Palo Alto : Q1 FY2021 Earnings Call Presentation

Q1 Fiscal Year 2021 Earnings Call

November 16, 2020

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 regarding Palo Alto Networks' expectations regarding the introduction of new offerings, our intention to continue investing in Cloud & AI and to transition customers to software models, our financial guidance for the second quarter of fiscal 2021 and our expectations for the remainder of fiscal year 2021 regarding total billings, Next-Gen Security ARR, total revenue, product revenue, non-GAAP operating margin, non-GAAP EPS and adjusted free cash flow margin, our expectations on the impact, financial contribution and successful integration of our pending acquisition of Expanse, Inc., expectations for fiscal 2021 Network Security billings, revenue, non-GAAP gross margin and non-GAAP operating margin, our expectations for fiscal 2021 Cloud & AI ARR, revenue, non-GAAP gross margin, non-GAAP operating margin, our expectations regarding improvement in gross margins and operating margins. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the impact of COVID-19 on our customers' purchasing decisions and the length of our sales cycles, particularly for customers in certain industries highly affected by COVID-19.

There are a significant number of factors that could cause actual results to differ materially from statements made in this presentation, including: developments

and changes in general market, political, economic, and business conditions; the duration and global impact of COVID-19;risks associated with managing our growth; the risks associated with new products and subscription and support offerings, including the discovery of software bugs; our ability to attract and retain new customers; delays in the development or release of new subscription offerings; our competition; rapidly evolving technological developments in the market for network security products and subscription and support offerings; our ability as an organization to acquire and integrate other companies, products or technologies in a successful manner; length of sales cycles; our share repurchase program, which may not be fully consummated or enhance shareholder value, and any share repurchases which could affect the price of our common stock. Further information on these and other factors that could affect the forward-looking statements we make in this presentation can be found in the documents that we file with or furnish to the U.S. Securities and Exchange Commission, including Palo Alto Networks' most recent Annual Report on Form 10-K filed for the fiscal year ended July 31, 2020, which is available on our website at investors.paloaltonetworks.com and on the SEC's website at www.sec.gov. 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 our current beliefs and 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.

All information in this presentation is as of November 16, 2020. This presentation contains non-GAAP financial measures and key metrics relating to the company's past and expected future performance. We have not reconciled diluted non-GAAP net income per share guidance to GAAP net income (loss) per diluted share because we do not provide guidance on GAAP net income (loss) and would not be able to present the various reconciling cash and non-cash items between GAAP net income (loss) and non-GAAP net income, including share-based compensation expense, without unreasonable effort. You can also find information regarding our use of non-GAAP financial measures in our earnings release dated November 16, 2020.

2 | © 2020 Palo Alto Networks, Inc. All rights reserved.

Welcome

Another consecutive strong quarter

	Q1'21	Q1'21
	Guidance (as of 8/24/20)	Actual
Total Billings1	$1,030M-$1,050M	$1,083M
	15%-17% yr/yr	21% yr/yr
Total Revenue	$915M-$925M	$946M
19%-20% yr/yr	23% yr/yr
Gross Margin (Non-GAAP)		75.8%
	-80 bps yr/yr
Op Margin (Non-GAAP)		21.7%
	+590 bps yr/yr
EPS (Non-GAAP)	$1.32-$1.35	$1.62
+$0.57 yr/yr
Adj. FCF Margin (Non-GAAP)		53.4%

• Total billings is a key financial metric calculated as total revenue plus change in total deferred revenue, net of total acquired deferred revenue.

A reconciliation of forward-lookingnon-GAAP financial measures to the corresponding GAAP measures has not been provided as it is not available without unreasonable effort. Fiscal year ending on July 31.

4 | © 2020 Palo Alto Networks, Inc. All rights reserved.