Palo Alto Networks, Inc. · NASDAQ:PANW

Palo Alto Networks — Q3 2024 Earnings Presentation

30 slides from Palo Alto Networks's earnings presentation, May 20, 2024

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
Slide 4: Attack activity, compounded by AI, kept cybersecurity in focus in Q3
Attack activity, compounded by AI, kept cybersecurity in focus in Q3 High proﬁle attacks continuing to AI adoption is creating a new attack escalate surface, and increasing cloud demand Stable spending backdrop with ‘Green shoots’ from our accelerated Cybersecurity priorities well-funded consolidati
Slide 5: We delivered great Q3 results
We delivered great Q3 results Focused Execution Against 9th consecutive quarter of Top-Line Targets operating margin expansion NGS ARR1 Remaining Performance Obligation Operating Income (non-GAAP) Operating Margin (non-GAAP) $3.79B $11.3B $508M 25.6% +47% y/y +23% y/y +25% y/y +200 bps y/y Total Rev
Slide 7: We measured our success in 'landing' platforms over the last several years
We measured our success in ‘landing’ platforms over the last several years Customer Landed on: Landed 3 Platforms2 13% At least 2 51% Platforms At least 1 Platform 100% 0 Top 5k customers1 (Q3’24) 5,000 70,000+ Q3’24 Active Customers 1 Top 5k customers represents 5,000 largest Palo Alto Networks cus
Slide 8: Platformization drove significant ARR expansion
It became clear to us that platformization drove signiﬁcant ARR expansion Landed Landed NGS ARR1 Platformized NGS ARR2 Platformized 3 Platforms 2 Platforms ~$200k ~$800k ~$2M ~$14M Average NGS ARR for Average NGS ARR for Average NGS ARR for Average NGS ARR for 1 Platform a customer landed on a custo
Slide 9: Platformization progress toward our $15B NGS ARR forecast in FY30
Platformization progress toward our $15B NGS ARR forecast in FY301 3 Platforms ~900 2,500-3,500 Platformizations2 Platformizations to reach $15B through Q3’24 NGS ARR Target in FY’30 At least 2 Platforms ~65 At least 1 New Platformizations in Platform Q3’24, up 40% since Q2 0 Top 5k customers (FY’30
Slide 10: Platformization is benefitting our customers with higher productivity and better security effectiveness
Platformization is beneﬁtting our customers with higher productivity and better security eﬀectiveness “The point product cybersecurity tool approach is ineﬀective given the new reality” Higher productivity1 Better security eﬀectiveness 10% 34% 1.4x 1.6x lower annualized security More eﬃcient Faster
Slide 11: Our largest deals in Q3 showcase the broad drivers of our momentum
Our largest deals in Q3 showcase the broad drivers of our momentum New logo deal Platformization deal 7-ﬁgure deal ﬁrst sale to a U.S. local 8-ﬁgure deal with a data services government displacing competitor’s company, platforming on SASE. ﬁrewalls and purchasing Cortex XDR New platform adoption dea
Slide 12: Driving platformization together with IBM
Driving platformization together with IBM Expansion of partnership to drive platformization in joint customers with initial focus on security operations 12 | © 2024 Palo Alto Networks, Inc. All rights reserved.
Slide 13: A milestone moment around AI Security, addressing a ~$15B TAM
We delivered a milestone moment around AI Security, addressing a ~$15B TAM1 Announced solutions to Delivered co-pilots2 across Announced the Precision secure AI by design all three platforms AITM Security Bundle AI Enable Safe AI Adoption to Leverage inline AI to counter AI Access attacks with AI De
Slide 14: We continue to deliver innovation across our three platforms
We continue to deliver innovation across our three platforms SASE 3.0 AI-based New modules showcase our XSIAM momentum is spurring Innovations innovation Cortex growth Industry’s only SASE-integrated Enterprise Browser, an important Cloud Detection and Response (CDR) release with Cortex XSIAM AI sec
Slide 15: Cement our broad market leadership across all three platforms
And cement our broad market leadership across all three platforms Product leadership in 23 diﬀerent cybersecurity markets Network Security Platform Cloud Security Platform Security Operations Platform Best-in-class Zero Trust Platform Comprehensive, cloud-native Breakthrough outcomes for SOC by acro
Slide 16: We are pleased with our Q3 execution and focused on closing out a strong FY'24
We are pleased with our Q3 execution and are focused on closing out a strong FY’24 Strong Q3 results, on the back of stable spending environment New threat vectors, such as AI, fueling breach activity Strong initial traction of our accelerated consolidation and platformization strategy, with endorse
Slide 18: Q3'24 Metrics
Q3’24 Metrics Q3’24 Q3’24 Guidance (as of 2/20/24) Actual Total Billings $2.30B-$2.35B $2.33B 2%-4% yr/yr 3% yr/yr Total Revenue $1.95B-$1.98B $1.98B 13%-15% yr/yr 15% yr/yr Product Revenue $391M 1% yr/yr Remaining Performance Obligation $11.3B 23% yr/yr Next-Gen Security ARR $3.79B 47% yr/yr Gross
Slide 19: Continued consistency in RPO growth with an uptick in Q3
Continued consistency in RPO growth with an uptick in Q3 RPO growth y/y NGS ARR growth y/y Services revenue growth y/y Billings growth y/y 19 | © 2024 Palo Alto Networks, Inc. All rights reserved.
Slide 20: Selected financial details of our IBM partnership
Selected ﬁnancial details of our IBM partnership $500M in upfront cash consideration at close to purchase IBM’s QRadar SaaS assets including QRadar intellectual property rights ‘Earn-out’ over multiple years based on successful migration of QRadar on-premise customers to XSIAM We anticipate closing
Slide 21: Q4 & Fiscal Year 2024 Guidance
Q4 & Fiscal Year 2024 Guidance Q4 FY’24 FY 2024 Guidance (as of 5/20/24) Guidance (as of 5/20/24) Total Billings $3.43B - $3.48B $10.13B - $10.18B 9% - 10% yr/yr 10% - 11% yr/yr Next-Gen Security ARR $4.05B - $4.10B 37% - 39% yr/yr Total Revenue $2.15B - $2.17B $7.99B - $8.01B 10% - 11% yr/yr 16% yr
Slide 24: Modeling Points
Modeling Points ● Q4’24 and FY’24 non-GAAP eﬀective tax rate: 22% ● FY’24 Cash taxes of $230M - $280M ● Q4’24 net interest and other income of ~$70M ● Q4’24 diluted shares outstanding 345 – 347 million ● FY’24 diluted shares outstanding 343 – 344 million ● Q4’24 capital expenditures of $50M – $55M ●
Slide 25: Calculation of Billings
Calculation of Billings $ In millions Billings: Q321 Q421 Q122 Q222 Q322 Q422 Q123 Q223 Q323 Q423 Q124 Q224 Q324 Total revenue $1,073.9 $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 Add: change in total deferred revenue, net of 212.5 649.
Slide 26: GAAP to Non-GAAP Reconciliations – Gross Margin
GAAP to Non-GAAP Reconciliations – Gross Margin $ In millions Non-GAAP gross proﬁt and gross margin: Q323 Q324 $ % $ % GAAP gross proﬁt and gross margin $1,246.1 72.4% $1,471.2 74.1% Share-based compensation-related charges 42.4 2.4% 39.7 2.0% Amortization expense of acquired intangible assets 19.9
Slide 27: GAAP to Non-GAAP Reconciliations – Operating Income & Operating Margin
GAAP to Non-GAAP Reconciliations – Operating Income & Operating Margin $ In millions Non-GAAP operating income and operating margin: Q323 Q324 $ % $ % GAAP operating income and operating margin $78.7 4.6% $176.7 8.9% Share-based compensation-related charges 293.5 17.0% 290.0 14.6% Acquisition-relate
Slide 28: GAAP to Non-GAAP Reconciliations – EPS
GAAP to Non-GAAP Reconciliations – EPS Non-GAAP net income per share, diluted: Q323 Q324 GAAP net income per share, diluted $0.31 $0.79 Share-based compensation-related charges 0.91 0.85 Acquisition-related cost⁽¹⁾ 0.02 0.01 Amortization expense of acquired intangibles assets 0.07 0.09 Litigation-re
Slide 29: GAAP to Non-GAAP Reconciliations – Adjusted Free Cash Flow
GAAP to Non-GAAP Reconciliations – Adjusted Free Cash Flow $ In millions TTM TTM Free cash ﬂow and adjusted free cash ﬂow (non-GAAP): Q324 Q323 Q324 Net cash provided by operating activities $528.9 $2,887.1 $3,159.0 Less: purchases of property, equipment, and other assets 37.4 148.3 146.6 Free cash

Palo Alto Networks — Q3 2024 Earnings Presentation on 6ix

Palo Alto Networks — Q3 2024 Earnings Presentation

Slide 1: Q3 Fiscal Year 2024 Earnings Call

Slide 2: Safe Harbor

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

Slide 4: Attack activity, compounded by AI, kept cybersecurity in focus in Q3

Slide 5: We delivered great Q3 results

Slide 6: Our platformization framework

Slide 7: We measured our success in 'landing' platforms over the last several years

Slide 8: Platformization drove significant ARR expansion

Slide 9: Platformization progress toward our $15B NGS ARR forecast in FY30

Slide 10: Platformization is benefitting our customers with higher productivity and better security effectiveness

Slide 11: Our largest deals in Q3 showcase the broad drivers of our momentum

Slide 12: Driving platformization together with IBM

Slide 13: A milestone moment around AI Security, addressing a ~$15B TAM

Slide 14: We continue to deliver innovation across our three platforms

Slide 15: Cement our broad market leadership across all three platforms

Slide 16: We are pleased with our Q3 execution and focused on closing out a strong FY'24

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

Slide 18: Q3'24 Metrics

Slide 19: Continued consistency in RPO growth with an uptick in Q3

Slide 20: Selected financial details of our IBM partnership

Slide 21: Q4 & Fiscal Year 2024 Guidance

Slide 22: Q&A

Slide 23: Appendix

Slide 24: Modeling Points

Slide 25: Calculation of Billings

Slide 26: GAAP to Non-GAAP Reconciliations – Gross Margin

Slide 27: GAAP to Non-GAAP Reconciliations – Operating Income & Operating Margin

Slide 28: GAAP to Non-GAAP Reconciliations – EPS

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

Slide 30: Thank You