|
Delaware
|
001-35594
|
20-2530195
|
(State or other jurisdiction of
incorporation)
|
(Commission File Number)
|
(IRS Employer
Identification No.)
|
3000 Tannery Way
Santa Clara, California 95054
(Address of principal executive office, including zip code)
|
|
Exhibit No.
|
Description of Exhibit
|
Press release dated as of February 26, 2019.
|
|
PALO ALTO NETWORKS, INC.
|
|
|
By:
|
/s/ N
IKESH
A
RORA
|
|
Nikesh Arora
|
|
Chief Executive Officer
|
•
|
Fiscal second quarter revenue grows 30 percent year over year to $711.2 million
|
•
|
Fiscal second quarter billings grow 27 percent year over year to $852.5 million
|
•
|
Deferred revenue grows 32 percent year over year to $2.5 billion
|
•
|
Announces $1 billion share repurchase authorization
|
•
|
Total revenue in the range of $697 to $707 million, representing year-over-year growth between 23 percent and 25 percent on an ASC 606 basis.
|
•
|
Diluted non-GAAP net income per share in the range of $1.23 to $1.25, which includes expenses related to the proposed Demisto acquisition, using 99 to 101 million shares on an ASC 606 basis.
|
Palo Alto Networks, Inc.
|
|||||||||||||||
Preliminary Condensed Consolidated Statements of Operations
|
|||||||||||||||
(In millions, except per share data)
|
|||||||||||||||
(Unaudited)
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended January 31,
|
|
Six Months Ended January 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
(As Adjusted)
(1)
|
|
|
|
(As Adjusted)
(1)
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
271.6
|
|
|
$
|
204.8
|
|
|
$
|
512.1
|
|
|
$
|
389.6
|
|
Subscription and support
|
439.6
|
|
|
340.8
|
|
|
855.1
|
|
|
657.8
|
|
||||
Total revenue
|
711.2
|
|
|
545.6
|
|
|
1,367.2
|
|
|
1,047.4
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
82.5
|
|
|
63.9
|
|
|
155.7
|
|
|
121.5
|
|
||||
Subscription and support
|
120.1
|
|
|
95.5
|
|
|
230.4
|
|
|
179.2
|
|
||||
Total cost of revenue
|
202.6
|
|
|
159.4
|
|
|
386.1
|
|
|
300.7
|
|
||||
Total gross profit
|
508.6
|
|
|
386.2
|
|
|
981.1
|
|
|
746.7
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
128.3
|
|
|
96.6
|
|
|
241.7
|
|
|
190.8
|
|
||||
Sales and marketing
|
320.0
|
|
|
258.8
|
|
|
634.6
|
|
|
512.9
|
|
||||
General and administrative
|
53.7
|
|
|
53.3
|
|
|
130.3
|
|
|
119.0
|
|
||||
Total operating expenses
|
502.0
|
|
|
408.7
|
|
|
1,006.6
|
|
|
822.7
|
|
||||
Operating income (loss)
|
6.6
|
|
|
(22.5
|
)
|
|
(25.5
|
)
|
|
(76.0
|
)
|
||||
Interest expense
|
(20.6
|
)
|
|
(6.4
|
)
|
|
(43.3
|
)
|
|
(12.7
|
)
|
||||
Other income, net
|
16.0
|
|
|
4.9
|
|
|
29.0
|
|
|
9.7
|
|
||||
Income (loss) before income taxes
|
2.0
|
|
|
(24.0
|
)
|
|
(39.8
|
)
|
|
(79.0
|
)
|
||||
Provision for income taxes
|
4.6
|
|
|
1.6
|
|
|
1.1
|
|
|
9.8
|
|
||||
Net loss
|
$
|
(2.6
|
)
|
|
$
|
(25.6
|
)
|
|
$
|
(40.9
|
)
|
|
$
|
(88.8
|
)
|
Net loss per share, basic and diluted
|
$
|
(0.03
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.98
|
)
|
Weighted-average shares used to compute net loss per share, basic and diluted
|
94.0
|
|
|
91.1
|
|
|
93.9
|
|
|
91.0
|
|
(1)
|
Certain amounts have been adjusted due to the company’s adoption of the new revenue recognition standard (ASC 606) as of August 1, 2018 using the full retrospective method.
|
Palo Alto Networks, Inc.
|
|||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures
|
|||||||||||||||
(In millions, except per share amounts)
|
|||||||||||||||
(Unaudited)
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
(As Adjusted)
(1)
|
|
|
|
(As Adjusted)
(1)
|
||||||||
GAAP net loss
|
$
|
(2.6
|
)
|
|
$
|
(25.6
|
)
|
|
$
|
(40.9
|
)
|
|
$
|
(88.8
|
)
|
Share-based compensation-related charges
|
149.5
|
|
|
136.3
|
|
|
290.2
|
|
|
265.2
|
|
||||
Acquisition-related costs
(2)
|
1.6
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
||||
Amortization expense of acquired intangible assets
|
14.1
|
|
|
2.5
|
|
|
23.4
|
|
|
5.0
|
|
||||
Litigation-related charges
(3)
|
3.0
|
|
|
3.0
|
|
|
6.1
|
|
|
6.1
|
|
||||
Facility exit costs
(4)
|
—
|
|
|
1.4
|
|
|
—
|
|
|
17.0
|
|
||||
Non-cash charges related to convertible notes
(5)
|
17.5
|
|
|
6.4
|
|
|
39.1
|
|
|
12.7
|
|
||||
Foreign currency loss associated with non-GAAP adjustments
|
0.6
|
|
|
1.0
|
|
|
0.1
|
|
|
1.5
|
|
||||
Income tax and other tax adjustments related to the above
(6)
|
(36.7
|
)
|
|
(26.3
|
)
|
|
(72.7
|
)
|
|
(49.7
|
)
|
||||
Non-GAAP net income
|
$
|
147.0
|
|
|
$
|
98.7
|
|
|
$
|
262.4
|
|
|
$
|
169.0
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP net loss per share, diluted
|
$
|
(0.03
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.98
|
)
|
Share-based compensation-related charges
|
1.53
|
|
|
1.46
|
|
|
2.97
|
|
|
2.86
|
|
||||
Acquisition-related costs
(2)
|
0.02
|
|
|
0.00
|
|
|
0.18
|
|
|
0.00
|
|
||||
Amortization expense of acquired intangible assets
|
0.15
|
|
|
0.03
|
|
|
0.25
|
|
|
0.05
|
|
||||
Litigation-related charges
(3)
|
0.03
|
|
|
0.03
|
|
|
0.06
|
|
|
0.07
|
|
||||
Facility exit costs
(4)
|
0.00
|
|
|
0.02
|
|
|
0.00
|
|
|
0.19
|
|
||||
Non-cash charges related to convertible notes
(5)
|
0.19
|
|
|
0.07
|
|
|
0.42
|
|
|
0.14
|
|
||||
Foreign currency loss associated with non-GAAP adjustments
|
0.01
|
|
|
0.01
|
|
|
0.00
|
|
|
0.02
|
|
||||
Income tax and other tax adjustments related to the above
(6)
|
(0.39
|
)
|
|
(0.29
|
)
|
|
(0.77
|
)
|
|
(0.55
|
)
|
||||
Non-GAAP net income per share, diluted
|
$
|
1.51
|
|
|
$
|
1.05
|
|
|
$
|
2.67
|
|
|
$
|
1.80
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP weighted-average shares used to compute net loss per share, diluted
|
94.0
|
|
|
91.1
|
|
|
93.9
|
|
|
91.0
|
|
||||
Weighted-average effect of potentially dilutive securities
(7)
|
3.6
|
|
|
2.8
|
|
|
4.4
|
|
|
2.8
|
|
||||
Non-GAAP weighted-average shares used to compute net income per share, diluted
|
97.6
|
|
|
93.9
|
|
|
98.3
|
|
|
93.8
|
|
(1)
|
Certain amounts have been adjusted due to the company’s adoption of the new revenue recognition standard (ASC 606) as of August 1, 2018 using the full retrospective method.
|
(2)
|
Consists of acquisition transaction costs, share-based compensation related to the cash settlement of certain equity awards, and costs to terminate certain employment and operating lease contracts of the acquired company.
|
(3)
|
Consists of the amortization of intellectual property licenses.
|
(4)
|
Consists of charges related to the relocation of the company’s corporate headquarters during the three months ended October 31, 2017, including a cease-use loss of $15.4 million and accelerated depreciation, and charges related to the relocation of the company’s research and development center in Israel during the three months ended January 31, 2018, including a cease-use loss of $1.3 million and accelerated depreciation.
|
(5)
|
Consists primarily of non-cash interest expense related to the company’s convertible senior notes. Also includes non-cash losses of $0.4 million and $2.6 million during the three and six months ended January 31, 2019, respectively, related to early conversions of the convertible notes during those periods.
|
(6)
|
The company changed its non-GAAP effective tax rate from 31% to 22% in its second quarter of fiscal 2018 due to the reduction of the U.S. federal corporate income tax rate under the U.S. Tax Cuts and Jobs Act, which was enacted into law on December 22, 2017.
|
(7)
|
Non-GAAP net income per share, diluted, includes the potentially dilutive effect of employee equity incentive plan awards and convertible senior notes outstanding and related warrants. In addition, non-GAAP net income per share, diluted, includes the anti-dilutive impact of the company’s note hedge agreements, which reduced the potentially dilutive effect of the convertible notes by 0.6 million shares and 0.8 million shares for the
three and six months ended
January 31, 2019
, respectively, and 1.4 million shares and 1.4 million shares for the
three and six months ended
January 31, 2018
, respectively.
|
Palo Alto Networks, Inc.
|
|||||||||||||||
Calculation of Billings
|
|||||||||||||||
(In millions)
|
|||||||||||||||
(Unaudited)
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 31,
|
|
January 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
(As Adjusted)
(1)
|
|
|
|
(As Adjusted)
(1)
|
||||||||
Total revenue
|
$
|
711.2
|
|
|
$
|
545.6
|
|
|
$
|
1,367.2
|
|
|
$
|
1,047.4
|
|
Add: change in total deferred revenue, net of acquired deferred revenue
|
141.3
|
|
|
127.6
|
|
|
243.8
|
|
|
221.2
|
|
||||
Billings
|
$
|
852.5
|
|
|
$
|
673.2
|
|
|
$
|
1,611.0
|
|
|
$
|
1,268.6
|
|
(1)
|
These amounts have been adjusted due to the company’s adoption of the new revenue recognition standard (ASC 606) as of August 1, 2018 using the full retrospective method.
|
Palo Alto Networks, Inc.
|
|||||||
Preliminary Condensed Consolidated Balance Sheets
|
|||||||
(In millions)
|
|||||||
(Unaudited)
|
|||||||
|
|
|
|
||||
|
January 31, 2019
|
|
July 31, 2018
|
||||
|
|
|
(As Adjusted)
(1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,127.8
|
|
|
$
|
2,506.9
|
|
Short-term investments
|
1,702.2
|
|
|
896.5
|
|
||
Accounts receivable, net
|
415.0
|
|
|
467.0
|
|
||
Prepaid expenses and other current assets
|
242.5
|
|
|
268.1
|
|
||
Total current assets
|
3,487.5
|
|
|
4,138.5
|
|
||
Property and equipment, net
|
273.2
|
|
|
273.1
|
|
||
Long-term investments
|
808.6
|
|
|
547.5
|
|
||
Goodwill
|
636.4
|
|
|
522.8
|
|
||
Intangible assets, net
|
171.8
|
|
|
140.8
|
|
||
Other assets
|
330.0
|
|
|
326.2
|
|
||
Total assets
|
$
|
5,707.5
|
|
|
$
|
5,948.9
|
|
Liabilities, temporary equity, and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
27.9
|
|
|
$
|
49.4
|
|
Accrued compensation
|
143.4
|
|
|
163.7
|
|
||
Accrued and other liabilities
|
171.4
|
|
|
124.6
|
|
||
Deferred revenue
|
1,369.2
|
|
|
1,213.6
|
|
||
Convertible senior notes, net
|
156.3
|
|
|
550.4
|
|
||
Total current liabilities
|
1,868.2
|
|
|
2,101.7
|
|
||
Convertible senior notes, net
|
1,399.5
|
|
|
1,369.7
|
|
||
Long-term deferred revenue
|
1,156.5
|
|
|
1,065.7
|
|
||
Other long-term liabilities
|
208.7
|
|
|
229.6
|
|
||
Temporary equity
|
2.8
|
|
|
21.9
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital
|
1,941.5
|
|
|
1,967.4
|
|
||
Accumulated other comprehensive loss
|
(9.8
|
)
|
|
(16.4
|
)
|
||
Accumulated deficit
|
(859.9
|
)
|
|
(790.7
|
)
|
||
Total stockholders’ equity
|
1,071.8
|
|
|
1,160.3
|
|
||
Total liabilities, temporary equity, and stockholders’ equity
|
$
|
5,707.5
|
|
|
$
|
5,948.9
|
|
(1)
|
Certain amounts have been adjusted due to the company’s adoption of the new revenue recognition standard (ASC 606) as of August 1, 2018 using the full retrospective method.
|