10-QPeriod: Q3 FY2021

Palo Alto Networks Inc Quarterly Report for Q3 Ended Apr 30, 2021

Filed May 21, 2021For Securities:PANW

Summary

Palo Alto Networks Inc. (PANW) reported its financial results for the fiscal third quarter ending April 30, 2021. The company demonstrated robust top-line growth, with total revenue increasing by 23.5% year-over-year to $1.07 billion. This growth was primarily driven by a strong performance in subscription and support services, which saw a 33.4% increase, while product revenue experienced a more modest 2.8% rise. Despite revenue growth, the company reported an operating loss of $110.4 million and a net loss of $145.1 million for the quarter, indicating continued investment in growth and operations. The company's balance sheet reflects a significant increase in goodwill, largely due to strategic acquisitions aimed at expanding its cloud security and analytics capabilities. Financially, Palo Alto Networks generated substantial operating cash flow of $1.18 billion for the nine months ended April 30, 2021, and free cash flow of $1.09 billion. The company also maintained a strong liquidity position with $3.83 billion in cash, cash equivalents, and investments. Significant investments were made in acquisitions during the period, including Expanse Inc. and Bridgecrew Inc., totaling over $950 million, which are expected to enhance its Prisma and Cortex offerings. The company's deferred revenue also saw a healthy increase, signaling future revenue potential.

Financial Highlights

49 data points
Beta

Revenue

$1.07B

69.2% Gross Margin

Net Income

-$145.10M

-13.5% Net Margin

EPS (Diluted)

$-0.25

Total Assets

$9.56B

Cash & Equivalents

$1.89B

Free Cash Flow

$277.80M

Financial Statements
Beta
Revenue$1.07B
Cost of Revenue$330.60M
Gross Profit$743.30M
R&D Expenses$311.00M
Operating Expenses$853.70M
Operating Income-$110.40M
Interest Expense$41.00M
Net Income-$145.10M
EPS (Basic)$-0.25
EPS (Diluted)$-0.25
Shares Outstanding (Basic)581.40M
Shares Outstanding (Diluted)581.40M

Key Highlights

  • 1Total revenue grew 23.5% year-over-year to $1.07 billion for the third quarter of fiscal 2021.
  • 2Subscription and support revenue increased by 33.4% to $785.0 million, now representing 73.1% of total revenue.
  • 3Product revenue increased by 2.8% to $288.9 million.
  • 4The company reported an operating loss of $110.4 million and a net loss of $145.1 million for the quarter.
  • 5Operating cash flow was strong, reaching $1.18 billion for the nine months ended April 30, 2021.
  • 6Significant investments were made in acquisitions, including Expanse Inc. ($797.2M) and Bridgecrew Inc. ($156.9M), to bolster cloud security and analytics capabilities.
  • 7Deferred revenue increased by $564.8 million to $4.38 billion as of April 30, 2021, indicating strong future revenue potential.

Frequently Asked Questions

Palo Alto Networks reported total revenue of $1.07 billion for the third quarter of fiscal year 2021, representing a 23.5% increase year-over-year. The primary driver of this growth was the subscription and support segment, which increased by 33.4% to $785.0 million, now constituting 73.1% of total revenue. Product revenue saw a more modest increase of 2.8% to $288.9 million.

No, Palo Alto Networks reported an operating loss of $110.4 million and a net loss of $145.1 million for the third quarter of fiscal year 2021. This indicates continued investment in research and development, sales and marketing, and integration of recent acquisitions, which are impacting short-term profitability.

During the nine months ended April 30, 2021, Palo Alto Networks completed several significant acquisitions. Notably, Expanse Inc. for $797.2 million and Bridgecrew Inc. for $156.9 million were acquired to enhance its Prisma Cloud offering and Cortex capabilities, respectively, focusing on expanding its cloud security and application lifecycle security solutions.

The company demonstrated strong financial health in terms of cash flow and liquidity. For the nine months ended April 30, 2021, Palo Alto Networks generated $1.18 billion in cash from operating activities and $1.09 billion in free cash flow (non-GAAP). As of April 30, 2021, the company had $3.83 billion in cash, cash equivalents, and investments, indicating a robust liquidity position to fund operations and strategic initiatives.