Palo Alto Networks, the fast-growing provider of computer networking security, topped analyst expectations in its first quarter as a public company but still saw its share price drubbed in after-hours trading.
The company, which is actually based in Santa Clara, posted one of the year's most robust tech IPOs in July. Shares jumped nearly 27 percent at the initial public offering, which was the first by a tech company after Facebook's underwhelming stock debut, and the stock has continued to trend upward.
After closing their first day of trading at $53.13, Palo Alto Networks finished Monday at $71.75.
But after-hours traders sent the stock down by nearly 10 percent once the company reported its financial numbers. This despite fourth-quarter revenues that grew 88 percent compared to the year-earlier period, to $75.6 million.
Analysts polled by Thomson Reuters had expected a consensus $71.3 million.
The company posted a quarterly net loss of $4.6 million, or 18 cents a share. Both were improvements over the same period a year ago.
Brent Thill, who follows the stock for UBS, said he's still bullish on Palo Alto Networks but said Wall Street is holding the company to a high standard of performance in order to justify its lofty price-to-earnings ratio.
"The Street, obviously, at that multiple wants to ensure they're delivering a lot of upside," said Thill, who
"The market's growing 10 percent, and they're growing 115 percent. You're talking the difference between a Ferrari and a Toyota," he said.
For the fiscal year that ended July 31, Palo Alto Networks grew revenue 115 percent, to $255 million. The company posted full-year net income of $700,000, marking its first full year of profitability. The company lost $12.5 million in the 2011 fiscal year.
Founded in 2005 by former Check Point engineer Nir Zuk, Palo Alto Networks makes hardware and software firewalls to protect networks from computer viruses.
Chief Executive Mark McLaughlin, in a conference call, said the company had landed 1,000 new customers in the quarter, its third consecutive quarter with such growth. He said that with corporate computing increasingly moving to mobile devices and the cloud, worker productivity is on the rise -- but so are online threats.
McLaughlin said his company's technology "doesn't force users to choose between security vs. productivity. Legacy firewall technology simply can't keep up."
Still, analysts on the conference call questioned why revenue growth had slowed somewhat in Europe, which McLaughlin said is still a "growth market," and why deferred revenue had grown faster than it had during the same period last year.
Chief Financial Officer Steffan Tomlinson said that's natural, since Palo Alto Networks is "primarily a book-and-ship business" -- meaning it books revenue when orders are placed but isn't paid until the products are delivered.
Tomlinson also said Palo Alto Networks has $323 million in cash, most of it stockpiled from the IPO. And he projected the company will book revenues of $80 million to $84 million in the next quarter, a 42 percent increase year over year.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.