earnings

Palo Alto Growth

Palo Alto sees 20% YoY growth

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Palo Alto Networks who recently acquired SD-WAN provider GloudGenix announced 20% year over year growth for their Fiscal Q3 coming in at $869.4 million. Palo Alto Networks is nearing the $1billion quarterly threshold on strong product performance and seizing the remote work trends driven by COVID-19.

“The last month of this quarter saw the majority of the world under lockdown. To be able to deliver these results in this time is a testament to the strength of our team and our partner ecosystem,” said Palo Alto Networks Chairman and CEO Nikesh Arora, on Thursday’s earnings call.

CloudGenix appears to be a major portion of the larger Palo Alto strategy and the company plans on supporting customers on both platforms. In their entirety, SaaS revenue grew 37% and 68% of total revenue is now subscription based.

Palo Alto appears poised to continue to lead the pack and while the pandemic stays top of mind, Palo Alto expects to weather the storm but may see some issues with cost cutting in the enterprise – especially around cyber security. The organization still anticipates strong Q4 growth with the possibility of reaching $925 million on the top end of their guidance.

Arora ended the call stating, ““Our goal is to leverage our advantage and come through this unprecedented event even stronger and more resilient than before…”

GTT-Expands-Silverpeark-Americas-again

GTT expands SD-WAN portfolio… again

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In January, GTT announced the incorporation of Fortinet Secure SD-WAN services. This was in addition to already having offerings from VMware (VeloCloud) and SilverPeak Unity EdgeConnect. at the time, Todd Kiehn stated, “Fortinet has been a long-standing partner of GTT, delivering network firewall solutions as a core aspect of GTT’s managed security portfolio.”

Diving deeper it appears that the acquisition of interoute gave them access to the aforementioned Silver Peak solutions. Interoute, one of the largest network providers in the EMEA region was a very large (if not the largest) acquisition made by GTT in 2018. The $2 Billion cash transaction expanded GTT’s coverage area broadly. It also gave them innovations as Interoute was seen as the only competitor to perennial networking innovation organization Masergy in Gartner’s Network Magic Quadrant. GTT has since fallen back into the niche category.

Reclaim old glory?

GTT Stock Performance

Now the Silver Peak solution is available in the Americas. It will be interesting to see if they can move the needle and reclaim growth and take market share. The SD-WAN space has become increasingly convoluted and we’ve been bullish on massive consolidation even during and post-pandemic. It is important to note that GTT has a variety of debt obligations that come full circle in the coming years and the general performance outlook is down short, mid, and long term from the Commodity Channel Index. In fact, since mid 2018 (shortly after the Interoute acquisition) GTT’s stock has been on a steady decline from $56 dollars per share to around $9 dollars a share.

Americas Expansion

IDC anticipates enterprise SD-WAN services to grow over 25% per year through 2023 in the Americas Region. GTT uses this metric as a key reason for their SD-WAN / Silver Peak addition stating, “The addition of Silver Peak Unity EdgeConnect expands GTT’s managed SD-WAN offering in the Americas and offers enterprises an attractive technology option to meet their specific network bandwidth and applications requirements,” stated Ghassan Abdo, research vice president, worldwide telecom at IDC. “GTT’s managed SD-WAN service allows enterprises to focus critical IT personnel on core business operational activity and provides substantial value-add in the management of complex network integrations, as well as helping conserve scarce capital resources.”     

Has GTT Turned the Corner?

On May 8th 2020, GTT announced their financials for Q1 2020. It is interesting that while their YoY revenue was down 5%, their QoQ performance was up marginally. Given the beginnings of the pandemic, uncertainty and distractions, this may actually be a positive sign. Additionally, while EBITDA has decreased, their cash flow increased 37% QoQ and 157% YoY and their CAPEX decreased nearly half a % point as a percent of revenue.

The biggest concern with this announcement is can GTT provide a consistent reliable user experience across 3 of the top SD-WAN Services available today. If they can succeed in this area, they may be poised to seize the market as our society continues its digital transformation revolution.