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Palo Alto (PANW) Q4 Earnings and Revenues Beat Estimates

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Palo Alto Networks (PANW - Free Report) reported strong fourth-quarter fiscal 2021 results, wherein both earnings and revenues not only topped the respective Zacks Consensus Estimate but also improved year over year.

It reported non-GAAP earnings of $1.60 per share beating the Zacks Consensus Estimate of $1.44 per share. The bottom line grew 8.1% from $1.48 per share in the year-ago quarter.

Palo Alto’s fiscal fourth-quarter revenues of $1.22 billion surpassed the Zacks Consensus Estimate of $1.17 billion. The top line improved 28% from the year-earlier reported figure.

The company’s strong quarterly performance reflects its sustained focus on product innovation, shift in business model to subscription-based services, platform integration and continued investments in go-to-market strategy.

The top line was primarily aided by several deal wins, and increased adoption of the company’s next-generation security platforms owing to remote-working trend and heightened need for stronger security. Growing traction in the Strata, Prisma and Cortex offerings acted as a tailwind.

 

Palo Alto Networks, Inc. Price, Consensus and EPS Surprise Palo Alto Networks, Inc. Price, Consensus and EPS Surprise

Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote

Quarterly Details

Product revenues increased 11.1% year over year to $339.4 million and contributed 27.8% to total revenues. The company’s subscription and support revenues, which accounted for 72.2% of total revenues, improved 36.5% to $879.9 million.

Billings jumped 34% to $1.9 billion. Deferred revenues increased 32% to $5 billion. The global cyber security leader’s remaining performance obligation climbed to $5.9 billion, reflecting a year-over-year surge of 36%.

Palo Alto’s Next-Gen Security (NGS) Annualized Recurring Revenues (ARR) was $1.18 billion in the reported quarter, compared with $651 in the year-ago quarter and $973 million in the previous quarter.

The company’s non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis to 75.3%. However, non-GAAP operating margin contracted 230 bps to 17.5%.

Balance Sheet & Cash Flow

Palo Alto exited the fiscal fourth quarter with cash, cash equivalents and short-term investments of $2.90 billion compared with $2.95 billion at the end of the previous quarter. The company’s balance sheet does not carry any long-term debt.

The company generated operating cash flow of $325.8 million and non-GAAP adjusted free cash flow of $298.5 million during the fourth quarter. For full fiscal 2021, cash generated through operating activities totaled $1.50 billion and non-GAAP free cash flow amounted to $1.39 billion.

Palo Alto returned $328.1 million to its shareholder through stock buyback. In fiscal 2021, it repurchased share worth $1.18 billion.

Concurrent with its earnings release, the company announced that its board of directors has increased its existing share repurchase authorization limit by $676.1 million to $1 billion. The newly updated share repurchase program will expire on Dec 31, 2022.

Full-Year Highlights

Palo Alto reported revenues of $4.3 billion in full-year fiscal 2021, up 25% year over year.

For full year 2021, total billings were $5.5 billion. NGS billings accounted for 28% of total billings.

Non-GAAP earnings per share increased 25.8% year over year to $6.14.

Non-GAAP operating income for fiscal 2021 increased 33.9% year over year to $802.3 million. The operating margin expanded 130 bps to 18.9%. Segment wise, non-GAAP operating income from ‘Network Security’ was $1.09 billion, while non-GAAP operating loss from ‘Cloud & AI’ was $283.5 million.

Non-GAAP gross profit was $3.20 billion. Non-GAAP gross margin declined 40 bps to 75.2%. Segment wise, non-GAAP gross profit from ‘Network Security’ was $2.83 billion, representing 88.5% of total non-GAAP gross profit. Non-GAAP gross profit from ‘Cloud & AI’ accounted for 11.5% of total non-GAAP gross profit and amounted to $369.5 million.

Guidance

For the first quarter of fiscal 2022, Palo Alto projects revenues between $1.19 billion and $1.21 billion, reflecting year-over-year growth in the range of 26-28%.

Total billings are anticipated between $1.29 billion and $1.31 billion, indicating an increase of 19-21% from the year-ago quarter. Non-GAAP earnings are projected to be $1.55-$1.58 per share.

Palo Alto expects fiscal 2022 revenues of $5.275-$5.325 billion, suggesting growth in the range of 24-25% from fiscal 2021 level. NGS ARR is expected between $1.65 billion and $1.70 billion.

Total billings are estimated to be $6.60-$6.65 billion for the full fiscal 2022, indicating year-over-year increase of 21-22%. Non-GAAP earnings for fiscal 2022 are expected to be $7.15-$7.25 per share.

Non-GAAP adjusted free cash flow margin is anticipated to be at least 30%.

Zacks Rank and Key Picks

Palo Alto Networks currently carries Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include the following:

Avnet (AVT - Free Report) has a Zacks Rank #1 (Strong Buy) and a long-term earnings growth rate of 25.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

ON Semiconductor (ON - Free Report) has a Zacks Rank #1 and a long-term earnings growth rate of 52.3%.

Shopify (SHOP - Free Report) has a Zacks Rank #1 and a long-term earnings growth rate of 25%.

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