10-QPeriod: Q2 FY2018

Palo Alto Networks Inc Quarterly Report for Q2 Ended Jan 31, 2018

Filed February 27, 2018For Securities:PANW

Summary

Palo Alto Networks reported solid revenue growth of 28.3% year-over-year for the second quarter of fiscal 2018, reaching $542.4 million. This growth was driven by both product and subscription/support revenue, with subscription and support revenue showing a stronger increase of 34.0%. The company continues to invest in innovation, launching new cloud-based services and updated firewall hardware and software. Despite revenue growth, the company reported an operating loss of $31.8 million for the quarter, an improvement from the prior year's loss of $54.4 million, indicating progress towards profitability. The balance sheet remains strong with $2.36 billion in cash, cash equivalents, and investments. The company also noted the impact of the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, which resulted in a provisional tax benefit. Key financial highlights include a continued increase in deferred revenue, signaling future revenue streams. While gross margins saw a slight decrease to 70.6% from 73.2% year-over-year, this was attributed to higher product costs for new appliances and increased infrastructure costs for cloud offerings. Operating expenses grew, primarily in sales and marketing and R&D, reflecting ongoing investment in growth. The company maintained a strong cash flow from operations of $517.8 million for the first six months of fiscal 2018.

Financial Highlights

48 data points
Beta

Revenue

$545.60M

70.8% Gross Margin

Net Income

-$25.60M

-4.7% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$3.63B

Cash & Equivalents

$915.00M

Free Cash Flow

$244.60M

Financial Statements
Beta
Revenue$545.60M
Cost of Revenue$159.40M
Gross Profit$386.20M
R&D Expenses$96.60M
Operating Expenses$408.70M
Operating Income-$22.50M
Interest Expense$6.40M
Net Income-$25.60M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05
Shares Outstanding (Basic)546.60M

Key Highlights

  • 1Total revenue for the quarter reached $542.4 million, a 28.3% increase year-over-year.
  • 2Subscription and support revenue grew significantly by 34.0% to $340.2 million, now representing 62.7% of total revenue.
  • 3Operating loss improved to $31.8 million, a decrease from $54.4 million in the prior year's quarter.
  • 4Total cash, cash equivalents, and investments stood at $2.36 billion as of January 31, 2018.
  • 5Deferred revenue increased to $1.997 billion, indicating strong future revenue potential.
  • 6The company announced new product and service offerings, including GlobalProtect cloud service, Logging Service, and Magnifier.
  • 7The Tax Cuts and Jobs Act (TCJA) resulted in a provisional tax benefit of $6.2 million for the quarter.

Frequently Asked Questions

Palo Alto Networks reported total revenue of $542.4 million for the second quarter of fiscal 2018, representing a 28.3% increase year-over-year. This growth was driven by both product revenue, which increased by 19.8%, and subscription and support revenue, which saw a stronger increase of 34.0%.

The company reported an operating loss of $31.8 million for the quarter. While this is an improvement from the operating loss of $54.4 million in the same quarter last year, the company is not yet profitable on an operating basis. However, the company generated strong positive cash flow from operations.

Palo Alto Networks maintains a strong liquidity position with $2.36 billion in cash, cash equivalents, and investments as of January 31, 2018.

The enactment of the TCJA in December 2017 resulted in a one-time provisional tax benefit of $6.2 million for the three months ended January 31, 2018, related to refundable alternative minimum tax credits. The company is still evaluating the full impact of the TCJA.