Palo Alto Networks, Inc. · NASDAQ:PANW
Palo Alto Networks — Q3 FY2019 Earnings Presentation
22 slides from Palo Alto Networks's earnings presentation, May 2019
Slide 1: Q3 FY'19 Investor Presentation
Q3 FY’19 Investor Presentation May 2019
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 | © 2019, Palo Alto Networks. All Rights Reserved.
3 | © 2019, 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 | © 2019, 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 | © 2019, 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 | © 2019, Palo Alto Networks. All Rights Reserved.
Slide 7: The Palo Alto Networks Security Operating Platform
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 | © 2019 Palo Alto Netw
Slide 8: Large and expanding addressable market
Large and expanding addressable market Cortex +$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 Network Security
Slide 9: 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 WildFire G
Slide 10: Continued strength of customer acquisition
Continued strength of customer acquisition Q3’19 Customer Acquisition ~62,000 60,000 Q3’18 ~51,000 50,000 Q3’17 >39,500 40,000 Q3’16 >31,000 Q3’15 30,000 >24,000 Q3’14 >17,000 20,000 Q3’13 >12,500 Q3’12 Q3’11 >7,500 10,000 >3,500 - Note: Fiscal year ends July 31. 10 | © 2019, Palo Alto Networks. All
Slide 11: Top-25 customer buying behavior
Top-25 customer buying behavior Q4'08 Q1'16 Q1'18 Q1'08 Q2'08 Q3'08 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 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q2'18 Q3'18 Q4'18 Q1'1
Slide 12: Q3'19 Financial highlights
Q3’19 Financial highlights Q3 FY’19 Q3 FY’18 Y/Y Change Billings(1) $821.9Mn $724.7Mn 13.4% Revenue $726.6Mn $567.7Mn 28.0% Gross margin %(2) 76.5% 76.2% 30 bps Operating margin %(2) 20.9% 21.4% (50) bps EPS(2) $1.31 $1.04 $0.27 Deferred revenue $2.6Bn $2.1Bn 26.9% Free cash flow margin %(2) 38.0% 3
Slide 13: Annual billings momentum
Annual billings momentum $Millions $2,856 $2,433 $2,252 $1,993 $1,906 $1,219 $771 FY'14 FY'15 FY'16 FY'17 FY'18 9M'18 9M'19 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 cal
Slide 14: Deferred revenue
Deferred revenue $2,632 $Millions $2,526 % of total $2,279 $1,914 $1,183 $1,156 45% $1,692 46% $1,066 47% $1,411 $876 $773 46% 46% $635 45% $1,369 $1,450 $1,214 54% 55% $1,037 53% $920 $776 54% 54% 55% Q2'17 Q4'17 Q2'18 Q4'18 Q2'19 Q3'19 Short-term deferred revenue Long-term deferred revenue Total A
Slide 15: Revenue by type
Revenue by type $Millions FY’14-FY’18 CAGR Product 27% $2,274 Subscription 58% $2,094 Support 47% $636 $1,755 $564 $1,615 $1,378 $498 $463 $758 $350 $740 $928 $549 $357 $544 $222 $598 $213 $135 $123 $880 $708 $791 $671 $608 $493 $340 FY'14 FY'15 FY'16 FY'17 FY'18 9M'18 9M'19 Product Subscription Sup
Slide 16: Leverage at scale
Leverage at scale $Millions FY’14 Adj. FCF margin(1): 21.9% FY’18 Adj. FCF margin(1): 40.5% FY’14 Op margin(1): 11.6% $926 $921 FY’18 Op margin(1): 21.9% $499 $827 $797 $463 $746 $705 $369 $587 $588 $271 $316 $316 $153 $70 $131 $56 FY'14 FY'15 FY'16 FY'17 FY'18 9M'19 FY'14 FY'15 FY'16 FY'17 FY'18 9M
Slide 17: Appendix
_— Appendix
Slide 18: Calculation of billings
Calculation of billings $Millions Billings: FY'14 FY'15 FY'16 FY'17(1) FY'18(1) 9M'18(1) 9M'19 Q3'18(1) Q3'19 Total revenue $ 598.2 $ 928.1 $ 1,378.5 $ 1,755.1 $ 2,273.6 $ 1,615.1 $ 2,093.8 $ 567.7 $ 726.6 Add: change in total deferred revenue, net of acquired deferred 173.2 291.0 527.1 496.6 582.6
Slide 19: GAAP to non-GAAP reconciliations
GAAP to non-GAAP reconciliations $Millions Non-GAAP gross profit and gross margin: Q3'18 Q3'19 $ % $ % GAAP gross profit and gross margin (1) $ 407.8 71.8% $ 521.7 71.8% Share-based compensation-related charges 18.2 3.3% 20.7 2.8% Amortization expense of acquired intangible assets 3.4 0.6% 10.7 1.5%
Slide 20: GAAP to non-GAAP reconciliations (cont'd)
GAAP to non-GAAP reconciliations (cont’d) $Millions Non-GAAP operating income and operating margin: FY'14 FY'15 FY'16 FY'17 FY'18 $ % $ % $ % $ % $ % (1) GAAP operating loss and operating margin $ (196.2) (32.8%) $ (99.8) (10.8%) $ (157.3) (11.4%) $ (165.8) (9.4%) $ (104.2) (4.6%) Share-based compen
Slide 21: GAAP to non-GAAP reconciliations (cont'd)
GAAP to non-GAAP reconciliations (cont’d) Non-GAAP net income per share, diluted: Q3'18(1) Q3'19 GAAP net loss per share, diluted $ (0.44) $ (0.21) Share-based compensation-related charges 1.30 1.48 (2) Acquisition-related costs 0.14 0.03 Amortization expense of acquired intangible assets 0.04 0.15
Slide 22: GAAP to non-GAAP reconciliations (cont'd)
GAAP to non-GAAP reconciliations (cont’d) $Millions Free cash flow and adjusted free cash flow (non-GAAP): FY'14 (1) FY'15 (1) FY'16(1) FY'17 (1) FY'18 (1) 9M'18 (1) 9M'19 Q3'18 (1) Q3'19 (2) Net cash provided by operating activities $ 92.0 $ 349.4 $ 659.1 $ 868.8 $ 1,038.1 $ 760.5 $ 824.1 $ 241.9 $