PANW - Earnings call transcript Q1 2018 | Palo Alto Networks, Inc.

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Operator

Good day and welcome to the Palo Alto Networks Fiscal First Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Kelsey Turcotte, Vice President of Investor Relations. Please go ahead ma'am.

Kelsey Turcotte

you. Thank thank Palo us quarter Alto results. and call today’s XXXX for discuss to Networks' you afternoon, on joining conference financial Good fiscal first call website at web over on This Investors investors.paloaltonetworks.com. broadcast be the our can accessed the of section being is and live Officer; Anderson, appointed on Executive our Kathy our call newly President and today’s Chief our me Mark McLaughlin, and Tomlinson, With Chairman Financial CFO. our are Chief Steffan Officer; Mark Bonanno, fiscal announcing afternoon, ended fourth we the issued results This quarter release XX, our press XXXX. October for a

those obligation points If can full-year no and this you them representing undertake our will for as these anticipated forward-looking statements in our our growth quarter our cause management remind and results of our would a like the you financial and outside on release, modeling to competitive position rely would products course and apply update some risks number a copy statements. second trends we are call. our statements call, shift certain These could fiscal from to timing access and rates, by website. materially These fiscal statements mix of results, make and operating the products of subscription views involve which of these and uncertainties, forward-looking demand like control, not and seasonality. which benefits our you drive you beyond of as and and metrics, of forward-looking should differ the today, opportunity and to conference the on actual the future that after statements, in new during it and offerings, including guidance market online for this to regarding XXXX, We financial ability subscriptions, statements

cause to our Also, on minutes on a our XX, and XX-K, on on certain For SEC charges. website results Form X-K. a please factors release on with we our to ago the posted call Report few filed earnings to description been September XXXX have actual use differ, a certain and basis with Form refer exclude Annual this that expressed that SEC note could measures please the detailed are of more on and adjusted filed financial non-GAAP

For City, on will Conference provided XXXX non-GAAP like XXXX measures XX, section the Francisco Investors turn finally, in our GAAP to information in December reconciliations York historical with located And Relations in and to York remarks, have also once completed the periods, Technology them under And measures we XXth. have remind the Xth, formal in Technology that and December that that, Summit on San Suisse Technology Investor our December website Mark. be James we Networking Media Cowen Media to these Conference the Xth, Global New supplemental posting be XXst in in financial We’d website Utah Results. be Conference the participating Barclay's I’ll Wells over to call Quarterly of at Raymond Investors in the Telecom Xth the November found financial investors.paloaltonetworks.com. and can on our financial Fargo Tech Telecom you Arizona we Cybersecurity Annual December New will on and Credit the Scottsdale, Park in on Summit we of

Mark McLaughlin

fiscal security the our basis that to start for delivered a to and endpoint I'm fiscal platform everyone QX you thank and we Kelsey joining its generation drive interest in as growth a and strong year. year. to our to in $XXX which XX%. changes The 'XX in first go In up cloud. On are million well million pleased quarter all midyear healthy the this results. XX,XXX environment quarter designed quarter all added customer to up for you, off paying earnings the from leverage as report share market XX% XXXX revenue customers we Billings are us a and Thank globally. XXXX made over customers were extended afternoon per theaters fiscal was dividends network, us scale new non-GAAP the XX%. next of were privileged saw $X.XX and were in we fiscal $XXX for our year-over-year up capabilities as now we channel In serve we our strong demand start over new

customer In acquisition, to existing wallet of addition share we also new rapidly our increase continue to customers. strong the

leading in Check prospects. a increasingly one included to global at one our and Hallmarks EMEA, a that Check our which of over There from million endpoint on processors QX in security in our innovation examples in at platform, center a of fiscal Symantec based become top Our in customers the growth center for that in Point displacements Specific seven-figure $XX.X based against $XX.X The wins customer understood displacement and is world's and vendor security one relentless deal a our airports customers. included standard AutoFocus. increase quarter of XX of 'XX. workstations in a minimum organization. well as The of companies also value competitive the XX% an three at the deal are a the its the Cisco of results military at million busiest by data data agency with rapid of a focus and the to lifetime world's displacement of the the customers in competitive platform, a adoption U.S. States platform in Cisco virtualized payment U.S. federal the United largest Point XX,XXX technology spent each displacement QX win are world's displacement

continue increased on time each environments; ability on-premise, competitive The To are demonstrated when first we these in evolutions other to the boundaries prevention budgets. September. new a at objectives to requirements introduced operational ability end, simplify meet offerings that the disruptive struggling endpoint, continually in that over build through security is across to they ability two provide time our and today's security security orchestration; our third, is our cloud consumption organizations manpower deliver to models is hybrid automation and to designed outcomes push in consistently second, to challenging with establish needs differentiation. we to significant market most and are drive to limited accomplish To these and balance

new service logs platform. late service. the cloud September Managed Alto seamlessly GlobalProtect their Networks stores based a organizations, our which the offering remote generation Service, for use distribute reduce as security our for Also of Palo opens infrastructure security improve Networks Palo our cases First, generated by delivers Application introduced existing security. offices Alto complexity. offering evolution mobile and we us, cloud the rich is Logging security that major help in management users in Service and Framework with widely product This is next a foundation panorama up which our the cloud-based context next Logging

We the expect to of in and Application capabilities and our data already have new it automated workflow model sets in delivery endpoint through provide apply enforced a Framework advanced decisions for on to analytics network the cloud. that massive the security can applications the deployed

XXXX. strong reception to we and deals great have Application pleased Framework deliver of quarter. received from very the calendar Initial the GlobalProtect customers we track first are Logging in to [ph] to service half on of We on cloud which closed in are the hundreds has have the been several and first brief the feedback Services

just expanded protection, our X.X the kernel protection AV enhanced endpoint earned software. third-party that of a from services independent Report Security validation And exploit In our enhanced This the Cloud added Access few and new capabilities with our to Among scored the ransomware the OS. capabilities Aperture, addition Security to advanced And new ago Traps, October of of assesses Version behavior-based protection we in XXX% traditional features X.X. the by rate further our Approved AV-Comparatives, weeks AV is Business and offering yet analysis Traps and an many tests Broker of a ability prevention in Award products. local introduction replace organization the offering. published Mac another we

a that offerings strategy achieve and migration application AWS many for ECX, solutions includes cloud and SX. now basic several Amazon Identity part including of large advanced cloud cloud and are consistent complement within of that storing Amazon to provides amounts AWS adopting environments multi-cloud comprehensive requires protections which the Aperture the and security. Management protection data native As organizations to Access

support applications. enhanced marketplace our based cloud Google We Office XXX GX for applications include also to services and and email

for requirements our continue We broad as work than a be to honored more see XX at in for a joined building XX outcomes commitment and welcome named Vice world-class as three XXXX world Alto with and years to the hybrid in enterprise facilities. has Finance to With our further planning, top of and want is in the security Chief decade Kathy list Future also dedication responsible they President were Fortune our across well customers our acknowledgements I and next you. record to security our financial intimate the us to proven of forward she improving continue of industry as I help and disciplines recently organizations. work very look These Kathy. changing an world. Magazine's as company, we financial to Senior of management currently risk the team Kathy expertise XX years Also Financial knowledge to and security companies with Palo through list. to innovation Officer. customers. to Bonanno the good Networks, treasury, them a experience our of track to look Congratulations cyber underscore traction business Fortune

Kathy Bonanno

team. be scale excited the of you continue take and opportunity I'm forward share will look to about Thanks market, have increase upcoming meeting at leverage. of I operating those and to a Mark. I already role we know. and unique the at work several don't my I security the believe with this truly conferences disrupt investor to

Mark McLaughlin

and taking I from and protect to going in Wednesday. and of Congratulations Kathy to the Steffan. which conclude, And our want partners team over look forward their I our I Steffan thank life to to And customers coming the their support I'm turn again for this with before reins to digital age. our our for call to way mission dedication is that, the

Steffan Tomlinson

like Kathy you'll be you Mark. successful I've your know role. enjoyed with and add to to I'd Thanks I my working as really congratulations new in well.

and strong revenue figures that for guidance. are In our are unless we let's I'd delivered otherwise. Now market non-GAAP first growth figures to and turn note land-and-expand stated prior financial to quarter numbers and year all the model. against compared billings to to the performance like periods except rates the go

flow SaaS that operating EPS generation. expansion margin the our which to continues evident cash was to addition, record subscription non-GAAP in mix of driven year-over-year XX% ongoing hybrid drove by be in non-GAAP very model shift power our deferred support In revenue healthy and and free growth

to look revenue balance to we year is $XXX.X with and widening by improving million. XX% new our our are grew the fiscal positioning As pleased QX execution differentiated the competitive offerings. of which we total further In

to million QX new year-over-year at XX.X% SaaS based subscription driven GAAP quarter primarily decrease $XXX.X by or million of traction XX%. and hardware the QX the the total with the total of end our 'XX sales and expenses and the is subscription the Billings basis revenue basis was XX. an of increased support a ongoing with new last basis increasing income quarter year. prior up-sell was was $XXX.X XXX ongoing QX total marketing. land points. Net of geographic grew XX% into XXX increased a XXX of Operating XX.X% within and QX primarily In operating leverage the at APAC was were the revenue per margin grew target which well $XXX.X the diluted The XXX of to $XXX.X share last basis QX of employees. quarter increased year. million of Looking revenue launched increased point On $X.X XX% of as fiscal revenue of XX%, $XXX.X QX in growth first of $XXX in accounted to margin XXXX Americas products seeing compared attributable an basis a XX%. of introduced customer million XX% for revenue point for XX% perform compared which grew increase XX% them to continued Sales share. revenue year. to a the to XX% QX grew per product XX%. $X.XX deferred or for or million billion customers revenue $X.XX basic and improvement third million net we're the of XX%. XX%. which QX our range $XX quarter we compared decline grew $XX.X existence points million we to loss first gross share. We first XX% new increase of in increase was last of ended fiscal million Total Support XX% EMEA to base. revenue increased year and diluted and

cash, flows billion. to Turning and with cash and cash sheet balance $X.X October equivalents we investments finished of items,

the approximately repurchases XXX per shares average share During of stock XXX,XXX XXXX. million quarter first available December through approximately we an for balance price $XXX of approximately common of repurchased ongoing leaving a at

including margin headquarters. Turning upfront to cash the flow a quarter XX lease an of related expenditures investment headquarters our free end operations the up million to and the to upfront $XXX.X from XX days was target flow, of cash million CapEx agreements. On flow reimbursement cash at margin receipt in were of was million at of a XX.X%. cash XX% in XX% new excluding up Capital million $XX.X reimbursement days. increased range XX cash basis included XX.X%. low XX% million at $XX.X of to cash million the $XX.X DSO our of adjusted Free flow new $XXX.X QX a of the $XXX.X of related certain and were company's the

this now Turning modeling guidance Kelsey that into to forward-looking points, and information the to referred account type earlier. of guidance takes

range increase to revenue to shares $XX to and be 'XX XX% to XX% the to XX QX non-GAAP to an for 'XX range in million $XXX XX% EPS $XXX we approximately to expect revenue increase year-over-year, billings expect in to range XX% of QX XX% XX be of product million the we million an million in of of $XXX $X.XX million to increase of $XXX in year-over-year, fiscal $X.XX of fiscal the range to to CapEx an be million. to year-over-year, be For million $XXX be $XXX XX% of million using the to

we to $X.XX be the XX now to billion to of to $X.XXX using XX% $X.XX XX% year of in the million of be $XXX of shares 'XX be increase are year-over-year, product raising increase the and an $XXX XX $XXX to be For our XX% to the an billion guidance the of range X% $X.XXX of to fiscal full in to expect year-over-year, in revenue billion million to revenue range increase X% continue $X.XX to year-over-year, approximately EPS billings an of to non-GAAP to and XX% million range to be $X.XX billion in extremity to million. range we expect

year. to like fiscal some for additional I'd conclude, I provide Before modeling points the

We QX have growth. continue QX fiscal to total expect fiscal strongest to sequential the and revenue

throughout LightCyber as mostly rent margin operating balance As expansion With payments call consensus of the expect the EPS Mark. half fiscal include to that, to we XX% non-GAAP approximately investments points over our first flow I'll by with the XX% continue 'XX will fiscal basis into cash nonrecurring reflected to be year heading continues be of free guide back XXX this associated year organic QX And reimbursement this range call margin in the the year. cash turn acquisition. to fiscal excluding offset received in in of to

Mark McLaughlin

Steffan. Thanks

over head want to again we thank questions opportunity take Before for the your Networks. contributions I to to to Palo all Alto you

very you been you. to been and leader, a friend pleasure you've work with organization a that. real much Thank great You've wonderful got a you've an and inspiring for

Steffan Tomlinson

appreciate Mark, the Thanks kind I words.

Mark McLaughlin

head questions? with to why Operator, that questions. please poll we you And don’t for would

Operator

Absolutely. of come And Fargo. Philip Wells our first [Operator Instructions] will from question Winslow

Philip Winslow

the that you practices was the now the one acceleration click Obviously you Wonder an two great the the sales to Hey, last and on thanks following quarter wondering just QX just strong just feel quarters. of year? just made you discussed product and in congrats in the you how go to prior can terms from market and that. that guys again double right if quick quarter. all with number on then a followup changes saw And

Mark McLaughlin

we changes made theatre really mid feel which with a which year. phase saw in the I seems process. the there the and we then health of we we us We're last so expect out started dividends with we’re every keep able building year with where relationship Phil, strong very think us of seeing that to for play base being we the the good that as we last year that about capitalize so the work space and going are to the dividends really back out to be call we'd taken Sure we have environment some market well, before good go liked the from paying we

Philip Winslow

comment hoping exit if of on as I environment sort Thanks year? through changes there just seen all there earlier the Got you any was in are last pricing versus year that as then year this calendar could you've it maybe guys. well, and the we

Mark McLaughlin

it it competitive it to of that, We've time value market. same is Yes sell the continue price be seen able the and seen aggressively is question. seems do some us competition what Yes, platform. quite good we've for to seems the a the to very

customers think more. that get more I and

trained it that to as we all Our like through continuously, to for over example, have the to machinations like do improve we as succumb that that not here are of is seem platform. customers to pricing as sequentially at continue well results adopt the see and been that the and and we product to really going the the does competition able entire team like we've discounting

Operator

our Bernstein. will Ferragu come next of question Pierre And from

Pierre Ferragu

thanks for taking question. everybody, my Hi

have so and to your X% product at billing. look guidance I when in in XX% So to year, next XX% X% for you

are which is year-on-year product make billing if way first to growing really you difference I are the subscription your and impressive above XX% so XX% So growth. your

that of faster then wish subscription How by attached are be third would installed much than I second right my way? like a of is still split that would not be, driven next subscriptions from subscriptions between base anymore? expansion to much product XX% that keep than that of And coming of years your products your and business, question would does only if to XX% thinking how and like are year So really and unattached it how in much firewall less and going my your growing that is products, it be like three I have question you billings two product? then attached you am

Mark McLaughlin

services Yes, Pierre, a category I beyond We've better subscription general our is few the services move reasons. a for [Indiscernible] the how the particularly services and this into is so platform we provide consumption continue security matter. the the don’t understand complexity the One in customers seen obviously and year, but think that, reduce very guide business models. their over is of to time powerful subscription

to are We new service Secondly introduce GlobalProtect we and already just with introduced we continue happy the Service Logging September, in services. cloud and with those. performance two the

see services – market that's and of which side of those so would the to over revenue as that will new we've you come what will to moving from keep we time as period Day would then is to in move next XX% but directions, guided framework what we of come on split move as if well also the direction about the So recall we into business. continue that in business occur a it well would services imaging year the from Analyst year the as market services top well for application bring the in subscription we should would things as direction,

Pierre Ferragu

you. Thank

Mark McLaughlin

Thank you.

Kelsey Turcotte

Next question please?

Operator

Rob will Owens Markets. Capital our question KeyBanc come next And of from

Rob Owens

things an from that seeing renewal color little are taking us side are my for wins? Maybe what's in and coming a you give base the and customers could maybe the question. preexisting your versus competitive Great increase thanks on within products on of you success more

Mark McLaughlin

Rob, we're in well Yes well doing both cases.

selling net of see You of matter we're those fact. like majority lot as a very to product vast customers, those be acquisitions new continue can customer a and strong into the of obviously

in business the powering know expansion time So majority [Indiscernible] the we very for customer continue us well. has their to the our for new is also expansion you and like you long to know been by space in we're convincing opportunities customers and strong white size us. continue customer bring also to with the in business math to our of a feel of wins continues business life grow base, really and time the do I value doing great

Rob Owens

product much the quarter in and guess the the product, on high achieved billings revenue. was but at I lines with of coming end those over you And along the on upside total over from achieved

could inverse attach uplift is I preexisting if give the at relative of to yield mainly the So less much or customers, coming don’t provide then revenue color less from there? attach, that billings product of a help duration have Thanks. guess attach with some product or you subscriptions, looked I subscription you to maybe us or you

Mark McLaughlin

couple well couple and Yes, net rounding going with delivery [Indiscernible] the billings saw and of the buckets are just bucket thought a CapEx quarter we we the the the we mixes were coming so the quarter a really product heavy in a side, to sure, on out the purchases revenue total than of different quarter happy that our had more things obviously expected we mix into little the some were continue just forecasted discounting than product the some as observations, the revenue put more into very ratio, of delivery on as a well, those businesses of was put we we product would one would improve the so little as also we bit product higher a is in would quarter. more so into service and also see provider in than the some

Operator

our And of question will from Talanian next come ISI. Evercore Ken

Ken Talanian

guys. Hi, the for taking question. Thanks

you wondering and was much that the I think the the a of the contributed could us one sense about if year? for we in how how the to remainder Panorama should another fiscal and So VM-Series quarter revenue for give product, on product

Mark McLaughlin

product. recognize how primarily but little. performed well that the very services heading almost Yes, that very by all this is of that’s very, in goes subscription we way little is and is Mark, the line into VM-Series the very it it

Steffan Tomlinson

And true the Panorama. same is with

Mark McLaughlin

same panorama. Yes, with

Ken Talanian

product in the expecting bit little anything delivered Okay back and next cautious? half a the I growth year-over-year you the quarter, quarter. see that guess that of Is makes digit you there same double year revenue in you the

Mark McLaughlin

which the like great. quarter played out, we so No, over is product the we way on delivered

looks that the early a second but and good out quarter Our revenue based it increased little basis, we've on in don't a year the guide we in more? product forecast bit year it's on the see play full so

Operator

And come our next from Sterling will question Auty of JP Morgan.

Sterling Auty

Yes, thanks. Hi Guys.

or Kathy, color in of finish general comments this First specifically in in firewall you and to high job of us additional to a concerns to pointed the firewalls your big the Steffan, want the all congratulations. tenure just help all environment on everybody's But was you of point take as Fortinet there's you theaters. is all out good put Can in much a give to Check but question network more to of just on non-event to. what to spending the specifically what great note. I happening good out Point, going to strong security level Mark hamper, still vendors? these off demand That's guide such move up the Obviously for to minds, there firewall be a cloud your how was wanted about results it market. out the with

Mark McLaughlin

competitive just also for highest better strong, with environments Analyst like so security of those evolutions a demand period S end one our I continued or and right time. three the we're what's on the think consistency talk in definitely Sterling real that which get there are environments that. but it is we if best there which then and customers happening higher talked other to only I cloud we market, have so security is the I one we of at and that important. the outcomes all and are all second and but seen think two just points continues Yes, we've and mean across whether the in is think advantage in platform about moving Day about each we in market cloud healthy levels, direction And we feel very but are in different second and public build network defined better that very as they're not over And remember agree hybrid you drive of that

and are expect seeing Aperture a lots folks time. good as operating of well. are our environments cloud M-Series them in we I to that hybrid continue in But adoption for to the and So some offerings do

So the strength and cloud a offering from not and center, data data that theatre? that see this. be and we strength perspective in drives hardware and all drives about happening May what’s centers Mark talk less you the only that can

Mark Anderson

Mark. you Yes, bet

we execution XX% EMEA, the so So the board. XX% XX% the biggest we really and across I Sterling, good board no in hey in think geographical saw far Americas standpoint Japan across strong by the have in theatre and in fact

because all theatres we're and the all great really well. in getting regions in bats good geographic we've set think partner traction I coverage as tremendous [ph] got sub

those more getting we winning bats the we're we're of a better lot a much have of So bats majority because solution. vast

said clearly at pretty we regards Day we as with coming cloud. think really tailwinds that there’s I to think major cloud Analyst with

want about of-prim we talking that's We are they we've customers what hearing and as that a kind been they're in think unique pretty of going of from over want that. constantly security delivery for move long then and were more more consistent they to the time term, off long and

Operator

RBC Capital our will of come question Matt Hedberg And Markets. from next

Matthew Hedberg

the in the what well. you more bit I'll my remarks, you've competitive thanks questions. opportunities? good guys about a my have then Kathy for and of And continue services some little prepared taking up. could your to are as congratulations you Hey Mark, quick hear I things follow talk we offer about highlighted cloud landscape a there, GlobalProtect

Mark McLaughlin

Yes, sure.

is and customers models way as the think the it about think certainly flexible are and platform, that our the I we broad possible. to want to we want those that make sure So consume consumption way Matt is that about they think when to

as cloud perspective based well. offered mentioned long an given what evolve So having had experience cloud the managed people we option be all service future. on third-party could the we’ve of as now we’ve time GlobalProtect with where we’ve a offerings the by the We've with the have continued partners those will that into needs and be MSSP to totally for on-prem capabilities customer from it themselves

security were we’re provide if if form say I So ways driving we full-on the able time We full-on back like market are providing well which across and okay, that from and for the being the the going consistently but bridge just multiple security or we network also outcomes are enterprise in security are the means that as been to what user. all step to into be platform leaving I some to to is cloud and not the that network to and we’ve factor in able network and traffic doing? coming applications be bringing endpoint

pretty that competitive far advantage very model distinct customers' and reaction has think I new So flexibility positive. a also on there so been

Matthew Hedberg

the about quick billings QX capacity more rate you maybe of on was it ads or the same? XX% And great. That’s just relative a to growth relative one, less, sales could in then comment your little

Mark McLaughlin

so very historically many Nothing consistent been for doing than years. - what other we’ve

Operator

from come will question next of Barclays. Saket our And Kalia

Saket Kalia

for thanks well. my Hi for as congrats here taking the Kathy promotion and questions guys,

Kathy Bonanno

you. Thank

Saket Kalia

this start at maybe Framework to conversations Framework, I’m just part it’s maybe customer is at curious Mark, if how Application juncture? all early Hey still just of understanding changing on you, days just Application with level

Mark McLaughlin

been security been also security better be the even more much dramatic decade all with can simpler but and the the but doing that, say, which long rates we the highly and things less higher customers are to we they’re that bringing for And ROI, of to broken can time we’ve to is Palo more be up very like a really so it along with consumption that massively vastly framework way model are, of the imagine is evolution consumption simplified, simplifying believe the and to company that. and here getting have our way, to like looks has the models to prevention manpower, with high automation addition don’t always has application one really fundamentally to better the to a way with market with do that rates we lots model from automation, this that have the are to way and were really innovative off a they completely innovation because the orchestration higher fundamentally we for model show them start with the level last important Saket Alto and for now have do [indiscernible] that then It’s you better been they orchestration, well security prevention drives customers talking world give say that, are get no consumption way the when is and positive different. third

much future Now now us right the think right, is look is doing I what very to showing for what that’s as the like thought going leader.

making of real. We of have demonstrated capabilities lots those

they’re mind going along or after have those that might of the something it for in writing our why you've to be machine very cloud it point capabilities. and today that keep Application places significant want we what the architecture something conversation a Alto a afternoon, Networks always virtual this better in Palo be in our for security platform hearing might applications as lack a be to solution, might end given it buy lines them is to We all for reason think choose project our people operating us a I for Framework firewall, we’re and term got we and say

Operator

come question our Goldman Gabriela of And will from next Sachs. Borges

Gabriela Borges

afternoon, of on think bit and some taking the could of but just picture, helpful? products mix and more being on about the really from verticals, earlier geographically bit because talk the seeing little that a the little there a Mark better on towards the was good mix service up by instead a demand for so federal across a bit you’re profile you carrier thanks be you a vertical maybe if would if Maybe the provider, question. comment could comment so CapEx I Great, follow of my demand

Mark McLaughlin

of year back being wins a start to which and Fed from positions resolution mostly see a anxiety getting verticals we or continuing increasing you normal end see across be which lot that. at Fed and and now. to filled spending has and I in played well ups been continue me that we mean horizontally to due there diversified signs so with would of downs out verticals like fantastic. platform saw market is thanks. good of truly because are There in first leadership the right it type we a all great to across our that Fed Yes, we’re demonstrates Sure let and very see perspective and

which be find and as in very what our trying which space government to the with can life return mission, do they is in So mission digital there. way Fed what good of to is their the for a age any that to like very a fits our And the - we thing that they great. lot within so normalcy well federal to too also is protect line do

It the remarks around some sets of deal the bit service in in market we service like mix a to from the that which investment service that, continues function in the earlier comment than and to to On to my heavier on the quarter earlier was features that product technology there for perspective provider prepared thought We've provider a of quarter put good us. the continued we side a is and to mix the nicely. the is of more grow contributed in adding provider course product that see.

Operator

hear from Turits we'll of And Raymond Michael James. next

Michael Turits

have two I guys. questions. Hey

Rob refresh you asking then and continuation sense First are think question cycle some existing, about of coming you Owens us of this one I give off the where new is a can risk and be big era in you a then where was billings. on your build might where XXXX, strong about of question you I XXXX followup really track? that's if approached the have And back

Mark McLaughlin

Yes, sure.

grow from a quarter, for that's and through continues this we we before in had year. rest So large to us. and customers been as we've perspective refresh that We time the to of refresh the grow the refresh well over going opportunity is add cohorts the many the said continue expect to

mentioned for likewise product be in that that you expect be of wouldn’t growth We driver we major the Analyst Day to on [ph] select really the year. We wallet also the customers new remember positive may the well. or itself team refresh new product that very or introductions and in platform is us we definitely sales doing increasing a the we're and that own, but to case productivity

Operator

question Patrick And will come from [indiscernible]. our next

Unidentified Analyst

Thanks hardware or product launched blend if ’XX? from in indication for questions. the my I the you taking tell us give of us would new Feb revenue wonder He see,

Steffan Tomlinson

I’m exactly I'm question. the I not sure sorry blend, revenue Product Patrick, understand

Unidentified Analyst

the of the quarter year? roughly portion So kind hardware new quarter of kind in revenue of the sold from early what was this launched you

Steffan Tomlinson

out to had products. new the launched healthy factor We strong. It's give has of the that the new an but to strong selling we opportunities new percentages, was the the customers it just Yes, well a mix and contributing that a opened very traction specific from been very as products to specific as very don't don't up base into contributor. our sell percentages. expansion We standpoint up installed so give

Operator

Jaffray. Andrew from come will Piper question of Nowinski next our And

Andrew Nowinski

thanks congratulations Great, Kathy.

the margin? was due clarification new historically expect where see which the has a from new a was I be the But hardware. the longer gross do may guess been your when no cost little said just to headwind are product So start to you to lower think your products I you products new it bit they than margin efficiencies gross

Mark McLaughlin

we we've but able closest perfect ago have a economies the case scale gross launches providers when we supply that into a the have our broad scale launch we had we as one got headwinds we that one some can long be back base we were and components probably that to a us of new about Yes, we years the by did what earlier so look take just would in margins don't number on that XXXX those analogies did product year of kind so of also size shot, at people Series those product also When a into who the done we said that's components the get February actually or to on here. is is we the the product before of a with to expect market. the we biggest

Steffan Tomlinson

of with And just and point, good margin XX% to dynamic that total that into structure. the we're still follow-on XX% gross dynamic range, that guidance within being about incorporated we so that our feel operating we've framework

Operator

Gur And with Talpaz will Stifel. come our question next from

Gur Talpaz

Thanks for taking Great. my question.

standardization same to you enterprises security where seeing the point way end prevention think thinking the point So at perhaps end buy point you in quarter. projects vendor and are do a quick the we're question in now and willing more on more large are of from the networking

Mark McLaughlin

We is matter done in on end is definitely points the cloud the this as to going as picture very we a data or going network think the some cloud. that and some point perspective the case future a I matter be that security important network better case it define and a points will to Yes, you that evolution from on think of better be increasing second by the big heavily Mark. of end just and the the market that's it done the that's that capabilities way be consistency and you Yes, into that's end been we've believe is in know. very think we necessity are about some

for so platform they devices have matter on that to in agents allows might be network, consistency I well have work We're number importantly So in big and being reduce is them. that a of all have right a they they that and also those net that we vendors endpoint be and get that able that to sprawl very together. an think to of organization picture fewer consistency seeing the want a has the a positive vendors the might want want, as all to as customers

Operator

And Gregg and our with Moskowitz Cowen Company question. has next

Gregg Moskowitz

of Congrats Steffan. Congrats best Okay, good Kathy, luck thank on a quarter. you.

because do like year attribute the Thanks. QX. you market product quarter impressive We was I'd in back to go So new for especially would so focus to basis earlier say this accounts? this the a acquisition to or more that around reaching concerted to customer also new there is an on go refresh and

Mark McLaughlin

from well with of performance also a sure had and across growing in solid that reception of positive products we getting new all increasingly the The theatres, our work while going for as offerings started customer from improvements a year. that things on you productivity the last new all then are I We've We we services. ago little are think got Gregg. the the profiles. have their heard market so continued number a

ability to the have cash not opportunities with new well. customers We and new talk as customers to services land about

are products of whole ability stuff definitely a going bunch customers new nicely test far on of as So the that. contributing we from have as to

Gregg Moskowitz

thanks. Okay,

Mark McLaughlin

Greg. Thanks

Operator

And our of DiFucci next Jefferies. question John from come will

John DiFucci

I that you Anderson. guess is product, just conversations advantages, they your seen, I'll like consider And Traps, along do some interesting. its mean McLaughlin that is traction that competing Symantec consider is also merit and against but hey, to do this question and merits everything have own has up more question buy will do like that comparing know and or ever But product when first on with when displacement ever assume is comes you're at has Symantec? some you about you. has land seeing firewall I've to it and ever merits and its I having And customers I I been Gurs Traps that then on with then buy consider you you quick against the the follow good own I it really seen have firewall? they accurate? own the Mark by maybe they its Traps the both talked it are Traps. because question, way look with they looks a against it want have be Traps Mark Thank think for think for I

Mark Anderson

the solution first security, traditional on so spending that winning they are better traditional we're we No, very with Yes, about customers for budget Traps that field John. with third just that on I not we think have of value of our focus purchases the and of have going the little after first anti-virus. we're all traditional a think the money are the in delivering for question. customers the outcomes. associated network or And Traps Thanks anti-virus merits because we that because

success space to we're to the we mentioned really think won't as earlier and and going road strategic down here. for continue I Mark see us

Mark McLaughlin

ability think to that off Framework for where the second and be things Yes customer making to teams be is cloud. that's over the sometimes your you're data reasons and the tell evolution I a John all our sales of able these bake are competitive that we the to future very really this to this right? enforcement it is there interesting important to define think sometimes you well grow a get consistency that. off Application do is say we the into know one which regardless allows we is about should out right? able is that putting important to choose going you have good best and basis where definitely sometime in to even point like and So things you collection want security there on time an the about So and head-to-head everywhere a we're consistency you the So important winning outcomes to in bake And network, as an also of feel also want sometimes the in more deploy and the you the as on a to consistency data endpoint, want we endpoint that right? say aspect networks architecture why us head-to-head more off be on addition

Steffan Tomlinson

the it the really know in to product way from there quality in a provide trust to then we're decade a support can that than out faith where high going we've a more last a we're it's way over they anybody customers support focused that And product earned and standpoint. going from and

John DiFucci

Great, thank you, guys.

Steffan Tomlinson

thanks. Sure,

Operator

next from Fatima Boolani come will And our of UBS. question

Fatima Boolani

your my partners your dedicated for building cloud a question around you for practice a Thank taking you questions. Mark around public efforts bringing and there. in

are having at to And cavern? a help you and a love what cloud of sort the if may. how follow Steffan I'd positioned of the customers their sort public up around challenges them are you high I cross level with quick see to Just conversations

Steffan Tomlinson

Fatima. bet you Yes,

putting applications we've leaning preproduction some the into cloud. are into think public of and deve we're I So got new spectrum aggressively a customers, pretty ups cloud really broad

going from for of can opportunity toes dipping and to comfort more them to that feel impose to security are the that to we deliver next provide real over going consistent see them. what come ten and five to to that is years. is the help going is I the their as can I more people think to an and This and migration look that Some for we more place kind We're continue and there. a take their for think become represent more security we comfortable

I good in space were a So very think there.

Fatima Boolani

helpful? in back performance contracts, if years ‘XX billings Steffan up That's be may your helpful what even you renewal crop are as for seeing longer of where and signed to look of you the same in at come term a of and longer these the really renewing ago term those they deals, sort ‘XX duration, Thank trends are be that you. some earlier would I couple

Steffan Tomlinson

Well, if leveled last and several have seems over seen to it years, a years. increase in the look you back duration out we've three approximately gradual modest at

companies mix business seeing we're are, We're deal re-op now. really the multi-year who annually. ago, a others right for term so there's for of a years who three a renewals three-year seeing And renewing some did

we and to is the roughly year our years. duration don't believe about we really rest overall fiscal it be So the really true in three there's be changes that but what what for mix any Day a at there, we of Analyst should still see that said

Operator

from question next come our Citi. Pritchard will Walter And with

Walter Pritchard

top thank Hi, you six revenue when what for all about business? you market a can large to probably are around of dipping lower Are is last look is of you're strategy customer, end kind at you and the to the player potentially are not but know into do $X.X customers smaller small some think revenue that SMB turn happening look opportunity office as your down months, million you? into I be which the segment you your of some you you per released with talk customer just other in I’m highlighted your XX at wondering I the of products I at end you. a what's

Mark McLaughlin

Walter Hey Mark. its

market we has been know a is support quality because manner. matters delivering mostly you in and security have as be focus enterprise is to find them and high the Our best continues focus solution been

mix that hasn't with changed who for look customers what the time. for of are some acquisition the been So and very and consistent at we us it has customer

seen user cases of and new are seeing work interesting So some a would think larger some either. to address like be. and change lines, and work, a use that from retail the there environment services we to expect able I to some those we and ability haven't plus to is continue I the what as more to of want Though some use around things well customers the just campus along be do global cases

Walter Pritchard

that I might explain there was Then specific strong, markets certain sometimes strong around specific, the a in in there just performance seeing answer, is theatre question the anything European that especially but for execution Mark or the Anderson to curious vertical was you're mean anything good countries certain Europe? I'm is

Mark Anderson

Yes the that was really good every year board the sub performance within in in Walter. across region

things for culture we're the just a customers Americas seeing can them an bad if are in products that's typically IT general and board coverage GPR in to world, focused Europe just a country major the of we're be that on happening they're will in in have front you disconnected away from need the a and a in and their seeing one Europe legislation the at getting provider I legacy years think of better now behind showing every with what when coming around across them. approach. two time much of and of terms architecture us more the That’s frankly we is for awareness to migration how we

Walter Pritchard

Great, thank you.

Mark McLaughlin

Sure.

Operator

from question Stanley. Weiss next of come Keith And Morgan will our

Keith Weiss

all where platform, this in and strategy, it of differentiation selling the the you're of way, guys of selling a sort like guys. for kind get a box base that partners the of this the this sort wondering seems value you sales the big to me nice was and are market change across with proposition? could Hi going Thanks on selling appliance who sort kinds to actually does changing in in service of is customer partners very in change sort a kind at was selling of go an just strategy a market of isn't what fitting quarter. to I of terms not or it

Mark McLaughlin

for wide really Certainly partners, to looking we're coverage good lookout have improve a question a the cast world. but always around on for surgically frankly That’s Keith. new blanket, the looking we the not to

systems is just integrators frankly. the ago it couldn't it's naturally we're the ones, large partners So we them as or large now us kind address that at the to where hard years eight grown avoid of we've scale global for seven the

So Analyst point I’d and about we've large over and for five getting provider field think different our really attention global want national versus consistent a nothing much very the we’ve I in looking on the a products. there. brands. discussed service we team we’re Days, want to that’s that is say than more systems actually partners, and disconnected worked Analyst customers years that with architecture talking message Day this other hard on last do partners dramatically platform each of delivery than the last just is as distribution But what really we or integrators, focus What global more large

Keith Weiss

it. federal that sort strength what for federal expectations particular, budgeting fiscal in on potential of in up could one any give the strength given not, of continue then of the further Got and vertical and machinations QX on just And to into you current color follow sort year? us with

Mark McLaughlin

the now look for wins Fed space right again. understanding big still of resolution saw Mark go a will there continued for people important the unfilled. normal also there say we’re there. a positions following senior think normal to the for the the very the the progression Keith, on In of continuous spending December back is would think And space been some budgets but what and quarter. the more it said quarters more is mixed number solution seeing picture bag table that federal has year and a marker it’s to patterns we be as leadership like in good I been budget some I like on in the consternation their getting that working positive through get don’t would it’s timeframe, Fed I some hopefully people on still just on spending Yes

Mark Anderson

great years last we’ve Yes really and Pavilion across segments over coverage got it’s and and I just add, then DoD the in, and us feel the team would invested really in I a be the we’ve good think space three about important Intel, the team. for to we

Keith Weiss

Excellent. Thank you very much guys.

Mark Anderson

Keith. thanks Sure,

Operator

And Keirstead our Karl from Bank. come next of question Deutsche will

Karl Keirstead

to wedge to is same, the as question, because Steffan least a you you. Thank to the don’t feels just to items this I gap either I us the guidance and And they the thanks to guiding help comes on those the billings can quarter a a there? that to Fortinet be mind to up line widening you've guidance, know back between essentially as if Is were it and product you prior more the versus help relative and the subscription maybe that then us could ask opening follow seems maybe at want maintenance It simply be most of that exactly little understand simple Mark, up? and outperformance you is got where DR the perhaps raised cycle line like seems end on benefit you’re Hi a Check bit wouldn’t for high revenue product? at in in Point the but performance. going and yourselves and one build from

Mark McLaughlin

I is positive mentioned the highly a the importance I benefits for fashion which think the are in market automated of in and platform models together been the of a will have where we while simplicity that result. outcomes there in plus part. take What prevention really work seeing I things is before So the and first the consumption

itself and on that’s of continues really those in really statements matters day market cobbling make the works of other and references right to what architecture think end is the really we at work how the can when to can distinguish anybody don’t think we make but at things ourselves, it’s companies over really together I do those get and to this I we And the because might have is the working customers where together company lots out things there that credibility of be developing of at statements trying to building a what get those to the actually end is we’re scale day, a primarily things think because actually we’ve and trying that say time lot on no to built. you proven that automated talk platforms. we the can

the level, simplicity is the matters work mostly it architecture is I build So elegance one it a of orchestrated that in from matters on of platform perspective. the of a yourself architecture kind automated lot in and think well where way you the of thing that’s a second from the stability charge having perspective

does these as longer saying break we together not Networks in a is like add not reasons outcomes just primary it’s well. coming but run to more hear it well. the stability scales big keep is increasingly security and doesn’t not as we my try one really at well and as things to the stuff also increasing instability just provide starting other adding they acquisitions it will more So folks can’t currently Palo of vendors into mix of any work networks but the technical Alto that lot only stuff

comes of to these other -whole increases stuff the that and the we all platform the that distinguish try on revolutions architecture think over continue of as if time in we ourselves. primary the each mix bunch back we'll moat we to So is build it and of they but and differentiator the

Steffan Tomlinson

for The more and with product in-period our you because your had mentioned the about leave the you also robust planned and $XX full full on change revenue it the and you adding last think the reflects we healthy in year. subscriptions balance expected deferred more such part versus if did of Yes and for and and strong year current so was Karl raise attached period as in strong as is that second mechanics raised, that we are to revenue billings, deferred. so having billings non-attached revenue that question, short million. in billings I the look But product the coming they're when that for point, originally by what current you and product point we And think I'll we're was in every line quarter to raised very than we both maintenance. in-period are term the growth and also you

Karl Keirstead

it, Thanks okay. Got a lot.

Steffan Tomlinson

Karl. Thanks

Operator

And of Shaul our Eyal next from question will Oppenheimer. come

Shaul Eyal

you. Actually of Thank you good any Hi a we housekeeping. the customers just you any thank go update have congrats recent Steffan Traps quarter, guys, congrats to for a lines? you and promotion, Kathy providing along afternoon relating been that, WildFire before let on Number everything. historically Steffan, on quick these good view,

Steffan Tomlinson

front, we a release on basis lines. we saw very healthy that growth in on a Yes product those and those customer both for semi-annual accounts of

Shaul Eyal

your you mentioned of your an prepared enough. product. expansion Fair Mark, cloud in remarks

we XXX that our including make with offering the A landscape just [indiscernible] mentioned also is email you Mark Shaul sure an think does I targeting to Office successful partnership Aperture - our for like and that which coverage we've we it's Proofpoint? you updated I application them among getting Cloud Gmail mentioned into offering so them Yes for is to version continue just with Aperture. it what want other that things, products can offerings done McLaughlin applications e-mail Broker expand Security Access we've cloud more example, as based think so worked of expanded it's APIs keep the and through

Mark Anderson

been between it an that do about hasn’t it, this proof actually of Proofpoint. for point Proofpoint Palo can allow ad with so can would number when we something is really Networks discovery But great Alto Proofpoint integration make there

Shaul Eyal

is you. Got thank it, helpful, that

Operator

Blair. And William will Ho question Jonathan today of from our final come

Jonathan Ho

and like it just time? congratulations, color over data sell expansion terms quick, framework lake make deals little give the can to your Hi look early one potential deals maybe a what of bit those you us with will application and I of and in up in leave for question,

Mark McLaughlin

and the be machine not against of but is bringing Yes and in it set sure, things runs big learning Mark The also that important Jonathan capability. terms the framework only somewhat capability, interesting if customers on some data which that of of I these, you will going in the that set very maybe of lots definitely information but its market in size with is bad bad, driven kind you're to the security he every third don't right, right. application example to like color, on the will is very machine really based capability that to only reinforcing you are we for in tell is we with stuff learning of of data more data on diversity give have sets analytic need evolution take there put some are an picture involved analytics but the increasingly and statement obvious

a So of to of the and set sets you that dataset bigger to are for things a capabilities the want cost point customers and Logging datasets it cost we unknowns are, on the lot application have doesn't of they to is and very and will want framework of log grow large because types those effective for Service lot you big could a good, to they example want information data bad, like to analytic very for a can that have say bring you and prohibitive really the Palo these diversity view, chew all and coming have there Alto capability LightCyber off of all go to be Networks the better capabilities of information. in you

involved can add a was little in quarter, this couple maybe So deeply of the sales Mark you color.

Mark McLaughlin

pretty Yes Mark. you I nailed much think it

customers an I velocity. scale series everyday our leveraging to think machine are and in for – leverage to against like be able increasing average learning our

also be just log let to really bad crunch the suspected good but Mark not need to bad machine You to said. as able and

to our be what makes centers us that surface. price really to that artifacts the Logging the think data we're threat need the intelligence to attractive able I beyond able reduce attack trillions add is fact take automation drive in data the you that have to the Service So of to the we world kind and around that from of

last the I think question. that’s

well Okay, thanks.

Thanksgiving. close, joining and you you safe I Summer coming look wish weekly I very want families I to a forward for your the time. Investor I Conferences. seeing We really next of and See everybody your to in Before appreciate time. many again happy and thank today us you

Operator

you We disconnect. and gentlemen, may thank for your does participation, this now And ladies conference. conclude you today's

Palo Alto Networks (PANW) 20 Nov 172018 Q1 Earnings call transcript