Palo Alto Networks Reports Fiscal Third Quarter 2020 Financial Results

Palo Alto Networks the global cybersecurity leader, announced today financial results for its fiscal third quarter 2020, ended April 30, 2020.

Total revenue for the fiscal third quarter 2020 grew 20% year over year to $869.4 million, compared with total revenue of $726.6 million for the fiscal third quarter 2019. GAAP net loss for the fiscal third quarter 2020 was $74.8 million, or $0.77 per diluted share, compared with GAAP net loss of $20.2 million, or $0.21 per diluted share, for the fiscal third quarter 2019.

Non-GAAP net income for the fiscal third quarter 2020 was $114.6 million, or $1.17 per diluted share, compared with non-GAAP net income of $130.1 million, or $1.31 per diluted share, for the fiscal third quarter 2019. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

“The world will likely be in a state of transition over the next 12 to 18 months due to the COVID-19 pandemic. We believe this will prompt key trends to accelerate, including remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes,” said Nikesh Arora, chairman and CEO of Palo Alto Networks. “Palo Alto Networks is well positioned to leverage the acceleration of these trends, with our significant and ongoing investments to transform our company into a multi-product, integrated platform provider of cybersecurity solutions. As our performance this quarter demonstrates, we are entering this transition in a position of strength, and while the path might be bumpy, we believe we will emerge stronger as we continue providing the best security solutions for our customers.”

Financial Outlook
Palo Alto Networks provides guidance based on current market conditions and expectations.

For the fiscal fourth quarter 2020, we expect:

• Total billings in the range of $1.190 billion to $1.210 billion, representing year-over-year growth of between 13% and 14%.
• Total revenue in the range of $915 million to $925 million, representing year-over-year growth between 14% and 15%.
• Diluted non-GAAP net income per share in the range of $1.37 to $1.40, which incorporates approximately $8 million of net expense, or $0.06 per share, related to the acquisition of CloudGenix, using 96.0 million to 98.0 million shares.

For the full year fiscal 2020, we expect:

• Total billings in the range of $4.102 billion to $4.122 billion, representing year-over-year growth of 18%.
• Total revenue in the range of $3.373 billion to $3.383 billion, representing year-over-year growth between 16% and 17%.
• Diluted non-GAAP net income per share in the range of $4.78 to $4.81, using 98.0 million to 100.0 million shares.
• Adjusted free cash flow margin of approximately 27% – 28%, which excludes cash flow associated with the additional investment in our headquarters in Santa Clara and a cash payment associated with a litigation-related settlement.

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, gains (losses) related to facility exit, non-cash charges related to convertible notes, foreign currency gains (losses), and income and other tax effects associated with these items, along with certain non-recurring expenses. We have not reconciled diluted non-GAAP net income per share guidance to GAAP net income (loss) per diluted share because we do not provide guidance on GAAP net income (loss) and would not be able to present the various reconciling cash and non-cash items between GAAP net income (loss) and non-GAAP net income, including share-based compensation expense, without unreasonable effort. Share-based compensation expense is impacted by the company’s future hiring and retention needs and, to a lesser extent, the future fair market value of the company’s common stock, all of which is difficult to predict and subject to constant change. The actual amounts of such reconciling items will have a significant impact on the company’s GAAP net income (loss) per diluted share.

Stockholder Letter
Palo Alto Networks issued a stockholder letter today, which can be found on the “Investors” section of the company’s website at investors.paloaltonetworks.com.

Earnings Call Information
Palo Alto Networks will host a video webcast for analysts and investors to discuss its fiscal third quarter 2020 results and outlook for its fiscal fourth quarter and full year 2020 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.