Palo Alto Networks Reports Fiscal Third Quarter 2017 Financial Results

SANTA CLARA, Calif., May 31, 2017 /PRNewswire/ -- Palo Alto Networks(®) (NYSE: PANW), the next-generation security company, today announced financial results for its fiscal third quarter 2017 ended April 30, 2017.

Total revenue for the fiscal third quarter 2017 grew 25 percent year over year to $431.8 million, compared with total revenue of $345.8 million for the fiscal third quarter 2016. GAAP net loss for the fiscal third quarter 2017 was $60.9 million, or $0.67 per diluted share, compared with GAAP net loss of $64.1 million, or $0.73 per diluted share, for the fiscal third quarter 2016.

Non-GAAP net income for the fiscal third quarter 2017 was $57.1 million, or $0.61 per diluted share, compared with non-GAAP net income of $42.3 million, or $0.46 per diluted share, for the fiscal third quarter 2016. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

"We reported record revenue of $432 million in our fiscal third quarter and added the second highest number of new customers in the company's history," said Mark McLaughlin, chief executive officer of Palo Alto Networks. "The integrated and highly automated prevention capabilities of our Next-Generation Security Platform continue to differentiate us in the market as we help our customers protect our digital way of life."

"Expansion within our existing customer base and new customer acquisitions in the quarter drove growth in revenue, billings and deferred revenue," commented Steffan Tomlinson, chief financial officer of Palo Alto Networks. "In addition, we continue to balance growth and profitability, as cash flow from operations totaled $211.2 million in the quarter, free cash flow totaled $162.6 million, and we ended the quarter with cash, cash equivalents and investments of $2.1 billion."

Recent Highlights

    --  Announced enhancements to our Traps advanced endpoint protection
        offering - With Traps(TM) version 4.0, we expanded our multi-method
        prevention approach to block both known and unknown malware as well as
        exploits before they compromise endpoints. The enhancements also include
        the addition of support for macOS(®) and Android(®) (beta), plus
        several new prevention modules designed to detect and stop ransomware
        and other advanced threats.
    --  Won the SANS Best of 2016 Award for Next Generation Firewall - Each year
        SANS surveys its community for nominations for its "Best of the Year"
        awards for products and services that have been successfully used to
        provide increases in both the effectiveness and efficiency of
        cybersecurity programs. The products were voted on by security
        operations professionals and security managers from around the world,
        all of whom are actual users of these products, with Palo Alto Networks
        taking top honors in the Next Generation Firewall category.
    --  Expanded availability of Aperture SaaS security service to both Europe
        and APAC - We have made the Aperture(TM) SaaS security service available
        in Europe and APAC with new data centers in Germany and Singapore to
        alleviate concerns organizations may have in relation to data privacy
        and data transfer. For any organization operating across international
        borders, embracing SaaS applications brings security challenges, coupled
        with data privacy concerns, that can limit the ability to store, share
        or transfer data outside of the region, even for security purposes.
    --  Joined forces with AT&T, IBM and others to form IoT Cybersecurity
        Alliance - Recognizing that IoT presents daunting cybersecurity
        challenges that can jeopardize trust in our digital age, we are pleased
        to be joining forces with other notable industry leaders, including
        AT&T, IBM, Nokia, Symantec and Trustonic, to help customers demystify
        IoT security, share best practices, conduct research and raise awareness
        of ways to better secure the IoT ecosystem.

Financial Outlook

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

For the fiscal fourth quarter 2017, we expect:

    --  Total revenue in the range of $481 to $491 million, representing
        year-over-year growth between 20 percent and 23 percent.
    --  Diluted non-GAAP net income per share in the range of $0.78 to $0.80
        using 93 to 95 million shares.

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, non-cash interest expense related to our convertible senior notes, foreign currency gains (losses) and income and other tax effects associated with these items, and 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 (loss), 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.

Conference Call Information

Palo Alto Networks will host a conference call for analysts and investors to discuss its fiscal third quarter 2017 results and outlook for its fiscal fourth quarter 2017 today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Open to the public, investors may access the call by dialing 1-888-438-5448 or 1-719-325-2432 and using conference ID 6536755. A live audio webcast of the conference call, along with supplemental financial information, will also be accessible from the "Investors" section of our website at investors.paloaltonetworks.com. Following the webcast, an archived version will be available on our website for one year. A telephonic replay of the call will be available three hours after the call, will run for ten days, and may be accessed by dialing 1-888-203-1112 or 1-719-457-0820 and entering the passcode 6536755.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our future financial and operating performance, including our financial outlook for the fiscal fourth quarter 2017. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: our limited operating history; our ability to identify and effectively implement the necessary changes to address execution challenges; risks associated with managing our rapid growth; our limited experience with new product and subscription and support introductions and the risks associated with new products and subscription and support offerings, including the discovery of software bugs; our ability to attract and retain new customers; the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing products and subscription and support; rapidly evolving technological developments in the market for network security products and subscription and support offerings; length of sales cycles; and general market, political, economic and business conditions.

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 Quarterly Report on Form 10-Q filed with the SEC on March 1, 2017, 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 key metrics internally in analyzing its financial results and believes that the use of these non-GAAP financial measures and key metrics is 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 and key metrics 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, non-cash interest expense related to the company's convertible senior notes, and intellectual property restructuring related charges. The company also excludes from non-GAAP net income the 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, 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 non-GAAP 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 given the company's hybrid-SaaS revenue model, 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 revenue recognition criteria 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 subscription and support.

Free cash flow. Palo Alto Networks defines free cash flow as cash provided by operating activities less purchases of property, equipment, and other assets. The company considers free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures.

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 and free cash flow does not represent the total increase or decrease in our cash balance for the period. In addition, 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 next-generation security company, leading a new era in cybersecurity by safely enabling applications and preventing cyber breaches for tens of thousands of organizations worldwide. Built with an innovative approach and highly differentiated cyberthreat prevention capabilities, our game-changing security platform delivers security far superior to legacy or point products, safely enables daily business operations, and protects an organization's most valuable assets. Find out more at 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 April 30,                       Nine Months Ended April 30,

                               2017(2)                          2016                    2017(2)                           2016
                                ------                          ----                     ------                           ----

                                                 (As Adjusted)(1)                                        (As Adjusted)(1)

    Revenue:

    Product                               $164.2                                                   $162.1                          $496.8       $479.7

    Subscription and support     267.6                                     183.7                                        755.7        498.0
                                 -----                                     -----                                        -----        -----

    Total revenue                431.8                                     345.8                                      1,252.5        977.7

    Cost of revenue:

    Product                       49.7                                      43.2                                        137.7        126.9

    Subscription and support      74.0                                      51.7                                        200.4        141.4

    Total cost of revenue        123.7                                      94.9                                        338.1        268.3
                                 -----                                      ----                                        -----        -----

    Total gross profit           308.1                                     250.9                                        914.4        709.4

    Operating expenses:

    Research and development      86.0                                      74.0                                        260.1        207.7

    Sales and marketing          226.9                                     195.9                                        673.7        537.8

    General and administrative    44.3                                      33.5                                        133.1         98.5

    Total operating expenses     357.2                                     303.4                                      1,066.9        844.0
                                 -----                                     -----                                      -------        -----

    Operating loss              (49.1)                                   (52.5)                                     (152.5)     (134.6)

    Interest expense             (6.2)                                    (5.8)                                      (18.3)      (17.4)

    Other income, net              2.1                                       1.0                                          7.3          5.7
                                   ---                                       ---                                          ---          ---

    Loss before income taxes    (53.2)                                   (57.3)                                     (163.5)     (146.3)

    Provision for income taxes     7.7                                       6.8                                         14.9         15.0

    Net loss                             $(60.9)                                                 $(64.1)                       $(178.4)    $(161.3)
                                          ======                                                   ======                         =======      =======

    Net loss per share, basic
     and diluted                         $(0.67)                                                 $(0.73)                        $(1.97)     $(1.86)
                                          ======                                                   ======                          ======       ======

    Weighted-average shares
     used to compute net loss
     per share, basic and
     diluted                      91.0                                      87.8                                         90.5         86.5
                                  ====                                      ====                                         ====         ====



             (1)    Certain amounts have
                     been adjusted as a
                     result of the
                     Company's change in
                     accounting policy for
                     sales commissions.
                     Refer to Appendix A
                     for more information.


             (2)    The Company early
                     adopted new share-
                     based payment
                     accounting guidance
                     in its second quarter
                     of fiscal 2017, which
                     simplified, among
                     other things, the
                     accounting for income
                     tax consequences and
                     the method of
                     accounting for
                     forfeitures of share-
                     based payment awards.
                     As a result of the
                     early adoption, the
                     Company's share-
                     based compensation
                     and provision for
                     income taxes
                     decreased by $0.9
                     million and $4.0
                     million,
                     respectively, for the
                     three months ended
                     October 31, 2016.
                     These adjustments are
                     reflected in the
                     results for the nine
                     months ended April
                     30, 2017.


                                                                       Palo Alto Networks, Inc.

                                                        Reconciliation of GAAP to Non-GAAP Financial Measures

                                                               (In millions, except per share amounts)

                                                                             (Unaudited)


                                      Three Months Ended                                 Nine Months Ended

                                          April 30,                                          April 30,

                                  2017                           2016                       2017                           2016
                                  ----                           ----                       ----                           ----

                                                  (As Adjusted)(1)                                        (As Adjusted)(1)

    GAAP net loss                         $(60.9)                                                 $(64.1)                       $(178.4)    $(161.3)

    Share-based compensation
     related charges             120.6                                      112.7                                        368.0        294.8

    Acquisition related costs      2.4                                          -                                         3.1            -

    Amortization expense of
     acquired intangible assets    2.3                                        2.1                                          6.4          6.3

    Litigation related charges     3.1                                        3.1                                          9.2          9.2

    Non-cash interest expense
     related to convertible
     notes                         6.2                                        5.9                                         18.3         17.4

    Foreign currency loss
     associated with non-GAAP
     adjustments                   1.4                                        1.8                                          1.8          0.3

    Income tax and other tax
     adjustments related to the
     above                      (18.0)                                    (19.2)                                      (60.5)      (54.1)

    Non-GAAP net income                     $57.1                                                    $42.3                          $167.9       $112.6
                                            =====                                                    =====                          ======       ======


    GAAP net loss per share,
     diluted                              $(0.67)                                                 $(0.73)                        $(1.97)     $(1.86)

    Share-based compensation
     related charges              1.30                                       1.27                                         4.01         3.35

    Acquisition related costs     0.03                                       0.00                                         0.03         0.00

    Amortization expense of
     acquired intangible assets   0.03                                       0.02                                         0.07         0.07

    Litigation related charges    0.03                                       0.03                                         0.10         0.11

    Non-cash interest expense
     related to convertible
     notes                        0.07                                       0.07                                         0.20         0.20

    Foreign currency loss
     associated with non-GAAP
     adjustments                  0.02                                       0.02                                         0.02         0.00

    Income tax and other tax
     adjustments related to the
     above                      (0.20)                                    (0.22)                                      (0.67)      (0.64)

    Non-GAAP net income per
     share, diluted                         $0.61                                                    $0.46                           $1.79        $1.23
                                            =====                                                    =====                           =====        =====


    GAAP weighted-average
     shares used to compute net
     loss per share, diluted      91.0                                       87.8                                         90.5         86.5

    Weighted-average effect of
     potentially dilutive
     securities(2)                 2.3                                        3.5                                          3.2          4.7

    Non-GAAP weighted-average
     shares used to compute net
     income per share, diluted    93.3                                       91.3                                         93.7         91.2
                                  ====                                       ====                                         ====         ====


    Net cash provided by
     operating activities                  $211.2                                                   $170.3                          $629.0       $471.3

    Less: purchases of
     property, equipment, and
     other assets                 48.6                                       19.3                                        114.2         56.2

    Free cash flow (non-GAAP)              $162.6                                                   $151.0                          $514.8       $415.1
                                           ======                                                   ======                          ======       ======

    Net cash used in investing
     activities                          $(166.8)                                                 $(54.6)                       $(411.1)    $(339.3)
                                          =======                                                   ======                         =======      =======

    Net cash provided by (used
     in) financing activities            $(113.8)                                                   $21.1                        $(260.3)       $42.2
                                          =======                                                    =====                         =======        =====



             (1)    Certain amounts have
                     been adjusted as a
                     result of the
                     Company's change in
                     accounting policy for
                     sales commissions.
                     Refer to Appendix A
                     for more information.


             (2)    Non-GAAP net income
                     per share, diluted,
                     includes the
                     potentially dilutive
                     effect of employee
                     equity incentive plan
                     awards and
                     convertible senior
                     notes outstanding. In
                     addition, non-GAAP
                     net income per share,
                     diluted, includes the
                     anti-dilutive impact
                     of the Company's note
                     hedge agreements,
                     which reduced the
                     potentially dilutive
                     effect of the
                     convertible notes by
                     0.1 million shares
                     and 0.8 million
                     shares for the three
                     and nine months ended
                     April 30, 2017,
                     respectively, and 1.4
                     million shares and
                     1.6 million shares
                     for the three and
                     nine months ended
                     April 30, 2016,
                     respectively.


                                                       Palo Alto Networks, Inc.

                                                        Calculation of Billings

                                                             (In millions)

                                                              (Unaudited)


                      Three Months Ended April 30,                Nine Months Ended April 30,

                           2017                 2016               2017                 2016
                           ----                 ----               ----                 ----

    Total revenue                  $431.8                                 $345.8              $1,252.5    $977.7

    Add: change in
     total deferred
     revenue, net of
     acquired
     deferred revenue     112.3                      140.4                            370.1       355.5
                          -----                      -----                            -----       -----

    Billings                       $544.1                                 $486.2              $1,622.6  $1,333.2
                                   ======                                 ======              ========  ========


                                                    Palo Alto Networks, Inc.

                                       Preliminary Condensed Consolidated Balance Sheets

                                                         (In millions)

                                                          (Unaudited)


                                                     April 30, 2017                 July 31, 2016
                                                     --------------                 -------------

                                                                                (As Adjusted)(1)

    Assets

    Current assets:

    Cash and cash equivalents                                            $692.0                              $734.4

    Short-term investments                                    680.0                                  551.2

    Accounts receivable, net                                  364.1                                  348.7

    Prepaid expenses and other
     current assets                                           159.1                                  139.7
                                                              -----                                  -----

    Total current assets                                    1,895.2                                1,774.0

    Property and equipment, net                               192.3                                  117.2

    Long-term investments                                     719.1                                  652.8

    Goodwill                                                  238.8                                  163.5

    Intangible assets, net                                     56.5                                   44.0

    Other assets                                              148.2                                  106.7

    Total assets                                                       $3,250.1                            $2,858.2
                                                                       ========                            ========

    Liabilities and stockholders' equity

    Current liabilities:

    Accounts payable                                                      $33.2                               $30.2

    Accrued compensation                                       76.4                                   73.5

    Accrued and other liabilities                              60.1                                   39.2

    Deferred revenue                                          885.0                                  703.9

    Total current liabilities                               1,054.7                                  846.8

    Convertible senior notes, net                             518.4                                  500.2

    Long-term deferred revenue                                726.8                                  536.9

    Other long-term liabilities                               137.1                                   79.4

    Stockholders' equity:

    Preferred stock                                               -                                     -

    Common stock and additional
     paid-in capital                                        1,615.8                                1,515.5

    Accumulated other
     comprehensive income (loss)                              (4.2)                                   1.0

    Accumulated deficit                                     (798.5)                               (621.6)
                                                             ------                                 ------

    Total stockholders' equity                                813.1                                  894.9

    Total liabilities and
     stockholders' equity                                              $3,250.1                            $2,858.2
                                                                       ========                            ========



             (1)    Certain amounts have
                     been adjusted as a
                     result of the
                     Company's change in
                     accounting policy for
                     sales commissions.
                     Refer to Appendix A
                     for more information.


                                                     Palo Alto Networks, Inc.

                                   Preliminary Condensed Consolidated Statements of Cash Flows

                                                          (In millions)

                                                           (Unaudited)


                                                                 Nine Months Ended April 30,

                                                                  2017                           2016
                                                                  ----                           ----

                                                                                  (As Adjusted)(1)

    Cash flows from operating activities

    Net loss                                                             $(178.4)                              $(161.3)

    Adjustments to reconcile net loss to net cash provided
     by operating activities:

    Share-based compensation for equity
     based awards                                                356.8                                   283.2

    Depreciation and amortization                                 43.1                                    30.7

    Amortization of investment premiums,
     net of accretion of purchase
     discounts                                                     2.1                                     2.4

    Amortization of debt discount and
     debt issuance costs                                          18.3                                    17.4

    Changes in operating assets and liabilities, net of
     effects of acquisitions:

    Accounts receivable, net                                    (14.9)                                 (55.3)

    Prepaid expenses and other assets                           (49.6)                                 (17.8)

    Accounts payable                                               2.8                                    11.7

    Accrued compensation                                           1.7                                  (23.4)

    Accrued and other liabilities                                 77.0                                    28.2

    Deferred revenue                                             370.1                                   355.5
                                                                 -----                                   -----

    Net cash provided by operating
     activities(2)                                               629.0                                   471.3

    Cash flows from investing activities

    Purchases of investments                                   (726.9)                                (830.1)

    Proceeds from sales of investments                               -                                  137.4

    Proceeds from maturities of
     investments                                                 520.7                                   409.6

    Business acquisitions, net of cash
     acquired                                                   (90.7)                                      -

    Purchases of property, equipment, and
     other assets                                              (114.2)                                 (56.2)

    Net cash used in investing activities                      (411.1)                                (339.3)

    Cash flows from financing activities

    Repurchases of common stock                                (295.1)                                      -

    Proceeds from sales of shares through
     employee equity incentive plans                              45.8                                    42.2

    Payments for taxes related to net
     share settlement of equity awards                          (11.0)                                      -

    Net cash provided by (used in)
     financing activities(2)                                   (260.3)                                   42.2

    Net increase (decrease) in cash and
     cash equivalents                                           (42.4)                                  174.2

    Cash and cash equivalents -beginning
     of period                                                   734.4                                   375.8

    Cash and cash equivalents -end of
     period                                                                $692.0                                 $550.0
                                                                           ======                                 ======



             (1)    Certain amounts have
                     been adjusted as a
                     result of the
                     Company's change in
                     accounting policy for
                     sales commissions.
                     Refer to Appendix A
                     for more information.


             (2)    The Company early
                     adopted new share-
                     based payment
                     accounting guidance
                     in its second quarter
                     of fiscal 2017, which
                     simplified, among
                     other things, the
                     presentation of
                     excess tax benefits
                     in the statement of
                     cash flows. The
                     Company adopted this
                     portion of the
                     guidance on a
                     retrospective basis,
                     which increased net
                     cash provided by
                     operating activities
                     by $0.7 million for
                     the nine months ended
                     April 30, 2016, with
                     a corresponding
                     decrease to net cash
                     provided by financing
                     activities.


          Palo Alto Networks, Inc.
                 Appendix A
         Change in Accounting Policy
                 (Unaudited)


    Effective August 1, 2016, the
     Company voluntarily changed its
     accounting policy for sales
     commissions that are incremental
     and directly related to non-
     cancelable customer sales contracts
     from recording an expense when
     incurred to deferral and
     amortization of the sales
     commissions over the term of the
     related contract in proportion to
     the recognized revenue. The
     adoption of this accounting policy
     change has been applied
     retrospectively to all prior
     periods presented in this document,
     in which the cumulative effect of
     the change has been reflected as of
     the beginning of the earliest
     period presented.


    The following tables present the
     changes to financial statement line
     items as a result of the accounting
     change for the periods presented in
     the Company's preliminary condensed
     consolidated financial statements
     (in millions, except per share
     data):

                                                       April 30, 2017                                                         July 31, 2016

                                Computed              Impact of               As Reported             As                   Impact of               As Adjusted
                               under Prior            Commission                                  Previously               Commission
                                 Method               Adjustment                                  Reported                 Adjustment
                                 ------               ----------                                  --------                 ----------

    Preliminary Condensed
     Consolidated Balance
     Sheets

    Prepaid expenses and other
     current assets                           $99.4                                         $59.7                                           $159.1                         $84.8                $54.9      $139.7

    Other assets                      91.7                               56.5                            148.2                                 64.6               50.1                114.7

    Other long-term
     liabilities                     136.7                                0.4                            137.1                                 79.4                  -                79.4

    Accumulated deficit                    $(914.3)                                       $115.8                                         $(798.5)                     $(726.6)              $105.0    $(621.6)



                                           Three Months Ended April 30, 2017                                  Three Months Ended April 30, 2016

                                Computed              Impact of               As Reported             As                   Impact of               As Adjusted
                               under Prior            Commission                                  Previously               Commission
                                 Method               Adjustment                                  Reported                 Adjustment
                                 ------               ----------                                  --------                 ----------

    Preliminary Condensed
     Consolidated Statements
     of Operations

    Sales and marketing                      $234.6                                        $(7.7)                                          $226.9                        $202.0               $(6.1)     $195.9

    Operating loss                  (56.8)                               7.7                           (49.1)                              (58.6)               6.1               (52.5)

    Provision for income taxes         7.3                                0.4                              7.7                                  6.8                  -                 6.8

    Net loss                                $(68.2)                                         $7.3                                          $(60.9)                      $(70.2)                $6.1     $(64.1)

    Net loss per share, basic
     and diluted                            $(0.75)                                        $0.08                                          $(0.67)                      $(0.80)               $0.07     $(0.73)

    Weighted-average shares
     used to compute net loss
     per share, basic and
     diluted                          91.0                                  -                            91.0                                 87.8                  -                87.8



                                            Nine Months Ended April 30, 2017                                   Nine Months Ended April 30, 2016

                                Computed              Impact of               As Reported             As                   Impact of               As Adjusted
                               under Prior            Commission                                  Previously               Commission
                                 Method               Adjustment                                  Reported                 Adjustment
                                 ------               ----------                                  --------                 ----------

    Preliminary Condensed
     Consolidated Statements
     of Operations

    Sales and marketing                      $684.8                                       $(11.1)                                          $673.7                        $547.9              $(10.1)     $537.8

    Operating loss                 (163.6)                              11.1                          (152.5)                             (144.7)              10.1              (134.6)

    Provision for income taxes        14.6                                0.3                             14.9                                 15.0                  -                15.0

    Net loss                               $(189.2)                                        $10.8                                         $(178.4)                     $(171.4)               $10.1    $(161.3)

    Net loss per share, basic
     and diluted                            $(2.09)                                        $0.12                                          $(1.97)                      $(1.98)               $0.12     $(1.86)

    Weighted-average shares
     used to compute net loss
     per share, basic and
     diluted                          90.5                                  -                            90.5                                 86.5                  -                86.5


    This change in accounting policy does not
     affect the Company's balance of cash and
     cash equivalents and, as a result, did
     not change net cash flows from
     operating, investing, or financing
     activities or materially impact any
     individual line items in the Company's
     preliminary condensed consolidated
     statement of cash flows for the nine
     months ended April 30, 2016.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/palo-alto-networks-reports-fiscal-third-quarter-2017-financial-results-300466451.html

SOURCE Palo Alto Networks, Inc.