Palo Alto Networks, Inc. · NASDAQ:PANW

Palo Alto Networks — Q4 2024 Earnings Presentation

34 slides from Palo Alto Networks's earnings presentation, Aug 19, 2024

1. Slide 1: Q4 Fiscal Year 2024 Earnings Call

   Q4 Fiscal Year 2024 Earnings Call August 19, 2024 | ©2024 © 2024Palo 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 the cybersecurity threat landscape, expectations regarding our platformization strategy and related progress and opportunities, l

3. Slide 3: | © 2024 Palo Alto Networks, Inc. All rights reserved.

   | © 2024 Palo Alto Networks, Inc. All rights reserved.

4. Slide 4: The Cybersecurity environment continues to intensify

   The Cybersecurity environment continues to intensify Uptick in mega-breaches Additional trends creating further cybersecurity challenges Multi-$BB impacts from breaches Sprawling Interconnectedness of business exacerbating impacts Ransomware public extortion activity Recent broad outage has elevated

5. Slide 5: 2H acceleration allowed us to outperform across the board in Q4

   2H acceleration allowed us to outperform across the board in Q4 Focused Execution Against …balanced with strong Top-Line Targets… profitability and cash generation Q4’24 NGS ARR1 Q4’24 RPO FY’24 Operating Margin (non-GAAP) Q4’24 EPS (non-GAAP) $4.22B $12.7B 27.3% $1.51 +43% y/y +20% y/y +320 bps y/y

6. Slide 6: Our business in Q4 was driven by early momentum in Platformization

   Our business in Q4 was driven by early momentum in Platformization >$2.0M 3 Platforms Average ARR per platformized customer, up >10% since Q1’24 >1,000 Total Platformizations1 At least 2 2,500-3,500 Platforms Platformizations to reach $15B NGS ARR Target >90 New Platformizations in Q4 in FY’30 +70%

7. Slide 7: Key Platformization deals from Q4

   Key Platformization deals from Q4 3-Platform Customer 2-Platform Customer High 8-figure deal with a global energy 8-figure deal with a semiconductor company platformized on Network company beating out competitors Security, Cloud Security, and Security firewalls and platformizing in NetSec and Operation

8. Slide 8: FY 24: Software and SASE are leading our Network Security growth

   FY 24: Software and SASE are leading our Network Security growth FWaaP1 driven by growth in Software and SASE in FY’24 SASE Customer Momentum 100% Appliance % of Total FWaaP2 67% 55% >5,300 SASE customers, up 21% y/y Software & 41% Software % of Total FWaaP4 54% SASE % of Total Software & SASE FWaaP

9. Slide 9: Security subscription adoption is also adding to our momentum

   Security subscription adoption is also adding to our momentum Ramping opportunity for our higher-value Subscription attach rate is up 35% since Q4’22 advanced subscriptions1 34K 3.5 3.1 2.6 18K 11K Q4 Launch Q4’21 Q3’22 Q2’23 Q4’24 Advanced Advanced Advanced Advanced Q4’22 Q4’23 Q4’24 URL Threat Wil

10. Slide 10: FY 25: Innovation in software and SASE - drive continued growth

    FY 25: Innovation in software and SASE - drive continued growth First enterprise browser ADEM across NetSec, natively integrated bringing this key SASE into SASE differentiator to our firewalls AI Access Security AI Runtime protects enables safe GenAI enterprise AI applications adoption 10 | © 2024 Pa

11. Slide 11: FY 24/25: Maintaining momentum in the competitive Cloud Security market

    FY 24/25: Maintaining momentum in the competitive Cloud Security market We are staying ahead of the Hitting milestones and driving Cloud industry leaders chose CNAPP market with innovation growth with new customers Prisma Cloud in FY’24 General availability of 13th 7-figure deal module: st Pure-play

12. Slide 12: FY 24: Cortex crossed $900M in ARR with strength driven by XSIAM

    FY 24: Cortex crossed $900M in ARR with strength driven by XSIAM Customers are making significant Broader Cortex momentum continues XSIAM investments to transform their with breach activity top-of-mind SoC ~$500M >$900M FY’24 XSIAM Bookings Cortex ARR >4x >6,100 XSIAM active customers in FY’24, y/y C

13. Slide 13: FY 25: Expanded opportunities for XSIAM Platformization

    FY 25: Expanded opportunities for XSIAM Platformization XSIAM drives Significant reduction in MTTR1 Post-Platformization opportunities Cortex® XDR™ Additional add-on Before XSIAM After XSIAM modules 2-3 Days as low as XSIAM for Cloud, in ~1 minute Cortex® XSOAR addition to enterprise Enabling leading

14. Slide 14: Clear market leadership fueled by evergreen innovation

    Clear market leadership fueled by evergreen innovation Product leadership in 24 different cybersecurity markets Evergreen innovation Product Category Leaderships Network Cloud Security Security Platform 9 Security Platform 8 Operations Platform 7 CDR Enterprise Browser App Acceleration AI Access Secu

15. Slide 15: Encouraged by early momentum in AI ARR - FY’25 launches

    Encouraged by early momentum in AI ARR - FY’25 launches Gaining scale and General availability of Secure AI by design offerings growing rapidly AI ARR1 >$200M Growth AI Access AI SPM AI Runtime Securely enable Securing AI Protect enterprise GenAI applications in the Cloud AI applications ~4x y/y Laun

16. Slide 16: Strong finish to FY'24, optimistic about sustained growth in FY'25

    Strong finish to FY'24, optimistic about sustained growth in FY'25 We saw acceleration in 2H driven by demand for platformization Platformization momentum is broadening and strengthened as we closed Q4 We are sustaining our market leadership through ‘evergreen’ innovation across our three platforms,

17. Slide 17: | © 2024 Palo Alto Networks, Inc. All rights reserved.

    | © 2024 Palo Alto Networks, Inc. All rights reserved.

18. Slide 18: Q4’24 Metrics

    Q4’24 Metrics Q4’24 Q4’24 Guidance (as of 5/20/24) Actual Total Billings $3.43B-$3.48B $3.50B 9%-10% yr/yr 11% yr/yr Total Revenue $2.15B-$2.17B $2.19B 10%-11% yr/yr 12% yr/yr Product Revenue $481M (5)% yr/yr Remaining Performance Obligation $12.7B 20% yr/yr Next-Gen Security ARR $4.22B 43% yr/yr Gr

19. Slide 19: RPO and NGS ARR continue to be steady indicators of our business

    RPO and NGS ARR continue to be steady indicators of our business RPO growth y/y NGS ARR growth y/y Revenue growth y/y Billings growth y/y 19 | © 2024 Palo Alto Networks, Inc. All rights reserved.

20. Slide 20: We have outlined the challenges with billings over the last year

    We have outlined the challenges with billings over the last year Q4’23 Earnings Call Q1’24 Earnings Call Q2’24 Earnings Call Q3’24 Earnings Call “As we see the shift in billing “Our Q1 revenue grew 20%, and our terms, RPO is becoming a more billings grew 16%, while our RPO important leading indicato

21. Slide 21: RPO & Revenue give visibility to both Long Term & Short Term contracted business

    RPO & Revenue give visibility to both Long Term & Short Term contracted business RPO & RPO Growth Revenue & Revenue Growth RPO RPO Growth y/y Revenue Revenue Growth y/y 21 | © 2024 Palo Alto Networks, Inc. All rights reserved.

22. Slide 22: While NGS ARR is a great indicator of our continued transformation

    While NGS ARR is a great indicator of our continued transformation $15.0B ~90% of revenue NGS ARR $5.42B- recurring $4.2B 5.47B $3.0B $1.9B FY’22 FY’23 FY’24 FY’25 FY’30 Target Guidance FY exit NGS ARR as a % of Total FY Revenue 34% 43% 53% 60% 22 | © 2024 Palo Alto Networks, Inc. All rights reserve

23. Slide 23: Replacing billings with NGS ARR and RPO in our guidance

    As a result, we are replacing billings with NGS ARR and RPO in our guidance NGS ARR Q1’25 FY’25 +34-36% +28-30% Y/Y Y/Y Billings Remaining Performance Obligation Q1’25 FY’25 +19-20% +19-20% Y/Y Y/Y Other companies focusing on RPO and ARR 23 | © 2024 Palo Alto Networks, Inc. All rights reserved.

24. Slide 24: Q1 & Fiscal Year 2025 Guidance

    Q1 & Fiscal Year 2025 Guidance Q1 FY’25 FY 2025 Guidance (as of 8/19/24) Guidance (as of 8/19/24) Next-Gen Security ARR $4.33B - $4.38B $5.42B - $5.47B 34% - 36% yr/yr 28% - 30% yr/yr Remaining Performance Obligation $12.4B - $12.5B $15.2B - $15.3B 19% - 20% yr/yr 19% - 20% yr/yr Total Revenue $2.10

25. Slide 25: Modeling Points

    Modeling Points ● Q1’25 and FY’25 non-GAAP effective tax rate: 22% ● FY’25 Cash taxes of $550M - $625M, up from $340M in FY’24 ● Q1’25 net interest and other income of ~$73-78M ● Q1’25 diluted shares outstanding 348 – 350 million ● FY’25 diluted shares outstanding 350 – 354 million ● Q1’25 capital ex

26. Slide 26: Q&A

    Q&A | ©2024 © 2024Palo PaloAlto AltoNetworks, Networks,Inc. Inc. All rights reserved.

27. Slide 27: Appendix

    Appendix | ©2024 © 2024Palo PaloAlto AltoNetworks, Networks,Inc. Inc. All rights reserved.

28. Slide 28: Calculation of Billings

    Calculation of Billings $ In millions Billings: Q421 Q122 Q222 Q322 Q422 Q123 Q223 Q323 Q423 Q124 Q224 Q324 Q424 Total revenue $1,219.3 $1,247.4 $1,316.9 $1,386.7 $1,550.5 $1,563.4 $1,655.1 $1,720.9 $1,953.3 $1,878.1 $1,975.1 $1,984.8 $2,189.5 Add: change in total deferred revenue, 649.0 134.2 291.0

29. Slide 29: GAAP to Non-GAAP Reconciliations – Gross Margin

    GAAP to Non-GAAP Reconciliations – Gross Margin $ In millions Non-GAAP gross profit and gross margin: Q423 Q424 $ % $ % GAAP gross profit and gross margin $1,446.5 74.1% $1,615.8 73.8% Share-based compensation-related charges 41.8 2.1% 37.5 1.7% Amortization expense of acquired intangible assets 19.3

30. Slide 30: GAAP to Non-GAAP Reconciliations – Operating Margin

    GAAP to Non-GAAP Reconciliations – Operating Margin $ In millions Non-GAAP operating income and operating margin: Q423 Q424 FY'23 FY'24 $ % $ % $ % $ % GAAP operating income and operating margin $253.5 13.0% $238.4 10.9% $387.3 5.6% $683.9 8.5% Share-based compensation-related charges 274.1 14.0% 28

31. Slide 31: GAAP to Non-GAAP Reconciliations – EPS

    GAAP to Non-GAAP Reconciliations – EPS Non-GAAP net income per share, diluted: Q423 Q424 GAAP net income per share, diluted $0.64 $1.01 Share-based compensation-related charges 0.86 0.85 Acquisition-related cost⁽¹⁾ 0.00 0.01 Amortization expense of acquired intangibles assets 0.07 0.10 Litigation-re

32. Slide 32: 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): Q424 Net cash provided by operating activities $512.7 Less: purchases of property, equipment, and other assets 47.4 Free cash flow (non-GAAP) $465.3 Add: litigation related pa

33. Slide 33: 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): FY'23 FY'24 Net cash provided by operating activities $2,777.5 $3,257.6 Less: purchases of property, equipment, and other assets 146.3 156.8 Free cash flow (non-GAAP) $2,631.2

34. Slide 34: Thank You

    Thank You paloaltonetworks.com | ©2024 © 2024Palo PaloAlto AltoNetworks, Networks,Inc. Inc.AllAllrights rightsreserved. reserved.

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