Palo Alto Networks, Inc. (PANW -1.23%)
Q4 2017 Earnings Conference Call
August 31, 2017 4:30pm EST
Contents
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks
Operator:
Good day and welcome to the Palo Alto Networks Fiscal Fourth Quarter Conference Call. Today’s conference is being recorded. At this time I'd like to turn the conference over to Miss Kelsey Turcotte, Vice President of Investor Relations. Please go ahead.
Kelsey Turcotte - Vice President of Investor Relations:
Great, thank you, very much. Good afternoon and thank you for joining us on today’s conference call to discuss Palo Alto Networks Fiscal Fourth Quarter ad Full Year 2017 Financial Results. This call is being broadcast live over the web and can be accessed on the Investor section of our website at investors.paloaltonetworks.com.
With me on today’s call are Mark McLaughlin, our Chairman and Chief Executive Officer, Steffan Tomlinson, our Chief Financial Officer, and Mark Anderson, our President.
This afternoon we issued a press release announcing our results for the fiscal fourth quarter and full year ended July 31, 2017. If you would like a copy of the release, you can access it online on our website. We would like to remind you that during the course of this conference call, management will make forward-looking statements, including statements regarding our financial guidance and modeling points for the fiscal first quarter and full year fiscal ’18, our competitive position and the demand and market opportunity for our products and subscriptions, benefits and timing of new products and subscription offerings, organizational changes, our ability to drive outside growth rates, and trends in certain financial results, operating metrics, mix shift and seasonality.
These forward-looking statements involve a number of risks and uncertainties, some of which are beyond or control, which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future, and we undertake no obligation to update these statements after this call. For a more detailed description of factors that could cause actual results to differ, please refer to our quarterly report on Form 10Q, filed with the SEC on June 1, 2017 and our earnings release posted a few minutes ago on our website and on the SEC’s website.
Also, please note that certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. For historical periods, we have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in the supplemental financial information that can be found in the Investors section of our website located at investors.paloaltonetworks.com.
We would also like to remind you that we will be hosting Investor Day 2017 with onsite registration starting at 8:00 a.m., Eastern Standard Time on Wednesday, September 27 in New York City. For more information or registration details, please visit our Investor Relations website, or email shanez@[email protected].
And finally, once we have completed our formal remarks, we will be posting them to our Investor Relations website under Quarterly Results. And with that, I’ll turn the call over to Mark.
Mark McLaughlin - Chairman and Chief Executive Officer:
Thank you Kelsey, and thank you everyone for joining us this afternoon for our fiscal fourth quarter and full year 2017 results. I’m pleased to report that we ended the year with a strong fourth quarter. On a year-over-year basis, Q4 revenue was $509 million, up 27 percent; billings were $671 million, up 17 percent; non-GAAP earnings per share was $0.92, up 39 percent; and free cash flow was $190 million.
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With that, I’ll turn the call back over to the operator for questions.
Questions and Answers
Operator:
Thank you. If you’d like to ask a question, please signal by pressing star-one on your telephone keypad. If you’re using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And again, please press star-one to ask a question.
We’ll go first to Ken Talanian from Evercore ISI.
Ken Talanian - Evercore ISI:
Hi, thanks for taking the question. First off, I was wondering where are you in refreshing the group of customers who are likely to come up to renew hardware within the next year or so with the new hardware? And then what assumptions are you factoring into your fiscal ’18 guidance around that?
Mark McLaughlin Chairman and Chief Executive Officer:
Hey Ken, it’s Mark. I can take that question. From a refresh perspective, you should know the cohorts for our customers continue to increase each year, so that gets better and better for us as the years go on, and we’ve been doing well on the refresh so far. We’re doing a lot of work to make sure that we capture refresh opportunity into the future. In our fiscal ’18 numbers, we have a number of drivers associated with product growth. Refresh is one of them; it’s not the primary driver for growth but it’s one of them in there.
Ken Talanian - Evercore ISI:
Okay, and then along those lines are you seeing any changes in the level of attach for your attached subscriptions or acceleration in the unattached?
Mark McLaughlin - Chairman and Chief Executive Officer:
Yes, the last time we had talked about attached, which is a metric that we’re not going to provide any longer because we’re more focused on the penetration rates. The last time we talked about it a couple quarters ago, we said it was 2.6 and since that time it’s been rising continuously for us.
Operator:
Thank you, and we’ll go next to Michael Turits from Raymond James.
Michael Turits - Raymond James:
Hey guys, and first congrats on the quarter and Steffan, thanks for all your hard work over the years and best of luck in all things. Glad you’re sticking with it through the transition. Two questions, first of all the guidance is all very strong. Billings growth is still lagging by about 5 points. Any thoughts on what’s happening there in terms of duration or why we’re still seeing that lag, and then I have a product question.
Steffan Tomlinon - Chief Financial Officer:
On the billing side Michael, as you know when we came off the first half of fiscal ’17 we were working on some issues and those are improving for us. We saw productivity increasing through the second half, so naturally we were lower on the billings growth than we had originally planned in fiscal ’17 as it created a lag due to revenue. As you see in the guidance, we expect that lag to continue but it’s compressing through the back half of fiscal ’18 as we benefit from the ongoing work there.
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Operator:
That does conclude today's conference. Thank you for your participation.
Duration: 59 minutes
Call participants
Kelsey Turcotte -- Vice President of Investor Relations
Mark McLaughlin -- Chairman and Chief Executive Officer
Steffan Tomlinon -- Chief Financial Officer
Mark Anderson -- President
Ken Talanian -- Evercore ISI -- Analyst
Michael Turits -- Raymond James -- Analyst
Walter Pritchard -- Citi Financial -- Analyst
Philip Winslow -- Wells Fargo Securities -- Analyst
Pierre Fargue -- Bernstein -- Analyst
Rob Ownes -- KeyBank -- Analyst
Jonathan Ho -- William Blair -- Analyst
John DiFucci -- Jefferies -- Analyst
Sara Hindlian -- Macquarie Group -- Analyst
Gert Topas -- Stifel -- Analyst
Sterling -- JP Morgan -- Analyst
Greg Moskowitz -- Cowen & Company -- Analyst
Fazam Bolani -- UBS -- Analyst
Eric Schlezinger -- JNT Revenue -- Analyst
Carl Christian -- Deutsche Bank -- Analyst
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