|
|
$
|
606.3
|
|
|
73.9
|
%
|
|
$
|
458.5
|
|
|
72.6
|
%
|
|
Three Months Ended January 31,
|
|
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Research and development
|
$
|
89.9
|
|
|
$
|
74.0
|
|
|
$
|
15.9
|
|
|
21.5
|
%
|
|
$
|
174.1
|
|
|
$
|
133.7
|
|
|
$
|
40.4
|
|
|
30.2
|
%
|
Number of employees at period end
|
661
|
|
|
558
|
|
|
103
|
|
|
18.5
|
%
|
|
661
|
|
|
558
|
|
|
103
|
|
|
18.5
|
%
|
|
Three Months Ended January 31,
|
|
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Sales and marketing
(1)
|
$
|
226.7
|
|
|
$
|
182.4
|
|
|
$
|
44.3
|
|
|
24.3
|
%
|
|
$
|
446.8
|
|
|
$
|
341.9
|
|
|
$
|
104.9
|
|
|
30.7
|
%
|
Number of employees at period end
|
2,269
|
|
|
1,847
|
|
|
422
|
|
|
22.8
|
%
|
|
2,269
|
|
|
1,847
|
|
|
422
|
|
|
22.8
|
%
|
(1)
|
Prior period amount has been adjusted as a result of our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
|
Three Months Ended January 31,
|
|
|
|
|
|
Six Months Ended January 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
General and administrative
|
$
|
47.2
|
|
|
$
|
34.2
|
|
|
$
|
13.0
|
|
|
38.0
|
%
|
|
$
|
88.8
|
|
|
$
|
65.0
|
|
|
$
|
23.8
|
|
|
36.6
|
%
|
Number of employees at period end
|
492
|
|
|
399
|
|
|
93
|
|
|
23.3
|
%
|
|
492
|
|
|
399
|
|
|
93
|
|
|
23.3
|
%
|
|
Three Months Ended January 31,
|
|
Change
|
|
Six Months Ended January 31,
|
|
Change
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Amount
|
|
%
|
|
2017
|
|
2016
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Provision for income taxes
|
$
|
2.8
|
|
|
$
|
3.9
|
|
|
$
|
(1.1
|
)
|
|
(28.2
|
)%
|
|
$
|
7.2
|
|
|
$
|
8.2
|
|
|
$
|
(1.0
|
)
|
|
(12.2
|
)%
|
Effective tax rate
(1)
|
(4.8
|
)%
|
|
(7.3
|
)%
|
|
|
|
|
|
(6.5
|
)%
|
|
(9.2
|
)%
|
|
|
|
|
(1)
|
Prior period effective tax rate has been adjusted as a result of our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
|
January 31, 2017
|
|
July 31, 2016
|
||||
|
(in millions)
|
||||||
Working capital
(1)
|
$
|
886.8
|
|
|
$
|
927.2
|
|
Cash, cash equivalents, and investments:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
761.4
|
|
|
$
|
734.4
|
|
Investments
|
1,383.5
|
|
|
1,204.0
|
|
||
Total cash, cash equivalents, and investments
|
$
|
2,144.9
|
|
|
$
|
1,938.4
|
|
(1)
|
Working capital as of July 31, 2016, has been adjusted as a result of our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
|
Six Months Ended January 31,
|
||||||
2017
|
|
2016
|
|||||
|
(in millions)
|
||||||
Net cash provided by operating activities
(1)
|
$
|
417.8
|
|
|
$
|
301.0
|
|
Net cash used in investing activities
|
(244.3
|
)
|
|
(284.7
|
)
|
||
Net cash provided by (used in) financing activities
(1)
|
(146.5
|
)
|
|
21.1
|
|
||
Net increase in cash and cash equivalents
|
$
|
27.0
|
|
|
$
|
37.4
|
|
(1)
|
Amounts reflect adjustments as a result of our early adoption of new share-based payment accounting guidance. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
|
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 or sell additional products and subscriptions to our existing 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 and strategic partnerships entered into by and between our competitors;
|
•
|
changes in the mix of our products, subscriptions, and support, including changes in multi-year subscriptions and support;
|
•
|
our ability to successfully and continuously expand our business domestically and internationally;
|
•
|
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;
|
•
|
the timing and costs related to the development or acquisition of technologies or businesses or strategic partnerships;
|
•
|
lack of synergy or the inability to realize expected synergies, resulting from acquisitions or strategic partnerships;
|
•
|
our inability to execute, complete or integrate efficiently any acquisitions that we may undertake;
|
•
|
increased expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we consummate;
|
•
|
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 penetration, attach, and renewal rates for our subscriptions;
|
•
|
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 end-customers, which could adversely affect their ability to purchase or pay for our products and subscription and support offerings, 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;
|
•
|
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;
|
•
|
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, such as those caused by the recent U.S. election or the upcoming elections in Europe, the recent referendum in which voters in the United Kingdom (the “U.K.”) approved an exit from the European Union (the “E.U.”), 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 that could impact some or all regions where we operate.
|
•
|
large networking vendors such as Cisco and Juniper that incorporate security features in their products;
|
•
|
large companies such as Intel and IBM that have acquired large network and endpoint security 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, Fortinet, FireEye, and Symantec that offer a mix of network and 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 strategic acquisitions or enter into strategic partnerships;
|
•
|
lower labor and development costs;
|
•
|
larger and more mature intellectual property portfolios; and
|
•
|
substantially greater financial, technical, and other resources.
|
•
|
end-customers with a December 31 fiscal year-end choosing to spend remaining unused portions of their discretionary budgets before their fiscal year-end, which potentially results in a positive impact on our revenue in our second fiscal quarter;
|
•
|
our sales compensation plans, which are typically structured around annual quotas and commission rate accelerators, which potentially results in a positive impact on our revenue in our fourth fiscal quarter;
|
•
|
seasonal reductions in business activity during August in the United States, Europe and certain regions, which potentially results in a negative impact on our first fiscal quarter revenue; and
|
•
|
the timing of end-customer budget planning at the beginning of the calendar year, which can result in a delay in spending at the beginning of the calendar year potentially resulting in a negative impact on our revenue in our third fiscal quarter.
|
•
|
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 contracts, including stricter support response times and penalties for any failure to meet support requirements; and
|
•
|
longer sales cycles, in some cases over 12 months, 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 subscriptions.
|
•
|
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, those caused by the recent U.S. presidential election, 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 foreign and domestic regulatory practices, tariffs, and tax laws and treaties, including regulatory and trade policy changes adopted by the new administration;
|
•
|
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;
|
•
|
increased expenses incurred in establishing and maintaining office space and equipment for our international operations;
|
•
|
management communication and integration problems resulting from cultural and geographic dispersion; and
|
•
|
fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business and related impact on sales cycles.
|
•
|
announcements of new products, subscriptions or technologies, commercial relationships, strategic partnerships, 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;
|
•
|
inaccurate or unfavorable research reports about our business and industry published by securities analysts or reduced coverage of our company by securities analysts;
|
•
|
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 common stock or substantial future sales by our directors, executive officers, employees and significant stockholders;
|
•
|
sales of our common stock by investors who view the Notes as a more attractive means of equity participation in us;
|
•
|
hedging or arbitrage trading activity involving our common stock as a result of the existence of the Notes;
|
•
|
departures of key personnel; or
|
•
|
economic uncertainty around the world, in particular, macroeconomic challenges in Europe.
|
•
|
establish that our board of directors is divided into three classes, Class I, Class II and Class III, with three-year staggered terms;
|
•
|
authorize 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;
|
•
|
provide our board of directors with the exclusive right 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;
|
•
|
prohibit our stockholders from taking action by written consent;
|
•
|
specify that special meetings of our 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;
|
•
|
require 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;
|
•
|
authorize our board of directors to amend our bylaws by majority vote; and
|
•
|
establish advance notice procedures with which our stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
(2)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(1)
|
||||||
November 1, 2016 to November 30, 2016
|
|
0.5
|
|
|
$
|
136.08
|
|
|
0.5
|
|
|
$
|
377.0
|
|
December 1, 2016 to December 31, 2016
|
|
0.4
|
|
|
$
|
125.49
|
|
|
0.4
|
|
|
$
|
329.9
|
|
January 1, 2017 to January 31, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
329.9
|
|
Total
|
|
0.9
|
|
|
$
|
131.72
|
|
|
0.9
|
|
|
|
(1)
|
On February 24, 2017, our board of directors authorized a
$500.0 million
increase to our existing share repurchase program, bringing the total authorization to
$1.0 billion
, which will be funded from available working capital. This authorization is an increase to the existing $500.0 million repurchase authorization previously approved by our board of directors in August 2016. Additionally, our board of directors extended the term of the repurchase authorization, which will now expire on December 31, 2018, and may be suspended or discontinued at any time. Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.
|
(2)
|
Average price paid per share includes costs associated with the repurchases.
|
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
|
|
Incorporated by Reference
|
||||||
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
||||
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Amendment No. 2 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 16, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Amendment No. 2 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 16, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Amendment No. 3 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 16, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
Building E:
|
That certain building currently constructed on the Property with a street address of 3000 Tannery Way (“
Building E
”), containing approximately 290,082 rentable square feet of space, and, for purposes of this Lease, agreed to contain said number of rentable square feet.
|
Other Buildings:
|
(a) That certain building currently constructed in the Project`(but outside the Property) with a street address of 3333 Scott Boulevard (“
Building D
”), containing approximately 245,830 rentable square feet of space,
|
Period
|
Base Monthly Rent
|
Months 1-12
|
$0.00 (abated)
|
Months 13-24
|
$893,234.15
|
Months 25-36
|
$919,441.69
|
Months 37-48
|
$939,687.00
|
Months 49-60
|
$958,087.75
|
Months 61-72
|
$976,856.51
|
Months 73-84
|
$996,000.65
|
Months 85-96
|
$1,015,527.66
|
Months 97-108
|
$1,035,445.22
|
Months 109-120
|
$1,055,761.13
|
Months 121-132
|
$1,076,483.36
|
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
|
|
|
By:
|
/s/ M
ARK
D. M
C
L
AUGHLIN
|
|
|
Mark D. McLaughlin, Chairman and CEO
|
|
|
|
|
LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
|
|
By: Santa Clara Phase III REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Manager
By: Menlo Equities Development Company IX
LLC,
a California limited liability company,
its Manager
By: Menlo Equities V LLC,
a California limited liability company,
its Manager
By: Diamant Investments
LLC, a Delaware
limited liability
company, its Member
|
|
|
By:
|
/s/ R
ICHARD
H
OLMSTROM
|
|
|
Richard Holmstrom, Manager
|
|
|
|
1.
|
Definitions
. All capitalized terms used in this Amendment but not otherwise defined shall have the meanings assigned to them in the Lease.
|
2.
|
Lump Sum Payment Date
. The Lump Sum Payment Date is ___________, 201_.
|
3.
|
Base Monthly Rent Start Date
. The Base Monthly Rent Start Date is ________, 201_.
|
4.
|
Abated Rent Lump Sum Payment
. The amount of the Abated Rent Lump Sum Payment is _____________ Dollars ($___________).
|
5.
|
Base Monthly Rent
. The schedule of Base Monthly Rent, as set forth in Article 1 of the Lease, is hereby amended in its entirety to read as follows:
|
Period
|
Base Monthly Rent
|
Months __-__
|
$0.00
|
Months __**-24
|
$893,234.15
|
Months 25-36
|
$919,441.69
|
Months 37-48
|
$939,687.00
|
Months 49-60
|
$958,087.75
|
Months 61-72
|
$976,856.51
|
Months 73-84
|
$996,000.65
|
Months 85-96
|
$1,015,527.66
|
Months 97-108
|
$1,035,445.22
|
Months 109-120
|
$1,055,761.13
|
Months 121-132
|
$1,076,483.36
|
6.
|
Ratification
. The Lease, as amended by this Amendment, is hereby ratified by Landlord and Tenant and Landlord and Tenant hereby agree that the Lease, as so amended, shall continue in full force and effect.
|
7.
|
Miscellaneous
.
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
By: _______________________________________________
Mark D. McLaughlin, Chairman and CEO
|
|
LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
By: Santa Clara Phase III REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Manager
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:_______________________
Henry D. Bullock, President
|
|
Building G:
|
That certain building currently constructed on the Property with a street address of 3200 Tannery Way (“
Building G
”), containing approximately 309,559 rentable square feet of space, and, for purposes of this Lease, agreed to contain said number of rentable square feet.
|
Other Buildings:
|
(a) That certain building currently constructed in the Project (but outside the Property) with a street address of
|
Period
|
Base Monthly Rent
|
Months 1-28
|
$0.00 (abated)
|
Months 29-36
|
$983,736.60
|
Months 37-48
|
$1,005,373.48
|
Months 49-60
|
$1,025,038.99
|
Months 61-72
|
$1,045,097.82
|
Months 73-84
|
$1,065,557.82
|
Months 85-96
|
$1,086,427.02
|
Months 97-108
|
$1,107,713.60
|
Months 109-120
|
$1,129,425.92
|
Months 121-132
|
$1,151,572.48
|
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
|
|
|
By:
|
/s/ M
ARK
D. M
C
L
AUGHLIN
|
|
|
Mark D. McLaughlin, Chairman and CEO
|
|
|
|
|
LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
|
|
By: Santa Clara Phase III REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Manager
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: Diamant Investments
LLC, a Delaware
limited liability
company, its Member
|
|
|
By:
|
/s/ R
ICHARD
H
OLMSTROM
|
|
|
Richard Holmstrom, Manager
|
|
|
|
Period
|
Base Monthly Rent
|
Months __-__
|
$0.00
|
Months __**-36
|
$983,736.60
|
Months 37-48
|
$1,005,373.48
|
Months 49-60
|
$1,025,038.99
|
Months 61-72
|
$1,045,097.82
|
Months 73-84
|
$1,065,557.82
|
Months 85-96
|
$1,086,427.02
|
Months 97-108
|
$1,107,713.60
|
Months 109-120
|
$1,129,425.92
|
Months 121-132
|
$1,151,572.48
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
By: _______________________________________________
Mark D. McLaughlin, Chairman and CEO
|
|
LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
By: Santa Clara Phase III REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Manager
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:_______________________
Henry D. Bullock, President
|
|
Building F:
|
That certain building currently constructed on the Property with a street address of 3100 Tannery Way (“
Building F
”), containing approximately 310,438 rentable square feet of space, and, for purposes of this Lease, agreed to contain said number of rentable square feet.
|
Amenities Building H:
|
That certain building currently constructed on the Property with a street address of 3130 Tannery Way (“
Amenities
Building H
”), containing approximately 30,485 rentable square feet of space, and, for purposes of this Lease, agreed to contain said number of rentable square feet.
|
Other Buildings:
|
(a) That certain building currently constructed in the Project (but outside the Property) with a street address of 3333 Scott Boulevard (“
Building D
”), containing approximately 245,830 rentable square feet of space, and, for purposes of this Lease, agreed to contain said number of rentable square feet; and
|
5.
|
Base Monthly Rent
.
|
Months 121-132
|
$1,301,540.56
|
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
|
|
|
By:
|
/s/ M
ARK
D. M
C
L
AUGHLIN
|
|
|
Mark D. McLaughlin, Chairman and CEO
|
|
|
|
|
LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
|
|
By: Santa Clara Phase III REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Manager
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: Diamant Investments
LLC, a Delaware
limited liability
company, its Member
|
|
|
By:
|
/s/ R
ICHARD
H
OLMSTROM
|
|
|
Richard Holmstrom, Manager
|
|
|
|
Period
|
Base Monthly Rent
|
|
|
[Months __-__
|
$0.00
|
Months __**-24
|
$1,086,146.03
|
Months 25-36
|
$1,116,950.85
|
Months 37-48
|
$1,140,747.58
|
Months 49-60
|
$1,162,376.16
|
Months 61-72
|
$1,184,437.31
|
Months 73-84
|
$1,206,939.68
|
Months 85-96
|
$1,229,892.10
|
Months 97-108
|
$1,253,303.57
|
Months 109-120
|
$1,277,183.27
|
Months 121-132
|
$1,301,540.56
|
|
TENANT:
PALO ALTO NETWORKS, INC.
, a Delaware corporation
By: _______________________________________________
Mark D. McLaughlin, Chairman and CEO
|
|
|
|
LANDLORD:
SANTA CLARA CAMPUS PROPERTY OWNER I LLC
, a Delaware limited liability company
|
|
By: Santa Clara Phase III REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Partners LLC,
a Delaware limited liability company,
its Manager
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:_______________________
Henry D. Bullock, President
|
/s/ M
ARK
D. M
C
L
AUGHLIN
|
Mark D. McLaughlin
|
Chief Executive Officer and Director
|
/s/ S
TEFFAN
C. T
OMLINSON
|
Steffan C. Tomlinson
|
Chief Financial Officer
|
/s/
M
ARK
D. M
C
L
AUGHLIN
|
Mark D. McLaughlin
|
Chief Executive Officer and Director
|
/s/
S
TEFFAN
C. T
OMLINSON
|
Steffan C. Tomlinson
|
Chief Financial Officer
|