01—Abstract
Summary
Summary of the 10-K filed September 13, 2018. Cited figures are marked; the original filing is the authoritative source.
Palo Alto Networks Inc.'s 2018 10-K filing reveals a company experiencing significant growth, driven by its innovative Security Operating Platform.
The company's revenue increased by 29.0% in fiscal year 2018 to $2.27 billiona, with subscription and support services representing a growing majority (61.7%) of total revenue. This shift indicates a successful transition towards a recurring revenue model. Investments in research and development, including acquisitions to expand cloud and endpoint security capabilities, highlight a commitment to staying ahead in the dynamic cybersecurity landscape.
While the company demonstrates strong top-line growth and expanding customer base (over 54,000 end-customers), it continues to operate at a net loss, though the loss narrowed compared to the previous year. The company is strategically investing in its platform, R&D, and sales force to maintain its competitive edge.
Key areas of focus include expanding cloud security offerings and enhancing endpoint protection. The company also highlighted its substantial cash and investments, providing a strong liquidity position to fund future growth and initiatives.
02—Key points
Key Highlights
- Total revenue reached $2.27 billion in fiscal year 2018, a 29.0% increase year-over-year, demonstrating strong top-line growth.
- Subscription and support revenue constituted 61.7% of total revenue, signaling a successful shift towards a recurring revenue model.
- The company serves over 54,000 end-customers across various industries, indicating broad market adoption.
- Significant investment in R&D ($400.7 million) and strategic acquisitions (Evident.io, Secdo) underscore a focus on innovation and expanding cloud and endpoint security capabilities.
- Despite revenue growth, the company reported a net loss of $147.9 million for fiscal year 2018, although this represents an improvement from the prior year.
- Palo Alto Networks maintained a strong liquidity position with $3.95 billion in cash, cash equivalents, and investments as of July 31, 2018.
- Gross margin remained healthy at 71.6%, though slightly decreased from the previous year due to product cost increases associated with new appliances.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2018, Palo Alto Networks Inc lost $0.05.
- Revenue$2.27B100.0%
- Cost of revenue−$645.1M28.4%
- Gross profit$1.63B71.6%
- Operating costs−$1.73B76.2%
- Operating income−$104.2M4.6%
- Interest, other & tax−$18.0M0.8%
- Net income−$122.2M5.4%
04—Financials
Financial Highlights
Figures from 10-KFY2018filed September 13, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.27B$1.76B | +29.1% |
| Cost of Revenue | $645.10M$476.40M | +35.4% |
| Gross Profit | $1.63B$1.28B | +27.4% |
| R&D Expenses | $400.70M$347.40M | +15.3% |
| Operating Expenses | $1.73B$1.44B | +20.0% |
| Operating Income | -$104.20M-$165.80M | +37.2% |
| Interest Expense | $29.60M$24.50M | +20.8% |
| Net Income | -$122.20M-$203.00M | +39.8% |
| EPS (Basic) | $-0.22$-0.37 | +40.6% |
| Shares Outstanding (Basic) | 550.20M543.60M | +1.2% |
05—Questions
Frequently Asked Questions
What is Palo Alto Networks' primary business and product offering?
Palo Alto Networks offers a Security Operating Platform designed to secure organizations by enabling applications and data across networks, endpoints, and the cloud. Their core offerings include Next-Generation Firewalls (physical and virtual), advanced endpoint protection (Traps), and various subscription services like WildFire (malware analysis), Threat Prevention, URL Filtering, and cloud security solutions.
How did the company perform financially in fiscal year 2018?
In fiscal year 2018, Palo Alto Networks generated $2.27 billion in revenue, an increase of 29.0% year-over-year. While subscription and support revenue grew significantly, contributing 61.7% of total revenue, the company reported a net loss of $147.9 million. However, this net loss was an improvement compared to the $216.6 million net loss in fiscal year 2017.
What are the company's key growth drivers and future strategies?
Key growth drivers include the increasing adoption of their platform, expansion of cloud and endpoint security offerings, and the recurring revenue model driven by subscriptions. Future strategies involve continued investment in R&D, potential acquisitions to enhance capabilities, and expanding their sales force to increase market penetration both domestically and internationally.
How does the company manage its supply chain and manufacturing?
Palo Alto Networks outsources the manufacturing of its products to third-party providers, primarily an EMS provider. This allows for flexibility and cost reduction. The company manages supply chain risks through demand forecasting and strategic relationships with manufacturing partners and component suppliers.
06—Continue