Stock Analysis on Net
Stock Analysis on Net

Palo Alto Networks Inc. (NASDAQ:PANW)

Analysis of Goodwill and Intangible Assets

Microsoft Excel

Goodwill and Intangible Asset Disclosure

Palo Alto Networks Inc., balance sheet: goodwill and intangible assets

US$ in thousands

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
Goodwill 2,926,800 2,747,700 2,710,100 1,812,900 1,352,300 522,800
Developed technology 633,200 600,700 596,200 425,900 318,800 154,700
Customer relationships 172,700 172,700 172,700 87,600 39,800 12,200
Acquired intellectual property 14,600 11,300 7,900 6,300 8,900 8,900
Trade name and trademarks 9,400 9,400 9,400 9,400 9,400 8,500
Other 900 900 1,800 3,100 2,200 2,200
Intangible assets subject to amortization, gross carrying amount 830,800 795,000 788,000 532,300 379,100 186,500
Accumulated amortization (519,300) (414,400) (289,400) (174,100) (100,100) (46,500)
Intangible assets subject to amortization, net carrying amount 311,500 380,600 498,600 358,200 279,000 140,000
In-process research and development 3,900 3,900 — — 1,600 800
Intangible assets not subject to amortization 3,900 3,900 — — 1,600 800
Purchased intangible assets 315,400 384,500 498,600 358,200 280,600 140,800
Goodwill and intangible assets 3,242,200 3,132,200 3,208,700 2,171,100 1,632,900 663,600

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

Item Description The company
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Palo Alto Networks Inc. goodwill increased from 2021 to 2022 and from 2022 to 2023.
Purchased intangible assets Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Palo Alto Networks Inc. purchased intangible assets decreased from 2021 to 2022 and from 2022 to 2023.
Goodwill and intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Palo Alto Networks Inc. goodwill and intangible assets decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Adjustments to Financial Statements: Removal of Goodwill

Palo Alto Networks Inc., adjustments to financial statements

US$ in thousands

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
Adjustment to Total Assets
Total assets (as reported) 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200 5,823,000
Less: Goodwill 2,926,800 2,747,700 2,710,100 1,812,900 1,352,300 522,800
Total assets (adjusted) 11,574,300 9,505,900 7,531,500 7,252,500 5,239,900 5,300,200
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 1,748,400 210,000 634,500 1,101,800 1,586,300 966,400
Less: Goodwill 2,926,800 2,747,700 2,710,100 1,812,900 1,352,300 522,800
Stockholders’ equity (adjusted) (1,178,400) (2,537,700) (2,075,600) (711,100) 234,000 443,600

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

Palo Alto Networks Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Palo Alto Networks Inc., adjusted financial ratios

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
Total Asset Turnover
Reported total asset turnover 0.48 0.45 0.42 0.38 0.44 0.39
Adjusted total asset turnover 0.60 0.58 0.57 0.47 0.55 0.43
Financial Leverage
Reported financial leverage 8.29 58.35 16.14 8.23 4.16 6.03
Adjusted financial leverage — — — — 22.39 11.95
Return on Equity (ROE)
Reported ROE 25.15% -127.14% -78.63% -24.23% -5.16% -15.30%
Adjusted ROE — — — — -35.00% -33.34%
Return on Assets (ROA)
Reported ROA 3.03% -2.18% -4.87% -2.95% -1.24% -2.54%
Adjusted ROA 3.80% -2.81% -6.62% -3.68% -1.56% -2.79%

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Palo Alto Networks Inc. adjusted total asset turnover ratio improved from 2021 to 2022 and from 2022 to 2023.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Palo Alto Networks Inc. adjusted ROA improved from 2021 to 2022 and from 2022 to 2023.

Palo Alto Networks Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Revenue 6,892,700 5,501,500 4,256,100 3,408,400 2,899,600 2,273,100
Total assets 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200 5,823,000
Activity Ratio
Total asset turnover1 0.48 0.45 0.42 0.38 0.44 0.39
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Revenue 6,892,700 5,501,500 4,256,100 3,408,400 2,899,600 2,273,100
Adjusted total assets 11,574,300 9,505,900 7,531,500 7,252,500 5,239,900 5,300,200
Activity Ratio
Adjusted total asset turnover2 0.60 0.58 0.57 0.47 0.55 0.43

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

2023 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= 6,892,700 ÷ 14,501,100 = 0.48

2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 6,892,700 ÷ 11,574,300 = 0.60

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Palo Alto Networks Inc. adjusted total asset turnover ratio improved from 2021 to 2022 and from 2022 to 2023.

Adjusted Financial Leverage

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Total assets 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200 5,823,000
Stockholders’ equity 1,748,400 210,000 634,500 1,101,800 1,586,300 966,400
Solvency Ratio
Financial leverage1 8.29 58.35 16.14 8.23 4.16 6.03
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Adjusted total assets 11,574,300 9,505,900 7,531,500 7,252,500 5,239,900 5,300,200
Adjusted stockholders’ equity (1,178,400) (2,537,700) (2,075,600) (711,100) 234,000 443,600
Solvency Ratio
Adjusted financial leverage2 — — — — 22.39 11.95

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

2023 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 14,501,100 ÷ 1,748,400 = 8.29

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 11,574,300 ÷ -1,178,400 = —

Adjusted Return on Equity (ROE)

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 439,700 (267,000) (498,900) (267,000) (81,900) (147,900)
Stockholders’ equity 1,748,400 210,000 634,500 1,101,800 1,586,300 966,400
Profitability Ratio
ROE1 25.15% -127.14% -78.63% -24.23% -5.16% -15.30%
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net income (loss) 439,700 (267,000) (498,900) (267,000) (81,900) (147,900)
Adjusted stockholders’ equity (1,178,400) (2,537,700) (2,075,600) (711,100) 234,000 443,600
Profitability Ratio
Adjusted ROE2 — — — — -35.00% -33.34%

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

2023 Calculations

1 ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 439,700 ÷ 1,748,400 = 25.15%

2 Adjusted ROE = 100 × Net income (loss) ÷ Adjusted stockholders’ equity
= 100 × 439,700 ÷ -1,178,400 = —

Adjusted Return on Assets (ROA)

Microsoft Excel
Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 439,700 (267,000) (498,900) (267,000) (81,900) (147,900)
Total assets 14,501,100 12,253,600 10,241,600 9,065,400 6,592,200 5,823,000
Profitability Ratio
ROA1 3.03% -2.18% -4.87% -2.95% -1.24% -2.54%
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net income (loss) 439,700 (267,000) (498,900) (267,000) (81,900) (147,900)
Adjusted total assets 11,574,300 9,505,900 7,531,500 7,252,500 5,239,900 5,300,200
Profitability Ratio
Adjusted ROA2 3.80% -2.81% -6.62% -3.68% -1.56% -2.79%

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

2023 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 439,700 ÷ 14,501,100 = 3.03%

2 Adjusted ROA = 100 × Net income (loss) ÷ Adjusted total assets
= 100 × 439,700 ÷ 11,574,300 = 3.80%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Palo Alto Networks Inc. adjusted ROA improved from 2021 to 2022 and from 2022 to 2023.