10-QPeriod: Q3 FY2017

Palo Alto Networks Inc Quarterly Report for Q3 Ended Apr 30, 2017

Filed June 1, 2017For Securities:PANW

Summary

Palo Alto Networks (PANW) reported its third-quarter fiscal year 2017 results, showcasing continued strong revenue growth driven by its subscription and support offerings, which outpaced product revenue growth. The company saw a significant increase in subscription and support revenue by 45.7% year-over-year, contributing 62.0% of total revenue. Total revenue grew 24.9% to $431.8 million. Despite revenue growth, the company continued to operate at a net loss of $60.9 million for the quarter, reflecting ongoing investments in research and development and sales and marketing to fuel expansion. Key financial highlights include a healthy deferred revenue balance of $1.61 billion, indicating strong future revenue potential. The company also actively managed its capital resources, utilizing $295.1 million for share repurchases during the nine-month period, demonstrating a commitment to returning value to shareholders. The acquisition of LightCyber for $103.1 million in cash was completed, aimed at enhancing the company's behavioral analytics capabilities and expanding its next-generation security platform.

Financial Highlights

47 data points
Beta

Revenue

$431.80M

71.4% Gross Margin

Net Income

-$60.90M

-14.1% Net Margin

EPS (Diluted)

$-0.11

Total Assets

$3.25B

Cash & Equivalents

$692.00M

Free Cash Flow

$211.20M

Financial Statements
Beta
Revenue$431.80M
Cost of Revenue$123.70M
Gross Profit$308.10M
R&D Expenses$86.00M
Operating Expenses$357.20M
Operating Income-$49.10M
Interest Expense$6.20M
Net Income-$60.90M
EPS (Basic)$-0.11
Shares Outstanding (Basic)546.00M

Key Highlights

  • 1Total revenue increased by 24.9% year-over-year to $431.8 million for the third quarter.
  • 2Subscription and support revenue grew by 45.7% year-over-year to $267.6 million, representing 62.0% of total revenue.
  • 3Product revenue saw a modest increase of 1.3% year-over-year to $164.2 million.
  • 4The company reported a net loss of $60.9 million for the quarter, compared to a net loss of $64.1 million in the prior year period.
  • 5Deferred revenue, a key indicator of future revenue, increased to $1.61 billion.
  • 6Palo Alto Networks acquired LightCyber for $103.1 million in cash to enhance its behavioral analytics capabilities.
  • 7Share repurchases totaled $295.1 million for the nine months ended April 30, 2017.

Frequently Asked Questions

Palo Alto Networks demonstrated strong revenue growth, with total revenue increasing by 24.9% year-over-year to $431.8 million in the third quarter of fiscal 2017. This growth was primarily driven by its subscription and support segment, which saw a 45.7% increase year-over-year.

No, Palo Alto Networks continued to report a net loss for the third quarter of fiscal 2017, amounting to $60.9 million. This is a slight improvement from the $64.1 million net loss reported in the same period last year, indicating ongoing investments in growth initiatives that are impacting short-term profitability.

The company maintained a strong liquidity position with $2.1 billion in cash, cash equivalents, and investments as of April 30, 2017. During the nine months ended April 30, 2017, Palo Alto Networks generated $629.0 million in cash from operating activities and used $260.3 million in financing activities, notably for $295.1 million in share repurchases, indicating active capital management.

A key strategic move was the acquisition of LightCyber Ltd. for $103.1 million in cash. This acquisition is expected to enhance the company's next-generation security platform by adding behavioral analytics technology. Additionally, the company launched several new firewall appliances and the PAN-OS 8.0 software release.