Palo Alto Networks. September 2014

Transcription

1 Palo Alto Networks September 2014

2 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 statements include statements regarding future product offerings, in particular, future endpoint products that we anticipate being able to offer; or the expansion of our total addressable market; accelerating growth in attach rates for our subscription services; and continued momentum in our business. These statements reflect our current beliefs and are based on current information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made. There are a significant number of factors that could cause actual results to differ materially from statements made in this presentation, including the failure to successfully integrate Cyvera with our current product and service offerings; the failure to timely develop and achieve market acceptance of our combined products and services; our limited operating history and experience with integrating acquired companies; risks associated with our rapid growth, particularly outside the United States; rapidly evolving technological developments in the competitive market for enterprise security products; and general market, political, economic and business conditions. Additional risks and uncertainties are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our quarterly report on Form 10-Q filed with the SEC on June 3, 2014, which is available on our website at investors.paloaltonetworks.com and on the SEC's website at Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this presentation are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Page 2

3 Palo Alto Networks at a glance Disruptive technology Strategic solution for high visibility issues Platform approach Superior TCO Large and growing TAM Compelling business model Demonstrated results Page 3

4 Palo Alto Networks at a glance prevention platform superior security with superior TCO Page 4

5 Tectonic shifts create the perfect storm SaaS Social + consumerization Mobility + BYOD Massive opportunity for cyber criminals Cloud + virtualization Page 5

6 Core value proposition An enterprise security platform that safely enables all applications through granular use control and prevention of known and unknown cyber threats for all users on any device across any network. Superior security with superior TCO Page 6

7 Next-Generation Enterprise Security Platform Palo Alto Networks Next-Generation Threat Intelligence Cloud Next-Generation Firewall Inspects all traffic Blocks known threats Sends unknown to cloud Extensible to mobile & virtual networks Next-Generation Threat Intelligence Cloud Gathers potential threats from network and endpoints Analyzes and correlates threat intelligence Disseminates threat intelligence to network and endpoints Palo Alto Networks Next-Generation Firewall Next-Generation Endpoint Protection Inspects all processes and files Prevents both known & unknown exploits Integrates with cloud to prevent known & unknown malware Palo Alto Networks Next-Generation Endpoint Protection Page 7

8 How we deliver superior security Network location Data center/cloud Enterprise perimeter Distributed/BYOD Endpoint Next-generation appliances Subscriptions Use cases Management system Physical: PA-200, PA-500, PA-2000 Series, PA-3000 Series, PA-4000 Series, PA-5000 Series, PA-7050 WildFire: WF-500 Virtual: VM-Series & VM-Series-HV for NSX Next-Generation Firewall Cybersecurity: IDS / IPS / APT Threat Prevention URL Filtering GlobalProtect WildFire Endpoint (Cyvera) Web gateway Panorama, M-100 appliance, GP-100 appliance VPN Page 8 Operating system PAN-OS

9 2014 Gartner Magic Quadrant for Enterprise Network Firewalls Gartner magic quadrant for enterprise network firewalls Page 9

10 The opportunity large and growing $15.8Bn Enterprise endpoint security $4.0Bn Advanced threat $0.6Bn CAGR of 7.3% $19.5Bn Enterprise endpoint security $4.9Bn Advanced threat $1.2Bn Enterprise network security $11.2Bn Enterprise network security $13.4Bn Sources: IDC, Worldwide Network Security Forecast and 2012 Vendor Shares, July 2013 IDC, Worldwide Web Security Forecast and 2012 Vendor Shares, July 2013 IDC, Worldwide Endpoint Security Forecast and 2012 Vendor Shares, August 2013 IDC, Worldwide Specialized Threat and Protection Forecast and 2012 Vendor Shares, August 2013 Page 10

11 Go-to-market strategy drives growth opportunities 1 Land with our enterprise platform Become the strategic enterprise Become security the strategic vendor enterprise network security vendor 2 3 Expand into other parts of the enterprise Retain by performing more security functions All global enterprises Page 11

12 Fueling the engine of growth: land Customer count Q4 2014: added record number of new customers 13,500 16,000 17,000 19,000 Over 19,000 end-customers 9,000 11,000 Rapidly cementing position as leader in enterprise security 6,650 Q2'12 Q4'12 Q2'13 Q4'13 Q2'14 Q3'14 Q4'14 Note: Fiscal year ends July 31. Page 12

13 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 Government Government Media Service Provider Aerospace & Defense Internet High Tech High Tech Government Media Service Provider Financial Services Services Government Financial Services Service Provider Financial Services Healthcare Financial Services Financial Services Manufacturing Media Healthcare Government Financial Services Minimum $5.6 million spent in lifetime value for inclusion Entry threshold increased 10% sequentially and 50% year-over-year Top-25 customers are life-time-to-date, excluding the Japan MOD account Page 13

14 The power of the model: recurring revenue and hybrid-saas New subscription sale = new product sale Chosen to monetize each subscription as a SaaS model Number of subscription offerings growing Growth increasingly being driven by increases in subscription attach rates Threat Prevention URL Filtering WildFire Global Protect Page 14

15 Industry and market leading growth Revenue over time $MM $598.2 $396.1 $255.1 $118.6 $13.4 $48.8 FY'09 FY'10 FY'11 FY'12 FY'13 FY' industry CAGR: 5.4%; Source: IDC Note: Fiscal year ends July 31. Page 15

16 Q highlights Record revenue grew 59% year-over-year and 18% sequentially Recurring services revenue grew 67% year-over-year Deferred revenue grew 70% year-over-year Billings grew 64% year-over-year* Expanded gross margins* Strong free cash flow generation* (1) * Non-GAAP financial measures. See appendix for reconciliation to most comparable GAAP measure. Page 16

17 Product and recurring services revenue Product revenue Recurring services revenue $MM 120 $MM 100 Recurring subscription services 100 $99.7 Support and maintenance $ $84.1 $80.8 $ $75.5 $60.3 $ $52.7 $60.8 $ $ Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Y/Y growth 40% 32% 36% 30% 38% 52% 20 0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 RS $18.7 $21.7 $24.8 $28.8 $32.0 $37.6 SM $21.8 $25.2 $27.9 $31.5 $34.6 $40.9 Note: Fiscal year ends July 31. Page 17

18 Billings and deferred revenue growth Billings (1) Deferred revenue $MM $MM 450 Long-term $MM 250 Short-term Long term $232.9 (2) 400 Short term $367.9 $ $324.6 $ $279.0 $157.9 $ $142.3 $ $ $ Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Y/Y growth 57% 50% 43% 50% 46% 64% Y/Y growth 88% 84% 74% 72% 68% 70% (1) (1) Billings is a non-gaap measure defined as revenue plus the change in deferred revenue, net of acquired deferred revenue. See Appendix for a reconciliation to most comparable GAAP financial measure. (2) (2) Current deferred revenue reflects payments received for services or products that expected to be delivered and recognized as revenue during the next twelve months. (3) Note: Fiscal year ends July 31. Page 18

19 Hybrid model positively impacts free cash flow $MM FY 11 FY 12 FY 13 FY 14 Adjusted (1) Cash flow from operations $32.1 $77.4 $114.5 $163.4 CAPEX $13.0 $14.6 $22.4 $36.1 Free cash flow (2) $19.1 $62.8 $92.1 $127.3 Free cash flow margin (2) 16.1% 24.6% 23.2% 21.3% Operating margin (2) (4.8%) 7.2% 7.7% 8.4% (1) Non-GAAP financial measures. Adjusted to exclude the $75.0 million cash payment related to the Juniper settlement in Q4 fiscal year See appendix for reconciliation to the most comparable GAAP financial measures. (2) Non-GAAP free cash flow and adjusted free cash flow and operating margins. See Appendix for reconciliations to the most comparable GAAP financial measures. Page 19

20 Appendix

21 Reconciliation of GAAP to non-gaap $MM Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Billings (non-gaap): Revenue $101.3 $112.4 $128.2 $141.1 $150.7 $178.2 Add: change in deferred revenue, net of acquired deferred revenue Billings (non-gaap) $132.4 $142.3 $157.9 $186.7 $193.9 $232.9 $MM FY 11 FY 12 FY 13 FY 14 Free cash flow (non-gaap): Net cash provided by operating activities $32.1 $77.4 $114.5 $88.4 Add: cash paid for legal settlement 75.0 Adjusted net cash provided by operating activities (non-gaap) $32.1 $77.4 $114.5 $163.4 Less: purchases of property, equipment, and other assets Adjusted free cash flow (non-gaap) $19.1 $62.8 $92.1 $127.3 Adjusted free cash flow margin (non-gaap) 16.1% 24.6% 23.2% 21.3%

22 Reconciliation of GAAP to non-gaap $MM FY 11 FY 12 FY 13 FY 14 GAAP operating income (loss) $(10.4) $3.9 $(18.6) $(215.3) Share-based compensation & related tax expense Acquisition related costs & amortization expense of acquired intangible assets 9.9 Litigation related charges Loss on facility sublease 0.3 Non-GAAP operating income $(5.7) $18.5 $30.4 $50.4 Non-GAAP operating margin (4.8)% 7.2% 7.7% 8.4%

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