Palo Alto Networks, Inc. (PANW) Earnings Call Transcript & Summary

Welcome to the Palo Alto Networks, Inc. 2021 Annual Meeting of Stockholders. I will now turn the meeting over to Nikesh Arora, Chairman and CEO of Palo Alto Networks.

Thank you, operator. Good morning, ladies and gentlemen. I'm Nikesh Arora, Chairman and CEO of Palo Alto Networks, and it is a pleasure to welcome you to our 2021 Annual Meeting of Stockholders. I will be presiding as Chairman of the meeting. In light of the evolving public health and safety consideration posed by the COVID-19 pandemic, we are holding our Annual Stockholders Meeting virtually this year. First, let me introduce our directors and officers will be -- who are with us today. From our Board of Directors, we have John Donovan, Aparna Bawa, Asheem Chandna, Carl Eschenbach, Dr.Helene Gayle, Jim Goetz, Sir John Key, Mary Pat McCarthy, Mark McLaughlin, Lorraine Twohill and Nir Zuk. And our corporate officers joining us today are Bruce Byrd, our General Counsel and Corporate Secretary; Dipak Golechha, our Chief Financial Officer; Liane Hornsey, our Chief People Officer; BJ Jenkins, our President; Lee Klarich, our Chief Product Officer; Zeynep Ozdemir, Chief Marketing Officer; Amit Singh, Chief Business Officer; and Nir, who also serves as our Chief Technology Officer. Also with us today are Dave Cabral and Katie Tobin from Ernst & Young LLP, our independent registered public accounting firm; and Jose Macias from Wilson Sonsini, our outside counsel. Today, we will be conducting the formal business of the meeting first, then we will answer any stockholder questions pertinent to the subject matter of the meeting. Validated stockholders may submit questions to our virtualshareholdermeeting.com web portal at the bottom left-hand section of the screen. The general rules of conduct are posted on the web portal. In order to ensure that the business is meeting proceeds efficiently, we ask that you observe those rules. I now turn the meeting over to Bruce Byrd, our General Counsel, Corporate Secretary, who will conduct the formal business of the meeting.

Thank you. The meeting is now called to order. I have an affidavit certifying the mailing of the proxy materials on or about October 29, 2021, to all stockholders of record at the close of business on October 18, 2021. As authorized by the Board of Directors, I hereby appoint Kathy Blackwell as the inspector of election for this annual meeting. The inspector of election has signed an oath of office. The affidavit of distribution and the oath of inspector of election will be filed with the minutes of this meeting. The inspector of election has advised me that we have present, virtually and by proxy, a sufficient number of shares to constitute a quorum, so the meeting is duly constituted. If you have previously sent in your proxy or voted via telephone or Internet and you do not intend to change your vote, it is not necessary that you take any further action. Your vote will be counted. If you are eligible to vote and have not done so or if you want to change your vote, you may vote by clicking on the Voting button on the web portal and following the instructions there. The first item of formal business is the election of John Donovan, Sir John Key, Mary Pat McCarthy and Nir Zuk as Class 1 directors. The second item of formal business is to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending July 31, 2022. The third item of formal business is to hold an advisory vote on executive compensation. The last item of formal business is to approve our 2021 equity incentive plan. The Board of Directors recommends that stockholders vote in favor of each of these 4 proposals. The proxy solicited by the Board of Directors will be voted in favor of these proposals unless otherwise instructed by the stockholder. We will proceed to vote. The time is now 12:35 p.m. Pacific Time, and the polls are now open for voting. If you are eligible to vote and have not done so or if you want to change your vote, you may vote by clicking on the voting button on the web portal and following the instructions there. If any stockholder would like to ask a question regarding any of the proposals or voting procedures, please submit your question through the web portal. Clay, are there any questions regarding the proposals or voting procedures?

There are no questions regarding the proposals or the voting procedures.

If you are voting, please ensure you have submitted your vote. [Voting]

The time is now 12:37 p.m. Pacific Time, and the polls are now closed. The inspector of election will count the votes. At this time, I would like the inspector of election to report on the preliminary results of the voting.

Regarding proposal #1, the election of directors. Each of the directors received the requisite votes in favor of their election, with each director receiving 84% of the vote in favor. Regarding proposal #2, the ratification of Ernst & Young as the company's independent auditor, over 98% of the vote was in favor of the ratification. . Regarding proposal #3, the advisory vote on executive compensation as described in the proxy statement, received the requisite votes to approve the executive compensation with over 81% of the votes in favor. Regarding proposal #4, the 2021 equity incentive plan, as described in the proxy statement, did receive the requisite votes to approve the plan, with over 84% of the votes in favor.

The inspector of election will conduct a final count of all votes on these matters, and the final results will be included in the minutes of this meeting and in our current report on Form 8-K announcing the results of this meeting. This concludes the formal business of the meeting, and the meeting is adjourned.

Now we will address a question submitted through the virtual meeting portal. Clay, please read the question.

The question is, has Palo Alto Networks considered initiating a dividend?

Thank you very much for the question. As you might remember, we outlined at our Analyst Day in September, that our capital allocation strategy is focused on 4 principles: one, investing in organic growth; two, returning capital to our shareholders; three, optimizing our capital base; and four, funding strategic M&A. We don't believe that issuing dividends would support those objectives. However, on the other hand, our stock repurchase program is an effective means of returning capital to our shareholders. Once again, thank you for your question. I want to thank all of you who are attending today's virtual meeting for the interest you've shown in the affairs of our company. We very much appreciate your attendance. And as always, thank you for your support. This concludes our meeting.

This now concludes the meeting. Thank you for joining, and have a pleasant day.