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Item 2. Management’s Discussion and Analysis

2023-11-17 compared with 2023-05-24 · 172 added, 210 removed, 245 unchanged (61% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

The following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements include, among other things:

our expectation of achieving and maintaining profitability under U.S.

the effects of supply chain challenges and other factors affecting the manufacture, delivery and cost of certain of our products;

expectations regarding drivers of and factors affecting growth in our business;

This Quarterly Report on Form 10-Q, including, without limitation, the following discussion and analysis, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These statements include, but are not limited to, statements concerning:

our expectations regarding drivers of and factors affecting growth in our business;

statements regarding expected profitability, trends in billing, our mix of product and subscription and support revenue, cost of revenue, gross margin, cash flows, operating expenses, including future share-based compensation expense, income taxes, investment plans, and liquidity;

expected recurring revenues resulting from growth in our end-customers and increased adoption of our products and cloud delivered security solutions;

the performance advantages of our products and subscription and support offerings and the potential benefits to our customers;

statements regarding trends in billings, our mix of product and subscription and support revenue, cost of revenue, gross margin, cash flows, operating expenses, including future share-based compensation expense, income taxes, investment plans and liquidity;

our expectations regarding future investments in research and development and product development, customer support, in our employees and in our sales force, including expectations regarding growth in our sales headcount;

our expectation that we will continue to expand our global presence;

expectations regarding our revenues, including the seasonality and cyclicality from quarter to quarter;

expectations and intentions with respect to the products, technologies and businesses that we acquire and introduce;

our strategy of acquiring complementary businesses and our ability to successfully acquire and integrate businesses and technologies;

expected recurring revenues resulting from expected growth in our installed base and increased adoption of our products and cloud-based subscription services;

the sufficiency of our existing cash, investments and available financing instruments to meet our cash needs for the foreseeable future;

our intentions to sell any of our available-for-sale debt instruments;

capital expenditures and share repurchases;

expectations to increase customer financing activities in the future;

expectations regarding the potential impacts of the coronavirus disease discovered in 2019 (“COVID-19”) and related public health measures on our business, the business of our customers, suppliers and channel partners, and the economy;

our expectation that we will increase our customer financing activities;

the sufficiency of our cash flow from operations with existing cash, cash equivalents, and investments to meet our cash needs for the foreseeable future;

our ability to successfully acquire and integrate companies and assets and our expectations and intentions with respect to the products and technologies that we acquire and introduce;

the timing and amount of capital expenditures and share repurchases;

the effects of worldwide economic and geopolitical conditions, including but not limited to recent hostilities in Israel, inflation, interest rate levels, growth rates and other conditions, on our operating and financial results and performance;

the manufacture, delivery and cost of certain of our products;

the effects of current or potential litigation or regulatory developments involving us or affecting our industry;

and other statements regarding our future operations, financial condition and prospects, and business strategies.

Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “predicts,” “projects,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “projects,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions that convey uncertainty of future events or outcomes.

These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those anticipated or implied by any forward-looking statements.

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• Key Financial Metrics.

A summary of our GAAP and non-GAAP key financial metrics, which management monitors to evaluate our performance.

A summary of our U.S.

GAAP and non-GAAP key financial metrics, which management monitors to evaluate our performance.

• Results of Operations.

A discussion of the nature and trends in our financial results and an analysis of our financial results comparing the three and nine months ended April 30, 2023 to the three and nine months ended April 30, 2022.

A discussion of the nature and trends in our financial results and an analysis of our financial results comparing the three months ended October 31, 2023 to the three months ended October 31, 2022.

• Liquidity and Capital Resources.

An analysis of changes in our balance sheets and cash flows, and a discussion of our financial condition and our ability to meet cash needs.

An analysis of changes on our balance sheets and cash flows, and a discussion of our financial condition and our ability to meet cash needs.

• Critical Accounting Estimates.

A discussion of our accounting policies that require critical estimates, assumptions, and judgments.

• Recent Accounting Pronouncements.

A discussion of expected impacts of impending accounting changes on financial information to be reported in the future.

We empower enterprises, organizations, service providers, and government entities to protect themselves against today’s most sophisticated cyber threats.

Our cybersecurity platforms and services help secure enterprise users, networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by industry-leading artificial intelligence and automation.

We are a leading provider of zero trust solutions that start with the next-generation of zero trust network access to secure remote workforces and extend into securing all users, applications and infrastructure with zero trust principles.

Our security solutions are designed to increase security while reducing our customers’ total cost of ownership by improving operational efficiency and eliminating the need for siloed point products.

Our company focuses on delivering value in five fundamental areas:

Table of Conten ts

We are a leading provider of zero trust solutions, starting with next-generation zero trust network access to secure today’s remote hybrid workforces and extending to securing all users, applications, and infrastructure with zero trust principles.

Our security solutions are designed to reduce customers’ total cost of ownership by improving operational efficiency and eliminating the need for siloed point products.

Our company focuses on delivering value in four fundamental areas:

Network Security:

• Our network security platform, which includes our ML-Powered Next-Generation Firewalls, available in a number of form factors, including physical, virtual, and containerized appliances, as well as a cloud-delivered service, has been a leader in the industry for eleven consecutive years.

Our network security platform also includes our Cloud-Delivered Security Services, such as Advanced Threat Prevention, Advanced WildFire ® , Advanced URL Filtering, DNS Security, IoT Security, GlobalProtect™, Enterprise Data Loss Prevention (“Enterprise DLP”), AIOps, and SaaS Security.

Through these add-on security services, our customers are able to secure their applications, users, devices, and content across our network security platform as well as the Prisma ® and Cortex ® product lines.

Panorama™, our network security management solution, available as hardware or virtual machine, can centrally manage our network security platform irrespective of form factor, location, or scale.

Our software-defined wide-area network (“SD-WAN”) is integrated with PAN-OS, so that our end-customers can get the security features of our ML-Powered Next-Generation Firewall together with SD-WAN functionality.

Secure Access Service Edge:

• Prisma Access is our next-generation cloud-delivered security platform that provides secure network access for employees across all locations with continuous threat inspection and unified policy management for information technology.

We recently introduced Zero Trust Network Access (“ZTNA”) 2.0, which addresses major shortcomings in the first-generation ZTNA products in the industry (which we refer to as ZTNA 1.0).

Prisma Access delivers granular least-privileged access to all applications and data across the enterprise, while continuously verifying trust and inspecting traffic for security.

Prisma Access is also combined with Prisma SD-WAN to provide a comprehensive single-vendor Secure Access Service Edge (“SASE”) offering that we call Prisma SASE, that is used to secure hybrid workforces and enable the cloud-delivered branch.

• Our network security platform, designed to deliver complete zero trust solutions to our customers, includes our hardware and software ML-Powered Next-Generation Firewalls, as well as a cloud-delivered Secure Access Service Edge (“SASE”).

Prisma ® Access, our Security Services Edge (“SSE”) solution, when combined with Prisma SD-WAN, provides a comprehensive single-vendor SASE offering that is used to secure remote workforces and enable the cloud-delivered branch.

We have been recognized as a leader in network firewalls, SASE, SSE, and SD-WAN.

Our network security platform also includes our cloud-delivered security services, such as Advanced Threat Prevention, Advanced WildFire ® , Advanced URL Filtering, DNS Security, IoT/OT Security, GlobalProtect ® , Enterprise Data Loss Prevention (“Enterprise DLP”), Artificial Intelligence for Operations (“AIOps”), SaaS Security API, and SaaS Security Inline.

Through these add-on security services, our customers are able to secure their content, applications, users, and devices across their entire organization.

Panorama ® , our network security management solution, can centrally manage our network security platform irrespective of form factor, location, or scale.

Cloud Security:

• As a comprehensive Cloud Native Application Protection Platform (“CNAPP”), Prisma Cloud removes friction and guesswork out of securing hybrid and multi-cloud environments with continuous visibility and threat prevention.

With code to cloud security coverage that encompasses code, infrastructure, workloads, data, networks, web applications, and APIs, Prisma Cloud is the only platform that addresses security needs at every step in the application lifecycle.

• We enable cloud-native security through our Prisma Cloud platform.

As a comprehensive Cloud Native Application Protection Platform (“CNAPP”), Prisma Cloud secures multi- and hybrid-cloud environments for applications, data, and the entire cloud native technology stack across the full development lifecycle, from code to runtime.

For inline network security on multi- and hybrid-cloud environments, we also offer our VM-Series and CN-Series Firewall offerings.

Security Operations:

• We deliver the next generation of endpoint security, security analytics and security automation solutions through our Cortex portfolio.

These include our industry-leading extended detection and response solution Cortex XDR ® to prevent, detect, and respond to complex cybersecurity attacks, Cortex XSOAR ® for security orchestration, automation, and response (“SOAR”), and Cortex Xpanse ® for attack surface management (“ASM”).

In October 2022, we released Cortex XSIAM ® , our autonomous Security Operations Center (“SOC”) platform that delivers unified security operations functions including automated threat detection and response, user behavioral analytics, threat intelligence management, orchestration and workflow, endpoint protection, and cloud detection and response.

These products are delivered as software or SaaS subscriptions.

• We deliver the next generation of security automation, security analytics, endpoint security, and attack surface management solutions through our Cortex portfolio.

These include Cortex XSIAM, our AI-driven security automation platform, Cortex XDR ® for the prevention, detection, and response to complex cybersecurity attacks on the endpoint, Cortex XSOAR ® for security orchestration, automation, and response (“SOAR”), and Cortex Xpanse TM for attack surface management (“ASM”).

These products are delivered as SaaS or software subscriptions.

Threat Intelligence and Security Consulting (Unit 42):

• We enable security teams with up-to-date threat intelligence and deep cybersecurity expertise before, during and after attacks through our Unit 42 threat research and security consulting team.

Unit 42 offers incident response, risk management, proactive cybersecurity assessment services, and managed detection and response and threat hunting services.

For the third quarter of fiscal 2023 and 2022, total revenue was $1.7 billion and $1.4 billion, respectively, representing year-over-year growth of 24.1%.

• Unit 42 brings together world-renowned threat researchers with an elite team of incident responders and security consultants to create an intelligence-driven, response-ready organization to help customers proactively manage cyber risk.

Our consultants serve as trusted advisors to our customers by assessing and testing their security controls against the right threats, transforming their security strategy with a threat-informed approach, and responding to security incidents on behalf of our clients.

For the first quarter of fiscal 2024 and 2023, total revenue was $1.9 billion and $1.6 billion, respectively, representing year-over-year growth of 20.1%.

Our growth reflects the increased adoption of our portfolio, which consists of product, subscriptions, and support.

We believe our portfolio will enable us to benefit from recurring revenues and new revenues as we continue to grow our end-customer base.

As of April 30, 2023, we had end-customers in over 180 countries.

As of October 31, 2023, we had end-customers in over 180 countries.

Our end-customers represent a broad range of industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications, and include almost all of the Fortune 100 companies and a majority of the Global 2000 companies.

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We primarily use a two-tiered, indirect fulfillment model whereby we sell our products, subscriptions, and support to our distributors, which, in turn, sell to our resellers, which then sell to our end-customers.

Table of Conten ts

Our product revenue grew to $388.1 million, or 22.6% of total revenue, for the third quarter of fiscal 2023, representing year-over-year growth of 10.4%.

Product revenue is primarily generated from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.

Product revenue also includes revenue derived from software licenses of Panaroma, SD-WAN, and the VM-Series.

Our product revenue grew to $341.1 million, or 18.2% of total revenue, for the first quarter of fiscal 2024, representing year-over-year growth of 3.4%.

Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.

Product revenue also includes revenue derived from software licenses of Panorama, SD-WAN, and the VM-Series.

Our ML-Powered Next-Generation Firewall incorporates our PAN-OS operating system, which provides a consistent set of capabilities across our entire network security product line.

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The same firewall functionality that is delivered in our physical appliances is also available in our VM-Series virtual firewalls, which secure virtualized and cloud-based computing environments, and in our CN-Series container firewalls, which secure container environments and traffic.

Our subscription and support revenue grew to $1.3 billion, or 77.4% of total revenue, for the third quarter of fiscal 2023, representing year-over-year growth of 28.7%.

Our subscription and support revenue grew to $1.5 billion, or 81.8% of total revenue, for the first quarter of fiscal 2024, representing year-over-year growth of 24.6%.

Our subscriptions provide our end-customers with near real-time access to the latest antivirus, intrusion prevention, web filtering, modern malware prevention, data loss prevention, and cloud access security broker capabilities across the network, endpoints, and the cloud.

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We continue to invest in innovation as we evolve and further extend the capabilities of our portfolio, as we believe that innovation and timely development of new features and products are essential to meeting the needs of our end-customers and improving our competitive position.

For example, in March 2023, we enhanced our Prisma SASE capabilities for organizations to leverage the power of artificial intelligence to drive better security outcomes and operating efficiencies.

For example, in October 2023, we enhanced our Prisma Cloud capabilities with new integrated Code to Cloud intelligence for developers, operations, and security teams to improve productivity and collaboration across code, infrastructure, and runtime.

We believe that the growth of our business and our short-term and long-term success are dependent upon many factors, including our ability to extend our technology leadership, grow our base of end-customers, expand deployment of our portfolio and support offerings within existing end-customers, and focus on end-customer satisfaction.

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Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior.

Worsening economic conditions, including inflation, higher interest rates, slower growth, fluctuations in foreign exchange rates, and other conditions such as the effects of COVID-19, may adversely affect our results of operations and financial performance.

The global supply chain and the semiconductor industry continue to experience challenges.

We have experienced supply chain challenges, including chip and component shortages, which have, in certain cases, caused delays for us in acquiring chips, components and inventory and have resulted in increased costs as compared to historic levels.

While we have experienced improvements in the availability of chips and components in general during the third quarter of fiscal 2023, we are still incurring increased costs and experiencing increased lead time for certain product deliveries to our end-customers.

We will continue to work to minimize the effects from supply chain challenges.

Table of Conten ts

Worsening economic conditions, including inflation, higher interest rates, slower growth, fluctuations in foreign exchange rates, supply chain disruptions, and other conditions, may adversely affect our results of operations and financial performance.

The recent hostilities in Israel and the surrounding region have increased the levels of economic and political uncertainty.

While we have business operations in Israel, and intend to continue growing our presence in Israel, we currently do not expect significant business disruption.

We are actively monitoring, evaluating, and responding to the developing situation.

We are also monitoring the impact of inflationary pressures and the tensions between China and Taiwan, and between the U.S.

and China, which could have an adverse impact on our business or results of operations in future periods.

Key Financial Metrics

We monitor the key financial metrics set forth in the tables below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies.

We discuss revenue, gross margin, and the components of operating income (loss) and margin below under “Results of Operations.”

April 30, 2023 July 31, 2022

We discuss revenue, gross margin, and the components of operating income and margin below under “Results of Operations.”

October 31, 2023 July 31, 2023

(in millions)

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Cash, cash equivalents, and investments $ 6,882.7 $ 5,437.9

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

2023 2022 2023 2022

Three Months Ended October 31,

(dollars in millions)

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Gross margin 74.8 % 70.5 %

Operating income (loss) $ 78.7 $ (47.6) $ 133.8 $ (204.2)

Operating income $ 215.2 $ 15.2

Operating margin 11.5 % 1.0 %

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We calculate billings in the following manner:

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

2023 2022 2023 2022

(in millions) (in millions)

Three Months Ended October 31,

(in millions)

Total revenue $ 1,878.1 $ 1,563.4

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Billings $ 2,024.5 $ 1,749.0

Table of Conten ts

• Cash Flow Provided by Operating Activities.

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Our cash flow provided by operating activities is driven in large part by sales of our products and from up-front payments for subscription and support offerings.

Monitoring cash flow provided by operating activities enables us to analyze our financial performance without the non-cash effects of certain items such as depreciation, amortization, and share-based compensation costs, thereby allowing us to better understand and manage the cash needs of our business.

Monitoring cash flow provided by operating activities enables us to analyze our financial performance without the non-cash effects of certain items such as share-based compensation costs, depreciation and amortization, thereby allowing us to better understand and manage the cash needs of our business.

• Free Cash Flow (non-GAAP).

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In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure.

A reconciliation of free cash flow to cash flow provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, is provided below:

Nine Months Ended April 30,

A reconciliation of free cash flow to cash flow provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with U.S.

GAAP, is provided below:

Three Months Ended October 31,

(in millions)

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Net cash used in investing activities $ (129.0) $ (1,319.8)

Net cash used in financing activities $ (91.5) $ (453.5)

Table of Conten ts

Net cash provided by (used in) financing activities $ (41.8) $ 31.1

Results of Operations

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The period-to-period comparison of results is not necessarily indicative of results for future periods.

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

2023 2022 2023 2022

Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue

Three Months Ended October 31,

Amount % of Revenue

(dollars in millions)

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Total revenue 1,878.1 100.0 % 1,563.4 100.0 %

1,720.9 100.0 % 1,386.7 100.0 % 4,939.4 100.0 % 3,951.0 100.0 %

Cost of revenue:

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Total gross profit 1,405.3 74.8 % 1,101.5 70.5 %

1,246.1 72.4 % 946.2 68.2 % 3,536.5 71.6 % 2,724.6 69.0 %

Operating expenses:

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1,190.1 63.3 % 1,086.3 69.5 %

Operating income (loss) 78.7 4.6 % (47.6) (3.4) % 133.8 2.7 % (204.2) (5.2) %

Operating income 215.2 11.5 % 15.2 1.0 %

Interest expense (2.9) (0.2 %) (6.8) (0.4) %

Other income, net 70.3 3.7 % 26.0 1.6 %

Income (loss) before income taxes 131.0 7.6 % (52.5) (3.8) % 249.8 5.1 % (224.5) (5.7) %

Income before income taxes 282.6 15.0 % 34.4 2.2 %

Provision for income taxes 88.4 4.7 % 14.4 0.9 %

Net income (loss) $ 107.8 6.3 % $ (73.2) (5.3) % $ 212.0 4.3 % $ (270.3) (6.8) %

______________

Net income $ 194.2 10.3 % $ 20.0 1.3 %

(1) Includes share-based compensation as follows:

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

2023 2022 2023 2022

Three Months Ended October 31,

(in millions)

Cost of product revenue $ 2.4 $ 2.4

$ 2.5 $ 2.3 $ 7.5 $ 6.9

Cost of subscription and support revenue 30.6 28.8

32.0 27.4 91.5 81.8

Research and development 120.1 118.0

125.4 112.7 373.1 361.9

Sales and marketing 79.2 87.4

80.5 75.7 256.3 228.8

General and administrative 38.7 29.4

36.8 29.2 104.7 93.3

Total share-based compensation $ 271.0 $ 266.0

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Revenue is recognized upon transfer of control of the corresponding promised products and subscriptions and support to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products and subscriptions and support.

We expect our revenue to vary from quarter to quarter based on seasonal and cyclical fact ors.

Table of Conten ts

We expect our revenue to vary from quarter to quarter based on seasonal and cyclical factors.

PRODUCT REVENUE

Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall, which is available in a number of form factors, including as physical, virtual, and containerized appliances.

Product revenue also includes revenue derived from software licenses of Panorama and SD-WAN.

Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.

Product revenue also includes revenue derived from software licenses of Panorama, SD-WAN, and the VM-Series.

Our appliances and software licenses include a broad set of built-in networking and security features and functionalities.

We recognize product revenue at the time of hardware shipment or delivery of software license.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Product $ 341.1 $ 330.0 $ 11.1 3.4 %

Product revenue for the three and nine months ended April 30, 2023 increased compared to the same periods in 2022 driven by increased demand for our new generation of hardware products and increased software revenue primarily due to a new go-to-market strategy for certain Network Security offerings, partially offset by decreased revenue from our prior generation of hardware products.

Product revenue for the three months ended October 31, 2023 increased compared to the same period in 2022 driven by increased software revenue primarily due to a new go-to-market strategy for certain Network Security offerings, and increased demand for our new generation of hardware products, partially offset by decreased revenue from our prior generation of hardware products.

SUBSCRIPTION AND SUPPORT REVENUE

Subscription and support revenue is derived primarily from sales of our subscription and support offerings.

Our contractual subscription and support contracts are typically one to five years.

Our subscription and support contracts are typically one to five years.

We recognize revenue from subscriptions and support over time as the services are performed.

As a percentage of total revenue, we expect our subscription and support revenue to vary from quarter to quarter and increase over the long term as we introduce new subscriptions, renew existing subscription and support contracts, and expand our installed end-customer base.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

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Total subscription and support $ 1,537.0 $ 1,233.4 $ 303.6 24.6 %

Subscription and support revenue increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022 due to increased demand for our subscription and support offerings from our end-customers.

Subscription and support revenue increased for the three months ended October 31, 2023 compared to the same period in 2022 due to increased demand for our subscription and support offerings from our end-customers.

The mix between subscription revenue and support revenue will fluctuate over time, depending on the introduction of new subscription offerings, renewals of support services, and our ability to increase sales to new and existing end-customers.

REVENUE BY GEOGRAPHIC THEATER

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

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Total revenue $ 1,878.1 $ 1,563.4 $ 314.7 20.1 %

$ 1,720.9 $ 1,386.7 $ 334.2 24.1 % $ 4,939.4 $ 3,951.0 $ 988.4 25.0 %

With respect to geographic theaters, the increases in revenue for the three and nine months ended April 30, 2023 compared to the same periods in 2022 were driven primarily by the Americas, due to its larger sales force and a larger percentage of our customers located in the Americas.

Revenue from our other geographic theaters, Europe, the Middle East, and Africa (“EMEA”) and Asia Pacific and Japan (“APAC”), increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022 due to continued investment in our global sales force to support our growth and increase our customer base in the regions.

Table of Conten ts

Revenue from the Americas, Europe, the Middle East, and Africa (“EMEA”), and Asia Pacific and Japan (“APAC”), increased for the three months ended October 31, 2023 compared to the same period in 2022 as we continued to increase investment in our global sales force in order to support our growth and innovation.

Our three geographic theaters had similar year-over-year revenue growth rates for the three months ended October 31, 2023 compared to the same period in 2022, with the Americas contributing the highest increase in revenue due to its larger scale.

COST OF REVENUE

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Cost of product revenue primarily includes costs paid to our manufacturing partners for procuring components and manufacturing our products.

Our cost of product revenue also includes personnel costs, which consist of salaries, benefits, bonuses, share-based compensation and travel and entertainment associated with our operations organization, amortization of intellectual property licenses, product testing costs, shipping and tariff costs, and shared costs.

Our cost of product revenue also includes personnel costs, which consist of salaries, benefits, bonuses, share-based compensation, and travel associated with our operations organization, amortization of intellectual property licenses, product testing costs, shipping and tariff costs, and shared costs.

Shared costs consist of certain facilities, depreciation, benefits, recruiting, and information technology costs that we allocate based on headcount.

We expect our cost of product revenue to fluctuate with our revenue from hardware products.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Cost of product revenue $ 77.4 $ 120.1 $ (42.7) (35.6) %

Number of employees at period end 141 147 (6) (4.1) % 141 147 (6) (4.1) %

Cost of product revenue decreased for the three months ended April 30, 2023 compared to the same period in 2022 due to decreased demand for our prior generation hardware products, partially offset by increased demand for our new generation hardware products.

The decrease was further driven by lower costs primarily due to an easing of supply chain challenges during the three months ended April 30, 2023.

Cost of product revenue was relatively flat for the nine months ended April 30, 2023 compared to the same period in 2022 due to increased demand for our new generation hardware products as we shifted away from prior generation, and higher costs primarily driven by supply chain challenges during the first two quarters of fiscal 2023, offset by hardware product mix.

Cost of product revenue decreased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to lower costs largely driven by an easing of supply chain challenges and decreased demand for our prior generation of hardware products.

COST OF SUBSCRIPTION AND SUPPORT REVENUE

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We expect our cost of subscription and support revenue to increase as our installed end-customer base grows and adoption of our cloud-based subscription offerings increases.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Cost of subscription and support revenue $ 395.4 $ 341.8 $ 53.6 15.7 %

Number of employees at period end 2,815 2,400 415 17.3 % 2,815 2,400 415 17.3 %

Cost of subscription and support revenue increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022, primarily due to increased costs to support the growth of our subscription and support offerings.

Cloud hosting service costs, which support our cloud-based subscription offerings, increased $27.9 million for the three months ended April 30, 2023 compared to the same period in 2022, and increased $73.6 million for the nine months ended April 30, 2023 compared to the same period in 2022.

Personnel costs grew $25.8 million to $168.3 million for the three months ended April 30, 2023 compared to the same period in 2022, and grew $68.2 million to $472.1 million for the nine months ended April 30, 2023 compared to the same period in 2022, primarily due to headcount growth.

Table of Conten ts

Cost of subscription and support revenue increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to increased costs to support the growth of our subscription and support offerings.

Cloud hosting service costs, which support our cloud-based subscription offerings, increased $26.2 million for the three months ended October 31, 2023 compared to the same period in 2022.

Personnel costs grew $23.0 million for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to headcount growth.

Gross margin has been and will continue to be affected by a variety of factors, including the introduction of new products, manufacturing costs, the average sales price of our products, cloud hosting service costs, personnel costs, the mix of products sold, and the mix of revenue between product and subscription and support offerings.

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We expect our gross margins to vary over time depending on the factors described above.

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

2023 2022 2023 2022

Amount Gross Margin Amount Gross Margin Amount Gross Margin Amount Gross Margin

Three Months Ended October 31,

Amount Gross Margin Amount Gross Margin

(dollars in millions)

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Total gross profit $ 1,405.3 74.8 % $ 1,101.5 70.5 %

Product gross margin increased for the three months ended April 30, 2023 compared to the same period in 2022, primarily due to increased software revenue, lower costs primarily driven by an easing of supply chain challenges, and a favorable hardware product mix.

Product gross margin increased for the nine months ended April 30, 2023 compared to the same period in 2022, primarily due to increased software revenue and a favorable hardware product mix, partially offset by higher costs primarily driven by supply chain challenges during the first two quarters of fiscal 2023.

Subscription and support gross margin increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022, primarily due to our growth in subscription and support revenue, which outpaced the subscription and support costs.

Product gross margin increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to lower costs largely driven by an easing of supply chain challenges and increased software revenue.

Subscription and support gross margin increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to our growth in subscription and support revenue, which outpaced the subscription and support costs.

OPERATING EXPENSES

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We expect operating expenses generally to increase in absolute dollars and decrease over the long term as a percentage of revenue as we continue to scale our business.

As of April 30, 2023, we expect to recognize approximately $2.1 billion of share-based compensation expense over a weighted-average period of approximately 2.5 years, excluding additional share-based compensation expense related to any future grants of share-based awards.

As of October 31, 2023, we expect to recognize approximately $1.9 billion of share-based compensation expense over a weighted-average period of approximately 2.7 years, excluding additional share-based compensation expense related to any future grants of share-based awards.

Share-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards.

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We expect research and development expense to increase in absolute dollars as we continue to invest in our future products and services, although our research and development expense may fluctuate as a percentage of total revenue.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Research and development $ 409.5 $ 371.8 $ 37.7 10.1 %

Number of employees at period end 3,693 3,047 646 21.2 % 3,693 3,047 646 21.2 %

Research and development expense increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022, primarily due to increased personnel costs, which grew $50.2 million to $328.0 million for the three months ended April 30, 2023 compared to the same period in 2022, and grew $107.9 million to $938.8 million for the nine months ended April 30, 2023 compared to the same period in 2022, largely due to headcount growth.

Table of Conten ts

Research and development expense increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to increased personnel costs, which grew $27.4 million, largely due to headcount growth.

SALES AND MARKETING

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We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our sales and marketing organizations to grow our customer base, increase touch points with end-customers, and expand our global presence, although our sales and marketing expense may fluctuate as a percentage of total revenue.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Sales and marketing $ 660.5 $ 615.0 $ 45.5 7.4 %

Number of employees at period end 5,710 4,908 802 16.3 % 5,710 4,908 802 16.3 %

Sales and marketing expense increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022, primarily due to increased personnel costs, which grew $69.9 million to $482.8 million for the three months ended April 30, 2023 compared to the same period in 2022, and grew $223.8 million to $1.4 billion for the nine months ended April 30, 2023 compared to the same period in 2022, largely due to headcount growth.

The increases in both periods were further driven by increased costs associated with marketing activities.

Sales and marketing expense increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to increased personnel costs, which grew $21.8 million, largely due to headcount growth.

The increase in sales and marketing expense was further driven by increased costs associated with sales and marketing events and go-to-market initiatives.

GENERAL AND ADMINISTRATIVE

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We expect general and administrative expense to increase in absolute dollars over time as we increase the size of our general and administrative organizations and incur additional costs to support our business growth, although our general and administrative expense may fluctuate as a percentage of total revenue.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

General and administrative $ 120.1 $ 99.5 $ 20.6 20.7 %

Number of employees at period end 1,620 1,368 252 18.4 % 1,620 1,368 252 18.4 %

General and administrative expense increased for the three and nine months ended April 30, 2023 compared to the same periods in 2022 primarily due to increased personnel costs, which grew $9.4 million to $77.8 million for the three months ended April 30, 2023 compared to the same period in 2022, and grew $18.0 million to $223.1 million for the nine months ended April 30, 2023 compared to the same period in 2022.

The increases in personnel costs for both periods were primarily due to share-based compensation related to our recent acquisitions and headcount growth.

The increases in both periods were further driven by slightly higher reserves due to increased receivables as a result of our business growth.

General and administrative expense increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to increased personnel costs, which grew $12.8 million, largely due to increased share-based compensation and headcount growth.

The increase in general and administrative expense was further driven by increased professional services expense during the three months ended October 31, 2023.

INTEREST EXPENSE

Interest expense primarily consists of interest expense related to our 0.75% Convertible Senior Notes due 2023 (the “2023 Notes”) and the 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with “2023 Notes,” the “Notes”).

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Interest expense primarily consists of interest expense related to our 0.75% Convertible Senior Notes due 2023 (the “2023 Notes”) and our 0.375% Convertible Senior Notes due 2025 (the “2025 Notes,” and together with “2023 Notes,” the “Notes”).

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Interest expense $ 2.9 $ 6.8 $ (3.9) (57.4) %

Interest expense increased slightly for the three and nine months ended April 30, 2023 compared to the same periods in 2022 primarily due to certain additional costs during the three months ended April 30, 2023.

Table of Conten ts

Interest expense decreased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to conversions of the 2023 Notes prior to or upon maturity in July 2023.

Refer to Note 8.

Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the Notes.

OTHER INCOME, NET

Other income, net includes interest income earned on our cash, cash equivalents, and investments, and gains and losses from foreign currency remeasurement and foreign currency transactions.

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

2023 2022 Change 2023 2022 Change

Amount Amount Amount % Amount Amount Amount %

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

Other income, net $ 70.3 $ 26.0 $ 44.3 170.4 %

______________

* Not meaningful

The increases in other income, net for the three and nine months ended April 30, 2023 compared to the same periods in 2022 were primarily due to higher interest income earned as a result of higher interest rates and higher cash, cash equivalent, and investments balances for the three and nine months ended April 30, 2023 compared to 2022.

Other income, net increased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to higher interest income as a result of higher interest rates and higher average cash, cash equivalent, and investment balances for the three months ended October 31, 2023 compared to 2022.

PROVISION FOR INCOME TAXES

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We regularly evaluate the need for a valuation allowance.

Due to recent profitability, a reversal of our valuation allowance in certain jurisdictions in the foreseeable future is reasonably possible.

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

Change 2023 2022 Change

2023 2022 Amount % Amount Amount Amount %

Due to recent profitability, a reversal of our valuation allowance in certain jurisdictions in the near future is reasonably possible.

Three Months Ended October 31,

2023 2022 Change

Amount Amount Amount %

(dollars in millions)

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Effective tax rate 31.3 % 41.9 %

Our provision for income taxes for the three and nine months ended April 30, 2023 was primarily due to U.S.

Our provision for income taxes for the three months ended October 31, 2023 was primarily due to U.S.

federal and state income taxes, withholding taxes, and foreign income taxes.

Our effective tax rate varied for the three and nine months ended April 30, 2023 compared to the same periods in 2022, primarily due to an increase in current taxes driven by capitalization of research and development expenditures with no offsetting deferred benefit as a result of our valuation allowance.

This increase was offset by a release of uncertain tax positions during the nine months ended April 30, 2023 resulting from a tax settlement.

Our effective tax rate decreased for the three months ended October 31, 2023 compared to the same period in 2022 primarily due to higher tax benefits from our share-based compensation.

Refer to Note 12.

Income Taxes in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.

Table of Conten ts

Liquidity and Capital Resources

April 30, 2023 July 31, 2022

October 31, 2023 July 31, 2023

(in millions)

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Total cash, cash equivalents, and investments $ 6,882.7 $ 5,437.9

______________

(1) Current liabilities included net carrying amounts of convertible senior notes of $3.7 billion as of both April 30, 2023 and July 31, 2022.

Refer to Note 9.

Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Notes.

As of April 30, 2023, our total cash, cash equivalents, and investments of $6.7 billion were held for general corporate purposes.

As of April 30, 2023, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S.

(1) Current liabilities included net carrying amounts of convertible senior notes of $1.9 billion and $2.0 billion as of October 31, 2023 and July 31, 2023, respectively.

Refer to Note 8 Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Notes.

As of October 31, 2023, our total cash, cash equivalents, and investments of $6.9 billion were held for general corporate purposes.

As of October 31, 2023, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S.

investment in foreign subsidiaries.

However, there could be local withholding taxes payable due to various foreign countries if certain lower tier earnings are distributed.

However, there could be local withholding taxes due to various foreign countries if certain lower tier earnings are distributed.

Withholding taxes that would be payable upon remittance of these lower tier earnings are not expected to be material.

In July 2018, we issued the 2023 Notes with an aggregate principal amount of $1.7 billion.

Beginning in fiscal 2023, we were required to capitalize and amortize R&D expenses as required by the Tax Cuts and Jobs Act.

As a result of this change, we expect to pay significantly more cash taxes in the future, beginning in fiscal 2024.

In June 2020, we issued the 2025 Notes with an aggregate principal amount of $2.0 billion.

The 2023 Notes mature on July 1, 2023 and the 2025 Notes mature on June 1, 2025;

however, under certain circumstances, holders may surrender their Notes of a series for conversion prior to the applicable maturity date.

Upon conversion of the Notes of a series, we will pay cash equal to the aggregate principal amount of the Notes of such series to be converted, and, at our election, will pay or deliver cash and/or shares of our common stock for the amount of our conversion obligation in excess of the aggregate principal amount of the Notes of such series being converted.

All the 2023 Notes will mature on July 1, 2023 and at that time we will be obligated to pay the $1.7 billion principal amount of the 2023 Notes in cash.

The sale price condition for the 2025 Notes was met during the fiscal quarter ended April 30, 2023, and as a result, holders may convert their 2025 Notes at any time during the fiscal quarter ending July 31, 2023.

If all of the holders converted their 2025 Notes during this period, we would be obligated to settle the $2.0 billion principal amount of the 2025 Notes in cash.

We believe that our cash provided by operating activities, our existing cash, cash equivalents and investments, and existing sources of and access to financing will be sufficient to meet our anticipated cash needs should the holders choose to convert their Notes during the fiscal quarter ending July 31, 2023 or hold the 2023 Notes until maturity on July 1, 2023.

As of April 30, 2023, substantially all of our Notes remained outstanding.

The 2025 Notes mature on June 1, 2025;

however, under certain circumstances, holders may surrender their 2025 Notes for conversion prior to the maturity date.

Upon conversion of the 2025 Notes, we will pay cash equal to the aggregate principal amount of the 2025 Notes to be converted, and, at our election, we will pay or deliver cash and/or shares of our common stock for the amount of our conversion obligation in excess of the aggregate principal amount of the 2025 Notes being converted.

During the three months ended October 31, 2023, holders of the 2025 Notes converted $46.0 million in aggregate principal amount of the 2025 Notes, which we repaid in cash.

We also issued 0.3 million shares of our common stock to the holders of the 2025 Notes for the conversion value in excess of the principal amount of the 2025 Notes converted, which were fully offset by shares we received from the corresponding exercise of the associated note hedges.

The sale price condition for the 2025 Notes was met during the fiscal quarter ended October 31, 2023, and as a result, holders may convert their 2025 Notes during the fiscal quarter ending January 31, 2024.

If all of the holders convert their 2025 Notes during this period, we would be obligated to settle the $2.0 billion principal amount of the 2025 Notes in cash.

We believe that our cash provided by operating activities, our existing cash, cash equivalents, and investments, and existing sources of and access to financing will be sufficient to meet our anticipated cash needs should the holders choose to convert their 2025 Notes during the fiscal quarter ending January 31, 2024 or hold the 2025 Notes until maturity on June 1, 2025.

As of October 31, 2023, substantially all of our 2025 Notes remained outstanding.

Refer to Note 8.

Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the Notes.

In April 2023, we entered into a new credit agreement (the “2023 Credit Agreement”) that provides for a $400.0 million unsecured revolving credit facility (the “2023 Credit Facility”), with an option to increase the amount of the Credit Facility by up to an additional $350.0 million, subject to certain conditions.

In April 2023, we entered into a credit agreement (the “Credit Agreement”) that provides for a $400.0 million unsecured revolving credit facility (the “Credit Facility”), with an option to increase the amount of the Credit Facility by up to an additional $350.0 million, subject to certain conditions.

The interest rates and commitment fees are also subject to upward and downward adjustments based on our progress towards the achievement of certain sustainability goals related to greenhouse gas emissions.

As of April 30, 2023, there were no amounts outstanding and we were in compliance with all covenants under the 2023 Credit Agreement.

As of October 31, 2023, there were no amounts outstanding, and we were in compliance with all covenants under the Credit Agreement.

Refer to Note 8.

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Repurchases will be funded from available working capital and may be made at management’s discretion from time to time.

The expiration date of this repurchase authorization was extended to December 31, 2023, and our repurchase program may be suspended or discontinued at any time.

As of April 30, 2023, $750.0 million remained available for future share repurchases under this repurchase program.

As of October 31, 2023, $683.3 million remained available for future share repurchases under this repurchase program.

On November 16, 2023, our board of directors authorized a $316.7 million increase to our share repurchase program, bringing the total remaining authorization for future share repurchases to $1.0 billion.

The repurchase authorization will expire on December 31, 2024, and may be suspended or discontinued at any time without prior notice.

Refer to Note 10.

Stockholders’ Equity in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on this repurchase program.

Table of Conten ts

Stockholders’ Equity and Note 15.

Subsequent Events in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on this repurchase program.

LEASES AND OTHER MATERIAL CASH REQUIREMENTS

We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the year ending July 31, 2032, with the most significant leases relating to our corporate headquarters in Santa Clara, California.

As of April 30, 2023, we have total operating lease obligations of $327.9 million recorded on our condensed consolidated balance sheet.

As of April 30, 2023, our commitments to purchase products, components, cloud and other services totaled $2.0 billion.

We have entered into various non-cancelable operating leases primarily for our facilities with original lease periods expiring through the fiscal year ending July 31, 2033, with the most significant leases relating to our corporate headquarters in Santa Clara, California.

As of October 31, 2023, we have total operating lease obligations of $336.8 million recorded on our condensed consolidated balance sheet.

As of October 31, 2023, our commitments to purchase products, components, cloud and other services totaled $1.7 billion.

Refer to Note 9.

Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on these commitments.

The following table summarizes our cash flows for the nine months ended April 30, 2023 and 2022:

Nine Months Ended April 30,

The following table summarizes our cash flows for the three months ended October 31, 2023 and 2022:

Three Months Ended October 31,

(in millions)

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Net cash used in investing activities (129.0) (1,319.8)

Net cash used in financing activities (91.5) (453.5)

Net cash provided by (used in) financing activities (41.8) 31.1

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 1,355.2 $ (52.0)

Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the effects of COVID-19 and other risks detailed in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

Cash from operations could be affected by various risks and uncertainties detailed in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

We believe that our cash flow from operations with existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months and thereafter for the foreseeable future.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and subscription and support offerings, the costs to acquire or invest in complementary businesses and technologies, the costs to ensure access to adequate manufacturing capacity, the investments in our infrastructure to support the adoption of our cloud-based subscription offerings, the repayment obligations associated with our Notes, the continuing market acceptance of our products and subscription and support offerings and macroeconomic events such as COVID-19.

In addition, from time to time, we may incur additional tax liability in connection with certain corporate structuring decisions.

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OPERATING ACTIVITIES

Our operating activities have consisted of net income (losses) adjusted for certain non-cash items and changes in assets and liabilities.

Our largest source of cash provided by our operations is receipts from our product revenue and subscription and support revenue.

Cash provided by operating activities during the nine months ended April 30, 2023 was $2.4 billion, an increase of $902.4 million compared to the same period in 2022.

The increase was primarily due to growth of our business as reflected by increases in collections during the nine months ended April 30, 2023, partially offset by a decrease in cash due to timing of payments and higher cash expenditure to support our business growth.

Our operating activities have consisted of net income adjusted for certain non-cash items and changes in assets and liabilities.

Our largest source of cash provided by our operations is receipts from our billings.

Cash provided by operating activities during the three months ended October 31, 2023 was $1.5 billion, an increase of $289.3 million compared to the same period in 2022.

The increase was primarily due to growth of our business as reflected by increases in collections during the three months ended October 31, 2023, partially offset by higher cash expenditure to support our business growth.

INVESTING ACTIVITIES

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We expect to continue such activities as our business grows.

Cash used in investing activities during the nine months ended April 30, 2023 was $2.4 billion, an increase of $1.9 billion compared to the same period in 2022.

The increase was primarily due to an increase in purchases of investments and increase in net cash payments for business acquisitions, offset by an increase in proceeds from sales and maturities of investments during the nine months ended April 30, 2023.

Cash used in investing activities during the three months ended October 31, 2023 was $129.0 million, a decrease of $1.2 billion compared to the same period in 2022.

The decrease was primarily due to a decrease in purchases of investments during the three months ended October 31, 2023.

FINANCING ACTIVITIES

Our financing activities have consisted of cash used to repurchase shares of our common stock, proceeds from sales of shares through employee equity incentive plans, and payments for tax withholding obligations of certain employees related to the net share settlement of equity awards.

Table of Conten ts

Cash used in financing activities during the nine months ended April 30, 2023 was $91.5 million, a decrease of $362.0 million compared to the same period in 2022.

The decrease was primarily due to decrease in repurchases of our common stock during the nine months ended April 30, 2023.

Cash used in financing activities during the three months ended October 31, 2023 was $41.8 million, a change of $72.9 million compared to cash provided by financing activities of $31.1 million during the same period in 2022.

The change was primarily due to early repayments of our 2025 Notes and repurchases of our common stock during the three months ended October 31, 2023.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with GAAP.

Our condensed consolidated financial statements have been prepared in accordance with U.S.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.

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To the extent that there are material differences between these estimates and our actual results, our future consolidated financial statements will be affected.

We believe the critical accounting estimates discussed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022 reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements.

We believe the critical accounting estimates discussed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 reflect our more significant estimates, assumptions, and judgments that have the most significant impact on our condensed consolidated financial statements.

There have been no significant changes to our critical accounting estimates as filed in such report.

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-Q

Item 2. Management’s Discussion and Analysis