Palo Alto Networks, Inc. · NASDAQ:PANW
Palo Alto Networks — Q2 2023 Earnings Presentation
32 slides from Palo Alto Networks's earnings presentation, Feb 21, 2023
Slide 1: Q2 Fiscal Year 2023 Earnings Call
Q2 Fiscal Year 2023 Earnings Call February 21, 2023
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 that are based on our management’s beliefs and assumptions and on information currently available to management, including statements relate
Slide 3: Nikesh Arora, CEO & Chairman
NIKESH ARORA CEO & CHAIRMAN NETWORKS
Slide 4: Q2 Results Balanced Top Line Performance
Q2 Results Total Billings1 Remaining Performance Obligation Balanced $2.03B $8.8B +26% y/y +39% y/y Top Line NGS ARR2 Total Revenue Performance $2.33B $1.66B +63% y/y +26% y/y Operating Income (non-GAAP) EPS (non-GAAP) Delivered $377M $1.05 +55% y/y +$0.28 vs. Q2 Guidance3 Accelerated Adj. Free Cash
Slide 5: Heads down execution in a tough macro environment
Heads down execution in a tough macro environment Our Execution Macro Factors Focus FY23 guidance updates Sustained Investing for $9.10B-$9.20B Cybersecurity Demand profitable growth Billings was $8.95B - $9.10B $2.75B-$2.80B Increased Deal Staying ahead of NGS ARR was $2.65B - $2.70B Scrutiny longer
Slide 6: Early days of consolidation in Cybersecurity
Early days of consolidation in Cybersecurity >$1M deals in Q2’23 >$5M deals in Q2’23 >$10M deals in Q2’23 +19% Y/Y +84% Y/Y +144% Y/Y Number of >$1M deals in Q2’23 Number of >$5M deals in Q2’23 Number of >$10M deals in Q2’23 +59% Y/Y +132% Y/Y +196% Y/Y Total Value of >$1M deals in Q2’23 Total Value
Slide 7: Themes driving consolidation
Themes driving consolidation Zero Trust Transformation 8 figure deal | Financial Services Firm 8 figure deal | Life Sciences Firm Cloud Transformation SOC Transformation High 8 figure deal | Financial Services Firm High 7 figure deal | Retail Firm Fiscal year ending on July 31. 7 | © 2023 Palo Alto Netw
Slide 8: Constant Innovation Flywheel
Constant Innovation Flywheel R&D Investment Innovation $1.0B 35 Key 1H’23 Product Launches AI-Ops & Adv. Wildfire Trailing 12-months R&D Major Product Spending1 Releases2 in 1H’23 PAN-OS 11.0 Prisma Access 3.2 Prisma Cloud SCA 2x - 5x +59% XDR 3.5 Xpanse 2.0 XSIAM The spend of pure-play vs. Major Pro
Slide 9: NGS: High Growth Area - SASE
NGS: High Growth Area - SASE Five-year revenue stream ~$1B $40M NGFW in bookings last 6 First $40M SASE deal Appliance 1x quarters SASE (FY’21) ~2x Prisma® Drivers of additional value: SASE ~50% 4K+ ADEM | AI Ops | SSPM ARR growth1 as we Active customers2 scale SASE Gross margin (FY’23) >2.5x up vs.
Slide 10: NGS: Software Firewalls Inflection
NGS: Software Firewalls Inflection Macro environment is driving preference for >$1M deals OpEx vs. nearly doubled CAPEX Y/Y in Q2’23 VM Market Share Leader Software Firewalls >3x share of #2 player1 Large deals Bookings include SW FW acceleration 6 of the 8 largest deals in Q2 through 1H’FY23 include
Slide 11: NGS: More modules, more consumption -- steady Prisma Cloud growth
NGS: More modules, more consumption -- steady Prisma Cloud growth New modules and enhancements to Strong credit growth and broaden our platform module adoption Code & Build Deploy Run 4+ +114% modules Customers y/y Prisma® Open Source Scanning Infrastructure as Code (IaC) Cloud Security Posture Mgmt
Slide 12: Well positioned to transform cybersecurity with AI
Well positioned to transform cybersecurity with AI AI-based Zero day protections2 Real time response outcomes 2.5M new malicious websites 10 second mean time to detect1 3.8M new malicious domains 1 minute mean time to remediate1 158K new malware 1,000+ AI-detection algorithms applied to 4PB+ data/da
Slide 13: NGS: XDR, Xpanse, XSOAR perform, Encouraging XSIAM traction
NGS: XDR, Xpanse, XSOAR perform, Encouraging XSIAM traction Competitive best of breed Enabling us to transform capabilities… security operations with XSIAM New in Q2 ~$30M XSIAM Bookings through Q2’23 Signed 60th 8.0 / SaaS Active ASM GA Launch XMDR partner Cortex® Early access / beta …and strong cr
Slide 14: Our operating model focused on AI, better operations, scale and profitable growth
Our operating model focused on: AI, better operations, scale and profitable growth Sustaining revenue growth for longer with strength in Next Generation Security offerings Driving Operating leverage on a new base having achieved our 2021 Analyst Day Plan Sustaining free cash flow margins driven by ope
Slide 15: Dipak Golechha, Chief Financial Officer
DIPAK GOLECHHA CHIEF FINANCIAL OFFICER NETWORKS
Slide 16: Strong top-line trends in Q2'23
Strong top-line trends in Q2’23 Total Revenue Next-Gen Security ARR Total Revenue Total Revenue (y/y) Next-Gen Security ARR Total Billings Remaining Performance Obligation Total Billings Total Billings (y/y) Remaining Performance Obligation Remaining Performance Obligation (y/y) Fiscal year ending o
Slide 17: Focused on profitable growth
Focused on profitable growth Non-GAAP Earnings Per Share1 Trailing 12 Month Adjusted Non-GAAP Free Cash Flow Non-GAAP Earnings Per Share Trailing 12-month Adjusted Non-GAAP Free Cash Flow Non-GAAP Earnings Per Share (y/y) Trailing 12-month Adjusted Non-GAAP Free Cash Flow (y/y) 1 Non-GAAP Earnings Pe
Slide 18: Q2 metrics
Q2 metrics Q2’23 Q2’23 Guidance (as of 11/17/22) Actual Total Billings $1.94B-$1.99B $2.03B 21%-24% yr/yr 26% yr/yr Total Revenue $1.63B-$1.66B $1.66B 24%-26% yr/yr 26% yr/yr Product Revenue $353M 15% yr/yr Remaining Performance Obligation $8.8B 39% yr/yr Next-Gen Security ARR $2.33B 63% yr/yr Gross
Slide 19: Operating Margin Resilience: Balanced Growth/OM
Operating Margin Resilience: Balanced Growth/OM Drivers Peers of EPS growth demonstrate we haveahead of OM room in Raising the bar Scale in our on ROI as we scale revenue fastest-growing requirements for businesses investments Operating Optimizing our Annual Revenue Growth leverage capital structure
Slide 20: Q3 and Q4 fiscal 2023 guidance
Q3 and Q4 fiscal 2023 guidance Q3’23 Q4’23 Total Billings $2.20B - $2.25B $3.12B - $3.17B 22%-25% yr/yr 16%-18% yr/yr Total Revenue $1.695B - $1.725B $1.937B - $1.967B 22%-24% yr/yr 25%-27% yr/yr EPS (Non-GAAP)1 $0.90 - $0.94 $1.18 - $1.22 50%-57% yr/yr 48%-53% yr/yr Maintaining our annual revenue gu
Slide 21: Fiscal year 2023 guidance
Fiscal year 2023 guidance : FY 2023 FY 2023 Guidance as of 11/17/22 Guidance as of 2/21/23 Total Billings $8.95B - $9.10B $9.10B - $9.20B +20%-22% yr/yr +22%-23% yr/yr Next-Gen Security ARR $2.65B - $2.70B $2.75B - $2.80B +40%-43% yr/yr +45%-48% yr/yr Total Revenue $6.85B - $6.91B $6.85B - $6.91B +2
Slide 22: Modeling points
Modeling points ● Q3’23 and FY’23 non-GAAP effective tax rate: 22% ● Q3’23 and Q4’23 net interest and other income of $45M – $49M ● Q3’23 diluted shares outstanding 321 – 327 million ● Q4’23 diluted shares outstanding 326 – 332 million ● FY23 diluted shares outstanding 320 – 326 million ● Q3’23 capi
Slide 23: @paloalto
@ paloalto
Slide 24: Appendix
@ paloalto
Slide 25: Investor Links and Resources
Investor Links and Resources Analyst Day Videos | Sept 2021 (single click access to each executive’s presentation) Presenter | Video replay link Duration Nikesh Arora, CEO & Chairman | Where We Are & Looking Ahead 18:34 Lee Klarich, Chief Product Officer | Market Needs & Our Platforms 40:42 Anand Osw
Slide 26: Calculation of Billings
Calculation of Billings $ In millions Billings: Q222 Q322 Q422 Q123 Q223 Total revenue $1,316.9 $1,386.7 $1,550.5 $1,563.4 $1,655.1 Add: change in total deferred revenue, net of acquired deferred revenue 291.0 410.2 1,134.6 185.6 374.0 Total billings $1,607.9 $1,796.9 $2,685.1 $1,749.0 $2,029.1 26 |
Slide 27: GAAP to Non-GAAP Reconciliations – Gross Margin
GAAP to Non-GAAP Reconciliations – Gross Margin Non-GAAP gross profit and gross margin: Q222 Q223 $ % $ % GAAP gross profit and gross margin $911.6 69.2% $1,188.9 71.8% Share-based compensation-related charges 35.5 2.7% 39.4 2.5% Amortization expense of acquired intangible assets 26.1 2.0% 19.0 1.1%
Slide 28: GAAP to Non-GAAP Reconciliations – Research and Development Expense
GAAP to Non-GAAP Reconciliations – Research and Development Expense $ In millions Non-GAAP research and development expense: TTM Q223 GAAP research and development expense $1,495.1 Share-based compensation-related charges (485.4) Restructuring and other costs⁽¹⁾ (1.8) Non-GAAP research and developme
Slide 29: GAAP to Non-GAAP Reconciliations – Operating Margin
GAAP to Non-GAAP Reconciliations – Operating Margin $ In millions Non-GAAP operating income and operating margin: Q222 Q223 $ % $ % GAAP operating income (loss) and operating margin ($73.9) -5.6% $39.9 2.4% Share-based compensation-related charges 283.3 21.5% 298.6 18.1% Acquisition-related costs⁽¹⁾
Slide 30: GAAP to Non-GAAP Reconciliations – EPS
GAAP to Non-GAAP Reconciliations – EPS Non-GAAP net income per share, diluted: Q221 Q321 Q421 Q122 Q222 Q322 Q422 Q123 Q223 GAAP net income (loss) per share, diluted ($0.49) ($0.50) ($0.41) ($0.35) ($0.32) ($0.25) $0.01 $0.06 $0.25 Share-based compensation-related charges 0.81 0.83 0.80 0.88 0.90 0.
Slide 31: 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 TTM TTM TTM TTM TTM TTM TTM TTM TTM Q222 Q223 (non-GAAP): Q221 Q321 Q421 Q122 Q222 Q322 Q422 Q123 Q223 Net cash provided by operating activities $482.6 $694.6 $1,403.0 $1,510.9 $1,503.
Slide 32: Thank you
Thank you paloaltonetworks.com