What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-09-03 compared with 2020-09-04 · 286 added, 331 removed, 1139 unchanged (35% of the section changed)

45 unchanged sentences

Description of the Matter

As described in Note 6 to the consolidated financial statements, the Company completed an acquisition of CloudGenix, Inc.

As described in Note 7 to the consolidated financial statements, the Company completed an acquisition of Expanse Inc.

for net consideration of $797.2 million in the year ended July 31, 2021.

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Additionally, we tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

Convertible Notes

Description of the Matter As described in Note 10 to the consolidated financial statements, the Company issued $2.0 billion of convertible senior notes due in 2025 (Convertible Notes) in the year ended July 31, 2020.

The accounting for the transaction was complex, as it required assessment as to whether features, other than the conversion feature, required bifurcation and separate valuation.

Additionally, the transaction was complex as it required valuation of the conversion feature in the debt instrument, which involved estimation of the fair value of the debt instrument absent of any conversion feature, and evaluation of the appropriate classification of the conversion feature in the financial statements.

Auditing the Company’s accounting for the Convertible Notes was complex due to the significant judgment required in determining the liability component of the Convertible Notes as well as the balance sheet classification of the elements of the Convertible Notes.

The Company estimated the fair value of the liability component of the Convertible Notes, absent any embedded conversion features, using an income approach which considers the instrument’s discounted cash flow model with a risk adjusted yield.

Additionally, the Company performed a detailed analysis of the terms of the Convertible Notes to identify whether any derivatives that required separate mark-to-market accounting under applicable accounting guidance were present.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s Convertible Notes.

For example, we tested the Company’s controls over the initial recognition and measurement of the Convertible Notes, including the recording of the associated liability and equity components.

We also tested the evaluation of the Convertible Notes and the identification and evaluation of specific features and the related accounting.

To test the accounting for the Convertible Notes, our audit procedures included, among others, reading the underlying Convertible Notes agreements, testing management’s application of the relevant accounting guidance, and involving a specialist to assist us in the evaluation of the Company's valuation methodology and testing of the significant assumptions.

Our testing of the fair value of the liability component, included, among other procedures, evaluating the Company’s selection of the valuation methodology and significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions.

Specifically, when assessing the key assumptions, we evaluated the appropriateness of the Company’s estimates of its credit risk, volatility, dividend yield and the market risk free rate as well as its analysis of comparable issuances of debt securities by companies with a similar credit risk rating.

/s/ Ernst & Young LLP

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Short-term investments 1,026.9 789.8

Accounts receivable, net of allowance for doubtful accounts of $ 2.3 and $ 0.8 at July 31, 2020 and July 31, 2019, respectively

Accounts receivable, net of allowance for credit losses of $ 11.2 and $ 2.3 at July 31, 2021 and July 31, 2020, respectively

1,240.4 1,037.1

Short-term deferred contract costs 276.5 206.0

Prepaid expenses and other current assets 229.3 138.3

3 unchanged sentences

Long-term investments 888.3 554.4

Long-term deferred contract costs 494.6 422.3

Goodwill 2,710.1 1,812.9

2 unchanged sentences

Total assets $ 10,241.6 $ 9,065.4

Liabilities and stockholders’ equity

Liabilities, temporary equity and stockholders’ equity

Current liabilities:

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Deferred revenue 2,741.9 2,049.1

Convertible senior notes, net 1,557.9 —

Total current liabilities 5,116.7 2,691.7

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Commitments and contingencies (Note 12)

Temporary equity 129.1 —

Stockholders’ equity:

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Total stockholders’ equity 634.5 1,101.8

Total liabilities and stockholders’ equity $ 9,065.4 $ 6,592.2

Total liabilities, temporary equity and stockholders’ equity $ 10,241.6 $ 9,065.4

See notes to consolidated financial statements.

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2021 2020 2019

$ 1,064.2 $ 1,096.2 $ 879.8

Product $ 1,120.3 $ 1,064.2 $ 1,096.2

Subscription and support 3,135.8 2,344.2 1,803.4

2,344.2 1,803.4 1,393.8

Total revenue 4,256.1 3,408.4 2,899.6

3,408.4 2,899.6 2,273.6

Cost of revenue:

294.4 315.9 272.4

Product 308.5 294.4 315.9

Subscription and support 966.4 705.1 492.5

705.1 492.5 372.7

Total cost of revenue 1,274.9 999.5 808.4

999.5 808.4 645.1

Total gross profit 2,981.2 2,408.9 2,091.2

2,408.9 2,091.2 1,628.5

Operating expenses:

Research and development 1,140.4 768.1 539.5

768.1 539.5 400.7

Sales and marketing 1,753.8 1,520.2 1,344.0

1,520.2 1,344.0 1,074.2

General and administrative 391.1 299.6 261.8

299.6 261.8 257.8

Total operating expenses 3,285.3 2,587.9 2,145.3

2,587.9 2,145.3 1,732.7

Operating loss

1 unchanged sentence

Interest expense ( 163.3 ) ( 88.7 ) ( 83.9 )

( 88.7 ) ( 83.9 ) ( 29.6 )

Other income, net 2.4 35.9 63.4

35.9 63.4 28.5

Loss before income taxes

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$ ( 498.9 ) $ ( 267.0 ) $ ( 81.9 )

$ ( 267.0 ) $ ( 81.9 ) $ ( 122.2 )

Net loss per share, basic and diluted $ ( 5.18 ) $ ( 2.76 ) $ ( 0.87 )

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Balance as of July 31, 2018 93.6 $ 1,967.4 $ ( 16.4 ) $ ( 790.7 ) $ 1,160.3

Net loss — — ( 122.2 ) ( 122.2 )

Other comprehensive loss — — ( 13.0 ) — ( 13.0 )

Issuance of common stock in connection with employee equity incentive plans 3.8 55.0 — — 55.0

Taxes paid related to net share settlement of equity awards — ( 43.7 ) — — ( 43.7 )

Share-based compensation for equity-based awards — 502.5 — — 502.5

Repurchase and retirement of common stock ( 1.7 ) ( 250.0 ) ( 250.0 )

Temporary equity reclassification — ( 21.9 ) — — ( 21.9 )

Equity component of convertible senior notes, net — 312.4 — — 312.4

Issuance of warrants — 145.4 — — 145.4

Purchase of note hedges — ( 332.0 ) — — ( 332.0 )

Balance as of July 31, 2018 93.6 1,967.4 ( 16.4 ) ( 790.7 ) 1,160.3

Cumulative-effect adjustment from adoption of new accounting pronouncement — — — ( 28.3 ) ( 28.3 )

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Balance as of July 31, 2020 96.3 2,259.2 10.5 ( 1,167.9 ) 1,101.8

Net loss — — — ( 498.9 ) ( 498.9 )

Other comprehensive loss — — ( 20.4 ) — ( 20.4 )

Issuance of common stock in connection with employee equity incentive plans 3.7 104.0 — — 104.0

Taxes paid related to net share settlement of equity awards — ( 28.9 ) — — ( 28.9 )

Share-based compensation for equity-based awards — 943.4 — — 943.4

Repurchase and retirement of common stock ( 4.0 ) ( 1,178.1 ) — — ( 1,178.1 )

Issuance of common and restricted common stock in connection with acquisitions 1.3 340.7 — — 340.7

Temporary equity reclassification — ( 129.1 ) — — ( 129.1 )

Balance as of July 31, 2021 97.3 $ 2,311.2 $ ( 9.9 ) $ ( 1,666.8 ) $ 634.5

See notes to consolidated financial statements.

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Accounts receivable, net ( 172.4 ) ( 435.6 ) ( 108.7 )

Deferred contract costs ( 440.8 ) ( 407.4 ) ( 361.1 )

Prepaid expenses and other assets ( 299.1 ) ( 1.6 ) 28.6

26 unchanged sentences

Cash, cash equivalents, and restricted cash—end of period $ 1,880.1 $ 2,961.7 $ 965.0

Year Ended July 31,

2020 2019 2018

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

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Equity consideration for business acquisitions $ ( 365.4 ) $ ( 11.0 ) $ ( 229.5 )

Property and equipment acquired through lease incentives $ — $ — $ 37.8

Supplemental disclosures of cash flow information

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Palo Alto Networks, Inc.

(the “Company,” “we,” “us,” or “our”), located in Santa Clara, California, was incorporated in March 2005 under the laws of the State of Delaware and commenced operations in April 2005.

We empower enterprises, service providers, and government entities to secure all users, applications, data, networks and devices with comprehensive context at all times, across all locations.

(the “Company,” “we,” “us,” or “our”), headquartered in Santa Clara, California, was incorporated in March 2005 under the laws of the State of Delaware and commenced operations in April 2005.

We empower enterprises, service providers, and government entities to secure all users, applications, data, networks, clouds and devices with comprehensive visibility and context, continuously, across all locations.

Basis of Presentation

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Concentrations

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, accounts receivable, derivative contracts and financing receivable.

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivative contracts, accounts receivable and financing receivables.

We invest only in high-quality credit instruments and maintain our cash and cash equivalents and available-for-sale investments in fixed income securities.

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We do not enter into derivative contracts for trading or speculative purposes.

Our accounts receivables are primarily derived from our distributors in various geographical locations.

We perform ongoing credit evaluations and generally do not require collateral on accounts receivable.

As of July 31, 2020, one distributor accounted for over 10% of our gross accounts receivable representing 31.5 %.

For fiscal 2020, four distributors accounted for over 10% of our total revenue, representing 34.4 %, 12.1 %, 11.8 %, and 10.5 % each.

Our accounts receivable are primarily derived from our distributors in various geographical locations.

Our financing receivables are with certain qualified end-customers.

We perform ongoing credit evaluations and generally do not require collateral on accounts receivable or financing receivables.

As of July 31, 2021, four distributors individually represented 10% or more of our gross accounts receivable, and in the aggregate represented 56.6 % of our gross accounts receivable.

As of July 31, 2021, four end-customers represented 10% or more of our gross financing receivables, and in aggregate represented 67.0 % of our gross financing receivables.

For fiscal 2021, three distributors represented 10% or more of our total revenue, representing 33.2 %, 12.2 %, and 10.6 %, respectively.

No single end-customer accounted for more than 10% of our total revenue in fiscal 2021, 2020, or 2019.

We rely on an electronics manufacturing services provider (“EMS provider”) to assemble most of our products and sole source component suppliers for a certain number of our components.

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dollars using the exchange rates in effect at the balance sheet dates.

Foreign currency denominated income and expenses have been remeasured using the average exchange rates in effect during each period.

currency remeasurement gains and losses and foreign currency transaction gains and losses are not significant to the financial statements.

Foreign currency remeasurement gains and losses and foreign currency transaction gains and losses are not significant to the financial statements.

We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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Cash, Cash Equivalents, and Investments

We consider all highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents.

Investments not considered cash equivalents and with maturities one year or less from the consolidated balance sheet date are classified as short-term investments.

We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Investments not considered cash equivalents, and with maturities of one year or less from the consolidated balance sheet date, are classified as short-term investments.

Investments with maturities greater than one year from the consolidated balance sheet date are classified as long-term investments.

We classify our investments in marketable debt securities as available-for-sale at the time of purchase.

These investments are considered impaired when a decline in fair value is judged to be other-than-temporary.

We consult with our investment managers and consider available quantitative and qualitative evidence in evaluating potential impairment of our investments on a quarterly basis.

If the cost of an individual investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment.

Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.

When the fair value of a security is below its amortized cost, the amortized cost will be reduced to its fair value if it is more likely than not that we are required to sell the impaired security before recovery of its amortized cost basis, or we have the intention to sell the security.

If neither of these conditions are met, we determine whether the impairment is due to credit losses by comparing the present value of the expected cash flows of the security with its amortized cost basis.

The amount of impairment recognized is limited to the excess of the amortized cost over the fair value of the security.

An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in other income, net in our consolidated statements of operations.

Impairment losses that are not credit-related are included in accumulated other comprehensive income (loss) (“AOCI”) in stockholders’ equity.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts.

The allowance for doubtful accounts is based on our assessment of the collectability of accounts.

Management regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice, each customer’s expected ability to pay, and the collection history with each customer, when applicable, to determine whether a specific allowance is appropriate.

Accounts receivable deemed uncollectible are charged against the allowance for doubtful accounts when identified.

As of July 31, 2020 and 2019, the allowance for doubtful accounts activity was not significant.

Trade accounts receivable are recorded at the invoiced amount, net of allowances for credit losses for any potential uncollectible amounts.

The allowance for credit losses is based on our assessment of the collectability of accounts.

Management regularly reviews the adequacy of the allowance for credit losses on a collective basis by considering the age of each outstanding invoice, each customer’s expected ability to pay and collection history, current market conditions, and reasonable and supportable forecasts of future economic conditions to determine whether the allowance is appropriate.

Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.

For the years ended July 31, 2021 and 2020, the allowance for credit losses activity was not significant.

Financing Receivables

We provide financing arrangements, primarily loans, for certain qualified end-user customers to purchase our products.

We determine the adequacy of our allowance for credit loss by assessing the risks and losses inherent in our financing receivables on either an individual or a collective basis.

Our assessment considers various factors, including our historical experience, credit quality and age of the receivable balances, and economic conditions that may affect a customer’s ability to pay.

Financing receivables are written off when they are considered uncollectible, and all outstanding balances will be reversed and charged against the allowance for credit loss.

We provide financing arrangements, primarily loans, for certain qualified end-user customers to purchase our products and services.

Payment terms on these financing arrangements are up to five years .

We evaluate our allowance for credit losses by assessing the risks and losses inherent in our financing receivables on either an individual or a collective basis.

Our assessment considers various factors, including lifetime expected losses determined using customer risk profile, current economic conditions that may affect a customer’s ability to pay, and forward-looking economic considerations.

Financing receivables are written off when they are considered uncollectible, and related outstanding balances are reversed and charged against the allowance for credit losses.

Short-term financing receivables are included in prepaid expenses and other current assets, and long-term financing receivables are included in other assets on our consolidated balance sheets.

As of July 31, 2020, financing receivables were not significant to our consolidated balance sheet.

As of July 31, 2019, there were no financing receivables on our consolidated balance sheet.

For the years ended July 31, 2021 and 2020, the allowance for credit losses activity was not significant.

Refer to Note 5.

Financing Receivables for additional information.

As a global business, we are exposed to currency exchange rate risk.

3 unchanged sentences

Our derivative financial instruments are recorded at fair value, on a gross basis, as either assets or liabilities in our consolidated balance sheets.

Gains or losses related to our cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) in our consolidated balance sheets and are reclassified into the financial statement line item associated with the underlying hedged transaction in our consolidated statements of operations when the underlying hedged transaction is recognized in earnings.

Gains or losses related to our cash flow hedges are recorded as a component of AOCI in our consolidated balance sheets and are reclassified into the financial statement line item associated with the underlying hedged transaction in our consolidated

statements of operations when the underlying hedged transaction is recognized in earnings.

If it becomes probable that the hedged transaction will not occur, the cumulative unrealized gain or loss is reclassified immediately from AOCI into the financial statement line item associated with the underlying hedged transaction in our consolidated statements of operations.

Gains or losses related to non-designated derivative instruments are recognized in other income, net in our consolidated statements of operations for each period until the instrument matures, is terminated, is re-designated as a qualified cash

flow hedge, or is sold.

Derivatives designated as cash flow hedges are classified in our consolidated statements of cash flows in the same manner as the underlying hedged transaction, primarily within cash flows from operating activities.

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Amortization is computed over the estimated useful lives of the respective assets.

Acquisition-related in-process research and development represents the fair value of incomplete research and development projects that have not reached technological feasibility as of the date of acquisition.

Initially, these assets are not subject to amortization.

Assets related to projects that have been completed are transferred to developed technology, which are subject to amortization.

Impairment of Goodwill, Intangible Assets, and Other Long-Lived Assets

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If the total of the future undiscounted cash flows is less than the carrying amount of an asset, we record an impairment loss for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

We did not recognize any impairment losses on our goodwill, intangible assets or other long-lived assets during the years ended July 31, 2020, 2019 and 2018.

We did no t recognize any impairment losses on our goodwill, intangible assets, or other long-lived assets during the years ended July 31, 2021, 2020, and 2019.

Manufacturing Partner and Supplier Liabilities

10 unchanged sentences

The carrying amount of the equity component representing the conversion option is determined by deducting the fair value of the liability component from the par value of the notes as a whole.

This difference represents a debt discount that is amortized to interest expense using the effective interest method over the term of the notes.

This difference represents a debt discount that is amortized to interest expense using the effective interest

method over the term of the notes.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the issuance of the notes, we allocate the total amount incurred to the

liability and equity components using the same proportions as the proceeds from the notes.

In accounting for the transaction costs related to the issuance of the notes, we allocate the total amount incurred to the liability and equity components using the same proportions as the proceeds from the notes.

Transaction costs attributable to the liability component are netted with the liability component and amortized to interest expense using the effective interest method over the term of the notes.

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Contract costs, which primarily consist of sales commissions, are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

Sales commissions paid for initial contracts are generally not commensurate with the commissions paid for renewal contracts, given the substantive difference in commission rates in proportion to their respective contract values.

Sales commissions for initial contracts that are not commensurate are amortized over a benefit period of five years , consistent

with the revenue recognition pattern of the performance obligations in the related contracts including expected renewals.

Sales commissions paid for initial contracts are generally not commensurate with the

commissions paid for renewal contracts, given the substantive difference in commission rates in proportion to their respective contract values.

Sales commissions for initial contracts that are not commensurate are amortized over a benefit period of five years , consistent with the revenue recognition pattern of the performance obligations in the related contracts including expected renewals.

The benefit period is determined by taking into consideration contract length, technology life, and other quantitative and qualitative factors.

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We classify deferred contract costs as short-term or long-term based on when we expect to recognize the expense.

Short-term deferred contract costs are included in prepaid expenses and other current assets and long-term deferred contract costs are included in other assets on our consolidated balance sheets.

Deferred contract costs are periodically reviewed for impairment.

The amortization of deferred contract costs is included in sales and marketing expense in our consolidated statements of operations.

Deferred contract costs are periodically reviewed for impairment.

We did not recognize any impairment losses on our deferred contract costs during the years ended July 31, 2021, 2020, or 2019.

Software Development Costs

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We evaluate the classification of leases at commencement and, as necessary, at modification.

Operating leases are included in operating lease right-of-use assets, accrued and other liabilities, and long-term operating lease liabilities on our consolidated balance sheets beginning August 1, 2019.

Operating leases are included in operating lease right-of-use assets, accrued and other liabilities, and long-term operating lease liabilities on our consolidated balance sheets.

We did not have any material finance leases in any of the periods presented.

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We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns.

addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards.

In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards.

Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.

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Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new authoritative guidance on lease accounting.

Among its provisions, the standard requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases and also requires additional qualitative and quantitative disclosures about lease arrangements.

We adopted this standard effective August 1, 2019 on a modified retrospective basis, under which financial results reported in periods prior to fiscal 2020 were not adjusted.

We elected the package of practical expedients, which allowed us to carry forward our historical assessments of whether contracts are or contain leases, lease classification, and initial direct costs.

Additionally, we elected to account for lease and non-lease components as a single lease component and to not recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less.

The most significant impact of adopting this guidance was the recognition of $ 286.4 million of operating lease right-of-use assets and $ 442.4 million of operating lease liabilities on our consolidated balance sheet as of August 1, 2019, which included reclassifying previously recognized $ 129.0 million in lease incentives, deferred or prepaid rent, as well as $ 27.0 million in cease-use liabilities to operating lease right-of-use assets.

The adoption of this standard had no impact on our consolidated statements of operations and consolidated statements of cash flows.

Refer to Note 11.

Leases for further discussion.

Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued new authoritative guidance on the accounting for credit losses on most financial assets and certain financial instruments.

The standard replaces the incurred loss model with an expected credit loss model for off-balance sheet credit exposures and financial assets measured at amortized cost, including trade accounts receivables and financing receivables.

Credit losses on available-for-sale debt securities are required to be recorded through an allowance rather than as a write-down.

We adopted this standard in our first quarter of fiscal 2021 using the modified-retrospective approach.

The adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

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In August 2020, the FASB issued new authoritative guidance to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The standard eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for as a single unit;

and simplifies classification of debt on the balance sheet and earnings per share calculation.

The standard is effective for us in our first quarter of fiscal 2023 and will be applied on a modified retrospective basis.

Early adoption is permitted from our first quarter of fiscal 2022.

We are currently evaluating whether this standard will have a material impact on our consolidated financial statements.

Financial Instruments - Credit Losses

In June 2016, the FASB issued new authoritative guidance on the accounting for credit losses on most financial assets and certain financial instruments.

The standard replaces the existing incurred loss model with an expected credit loss model for financial assets measured at amortized cost, including trade receivables and financing receivables, and requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down.

The standard is effective for us in our first quarter of

fiscal 2021 and will be applied on a modified retrospective basis.

We do not expect the adoption of the standard will have a material impact on our consolidated financial statements.

The standard reduces the number of models used to account for convertible instruments and simplifies both the classification of debt on the balance sheet and the earnings per share calculation.

We intend to early adopt this standard in our first quarter of fiscal 2022 using the modified-retrospective approach, under which, financial results reported in periods prior to fiscal 2022 will not be adjusted.

We expect the adoption of this standard to result in a decrease to accumulated deficit of $ 266.6 million, a decrease to additional paid-in capital of $ 711.0 million, and an increase to convertible senior notes, net of $ 444.4 million.

Interest expense recognized in future periods will be reduced as a result of accounting for our convertible debt instrument as a single liability measured at its amortized cost.

Disaggregation of Revenue

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Deferred Revenue

During the year ended July 31, 2020, we recognized approximately $ 1.5 billion of revenue pertaining to amounts that were deferred as of July 31, 2019.

During the years ended July 31, 2021 and July 31, 2020, we recognized approximately $ 2.0 billion and $ 1.5 billion of revenue pertaining to amounts that were deferred as of July 31, 2020 and July 31, 2019, respectively.

Remaining Performance Obligations

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Certificates of deposit — 150.4 — 150.4 — — — —

Commercial paper — — — — — 19.3 — 19.3

Corporate debt securities — 1.0 — 1.0 — — — —

government and agency securities — 116.3 — 116.3 — 342.0 — 342.0

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Certificates of deposit — 12.4 — 12.4 — 26.9 — 26.9

Commercial paper — — — — — 8.9 — 8.9

Corporate debt securities — 208.9 — 208.9 — 100.2 — 100.2

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Long-term investments:

Corporate debt securities — 91.7 — 91.7 — 214.3 — 214.3

Certificates of deposit — 5.0 — 5.0 — 5.0 — 5.0

Corporate debt securities — 180.7 — 180.7 — 91.7 — 91.7

government and agency securities — 674.1 — 674.1 — 447.4 — 447.4

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Total accrued and other liabilities — 6.4 — 6.4 — — — —

Other long-term liabilities:

Foreign currency forward contracts — 0.5 — 0.5 — — — —

Total other long-term liabilities — 0.5 — 0.5 — — — —

Total liabilities measured at fair value $ — $ 6.9 $ — $ 6.9 $ — $ — $ — $ —

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Cash equivalents:

Certificates of deposit $ 150.4 $ — $ — $ 150.4

Corporate debt securities 1.0 — — 1.0

government and agency securities 116.3 — — 116.3

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Cash equivalents:

Certificates of deposit $ 12.0 $ — $ — $ 12.0

Commercial paper 19.3 — — 19.3

government and agency securities $ 342.0 $ — $ — $ 342.0

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Certificates of deposit $ 31.9 $ — $ — $ 31.9

Commercial paper 8.9 — — 8.9

Corporate debt securities 190.1 1.8 — 191.9

government and agency securities 1,090.3 2.8 ( 0.1 ) 1,093.0

government and agent securities 27.4 — — 27.4

Total available-for-sale investments $ 1,339.7 $ 4.6 $ ( 0.1 ) $ 1,344.2

We do not intend to sell any of the securities in an unrealized loss position and it is not likely that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity.

As a result, there were no other-than-temporary impairments for these securities at July 31, 2020 and 2019.

We did not recognize any credit losses related to our available-for-sale debt securities during the year ended July 31, 2021, and there were no other-than-temporary impairments for these securities during the year ended July 31, 2020.

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of July 31, 2021, by contractual years-to-maturity (in millions):

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Marketable equity securities consist of money market funds and are included in cash and cash equivalents in our consolidated balance sheets.

As of July 31, 2020 and 2019, the carrying value of our marketable equity securities were $ 1.6 billion and $ 369.1 million, respectively.

As of July 31, 2021 and 2020, the carrying value of our marketable equity securities were $ 124.2 million and $ 1.6 billion, respectively.

There were no unrealized gains or losses recognized for these securities during the years ended July 31, 2021, 2020, and 2019.

Financing Receivables

The following table summarizes our short-term and long-term financing receivables as of July 31, 2021 (in millions):

Short-term financing receivables, gross

Allowance for credit losses ( 1.0 )

Short-term financing receivables, net

Long-term financing receivables, gross

Allowance for credit losses ( 4.3 )

Long-term financing receivables, net

There was no significant activity in allowance for credit losses during the year ended July 31, 2021.

Past due amounts on financing receivables were immaterial as of July 31, 2021.

Through July 31, 2020, financing receivables were not significant to our consolidated balance sheet.

Derivative Instruments

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During the years ended July 31, 2021, 2020, and 2019, both unrealized gains and losses recognized in AOCI related to our cash flow hedges and amounts reclassified into earnings were not material.

Unrealized gains and losses in AOCI related to our cash flow hedges as of July 31, 2020 and 2019 were not material.

Unrealized gains and losses in AOCI related to our cash flow hedges as of July 31, 2021 and July 31, 2020 were not material.

Bridgecrew Inc.

On March 2, 2021, we completed our acquisition of Bridgecrew Inc.

(“Bridgecrew”), a privately-held cloud security company.

We expect the acquisition will expand our Prisma Cloud offering to deliver security across the full application lifecycle.

The total purchase consideration for the acquisition of Bridgecrew was $ 156.9 million, which consisted of the following (in millions):

Fair value of replacement awards 1.0

Total $ 156.9

As part of the acquisition, we issued $ 42.5 million of replacement awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on preliminary estimated fair values, as presented in the following table (in millions):

Goodwill $ 129.6

Identified intangible assets 21.6

Net liabilities assumed ( 3.3 )

Total $ 156.9

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Bridgecrew technology into our platforms.

The goodwill is not deductible for income tax purposes.

The following table presents details of the identified intangible asset acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 21.6 6 years

On December 15, 2020, we completed our acquisition of Expanse Inc.

(“Expanse”), a privately-held company specializing in attack surface management.

We expect the acquisition will enrich our Cortex offerings and provide organizations an integrated view of the enterprise to combine external, internal, and threat data.

The total purchase consideration for the acquisition of Expanse was $ 797.2 million, which consisted of the following (in millions):

Common stock ( 1.1 million shares)

Fair value of replacement awards 21.6

Total $ 797.2

As part of the acquisition, we issued replacement equity awards, which included 0.2 million shares of our restricted common stock.

The total fair value of the replacement equity awards was $ 160.0 million, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 598.2

Identified intangible assets 160.3

Net liabilities assumed ( 12.4 )

Total $ 797.2

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Expanse technology into our platforms.

The goodwill is not deductible for income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 123.4 6 years

Customer relationships 36.9 10 years

Total $ 160.3

Sinefa Group, Inc .

On November 24, 2020, we completed our acquisition of Sinefa Group, Inc.

and its wholly owned subsidiaries (“Sinefa”), a privately-held digital experience monitoring company.

We expect the acquisition will extend our Prisma Access offering.

The total purchase consideration for the acquisition of Sinefa was $ 27.0 million, which consisted of the following (in millions):

Fair value of replacement awards 0.1

As part of the acquisition, we issued $ 11.5 million of replacement equity awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 13.7

Identified intangible assets 20.4

Net liabilities assumed ( 7.1 )

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Sinefa technology into our platforms.

The goodwill is deductible for income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 18.6 6 years

Customer relationships 1.8 8 years

The Crypsis Group

On September 17, 2020, we completed our acquisition of The Crypsis Group (“Crypsis”), an incident response, risk management, and digital forensics consulting firm.

We expect the acquisition will expand our capabilities and strengthen our Cortex strategy.

The total purchase consideration for the acquisition of Crypsis was $ 227.7 million, which consisted of the following (in millions):

Fair value of replacement awards 2.0

Total $ 227.7

As part of the acquisition, we issued $ 27.1 million of replacement awards, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration.

The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 157.6

Identified intangible assets 54.4

Net assets acquired 15.7

Total $ 227.7

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Crypsis technology into our platforms.

The goodwill is deductible for income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 6.9 3 years

Customer relationships 47.5 7 years

CloudGenix Inc.

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The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on estimated fair values, as presented in the following table (in millions):

Goodwill $ 301.2

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The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 111.3

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As part of the acquisition, we issued replacement equity awards with a total fair value of $ 5.7 million, which will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 48.1

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(“Twistlock”), a privately-held company specializing in container security.

The acquisition extends our cloud security strategy with the addition of Twistlock to our Prisma cloud security

The total purchase consideration for the acquisition of Twistlock was $ 378.1 million, which consisted of the following (in millions):

The acquisition extends our cloud security strategy with the addition of Twistlock to our Prisma cloud security offerings.

The total purchase consideration for the acquisition of Twistlock was $ 378.1 million, which consisted of the following (in

Fair value of replacement equity awards 2.7

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The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 300.6

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The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 24.4

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Net assets acquired 1.0

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating PureSec’s product into our platform.

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-

acquisition synergies from integrating PureSec’s product into our platform.

The goodwill is deductible for U.S.

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The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 387.8

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Of the total fair value, a portion was allocated to the purchase consideration and the remainder was allocated to future services and will be expensed over the remaining service periods as share-based compensation.

Goodwill $ 113.6

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Trade name and trademarks 0.9 6 months

Cyber Secdo Ltd.

On April 24, 2018, we completed our acquisition of Cyber Secdo Ltd.

(“Secdo”), a privately-held company specializing in endpoint detection and response (“EDR”).

The acquisition expands the functionality of our portfolio by adding EDR capabilities.

The total purchase consideration for the acquisition of Secdo was $ 82.7 million in cash.

We have accounted for this transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on their estimated fair values, as presented in the following table (in millions):

Goodwill $ 68.6

Identified intangible assets 17.3

Net liabilities assumed ( 3.2 )

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Secdo’s technology into our advanced endpoint protection offering and our portfolio.

The goodwill is deductible for income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 16.4 5 years

Customer relationships 0.9 2 years

Evident.io, Inc.

On March 26, 2018, we completed our acquisition of Evident.io, Inc.

(“Evident.io”), a privately-held cloud security company.

The acquisition expanded our API-based security capabilities for the public cloud with the addition of Evident.io’s cloud services infrastructure protection technology.

The total purchase consideration for the acquisition of Evident.io was $ 292.9 million in cash, of which $ 4.0 million was accrued and was paid over a period of five months from the acquisition date.

Goodwill $ 209.8

Identified intangible assets 85.1

Net liabilities assumed ( 2.0 )

Total $ 292.9

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Evident.io’s technology into our platform and sales opportunities of Evident.io’s software as a service (“SaaS”) offerings.

The goodwill is not deductible for income tax purposes.

The following table presents details of the identified intangible assets acquired (in millions, except years):

Fair Value Estimated Useful Life

Developed technology

$ 68.4 4.5 years

Trade name and trademarks 8.5 1 year

Customer relationships 8.2 8 years

Additional Acquisition-Related Information

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Additional information related to our acquisitions completed in fiscal 2021, such as that related to income tax and other contingencies, existing as of the acquisition date but unknown to us may become known during the remainder of the measurement period, not to exceed 12 months from the respective acquisition date, which may result in changes to the amounts and allocations recorded.

A portion of the goodwill from prior year foreign acquisitions may be deductible in future periods.

Goodwill and Intangible Assets

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Goodwill acquired 899.1

Measurement period adjustment ( 1.9 )

Balance as of July 31, 2021 $ 2,710.1

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Other 1.8 ( 1.8 ) — 3.1 ( 2.5 ) 0.6

Total intangible assets subject to amortization 532.3 ( 174.1 ) 358.2 379.1 ( 100.1 ) 279.0

Intangible assets not subject to amortization:

In-process research and development — — — 1.6 — 1.6

Total purchased intangible assets $ 788.0 $ ( 289.4 ) $ 498.6 $ 532.3 $ ( 174.1 ) $ 358.2

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The following table summarizes estimated future amortization expense of our intangible assets as of July 31, 2021 (in millions):

Years ending July 31:

2026 and thereafter 34.8

Total future amortization expense $ 358.2

Deferred Contract Costs

The following table presents details of our short-term and long-term deferred contract costs as of July 31, 2020 and July 31, 2019 (in millions):

Short-term deferred contract costs $ 206.0 $ 151.1

Long-term deferred contract costs 422.3 324.2

Total deferred contract costs $ 628.3 $ 475.3

We recognized amortization expense for our deferred contract costs of $ 254.4 million, $ 223.8 million, and $ 149.8 million during the years ended July 31, 2020, 2019, and 2018, respectively.

We did not recognize any impairment losses on our deferred contract costs during the years ended July 31, 2020, 2019, or 2018.

Fiscal years ending July 31,

Total 2022 2023 2024 2025 2026 2027 and Thereafter

Future amortization expense $ 498.6 $ 125.7 $ 99.6 $ 89.6 $ 75.9 $ 54.3 $ 53.5

Property and Equipment

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Leasehold improvements 231.6 229.5

Land 49.6 49.6

Demonstration units 43.8 43.3

Furniture and fixtures 40.3 39.9

Total property and equipment 669.1 540.2

Total property and equipment, gross 717.4 669.1

accumulated depreciation ( 399.0 ) ( 321.0 )

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If we call any or all of the 2025 Notes for redemption, holders may convert such 2025 Notes called for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date.

The following table presents details of our convertible senior notes (number of shares in millions):

The following table presents details of our Notes (number of shares in millions):

Conversion Rate per $1,000 Principal Initial Conversion Price Convertible Date Initial Number of Shares

2019 Notes 9.0680 $ 110.28 January 1, 2019 5.2

2023 Notes 3.7545 $ 266.35 April 1, 2023 6.4

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Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” under the applicable Indenture, holders of the Notes of such series may require us to repurchase for cash all or a portion of the Notes of such series at a repurchase price equal to 100 % of the principal amount of the Notes of such series plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The sale price condition was not met for the 2023 Notes during the fiscal quarters ended July 31, 2020 or July 31, 2019, and the sale price condition was not met for the 2025 Notes during the fiscal quarter ended July 31, 2020.

Since our Notes were not convertible, the net carrying amount of the Notes was classified as a long-term liability and the equity component was included in additional paid-in capital in our consolidated balance sheets in the periods they each were presented.

During the year ended July 31, 2019, we repaid $ 575.0 million in aggregate principal amount of the 2019 Notes, of which $ 415.6 million in aggregate principal amount pertained to early conversions submitted by the holders prior to January 1, 2019.

The following table presents details of early conversions of the 2019 Notes during the year ended July 31, 2019 (in millions):

July 31, 2019

2019 Notes principal early converted and repaid in cash:

Allocated to liability component (1)

Allocated to equity component (2)

Total principal early converted and repaid in cash $ 415.6

Loss on early conversions of convertible senior notes (3)

______________

(1) Recorded as a reduction to convertible senior notes, net in our consolidated balance sheets and calculated by measuring the fair value of a similar liability that did not have an associated convertible feature.

(2) Recorded as a reduction to additional paid-in capital in our consolidated balance sheets.

(3) Represents the difference between the cash consideration allocated to the liability component and the net carrying amount of the liability component on the respective settlement dates.

The amount is included in other income, net in our consolidated statement of operations.

The remaining $ 159.4 million in aggregate principal amount was repaid on the July 1, 2019 maturity date.

We issued 2.5 million shares of common stock to the holders of the 2019 Notes for the conversion value in excess of the principal amount during the year ended July 31, 2019.

The sale price condition was met for the 2023 Notes during the fiscal quarter ended July 31, 2021, and as a result, holders may convert their 2023 Notes at any time during the fiscal quarter ending October 31, 2021.

Accordingly, the net carrying amount of the 2023 Notes was reclassified into current liabilities and the portion of the equity component representing the conversion option was reclassified into temporary equity in our consolidated balance sheet as of July 31, 2021.

The sale price condition was not met for the 2025 Notes during the fiscal quarters ended July 31, 2021 or July 31, 2020, and was not met for the 2023 Notes during the fiscal quarter ended July 31, 2020.

Since the 2025 Notes for both periods and the 2023 Notes as of July 31, 2020 were not convertible, the associated net carrying amount was classified as a long-term liability and the equity component was included in additional paid-in capital in our consolidated balance sheets.

During the year ended July 31, 2019, we repaid $ 575.0 million in aggregate principal amount of the 2019 Notes and issued 2.5 million shares of common stock to the holders of the 2019 Notes for the conversion value in excess of the principal amount.

These shares were fully offset by shares received from the corresponding exercise of the associated note hedges.

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July 31, 2021 July 31, 2020

2023 Notes 2025 Notes Total 2023 Notes Total

2023 Notes 2025 Notes Total 2023 Notes 2025 Notes Total

Liability component:

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Net carrying amount $ 1,557.9 $ 1,668.1 $ 3,226.0 $ 1,493.0 $ 1,591.1 $ 3,084.1

Equity component $ 315.0 $ 403.0 $ 718.0 $ 315.0 $ 315.0

The total estimated fair value of the Notes was $ 4.1 billion at July 31, 2020.

The total estimated fair value of the 2023 Notes was $ 1.9 billion at July 31, 2019.

Equity component (including amounts classified as temporary equity) $ 315.0 $ 403.0 $ 718.0 $ 315.0 $ 403.0 $ 718.0

The total estimated fair value of the Notes was $ 5.5 billion and $ 4.1 billion at July 31, 2021 and July 31, 2020, respectively.

The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period.

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The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates.

Based on the closing price of our common stock on July 31, 2020, the if-converted value of the 2023 Notes and the 2025 Notes each was less than its principal amount.

Based on the closing price of our common stock on July 31, 2021, the if-converted values of the 2023 Notes and 2025 Notes exceeded their principal amounts by $ 754.4 million and $ 587.8 million, respectively.

The following table sets forth interest expense recognized related to our convertible senior notes (dollars in millions):

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To minimize the impact of potential economic dilution upon conversion of our convertible senior notes, we entered into separate convertible note hedge transactions (the “2019 Note Hedges,” with respect to the 2019 Notes, the “2023 Note Hedges,” with respect to the 2023 Notes, the “2025 Note Hedges,” with respect to the 2025 Notes and the 2023 Notes Hedgers together with 2025 Note Hedges, the “Note Hedges”) with respect to our common stock concurrent with the issuance of each series of our convertible senior notes.

Upon the settlement of the 2019 Notes, we exercised the corresponding portion of our 2019 Note Hedges during the year ended July 31, 2019 and received shares of our common stock that fully offset the shares issued in excess of the principal amount of the converted 2019 Notes.

The 2019 Note Hedges expired upon maturity of the 2019 Notes.

The following table presents details of our Note Hedges (in millions):

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2025 Note Hedges 6.7 $ 370.8

The 2019 Note Hedges expired upon maturity of the 2019 Notes.

The Note Hedges cover shares of our common stock at a strike price per share that corresponds to the initial applicable conversion price of the applicable series of Notes, which are also subject to adjustment, and are exercisable upon conversion of the applicable series of the Notes.

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Holders of the Notes of either series will not have any rights with respect to the Note Hedges.

Any shares of our common stock receivable by us under the Note Hedges are excluded from the calculation of diluted earnings per share as they are antidilutive.

Any shares of our common stock receivable by us under the Note Hedges are

excluded from the calculation of diluted earnings per share as they are antidilutive.

The aggregate amounts paid for the Note Hedges are included in additional paid-in capital in our consolidated balance sheets.

Separately, but concurrently with the issuance of each series of our convertible senior notes, we entered into transactions whereby we sold warrants (the “2019 Warrants,” with respect to the 2019 Notes, the “2023 Warrants,” with respect to the 2023 Notes, the “2025 Warrants,” with respect to the 2025 Notes, and the 2023 Warrants together with the 2025 Warrants, the “Warrants”) to acquire shares of our common stock, subject to anti-dilution adjustments.

The 2019 Warrants were exercisable as of October 2019, and the 2023 Warrants and 2025 Warrants are exercisable beginning October 2023 and September 2025, respectively.

The following table presents details of all our warrants (in millions, except per share data):

During the year ended July 31, 2020, we net settled all 2019 Warrants with 2.0 million shares or $ 462.0 million in fair value of our common stock.

The 2023 Warrants and 2025 Warrants are exercisable beginning October 2023 and September 2025, respectively.

The following table presents details of our Warrants (in millions, except per share data):

Initial Number of Shares Strike Price per Share Aggregate Proceeds

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2025 Warrants 6.7 $ 408.47 $ 202.8

During the year ended July 31, 2020, we net settled all 2019 Warrants with 2.0 million shares or $ 462.0 million in fair value of our common stock.

The number of net shares issued was determined based on the number of 2019 Warrants exercised multiplied by the difference between the strike price of the 2019 Warrants and their daily volume weighted-average stock price.

The shares issuable under the Warrants will be included in the calculation of diluted earnings per share when the average market value per share of our common stock for the reporting period exceeds the applicable strike price for such series of Warrants.

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As of July 31, 2021, there were no amounts outstanding, and we were in compliance with all covenants under the Credit Agreement.

We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year ending July 31, 2028.

In May 2015 and October 2015, we entered into a total of three lease agreements for approximately 941,000 square feet of corporate office space in Santa Clara, California, which serves as our new corporate headquarters.

We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year ending July 31, 2028, with the most significant leases relating to corporate headquarters in Santa Clara.

The leases contain rent holiday periods, scheduled rent increases, lease incentives, and renewal options which allow the lease terms to be extended beyond their expiration dates of July 2028 through July 2046.

In September 2017, per the terms of the lease agreements, the landlords exercised their option to amend our lease payment schedules and eliminate our rent holiday periods, which increased our rental payments by $ 24.4 million, $ 11.8 million, and $ 2.0 million for fiscal 2018, 2019, and 2020, respectively.

In exchange, we received an upfront cash reimbursement of $ 38.2 million during the three months ended October 31, 2017, which we have applied against the future additional rental payments when due.

As amended, rental payments under the three lease agreements are approximately $ 412.0 million over the lease term.

In May 2015, we also entered into a lease agreement for approximately 122,000 square feet of space in Santa Clara, California to serve as an extension of our previous corporate headquarters.

The lease contains scheduled rent increases, lease incentives, and

renewal options which allow the lease term to be extended beyond the expiration date of April 2021 through July 2046.

Rental payments under the lease agreement are approximately $ 23.1 million over the lease term.

In December 2017, we entered into an agreement to sublease this office space for the remaining lease term.

Proceeds from this sublease are approximately $ 16.3 million over the sublease term.

In September 2012, we entered into two lease agreements for a total of approximately 300,000 square feet of space in Santa Clara, California, which served as our previous corporate headquarters through August 2017, when we relocated to our new corporate campus.

Rental payments under the three lease agreements are approximately $ 412.0 million over the lease term.

The leases contain rent holiday periods and two separate five -year options to extend the lease term beyond their expiration dates of July 2023.

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In December 2019, we terminated these leases prior to their expiration date.

The early termination fee is $ 25.0 million, payable in equal quarterly installments from April 2020 through July 2023.

termination fee is $ 25.0 million, payable in equal quarterly installments from April 2020 through July 2023.

Upon termination, we recorded a decrease of $ 13.6 million in operating lease liabilities based on the payment schedule of the early termination fee discounted by the incremental borrowing rate for the remaining payment term.

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As a result, during the year ended July 31, 2020, we recorded a gain of $ 3.1 million net of other related fees of $ 1.8 million in general and administrative expense in our consolidated statements of operations.

During the year ended July 31, 2020, our net cost for operating leases was $ 80.4 million and primarily consisted of operating lease costs of $ 63.5 million, in addition to variable lease costs, short-term lease costs and sublease income.

We recognized rent expense of $ 43.0 million, and $ 35.2 million for the years ended July 31, 2019, and 2018, respectively prior to our adoption of the new lease guidance.

During the years ended July 31, 2021 and July 31, 2020, our net cost for operating leases was $ 75.2 million and $ 80.4 million, respectively, primarily consisting of operating lease costs of $ 59.3 million and $ 63.5 million, respectively.

Our net cost for operating leases also included variable lease costs, short-term lease costs and sublease income in both periods.

We recognized rent expense of $ 43.0 million for the year ended July 31, 2019, prior to our adoption of the new lease guidance.

The following tables present additional information for our operating leases (in millions, except for years and percentages):

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 48.6 $ 28.4

July 31, 2020

Weighted-average remaining lease term 7.0 years

July 31, 2021 July 31, 2020

Weighted-average remaining lease term 6.1 years 7.0 years

Weighted-average discount rate 3.8 % 3.9 %

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Manufacturing Purchase Commitments

Our EMS provider procures components and assembles our products based on our forecasts.

These forecasts are based on estimates of demand for our products primarily for the next 12 months, which are in turn based on historical trends and an analysis from our sales and product management organizations, adjusted for overall market conditions.

In order to reduce manufacturing lead times and plan for adequate supply, we may issue non-cancelable orders for products and components to our manufacturing partners or component suppliers.

As of July 31, 2020, our purchase commitments under such orders were $ 108.5 million, excluding obligations under contracts that we can cancel without a significant penalty.

In order to reduce manufacturing lead times and plan for adequate supply, we enter into agreements with manufacturing partners and component suppliers to procure inventory based on our demand forecasts.

We are committed to minimum or fixed purchases through the year ending July 31, 2026.

The following table presents details of the aggregate future purchase commitments under these arrangements excluding obligations under contracts that we can cancel without a significant penalty as of July 31, 2021 (in millions):

Fiscal years ending July 31,

Total 2022 2023 2024 2025 2026

Manufacturing purchase commitments

$ 359.9 $ 219.3 $ 35.6 $ 30.0 $ 35.0 $ 40.0

Other Purchase Commitments

We have entered into various non-cancelable agreements with third-party providers for our use of certain cloud and other services, under which we are committed to minimum or fixed purchases through the year ending July 31, 2026.

We have entered into various non-cancelable agreements with certain service providers, under which we are committed to minimum or fixed purchases through the year ending July 31, 2026.

The following table presents details of the aggregate future non-cancelable purchase commitments under these agreements as of July 31, 2021 (in millions):

Fiscal years ending July 31,

2026 and thereafter 20.0

Total other purchase commitments $ 313.4

Total 2022 2023 2024 2025 2026

Other purchase commitments

$ 1,471.8 $ 32.0 $ 241.3 $ 302.1 $ 345.3 $ 551.1

Mutual Covenant Not to Sue and Release Agreement

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This repurchase program expired on December 31, 2018.

In February 2019, our board of directors authorized a new $ 1.0 billion share repurchase program which is funded from available working capital (our “current authorization”).

This repurchase program will expire on December 31, 2020 and may be suspended or discontinued at any time.

In February 2019, our board of directors authorized a $ 1.0 billion share repurchase program and in December 2020 authorized a $ 700.0 million in cre ase to this share repurchase program, bringing the total authorization to $ 1.7 billion (our “current authorization”).

The expiration date of our current authorization was extended to December 31, 2021, and our repurchase program may be suspended or discontinued at any time.

Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.

During the years ended July 31, 2019 and 2018, we repurchased and retired 1.9 million shares and 1.7 million shares, respectively, of our common stock under our original authorization for an aggregate purchase price of $ 330.0 million, and $ 250.0 million, respectively, including transaction costs.

During the fiscal year ended July 31, 2020, we repurchased and retired 0.9 million shares of our common stock under our current authorization for an aggregate purchase price of $ 198.1 million, including transaction costs.

As of July 31, 2020, $ 801.9 million remained available for future share repurchases under our current repurchase authorization.

During the year ended July 31, 2019, we repurchased and retired 1.9 million shares of our common stock under our original authorization for an aggregate purchase price of $ 330.0 million and an average price per share of $ 177.64 , including transaction costs.

During the years ended July 31, 2021 and 2020, we repurchased and retired 4.0 million shares and 0.9 million shares of our common stock under our current authorization for an aggregate purchase price of $ 1.2 billion and $ 198.1 million, and an average price per share of $ 294.87 and $ 209.12 , respectively, including transaction costs.

As of July 31, 2021, we have $ 323.9 million remaining for future share repurchases under our current repurchase authorization.

The total price of the shares repurchased and related transaction costs are reflected as a reduction to common stock and additional paid-in capital on our consolidated balance sheets.

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Our 2012 Plan replaced our 2005 Equity Incentive Plan (our “2005 Plan”), which terminated upon the completion of our IPO, however, awards that were outstanding upon termination remained outstanding pursuant to their original terms.

Our 2012 Plan provides for the granting of stock options, restricted stock award (“RSA”), restricted stock unit (“RSU”), stock appreciation rights, performance-based stock units (“PSUs”), performance shares (“PSAs”), and performance stock options (“PSOs”) to our employees, directors, and consultants.

Our 2012 Plan provides for the granting of stock options, restricted stock award (“RSA”), restricted stock unit (“RSU”), stock appreciation rights, performance shares (“PSAs”), performance-based stock units (“PSUs”) and performance stock options (“PSOs”) to our employees, directors, and consultants.

Awards granted under our 2012 Plan vest over the periods determined by the board of directors, generally three to four years from the date of grant, and our options expire no more than ten years after the date of grant.

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We have also granted PSOs with both a market condition and a service condition to certain executives.

The market condition requires the price of our common stock to equal or exceed $ 297.75 , $ 397.00 , $ 496.25 , and $ 595.50 (the “stock price targets”) during the four -, five -, six -, and seven -year periods following the date of grant in fiscal year 2018 and 2019, respectively.

To the extent that the stock price targets have been met, one-fourth of the PSOs will vest on the anniversary date of the grant date for such PSOs, subject to continued service.

All outstanding PSOs may be exercised prior to vesting (“early exercised”).

The market condition for PSOs granted in the fiscal years 2018 and 2019 requires the price of our common stock to equal or exceed $ 297.75 , $ 397.00 , $ 496.25 , and $ 595.50 based on the average closing price for 30 consecutive trading days during the four -, five -, six -, and seven-and-a-half-year periods following the date of grant in fiscal year 2018 and 2019, respectively.

The market condition for PSOs granted in the fiscal year 2021 requires the price of our common stock to equal or exceed $ 397.00 , $ 496.25 , $ 595.50 and $ 700.00 based on the average closing price for 30 consecutive trading days during the three -, four -, five -, and six-and-a-half-year periods following the date of grant.

To the extent that the market condition has been met, one-fourth of the PSOs will vest on the anniversary date of the grant date for such PSOs, subject to continued service.

Certain outstanding PSOs may be exercised prior to vesting (“early exercise”).

Shares of common stock issued upon early exercise of the PSOs will be restricted and, at our option, subject to repurchase if the option holder ceases to be a service provider.

The contractual term of our PSOs is seven to seven and a half years from the date of grant, depending on vesting period.

As of July 31, 2020, the market condition for the PSOs has not been met.

The maximum contractual term of our PSOs ranged from six and a half years to seven and a half years from the date of grant, depending on vesting period.

During the fiscal year ended July 31, 2021, 0.4 million shares of our PSOs vested as the first stock price target for our PSOs granted in fiscal years 2018 and 2019 was satisfied and the service condition was met.

We net-share settle equity awards held by certain employees by withholding shares upon vesting to satisfy tax withholding obligations.

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Participants may purchase shares of common stock through payroll deductions of up to 15 % of their eligible compensation, subject to purchase limits of 625 shares per six-month purchase period and $ 25,000 worth of stock for each calendar year.

During the year ended July 31, 2020, employees purchased 0.6 million shares of common stock under our 2012 ESPP at an average exercise price of $ 146.90 per share .

purchased under our 2012 ESPP during the fiscal years ended July 31, 2021, 2020 and 2019 were 0.6 million, 0.6 million and 0.5 million, at an average exercise price of $ 161.07 per share , $ 146.90 per share and $ 128.81 per share respectively.

A total o f 4.6 million share s of our common stock are available for sale under our 2012 ESPP as of July 31, 2021.

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Assumed Share-based Compensation Plans

In connection with our acquisitions of Bridgecrew, Expanse, Sinefa and Crypsis during the year ended July 31, 2021, we assumed the Bridgecrew, Inc.

2019 Stock Incentive Plan, the Expanse Holding Company, Inc.

Amended and Restated 2012 Stock Incentive Plan, the Sinefa Group, Inc.

2020 Stock Plan, and the Crypsis Group Holdings, LLC 2017 Equity Incentive Plan (together, the “2021 assumed Plans”).

In connection with our acquisitions of CloudGenix, Aporeto, and Zingbox during the year ended July 31, 2020, we assumed CloudGenix’s 2013 Equity Incentive Plan, Aporeto’s Amended and Restated 2015 Stock Option and Grant Plan and Zingbox’s Stock Incentive Plan, as amended and restated (together, the “2020 assumed Plans”).

The equity awards assumed in connection with each acquisition were granted from their respective assumed plans.

The assumed equity awards will be settled in shares of our common stock and will retain the terms and conditions under which they were originally granted.

No additional equity awards will be granted under and forfeited awards will not be returned to the 2020 assumed Plans.

In connection with our acquisitions of RedLock, Demisto, and Twistlock during the year ended July 31, 2019, we assumed RedLock’s 2015 Stock Plan, as amended, Demisto’s 2015 Stock Option Plan, as amended, and Twistlock’s 2015 Share Option Plan, as amended and restated (together, the “2019 assumed Plans”).

In aggregate, the 2021 assumed Plans, the 2020 assumed Plans and the 2019 assumed plans are referenced as “the Assumed Plans.”

The equity awards assumed in connection with each acquisition were granted from their respective assumed plans.

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Restricted Stock Issuances

In connection with our acquisitions of Expanse and Sinefa during the year ended July 31, 2021, we issued a total of 0.3 million shares of restricted common stock as replacement equity awards which are subject to additional time-based vesting requirements and continued service by the award holder.

In connection with our acquisition of Zingbox during the year ended July 31, 2020, we issued a total of 0.1 million shares of restricted common stock as replacement equity awards which are subject to additional time-based vesting requirements and continued service by the award holder.

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Exercised ( 0.7 ) $ 12.61 — $ —

Forfeited 0.0 $ 1.24 ( 0.1 ) $ 193.51

Balance—July 31, 2019 0.3 $ 14.53 2.2 $ 81.4 3.7 $ 193.99 6.2 $ 120.1

Granted — $ — 2.6 $ 191.97

Exercised ( 0.2 ) $ 11.46 — $ —

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Balance—July 31, 2020 0.1 $ 19.59 1.5 $ 34.2 2.8 $ 194.14 5.2 $ 170.9

Granted — $ — 0.2 $ 304.29

Exercised 0.0 $ 12.82 — $ —

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Balance—July 31, 2018 6.5 $ 160.70 $ 1,291.4 0.2 $ 149.73 $ 43.7

Granted (1)(2)

3.9 $ 210.14 0.2 $ 215.64

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Balance—July 31, 2020 6.6 $ 203.30 $ 1,688.1 0.6 $ 231.42 $ 147.2

Granted (1)(2)

4.1 $ 297.89 0.8 $ 321.45

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(1) For PSUs, shares granted represent the aggregate maximum number of shares that may be earned and issued with respect to these awards over their full terms.

(2) Includes 0.1 million RSUs assumed in connection with the acquisitions of Zingbox, Aporeto and CloudGenix, with weighted-average grant-date fair value of $ 208.25 , $ 231.30 and $ 181.48 , respectively for the year ended July 31, 2020;

and includes 0.4 million RSUs assumed and 0.1 million replacement RSUs granted in connection with the acquisitions of RedLock, Demisto, PureSec, and Twistlock, with weighted-average grant-date fair values of $ 218.69 and $ 224.31 per share, respectively for the year ended July 31, 2019.

(2) Includes 0.4 million RSUs assumed in connection with the acquisitions of Crypsis, Sinefa, Expanse and Bridgecrew, with weighted-average grant-date fair value of $ 241.43 , $ 297.17 , $ 317.45 , $ 354.66 , respectively, for the year ended July 31, 2021 and 0.1 million RSUs assumed in connection with the acquisitions of Zingbox, Aporeto and CloudGenix, with weighted-average grant-date fair value of $ 208.25 , $ 231.30 and $ 181.48 , respectively, for the year ended July 31, 2020.

includes 0.4 million RSUs assumed and 0.1 million replacement RSUs granted in connection with the acquisitions of RedLock, Demisto, PureSec, and Twistlock, with weighted-average grant-date fair values of $ 218.69 and $ 224.31 per share, respectively, for the year ended July 31, 2019.

(3) Includes time-based vesting for PSUs.

The aggregate fair value, as of the respective vesting dates, of RSUs vested during the years ended July 31, 2021, 2020, and 2019 was $ 986.4 million, $ 615.7 million, and $ 566.4 million, respectively.

The aggregate fair value, as of the respective vesting dates, of PSUs vested during the year ended July 31, 2020 and 2019 was $ 11.9 million and $ 17.2 million.

The aggregate fair value, as of the respective vesting dates, of PSUs vested during the year ended July 31, 2021, 2020 and 2019 was $ 20.8 million, $ 11.9 million and $ 17.2 million, respectively.

Shares Available for Grant

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The fair value of PSOs is estimated on the grant date using a Monte Carlo simulation model, which predicts settlement of the options midway between the vesting term and the contractual term.

No new PSOs were granted during the year ended July 31, 2020.

No PSOs were granted during the year ended July 31, 2020.

The following table summarizes the assumptions used and the resulting grant-date fair values of our PSOs granted during the years ended July 31, 2021 and 2019:

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2.3 % - 2.6 %

1.2 % - 2.3 %

Grant-date fair value per share $ 69.48 - $ 129.05

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The expected term represents the term from the first day of the offering period to the purchase dates within each offering period.

The dividend yield assumption is based on our expectations about our anticipated dividend policy.

The dividend yield assumption is based on our expectations about our anticipated dividend

The risk-free interest rate is based on the implied yield available on U.S.

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Total share-based compensation $ 926.9 $ 664.5 $ 587.7

During the year ended July 31, 2021, we accelerated the vesting of certain equity awards in connection with our acquisitions of Bridgecrew, Expanse, Sinefa and Crypsis and recorded $ 9.8 million, $ 5.7 million, $ 9.8 million and $ 7.1 million, respectively.

During the year ended July 31, 2020, we accelerated the vesting of certain equity awards in connection with our acquisitions of Zingbox, Ap oreto and CloudGenix and recorded $ 1.3 million, $ 4.4 million and $ 0.3 million, respectively, and during the year ended July 31, 2019, we accelerated the vesting of certain equity awards in connection with our acquisitions of RedLock and Twistlock and recorded $ 14.2 million and $ 5.8 million, respectively, of share-based compensation within general and administrative expense.

During the year ended July 31, 2018, we paid $ 6.6 million in cash to settle certain Evident.io stock options, for which vesting was accelerated in connection with the acquisition and the subsequent termination of the option holders’ services.

This amount was recorded as post-acquisition share-based compensation included in general and administrative expense.

As of July 31, 2021, total compensation cost related to unvested share-based awards not yet recognized was $ 2.0 billion.

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Total $ 33.9 $ 35.2 $ 7.3

For the year ended July 31, 2021, our provision for income taxes decreased slightly compared to the year ended July 31, 2020, primarily due to tax benefits from changes in our valuation allowances.

For the year ended July 31, 2020, our provision for income taxes increased compared to the year ended July 31, 2019, primarily due to an increase in foreign income as a result of increased business operations and withholding taxes from an increase in billings in the relevant jurisdictions.

We also had a change in our valuation allowance related to acquisitions completed during fiscal 2019.

For the year ended July 31, 2019, our provision for income taxes decreased compared to the year ended July 31, 2018, primarily due to changes in our valuation allowance related to acquisitions completed during fiscal 2019 and our adoption of accounting guidance requiring the recognition of income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.

These decreases were partially offset by an increase in our foreign taxes due to growth in non-U.S.

The following table presents the items accounting for the difference between income taxes computed at the federal statutory income tax rate and our provision for income taxes:

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Share-based compensation 5.0 ( 5.1 ) 44.9

Amortization of deferred tax charges — — ( 8.0 )

Research credits 17.9 35.0 31.4

Tax credits 9.9 17.9 35.0

Non-deductible expenses ( 1.3 ) ( 3.9 ) ( 11.5 )

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Total ( 7.3 ) % ( 15.2 ) % ( 9.8 ) %

In December 2019, we transferred certain intellectual property rights to a wholly owned United Kingdom subsidiary, primarily to align our legal structure to our evolving operations.

In fiscal 2020, we transferred certain intellectual property rights to a wholly owned United Kingdom subsidiary, primarily to align our legal structure to our evolving operations.

The tax benefit from an increase in the tax basis of intellectual property rights resulted in an increase in effects of non-U.S.

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Net operating loss carryforwards 575.9 348.0

Research and development and foreign tax credits 179.6 143.3

Tax credits 230.8 179.6

Share-based compensation 53.9 33.7

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Deferred tax liabilities:

Fixed assets and intangible assets — ( 26.0 )

Deferred commissions ( 165.4 ) ( 130.8 )

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Net deferred tax assets $ 9.1 $ 9.0

Our increase in deferred tax assets relating to fixed assets and intangibles is largely due to transferring our intellectual property rights to a wholly owned United Kingdom subsidiary, primarily to align our legal structure to our evolving operations.

This resulted in an increase in the tax basis of these intellectual property rights and a corresponding increase in foreign deferred tax assets.

As of July 31, 2020, it is not more likely than not that these additional deferred tax assets will be realizable, and therefore, are offset by a full valuation allowance.

Our increase in deferred tax assets relating to net operating losses and fixed assets and intangible assets is largely due to an impact from the United Kingdom tax rate increase from 19% to 25% effective April 1, 2023.

As of July 31, 2021, it is not more likely than not that our deferred tax assets will be realizable, and therefore, are offset by a full valuation allowance.

A valuation allowance is provided when it is more likely than not that the deferred tax asset will not be realized.

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At such time, if it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be adjusted.

As of July 31, 2020, we have provided a valuation allowance for our federal, state, UK and certain other foreign deferred tax assets that we

believe will, more likely than not, be unrealizable.

The net valuation allowance increased by $ 1.7 billion from the year ended July 31, 2019 to the year ended July 31, 2020, primarily due to an increase in intangible tax basis as discussed above.

As of July 31, 2021, we have provided a valuation allowance for our federal, state, United Kingdom and certain other foreign deferred tax assets that we believe will, more likely than not, be unrealizable.

The net valuation allowance increased by $ 0.7 billion from the year

ended July 31, 2020 to the year ended July 31, 2021, primarily due to a change in the United Kingdom tax rate as discussed above and an increase in our operations.

As of July 31, 2021, we had federal, state, and foreign NOL carryforwards of approximately $ 1.8 billion, $ 0.9 billion, and $ 1.1 billion, respectively, as reported on our tax returns, available to reduce future taxable income, if any.

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Unrecognized tax benefits at the end of the period $ 372.9 $ 326.4 $ 314.5

During the years ended July 31, 2020 and July 31, 2019, our additions for tax positions taken in the given year were primarily attributable to intercompany transactions.

During the year ended July 31, 2018, our additions for tax positions taken in the current year were primarily attributable to uncertain tax positions related to federal and state research and development credits, withholding taxes, and intercompany transactions.

During the year ended July 31, 2021, our additions for tax positions taken in the given year were primarily attributable to uncertain tax positions related to tax credits.

During the year ended July 31, 2020 and July 31, 2019, our additions for tax positions taken in the given year were primarily attributable to intercompany transactions.

As of July 31, 2021, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S.

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United States $ 461.1 $ 502.3

International 104.5 55.5

Israel 61.9 52.1

Other countries 58.3 52.4

Total long-lived assets $ 581.3 $ 606.8

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Revenue for revenue by geographic theater and revenue for groups of similar products and services for the years ended July 31, 2021, 2020, and 2019.

Selected Quarterly Financial Data (Unaudited)

The following tables set forth selected unaudited quarterly financial data for the years ended July 31, 2020 and 2019 (in millions, except per share amounts):

Three Months Ended

2019 January 31,

2020 April 30,

2020 July 31,

Product $ 231.2 $ 246.5 $ 280.9 $ 305.6

Subscription and support 540.7 570.2 588.5 644.8

Total revenue 771.9 816.7 869.4 950.4

Cost of revenue:

Product 65.1 68.7 73.3 87.3

Subscription and support 152.6 164.4 185.0 203.1

Total cost of revenue 217.7 233.1 258.3 290.4

Total gross profit 554.2 583.6 611.1 660.0

Operating expenses:

Research and development 170.5 185.4 196.3 215.9

Sales and marketing 365.7 374.9 388.4 391.2

General and administrative 69.8 76.2 82.9 70.7

Total operating expenses 606.0 636.5 667.6 677.8

Operating loss ( 51.8 ) ( 52.9 ) ( 56.5 ) ( 17.8 )

Interest expense ( 18.9 ) ( 19.0 ) ( 19.4 ) ( 31.4 )

Other income, net 16.2 10.8 8.1 0.8

Loss before income taxes ( 54.5 ) ( 61.1 ) ( 67.8 ) ( 48.4 )

Provision for income taxes 5.1 12.6 7.0 10.5

Net loss $ ( 59.6 ) $ ( 73.7 ) $ ( 74.8 ) $ ( 58.9 )

Net loss per share, basic and diluted

$ ( 0.62 ) $ ( 0.75 ) $ ( 0.77 ) $ ( 0.61 )

Three Months Ended

2018 January 31,

2019 April 30,

2019 July 31,

Product $ 240.5 $ 271.6 $ 278.4 $ 305.7

Subscription and support 415.5 439.6 448.2 500.1

Total revenue 656.0 711.2 726.6 805.8

Cost of revenue:

Product 73.2 82.5 78.0 82.2

Subscription and support 110.3 120.1 126.9 135.2

Total cost of revenue 183.5 202.6 204.9 217.4

Total gross profit 472.5 508.6 521.7 588.4

Operating expenses:

Research and development 113.4 128.3 139.1 158.7

Sales and marketing 314.6 320.0 339.0 370.4

General and administrative 76.6 53.7 62.3 69.2

Total operating expenses 504.6 502.0 540.4 598.3

Operating income (loss) ( 32.1 ) 6.6 ( 18.7 ) ( 9.9 )

Interest expense ( 22.7 ) ( 20.6 ) ( 20.6 ) ( 20.0 )

Other income, net 13.0 16.0 18.2 16.2

Income (loss) before income taxes ( 41.8 ) 2.0 ( 21.1 ) ( 13.7 )

Provision for (benefit from) income taxes ( 3.5 ) 4.6 ( 0.9 ) 7.1

Net loss $ ( 38.3 ) $ ( 2.6 ) $ ( 20.2 ) $ ( 20.8 )

Net loss per share, basic and diluted

$ ( 0.41 ) $ ( 0.03 ) $ ( 0.21 ) $ ( 0.22 )

Related Party Transactions

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Acquisitions for more information on our acquisition of Demisto.

Subsequent Event

Subsequent Events

Share Repurchase

On August 17, 2021, our board of directors authorized a $ 676.1 million increase to our share repurchase program under the current authorization, bringing the total remaining authorization for future share repurchases to $ 1.0 billion.

The repurchase authorization will expire on December 31, 2022, and may be suspended or discontinued at any time.

Business Combination

In August 2020, we entered into a definitive agreement to acquire The Crypsis Group, an incident response, risk management and digital forensics consulting firm, in exchange for total consideration of $ 265.0 million in cash, subject to adjustments.

We expect the acquisition will expand our capabilities and strengthen our Cortex strategy.

The acquisition is expected to close during our first quarter of fiscal 2021, subject to regulatory approvals and other customary closing conditions.

On August 11, 2021, we completed our acquisition of Gamma Networks, Inc.

(“Gamma”), a privately-held AI powered company, for total consideration of approximately $ 36 million, subject to adjustment.

We expect the acquisition will expand our data loss prevention offerings.

We will complete the initial accounting for the acquisition of Gamma, including the allocation of purchase consideration, during our first quarter of fiscal 2022.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data