Palo Alto Networks, Inc. · NASDAQ:PANW
Palo Alto Networks — FY2018 Earnings Presentation
25 slides from Palo Alto Networks's earnings presentation, September 2018
Slide 1: Fiscal Fourth Quarter & Full Year 2018 Investor Presentation
Fiscal Fourth Quarter & Full Year 2018 Investor Presentation September 2018
Slide 2: Safe harbor
Safe harbor This presentation may contain “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on our management’s beliefs and assumptions and on information currently available to management, including statements reg
Slide 3: 3 | © 2018, Palo Alto Networks. All Rights Reserved.
3 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 4: Continuous evolution
Continuous evolution SaaS Cloud & Virtualization z MASSIVE OPPORTUNITY FOR CYBERCRIMINALS Mobility & BYOD Internet of Things 4 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 5: The challenge
The challenge SPEED z Keep pace with business needs RISK Disjointed tools limit insights BALANCING DISJOINTED TOOLS AND MANUAL EFFORTS 5 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 6: Security in the digital age
Security in the digital age z ANALYTICS AI IoT AUTOMATION DATA DRIVEN AUTOMATED CLOUD DELIVERED 6 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 7: Built for automation
The Palo Alto Networks Security Operating Platform PREVENT FOCUS ON CONSUME SUCCESSFUL WHAT MATTERS INNOVATIONS CYBERATTACKS QUICKLY Operate with ease using Automate tasks using From our technologies best practices context and analytics and 3rd parties. BUILT FOR AUTOMATION 7 | © 2018 Palo Alto Netw
Slide 8: The Palo Alto Networks Security Operating Platform
The Palo Alto Networks Security Operating Platform PALO ALTO NETWORKS APPS 3rd PARTY APPS CUSTOMER APPS APPLICATION FRAMEWORK LOGGING SERVICE THREAT INTEL DATA NETWORK ENDPOINT CLOUD 8 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 9: Large and expanding addressable market
Large and expanding addressable market Application Framework +$5Bn $24.0Bn Endpoint Security $5.2Bn $19.1Bn Endpoint Security Web Security $2.7Bn $4.4Bn Web Security $2.3Bn Network Security (Firewall, IPS, VPN) Network Security $16.1Bn (Firewall, IPS, VPN) $12.4Bn 2017 2020 Sources: IDC, Worldwide N
Slide 10: The power of the hybrid-SaaS model
The power of the hybrid-SaaS model Product Recurring subscription and support revenue Attached Non-attached Hardware Perpetual Support subscriptions subscriptions Traps VM-Series Threat Prevention AutoFocus URL Filtering Aperture Support GlobalProtect Logging Service Professional services Appliances
Slide 11: Continued strength of customer acquisition
Continued strength of customer acquisition Customer count Q4’18 >54,000 50,000 Q4’17 >42,500 40,000 Q4’16 ~34,000 Q4’15 30,000 >26,000 Q4’14 >19,000 20,000 Q4’13 >13,000 Q4’12 >8,000 Q4’11 10,000 >4,000 - Note: Fiscal year ends July 31. 11 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 12: Top-25 customer buying behavior
Top-25 customer buying behavior Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Industry Federal Gover
Slide 13: Q4’18 Financial highlights
Q4’18 Financial highlights Q4 FY’18 Q4 FY’17 Y/Y Change Billings(1) $868.1Mn $670.8Mn 29.4% Revenue $658.1Mn $509.1Mn 29.3% Gross margin %(2) 76.2% 77.3% (110) bps Operating margin %(2) 23.0% 23.7% (70) bps EPS(2) $1.28 $0.92 39.1% Deferred revenue $2.4Bn $1.8Bn 33.3% Adj. free cash flow margin %(2)
Slide 14: FY’18 Financial highlights
FY’18 Financial highlights FY’18 FY’17 Y/Y Change Billings(1) $2.9Bn $2.3Bn 24.7% Revenue $2.3Bn $1.8Bn 29.0% Gross margin %(2) 76.2% 77.9% (170) bps Operating margin %(2) 20.8% 20.1% 70 bps EPS(2) $3.99 $2.71 47.2% Deferred revenue $2.4Bn $1.8Bn 33.3% Adj. free cash flow margin %(2) 40.4% 45.2% (48
Slide 15: Annual billings momentum
Annual billings momentum $Millions $2,860 $2,293 $1,906 $1,219 $771 FY'14 FY'15 FY'16 FY'17 FY'18 Billings is a key financial metric defined as total revenue plus the change in total deferred revenue, net of acquired deferred revenue, during the period. See appendix for calculation. Note: Fiscal yea
Slide 16: Revenue by type
Revenue by type $Millions FY’14-FY’18 CAGR Product 27% $2,273 Subscription 58% Support 48% $1,762 $642 $1,378 $502 $759 $350 $928 $551 $222 $357 $598 $213 $135 $123 $872 $671 $709 $493 $340 FY'14 FY'15 FY'16 FY'17 FY'18 Product Subscription Support Note: Fiscal year ends July 31. All periods are und
Slide 17: Deferred revenue
Deferred revenue $2,365 $Millions % of total $1,773 $1,096 46% $805 $1,241 45% $537 43% $714 $1,269 $290 $423 $968 54% 41% $704 55% $163 38% $424 57% $260 62% 59% FY'14 FY'15 FY'16 FY'17 FY'18 Short-term deferred revenue Long-term deferred revenue Total Note: Fiscal year ends July 31. All periods ar
Slide 18: Leverage at scale
Leverage at scale $Millions $474 $925 $919 FY’14 Op margin(1): 11.6% FY’14 Adj. FCF margin(1): 21.4% FY’18 Op margin(1): 20.8% FY’18 Adj. FCF margin(1): 40.4% $797 $355 $705 $586 $587 $271 $153 $319 $319 $70 $128 $53 FY'14 FY'15 FY'16 FY'17 FY'18 FY'14 FY'15 FY'16 FY'17 FY'18 (1) (1) (1) Operating i
Slide 19: New revenue recognition standard: ASC 606
New revenue recognition standard: ASC 606 We will adopt the new standard using the full retrospective approach at the beginning of Q1 FY19 Current standard New standard (ASC 605) (ASC 606) Hardware / perpetual software(1) Upfront Upfront Term licenses Ratable Upfront Subscription / SaaS Ratable Rata
Slide 20: Appendix
Appendix —
Slide 21: Calculation of billings
Calculation of billings Note: Fiscal year ends July 31. 21 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 22: GAAP to non-GAAP reconciliations
GAAP to non-GAAP reconciliations (1) Consists of the amortization of intellectual property licenses. Note: Fiscal year ends July 31. 22 | © 2018, Palo Alto Networks. All Rights Reserved.
Slide 23: GAAP to non-GAAP reconciliations (cont’d)
GAAP to non-GAAP reconciliations (cont’d) (1) Consists of acquisition transaction costs, share-based compensation related to the accelerated vesting of certain equity awards, and costs to terminate certain employment, operating lease, and other contracts of the acquired companies. (2) Includes expen
Slide 24: GAAP to non-GAAP reconciliations (cont’d)
GAAP to non-GAAP reconciliations (cont’d) (1) Consists of acquisition transaction costs, share-based compensation related to the cash settlement of certain equity awards, and costs to terminate certain employment, operating lease, and other contracts of the acquired companies. (2) Consists of the am
Slide 25: GAAP to non-GAAP reconciliations (cont’d)
GAAP to non-GAAP reconciliations (cont’d) (1) Cash provided by operating activities during FY'18 includes the receipt of an upfront cash reimbursement of $38.2 million from our landlords in Q1'18 in connection with the exercise of their option to amend the lease payment schedules and eliminate the r