Palo Alto Networks, Inc. · NASDAQ:PANW
Palo Alto Networks — FY2017 Earnings Presentation
27 slides from Palo Alto Networks's earnings presentation, August 2017
Slide 1: Fiscal Fourth Quarter & Full Year 2017 Investor Presentation
Fiscal Fourth Quarter & Full Year 2017 Investor Presentation August 2017
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. Such forward-looking statem
Slide 3: Tectonic shifts create the perfect storm
Tectonic shifts create the perfect storm SaaS Cloud + Virtualization Massive opportunity for cybercriminals Mobility + BYOD Internet of Things 3 | © 2017 Palo Alto Networks, Inc. All Rights Reserved.
Slide 4: Preventing successful attacks
Preventing successful attacks 4 | © 2017 Palo Alto Networks, Inc. All Rights Reserved.
Slide 5: Prevention is possible with the real security platform
Prevention is possible with the real security platform 5 | © 2017 Palo Alto Networks, Inc. All Rights Reserved.
Slide 6: Introducing the Palo Alto Networks Application Framework
Introducing the Palo Alto Networks Application Framework • Consume innovative security capabilities from any provider via cloud-delivered applications PALO ALTO NETWORKS APPS 3rd PARTY PARTNERS APPS CUSTOMERS APPS with no additional infrastructure APPLICATION FRAMEWORK • Secure access to customer- L
Slide 7: The opportunity – large and growing
TAM 2017 – 2020 The opportunity – large and growing $24.0Bn $19.1Bn ($18.8Bn network, ($14.7Bn network, $5.2Bn endpoint) $4.4Bn endpoint) 2017 2020 Sources: IDC, Worldwide Network Security 2016–2020 Forecast, September 2016 IDC, Worldwide Web Security 2016–2020 Forecast, December 2016 IDC, Worldwide
Slide 8: 2017 Gartner magic quadrant
2017 Gartner magic quadrant Gartner “magic quadrant for enterprise network firewalls” Source: Gartner, magic quadrant for enterprise network firewalls, July 2017 8 | © 2017 Palo Alto Networks, Inc. All Rights Reserved.
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 Support Aperture GlobalProtect Professional services Appliances Panorama LightC
Slide 10: Q4'17 financial highlights
Q4’17 financial highlights Q4’17 Q4’16 Y/Y change Billings(1) $670.8Mn $572.4Mn 17.2% Revenue $509.1Mn $400.8Mn 27.0% Gross margin %(2) 77.3% 79.4% -210 bps Operating margin %(2) 23.7% 23.7%(3) - EPS(2) $0.92 $0.66(3) 39.4% Deferred revenue $1.8Bn $1.2Bn 42.9% Adjusted free cash flow margin %(2)(4)
Slide 11: FY'17 financial highlights
FY’17 financial highlights FY’17 FY’16 Y/Y change Billings(1) $2.3Bn $1.9Bn 20.4% Revenue $1.8Bn $1.4Bn 27.8% Gross margin %(2) 77.9% 78.2% -30 bps Operating margin %(2) 20.1% 19.7%(3) +40 bps EPS(2) $2.71 $1.89(3) 43.4% Deferred revenue $1.8Bn $1.2Bn 42.9% Adjusted free cash flow margin %(2)(4) 45.
Slide 12: Top-25 customer buying behavior
Top-25 customer buying behavior Industry 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 Federal Government Federal Government
Slide 13: Continued strength of customer acquisition
Continued strength of customer acquisition Highest quarter Customer count Q4’17 for >42,500 new customer 45,000 acquisitions 40,000 Q4’16 ~34,000 35,000 Q4’15 30,000 >26,000 25,000 Q4’14 >19,000 20,000 Q4’13 >13,000 15,000 Q4’12 >8,000 10,000 Q4’11 Q4’10 >4,000 5,000 >1,700 - Note: Fiscal year ends
Slide 14: Annual billings
Annual billings (1) $Millions $2,293 $Millions $1,906 $1,219 $771 $510 FY'13 FY'14 FY'15 FY'16 FY'17 (1) 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: Fis
Slide 15: Annual revenue by type
Annual revenue by type $Millions Subscription $1,762 Support Product $1,378 $551 $357 $928 $502 $213 $350 $598 $222 $123 $396 $135 $71 $671 $709 $81 $493 $340 $244 FY'13 FY'14 FY'15 FY'16 FY'17 Note: Fiscal year ends July 31. 15 | © 2017 Palo Alto Networks, Inc. All Rights Reserved.
Slide 16: Deferred revenue
Deferred revenue $Millions % of total Short-term deferred revenue $1,773 Long-term deferred revenue $805 $1,241 45% $537 43% $714 $290 $423 41% $968 55% $163 $704 $249 38% 57% $95 $424 38% $260 59% $154 62% 62% FY'13 FY'14 FY'15 FY'16 FY'17 Note: Fiscal year ends July 31. 16 | © 2017 Palo Alto Netwo
Slide 17: Hybrid-SaaS model: expanding operating margins
Hybrid-SaaS model: expanding operating margins Annual operating income(1) $Millions Operating income 20.1% 21.0% 19.7% Operating margin(1) 16.5% 16.0% 11.5% 9.9% 11.0% $355 6.0% $271 $153 1.0% $70 $39 (4.0%) FY'13 FY'14 FY'15 FY'16 FY'17 (1) Non-GAAP financial measure, which also reflects our change
Slide 18: Hybrid-SaaS model: strong free cash flow generation
Hybrid-SaaS model: strong free cash flow generation Annual free cash flow(1) $Millions 45.2%(3) Free cash flow 42.6%(3) 45.0% Free cash flow margin (1) 40.0% 34.4% 35.0% 30.0% 25.0% 21.4%(2) 25.0% (3) $797 (3) 20.0% (3) $587 15.0% 10.0% $319 (2) 5.0% $99 $128 0.0% FY'13 FY'14 FY'15 FY'16 FY'17 (1) N
Slide 19: Appendix
Appendix
Slide 20: Calculation of billings
Calculation of billings $Mn Billings: FY'13 FY'14 FY'15 FY'16 FY'17 Q4'16 Q4'17 Total revenue $ 396.1 $ 598.2 $ 928.1 $ 1,378.5 $ 1,761.6 $ 400.8 $ 509.1 Add: change in total deferred revenue, net of acquired deferred revenue 113.4 173.2 291.0 527.1 531.8 171.6 161.7 Billings $ 509.5 $ 771.4 $ 1,219
Slide 21: GAAP to Non-GAAP reconciliations
GAAP to Non-GAAP reconciliations $Mn Non-GAAP gross profit and gross margin: FY'16 FY'17(1) Q4'16 Q4'17 $ % $ % $ % $ % GAAP gross profit and gross margin $ 1,008.5 73.2% $ 1,285.0 72.9% $ 299.1 74.6% $ 370.6 72.8% Share-based compensation related charges 49.1 3.5% 66.2 3.8% 14.1 3.5% 17.4 3.4% Amor
Slide 22: GAAP to Non-GAAP reconciliations
GAAP to Non-GAAP reconciliations $Mn Non-GAAP operating income and operating margin: FY'13 FY'14 FY'15 FY'16 FY'17(2) $ % $ % $ % $ % $ % (1) GAAP operating loss and operating margin $ (9.9) (2.5%) $ (196.2) (32.8%) $ (99.8) (10.8%) $ (157.3) (11.4%) $ (179.8) (10.2%) Share-based compensation relate
Slide 23: GAAP to Non-GAAP reconciliations
GAAP to Non-GAAP reconciliations Non-GAAP net income per share, diluted: FY'16 FY'17(3) Q4'16 Q4'17 (1) GAAP loss per share, diluted $ (2.21) $ (2.39) $ (0.35) $ (0.42) Share-based compensation related charges 4.58 5.30 1.25 1.31 Acquisition related costs - 0.03 - - Amortization expense of acquired
Slide 24: GAAP to Non-GAAP reconciliations
GAAP to Non-GAAP reconciliations $Mn Free cash flow (non-GAAP): FY'13 FY'14 FY'15 FY'16 FY'17 Q4'16 Q4'17 Net cash provided by operating activities (1) $ 121.3 $ 89.4 $ 352.8 $ 658.6 $ 868.5 $ 187.3 $ 239.5 Less: purchases of property, equipment, and other assets 22.4 36.1 33.8 72.5 163.4 16.3 49.2
Slide 25: Impact of change in accounting policy for sales commissions
Impact of change in accounting policy for sales commissions $Mn, except per share amounts Consolidated Statements of Operations – GAAP impact: FY’13 FY’14 FY’15 FY’16 Q4'16 Operating loss $ 8.7 $ 19.1 $ 33.7 $ 32.8 $ 22.7 Provision for income taxes - - - (0.4) (0.4) Net loss $ 8.7 $ 19.1 $ 33.7 $ 33
Slide 26: Impact of early adoption of new accounting guidance
Impact of early adoption of new accounting guidance $Mn, except per share amounts Consolidated Statements of Cash Flows – GAAP impact: FY’13 FY’14 FY’15 FY’16 Q4'16 Q1’17 Net cash provided by operating activities $ 6.8 $ 1.0 $ 2.5 $ 0.5 $ (0.2) $ 0.2 Net cash provided by (used in) financing activiti
Slide 27: Slide 27