10-QPeriod: Q1 FY2017

Palo Alto Networks Inc Quarterly Report for Q1 Ended Oct 31, 2016

Filed November 22, 2016For Securities:PANW

Summary

Palo Alto Networks Inc. (PANW) reported its first quarter fiscal year 2017 results for the period ending October 30, 2016. The company demonstrated robust top-line growth, with total revenue increasing by 34.0% year-over-year to $398.1 million, driven by a significant expansion in subscription and support revenue (up 56.7%). This strong revenue growth was accompanied by an improvement in gross margin to 74.6%, up from 73.3% in the prior year period. The company continues to invest heavily in sales and marketing, and research and development, leading to an operating loss of $49.9 million for the quarter. Despite the operating loss, cash flow from operations was positive at $203.3 million, and the company ended the quarter with a strong cash and investments position of $2.1 billion.

Financial Highlights

46 data points
Beta

Revenue

$398.10M

74.6% Gross Margin

Net Income

-$56.90M

-14.3% Net Margin

EPS (Diluted)

$-0.10

Total Assets

$3.01B

Cash & Equivalents

$839.40M

Free Cash Flow

$203.50M

Financial Statements
Beta
Revenue$398.10M
Cost of Revenue$101.20M
Gross Profit$296.90M
R&D Expenses$84.20M
Operating Expenses$345.90M
Operating Income-$49.00M
Interest Expense$6.00M
Net Income-$56.90M
EPS (Basic)$-0.10
Shares Outstanding (Basic)538.80M

Key Highlights

  • 1Total revenue grew 34.0% year-over-year to $398.1 million.
  • 2Subscription and support revenue increased by 56.7% year-over-year, indicating strong recurring revenue growth.
  • 3Gross margin improved to 74.6% from 73.3% in the prior year period.
  • 4The company generated positive cash flow from operations of $203.3 million.
  • 5Total cash, cash equivalents, and investments stood at $2.1 billion as of October 31, 2016.
  • 6The company announced a $500 million share repurchase program, of which $50 million was utilized in the quarter.
  • 7Operating expenses, particularly sales and marketing and R&D, increased significantly, contributing to an operating loss of $49.9 million.

Frequently Asked Questions

Palo Alto Networks reported total revenue of $398.1 million for the first quarter of fiscal year 2017, an increase of 34.0% compared to $297.2 million in the same period of fiscal year 2016. This growth was primarily driven by a substantial increase in subscription and support revenue.

No, Palo Alto Networks reported a net loss of $61.8 million for the first quarter of fiscal year 2017, compared to a net loss of $39.9 million in the prior year period. The company incurred an operating loss of $49.9 million, reflecting significant investments in sales and marketing, and research and development.

The company generated strong positive cash flow from operations of $203.3 million during the quarter. As of October 31, 2016, Palo Alto Networks had a healthy liquidity position with $2.1 billion in cash, cash equivalents, and investments. They also announced a $500 million share repurchase program.

Effective August 1, 2016, Palo Alto Networks voluntarily changed its accounting policy for sales commissions. Previously expensed when incurred, these commissions are now deferred and amortized over the contract term. This change is intended to better match commission expenses with the recognition of associated revenue. It has been applied retrospectively, impacting prior periods presented and the accumulated deficit.