10-QPeriod: Q2 FY2019

Palo Alto Networks Inc Quarterly Report for Q2 Ended Jan 31, 2019

Filed February 27, 2019For Securities:PANW

Summary

Palo Alto Networks (PANW) reported its third quarter fiscal year 2019 financial results, showing continued strong revenue growth, with total revenue reaching $711.2 million, a 30.4% increase year-over-year. The company demonstrated robust product revenue growth of 32.6% and subscription and support revenue growth of 29.0%. While the company reported an operating income of $6.6 million for the quarter, it experienced a net loss of $2.6 million. Despite the net loss, the company's operational efficiency is improving, as indicated by a reduction in operating expenses as a percentage of revenue from 74.9% in the prior year's quarter to 70.6% in the current quarter. Financially, PANW maintained a strong liquidity position with $3.6 billion in cash, cash equivalents, and investments as of January 31, 2019. The company also announced a new $1.0 billion share repurchase program, underscoring its commitment to returning capital to shareholders. The acquisition of RedLock Inc. in October 2018 is expected to enhance cloud security capabilities, contributing to the company's strategic expansion in a key growth area. Investors should note the ongoing investments in research and development and sales and marketing, which are driving top-line growth but also contributing to operating expenses.

Financial Highlights

47 data points
Beta

Revenue

$711.20M

71.5% Gross Margin

Net Income

-$2.60M

-0.4% Net Margin

EPS (Diluted)

$-0.01

Total Assets

$5.71B

Cash & Equivalents

$1.13B

Free Cash Flow

$275.40M

Financial Statements
Beta
Revenue$711.20M
Cost of Revenue$202.60M
Gross Profit$508.60M
R&D Expenses$128.30M
Operating Expenses$502.00M
Operating Income$6.60M
Interest Expense$20.60M
Net Income-$2.60M
EPS (Basic)$-0.01
Shares Outstanding (Basic)564.00M

Key Highlights

  • 1Total revenue grew 30.4% year-over-year to $711.2 million.
  • 2Product revenue increased by 32.6% year-over-year to $271.6 million.
  • 3Subscription and support revenue grew 29.0% year-over-year to $439.6 million.
  • 4Operating income was $6.6 million, an improvement from an operating loss of $22.5 million in the prior year period.
  • 5Net loss for the quarter was $2.6 million.
  • 6Cash, cash equivalents, and investments stood at $3.6 billion, indicating strong liquidity.
  • 7A new $1.0 billion share repurchase program was authorized.

Frequently Asked Questions

Palo Alto Networks reported total revenue of $711.2 million for the three months ended January 31, 2019, representing a 30.4% increase compared to $545.6 million in the same period last year. This growth was driven by strong performance in both product revenue ($271.6 million, up 32.6% YoY) and subscription and support revenue ($439.6 million, up 29.0% YoY).

While the company achieved an operating income of $6.6 million in the quarter, it reported a net loss of $2.6 million. This net loss is an improvement from the $25.6 million net loss in the prior year's comparable quarter, indicating progress towards profitability.

Palo Alto Networks maintains a strong financial position, with $3.6 billion in cash, cash equivalents, and investments as of January 31, 2019. The company also generated $527.7 million in cash flow from operating activities for the six months ended January 31, 2019, demonstrating healthy cash generation capabilities.

The company highlighted the acquisition of RedLock Inc. in October 2018 to expand its cloud security capabilities. Additionally, they introduced PAN-OS 9.0 with new features and a DNS Security Service subscription, indicating ongoing investment in innovation and platform enhancement.