Palo Alto : Q1 FY2022 Earnings Call Presentation

Q1 Fiscal Year 2022 Earnings Call

November 18, 2021

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, including statements regarding our expectations regarding our view as to the security threat landscape, growth drivers for fiscal 2022 and beyond, our product and service offerings, our financial guidance for the second quarter of fiscal 2022 and fiscal year 2022 regarding total revenue, total billings, Next-Gen Security ARR, product revenue, non-GAAP operating margin, non-GAAP EPS and non-GAAP adjusted free cash flow margin, our modeling points, our expectations regarding gross margins and operating margins, and our expectations regarding product launches and adoption. Many of these assumptions relate to matters that are beyond our control and changing rapidly.

There are a significant number of factors that could cause actual results to differ materially from forward-looking 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; risks associated with new products and subscription and support offerings, including the discovery of software bugs; shifts in priorities or delays in the development or release of new subscription offerings, or the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing products and subscription and support offerings; rapidly evolving technological developments in the market for security products and subscription and support offerings; our customers' purchasing decisions and the length of sales cycles; our competition; our ability to attract and retain new customers; our ability as an organization to acquire and integrate other companies, products or technologies in a successful manner; the effects of supply chain constraints and the global chip and component shortages and other factors affecting the manufacture, delivery and cost of certain of our products; our ability to obtain adequate supply of our products from our third-party manufacturing partners; our debt repayment obligations; and 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 Quarterly Report on Form 10-Q filed for the quarter ended October 31, 2021, 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 18, 2021. 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 loss per diluted share, non-GAAP operating margin to GAAP operating margin or adjusted free cash flow margin guidance to GAAP net cash from operating activities because we do not provide guidance on GAAP net income (loss) or net cash from operating activities and would not be able to present the various reconciling cash and non-cash items between GAAP and non-GAAP financial measures, including share-based compensation expense, without unreasonable effort.

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Cybersecurity continuing to be relevant in board and nation state conversations

Cyber, Broadband Win Big In

Bipartisan Infrastructure Bill

Biden administration orders federal agencies to fix hundreds of cyberflaws

Cybersecurity o ers jobs, high wages -

if enough people can be trained

Gartner Predicts 40% of Boards Will Have a Dedicated Cybersecurity Committee by 2025

Number of cloud breaches surpass on-premones for first time.

Iowa farm services firm: systemsoffline due to cybersecurity incident

4 | © 2021 Palo Alto Networks, Inc. All rights reserved.

Strong demand and focused execution delivered Q1 strength

Top-line growth

Total Billings1

$1.38B

+28% y/y

Total Revenue

$1.25B

+32% y/y

Transformation to software continues

NGS ARR2

$1.27B

Software % of FWaaP billings3

37%

Balance of

profitability

Operating Income (non-GAAP)

$224M

+9% y/y

EPS (non-GAAP)

$1.64

+$0.07 vs. Q1 Guidance4

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

• ARR = Annualized Recurring Revenue. Next-Gen Security ARR is annualized allocated revenue of all active contracts as of the final day of the reporting period for Prisma and Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered security services.
  3 Software % of Total FWaaP billings is the total amount invoiced and billed for the Prisma Access and VM offerings, and the ratable portion of CloudGenix offerings, during the period stated, as a percentage of total Firewall as a Platform billings.. 4 Represents the midpoint of Q1'FY22 guidance provided on 8/23/2021.
  Reconciliations of historical non-GAAP measures can be found in the Appendix. Fiscal year ending on July 31.

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