Palo Alto Networks, Inc. · NASDAQ:PANW

Palo Alto Networks — Q1 2024 Earnings Presentation

30 slides from Palo Alto Networks's earnings presentation, Nov 15, 2023

1. Slide 1: Q1 Fiscal Year 2024 Earnings Call

   Q1 Fiscal Year 2024 Earnings Call November 15, 2023 | ©2023 © 2023Palo PaloAlto AltoNetworks, Networks,Inc. Inc.AllAllrights rightsreserved. reserved.

2. Slide 2: Safe Harbor

   Safe Harbor This presentation contains “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements related to our financial guidance for the second quarter of fiscal 2024 and fiscal year 2024, modeling points, plans rega

3. Slide 3: | © 2023 Palo Alto Networks, Inc. All rights reserved.

   | © 2023 Palo Alto Networks, Inc. All rights reserved.

4. Slide 4: 7th consecutive quarter of y/y margin expansion underpins profitable growth

   7th consecutive quarter of y/y margin expansion underpins profitable growth Next Generation Security Profitability Improvements Drove Top-line Towards FY’26 Targets Total Revenue Remaining Performance Obligation Operating Income (non-GAAP) EPS (non-GAAP) $1.88B $10.4B $529M $1.38 +20% y/y +26% y/y +64

5. Slide 5: The pace of malicious activity is fueling strong cybersecurity demand

   The pace of malicious activity is fueling strong cybersecurity demand Ransomware attacks are Increasing attack speed increasing in frequency and severity of cyber threats Speed of data exfiltration is accelerating3 +37% y/y +28% y/y 9 days 2 days increase in multi extortion increase in average 2 year

6. Slide 6: Q1 shows strong progress on our NGS transformation journey

   Q1 shows strong progress on our NGS transformation journey Our largest deals are cross platform NGS is driving transformation to a recurring with broad NGS representation revenue business 8-figure deal with U.S. Federal $3.2B government entity $2.1B Purchased all three platforms in Q1’24, surpassed $

7. Slide 7: Innovation continues to underpin consolidation towards Zero Trust

   NETWORK SECURITY Innovation continues to underpin consolidation towards Zero Trust Leveraging AI in Cosmos and Momentum around three form Strata Cloud Manager factor NetSec customers Continual health monitoring, analysis & forecasting 60% of our 100 largest Network Security customers1 have purchased

8. Slide 8: New SASE capabilities - most comprehensive solution in the market

   SASE New SASE capabilities - most comprehensive solution in the market Broadening SASE adoption Significant innovations at Acquiring Enterprise driving growth SASE Converge ‘23 Browser pioneer2 ~60% y/y SASE that is up to 5x faster than the Internet Growth in SASE ARR1 in Q1’24 Securing SaaS intercon

9. Slide 9: Steady execution in Prisma Cloud driving platform adoption

   PRISMA CLOUD Steady execution in Prisma Cloud driving platform adoption Growth in multi-module Rapid adoption of new Launched customers1 modules 12th module +166% Module Customers y/y CIEM Q3’21 Launch >700 Serverless +59% Q1’22 Launch >600 y/y Cloud Discovery & +31% Exposure Management y/y IaC Q2’2

10. Slide 10: Innovation - Extending code to cloud platform with data security for GenAI

    PRISMA CLOUD Innovation - Extending code to cloud platform with data security for GenAI + Cloud-Native Application Protection Data Security Posture Management (DSPM) Platform (CNAPP) and Data Detection & Response (DDR) Code to Cloud™ Root causes analysis Purpose-built data Contextualizing of intelli

11. Slide 11: Cortex execution and leadership position underpin our SecOps opportunity

    CORTEX Cortex execution and leadership position underpin our SecOps opportunity Cortex active customer count New recognitions for Cortex products Only product with Leader +25% y/y 100% Protection and Detection >5,300 For Cortex XDR in MITRE For Cortex XSIAM in Engenuity Round 5 evaluation GigaOm Aut

12. Slide 12: XSIAM continues to delight - positioning us as leaders in the AI Era

    CORTEX XSIAM continues to delight - positioning us as leaders in the AI Era Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 >$1M First XSIAM Average XSIAM 2.0 100%+ q/q XSIAM ACV with expansion deal Bookings “bring your 8-figure add-on growth purchase own AI” >$200M $30M $25M+ Cumulative Cumulative Transaction booking

13. Slide 13: We remain focused on driving our 3-year strategy in FY24

    We remain focused on driving our 3-year strategy in FY24 Be an evergreen innovation company Make our platforms more comprehensive & ubiquitous Leverage AI across our portfolio Amplify our go-to-market to deliver our ambition Be the best place to work in cybersecurity 13 | © 2023 Palo Alto Networks,

14. Slide 14: | © 2023 Palo Alto Networks, Inc. All rights reserved.

    | © 2023 Palo Alto Networks, Inc. All rights reserved.

15. Slide 15: Q1'24 Top-line Trends

    Q1’24 Top-line Trends Total Revenue Next-Gen Security ARR +25% +26% +24% +26% +20% +67% +63% +60% +56% +53% y/y y/y y/y y/y y/y y/y y/y y/y y/y y/y Total Revenue Next-Gen Security ARR Total Billings Remaining Performance Obligation +27% +38% +39% +35% +30% +26% +26% +26% +18% +16% y/y y/y y/y y/y y/

16. Slide 16: Expanding profitability as we continue to invest for growth

    Expanding profitability as we continue to invest for growth Non-GAAP Operating Income & Margin Trailing 12 Month Adjusted Non-GAAP Free Cash Flow Trailing 12-month Adjusted Non-GAAP Free Cash Flow Non-GAAP Operating Income Non-GAAP Operating Margin Trailing 12-month Adjusted Non-GAAP Free Cash Flow M

17. Slide 17: Q1'24 Metrics

    Q1’24 Metrics Q1’24 Q1’24 Guidance (as of 8/18/23) Actual Total Billings $2.05B-$2.08B $2.02B 17%-19% yr/yr 16% yr/yr Total Revenue $1.82B-$1.85B $1.88B 16%-18% yr/yr 20% yr/yr Product Revenue $341M 3% yr/yr Remaining Performance Obligation $10.4B 26% yr/yr Next-Gen Security ARR $3.23B 53% yr/yr Gro

18. Slide 18: Cost of money has an outsized impact on billings

    Cost of money has an outsized impact on billings Drivers of volatility in our billings RPO & cRPO show strength in Q1’24 Volatility in contract duration +26% Q1’24 RPO Growth (y/y) Increased demand for deal financing Increased demand for deferred billings plans +22% Q1’24 cRPO Growth (y/y) To maintai

19. Slide 19: Q2 Fiscal 2024 Guidance

    Q2 Fiscal 2024 Guidance Q2’24 Guidance Total Billings $2.335B - $2.385B 15% - 18% yr/yr Total Revenue $1.955B - $1.985B 18% - 20% yr/yr EPS (Non-GAAP) $1.29 - $1.31 Reconciliations of historical non-GAAP measures can be found in the Appendix. Fiscal year ending on July 31. 19 | © 2023 Palo Alto Netw

20. Slide 20: Fiscal Year 2024 Guidance

    Fiscal Year 2024 Guidance FY 2024 FY 2024 Guidance (as of 8/18/23) Guidance (as of 11/15/23) Total Billings $10.9B - $11.0B $10.7B - $10.8B 19% - 20% yr/yr 16% - 17% yr/yr Next-Gen Security ARR $3.95B - $4.00B $3.95B - $4.00B 34 - 35% yr/yr 34% - 35% yr/yr Total Revenue $8.15B - $8.20B $8.15B - $8.2

21. Slide 21: Modeling Points

    Modeling Points ● Q2’24 and FY’24 non-GAAP effective tax rate: 22% ● FY’24 Cash taxes of $230M - $280M ● Q2’24 net interest and other income of $55M – $60M ● Q2’24 diluted shares outstanding 339 – 342 million ● FY’24 diluted shares outstanding 338 – 343 million ● Q2’24 capital expenditures of $40M –

22. Slide 22: Q&A

    Q&A | ©2023 © 2023Palo PaloAlto AltoNetworks, Networks,Inc. Inc. All rights reserved.

23. Slide 23: Appendix

    Appendix | ©2023 © 2023Palo PaloAlto AltoNetworks, Networks,Inc. Inc. All rights reserved.

24. Slide 24: Calculation of Billings

    Calculation of Billings $ In millions Billings: Q123 Q223 Q323 Q423 Q124 Total revenue $1,563.4 $1,655.1 $1,720.9 $1,953.3 $1,878.1 Add: change in total deferred revenue, net of acquired deferred revenue 185.6 374.0 535.3 1,206.8 146.4 Total billings $1,749.0 $2,029.1 $2,256.2 $3,160.1 $2,024.5 Fisc

25. Slide 25: GAAP to Non-GAAP Reconciliations – Gross Margin

    GAAP to Non-GAAP Reconciliations – Gross Margin $ In millions Non-GAAP gross profit and gross margin: Q123 Q124 $ % $ % GAAP gross profit and gross margin $1,101.5 70.5% $1,405.3 74.8% Share-based compensation-related charges 36.8 2.3% 39.6 2.1% Amortization expense of acquired intangible assets 23.3

26. Slide 26: GAAP to Non-GAAP Reconciliations – Operating Margin

    GAAP to Non-GAAP Reconciliations – Operating Margin $ In millions Non-GAAP operating income and operating margin: Q123 Q223 Q323 Q423 Q124 $ % $ % $ % $ % $ % GAAP operating income and operating margin $15.2 1.0% $39.9 2.4% $78.7 4.6% $253.5 13.0% $215.2 11.5% Share-based compensation-related charge

27. Slide 27: GAAP to Non-GAAP Reconciliations – EPS

    GAAP to Non-GAAP Reconciliations – EPS Non-GAAP net income per share, diluted: Q123 Q223 Q323 Q423 Q124 GAAP net income per share, diluted $0.06 $0.25 $0.31 $0.64 $0.56 Share-based compensation-related charges 0.87 0.94 0.91 0.86 0.86 Acquisition-related cost⁽¹⁾ 0.00 0.04 0.02 0.00 0.00 Amortization

28. Slide 28: GAAP to Non-GAAP Reconciliations – Adjusted Free Cash Flow

    GAAP to Non-GAAP Reconciliations – Adjusted Free Cash Flow $ In millions Free cash flow and adjusted free cash flow (non-GAAP): Q123 Q124 Net cash provided by operating activities $1,236.7 $1,526.0 Less: purchases of property, equipment, and other assets 39.6 36.8 Free cash flow (non-GAAP) $1,197.1 $1,

29. Slide 29: GAAP to Non-GAAP Reconciliations – Adjusted Free Cash Flow

    GAAP to Non-GAAP Reconciliations – Adjusted Free Cash Flow $ In millions TTM TTM TTM TTM TTM Free cash flow and adjusted free cash flow (non-GAAP): Q123 Q223 Q323 Q423 Q124 Net cash provided by operating activities $2,632.5 $2,844.5 $2,887.1 $2,777.5 $3,066.8 Less: purchases of property, equipment, an

30. Slide 30: Thank You

    Thank You paloaltonetworks.com | ©2023 © 2023Palo PaloAlto AltoNetworks, Networks,Inc. Inc.AllAllrights rightsreserved. reserved.

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