- Fiscal first quarter revenue grew 25% year over year to
$1.6 billion
- Fiscal first quarter billings grew 27% year over year to
$1.7 billion
- Remaining performance obligation grew 38% year over year to
$8.3 billion
SANTA
CLARA, Calif., Nov. 17,
2022 /PRNewswire/ -- Palo Alto Networks (NASDAQ:
PANW), the global cybersecurity leader, announced today financial
results for its fiscal first quarter 2023, ended October 31, 2022.
Total revenue for the fiscal first quarter 2023 grew
25% year over year to $1.6
billion, compared with total revenue of $1.2 billion for the fiscal first quarter 2022.
GAAP net income for the fiscal first quarter 2023 was $20.0 million, or $0.06 per diluted share, compared with GAAP net
loss of $103.6 million, or
$0.35 per diluted share, for the
fiscal first quarter 2022.
Non-GAAP net income for the fiscal first quarter 2023 was
$266.4 million, or $0.83 per diluted share, compared with non-GAAP
net income of $170.3 million, or
$0.55 per diluted share, for the
fiscal first quarter 2022. A reconciliation between GAAP and
non-GAAP information is contained in the tables below.
"Our growth in Q1 was driven by customers continuing to increase
their commitments to our security platforms as they are able to
choose our best-of-breed capability and simplify their security
architecture," said Nikesh Arora,
chairman and CEO of Palo Alto Networks. "We are focused on
expanding the breadth of our offerings and our pace of innovation
to continue to drive share gains in the cybersecurity market."
"We exceeded our top-line guidance while generating $1.2 billion in free cash flow and expanding our
operating margins," said Dipak
Golechha, chief financial officer of Palo Alto Networks. "We
will continue to balance growth with profitability and cash
generation to further strengthen our position in the market."
Financial Outlook
Palo Alto Networks provides guidance based on current market
conditions and expectations.
For the fiscal second quarter 2023, we expect:
- Total billings in the range of $1.94
billion to $1.99 billion,
representing year-over-year growth of between 21% and 24%.
- Total revenue in the range of $1.63
billion to $1.66 billion,
representing year-over-year growth of between 24% and 26%.
- Diluted non-GAAP net income per share in the range of
$0.76 to $0.78, using 320 million to 326 million shares
outstanding.
For the fiscal year 2023, we are broadly raising guidance and
expect:
- Total billings in the range of $8.95
billion to $9.10 billion,
representing year-over-year growth of between 20% and 22%.
- Total revenue in the range of $6.85
billion to $6.91 billion,
representing year-over-year growth of between 25% and 26%.
- Diluted non-GAAP net income per share in the range of
$3.37 to $3.44, using 325 million to 331 million shares
outstanding.
- Adjusted free cash flow margin in the range of 34.5% to
35.5%.
Guidance for non-GAAP financial measures excludes share-based
compensation-related charges (including share-based payroll tax
expense), acquisition-related costs, amortization expense of
acquired intangible assets, litigation-related charges, including
legal settlements, restructuring and other costs, non-cash charges
related to convertible notes, and foreign currency gains (losses)
and income and other tax effects associated with these items, along
with certain non-recurring expenses and certain non-recurring cash
flows. We have not reconciled diluted non-GAAP net income per share
guidance to GAAP net income (loss) per diluted share or adjusted
free cash flow margin guidance to GAAP net cash from operating
activities because we do not provide guidance on GAAP net income
(loss) or net cash from operating activities and would not be able
to present the various reconciling cash and non-cash items between
GAAP and non-GAAP financial measures because certain items that
impact these measures are uncertain or out of our control, or
cannot be reasonably predicted, including share-based compensation
expense, without unreasonable effort. The actual amounts of such
reconciling items will have a significant impact on the company's
GAAP net income (loss) per diluted share and GAAP net cash from
operating activities.
Earnings Call Information
Palo Alto Networks will host a video webcast for analysts and
investors to discuss the company's fiscal first quarter 2023
results as well as the outlook for its fiscal second quarter 2023
today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time.
Open to the public, investors may access the webcast, supplemental
financial information and earnings slides from the "Investors"
section of the company's website at investors.paloaltonetworks.com.
A replay will be available three hours after the conclusion of the
webcast and archived for one year.
Forward-Looking Statements
This press release contains forward-looking statements that
involve risks, uncertainties, and assumptions including statements
regarding our ability to balance growth with profitability and cash
generation, and our financial outlook for the fiscal second quarter
2023 and fiscal year 2023. There are a significant number of
factors that could cause actual results to differ materially from
statements made in this press release, including: developments and
changes in general market, political, economic, and business
conditions; our ability to obtain adequate supply of our products
from our third-party manufacturing partners; the duration and
global impact of COVID-19; risks associated with managing our
growth; risks associated with new products and subscription and
support offerings, including the discovery of software bugs; shifts
in priorities or delays in the development or release of new
subscription offerings, or the failure to timely develop and
achieve market acceptance of new products and subscriptions as well
as existing products and subscription and support offerings;
rapidly evolving technological developments in the market for
security products and subscription and support offerings; our
customers' purchasing decisions and the length of sales cycles; our
competition; our ability to attract and retain new customers; our
ability as an organization to acquire and integrate other
companies, products, or technologies in a successful manner; the
effects of supply chain constraints and the global chip and
component shortages and other factors affecting the manufacture,
delivery, and cost of certain of our products; our debt repayment
obligations; and our share repurchase program, which may not be
fully consummated or enhance shareholder value, and any share
repurchases which could affect the price of our common stock.
Additional risks and uncertainties that could affect our
financial results are included under the captions "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in our Annual Report on Form 10-K filed
with the SEC on September 6, 2022,
which is available on our website at investors.paloaltonetworks.com
and on the SEC's website at www.sec.gov. Additional information
will also be set forth in other filings that we make with the SEC
from time to time. All forward-looking statements in this press
release are based on information available to us as of the date
hereof, and we do not assume any obligation to update the
forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were
made.
Non-GAAP Financial Measures and Other Key Metrics
Palo Alto Networks has provided in this press release financial
information that has not been prepared in accordance with generally
accepted accounting principles in the
United States (GAAP). The company uses these non-GAAP
financial measures and other key metrics internally in analyzing
its financial results and believes that the use of these non-GAAP
financial measures and key metrics are useful to investors as an
additional tool to evaluate ongoing operating results and trends,
and in comparing the company's financial results with other
companies in its industry, many of which present similar non-GAAP
financial measures or key metrics.
The presentation of these non-GAAP financial measures and key
metrics are not meant to be considered in isolation or as a
substitute for comparable GAAP financial measures and should be
read only in conjunction with the company's consolidated financial
statements prepared in accordance with GAAP. A reconciliation of
the company's historical non-GAAP financial measures to their most
directly comparable GAAP measures has been provided in the
financial statement tables included in this press release, and
investors are encouraged to review these reconciliations.
Non-GAAP net income and net income per share,
diluted. Palo Alto Networks defines non-GAAP net income as
net income (loss) plus share-based compensation-related charges,
including share-based payroll tax expense, acquisition-related
costs, amortization expense of acquired intangible assets,
litigation-related charges, including legal settlements,
restructuring and other costs, and non-cash charges related to
convertible notes. The company also excludes from non-GAAP net
income foreign currency gains (losses) and tax effects associated
with these items in order to provide a complete picture of the
company's recurring core business operating results. The company
defines non-GAAP net income per share, diluted, as non-GAAP net
income divided by the weighted-average diluted shares outstanding,
which includes the potentially dilutive effect of the company's
employee equity incentive plan awards and the company's convertible
senior notes outstanding and related warrants, after giving effect
to the anti-dilutive impact of the company's note hedge agreements,
which reduces the potential economic dilution that otherwise would
occur upon conversion of the company's convertible senior notes.
Under GAAP, the anti-dilutive impact of the note hedge is not
reflected in diluted shares outstanding. The company believes that
excluding these items from non-GAAP net income and net income per
share, diluted, provides management and investors with greater
visibility into the underlying performance of the company's core
business operating results, meaning its operating performance
excluding these items and, from time to time, other discrete
charges that are infrequent in nature, over multiple periods.
Billings. Palo Alto Networks defines billings as
total revenue plus the change in total deferred revenue, net of
acquired deferred revenue, during the period. The company considers
billings to be a key metric used by management to manage the
company's business and believes billings provides investors with an
important indicator of the health and visibility of the company's
business because it includes subscription and support revenue,
which is recognized ratably over the contractual service period,
and product revenue, which is recognized at the time of shipment,
provided that all other conditions for revenue recognition have
been met. The company considers billings to be a useful metric for
management and investors, particularly if sales of subscriptions
continue to increase and the company experiences strong renewal
rates for subscriptions and support.
Investors are cautioned that there are a number of limitations
associated with the use of non-GAAP financial measures and key
metrics as analytical tools. In particular, the billings metric
reported by the company includes amounts that have not yet been
recognized as revenue. Additionally, many of the adjustments to the
company's GAAP financial measures reflect the exclusion of items
that are recurring and will be reflected in the company's financial
results for the foreseeable future, such as share-based
compensation, which is an important part of Palo Alto Networks
employees' compensation and impacts their performance. Furthermore,
these non-GAAP financial measures are not based on any standardized
methodology prescribed by GAAP, and the components that Palo Alto
Networks excludes in its calculation of non-GAAP financial measures
may differ from the components that its peer companies exclude when
they report their non-GAAP results of operations. Palo Alto
Networks compensates for these limitations by providing specific
information regarding the GAAP amounts excluded from these non-GAAP
financial measures. In the future, the company may also exclude
non-recurring expenses and other expenses that do not reflect the
company's core business operating results.
About Palo Alto Networks
Palo Alto Networks is the world's cybersecurity leader. We
innovate to outpace cyberthreats, so organizations can embrace
technology with confidence. We provide next-gen cybersecurity to
thousands of customers globally, across all sectors. Our
best-in-class cybersecurity platforms and services are backed by
industry-leading threat intelligence and strengthened by
state-of-the-art automation. Whether deploying our products to
enable the Zero Trust Enterprise, responding to a security
incident, or partnering to deliver better security outcomes through
a world-class partner ecosystem, we're committed to helping ensure
each day is safer than the one before. It's what makes us the
cybersecurity partner of choice.
At Palo Alto Networks, we're committed to bringing together the
very best people in service of our mission, so we're also proud to
be the cybersecurity workplace of choice, recognized among
Newsweek's Most Loved Workplaces (2022), Comparably Best Companies
for Diversity (2021), and HRC Best Places for LGBTQ Equality
(2022). For more information, visit www.paloaltonetworks.com.
Palo Alto Networks and the Palo Alto Networks logo are
trademarks of Palo Alto Networks, Inc. in the United States and in jurisdictions
throughout the world. All other trademarks, trade names, or service
marks used or mentioned herein belong to their respective
owners.
Palo Alto Networks,
Inc.
|
Preliminary
Condensed Consolidated Statements of Operations
|
(In millions, except
per share data)
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
October
31,
|
|
2022
|
|
2021
|
Revenue:
|
|
|
|
Product
|
$
330.0
|
|
$
295.5
|
Subscription and
support
|
1,233.4
|
|
951.9
|
Total
revenue
|
1,563.4
|
|
1,247.4
|
Cost of
revenue:
|
|
|
|
Product
|
120.1
|
|
88.9
|
Subscription and
support
|
341.8
|
|
291.7
|
Total cost of
revenue
|
461.9
|
|
380.6
|
Total gross
profit
|
1,101.5
|
|
866.8
|
Operating
expenses:
|
|
|
|
Research and
development
|
371.8
|
|
339.5
|
Sales and
marketing
|
615.0
|
|
505.9
|
General and
administrative
|
99.5
|
|
104.1
|
Total operating
expenses
|
1,086.3
|
|
949.5
|
Operating income
(loss)
|
15.2
|
|
(82.7)
|
Interest
expense
|
(6.8)
|
|
(6.9)
|
Other income (expense),
net
|
26.0
|
|
(1.6)
|
Income (loss) before
income taxes
|
34.4
|
|
(91.2)
|
Provision for income
taxes
|
14.4
|
|
12.4
|
Net income
(loss)
|
$
20.0
|
|
$
(103.6)
|
|
|
|
|
Net income (loss) per
share, basic
|
$
0.07
|
|
$
(0.35)
|
Net income (loss) per
share, diluted
|
$
0.06
|
|
$
(0.35)
|
|
|
|
|
Weighted-average shares
used to compute net income (loss) per share, basic
|
299.8
|
|
292.9
|
Weighted-average shares
used to compute net income (loss) per share, diluted
|
338.4
|
|
292.9
|
Palo Alto Networks, Inc.
|
Reconciliation of GAAP to Non-GAAP Financial
Measures
|
(In millions, except per share
amounts)
|
(Unaudited)
|
|
Three Months Ended
|
|
October 31,
|
|
2022
|
|
2021
|
GAAP net income
(loss)
|
$
20.0
|
|
$
(103.6)
|
Share-based
compensation-related charges
|
278.9
|
|
270.2
|
Acquisition-related
costs(1)
|
—
|
|
3.1
|
Amortization expense
of acquired intangible assets
|
28.7
|
|
31.6
|
Litigation-related
charges(2)
|
1.8
|
|
1.8
|
Restructuring and
other costs(3)
|
(2.2)
|
|
—
|
Non-cash charges
related to convertible notes(4)
|
1.8
|
|
1.8
|
Foreign currency
(gain) loss associated with non-GAAP adjustments
|
(1.8)
|
|
1.1
|
Income tax and other
tax adjustments related to the above
|
(60.8)
|
|
(35.7)
|
Non-GAAP net
income
|
$
266.4
|
|
$
170.3
|
|
|
|
|
GAAP net income (loss)
per share, diluted
|
$
0.06
|
|
$
(0.35)
|
Share-based
compensation-related charges
|
0.87
|
|
0.88
|
Acquisition-related
costs(1)
|
0.00
|
|
0.01
|
Amortization expense
of acquired intangible assets
|
0.08
|
|
0.11
|
Litigation-related
charges(2)
|
0.01
|
|
0.01
|
Restructuring and
other costs(3)
|
(0.01)
|
|
0.00
|
Non-cash charges
related to convertible notes(4)
|
0.01
|
|
0.01
|
Foreign currency
(gain) loss associated with non-GAAP adjustments
|
(0.01)
|
|
0.00
|
Income tax and other
tax adjustments related to the above
|
(0.18)
|
|
(0.12)
|
Non-GAAP net income per
share, diluted
|
$
0.83
|
|
$
0.55
|
|
|
|
|
GAAP weighted-average
shares used to compute net income (loss) per share,
diluted
|
338.4
|
|
292.9
|
Weighted-average
dilutive effect of potentially dilutive
securities(5)
|
—
|
|
33.8
|
Weighted-average
anti-dilutive impact of note hedge agreements
|
(17.8)
|
|
(15.0)
|
Non-GAAP
weighted-average shares used to compute net income per share,
diluted
|
320.6
|
|
311.7
|
|
|
|
|
Net cash provided by
operating activities
|
$
1,236.7
|
|
$
588.9
|
Less: purchases of
property, equipment, and other assets
|
39.6
|
|
34.6
|
Free cash flow
(non-GAAP)
|
$
1,197.1
|
|
$
554.3
|
Net cash used in
investing activities
|
$
(1,319.8)
|
|
$
(229.9)
|
Net cash provided by
financing activities
|
$
31.1
|
|
$
38.7
|
|
|
(1)
|
Consists of acquisition
transaction costs, share-based compensation related to the cash
settlement of certain equity awards, and costs to terminate certain
employment, operating lease, and other contracts of the acquired
companies.
|
(2)
|
Consists of the
amortization of intellectual property licenses and covenant not to
sue.
|
(3)
|
Consists of adjustments
to restructuring and other costs.
|
(4)
|
Consists primarily of
non-cash interest expense for amortization of debt discount and
issuance costs related to the company's convertible senior
notes.
|
(5)
|
Includes the
potentially dilutive effect of employee equity incentive plan
awards and convertible senior notes outstanding and related
warrants.
|
Palo Alto Networks,
Inc.
|
Calculation of
Billings
|
(In
millions)
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
October
31,
|
|
2022
|
|
2021
|
Total
revenue
|
$
1,563.4
|
|
$
1,247.4
|
Add: change in total
deferred revenue, net of acquired deferred revenue
|
185.6
|
|
134.2
|
Billings
|
$
1,749.0
|
|
$
1,381.6
|
Palo Alto Networks,
Inc.
|
Preliminary
Condensed Consolidated Balance Sheets
|
(In
millions)
|
|
|
October 31,
2022
|
|
July 31,
2022
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
2,067.2
|
|
$
2,118.5
|
Short-term
investments
|
1,736.5
|
|
1,516.0
|
Accounts receivable,
net
|
1,238.1
|
|
2,142.5
|
Short-term deferred
contract costs
|
310.6
|
|
317.7
|
Prepaid expenses and
other current assets
|
381.1
|
|
320.2
|
Total current
assets
|
5,733.5
|
|
6,414.9
|
Property and equipment,
net
|
353.7
|
|
357.8
|
Operating lease
right-of-use assets
|
260.4
|
|
242.0
|
Long-term
investments
|
2,094.7
|
|
1,051.9
|
Long-term deferred
contract costs
|
520.3
|
|
550.1
|
Goodwill
|
2,747.7
|
|
2,747.7
|
Intangible assets,
net
|
355.4
|
|
384.5
|
Other assets
|
478.1
|
|
504.7
|
Total assets
|
$
12,543.8
|
|
$
12,253.6
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
125.9
|
|
$
128.0
|
Accrued
compensation
|
268.9
|
|
461.1
|
Accrued and other
liabilities
|
380.4
|
|
399.2
|
Deferred
revenue
|
3,741.3
|
|
3,641.2
|
Convertible senior
notes, net
|
3,678.6
|
|
3,676.8
|
Total current
liabilities
|
8,195.1
|
|
8,306.3
|
Long-term deferred
revenue
|
3,438.3
|
|
3,352.8
|
Long-term operating
lease liabilities
|
283.1
|
|
276.1
|
Other long-term
liabilities
|
119.3
|
|
108.4
|
Total
liabilities
|
12,035.8
|
|
12,043.6
|
Stockholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common stock and
additional paid-in capital
|
2,266.2
|
|
1,932.7
|
Accumulated other
comprehensive loss
|
(111.1)
|
|
(55.6)
|
Accumulated
deficit
|
(1,647.1)
|
|
(1,667.1)
|
Total stockholders'
equity
|
508.0
|
|
210.0
|
Total liabilities and
stockholders' equity
|
$
12,543.8
|
|
$
12,253.6
|
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SOURCE Palo Alto Networks, Inc.