Palo Alto Networks Secures Another Quarterly Beat
Palo Alto Networks (NYSE: PANW) announced fiscal first-quarter 2019 results on Thursday after the market closed, highlighting the continued adoption of its flagship cybersecurity platform and the potential to expand its industry leadership with the help of a recent acquisition.
Shares of the cybersecurity specialist initially climbed as much as 9% early today, but -- keeping in mind the stock was already up nearly 23% in the year leading up to this report -- ultimately pulled back to close down around 1.8%.
Let's dig deeper, then, to get a better idea of how Palo Alto Networks started its new fiscal year, and what investors should expect in the months ahead.
IMAGE SOURCE: GETTY IMAGES.
Palo Alto Networks results: The raw numbers
Metric | Fiscal Q1 2019* | Fiscal Q1 2018 | Year-Over-Year Change |
|---|---|---|---|
Revenue | $656 million | $501.8 million | 30.7% |
GAAP net income (loss) | ($38.3 million) | ($63.2 million) | N/A |
GAAP earnings (loss) per share | ($0.41) | ($0.70) | N/A |
DATA SOURCE: PALO ALTO NETWORKS. *FOR THE QUARTER ENDED OCTOBER 31, 2018.
What happened with Palo Alto Networks this quarter?
On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition expenses, Palo Alto Networks generated net income of $115.4 million, or $1.17 per share, up from $0.75 per share in the same year-ago period.
By comparison, in early September Palo Alto Networks told investors to expect lower revenue in the range of $625 million to $635 million, and adjusted earnings per share of $1.04 to $1.06.
Product revenue climbed 30.1% year over year to $240.5 million, while subscription and support revenue grew 31.1% to $415.5 million.
Billings increased 27% to $758.5 million, and deferred revenue grew 34% to $2.4 billion.
Palo Alto Networks generated operating cash flow of $252.3 million, and free cash flow of $218 million.
On October 12, 2018, Palo Alto Networks closed on its acquisition of cloud threat defense specialist RedLock for $173 million in cash.
What management had to say
Palo Alto Networks CEO Nikesh Arora stated:
We had an excellent start to the fiscal year that highlights the continued strength of our platform. Our approach of providing best-in-class security products, combined with automation and integration to remove complexity, continues to resonate with customers. The completion of our RedLock acquisition during the quarter marks another important step forward in our cloud security strategy. We expect to deliver an integrated offering early next year that combines RedLock's technologies with our existing cloud security products to help our customers secure their mobile workforce, protect the public cloud and stop advanced threats.
"We are very pleased with our first quarter results," added CFO Kathy Bonanno. "On the top line, both product and subscription revenue increased by more than 30% year over year, and on the bottom line, we expanded both GAAP and non-GAAP earnings per share and operating margin."
Looking forward
For the current second quarter of fiscal 2019, Palo Alto Networks expects revenue of $675 million to $685 million, or growth of 24% to 26% year over year. That should translate to adjusted earnings per share of $1.20 to $1.22. For perspective -- though we don't typically pay close attention to Wall Street's demands -- consensus predictions called for earnings near the lower end of that range on revenue closer to $669 million.
All things considered, this was a straightforward quarterly beat followed by encouraging forward guidance, leaving little not to like from a bullish investor's perspective. So while the market's initial reaction may not seem to indicate as much, I think patient shareholders should be more than pleased with Palo Alto Networks' position today.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.