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x
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ANNUAL 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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3000 Tannery Way
Santa Clara, California 95054
(Address of principal executive offices, including zip code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.0001 per share
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New York Stock Exchange LLC
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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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Emerging growth company
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¨
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Page
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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•
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trends in and expectations regarding revenue (including our revenue mix), costs of revenue, gross margin, cash flows, interest expense, and operating expenses (including future share-based compensation expense);
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•
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our ability to and expectation that we will continue to grow our installed end-customer base;
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•
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our expectations regarding future investments in research and development, customer support, and in our sales force, including expectations regarding growth in our sales headcount;
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•
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our ability to develop or acquire new product, subscription, and support offerings, improve our existing product, subscription, and support offerings, and increase the value of our product, subscription, and support offerings;
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•
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our expectation that we will continue to expand internationally;
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•
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our expectation that we will continue to renew existing contracts and increase sales to our existing customer base;
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•
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seasonal trends in our results of operations;
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•
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our expectation that we will expand our facilities or add new facilities as we add employees and enter new geographic markets and expectations related to charges incurred in connection with exiting our former headquarter facilities;
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•
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the sufficiency of our cash flow from operations with existing cash and cash equivalents to meet our cash needs for the foreseeable future;
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•
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future investments in product development, subscriptions, or technologies, and any related delays in the development or release of new product and subscription offerings;
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•
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our ability to successfully acquire and integrate companies and assets; and
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•
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the timing and amount of capital expenditures and share repurchases.
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ITEM 1.
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BUSINESS
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•
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Threat Prevention Subscription.
This subscription provides the intrusion detection and prevention capabilities of our platform. Our threat prevention engine blocks vulnerability exploits, viruses, spyware, buffer overflows, denial-of-service attacks, and port scans from compromising and damaging enterprise information resources. It includes mechanisms such as protocol decoder-based analysis, protocol anomaly-based protection, stateful pattern matching, statistical anomaly detection, heuristic-based analysis, custom vulnerability, and spyware “phone home” signatures.
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•
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URL Filtering Subscription.
This subscription provides the
uniform resource locator (“URL”)
filtering capabilities of our platform. The URL filtering database consists of millions of URLs across many categories and is designed to monitor and control employee web surfing activities. The on-appliance URL database can be augmented to suit the traffic patterns of the local user community with a custom URL database. URLs that are not categorized by the local URL database can be pulled into a separate, cache-based URL database from a very extensive, cloud-based URL database.
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•
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WildFire Subscription.
This cloud-based or appliance-based subscription provides protection against targeted malware and advanced persistent threats, and provides a near real-time analysis engine for detecting previously unseen malware. The core component of this subscription is a sandbox environment that can operate on an end-customers’ private cloud or our public cloud where files can be run and monitored for more than 100 behavioral characteristics that identify the file as malware. Once identified, preventive measures are automatically generated and delivered to all subscribed devices. By providing this as a cloud-based subscription, all of our end-customers benefit from malware found on any network.
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•
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GlobalProtect Subscription.
This appliance-based subscription provides protection for mobile users of both traditional laptop devices and mobile devices. It expands the boundaries of the physical network, effectively establishing a logical perimeter that encompasses remote laptop and mobile device users irrespective of their location. When a remote user logs into the device, GlobalProtect automatically determines the closest gateway available to the roaming device and establishes a secure connection. Windows and Apple laptops as well as mobile devices, such as Android phones and tablets and Apple iPhones and iPads, will stay connected to the corporate network whenever they are on a network of any kind. As a result, they are protected as if they never left the corporate campus. GlobalProtect ensures that the same secure application enablement policies that protect users at the corporate site are enforced for all users, independent of their location.
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•
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VM-Series Subscription.
VM-Series, the software form factor of our Next-Generation Firewall, is offered as both a perpetual license as well as a term-based subscription. The VM-Series provides all of the same security capabilities of our hardware appliances, but is delivered as a software package that can be deployed on VMware’s NSX and ESXi, Microsoft’s Hyper-V, and Red Hat KVM hypervisors, as well as natively in Amazon Web Services cloud and Microsoft Azure cloud.
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•
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Traps Endpoint Protection Subscription.
This subscription provides protection for endpoints against cyberattacks that aim to run malicious code or exploit software vulnerabilities. It prevents known and previously unknown attacks through its unique capability of stopping the underlying exploit techniques and can prevent cyberattacks without relying on prior knowledge of the attack. Through its integration with WildFire, it is also capable of preventing cyberattacks that rely on malware.
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•
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AutoFocus Subscription.
This cloud-based subscription provides threat intelligence capabilities to our end-customers’ security operations teams. Indicators of compromise and anomalies that occur on an end-customer’s network can be correlated with similar data that has been centrally collected by us in our Threat Intelligence Cloud from among all our participating end-customers. This offers our end-customers priority alerts, deep attack context, and high-fidelity threat intelligence across millions of malware samples and tens of billions of file artifacts.
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•
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Aperture Subscription.
This cloud-based subscription provides content control for IT-sanctioned SaaS applications that are used to store and share end-customer’s data. It offers end-customers the capability to safely use these SaaS applications and avert risks associated with improper sharing of confidential data and risks associated with sharing of malicious content.
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•
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GlobalProtect Cloud Service Subscription.
This cloud-based subscription, expected to be released in September 2017, enables our end-customers to utilize the preventive capabilities of our Next-Generation Security Platform to secure remote offices and mobile users, providing consistent protection across globally distributed network and cloud environments without the need for firewall appliances or software in the remote locations. With this offering, our end-
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•
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Logging Service Subscription.
This cloud-based subscription, expected to be released in September 2017, allows our end-customers to collect large amounts of context-rich enhanced network logs generated by our security offerings, including those of our firewalls and GlobalProtect Cloud-Based Security subscription, without needing to plan for local compute and storage.
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•
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large networking vendors that incorporate security features in their products, such as
Cisco Systems, Inc. (“Cisco”)
and
Juniper Networks, Inc. (“Juniper”)
, or those that have acquired, or may acquire, large network and endpoint security specialist vendors and have the technical and financial resources to bring competitive solutions to the market;
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•
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independent security vendors such as
Symantec Corporation (“Symantec”)
,
Check Point Software Technologies Ltd. (“Check Point”)
,
Fortinet, Inc. (“Fortinet”)
, and
FireEye, Inc. (“FireEye”)
that offer a mix of network and endpoint security products; and
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•
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small and large companies that offer point solutions and/or cloud security services that compete with some of the features present in our platform.
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•
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product features, reliability, performance, and effectiveness;
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product line breadth, diversity, and applicability;
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product extensibility and ability to integrate with other technology infrastructures;
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•
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price and total cost of ownership;
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•
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adherence to industry standards and certifications;
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•
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strength of sales and marketing efforts; and
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•
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brand awareness and reputation.
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ITEM 1A.
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RISK FACTORS
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•
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our ability to attract and retain new end-customers or sell additional products and subscriptions to our existing end-customers;
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•
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the budgeting cycles, seasonal buying patterns, and purchasing practices of end-customers;
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•
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changes in end-customer, distributor or reseller requirements, or market needs;
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•
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price competition;
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•
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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;
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•
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changes in the mix of our products, subscriptions, and support, including changes in multi-year subscriptions and support;
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•
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our ability to successfully and continuously expand our business domestically and internationally;
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•
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changes in the growth rate of the enterprise security market;
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•
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deferral of orders from end-customers in anticipation of new products or product enhancements announced by us or our competitors;
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•
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the timing and costs related to the development or acquisition of technologies or businesses or strategic partnerships;
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•
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lack of synergy or the inability to realize expected synergies, resulting from acquisitions or strategic partnerships;
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•
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our inability to execute, complete or integrate efficiently any acquisitions that we may undertake;
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increased expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we consummate;
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•
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our ability to increase the size and productivity of our distribution channel;
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•
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decisions by potential end-customers to purchase security solutions from larger, more established security vendors or from their primary network equipment vendors;
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•
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changes in end-customer penetration, attach, and renewal rates for our subscriptions;
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•
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timing of revenue recognition and revenue deferrals;
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•
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our ability to manage production and manufacturing related costs, global customer service organization costs, inventory excess and obsolescence costs, and warranty costs;
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•
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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;
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•
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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;
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•
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our inability to fulfill our end-customers’ orders due to supply chain delays or events that impact our manufacturers or their suppliers;
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•
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the cost and potential outcomes of litigation, which could have a material adverse effect on our business;
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•
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seasonality or cyclical fluctuations in our markets;
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•
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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;
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•
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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;
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•
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political, economic and social instability, such as those caused by 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
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•
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general macroeconomic conditions, both domestically and in our foreign markets that could impact some or all regions where we operate.
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•
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large companies that incorporate security features in their products, such as
Cisco
and
Juniper
, or those that have acquired, or may acquire, large network and endpoint security vendors and have the technical and financial resources to bring competitive solutions to the market;
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•
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independent security vendors, such as
Symantec
,
Check Point
,
Fortinet
, and
FireEye
, that offer a mix of network and endpoint security products; and
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•
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small and large companies that offer point solutions and/or cloud security services that compete with some of the features present in our platform.
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•
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greater name recognition and longer operating histories;
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•
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larger sales and marketing budgets and resources;
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•
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broader distribution and established relationships with distribution partners and end-customers;
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•
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greater customer support resources;
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•
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greater resources to make strategic acquisitions or enter into strategic partnerships;
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•
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lower labor and development costs;
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•
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larger and more mature intellectual property portfolios; and
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•
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substantially greater financial, technical, and other resources.
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•
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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;
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•
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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;
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•
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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
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•
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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.
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•
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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;
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•
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increased purchasing power and leverage held by large end-customers in negotiating contractual arrangements with us;
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•
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more stringent requirements in our worldwide support contracts, including stricter support response times and penalties for any failure to meet support requirements; and
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•
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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.
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•
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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;
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•
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loss of existing or potential end-customers or channel partners;
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•
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delayed or lost revenue;
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•
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delay or failure to attain market acceptance;
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•
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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
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•
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litigation, regulatory inquiries, or investigations that may be costly and harm our reputation.
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•
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political, economic and social uncertainty around the world, macroeconomic challenges in Europe, terrorist activities, and continued hostilities in the Middle East;
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•
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greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;
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•
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the uncertainty of protection for intellectual property rights in some countries;
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•
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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;
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•
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risks associated with trade restrictions and foreign legal requirements, including the importation, certification, and localization of our products required in foreign countries;
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•
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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;
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•
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heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements;
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•
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increased expenses incurred in establishing and maintaining office space and equipment for our international operations;
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•
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management communication and integration problems resulting from cultural and geographic dispersion; and
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•
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fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business and related impact on sales cycles.
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•
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announcements of new products, subscriptions or technologies, commercial relationships, strategic partnerships, acquisitions or other events by us or our competitors;
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•
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price and volume fluctuations in the overall stock market from time to time;
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•
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news announcements that affect investor perception of our industry, including reports related to the discovery of significant cyberattacks;
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•
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significant volatility in the market price and trading volume of technology companies in general and of companies in our industry;
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•
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fluctuations in the trading volume of our shares or the size of our public float;
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•
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actual or anticipated changes in our operating results or fluctuations in our operating results;
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•
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whether our operating results meet the expectations of securities analysts or investors;
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•
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actual or anticipated changes in the expectations of securities analysts or investors, whether as a result of our forward- looking statements, our failure to meet such expectation or otherwise;
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•
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inaccurate or unfavorable research reports about our business and industry published by securities analysts or reduced coverage of our company by securities analysts;
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•
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litigation involving us, our industry, or both;
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•
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regulatory developments in the United States, foreign countries or both;
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•
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major catastrophic events;
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•
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sales of large blocks of our common stock or substantial future sales by our directors, executive officers, employees and significant stockholders;
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•
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sales of our common stock by investors who view the
Notes
as a more attractive means of equity participation in us;
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•
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hedging or arbitrage trading activity involving our common stock as a result of the existence of the
Notes
;
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•
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departures of key personnel; or
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•
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economic uncertainty around the world, in particular, macroeconomic challenges in Europe.
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•
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establish that our board of directors is divided into three classes, Class I, Class II and Class III, with three-year staggered terms;
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•
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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;
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•
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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;
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•
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prohibit our stockholders from taking action by written consent;
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•
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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;
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•
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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;
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•
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authorize our board of directors to amend our bylaws by majority vote; and
|
•
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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.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
|
ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
High
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Low
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||||
Year Ended July 31, 2016
|
|
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||||
First Quarter
|
$
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191.00
|
|
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$
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140.39
|
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Second Quarter
|
$
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194.73
|
|
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$
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135.89
|
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Third Quarter
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$
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165.29
|
|
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$
|
111.09
|
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Fourth Quarter
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$
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151.99
|
|
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$
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114.64
|
|
Year Ended July 31, 2017
|
|
|
|
||||
First Quarter
|
$
|
163.01
|
|
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$
|
124.74
|
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Second Quarter
|
$
|
165.69
|
|
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$
|
123.57
|
|
Third Quarter
|
$
|
157.65
|
|
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$
|
107.31
|
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Fourth Quarter
|
$
|
143.90
|
|
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$
|
108.15
|
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Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
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Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(1)
|
||||||
May 1, 2017 to May 31, 2017
(2)
|
|
—
|
|
|
$
|
116.50
|
|
|
—
|
|
|
$
|
704.9
|
|
June 1, 2017 to June 30, 2017
(3)
|
|
0.5
|
|
|
$
|
133.82
|
|
|
0.5
|
|
|
$
|
636.1
|
|
July 1, 2017 to July 31, 2017
(3)
|
|
0.4
|
|
|
$
|
135.57
|
|
|
0.4
|
|
|
$
|
580.0
|
|
Total
|
|
0.9
|
|
|
$
|
133.91
|
|
|
0.9
|
|
|
|
(1)
|
On August 26, 2016, our board of directors authorized a $500.0 million share repurchase which is funded from available working capital. On February 24, 2017, our board of directors authorized a $500.0 million increase to our repurchase program, bringing the total authorization to $1.0 billion. 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. The repurchase authorization will expire on December 31, 2018, and may be suspended or discontinued at any time.
|
(2)
|
Repurchases during the month ended May 31, 2017 include shares of restricted common stock delivered by certain employees upon vesting of equity awards to satisfy tax withholding requirements. The number of shares delivered by these employees to satisfy tax withholding requirements during the period was not significant.
|
(3)
|
Repurchases during the months ended June 30, 2017 and July 31, 2017 consisted of repurchases under our share repurchase program, for which the average price paid per share excludes costs associated with the repurchases.
|
Company/Index
|
7/31/2012
|
|
7/31/2013
|
|
7/31/2014
|
|
7/31/2015
|
|
7/31/2016
|
|
7/31/2017
|
||||||||||||
Palo Alto Networks, Inc.
|
$
|
100.00
|
|
|
$
|
85.65
|
|
|
$
|
141.51
|
|
|
$
|
325.22
|
|
|
$
|
229.07
|
|
|
$
|
230.63
|
|
NYSE Composite Index
|
$
|
100.00
|
|
|
$
|
121.55
|
|
|
$
|
136.40
|
|
|
$
|
138.38
|
|
|
$
|
137.15
|
|
|
$
|
152.18
|
|
NYSE Arca Tech 100 Index
|
$
|
100.00
|
|
|
$
|
125.69
|
|
|
$
|
152.74
|
|
|
$
|
169.47
|
|
|
$
|
171.17
|
|
|
$
|
211.12
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended July 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Selected Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenue
|
$
|
1,761.6
|
|
|
$
|
1,378.5
|
|
|
$
|
928.1
|
|
|
$
|
598.2
|
|
|
$
|
396.1
|
|
Total gross profit
|
1,285.0
|
|
|
1,008.5
|
|
|
676.6
|
|
|
438.6
|
|
|
286.4
|
|
|||||
Operating loss
(1)
|
(179.8
|
)
|
|
(157.3
|
)
|
|
(99.8
|
)
|
|
(196.2
|
)
|
|
(9.9
|
)
|
|||||
Net loss
(1)
|
$
|
(216.6
|
)
|
|
$
|
(192.7
|
)
|
|
$
|
(131.3
|
)
|
|
$
|
(207.4
|
)
|
|
$
|
(20.5
|
)
|
Net loss per share, basic and diluted
(1)
|
$
|
(2.39
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(2.79
|
)
|
|
$
|
(0.30
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.6
|
|
|
87.1
|
|
|
81.6
|
|
|
74.3
|
|
|
68.7
|
|
|
July 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Selected Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
744.3
|
|
|
$
|
734.4
|
|
|
$
|
375.8
|
|
|
$
|
653.8
|
|
|
$
|
310.6
|
|
Investments
|
1,420.0
|
|
|
1,204.0
|
|
|
952.0
|
|
|
320.6
|
|
|
126.3
|
|
|||||
Working capital
(1)(2)(3)
|
775.0
|
|
|
927.2
|
|
|
79.3
|
|
|
630.9
|
|
|
334.5
|
|
|||||
Total assets
(1)
|
3,438.3
|
|
|
2,858.2
|
|
|
2,026.1
|
|
|
1,502.6
|
|
|
603.9
|
|
|||||
Total deferred revenue
|
1,773.5
|
|
|
1,240.8
|
|
|
713.7
|
|
|
422.6
|
|
|
249.2
|
|
|||||
Convertible senior notes, net
(2)(3)
|
524.7
|
|
|
500.2
|
|
|
476.8
|
|
|
454.6
|
|
|
—
|
|
|||||
Common stock and additional paid-in capital
|
1,599.7
|
|
|
1,515.5
|
|
|
988.7
|
|
|
804.4
|
|
|
381.6
|
|
|||||
Total stockholders’ equity
(1)
|
$
|
759.6
|
|
|
$
|
894.9
|
|
|
$
|
559.7
|
|
|
$
|
506.7
|
|
|
$
|
291.4
|
|
(1)
|
Prior period amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
(2)
|
Prior period amounts have been adjusted due to our adoption of new accounting guidance related to the presentation of debt issuance costs. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
(3)
|
The convertible senior notes, net balance was classified as a current liability in our consolidated balance sheets as of July 31, 2015, and classified as a long-term liability for all other periods presented.
|
ITEM 7.
|
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 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 fiscal
2017
to
2016
and fiscal
2016
to
2015
.
|
•
|
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
July 31, 2017
, including expected payment schedules.
|
•
|
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.
|
|
July 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Total deferred revenue
|
$
|
1,773.5
|
|
|
$
|
1,240.8
|
|
Cash, cash equivalents, and investments
|
$
|
2,164.3
|
|
|
$
|
1,938.4
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(dollars in millions)
|
||||||||||
Total revenue
|
$
|
1,761.6
|
|
|
$
|
1,378.5
|
|
|
$
|
928.1
|
|
Total revenue year-over-year percentage increase
|
27.8
|
%
|
|
48.5
|
%
|
|
55.1
|
%
|
|||
Gross margin
|
72.9
|
%
|
|
73.2
|
%
|
|
72.9
|
%
|
|||
Operating loss
(1)
|
$
|
(179.8
|
)
|
|
$
|
(157.3
|
)
|
|
$
|
(99.8
|
)
|
Operating margin
(1)
|
(10.2
|
)%
|
|
(11.4
|
)%
|
|
(10.8
|
)%
|
|||
Billings
|
$
|
2,293.4
|
|
|
$
|
1,905.6
|
|
|
$
|
1,219.1
|
|
Billings year-over-year percentage increase
|
20.4
|
%
|
|
56.3
|
%
|
|
58.0
|
%
|
|||
Cash flow provided by operating activities
(2)
|
$
|
868.5
|
|
|
$
|
658.6
|
|
|
$
|
352.8
|
|
Free cash flow (non-GAAP)
(2)
|
$
|
705.1
|
|
|
$
|
586.1
|
|
|
$
|
319.0
|
|
(1)
|
Prior period amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
(2)
|
Prior period amounts have been adjusted 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 in Part II, Item 8 of this Annual Report on Form 10-K 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, net of acquired 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:
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Billings:
|
|
|
|
|
|
||||||
Total revenue
|
$
|
1,761.6
|
|
|
$
|
1,378.5
|
|
|
$
|
928.1
|
|
Add: change in total deferred revenue, net of acquired deferred revenue
|
531.8
|
|
|
527.1
|
|
|
291.0
|
|
|||
Billings
|
$
|
2,293.4
|
|
|
$
|
1,905.6
|
|
|
$
|
1,219.1
|
|
•
|
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:
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Free cash flow (non-GAAP):
|
|
|
|
|
|
||||||
Net cash provided by operating activities
(1)
|
$
|
868.5
|
|
|
$
|
658.6
|
|
|
$
|
352.8
|
|
Less: purchases of property, equipment, and other assets
|
163.4
|
|
|
72.5
|
|
|
33.8
|
|
|||
Free cash flow (non-GAAP)
(1)
|
$
|
705.1
|
|
|
$
|
586.1
|
|
|
$
|
319.0
|
|
Net cash used in investing activities
|
$
|
(472.6
|
)
|
|
$
|
(338.9
|
)
|
|
$
|
(679.0
|
)
|
Net cash provided by (used in) financing activities
(1)
|
$
|
(386.0
|
)
|
|
$
|
38.9
|
|
|
$
|
48.2
|
|
(1)
|
Prior period amounts have been adjusted 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 in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
|
Year Ended July 31,
|
|||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Amount
|
|
% of Revenue
|
|
Amount
(1)
|
|
% of Revenue
(1)
|
|
Amount
(1)
|
|
% of Revenue
(1)
|
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
$
|
709.1
|
|
|
40.3
|
%
|
|
$
|
670.8
|
|
|
48.7
|
%
|
|
$
|
492.7
|
|
|
53.1
|
%
|
Subscription and support
|
1,052.5
|
|
|
59.7
|
%
|
|
707.7
|
|
|
51.3
|
%
|
|
435.4
|
|
|
46.9
|
%
|
|||
Total revenue
|
1,761.6
|
|
|
100.0
|
%
|
|
1,378.5
|
|
|
100.0
|
%
|
|
928.1
|
|
|
100.0
|
%
|
|||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
201.4
|
|
|
11.4
|
%
|
|
175.4
|
|
|
12.7
|
%
|
|
131.1
|
|
|
14.1
|
%
|
|||
Subscription and support
|
275.2
|
|
|
15.7
|
%
|
|
194.6
|
|
|
14.1
|
%
|
|
120.4
|
|
|
13.0
|
%
|
|||
Total cost of revenue
(2)
|
476.6
|
|
|
27.1
|
%
|
|
370.0
|
|
|
26.8
|
%
|
|
251.5
|
|
|
27.1
|
%
|
|||
Total gross profit
|
1,285.0
|
|
|
72.9
|
%
|
|
1,008.5
|
|
|
73.2
|
%
|
|
676.6
|
|
|
72.9
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research and development
|
347.4
|
|
|
19.7
|
%
|
|
284.2
|
|
|
20.6
|
%
|
|
185.8
|
|
|
20.0
|
%
|
|||
Sales and marketing
|
919.1
|
|
|
52.2
|
%
|
|
743.2
|
|
|
53.9
|
%
|
|
489.0
|
|
|
52.7
|
%
|
|||
General and administrative
|
198.3
|
|
|
11.2
|
%
|
|
138.4
|
|
|
10.1
|
%
|
|
101.6
|
|
|
11.0
|
%
|
|||
Total operating expenses
(2)
|
1,464.8
|
|
|
83.1
|
%
|
|
1,165.8
|
|
|
84.6
|
%
|
|
776.4
|
|
|
83.7
|
%
|
|||
Operating loss
|
(179.8
|
)
|
|
(10.2
|
)%
|
|
(157.3
|
)
|
|
(11.4
|
)%
|
|
(99.8
|
)
|
|
(10.8
|
)%
|
|||
Interest expense
|
(24.5
|
)
|
|
(1.4
|
)%
|
|
(23.4
|
)
|
|
(1.7
|
)%
|
|
(22.3
|
)
|
|
(2.4
|
)%
|
|||
Other income, net
|
10.2
|
|
|
0.6
|
%
|
|
8.4
|
|
|
0.6
|
%
|
|
0.2
|
|
|
—
|
%
|
|||
Loss before income taxes
|
(194.1
|
)
|
|
(11.0
|
)%
|
|
(172.3
|
)
|
|
(12.5
|
)%
|
|
(121.9
|
)
|
|
(13.2
|
)%
|
|||
Provision for income taxes
|
22.5
|
|
|
1.3
|
%
|
|
20.4
|
|
|
1.5
|
%
|
|
9.4
|
|
|
1.0
|
%
|
|||
Net loss
|
$
|
(216.6
|
)
|
|
(12.3
|
)%
|
|
$
|
(192.7
|
)
|
|
(14.0
|
)%
|
|
$
|
(131.3
|
)
|
|
(14.2
|
)%
|
(1)
|
Certain prior period amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
(2)
|
Includes share-based compensation as follows:
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Cost of product revenue
|
$
|
7.3
|
|
|
$
|
6.2
|
|
|
$
|
3.9
|
|
Cost of subscription and support revenue
|
56.2
|
|
|
40.9
|
|
|
20.4
|
|
|||
Research and development
|
152.6
|
|
|
132.9
|
|
|
74.8
|
|
|||
Sales and marketing
|
186.5
|
|
|
152.4
|
|
|
84.1
|
|
|||
General and administrative
|
73.1
|
|
|
60.5
|
|
|
38.2
|
|
|||
Total share-based compensation
|
$
|
475.7
|
|
|
$
|
392.9
|
|
|
$
|
221.4
|
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Product
|
$
|
709.1
|
|
|
$
|
670.8
|
|
|
$
|
38.3
|
|
|
5.7
|
%
|
|
$
|
670.8
|
|
|
$
|
492.7
|
|
|
$
|
178.1
|
|
|
36.2
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Subscription
|
$
|
550.8
|
|
|
$
|
357.0
|
|
|
$
|
193.8
|
|
|
54.3
|
%
|
|
$
|
357.0
|
|
|
$
|
212.7
|
|
|
$
|
144.3
|
|
|
67.8
|
%
|
Support
|
501.7
|
|
|
350.7
|
|
|
151.0
|
|
|
43.1
|
%
|
|
350.7
|
|
|
222.7
|
|
|
128.0
|
|
|
57.5
|
%
|
||||||
Total subscription and support
|
$
|
1,052.5
|
|
|
$
|
707.7
|
|
|
$
|
344.8
|
|
|
48.7
|
%
|
|
$
|
707.7
|
|
|
$
|
435.4
|
|
|
$
|
272.3
|
|
|
62.5
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Americas
|
$
|
1,237.4
|
|
|
$
|
973.2
|
|
|
$
|
264.2
|
|
|
27.1
|
%
|
|
$
|
973.2
|
|
|
$
|
639.4
|
|
|
$
|
333.8
|
|
|
52.2
|
%
|
EMEA
|
320.1
|
|
|
247.1
|
|
|
73.0
|
|
|
29.5
|
%
|
|
247.1
|
|
|
178.7
|
|
|
68.4
|
|
|
38.2
|
%
|
||||||
APAC
|
204.1
|
|
|
158.2
|
|
|
45.9
|
|
|
29.0
|
%
|
|
158.2
|
|
|
110.0
|
|
|
48.2
|
|
|
43.8
|
%
|
||||||
Total revenue
|
$
|
1,761.6
|
|
|
$
|
1,378.5
|
|
|
$
|
383.1
|
|
|
27.8
|
%
|
|
$
|
1,378.5
|
|
|
$
|
928.1
|
|
|
$
|
450.4
|
|
|
48.5
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Cost of product revenue
|
$
|
201.4
|
|
|
$
|
175.4
|
|
|
$
|
26.0
|
|
|
14.8
|
%
|
|
$
|
175.4
|
|
|
$
|
131.1
|
|
|
$
|
44.3
|
|
|
33.8
|
%
|
Number of employees at period end
|
96
|
|
|
91
|
|
|
5
|
|
|
5.5
|
%
|
|
91
|
|
|
67
|
|
|
24
|
|
|
35.8
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Cost of subscription and support revenue
|
$
|
275.2
|
|
|
$
|
194.6
|
|
|
$
|
80.6
|
|
|
41.4
|
%
|
|
$
|
194.6
|
|
|
$
|
120.4
|
|
|
$
|
74.2
|
|
|
61.7
|
%
|
Number of employees at period end
|
725
|
|
|
539
|
|
|
186
|
|
|
34.5
|
%
|
|
539
|
|
|
357
|
|
|
182
|
|
|
51.0
|
%
|
|
Year Ended July 31,
|
|||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Amount
|
|
Gross
Margin
|
|
Amount
|
|
Gross
Margin
|
|
Amount
|
|
Gross
Margin |
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Product
|
$
|
507.7
|
|
|
71.6
|
%
|
|
$
|
495.4
|
|
|
73.9
|
%
|
|
$
|
361.6
|
|
|
73.4
|
%
|
Subscription and support
|
777.3
|
|
|
73.9
|
%
|
|
513.1
|
|
|
72.5
|
%
|
|
315.0
|
|
|
72.3
|
%
|
|||
Total gross profit
|
$
|
1,285.0
|
|
|
72.9
|
%
|
|
$
|
1,008.5
|
|
|
73.2
|
%
|
|
$
|
676.6
|
|
|
72.9
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Research and development
|
$
|
347.4
|
|
|
$
|
284.2
|
|
|
$
|
63.2
|
|
|
22.2
|
%
|
|
$
|
284.2
|
|
|
$
|
185.8
|
|
|
$
|
98.4
|
|
|
52.9
|
%
|
Number of employees at period end
|
766
|
|
|
637
|
|
|
129
|
|
|
20.3
|
%
|
|
637
|
|
|
475
|
|
|
162
|
|
|
34.1
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Sales and marketing
(1)
|
$
|
919.1
|
|
|
$
|
743.2
|
|
|
$
|
175.9
|
|
|
23.7
|
%
|
|
$
|
743.2
|
|
|
$
|
489.0
|
|
|
$
|
254.2
|
|
|
52.0
|
%
|
Number of employees at period end
|
2,418
|
|
|
2,092
|
|
|
326
|
|
|
15.6
|
%
|
|
2,092
|
|
|
1,443
|
|
|
649
|
|
|
45.0
|
%
|
(1)
|
Prior period amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
General and administrative
|
$
|
198.3
|
|
|
$
|
138.4
|
|
|
$
|
59.9
|
|
|
43.3
|
%
|
|
$
|
138.4
|
|
|
$
|
101.6
|
|
|
$
|
36.8
|
|
|
36.2
|
%
|
Number of employees at period end
|
557
|
|
|
436
|
|
|
121
|
|
|
27.8
|
%
|
|
436
|
|
|
295
|
|
|
141
|
|
|
47.8
|
%
|
|
Year Ended July 31,
|
|
|
|
Year Ended July 31,
|
|
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||
Other income, net
|
$
|
10.2
|
|
|
$
|
8.4
|
|
|
$
|
1.8
|
|
|
NM
|
|
$
|
8.4
|
|
|
$
|
0.2
|
|
|
$
|
8.2
|
|
|
NM
|
|
Year Ended July 31,
|
|
|
|
|
|
Year Ended July 31,
|
|
|
|
|
||||||||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Provision for income taxes
(1)
|
$
|
22.5
|
|
|
$
|
20.4
|
|
|
$
|
2.1
|
|
|
10.3
|
%
|
|
$
|
20.4
|
|
|
$
|
9.4
|
|
|
$
|
11.0
|
|
|
117.0
|
%
|
Effective tax rate
(1)
|
(11.6
|
)%
|
|
(11.8
|
)%
|
|
|
|
|
|
(11.8
|
)%
|
|
(7.7
|
)%
|
|
|
|
|
(1)
|
Prior period amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
|
July 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Working capital
(1)
|
$
|
775.0
|
|
|
$
|
927.2
|
|
Cash, cash equivalents, and investments:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
744.3
|
|
|
$
|
734.4
|
|
Investments
|
1,420.0
|
|
|
1,204.0
|
|
||
Total cash, cash equivalents, and investments
|
$
|
2,164.3
|
|
|
$
|
1,938.4
|
|
(1)
|
Prior period amount has been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
|
Year Ended July 31,
|
||||||||||
2017
|
|
2016
|
|
2015
|
|||||||
|
(in millions)
|
||||||||||
Net cash provided by operating activities
(1)
|
$
|
868.5
|
|
|
$
|
658.6
|
|
|
$
|
352.8
|
|
Net cash used in investing activities
|
(472.6
|
)
|
|
(338.9
|
)
|
|
(679.0
|
)
|
|||
Net cash provided by (used in) financing activities
(1)
|
(386.0
|
)
|
|
38.9
|
|
|
48.2
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
$
|
9.9
|
|
|
$
|
358.6
|
|
|
$
|
(278.0
|
)
|
(1)
|
Prior period amounts have been adjusted 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 in Part II, Item 8 of this Annual Report on Form 10-K for more information.
|
|
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
|
$
|
575.0
|
|
|
$
|
—
|
|
|
$
|
575.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating lease obligations
(1)
|
517.5
|
|
|
31.0
|
|
|
110.8
|
|
|
111.2
|
|
|
264.5
|
|
|||||
Purchase obligations
(2)
|
104.1
|
|
|
98.5
|
|
|
5.6
|
|
|
—
|
|
|
—
|
|
|||||
Total
(3)
|
$
|
1,196.6
|
|
|
$
|
129.5
|
|
|
$
|
691.4
|
|
|
$
|
111.2
|
|
|
$
|
264.5
|
|
(1)
|
Consists of contractual obligations from our non-cancelable operating leases. Excludes contractual sublease proceeds of
$2.1 million
, which will be received in less than one year. Refer to Note
9
. Commitments and Contingencies of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information on our operating leases.
|
(2)
|
Consists of minimum purchase commitments of products and components with our manufacturing partners and component suppliers. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.
|
(3)
|
No amounts related to income taxes are included. As of
July 31, 2017
, we had approximately $
62.2 million
of tax liabilities recorded related to uncertainty in income tax positions.
|
•
|
Vendor-specific objective evidence (“VSOE”) of selling price, if available,
|
•
|
Third-party evidence (“TPE”) of selling price, if VSOE of selling price is not available, or
|
•
|
Best estimate of selling price (“BESP”), if neither VSOE of selling price nor TPE of selling price are available.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
July 31,
|
||||||
|
2017
|
|
2016
|
||||
|
|
|
(As Adjusted)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
744.3
|
|
|
$
|
734.4
|
|
Short-term investments
|
630.7
|
|
|
551.2
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $0.7 and $2.4 at July 31, 2017 and July 31, 2016, respectively
|
432.1
|
|
|
348.7
|
|
||
Prepaid expenses and other current assets
|
169.2
|
|
|
139.7
|
|
||
Total current assets
|
1,976.3
|
|
|
1,774.0
|
|
||
Property and equipment, net
|
211.1
|
|
|
117.2
|
|
||
Long-term investments
|
789.3
|
|
|
652.8
|
|
||
Goodwill
|
238.8
|
|
|
163.5
|
|
||
Intangible assets, net
|
53.7
|
|
|
44.0
|
|
||
Other assets
|
169.1
|
|
|
106.7
|
|
||
Total assets
|
$
|
3,438.3
|
|
|
$
|
2,858.2
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
35.5
|
|
|
$
|
30.2
|
|
Accrued compensation
|
117.5
|
|
|
73.5
|
|
||
Accrued and other liabilities
|
79.9
|
|
|
39.2
|
|
||
Deferred revenue
|
968.4
|
|
|
703.9
|
|
||
Total current liabilities
|
1,201.3
|
|
|
846.8
|
|
||
Convertible senior notes, net
|
524.7
|
|
|
500.2
|
|
||
Long-term deferred revenue
|
805.1
|
|
|
536.9
|
|
||
Other long-term liabilities
|
147.6
|
|
|
79.4
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock; $0.0001 par value; 100.0 shares authorized; none issued and outstanding at July 31, 2017 and July 31, 2016
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital; $0.0001 par value; 1,000.0 shares authorized; 91.5 and 90.5 shares issued and outstanding at July 31, 2017 and July 31, 2016, respectively
|
1,599.7
|
|
|
1,515.5
|
|
||
Accumulated other comprehensive income (loss)
|
(3.4
|
)
|
|
1.0
|
|
||
Accumulated deficit
|
(836.7
|
)
|
|
(621.6
|
)
|
||
Total stockholders’ equity
|
759.6
|
|
|
894.9
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,438.3
|
|
|
$
|
2,858.2
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
(As Adjusted)
|
|
(As Adjusted)
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Product
|
$
|
709.1
|
|
|
$
|
670.8
|
|
|
$
|
492.7
|
|
Subscription and support
|
1,052.5
|
|
|
707.7
|
|
|
435.4
|
|
|||
Total revenue
|
1,761.6
|
|
|
1,378.5
|
|
|
928.1
|
|
|||
Cost of revenue:
|
|
|
|
|
|
||||||
Product
|
201.4
|
|
|
175.4
|
|
|
131.1
|
|
|||
Subscription and support
|
275.2
|
|
|
194.6
|
|
|
120.4
|
|
|||
Total cost of revenue
|
476.6
|
|
|
370.0
|
|
|
251.5
|
|
|||
Total gross profit
|
1,285.0
|
|
|
1,008.5
|
|
|
676.6
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Research and development
|
347.4
|
|
|
284.2
|
|
|
185.8
|
|
|||
Sales and marketing
|
919.1
|
|
|
743.2
|
|
|
489.0
|
|
|||
General and administrative
|
198.3
|
|
|
138.4
|
|
|
101.6
|
|
|||
Total operating expenses
|
1,464.8
|
|
|
1,165.8
|
|
|
776.4
|
|
|||
Operating loss
|
(179.8
|
)
|
|
(157.3
|
)
|
|
(99.8
|
)
|
|||
Interest expense
|
(24.5
|
)
|
|
(23.4
|
)
|
|
(22.3
|
)
|
|||
Other income, net
|
10.2
|
|
|
8.4
|
|
|
0.2
|
|
|||
Loss before income taxes
|
(194.1
|
)
|
|
(172.3
|
)
|
|
(121.9
|
)
|
|||
Provision for income taxes
|
22.5
|
|
|
20.4
|
|
|
9.4
|
|
|||
Net loss
|
$
|
(216.6
|
)
|
|
$
|
(192.7
|
)
|
|
$
|
(131.3
|
)
|
Net loss per share, basic and diluted
|
$
|
(2.39
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.61
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.6
|
|
|
87.1
|
|
|
81.6
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
(As Adjusted)
|
|
(As Adjusted)
|
||||||
Net loss
|
$
|
(216.6
|
)
|
|
$
|
(192.7
|
)
|
|
$
|
(131.3
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Change in unrealized gains (losses) on investments
|
(4.3
|
)
|
|
1.1
|
|
|
—
|
|
|||
Change in unrealized gains (losses) on cash flow hedges
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income (loss)
|
(4.4
|
)
|
|
1.1
|
|
|
—
|
|
|||
Comprehensive loss
|
$
|
(221.0
|
)
|
|
$
|
(191.6
|
)
|
|
$
|
(131.3
|
)
|
|
Common Stock
and
Additional Paid-In Capital
|
|
Accumulated
Other
Comprehensive Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
Stockholders’
Equity
|
|||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||
|
|
|
|
|
|
|
(As Adjusted)
|
|
(As Adjusted)
|
|||||||||
Balance as of July 31, 2014
|
79.5
|
|
|
$
|
804.4
|
|
|
$
|
(0.1
|
)
|
|
$
|
(297.6
|
)
|
|
$
|
506.7
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(131.3
|
)
|
|
(131.3
|
)
|
||||
Issuance of common stock in connection with employee equity incentive plans and related excess tax benefit
|
5.3
|
|
|
50.9
|
|
|
—
|
|
|
—
|
|
|
50.9
|
|
||||
Share-based compensation for equity based awards
|
—
|
|
|
221.3
|
|
|
—
|
|
|
—
|
|
|
221.3
|
|
||||
Temporary equity reclassification
|
—
|
|
|
(87.9
|
)
|
|
—
|
|
|
—
|
|
|
(87.9
|
)
|
||||
Balance as of July 31, 2015
|
84.8
|
|
|
988.7
|
|
|
(0.1
|
)
|
|
(428.9
|
)
|
|
559.7
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(192.7
|
)
|
|
(192.7
|
)
|
||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
||||
Issuance of common stock in connection with employee equity incentive plans and related excess tax benefit
|
5.7
|
|
|
45.8
|
|
|
—
|
|
|
—
|
|
|
45.8
|
|
||||
Share-based compensation for equity based awards
|
—
|
|
|
393.1
|
|
|
—
|
|
|
—
|
|
|
393.1
|
|
||||
Temporary equity reclassification
|
—
|
|
|
87.9
|
|
|
—
|
|
|
—
|
|
|
87.9
|
|
||||
Balance as of July 31, 2016
|
90.5
|
|
|
1,515.5
|
|
|
1.0
|
|
|
(621.6
|
)
|
|
894.9
|
|
||||
Cumulative-effect adjustment from adoption of new accounting pronouncement
|
—
|
|
|
2.0
|
|
|
—
|
|
|
1.5
|
|
|
3.5
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(216.6
|
)
|
|
(216.6
|
)
|
||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
—
|
|
|
(4.4
|
)
|
||||
Issuance of common stock in connection with employee equity incentive plans
|
4.3
|
|
|
46.3
|
|
|
—
|
|
|
—
|
|
|
46.3
|
|
||||
Repurchase and retirement of common stock
|
(3.3
|
)
|
|
(420.1
|
)
|
|
—
|
|
|
—
|
|
|
(420.1
|
)
|
||||
Taxes paid related to net share settlement of equity awards
|
—
|
|
|
(21.4
|
)
|
|
—
|
|
|
—
|
|
|
(21.4
|
)
|
||||
Share-based compensation for equity based awards
|
—
|
|
|
477.4
|
|
|
—
|
|
|
—
|
|
|
477.4
|
|
||||
Balance as of July 31, 2017
|
91.5
|
|
|
$
|
1,599.7
|
|
|
$
|
(3.4
|
)
|
|
$
|
(836.7
|
)
|
|
$
|
759.6
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
(As Adjusted)
|
|
(As Adjusted)
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net loss
|
$
|
(216.6
|
)
|
|
$
|
(192.7
|
)
|
|
$
|
(131.3
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Share-based compensation for equity based awards
|
474.5
|
|
|
392.8
|
|
|
221.3
|
|
|||
Depreciation and amortization
|
59.8
|
|
|
42.8
|
|
|
28.9
|
|
|||
Asset impairment related to facility exit
|
20.9
|
|
|
—
|
|
|
—
|
|
|||
Amortization of investment premiums, net of accretion of purchase discounts
|
2.7
|
|
|
3.0
|
|
|
3.2
|
|
|||
Amortization of debt discount and debt issuance costs
|
24.5
|
|
|
23.4
|
|
|
22.3
|
|
|||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
(82.9
|
)
|
|
(136.4
|
)
|
|
(76.8
|
)
|
|||
Prepaid expenses and other assets
|
(48.1
|
)
|
|
(31.2
|
)
|
|
(69.0
|
)
|
|||
Accounts payable
|
5.9
|
|
|
15.1
|
|
|
(3.5
|
)
|
|||
Accrued compensation
|
42.8
|
|
|
(6.3
|
)
|
|
31.1
|
|
|||
Accrued and other liabilities
|
53.2
|
|
|
21.0
|
|
|
35.6
|
|
|||
Deferred revenue
|
531.8
|
|
|
527.1
|
|
|
291.0
|
|
|||
Net cash provided by operating activities
|
868.5
|
|
|
658.6
|
|
|
352.8
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Purchases of investments
|
(995.9
|
)
|
|
(1,037.0
|
)
|
|
(987.6
|
)
|
|||
Proceeds from sales of investments
|
—
|
|
|
141.9
|
|
|
18.5
|
|
|||
Proceeds from maturities of investments
|
777.4
|
|
|
628.7
|
|
|
339.0
|
|
|||
Business acquisitions, net of cash acquired
|
(90.7
|
)
|
|
—
|
|
|
(15.1
|
)
|
|||
Purchases of property, equipment, and other assets
|
(163.4
|
)
|
|
(72.5
|
)
|
|
(33.8
|
)
|
|||
Net cash used in investing activities
|
(472.6
|
)
|
|
(338.9
|
)
|
|
(679.0
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Repurchases of common stock
|
(411.0
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from sales of shares through employee equity incentive plans
|
46.4
|
|
|
45.3
|
|
|
48.2
|
|
|||
Payments for taxes related to net share settlement of equity awards
|
(21.4
|
)
|
|
—
|
|
|
—
|
|
|||
Payment of deferred consideration related to prior year business acquisition
|
—
|
|
|
(6.4
|
)
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
(386.0
|
)
|
|
38.9
|
|
|
48.2
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
9.9
|
|
|
358.6
|
|
|
(278.0
|
)
|
|||
Cash and cash equivalents—beginning of period
|
734.4
|
|
|
375.8
|
|
|
653.8
|
|
|||
Cash and cash equivalents—end of period
|
$
|
744.3
|
|
|
$
|
734.4
|
|
|
$
|
375.8
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash paid for income taxes
|
$
|
9.0
|
|
|
$
|
7.1
|
|
|
$
|
17.5
|
|
•
|
Persuasive Evidence of an Arrangement Exists.
We rely upon non-cancelable sales agreements and purchase orders to determine the existence of an arrangement.
|
•
|
Delivery has Occurred.
We use shipping documents or transmissions of product or subscription and support contract registration codes to determine delivery.
|
•
|
The Fee is Fixed or Determinable.
We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction.
|
•
|
Collectability is Reasonably Assured.
We assess collectability based on credit analysis and payment history.
|
|
July 31, 2017
|
|
July 31, 2016
|
||||||||||||||||||||
|
Computed under Prior Method
|
|
Impact of Commission Adjustment
|
|
As Reported
|
|
As Previously Reported
|
|
Impact of Commission Adjustment
|
|
As Adjusted
|
||||||||||||
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prepaid expenses and other current assets
|
$
|
95.8
|
|
|
$
|
73.4
|
|
|
$
|
169.2
|
|
|
$
|
84.8
|
|
|
$
|
54.9
|
|
|
$
|
139.7
|
|
Other assets
|
97.8
|
|
|
71.3
|
|
|
169.1
|
|
|
64.6
|
|
|
50.1
|
|
|
114.7
|
|
||||||
Accumulated deficit
|
$
|
(981.4
|
)
|
|
$
|
144.7
|
|
|
$
|
(836.7
|
)
|
|
$
|
(726.6
|
)
|
|
$
|
105.0
|
|
|
$
|
(621.6
|
)
|
|
Year Ended July 31, 2017
|
||||||||||
|
Computed under Prior Method
|
|
Impact of Commission Adjustment
|
|
As Reported
|
||||||
Consolidated Statements of Operations
|
|
|
|
|
|
||||||
Sales and marketing
|
$
|
958.4
|
|
|
$
|
(39.3
|
)
|
|
$
|
919.1
|
|
Operating loss
|
(219.1
|
)
|
|
39.3
|
|
|
(179.8
|
)
|
|||
Provision for income taxes
|
22.9
|
|
|
(0.4
|
)
|
|
22.5
|
|
|||
Net loss
|
$
|
(256.3
|
)
|
|
$
|
39.7
|
|
|
$
|
(216.6
|
)
|
Net loss per share, basic and diluted
|
$
|
(2.83
|
)
|
|
$
|
0.44
|
|
|
$
|
(2.39
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.6
|
|
|
—
|
|
|
90.6
|
|
|||
|
|
|
|
|
|
||||||
Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
||||||
Net loss
|
$
|
(256.3
|
)
|
|
$
|
39.7
|
|
|
$
|
(216.6
|
)
|
Comprehensive loss
|
$
|
(260.7
|
)
|
|
$
|
39.7
|
|
|
$
|
(221.0
|
)
|
|
Year Ended July 31, 2016
|
||||||||||
|
As Previously Reported
|
|
Impact of Commission Adjustment
|
|
As Adjusted
|
||||||
Consolidated Statements of Operations
|
|
|
|
|
|
||||||
Sales and marketing
|
$
|
776.0
|
|
|
$
|
(32.8
|
)
|
|
$
|
743.2
|
|
Operating loss
|
(190.1
|
)
|
|
32.8
|
|
|
(157.3
|
)
|
|||
Provision for income taxes
|
20.8
|
|
|
(0.4
|
)
|
|
20.4
|
|
|||
Net loss
|
$
|
(225.9
|
)
|
|
$
|
33.2
|
|
|
$
|
(192.7
|
)
|
Net loss per share, basic and diluted
|
$
|
(2.59
|
)
|
|
$
|
0.38
|
|
|
$
|
(2.21
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
87.1
|
|
|
—
|
|
|
87.1
|
|
|||
|
|
|
|
|
|
||||||
Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
||||||
Net loss
|
$
|
(225.9
|
)
|
|
$
|
33.2
|
|
|
$
|
(192.7
|
)
|
Comprehensive loss
|
$
|
(224.8
|
)
|
|
$
|
33.2
|
|
|
$
|
(191.6
|
)
|
|
Year Ended July 31, 2015
|
||||||||||
|
As Previously Reported
|
|
Impact of Commission Adjustment
|
|
As Adjusted
|
||||||
Consolidated Statements of Operations
|
|
|
|
|
|
||||||
Sales and marketing
|
$
|
522.7
|
|
|
$
|
(33.7
|
)
|
|
$
|
489.0
|
|
Operating loss
|
(133.5
|
)
|
|
33.7
|
|
|
(99.8
|
)
|
|||
Provision for income taxes
|
9.4
|
|
|
—
|
|
|
9.4
|
|
|||
Net loss
|
$
|
(165.0
|
)
|
|
$
|
33.7
|
|
|
$
|
(131.3
|
)
|
Net loss per share, basic and diluted
|
$
|
(2.02
|
)
|
|
$
|
0.41
|
|
|
$
|
(1.61
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
81.6
|
|
|
—
|
|
|
81.6
|
|
|||
|
|
|
|
|
|
||||||
Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
||||||
Net loss
|
$
|
(165.0
|
)
|
|
$
|
33.7
|
|
|
$
|
(131.3
|
)
|
Comprehensive loss
|
$
|
(165.0
|
)
|
|
$
|
33.7
|
|
|
$
|
(131.3
|
)
|
•
|
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 consolidated statements of cash flows on a retrospective basis, which increased net cash provided by operating activities by
$0.5 million
and
$2.5 million
for the years ended July 31, 2016 and 2015, respectively, with corresponding decreases 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
|
||||||
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
|
||||||
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
|
|
|||
|
|
|
|
|
|
||||||
Consolidated Statements of Comprehensive Loss
|
|
|
|
|
|
||||||
Net loss
|
$
|
(61.8
|
)
|
|
$
|
4.9
|
|
|
$
|
(56.9
|
)
|
Comprehensive loss
|
$
|
(64.7
|
)
|
|
$
|
4.9
|
|
|
$
|
(59.8
|
)
|
|
|
|
|
|
|
||||||
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.
|
•
|
removal of the current limitation on contingent revenue may result in revenue being recognized earlier for certain contracts;
|
•
|
term license revenue associated with our virtual firewalls will be recognized upfront;
|
•
|
allocation of revenue related to software due to the removal of the residual method of revenue recognition; and
|
•
|
amortization period for deferred commissions.
|
•
|
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.
|
|
|
July 31, 2017
|
|
July 31, 2016
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commercial paper
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.0
|
|
|
$
|
—
|
|
|
$
|
3.0
|
|
Corporate debt securities
|
|
—
|
|
|
159.4
|
|
|
—
|
|
|
159.4
|
|
|
—
|
|
|
121.4
|
|
|
—
|
|
|
121.4
|
|
||||||||
U.S. government and agency securities
|
|
—
|
|
|
471.3
|
|
|
—
|
|
|
471.3
|
|
|
—
|
|
|
426.8
|
|
|
—
|
|
|
426.8
|
|
||||||||
Total short-term investments
|
|
—
|
|
|
630.7
|
|
|
—
|
|
|
630.7
|
|
|
—
|
|
|
551.2
|
|
|
—
|
|
|
551.2
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Certificates of deposit
|
|
—
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
||||||||
Corporate debt securities
|
|
—
|
|
|
186.5
|
|
|
—
|
|
|
186.5
|
|
|
—
|
|
|
166.1
|
|
|
—
|
|
|
166.1
|
|
||||||||
U.S. government and agency securities
|
|
—
|
|
|
597.4
|
|
|
—
|
|
|
597.4
|
|
|
—
|
|
|
481.3
|
|
|
—
|
|
|
481.3
|
|
||||||||
Total long-term investments
|
|
—
|
|
|
789.3
|
|
|
—
|
|
|
789.3
|
|
|
—
|
|
|
652.8
|
|
|
—
|
|
|
652.8
|
|
||||||||
Total assets measured at fair value
|
|
$
|
—
|
|
|
$
|
1,420.0
|
|
|
$
|
—
|
|
|
$
|
1,420.0
|
|
|
$
|
—
|
|
|
$
|
1,204.0
|
|
|
$
|
—
|
|
|
$
|
1,204.0
|
|
|
July 31, 2017
|
||||||||||||||
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Certificates of deposit
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.4
|
|
Corporate debt securities
|
346.1
|
|
|
0.3
|
|
|
(0.5
|
)
|
|
345.9
|
|
||||
U.S. government and agency securities
|
1,071.2
|
|
|
0.1
|
|
|
(2.6
|
)
|
|
1,068.7
|
|
||||
Total
|
$
|
1,422.7
|
|
|
$
|
0.4
|
|
|
$
|
(3.1
|
)
|
|
$
|
1,420.0
|
|
|
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
|
$
|
631.6
|
|
|
$
|
630.7
|
|
Due between one and three years
|
791.1
|
|
|
789.3
|
|
||
Total
|
$
|
1,422.7
|
|
|
$
|
1,420.0
|
|
|
Amount
|
||
Cash
|
$
|
12.4
|
|
Goodwill
|
75.3
|
|
|
Identified intangible assets
|
19.5
|
|
|
Net liabilities assumed
|
(4.1
|
)
|
|
Total
|
$
|
103.1
|
|
|
Fair Value
|
|
Estimated Useful Life
|
||
Developed technology
|
$
|
16.6
|
|
|
8 years
|
Customer relationships
|
2.9
|
|
|
8 years
|
|
Total
|
$
|
19.5
|
|
|
|
|
Amount
|
||
Balance as of July 31, 2016
|
$
|
163.5
|
|
Goodwill acquired
|
75.3
|
|
|
Balance as of July 31, 2017
|
$
|
238.8
|
|
|
July 31,
|
||||||||||||||||||||||
|
2017
|
|
2016
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Developed technology
|
$
|
69.7
|
|
|
$
|
(23.8
|
)
|
|
$
|
45.9
|
|
|
$
|
53.1
|
|
|
$
|
(15.4
|
)
|
|
$
|
37.7
|
|
Acquired intellectual property
|
8.9
|
|
|
(3.8
|
)
|
|
5.1
|
|
|
8.9
|
|
|
(2.9
|
)
|
|
6.0
|
|
||||||
Customer relationships
|
2.9
|
|
|
(0.2
|
)
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
2.4
|
|
|
(2.4
|
)
|
|
—
|
|
|
2.4
|
|
|
(2.1
|
)
|
|
0.3
|
|
||||||
Total purchased intangible assets
|
$
|
83.9
|
|
|
$
|
(30.2
|
)
|
|
$
|
53.7
|
|
|
$
|
64.4
|
|
|
$
|
(20.4
|
)
|
|
$
|
44.0
|
|
|
Amount
|
||
Years ending July 31:
|
|
||
2018
|
$
|
10.7
|
|
2019
|
10.6
|
|
|
2020
|
10.6
|
|
|
2021
|
8.9
|
|
|
2022
|
4.4
|
|
|
2023 and thereafter
|
8.5
|
|
|
Total future amortization expense
|
$
|
53.7
|
|
|
July 31,
|
||||||
|
2017
|
|
2016
|
||||
Computers, equipment, and software
|
$
|
156.6
|
|
|
$
|
102.7
|
|
Leasehold improvements
|
110.1
|
|
|
58.0
|
|
||
Demonstration units
|
26.3
|
|
|
20.1
|
|
||
Furniture and fixtures
|
20.4
|
|
|
14.6
|
|
||
Total property and equipment
|
313.4
|
|
|
195.4
|
|
||
Less: accumulated depreciation
|
(102.3
|
)
|
|
(78.2
|
)
|
||
Total property and equipment, net
|
$
|
211.1
|
|
|
$
|
117.2
|
|
•
|
during any fiscal quarter commencing after the fiscal quarter ending on October 31, 2014 (and only during such fiscal quarter), 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.
|
|
July 31,
|
||||||
|
2017
|
|
2016
|
||||
Liability:
|
|
|
|
||||
Principal
|
$
|
575.0
|
|
|
$
|
575.0
|
|
Less: debt discount and debt issuance costs, net of amortization
|
50.3
|
|
|
74.8
|
|
||
Net carrying amount
|
$
|
524.7
|
|
|
$
|
500.2
|
|
|
|
|
|
||||
Equity
|
$
|
109.8
|
|
|
$
|
109.8
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Amortization of debt discount
|
$
|
22.0
|
|
|
$
|
21.1
|
|
|
$
|
20.2
|
|
Amortization of debt issuance costs
|
2.5
|
|
|
2.3
|
|
|
2.1
|
|
|||
Total interest expense recognized
|
$
|
24.5
|
|
|
$
|
23.4
|
|
|
$
|
22.3
|
|
|
|
|
|
|
|
||||||
Effective interest rate of the liability component
|
4.8
|
%
|
|
4.8
|
%
|
|
4.8
|
%
|
|
Amount
|
||
Years ending July 31:
|
|
||
2018
|
$
|
31.0
|
|
2019
|
50.7
|
|
|
2020
|
60.1
|
|
|
2021
|
57.3
|
|
|
2022
|
53.9
|
|
|
2023 and thereafter
|
264.5
|
|
|
Committed gross lease payments
|
517.5
|
|
|
Less: proceeds from sublease rental
|
2.1
|
|
|
Net operating lease obligation
|
$
|
515.4
|
|
|
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
|
(0.5
|
)
|
|
14.44
|
|
|
|
|
|
|||
Balance—July 31, 2017
|
1.6
|
|
|
$
|
13.11
|
|
|
4.2
|
|
$
|
190.6
|
|
Options exercisable—July 31, 2017
|
1.6
|
|
|
$
|
13.11
|
|
|
4.2
|
|
$
|
190.6
|
|
|
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
|
|
|
3.9
|
|
|
141.35
|
|
|
|
|
|
||||
Vested
|
(0.4
|
)
|
|
170.97
|
|
|
(3.3
|
)
|
|
119.88
|
|
|
|
|
|
||||
Forfeited
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
139.56
|
|
|
|
|
|
||||
Balance—July 31, 2017
|
1.0
|
|
|
$
|
163.55
|
|
|
6.5
|
|
|
$
|
141.16
|
|
|
1.3
|
|
$
|
854.1
|
|
|
Number of shares
|
|
Balance—July 31, 2016
|
8.2
|
|
Authorized
|
4.1
|
|
RSUs, RSAs, and PSAs granted
|
(4.2
|
)
|
RSUs and RSAs forfeited
|
0.6
|
|
Shares withheld for taxes
|
0.1
|
|
Balance—July 31, 2017
|
8.8
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cost of product revenue
|
$
|
7.3
|
|
|
$
|
6.2
|
|
|
$
|
3.9
|
|
Cost of subscription and support revenue
|
56.2
|
|
|
40.9
|
|
|
20.4
|
|
|||
Research and development
|
152.6
|
|
|
132.9
|
|
|
74.8
|
|
|||
Sales and marketing
|
186.5
|
|
|
152.4
|
|
|
84.1
|
|
|||
General and administrative
|
73.1
|
|
|
60.5
|
|
|
38.2
|
|
|||
Total share-based compensation
|
$
|
475.7
|
|
|
$
|
392.9
|
|
|
$
|
221.4
|
|
(1)
|
Certain amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies for more information.
|
(1)
|
Certain amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies for more information.
|
|
Year Ended July 31,
|
|||||||
|
2017
|
|
2016
(1)
|
|
2015
(1)
|
|||
Federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Effect of:
|
|
|
|
|
|
|||
State taxes, net of federal tax benefit
|
2.8
|
|
|
(1.7
|
)
|
|
4.6
|
|
Foreign income at other than U.S. rates
|
(14.4
|
)
|
|
(7.8
|
)
|
|
(6.1
|
)
|
Change in valuation allowance
|
(39.4
|
)
|
|
(25.4
|
)
|
|
(28.8
|
)
|
Share-based compensation
|
1.6
|
|
|
(15.9
|
)
|
|
(13.0
|
)
|
Amortization of deferred tax charges
|
(3.6
|
)
|
|
(3.4
|
)
|
|
(2.8
|
)
|
Research credits
|
10.1
|
|
|
11.3
|
|
|
8.6
|
|
Other, net
|
(3.7
|
)
|
|
(3.9
|
)
|
|
(5.2
|
)
|
Total
|
(11.6
|
)%
|
|
(11.8
|
)%
|
|
(7.7
|
)%
|
(1)
|
Certain amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies for more information.
|
|
July 31,
|
||||||
|
2017
|
|
2016
(1)
|
||||
Deferred tax assets:
|
|
|
|
||||
Accruals and reserves
|
$
|
35.9
|
|
|
$
|
43.5
|
|
Deferred revenue
|
123.2
|
|
|
62.0
|
|
||
Net operating loss carryforwards
|
245.3
|
|
|
5.4
|
|
||
Research and development and foreign tax credits
|
69.3
|
|
|
41.4
|
|
||
Share-based compensation
|
45.4
|
|
|
55.2
|
|
||
Gross deferred tax assets
|
519.1
|
|
|
207.5
|
|
||
Valuation allowance
|
(464.1
|
)
|
|
(161.3
|
)
|
||
Total deferred tax assets
|
55.0
|
|
|
46.2
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Fixed assets and intangible assets
|
(9.1
|
)
|
|
(14.2
|
)
|
||
Deferred commissions
|
(36.8
|
)
|
|
(27.7
|
)
|
||
Other deferred tax liabilities
|
(4.0
|
)
|
|
(2.5
|
)
|
||
Total deferred tax liabilities
|
(49.9
|
)
|
|
(44.4
|
)
|
||
Total
|
$
|
5.1
|
|
|
$
|
1.8
|
|
(1)
|
Certain amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies for more information.
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Unrecognized tax benefits at the beginning of the period
|
$
|
127.7
|
|
|
$
|
67.2
|
|
|
$
|
10.4
|
|
Additions for tax positions taken in prior years
|
3.1
|
|
|
25.2
|
|
|
6.1
|
|
|||
Reductions for tax positions taken in prior years
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|||
Additions for tax positions taken in the current year
|
170.5
|
|
|
35.3
|
|
|
51.3
|
|
|||
Unrecognized tax benefits at the end of the period
|
$
|
301.3
|
|
|
$
|
127.7
|
|
|
$
|
67.2
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss
|
$
|
(216.6
|
)
|
|
$
|
(192.7
|
)
|
|
$
|
(131.3
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
90.6
|
|
|
87.1
|
|
|
81.6
|
|
|||
Net loss per share, basic and diluted
|
$
|
(2.39
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.61
|
)
|
|
Year Ended July 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
RSUs
|
6.5
|
|
|
6.5
|
|
|
7.2
|
|
Convertible senior notes
|
5.2
|
|
|
5.2
|
|
|
5.2
|
|
Warrants related to the issuance of convertible senior notes
|
5.2
|
|
|
5.2
|
|
|
5.2
|
|
Options to purchase common stock
|
1.6
|
|
|
2.1
|
|
|
3.3
|
|
RSAs and PSAs
|
1.0
|
|
|
1.1
|
|
|
—
|
|
ESPP shares
|
0.2
|
|
|
0.1
|
|
|
0.1
|
|
Total
|
19.7
|
|
|
20.2
|
|
|
21.0
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Interest income
|
$
|
14.7
|
|
|
$
|
8.8
|
|
|
$
|
3.9
|
|
Foreign currency exchange losses, net
|
(3.4
|
)
|
|
—
|
|
|
(3.0
|
)
|
|||
Other
|
(1.1
|
)
|
|
(0.4
|
)
|
|
(0.7
|
)
|
|||
Total other income, net
|
$
|
10.2
|
|
|
$
|
8.4
|
|
|
$
|
0.2
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Americas
|
|
|
|
|
|
||||||
United States
|
$
|
1,155.3
|
|
|
$
|
901.8
|
|
|
$
|
593.8
|
|
Other Americas
|
82.1
|
|
|
71.4
|
|
|
45.6
|
|
|||
Total Americas
|
1,237.4
|
|
|
973.2
|
|
|
639.4
|
|
|||
Europe, the Middle East, and Africa (“EMEA”)
|
320.1
|
|
|
247.1
|
|
|
178.7
|
|
|||
Asia Pacific and Japan (“APAC”)
|
204.1
|
|
|
158.2
|
|
|
110.0
|
|
|||
Total revenue
|
$
|
1,761.6
|
|
|
$
|
1,378.5
|
|
|
$
|
928.1
|
|
|
Year Ended July 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Product
|
$
|
709.1
|
|
|
$
|
670.8
|
|
|
$
|
492.7
|
|
Subscription and support
|
|
|
|
|
|
||||||
Subscription
|
550.8
|
|
|
357.0
|
|
|
212.7
|
|
|||
Support
|
501.7
|
|
|
350.7
|
|
|
222.7
|
|
|||
Total subscription and support
|
1,052.5
|
|
|
707.7
|
|
|
435.4
|
|
|||
Total revenue
|
$
|
1,761.6
|
|
|
$
|
1,378.5
|
|
|
$
|
928.1
|
|
|
Year Ended July 31,
|
||||||
|
2017
|
|
2016
|
||||
Property and equipment, net:
|
|
|
|
||||
United States
|
$
|
178.4
|
|
|
$
|
102.3
|
|
International
|
32.7
|
|
|
14.9
|
|
||
Total property and equipment, net
|
$
|
211.1
|
|
|
$
|
117.2
|
|
|
Three Months Ended
|
||||||||||||||
|
Oct. 31,
2016
(1)
|
|
Jan. 31,
2017
|
|
Apr. 30,
2017
|
|
Jul. 31,
2017
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
163.8
|
|
|
$
|
168.8
|
|
|
$
|
164.2
|
|
|
$
|
212.3
|
|
Subscription and support
|
234.3
|
|
|
253.8
|
|
|
267.6
|
|
|
296.8
|
|
||||
Total revenue
|
398.1
|
|
|
422.6
|
|
|
431.8
|
|
|
509.1
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
42.2
|
|
|
45.8
|
|
|
49.7
|
|
|
63.7
|
|
||||
Subscription and support
|
59.0
|
|
|
67.4
|
|
|
74.0
|
|
|
74.8
|
|
||||
Total cost of revenue
|
101.2
|
|
|
113.2
|
|
|
123.7
|
|
|
138.5
|
|
||||
Total gross profit
|
296.9
|
|
|
309.4
|
|
|
308.1
|
|
|
370.6
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
84.2
|
|
|
89.9
|
|
|
86.0
|
|
|
87.3
|
|
||||
Sales and marketing
|
220.1
|
|
|
226.7
|
|
|
226.9
|
|
|
245.4
|
|
||||
General and administrative
|
41.6
|
|
|
47.2
|
|
|
44.3
|
|
|
65.2
|
|
||||
Total operating expenses
|
345.9
|
|
|
363.8
|
|
|
357.2
|
|
|
397.9
|
|
||||
Operating loss
|
(49.0
|
)
|
|
(54.4
|
)
|
|
(49.1
|
)
|
|
(27.3
|
)
|
||||
Interest expense
|
(6.0
|
)
|
|
(6.1
|
)
|
|
(6.2
|
)
|
|
(6.2
|
)
|
||||
Other income, net
|
2.5
|
|
|
2.7
|
|
|
2.1
|
|
|
2.9
|
|
||||
Loss before income taxes
|
(52.5
|
)
|
|
(57.8
|
)
|
|
(53.2
|
)
|
|
(30.6
|
)
|
||||
Provision for income taxes
|
4.4
|
|
|
2.8
|
|
|
7.7
|
|
|
7.6
|
|
||||
Net loss
|
$
|
(56.9
|
)
|
|
$
|
(60.6
|
)
|
|
$
|
(60.9
|
)
|
|
$
|
(38.2
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.63
|
)
|
|
$
|
(0.67
|
)
|
|
$
|
(0.67
|
)
|
|
$
|
(0.42
|
)
|
(1)
|
Certain amounts have been adjusted 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
|
||||||||||||||
|
Oct. 31,
2015 |
|
Jan. 31,
2016 |
|
Apr. 30,
2016 |
|
Jul. 31,
2016 |
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
147.7
|
|
|
$
|
169.9
|
|
|
$
|
162.1
|
|
|
$
|
191.1
|
|
Subscription and support
|
149.5
|
|
|
164.8
|
|
|
183.7
|
|
|
209.7
|
|
||||
Total revenue
|
297.2
|
|
|
334.7
|
|
|
345.8
|
|
|
400.8
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
38.8
|
|
|
44.9
|
|
|
43.2
|
|
|
48.5
|
|
||||
Subscription and support
|
40.4
|
|
|
49.3
|
|
|
51.7
|
|
|
53.2
|
|
||||
Total cost of revenue
|
79.2
|
|
|
94.2
|
|
|
94.9
|
|
|
101.7
|
|
||||
Total gross profit
|
218.0
|
|
|
240.5
|
|
|
250.9
|
|
|
299.1
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
59.7
|
|
|
74.0
|
|
|
74.0
|
|
|
76.5
|
|
||||
Sales and marketing
(1)
|
159.5
|
|
|
182.4
|
|
|
195.9
|
|
|
205.4
|
|
||||
General and administrative
|
30.8
|
|
|
34.2
|
|
|
33.5
|
|
|
39.9
|
|
||||
Total operating expenses
(1)
|
250.0
|
|
|
290.6
|
|
|
303.4
|
|
|
321.8
|
|
||||
Operating loss
(1)
|
(32.0
|
)
|
|
(50.1
|
)
|
|
(52.5
|
)
|
|
(22.7
|
)
|
||||
Interest expense
|
(5.8
|
)
|
|
(5.8
|
)
|
|
(5.8
|
)
|
|
(6.0
|
)
|
||||
Other income, net
|
2.2
|
|
|
2.5
|
|
|
1.0
|
|
|
2.7
|
|
||||
Loss before income taxes
(1)
|
(35.6
|
)
|
|
(53.4
|
)
|
|
(57.3
|
)
|
|
(26.0
|
)
|
||||
Provision for income taxes
(1)
|
4.3
|
|
|
3.9
|
|
|
6.8
|
|
|
5.4
|
|
||||
Net loss
(1)
|
$
|
(39.9
|
)
|
|
$
|
(57.3
|
)
|
|
$
|
(64.1
|
)
|
|
$
|
(31.4
|
)
|
Net loss per share, basic and diluted
(1)
|
$
|
(0.47
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(0.73
|
)
|
|
$
|
(0.35
|
)
|
(1)
|
Amounts have been adjusted due to our voluntary change in accounting policy for sales commissions. Refer to Note 1. Description of Business and Summary of Significant Accounting Policies for more information.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
1.
|
Consolidated Financial Statements
|
2.
|
Financial Statement Schedules
|
3.
|
Exhibits
|
PALO ALTO NETWORKS, INC.
|
|
By:
|
/s/ M
ARK
D. M
C
L
AUGHLIN
|
|
Mark D. McLaughlin
|
|
Chief Executive Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
||
/s/ M
ARK
D. M
C
L
AUGHLIN
|
|
Chief Executive Officer and Director (Principal Executive Officer)
|
|
September 7, 2017
|
Mark D. McLaughlin
|
|
|
||
|
|
|
|
|
/s/ S
TEFFAN
C. T
OMLINSON
|
|
Chief Financial Officer (Principal Accounting and Financial Officer)
|
|
September 7, 2017
|
Steffan C. Tomlinson
|
|
|
||
|
|
|
||
/s/ N
IR
Z
UK
|
|
Chief Technical Officer and Director
|
|
September 7, 2017
|
Nir Zuk
|
|
|
||
|
|
|
||
/s/ F
RANK
C
ALDERONI
|
|
Director
|
|
September 7, 2017
|
Frank Calderoni
|
|
|
||
|
|
|
|
|
/s/ A
SHEEM
C
HANDNA
|
|
Director
|
|
September 7, 2017
|
Asheem Chandna
|
|
|
||
|
|
|
||
/s/ J
OHN
M. D
ONOVAN
|
|
Director
|
|
September 7, 2017
|
John M. Donovan
|
|
|
||
|
|
|
|
|
/s/ C
ARL
E
SCHENBACH
|
|
Director
|
|
September 7, 2017
|
Carl Eschenbach
|
|
|
||
|
|
|
|
|
/s/ J
AMES
J. G
OETZ
|
|
Director
|
|
September 7, 2017
|
James J. Goetz
|
|
|
||
|
|
|
||
/s/ M
ARY
P
AT
M
C
C
ARTHY
|
|
Director
|
|
September 7, 2017
|
Mary Pat McCarthy
|
|
|
||
|
|
|
||
/s/ S
TANLEY
J. M
ERESMAN
|
|
Director
|
|
September 7, 2017
|
Stanley J. Meresman
|
|
|
||
|
|
|
|
|
/s/ S
RIDHAR
R
AMASWAMY
|
|
Director
|
|
September 7, 2017
|
Sridhar Ramaswamy
|
|
|
||
|
|
|
|
|
/s/ D
ANIEL
J. W
ARMENHOVEN
|
|
Director
|
|
September 7, 2017
|
Daniel J. Warmenhoven
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
||||||
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
Restated Certificate of Incorporation of the Registrant.
|
|
10-K
|
|
001-35594
|
|
3.1
|
|
October 4, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Bylaws of the Registrant.
|
|
10-K
|
|
001-35594
|
|
3.2
|
|
October 4, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of Change of Location of Registered Agent and/or Registered Office.
|
|
8-K
|
|
001-35594
|
|
3.1
|
|
August 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to Purchase Stock by Juniper Networks, Inc.
|
|
8-K
|
|
001-35594
|
|
4.1
|
|
June 4, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indenture between the Registrant and U.S. Bank National Association, dated as of June 30, 2014.
|
|
8-K
|
|
001-35594
|
|
4.1
|
|
July 1, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
*
|
|
Form of Indemnification Agreement between the Registrant and its directors and officers.
|
|
S-1/A
|
|
333-180620
|
|
10.1
|
|
July 9, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.2
*
|
|
2005 Equity Incentive Plan and related form agreements under 2005 Equity Incentive Plan.
|
|
S-1/A
|
|
333-180620
|
|
10.2
|
|
July 9, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.3
*
|
|
2012 Equity Incentive Plan and related form agreements under 2012 Equity Incentive Plan, as amended.
|
|
10-K
|
|
001-35594
|
|
10.3
|
|
September 18, 2014
|
|
|
|
|
|
|
|
|
|
|
|
10.4
*
|
|
2012 Employee Stock Purchase Plan and related form agreements under 2012 Employee Stock Purchase Plan, as amended and restated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5
*
|
|
Employee Incentive Compensation Plan, as amended and restated.
|
|
10-Q
|
|
001-35594
|
|
10.2
|
|
November 25, 2014
|
|
|
|
|
|
|
|
|
|
|
|
10.6
*
|
|
Offer Letter between the Registrant and Mark D. McLaughlin, dated July 21, 2011, as amended.
|
|
S-1
|
|
333-180620
|
|
10.6
|
|
April 6, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.7
*
|
|
Offer Letter between the Registrant and Steffan C. Tomlinson, dated January 17, 2012.
|
|
S-1
|
|
333-180620
|
|
10.7
|
|
April 6, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.8
*
|
|
Letter Agreement between the Registrant and Nir Zuk, dated December 19, 2011.
|
|
S-1
|
|
333-180620
|
|
10.8
|
|
April 6, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.9
*
|
|
Letter Agreement between the Registrant and René Bonvanie, dated December 19, 2011.
|
|
S-1
|
|
333-180620
|
|
10.10
|
|
April 6, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.10
*
|
|
Offer Letter between the Registrant and Stanley J. Meresman, dated September 8, 2014.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
September 22, 2014
|
|
|
|
|
|
|
|
|
|
|
|
10.11
*
|
|
Offer Letter between the Registrant and Daniel J. Warmenhoven, dated February 14, 2012.
|
|
S-1
|
|
333-180620
|
|
10.13
|
|
April 6, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.12
*
|
|
Offer Letter between the Registrant and Mark F. Anderson, dated May 23, 2012.
|
|
S-1/A
|
|
333-180620
|
|
10.16
|
|
July 9, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.13
*
|
|
Offer Letter between the Registrant and John M. Donovan, dated September 14, 2012.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
September 20, 2012
|
|
|
|
|
|
|
|
|
|
|
|
10.14
*
|
|
Offer Letter between the Registrant and Carl Eschenbach, dated May 9, 2013.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
May 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
10.15
*
|
|
Offer Letter between the Registrant and Frank Calderoni, dated February 24, 2016.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
February 25, 2016
|
|
|
|
|
|
|
|
|
|
|
|
10.16
*
|
|
Offer Letter between the Registrant and Mary Pat McCarthy, dated October 13, 2016.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
October 24, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease between the Registrant and Santa Clara Office Partners LLC, dated October 20, 2010, as amended.
|
|
S-1
|
|
333-180620
|
|
10.14
|
|
April 6, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 2 to Lease between the Registrant and Santa Clara Office Partners LLC, dated July 2, 2013.
|
|
10-K
|
|
001-35594
|
|
10.17
|
|
September 25, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
||||||
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
||||
|
Lease between the Registrant and SI 34 LLC, dated September 17, 2012.
|
|
10-K
|
|
001-35594
|
|
10.16
|
|
October 4, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease between the Registrant and SI 34 LLC, dated September 17, 2012.
|
|
10-K
|
|
001-35594
|
|
10.17
|
|
October 4, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21
**
|
|
Amended and Restated Flextronics Manufacturing Services Agreement, by and between the Registrant and Flextronics Telecom Systems Ltd., dated December 8, 2015.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
December 14, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement, Release and Cross-License Agreement, dated May 27, 2014, by and between the Registrant and Juniper Networks, Inc.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
May 28, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Purchase Agreement between the Registrant, Cyvera Ltd., Palo Alto Networks Holding B.V., the shareholders of Cyvera Ltd. and Shareholder Representative Services LLC, dated March 22, 2014.
|
|
10-Q
|
|
001-35594
|
|
10.1
|
|
June 3, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 1 to the Share Purchase Agreement between the Registrant, Cyvera Ltd., Palo Alto Networks Holding B.V., the shareholders of Cyvera Ltd. and Shareholder Representative Services LLC, dated April 9, 2014.
|
|
10-Q
|
|
001-35594
|
|
10.2
|
|
June 3, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase Agreement, dated June 24, 2014, by and among the Registrant and J.P. Morgan Securities LLC, RBC Capital Markets, LLC and Citigroup Global Markets Inc., as representatives of the initial purchasers named therein.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
June 26, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of Convertible Note Hedge Confirmation.
|
|
8-K
|
|
001-35594
|
|
10.2
|
|
June 26, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of Warrant Confirmation.
|
|
8-K
|
|
001-35594
|
|
10.3
|
|
June 26, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease between the Registrant and Santa Clara Campus Property Owner I LLC, dated May 28, 2015.
|
|
10-K
|
|
001-35594
|
|
10.29
|
|
September 17, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease between the Registrant and Santa Clara Campus Property Owner I LLC, dated May 28, 2015.
|
|
10-K
|
|
001-35594
|
|
10.30
|
|
September 17, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease between the Registrant and Santa Clara Campus Property Owner I LLC, dated May 28, 2015.
|
|
10-K
|
|
001-35594
|
|
10.31
|
|
September 17, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated October 7, 2015.
|
|
8-K
|
|
001-35594
|
|
10.1
|
|
October 19, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 1 to Lease by and between the Registrant and Santa Clara Phase I Property LLC, dated November 9, 2015.
|
|
10-Q
|
|
001-35594
|
|
10.2
|
|
November 24, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 1 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 9, 2015.
|
|
10-Q
|
|
001-35594
|
|
10.3
|
|
November 24, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 1 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated September 16, 2016.
|
|
10-Q
|
|
001-35594
|
|
10.1
|
|
November 22, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 1 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated September 16, 2016.
|
|
10-Q
|
|
001-35594
|
|
10.2
|
|
November 22, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 2 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated September 16, 2016.
|
|
10-Q
|
|
001-35594
|
|
10.3
|
|
November 22, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
||||||
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
||||
|
Amendment No. 2 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 16, 2016.
|
|
10-Q
|
|
001-35594
|
|
10.1
|
|
March 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 2 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 16, 2016.
|
|
10-Q
|
|
001-35594
|
|
10.2
|
|
March 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 3 to Lease by and between the Registrant and Santa Clara Campus Property Owner I LLC, dated November 16, 2016.
|
|
10-Q
|
|
001-35594
|
|
10.3
|
|
March 1, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 3 to Lease by and between the Registrant and Santa Clara EFH LLC, dated June 22, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 3 to Lease by and between the Registrant and Santa Clara G LLC, dated June 22, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment No. 4 to Lease by and between the Registrant and Santa Clara EFH LLC, dated June 22, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
List of subsidiaries of the Registrant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power of Attorney (contained in the signature page to this Annual Report on Form 10-K).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
*
|
Indicates a management contract or compensatory plan or arrangement.
|
**
|
Registrant has omitted portions of the relevant exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 406 under the Securities Act of 1933, as amended.
|
†
|
The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant 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 Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
|
TENANT:
PALO ALTO NETWORKS, INC.,
a Delaware corporation
|
|
|
By:
|
/s/ STEFFAN TOMLINSON
|
|
|
Steffan Tomlinson, Chief Financial Officer
|
|
|
|
|
LANDLORD:
Santa Clara EFH LLC,
a Delaware limited liability company
|
|
|
By: Santa Clara EFH REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Property Owner I LLC,
a Delaware limited liability company,
its Manager
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:
|
/s/ HENRY D. BULLOCK
|
|
|
Henry D. Bullock, President
|
|
|
|
Lease Expiration Date:
|
July 31, 2028, unless earlier terminated by Landlord in accordance with the terms of this Lease, or extended by Tenant pursuant to Article 15.
|
Period
|
Base Monthly Rent
|
Months 1-18
|
$0.00 (abated)
|
Months 19-36
|
$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 121-124
|
$1,151,572.48
|
TENANT:
PALO ALTO NETWORKS, INC.,
a Delaware corporation
|
|
|
By:
|
/s/ STEFFAN TOMLINSON
|
|
|
Steffan Tomlinson, Chief Financial Officer
|
|
|
|
|
LANDLORD:
Santa Clara G LLC,
a Delaware limited liability company
|
|
|
By: Santa Clara G REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Property Owner I LLC,
a Delaware limited liability company,
its Manager
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:
|
/s/ HENRY D. BULLOCK
|
|
|
Henry D. Bullock, President
|
•
|
The building is a steel frame structure with glass, metal and thin-shell concrete window wall system.
|
•
|
Interior brace frames with exterior moment frames.
|
•
|
Glass/metal frame entry doors.
|
•
|
Roof screen is included.
|
•
|
15’ floor-to-floor clearance on ground floor and 14’ on upper floors to allow for an 11’+/- ceiling height on the ground floor and a 10’ +/- finished ceiling on the upper floors.
|
•
|
Three stairs. Center stair to be open between floors 1-4 and floors 5-8.
|
•
|
15mil Stego vapor barrier installed under building slabs.
|
•
|
Ground floor and upper floor elevator lobbies to be completed by Tenant as part of TIs.
|
•
|
Floor flatness/levelness consistent with ASTM E1155/E 1155M.
|
•
|
The floors will be designed for structural loading capability that can accommodate the placement of furnishings, fixtures and equipment that is consistent with the needs of a typical office tenant (live load of 100psf), except structural components added for high density loads due to upsized rooftop HVAC equipment.
|
•
|
Exterior glass Title 24 compliant, insulated, free from scratches, nicks, cracks, marring and the intrusion of weather.
|
•
|
One 4,000lb and four 3,500lb capacity Mitsubishi Electric traction passenger elevators with a rated speed of 350fpm provided.
|
•
|
Center opening doors with 9’-3” cab finished ceiling height.
|
•
|
Finished interior cabs, except floors, which will be finished by Tenant to match Tenant’s ground floor lobby.
|
•
|
All elevator cars, lobby call lanterns and call buttons in compliance with all codes and regulations.
|
•
|
One 4,000lb 2-stop hydraulic freight elevator.
|
•
|
No elevator cars security card readers; part of TIs.
|
•
|
Lights, finished walls, ceiling and floor tile provided in restrooms and exit corridors only; lights and unfinished walls in electrical rooms. Toilet exhaust at restrooms included. IT closets are part of TI construction except ground floor MPOE room.
|
•
|
Code required exit stairwells with painted walls, finished ceilings, handrails, lights and noise reducing epoxy sealed floors stairs and landings The center stairwell is open with exposed steel and cable railings; additional finishes installed by Tenant with TIs.
|
•
|
Exposed window wall system. Completed window assembly with painted metal frames.
|
•
|
Exterior building envelope insulation as per Title 24, roof insulation and firesafing are included. No drywall is included except in the core areas. Core walls are framed, drywalled and fire taped finish.
|
•
|
Code compliant paint grade finished wood and metal doors, complete with frame, trim and hardware, installed at all stairwells, toilet rooms and service areas. Finish mutually agreed to by Tenant and Landlord. Additional double exit doors in Building G at grade. Intumescent paint in lieu of fireproofing on steel beams/columns and center open stairwell, mutually agreed to by Landlord and Tenant.
|
•
|
Code compliant temporary ground floor construction office and storage area (excluded from definition of “Substantially Complete”).
|
•
|
Women's and men's toilet rooms designed and constructed in compliance with current code requirements, laws and recommendations for size and quantity, including the Americans with Disabilities Act/Title 24, except that Landlord will provide two additional toilet stalls and one additional sink per restroom. The design and finish, mutually approved by Landlord and Tenant, include the following:
|
o
|
Water (hot and cold) shall be provided for all toilet rooms.
|
o
|
Lavatory counters shall have high quality solid surface tops with recessed lavatories.
|
o
|
All faucets shall have auto-sensors.
|
o
|
Code required wet walls shall be finished with full height ceramic tile.
|
o
|
Includes floor drains.
|
o
|
The ceilings shall be painted with semi-gloss paint.
|
o
|
Toilet partitions shall be floor mounted; baked enamel or P-lam.
|
o
|
Urinal partitions shall be wall mounted.
|
o
|
Low flow toilets and urinals shall be wall mounted in all restrooms.
|
o
|
Code compliant lighting only.
|
•
|
All fixtures are porcelain and ADA compliant.
|
•
|
Accessories include:
|
o
|
Recessed seat cover dispenser
|
o
|
Recessed paper towel dispenser/waste receptacles
|
o
|
Recessed feminine napkin vendor
|
o
|
Recessed mounted roll toilet tissue dispensers
|
o
|
Handicap grab bar as required by code
|
o
|
Lavatory soap dispensers
|
•
|
One cold water line, two hot water lines, a sanitary waste and vent on every floor for Tenant's use, size to be mutually determined. All plumbing required for TIs, including any break areas, to be installed by Tenant as part of TIs.
|
•
|
An ADA accessible drinking water refrigerated fountain installed on each floor. Domestic water booster pump, if required.
|
•
|
Underslab plumbing to support TIs, mutually agreed by Landlord and Tenant.
|
•
|
Underground grease interceptor for (2,000gal).
|
•
|
Built-up HVAC system: 760 tons of cooling with two rooftop chillers and two cooling towers plus roof top space for an additional chiller and cooling tower.
|
•
|
Supply and exhaust ductwork and air outlets for warm shell “core” areas installed by Landlord.
|
•
|
Rooftop boilers and hot water line vertically distributed and valved to each floor included.
|
•
|
Stairwell pressurization fans with vertical distribution as required to meet code.
|
•
|
Fire/smoke control system inclusive of smoke removal fans, damper and overriding controls at fire control room.
|
•
|
Tenant to install all additional exhaust and HVAC systems related to TIs, including connecting to the base building energy management system.
|
•
|
Supplied by Tenant in TI construction. Landlord to provide a rooftop equipment pad within Landlord’s roof screen area for Tenant’s supplemental HVAC units or other equipment.
|
•
|
12KV primary service with 3,000amps for typical office use plus infrastructure for an additional 3,000amps for non-standard office use per Approved Plans.
|
•
|
Power distribution system with vertical bus duct riser feeding lighting and power bus circuit breakers at each floor and rooftop HVAC.
|
•
|
Emergency distribution system consisting of standby generator, distribution board at ground floor with life safety and legally required automatic transfer switches, distribution boards and feeders.
|
•
|
Step-down transformers in electrical rooms on all upper floors provided.
|
•
|
Landlord to provide switchgear and panels in the main electrical room sufficient to distribute power to accommodate the core, landscape lighting, HVAC, elevators and fire alarm.
|
•
|
Power and lighting per 2013 Title 24 Requirements
|
•
|
Receptacles provided in the Landlord installed restrooms and exit corridors.
|
•
|
Downlights and specialty lighting provided in the Landlord installed restrooms and stairs.
|
•
|
Each building is to be separately metered. Landlord will coordinate with the utility companies to have meter installed at Landlord’s cost.
|
•
|
Emergency Generator as required by code.
|
•
|
No Backup Power Supply supplied by Landlord.
|
•
|
Emergency supply and exhaust fan service.
|
•
|
Emergency elevator service.
|
•
|
Emergency fire pump and tank per code.
|
•
|
Egress lighting to be fed by generator.
|
•
|
DAS system.
|
•
|
Major fire line throughout the building with sprinkler heads pointing up in unfinished interior space. Complete sprinkler assembly in Landlord installed restrooms and stairwells. Fire monitoring system for base building with core; adequately sized to allow tenant to expand as part of TIs.
|
•
|
Includes fire pump and water tanks, per code.
|
•
|
Monitoring provided for sprinklers, elevators and HVAC base building and core systems per code. Tenant to expand monitoring for TI.
|
•
|
Landlord to provide required Fire/Life Safety systems per code.
|
•
|
None provided. Supplied by Tenant in TI construction if desired by Tenant. Landlord to provide rough-in provisions at locations requested by Tenant.
|
•
|
Landlord will provide four 4” conduits into the ground floor MPOE room in each building from central underground telecom vaults on site which all service providers can access.
|
•
|
Tenant is responsible for distribution of its teledata/IT from the MPOE/IDF rooms to rest of the building.
|
•
|
Landlord will provide roof top space and conduit from the IDF room for Tenant's satellite dish. Tenant is responsible for installing its satellite dish.
|
•
|
Landlord is to install all surface parking and Parking Structure-P2 as shown on the Site Plan.
|
•
|
Landlord is to provide landscape and hardscape at all common areas surrounding the building and Parking Structure-P2 as shown on the Approved Plans.
|
•
|
Bike storage areas will be provided in Parking Structure – P2.
|
•
|
The landscaped areas are to be planted such that areas containing flowers shall mature within one year of initial occupancy. Areas planted with shrubs and trees shall mature within two years of initial occupancy.
|
•
|
All landscaped path of pedestrian travel areas to be lighted and irrigated with electrically controlled automatic systems.
|
•
|
One depressed and one grade level loading dock between Buildings G and H.
|
•
|
No trash compactors.
|
•
|
Conduit from Parking Structure – P2 electrical room to 75 dual EV stations (150 parking spaces) in Parking Structure – P2.
|
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 **-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 121-124
|
$1,151,572.48
|
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
|
|
TENANT:
PALO ALTO NETWORKS, INC.,
a Delaware corporation
|
|
|
By:
|
/s/ STEFFAN TOMLINSON
|
|
|
Steffan Tomlinson, Chief Financial Officer
|
|
|
|
|
LANDLORD:
Santa Clara EFH LLC,
a Delaware limited liability company
|
|
|
By: Santa Clara EFH REIT LLC,
a Delaware limited liability company,
its Sole Member
By: Santa Clara Campus Property Owner I LLC,
a Delaware limited liability company,
its Manager
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:
|
/s/ HENRY D. BULLOCK
|
|
|
Henry D. Bullock, President
|
|
|
|
Name of Subsidiary
|
|
Jurisdiction of Incorporation
|
|
|
|
Palo Alto Networks (Australia) Pty Ltd
|
|
Australia
|
Palo Alto Networks (Brasil) Ltda.
|
|
Brazil
|
Palo Alto Networks (Canada) Inc.
|
|
Canada
|
Palo Alto Networks (Germany) GmbH
|
|
Germany
|
Palo Alto Networks (Malaysia), LLC
|
|
Delaware
|
Palo Alto Networks (Mexico) S. de R.L. de C.V.
|
|
Mexico
|
Palo Alto Networks (Netherlands) B.V.
|
|
Netherlands
|
Palo Alto Networks (Norway) AS
|
|
Norway
|
Palo Alto Networks (Singapore) PTE. LTD.
|
|
Singapore
|
Palo Alto Networks (UK) Limited
|
|
United Kingdom
|
Palo Alto Networks Belgium B.V.B.A.
|
|
Belgium
|
Palo Alto Networks FZ LLC
|
|
United Arab Emirates
|
Palo Alto Networks K.K. (Kabushiki Kaisha)
|
|
Japan
|
Palo Alto Networks International, Inc.
|
|
Delaware
|
Palo Alto Networks Korea, Ltd.
|
|
South Korea
|
Palo Alto Networks, L.L.C.
|
|
Delaware
|
PAN C.V.
|
|
Netherlands
|
PAN LLC
|
|
Delaware
|
Cyvera Ltd., d/b/a Palo Alto Networks (Israel) Ltd.
|
|
Israel
|
Palo Alto Networks (Israel Services) Ltd.
|
|
Israel
|
Cyvera, Inc.
|
|
Delaware
|
Palo Alto Networks (India) Private Limited
|
|
India
|
Palo Alto Networks Holding B.V.
|
|
Netherlands
|
Palo Alto Networks (Singapore) Holding Company Pte. Ltd.
|
|
Singapore
|
Palo Alto Networks (Italy) S.R.L
|
|
Italy
|
PAN II LLC
|
|
Delaware
|
Palo Alto Networks (Switzerland) GmbH
|
|
Switzerland
|
Palo Alto Networks (Iberia), S.L.
|
|
Spain
|
Palo Alto Networks (RUS) LLC
|
|
Russia
|
CirroSecure, Inc.
|
|
Delaware
|
Palo Alto Networks (Czech) S.R.O.
|
|
Czech Republic
|
Palo Alto Networks Denmark ApS
|
|
Denmark
|
Palo Alto Security Limited
|
|
Ireland
|
Palo Alto Networks Saudi Arabian Limited Company
|
|
Saudi Arabia
|
Palo Alto Networks (EU) B.V.
|
|
Netherlands
|
Palo Alto Networks (GEO) B.V.
|
|
Netherlands
|
LightCyber Ltd.
|
|
Israel
|
LightCyber B.V.
|
|
Netherlands
|
LightCyber, Inc.
|
|
Delaware
|
Palo Alto Networks Management, LLC
|
|
Delaware
|
Palo Alto Networks Venture Fund, LLC
|
|
Delaware
|
(1)
|
Registration Statement on Form S-8 No. 333-182762 pertaining to the 2005 Equity Incentive Plan, 2012 Equity Incentive Plan and the 2012 Employee Stock Purchase Plan of Palo Alto Networks, Inc. and
|
(2)
|
Registration Statements on Form S-8 No. 333-191340, 333-198859, 333-207003, and 333-213547 pertaining to the 2012 Equity Incentive Plan and the 2012 Employee Stock Purchase Plan of Palo Alto Networks, Inc.;
|
/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
|