2024
ANNUAL REPORT &
PROXY STATEMENT
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
OUR VISION
Our vision is a world where
each day is safer and more
secure than the one before
WHAT WE Dr
Palo Alto Networks is the global cybersecurity leader,
committed to making each day safer than the one before with
industry-leading, Al-powered solutions in network security,
cloud security and security operations. Powered by Precision
AlTM, our technologies deliver precise threat detection and swift
response, minimizing false positives and enhancing security
effectiveness. Our Platformization approach integrates diverse
security solutions into a unified, scalable platform, streamlining
management and providing operational efficiencies with
comprehensive protection.
Cybersecurity consolidation
is the future. And we're
already there.
OUR VISION
Our vision is a world where
each day is safer and more
secure than the one before
WHAT WE DO
Palo Alto Networks is the global cybersecurity leader,
committed to making each day safer than the one before with
industry-leading, AI-powered solutions in network security,
cloud security and security operations. Powered by Precision
AI™, our technologies deliver precise threat detection and swift
response, minimizing false positives and enhancing security
effectiveness. Our Platformization approach integrates diverse
security solutions into a unified, scalable platform, streamlining
management and providing operational efficiencies with
comprehensive protection.
Cybersecurity consolidation
is the future. And we’re
already there.
Letter from our Chair
"The rollout of our new Secure Al by Design portfolio has begun. Our solutions,
powered by Precision AITM, are your ultimate defense in an Al-first world."
Dear Fellow Shareholders:
I have never been more excited about the future of our company and our industry. As I have expressed in this letter over the
past several years, I am incredibly proud of the work Palo Alto Networks and its employees have done with our customers
and partners to achieve our vision - a world where each day is safer and more secure than the one before.
FISCAL 2024 ACHIEVEMENTS
I am pleased to report that fiscal 2024 was another year of strong financial performance by Palo Alto Networks. Our revenue of
$8.03 billion (a 16% year-over-year increase), Next-Generation Security ("NGS") annual recurring revenue ("ARR") of $4.22 billion
(a 43% year-over-year increase) and remaining performance obligations ("RPO") of $12.7 billion (a 20%year-over-year increase)
demonstrate that our strategy is deeply resonating with customers. At the heart of this performance is the continued broad
adoption of our three platforms: Network Security, Cloud Security and Security Operations. In Network Security, we continued
to see our firewall-as-a-platform billings grow in a healthy manner, up 17% in fiscal year 2024, driven by growth in our
SASE and software firewall offerings. Our Cloud Security platform maintained momentum to become the first pure-play
cybersecurity cloud security business to achieve $700 million in ARR'. In Security Operations, we saw our Cortex® platform
exceed $900 million in ARR, and firmly established Cortex XSIAM® as the transformation platform for security operations.
In fiscal 2024, Cortex XSIAM achieved approximately $500 million in bookings, up more than 2x versus fiscal 2023.
None of these accomplishments are possible without the dedication and engagement of our over 15,000 employees,
located all over the world. We believe our ongoing success depends on our employees. We continue to prioritize an
employee-centric people strategy grounded on core tenets of personalization, fairness and equity, and choice that are
built upon our core values of disruption, execution, collaboration, inclusion, and integrity. We are proud of the workplace
recognitions that the company received in fiscal 2024, including Newsweek's "Global Most Loved Workplaces",
Comparably's "Best Company Culture" and "Best Company for Women" and Disability Equality Index's "Best Places to Work
for People with Disabilities."
LOOKING AHEAD
As we look to fiscal 2025 and beyond, Palo Alto Networks continues to build on its strong foundation of transformative
innovation, financial performance and profitable growth. Our customers' buy-in and our leadership positions across
cybersecurity gives me conviction that this is the time for us to invest in our long-term growth. In fiscal 2024, we embarked
on an ambitious plan to accelerate Platformization - our strategy to accelerate customer adoption of our platforms across
our portfolio. While there is more work to be done, I am pleased with the early momentum that we achieved with our
Platformization strategy in fiscal 2024, and we expect this strategy to be a driving force toward our goal of $15 billion in NGS
ARR in 2030.
Achievement of our aspirations cannot be done without talking about artificial intelligence ("Al"). In 2024, we witnessed
the acceleration of our efforts to innovate with the arrival of generative Al, the continued momentum of Cortex XSIAM
and the introduction of our Secure Al by Design product offerings — Al Access Security ("Al Access"), Al security posture
management ("Al-SPM") and Al Runtime Security ("Al Runtime"), as well as our Precision AITM security bundle. We
introduced Al Access to enable organizations' workforces to use Al tools with confidence, giving security teams full visibility,
robust controls, data protection and proactive threat prevention measures. With Al-SPM, we are securing our customers'
Al ecosystem by identifying vulnerabilities and prioritizing misconfigurations in models, applications and resources. And
with Al Runtime, we are helping organizations to confidently build Al-powered applications by securing their entire Al
application ecosystem, protecting against runtime threats. I personally believe Al is going to be one of the biggest inflection
points in technology in over a decade and likely, more importantly, to significantly increase the total addressable market in
cybersecurity. Our heritage of innovation - and our instinct to always have an eye on the frontier of technological innovation
- prepares us to harness the power of a new generation of Al capabilities. We look forward to more opportunities ahead
as we remain committed to the long-term interests of our shareholders and a broad range of stakeholders critical to our
success, including employees, customers, the communities we operate in, and our partners and suppliers.
(1) Cloud Security ARR represents annual recurring revenue for Prisma Cloud and VM-Series consumed in the public cloud.
2024 Proxy Statement
paloajtp:
3
3
2024 Proxy Statement
Letter from our Chair
“The rollout of our new Secure AI by Design portfolio has begun. Our solutions,
powered by Precision AITM, are your ultimate defense in an AI-first world.”
Dear Fellow Shareholders:
I have never been more excited about the future of our company and our industry. As I have expressed in this letter over the
past several years, I am incredibly proud of the work Palo Alto Networks and its employees have done with our customers
and partners to achieve our vision - a world where each day is safer and more secure than the one before.
FISCAL 2024 ACHIEVEMENTS
I am pleased to report that fiscal 2024 was another year of strong financial performance by Palo Alto Networks. Our revenue of
$8.03 billion (a 16% year-over-year increase), Next-Generation Security (“NGS”) annual recurring revenue (“ARR”) of $4.22 billion
(a 43% year-over-year increase) and remaining performance obligations (“RPO”) of $12.7 billion (a 20% year-over-year increase)
demonstrate that our strategy is deeply resonating with customers. At the heart of this performance is the continued broad
adoption of our three platforms: Network Security, Cloud Security and Security Operations. In Network Security, we continued
to see our firewall-as-a-platform billings grow in a healthy manner, up 17% in fiscal year 2024, driven by growth in our
SASE and software firewall offerings. Our Cloud Security platform maintained momentum to become the first pure-play
cybersecurity cloud security business to achieve $700 million in ARR1. In Security Operations, we saw our Cortex® platform
exceed $900 million in ARR, and firmly established Cortex XSIAM® as the transformation platform for security operations.
In fiscal 2024, Cortex XSIAM achieved approximately $500 million in bookings, up more than 2x versus fiscal 2023.
None of these accomplishments are possible without the dedication and engagement of our over 15,000 employees,
located all over the world. We believe our ongoing success depends on our employees. We continue to prioritize an
employee-centric people strategy grounded on core tenets of personalization, fairness and equity, and choice that are
built upon our core values of disruption, execution, collaboration, inclusion, and integrity. We are proud of the workplace
recognitions that the company received in fiscal 2024, including Newsweek’s “Global Most Loved Workplaces”,
Comparably’s “Best Company Culture” and “Best Company for Women” and Disability Equality Index’s “Best Places to Work
for People with Disabilities.”
LOOKING AHEAD
As we look to fiscal 2025 and beyond, Palo Alto Networks continues to build on its strong foundation of transformative
innovation, financial performance and profitable growth. Our customers’ buy-in and our leadership positions across
cybersecurity gives me conviction that this is the time for us to invest in our long-term growth. In fiscal 2024, we embarked
on an ambitious plan to accelerate Platformization - our strategy to accelerate customer adoption of our platforms across
our portfolio. While there is more work to be done, I am pleased with the early momentum that we achieved with our
Platformization strategy in fiscal 2024, and we expect this strategy to be a driving force toward our goal of $15 billion in NGS
ARR in 2030.
Achievement of our aspirations cannot be done without talking about artificial intelligence (“AI”). In 2024, we witnessed
the acceleration of our efforts to innovate with the arrival of generative AI, the continued momentum of Cortex XSIAM
and the introduction of our Secure AI by Design product offerings — AI Access Security (“AI Access”), AI security posture
management (“AI-SPM”) and AI Runtime Security (“AI Runtime”), as well as our Precision AITM security bundle. We
introduced AI Access to enable organizations’ workforces to use AI tools with confidence, giving security teams full visibility,
robust controls, data protection and proactive threat prevention measures. With AI-SPM, we are securing our customers’
AI ecosystem by identifying vulnerabilities and prioritizing misconfigurations in models, applications and resources. And
with AI Runtime, we are helping organizations to confidently build AI-powered applications by securing their entire AI
application ecosystem, protecting against runtime threats. I personally believe AI is going to be one of the biggest inflection
points in technology in over a decade and likely, more importantly, to significantly increase the total addressable market in
cybersecurity. Our heritage of innovation – and our instinct to always have an eye on the frontier of technological innovation
– prepares us to harness the power of a new generation of AI capabilities. We look forward to more opportunities ahead
as we remain committed to the long-term interests of our shareholders and a broad range of stakeholders critical to our
success, including employees, customers, the communities we operate in, and our partners and suppliers.
(1) Cloud Security ARR represents annual recurring revenue for Prisma Cloud and VM-Series consumed in the public cloud.
ON_
Network Security
STRATA I PRISMA SASE
Best-in-class security
delivered across
hardware, software
and SASE
Cloud Security
PRISMA CLOUD
Comprehensive
platform to secure
everything that runs
in the cloud
Security Operations
CORTEX
A new approach to
SOC with fully
integrated data,
analytics and
automation, wrapped
with strategic services
capability
For important information regarding our
use of forward-looking statements, please
see page 8 of this proxy statement.
Letter from our Chair
OUR ANNUAL MEETING
As in the past, this year's Proxy Statement is constructed to maximize clarity and
understanding about the company's strategies, successes and challenges. Several of our
key initiatives are worth prefacing here.
Shareholder Engagement. We remain guided by, and appreciative of, the perspectives
of our shareholders as expressed through their engagement with us. Due, in part, to the
disappointing "Say-on-Pay" vote result at our 2023 annual meeting, we redoubled our
efforts and engaged in discussions with shareholders holding approximately 55% of
our outstanding shares as of June 30, 2024. We conversed with you on a wide variety of
topics, including executive compensation, business strategy, risk management oversight,
sustainability, inclusion and diversity, and corporate governance. We understand the
importance of having a true dialogue with our investors, and we are committed to
meaningful outreach and discussion with our shareholders in the coming year.
Executive Compensation. We remain committed to an executive compensation
program that is truly pay-for-performance. For fiscal 2024,100% of our named
executive officers' equity compensation awards were performance-based, with
different performance targets than the cash incentive plan awards, and over 97% of my
compensation and, on average, approximately 94% of our other named executive officers'
compensation was performance-based. Understanding that you were not completely
satisfied with our executive compensation program in fiscal 2024, our Compensation and
People Committee made a number of important changes to our executive compensation
programs for fiscal 2025, particularly to the equity compensation program, which we
believe address the core concerns raised by you. In the pages that follow, our Lead
Independent Director, John Donovan, and our Compensation and People Committee
describe these changes to you in detail.
Our Commitment to Responsible Business Practices. We recognize our
responsibilities to provide safety, security and sustainability to our workforce, suppliers,
communities and environment. Elsewhere in this Proxy Statement, we discuss our efforts
throughout fiscal 2024 to reduce our impacts on climate change, to invest in our people
and our communities, and to operate with integrity in all we do. Your Board and executive
leadership team take seriously their duty to oversee these environmental, social and
governance strategies and are proud of our progress to date.
You are cordially invited to attend the 2024 Annual Meeting of Shareholders of Palo Alto
Networks, Inc. to be held on Tuesday, December10, 2024 at 11:00 AM., Pacific Time.
This year's annual meeting will be a virtual meeting conducted via a live webcast. You
will be able to listen to the annual meeting, submit your questions, and vote during the
live webcast of the meeting by visiting www.virtualshareholdermeeting.com/PANW2024
and entering the 16-digit control number included in our Notice of Internet Availability of
Proxy Materials, on your proxy card, or in the instructions that accompanied your proxy
materials. If you did not receive a 16-digit control number, please reach out to your broker
for further instructions.
On behalf of our Board, we thank you for your investment in Palo Alto Networks and for
your continued trust. We look forward to the annual meeting on December 10, 2024.
Thank you,
Nikesh Arora
Chair and Chief Executive Officer
4
palomIto°
2024 Proxy Statement
OUR ANNUAL MEETING
As in the past, this year’s Proxy Statement is constructed to maximize clarity and
understanding about the company’s strategies, successes and challenges. Several of our
key initiatives are worth prefacing here.
Shareholder Engagement. We remain guided by, and appreciative of, the perspectives
of our shareholders as expressed through their engagement with us. Due, in part, to the
disappointing “Say-on-Pay” vote result at our 2023 annual meeting, we redoubled our
efforts and engaged in discussions with shareholders holding approximately 55% of
our outstanding shares as of June 30, 2024. We conversed with you on a wide variety of
topics, including executive compensation, business strategy, risk management oversight,
sustainability, inclusion and diversity, and corporate governance. We understand the
importance of having a true dialogue with our investors, and we are committed to
meaningful outreach and discussion with our shareholders in the coming year.
Executive Compensation. We remain committed to an executive compensation
program that is truly pay-for-performance. For fiscal 2024, 100% of our named
executive officers’ equity compensation awards were performance-based, with
different performance targets than the cash incentive plan awards, and over 97% of my
compensation and, on average, approximately 94% of our other named executive officers’
compensation was performance-based. Understanding that you were not completely
satisfied with our executive compensation program in fiscal 2024, our Compensation and
People Committee made a number of important changes to our executive compensation
programs for fiscal 2025, particularly to the equity compensation program, which we
believe address the core concerns raised by you. In the pages that follow, our Lead
Independent Director, John Donovan, and our Compensation and People Committee
describe these changes to you in detail.
Our Commitment to Responsible Business Practices. We recognize our
responsibilities to provide safety, security and sustainability to our workforce, suppliers,
communities and environment. Elsewhere in this Proxy Statement, we discuss our efforts
throughout fiscal 2024 to reduce our impacts on climate change, to invest in our people
and our communities, and to operate with integrity in all we do. Your Board and executive
leadership team take seriously their duty to oversee these environmental, social and
governance strategies and are proud of our progress to date.
You are cordially invited to attend the 2024 Annual Meeting of Shareholders of Palo Alto
Networks, Inc. to be held on Tuesday, December 10, 2024 at 11:00 A.M., Pacific Time.
This year’s annual meeting will be a virtual meeting conducted via a live webcast. You
will be able to listen to the annual meeting, submit your questions, and vote during the
live webcast of the meeting by visiting www.virtualshareholdermeeting.com/PANW2024
and entering the 16-digit control number included in our Notice of Internet Availability of
Proxy Materials, on your proxy card, or in the instructions that accompanied your proxy
materials. If you did not receive a 16-digit control number, please reach out to your broker
for further instructions.
On behalf of our Board, we thank you for your investment in Palo Alto Networks and for
your continued trust. We look forward to the annual meeting on December 10, 2024.
Thank you,
Nikesh Arora
Chair and Chief Executive Officer
For important information regarding our
use of forward-looking statements, please
see page 8 of this proxy statement.
4
2024 Proxy Statement
Letter from our Chair
21
Meetings with investors
Representing 33% of our outstanding
shares, while offering meetings to investors
representing 47% of our outstanding shares
(each as of June 30, 2024).
Letter from our Lead Independent Director
"The Board recognizes that we are leading this company for our shareholders'
benefit. Thank you for the trust you place in us and the opportunity to serve you
and our company as directors."
Dear Fellow Shareholders:
As the lead independent director of the Palo Alto Networks Board of Directors, I wanted to write to you separately this
year to cover topics of interest to you as shareholders. As always, the Board's primary responsibility was to oversee the
company's efforts to deliver meaningful and sustainable value to our shareholders.
FISCAL 2024 HIGHLIGHTS
The company had another successful year, both financially and technologically. Through the dedicated efforts of our
executive team and employees, we achieved record financial results, as discussed in our Chair's letter, and were at the
forefront of innovation, particularly with the launch of our Secure Al by Design product offerings powered by Precision AITM.
In addition, we are thrilled to have completed acquisitions that further our mission to be the cybersecurity partner of
choice, protecting our digital way of life. The acquisition of Talon"' Cyber Security led to our launch of SASE's first natively-
integrated enterprise browser, which has attracted more attention to our SASE offerings, and helps secure work for users
on any managed or unmanaged device, working in any location, on any web application. In addition, the Board is excited by
the prospects of our expanding partnership with IBM and expect it will further accelerate the adoption of Cortex XSIAM®.
The Board believes that the company and the cybersecurity industry are at an inflection point as a result of the advances
in generative Al and the need for vendor consolidation to deliver optimal cybersecurity outcomes. With our broad platform
of products, Palo Alto Networks is uniquely situated to benefit from these conditions. Following the completion of the first
half of fiscal 2024, the company made a strategic shift to focus even more intentionally on Platformization to accelerate the
broad adoption of our product platforms. We expected this strategic shift to meaningfully increase long-term shareholder
value creation, even though these longer-term benefits would come, in part, at the expense of certain elements of our
short-term performance. Our executive team enthusiastically embraced this strategy despite the negative impact it could
have had on their compensation. This ultimately lead to the fiscal 2024 portion of recent equity awards resulting in 0%
payout attributable to fiscal 2024 performance.
SHAREHOLDER ENGAGEMENT AND EXECUTIVE COMO. =1.0.41 1,01.
During fiscal 2023, the Compensation and People Committee of our
Board granted Nikesh Arora, our Chief Executive Officer, a significant
performance-based restricted stock unit retention award. The
committee reached its decision following a rigorous and data-driven
assessment, concluding that Nikesh had typified our leadership ethos
- one that values high integrity and high performance for the benefit
of our shareholders. The committee also recognized that he led the
transformation of our company from a market leader in next generation
firewalls into the world's cybersecurity leader, with best-of-breed
products across network security, cloud security and security operations.
During his tenure, our financial performance and product innovation has
accelerated, and our market capitalization increased from $19.1 billion
(as of May 31, 2018, the last trading day prior to announcing Nikesh as
our Chief Executive Officer) to $76.5 billion (as of July 31, 2023, the last
day of fiscal 2023), and it continued to increase substantially throughout
fiscal 2024. With Nikesh at the helm, Palo Alto Networks has delivered
extraordinary value creation for our shareholders and has become the
largest pure-play cybersecurity company in the world.
2024 Proxy Statement
palositb:
5
2024 Proxy Statement
Letter from our Lead Independent Director
“The Board recognizes that we are leading this company for our shareholders’
benefit. Thank you for the trust you place in us and the opportunity to serve you
and our company as directors.”
Dear Fellow Shareholders:
As the lead independent director of the Palo Alto Networks Board of Directors, I wanted to write to you separately this
year to cover topics of interest to you as shareholders. As always, the Board’s primary responsibility was to oversee the
company’s efforts to deliver meaningful and sustainable value to our shareholders.
FISCAL 2024 HIGHLIGHTS
The company had another successful year, both financially and technologically. Through the dedicated efforts of our
executive team and employees, we achieved record financial results, as discussed in our Chair’s letter, and were at the
forefront of innovation, particularly with the launch of our Secure AI by Design product offerings powered by Precision AITM.
In addition, we are thrilled to have completed acquisitions that further our mission to be the cybersecurity partner of
choice, protecting our digital way of life. The acquisition of Talon™ Cyber Security led to our launch of SASE’s first natively-
integrated enterprise browser, which has attracted more attention to our SASE offerings, and helps secure work for users
on any managed or unmanaged device, working in any location, on any web application. In addition, the Board is excited by
the prospects of our expanding partnership with IBM and expect it will further accelerate the adoption of Cortex XSIAM®.
The Board believes that the company and the cybersecurity industry are at an inflection point as a result of the advances
in generative AI and the need for vendor consolidation to deliver optimal cybersecurity outcomes. With our broad platform
of products, Palo Alto Networks is uniquely situated to benefit from these conditions. Following the completion of the first
half of fiscal 2024, the company made a strategic shift to focus even more intentionally on Platformization to accelerate the
broad adoption of our product platforms. We expected this strategic shift to meaningfully increase long-term shareholder
value creation, even though these longer-term benefits would come, in part, at the expense of certain elements of our
short-term performance. Our executive team enthusiastically embraced this strategy despite the negative impact it could
have had on their compensation. This ultimately lead to the fiscal 2024 portion of recent equity awards resulting in 0%
payout attributable to fiscal 2024 performance.
SHAREHOLDER ENGAGEMENT AND EXECUTIVE COMPENSATION
During fiscal 2023, the Compensation and People Committee of our
Board granted Nikesh Arora, our Chief Executive Officer, a significant
performance-based restricted stock unit retention award. The
committee reached its decision following a rigorous and data-driven
assessment, concluding that Nikesh had typified our leadership ethos
– one that values high integrity and high performance for the benefit
of our shareholders. The committee also recognized that he led the
transformation of our company from a market leader in next generation
firewalls into the world’s cybersecurity leader, with best-of-breed
products across network security, cloud security and security operations.
During his tenure, our financial performance and product innovation has
accelerated, and our market capitalization increased from $19.1 billion
(as of May 31, 2018, the last trading day prior to announcing Nikesh as
our Chief Executive Officer) to $76.5 billion (as of July 31, 2023, the last
day of fiscal 2023), and it continued to increase substantially throughout
fiscal 2024. With Nikesh at the helm, Palo Alto Networks has delivered
extraordinary value creation for our shareholders and has become the
largest pure-play cybersecurity company in the world.
21
Meetings with investors
33%
Representing 33% of our outstanding
shares, while offering meetings to investors
representing 47% of our outstanding shares
(each as of June 30, 2024).
Letter from our Lead Independent Director
As a Board, we were disappointed that, at our 2023 annual meeting of shareholders, only 38% of the votes cast were in favor
of our fiscal 2023 executive compensation program. Understanding that you were not completely satisfied, I personally led
our shareholder outreach efforts to ensure that I, on behalf of the Board, heard from you directly. Collectively, the Chair of
our Compensation and People Committee and I personally met with shareholders representing 33% of our outstanding
shares, and I offered meetings to 47%. From your feedback, we distilled a number of important changes to our executive
compensation programs, particularly to the equity compensation program, which we believe address the core concerns
raised by you. While some of the changes we are making in response to shareholder feedback could not be reflected in
compensation decisions made for fiscal 2024, because certain of our fiscal 2024 pay decisions had already been made
when that feedback was received, we have implemented these changes in our fiscal 2025 pay decisions and also reflected
them in the equity awards for fiscal 2023 and fiscal 2024 where possible. The changes include:
Reducing the maximum payout of our performance stock unit awards by 33.3%, from 600% to 400% of the target number
of performance stock units, for fiscal 2025, fiscal 2024, and fiscal 2023 awards.
Updating the financial measures used in performance stock unit awards to annual NGS ARR and annual non-GAAP
earnings per diluted share, further aligning executive compensation to the success of our Platformization strategy and
focus on profitability, including for the remaining performance periods in the fiscal 2023 and fiscal 2024 performance
stock unit awards.
Clearly defining the threshold performance levels for each performance metric in our fiscal 2025 cash incentive plan
such that if either metric's performance is more than 10% below its respective target for fiscal 2025, then there is no
funding of or payout from our cash incentive plan.
Enhancing the disclosures around our compensation practices, as reflected in the compensation, discussion and
analysis ("COSA") contained in this Proxy Statement, as well as in a letter from our Compensation and People Committee.
We encourage you to read this letter, as well as the entire CD&A. We believe that you will conclude that your Board has
taken to heart the feedback we have received from our shareholders and designed an executive compensation program
deserving of your support.
On behalf of our Board, I thank you for your investment in Palo Alto Networks and your continued trust. I look forward to the
annual meeting on December 10, 2024.
Thank you,
John M. Donovan
Lead Independent Director
6
palomito°
2024 Proxy Statement
As a Board, we were disappointed that, at our 2023 annual meeting of shareholders, only 38% of the votes cast were in favor
of our fiscal 2023 executive compensation program. Understanding that you were not completely satisfied, I personally led
our shareholder outreach efforts to ensure that I, on behalf of the Board, heard from you directly. Collectively, the Chair of
our Compensation and People Committee and I personally met with shareholders representing 33% of our outstanding
shares, and I offered meetings to 47%. From your feedback, we distilled a number of important changes to our executive
compensation programs, particularly to the equity compensation program, which we believe address the core concerns
raised by you. While some of the changes we are making in response to shareholder feedback could not be reflected in
compensation decisions made for fiscal 2024, because certain of our fiscal 2024 pay decisions had already been made
when that feedback was received, we have implemented these changes in our fiscal 2025 pay decisions and also reflected
them in the equity awards for fiscal 2023 and fiscal 2024 where possible. The changes include:
y Reducing the maximum payout of our performance stock unit awards by 33.3%, from 600% to 400% of the target number
of performance stock units, for fiscal 2025, fiscal 2024, and fiscal 2023 awards.
y Updating the financial measures used in performance stock unit awards to annual NGS ARR and annual non-GAAP
earnings per diluted share, further aligning executive compensation to the success of our Platformization strategy and
focus on profitability, including for the remaining performance periods in the fiscal 2023 and fiscal 2024 performance
stock unit awards.
y Clearly defining the threshold performance levels for each performance metric in our fiscal 2025 cash incentive plan
such that if either metric’s performance is more than 10% below its respective target for fiscal 2025, then there is no
funding of or payout from our cash incentive plan.
y Enhancing the disclosures around our compensation practices, as reflected in the compensation, discussion and
analysis (“CD&A”) contained in this Proxy Statement, as well as in a letter from our Compensation and People Committee.
We encourage you to read this letter, as well as the entire CD&A. We believe that you will conclude that your Board has
taken to heart the feedback we have received from our shareholders and designed an executive compensation program
deserving of your support.
On behalf of our Board, I thank you for your investment in Palo Alto Networks and your continued trust. I look forward to the
annual meeting on December 10, 2024.
Thank you,
John M. Donovan
Lead Independent Director
6
2024 Proxy Statement
Letter from our Lead Independent Director
HOW TO VOTE
Online
/ o \
Visit www.oroxwote.com prior to
the Annual Meeting, 24 hours a
day, seven days a week.
1.=1
By Phone
Call the phone number located
on your proxy card or voting
instruction form.
By Mail
Complete, sign, date and return your
proxy card or voting instruction form
in the envelope provided.
QR CODE
Scan the QR code on your voting
materials to vote with your
mobile device
Notice of 2024 Annual Meeting
of Shareholders
Date and Time
Tuesday,
December 10, 2024
11:00 AM Pacific Time
00
r
Virtual Meeting Site
www.vir LUi:11511WerlUlUef
meeting.com/PANW2024
O
Who Can Vote
Shareholders of record as of
October 18, 2024 are entitled
to vote
Voting Items
Items of Business
Board Vote Recommendation
For Further Details
1.
To elect three Class I directors named in the accompanying
proxy statement to serve until our 2027 annual meeting of
shareholders and until their successors are duly elected
and qualified.
To ratify the appointment of Ernst &Young LLP as our
independent registered public accounting firm for our fiscal
year ending July 31, 2025.
To approve, on an advisory basis, the frequency of
holding future advisory votes on named executive
officer compensation.
To approve, on an advisory basis, the compensation of our
named executive officers.
To approve an amendment to the Palo Alto Networks, Inc.
2021 Equity Incentive Plan to increase the number of plan
shares reserved for issuance.
6. To consider and vote upon a shareholder proposal, if properly
presented at the Annual Meeting, regarding a report on
climate risks to retirement plan beneficiaries.
0
0
"FOR" each
director nominee
"FOR"
"FOR"
'AGAINST"
Page 52
Page 66
Page 69
Page 70
Page 126
Page 138
Shareholders will also act on such other business that may properly come
before the 2024 Annual Meeting of Shareholders (the "Annual Meeting") or any
adjournments or postponements thereof.
YOUR VOTE IS IMPORTANT. Please act as soon as possible to vote your
shares, even if you plan to attend the Annual Meeting online. On or about
October 29, 2024, we expect to mail to our shareholders a Notice of Internet
Availability of Proxy Materials (the "Notice") containing instructions on how
to access our proxy statement and our annual report and how to vote. For
instructions to vote your shares and more information, see "About the Annual
Meeting" on page 144.
We appreciate your continued support of Palo Alto Networks and look forward to
receiving your proxy.
By Order of the Board of Directors,
Bruce Byrd
Executive Vice President, General Counsel and Corporate Secretary
October 29, 2024
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING TO BE HELD ON DECEMBER 10, 2024: THE NOTICE OF
2024 ANNUAL SHAREHOLDERS' MEETING AND PROXY STATEMENT AND THE
2024 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.PROXYVOTE.COM.
2024 Proxy Statement
*paloajto:
7
7
2024 Proxy Statement
Notice of 2024 Annual Meeting
of Shareholders
Date and Time
Tuesday,
December 10, 2024
11:00 AM Pacific Time
Virtual Meeting Site
www.virtualshareholder
meeting.com/PANW2024
Who Can Vote
Shareholders of record as of
October 18, 2024 are entitled
to vote
Voting Items
Items of Business
Board Vote Recommendation
For Further Details
1. To elect three Class I directors named in the accompanying
proxy statement to serve until our 2027 annual meeting of
shareholders and until their successors are duly elected
and qualified.
“FOR” each
director nominee
Page Һҷ
2. To ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for our fiscal
year ending July 31, 2025.
“FOR”
Page һһ
3. To approve, on an advisory basis, the frequency of
holding future advisory votes on named executive
officer compensation.
”ONE YEAR”
Page һҾ
4. To approve, on an advisory basis, the compensation of our
named executive officers.
“FOR”
Page Ҽҵ
5. To approve an amendment to the Palo Alto Networks, Inc.
2021 Equity Incentive Plan to increase the number of plan
shares reserved for issuance.
“FOR”
Page Ҷҷһ
6. To consider and vote upon a shareholder proposal, if properly
presented at the Annual Meeting, regarding a report on
climate risks to retirement plan beneficiaries.
“AGAINST”
Page ҶҸҽ
Shareholders will also act on such other business that may properly come
before the 2024 Annual Meeting of Shareholders (the "Annual Meeting") or any
adjournments or postponements thereof.
YOUR VOTE IS IMPORTANT. Please act as soon as possible to vote your
shares, even if you plan to attend the Annual Meeting online. On or about
October 29, 2024, we expect to mail to our shareholders a Notice of Internet
Availability of Proxy Materials (the “Notice”) containing instructions on how
to access our proxy statement and our annual report and how to vote. For
instructions to vote your shares and more information, see “About the Annual
Meeting” on page 144.
We appreciate your continued support of Palo Alto Networks and look forward to
receiving your proxy.
By Order of the Board of Directors,
Bruce Byrd
Executive Vice President, General Counsel and Corporate Secretary
October 29, 2024
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING TO BE HELD ON DECEMBER 10, 2024: THE NOTICE OF
2024 ANNUAL SHAREHOLDERS’ MEETING AND PROXY STATEMENT AND THE
2024 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.PROXYVOTE.COM.
HOW TO VOTE
Online
Visit www.proxyvote.com prior to
the Annual Meeting, 24 hours a
day, seven days a week.
By Phone
Call the phone number located
on your proxy card or voting
instruction form.
By Mail
Complete, sign, date and return your
proxy card or voting instruction form
in the envelope provided.
QR CODE
Scan the QR code on your voting
materials to vote with your
mobile device
O
Proposal No. 2 Ratification of Appointment of Independent Registered Public
Accounting Firm
66
Fees Paid to the Independent
67
Audit Committee Policy on
Registered Public Accounting Firm
Pre-Approval of Audit and Permissible
66
Auditor Independence
Non-Audit Services of Independent
Registered Public Accounting Firm
68
Report of the Audit Committee
O
Proposal No. 3 Advisory Vote on the Frequency of Advisory Votes on Named Executive
Officer Compensation
0
Proposal No. 4 Advisory Vote on the Compensation of our Named Executive Officers
Executive Compensation
71
Letter from our Compensation and
102 Fiscal 2025 Compensation Decisions
People Committee
103 Other Aspects of Our Executive
74
Compensation Discussion and Analysis
Compensation Programs
78
We Followed Through on Our Commitments
108 Report of the Compensation and
79
Compensation-Setting Process
People Committee
82
CEO and NEO Pay for Performance
109 Executive Compensation Tables
Alignment for Fiscal 2024
124 Executive Officers
0
Proposal No. 5 Amendment to Our 2021 Equity Incentive Plan
126 Why Should Shareholders Vote to
129 Summary of the 2021 Plan
Approve the Amendment to the 2021 Plan?
O
Proposal No. 6 Shareholder Proposal - Repo& ••••• rs16".+. C r."
Retirement Plan Beneficiaries
138 Shareholders Proposal and
139 Company Opposing Statement
Supporting Statement
Security Ownership of Certain Beneficial Owners and Management
Related Person Transactions
About the Annual Meeting
Other Matters
150 Delinquent Section 16(a) Reports
150 Fiscal Year 2024 Annual Report and
SEC Filings
Table of Contents
Highlights
Letter from our Chair
Letter from our Lead Independent Director
Notice of 2024 Annual Meeting of Shareholders
About Us
Our Board at a Glance
Our Corporate Governance at a Glance
Shareholder Engagement at a Glance
Executive Compensation at a Glance
17
Our Compensation Best Practices
Corporate Responsibility at a Glance
Proxy Roadmap
Corporate Governance
21
Corporate Governance Highlights
37
22
Board Responsiveness to Shareholders
38
25
Leadership Structure
39
28
Board Committees and Responsibilities
39
33
Annual Board and Committee
Self-Evaluations
40
35
Board's Role in Strategy Oversight
35
Board's Role in Risk Oversight
40
Corporate Responsibility
41
An Overview of Our Environmental,
Social and Governance Strategies
41
ESG Oversight and Governance
Voting Roadmap
0
Proposal No. 1 Election of Directors
53
Director Tenure and Refreshment
53
Board Diversity
54
Board Skills and Experience Matrix
55
Directors
62
Identification and Evaluation
of Director Nominees
Appendix A
151
Calculation of Billings and Organic
Operating Margin
152 Calculation of Adjusted Operating
Margin, Free Cash Flow Margin and
Adjusted Free Cash Flow Margin
Appendix B
154 Amended and Restated 2021 Equity Incentive Plan
Select Oversight Areas
Enterprise Risk Management Program
Succession Planning
Communications with the Board of
Directors
Corporate Governance Guidelines and
Code of Business Conduct and Ethics
Compensation and People Committee
Interlocks and Insider Participation
12
Our Board at a Glance
15
Our Corporate
Governance at a Glance
17
Executive Compensation
at a Glance
50 Voting Roadmap
54
Board Skills and
Experience Matrix
71
Letter from our
Compensation and
People Committee
74
Compensation
Discussion and Analysis
126 Amendment to Our 2021
Equity Incentive Plan
This document includes forward-looking
statements within the meaning of the
Private Securities Litigation Reform
Act of 1995. All statements other than
statements of historical or current facts,
including statements regarding our
future prospects, social, environmental
and sustainability plans and goals, and
executive compensation plans, made
in this document are forward-looking.
We use words such as "anticipates,"
"believes: "continue: "estimate,"
"expects: "future: "intends", "may,"
"plan: and similar expressions to identify
forward-looking statements, although
not all forward-looking statements
contain these identifying words.
Forward-looking statements reflect
management's current expectations and
are inherently uncertain. Actual results
could differ materially for a variety
of reasons. Risks and uncertainties
that could cause our actual results to
differ materially from those expected
or implied in any forward-looking
statement include, but are not limited
to those discussed in the section titled
"Risk Factors" in our 2024 Annual
Report on Form 10-K. Unless otherwise
provided herein, all statements in this
Proxy Statement are as of the date of
the filing of this Proxy Statement, and
we do not assume any obligation to
update forward-looking statements.
References to our website in this
Proxy Statement are not intended
to function as a hyperlink and the
information contained on our website
is not intended to be part of this
Proxy Statement.
In this Proxy Statement, the terms "the
Company: "we," and "our" refer to Palo
Alto Networks, Inc. and the term "Board"
refers to the Board of Directors of Palo
Alto Networks, Inc.
To the extent that this Proxy Statement
has been or will be specifically
incorporated by reference into any
other filing of the Company under the
Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as
amended, the Letters from our Chair,
our Lead Independent Director and our
Compensation and People Committee,
and the sections of this Proxy Statement
titled "Report of the Audit Committee"
and "Report of the Compensation and
People Committee shall not be deemed
to be so incorporated, unless specifically
stated otherwise in such filing.
3
5
7
9
12
15
16
17
19
20
21
41
50
52
66
69
70
71
126
138
141
143
144
150
151
154
18
Significant At-Risk Compensation
43
Environmental
45
Social
49
Our ESG Journey
63
Director Independence
64
Director Compensation
65
Director Stock Ownership Guidelines
65
Director Attendance
153 Non-GAAP Financial Measures and
Other Key Metrics
8
*
palomIto°
2024 Proxy Statement
Table of Contents
Highlights
12
Our Board at a Glance
15
Our Corporate
Governance at a Glance
17
Executive Compensation
at a Glance
50
Voting Roadmap
54
Board Skills and
Experience Matrix
71
Letter from our
Compensation and
People Committee
74
Compensation
Discussion and Analysis
126
Amendment to Our 2021
Equity Incentive Plan
This document includes forward-looking
statements within the meaning of the
Private Securities Litigation Reform
Act of 1995. All statements other than
statements of historical or current facts,
including statements regarding our
future prospects, social, environmental
and sustainability plans and goals, and
executive compensation plans, made
in this document are forward-looking.
We use words such as “anticipates,”
“believes,” “continue,” “estimate,”
“expects,” “future,” “intends”, “may,”
“plan,” and similar expressions to identify
forward-looking statements, although
not all forward-looking statements
contain these identifying words.
Forward-looking statements reflect
management’s current expectations and
are inherently uncertain. Actual results
could differ materially for a variety
of reasons. Risks and uncertainties
that could cause our actual results to
differ materially from those expected
or implied in any forward-looking
statement include, but are not limited
to those discussed in the section titled
“Risk Factors” in our 2024 Annual
Report on Form 10-K. Unless otherwise
provided herein, all statements in this
Proxy Statement are as of the date of
the filing of this Proxy Statement, and
we do not assume any obligation to
update forward-looking statements.
References to our website in this
Proxy Statement are not intended
to function as a hyperlink and the
information contained on our website
is not intended to be part of this
Proxy Statement.
In this Proxy Statement, the terms “the
Company,” “we,” and “our” refer to Palo
Alto Networks, Inc. and the term “Board”
refers to the Board of Directors of Palo
Alto Networks, Inc.
To the extent that this Proxy Statement
has been or will be specifically
incorporated by reference into any
other filing of the Company under the
Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as
amended, the Letters from our Chair,
our Lead Independent Director and our
Compensation and People Committee,
and the sections of this Proxy Statement
titled “Report of the Audit Committee”
and “Report of the Compensation and
People Committee” shall not be deemed
to be so incorporated, unless specifically
stated otherwise in such filing.
3
Letter from our Chair
5
Letter from our Lead Independent Director
7
Notice of 2024 Annual Meeting of Shareholders
9
About Us
12
Our Board at a Glance
15
Our Corporate Governance at a Glance
16
Shareholder Engagement at a Glance
17
Executive Compensation at a Glance
17
Our Compensation Best Practices
18
Significant At-Risk Compensation
19
Corporate Responsibility at a Glance
20
Proxy Roadmap
21
Corporate Governance
21
Corporate Governance Highlights
22 Board Responsiveness to Shareholders
25 Leadership Structure
28 Board Committees and Responsibilities
33 Annual Board and Committee
Self-Evaluations
35 Board’s Role in Strategy Oversight
35 Board’s Role in Risk Oversight
37 Select Oversight Areas
38 Enterprise Risk Management Program
39 Succession Planning
39 Communications with the Board of
Directors
40 Corporate Governance Guidelines and
Code of Business Conduct and Ethics
40 Compensation and People Committee
Interlocks and Insider Participation
41
Corporate Responsibility
41
An Overview of Our Environmental,
Social and Governance Strategies
41
ESG Oversight and Governance
43 Environmental
45 Social
49 Our ESG Journey
50
Voting Roadmap
52
Proposal No. 1 Election of Directors
53 Director Tenure and Refreshment
53 Board Diversity
54 Board Skills and Experience Matrix
55 Directors
62 Identification and Evaluation
of Director Nominees
63 Director Independence
64 Director Compensation
65 Director Stock Ownership Guidelines
65 Director Attendance
66
Proposal No. 2 Ratification of Appointment of Independent Registered Public
Accounting Firm
66 Fees Paid to the Independent
Registered Public Accounting Firm
66 Auditor Independence
67 Audit Committee Policy on
Pre-Approval of Audit and Permissible
Non-Audit Services of Independent
Registered Public Accounting Firm
68 Report of the Audit Committee
69
Proposal No. 3 Advisory Vote on the Frequency of Advisory Votes on Named Executive
Officer Compensation
70
Proposal No. 4 Advisory Vote on the Compensation of our Named Executive Officers
71
Executive Compensation
71
Letter from our Compensation and
People Committee
74 Compensation Discussion and Analysis
78 We Followed Through on Our Commitments
79 Compensation-Setting Process
82 CEO and NEO Pay for Performance
Alignment for Fiscal 2024
102 Fiscal 2025 Compensation Decisions
103 Other Aspects of Our Executive
Compensation Programs
108 Report of the Compensation and
People Committee
109 Executive Compensation Tables
124 Executive Officers
126
Proposal No. 5 Amendment to Our 2021 Equity Incentive Plan
126 Why Should Shareholders Vote to
Approve the Amendment to the 2021 Plan?
129 Summary of the 2021 Plan
138
Proposal No. 6 Shareholder Proposal – Report on Climate Risks to
Retirement Plan Beneficiaries
138 Shareholder’s Proposal and
Supporting Statement
139 Company Opposing Statement
141
Security Ownership of Certain Beneficial Owners and Management
143
Related Person Transactions
144
About the Annual Meeting
150
Other Matters
150 Delinquent Section 16(a) Reports
150 Fiscal Year 2024 Annual Report and
SEC Filings
151
Appendix A
151 Calculation of Billings and Organic
Operating Margin
152 Calculation of Adjusted Operating
Margin, Free Cash Flow Margin and
Adjusted Free Cash Flow Margin
153 Non-GAAP Financial Measures and
Other Key Metrics
154
Appendix B
154 Amended and Restated 2021 Equity Incentive Plan
8
2024 Proxy Statement
400*
~QQJ
• We challenge
entrenched belief and look
to the future
• We take risks, fearlessly
• We fail early, fail fast and
move forward
• We solve real problems with new ideas
• When we work
together, we win together
• We can rely on each other
• We ensure individual and
Company goals are aligned
• We seek to empower
• We open ourselves to accountability
• We believe diversity
strengthens our ideas and
our business
• We supportthe
communities where we live,
work and operate
• We care about our employees
• We strive to reflect the
diversity of our customers
in the diversity of
our Company
• We are committed to quality
• Ourtechnology just worlcs
as promised, always
• We drive tirelessly for
simplicity and usability
Our Mission
Our mission is to be
the cybersecurity
partner of choice,
protecting our
digital way of life.
• We respect our customers, partners,
employees, and shareholders
• We are transparent and share with ourteams
• We inspire trust and we live up to it
• We are self-aware
• We take pride in our work
because we do it the right way
Our Corporate Values
Our corporate decisions are guided by our corporate values, which were co-created by
our employees. Foremost among these is integrity, which is the foundation of everything
we do and every decision we make. We believe that collaboration enhances our ability
to disrupt entrenched beliefs, which we think ultimately leads to innovation. Our ability
to execute on our innovations and deliver products and services that address the
cybersecurity needs of our customers is critical to our long-term success. Finally, we
are intentional about including diverse points of view, perspectives, experiences, and
ideas in our decision-making process. True inclusion and diversity exists when we have
representation of all ethnicities, orientations and identities, and cultures in our workforce.
We believe that our core values make us a better company.
About I lq
Our
Company
Palo Alto Networks is a global
cybersecurity provider with a vision of
a world where each day is safer and
more secure than the one before. We
were incorporated in Delaware in 2005
and are headquartered in Santa Clara,
California. Our principal executive
offices are located at 3000 Tannery
Way, Santa Clara, CA 95054.
We empower enterprises,
organizations, service providers,
and government entities to protect
themselves against today's most
sophisticated cyber threats. Our
cybersecurity platforms and services
help secure enterprise users, networks,
clouds, and endpoints by delivering
comprehensive cybersecurity
backed by industry-leading artificial
intelligence and automation. A key
element of our strategy is to help
our customers simplify their security
architectures through consolidating
disparate point products. We execute
on this strategy by developing our
capabilities and packaging our
offerings into platforms which are able
to cover many of our customers' needs
in the markets in which we operate.
Our Platform ization strategy combines
various products and services into a
tightly integrated architecture and
makes security faster, less complex,
and more cost-effective. We focus
on delivering value in four sectors of
the cybersecurity industry: Network
Security, Cloud Security, Security
Operations, and Threat Intelligence
and Security Consulting.
UNITED STATES
Best Companies to Work For
#35 Best • September 2024
MOST
LOVED
"Best Company Culture" and
Recognized as a
"Palo Alto Networks is on
"Most Loved Workplace" -
"Best Company for Women"
Best Place to Work for
InHerSight's list of the 50 best
"Palo Alto Networks puts its
"Palo Alto Networks' culture in
the Top 5% compared to similar
sized companies"
People with Disabilities
companies to work for . ."
people first . . The company
is dedicated to employee
development, innovation
and collaboration"
December 2023
July 2024
July 2024
June 2024
(Comparably)
(Disability:IN)
(InHerSight)
(Newsweek)
2024 Proxy Statement
paloajt9:
9
9
2024 Proxy Statement
About Us
Our
Company
Palo Alto Networks is a global
cybersecurity provider with a vision of
a world where each day is safer and
more secure than the one before. We
were incorporated in Delaware in 2005
and are headquartered in Santa Clara,
California. Our principal executive
offices are located at 3000 Tannery
Way, Santa Clara, CA 95054.
We empower enterprises,
organizations, service providers,
and government entities to protect
themselves against today’s most
sophisticated cyber threats. Our
cybersecurity platforms and services
help secure enterprise users, networks,
clouds, and endpoints by delivering
comprehensive cybersecurity
backed by industry-leading artificial
intelligence and automation. A key
element of our strategy is to help
our customers simplify their security
architectures through consolidating
disparate point products. We execute
on this strategy by developing our
capabilities and packaging our
offerings into platforms which are able
to cover many of our customers’ needs
in the markets in which we operate.
Our Platformization strategy combines
various products and services into a
tightly integrated architecture and
makes security faster, less complex,
and more cost-effective. We focus
on delivering value in four sectors of
the cybersecurity industry: Network
Security, Cloud Security, Security
Operations, and Threat Intelligence
and Security Consulting.
Our Corporate Values
Our corporate decisions are guided by our corporate values, which were co-created by
our employees. Foremost among these is integrity, which is the foundation of everything
we do and every decision we make. We believe that collaboration enhances our ability
to disrupt entrenched beliefs, which we think ultimately leads to innovation. Our ability
to execute on our innovations and deliver products and services that address the
cybersecurity needs of our customers is critical to our long-term success. Finally, we
are intentional about including diverse points of view, perspectives, experiences, and
ideas in our decision-making process. True inclusion and diversity exists when we have
representation of all ethnicities, orientations and identities, and cultures in our workforce.
We believe that our core values make us a better company.
Our Mission
Our mission is to be
the cybersecurity
partner of choice,
protecting our
digital way of life.
CO
LL
AB
OR
AT
IO
N
DI
SR
UP
TI
ON
IN
CL
US
IO
N
IN
TE
GR
IT
Y
EX
EC
UT
IO
N
• We challenge
entrenched belief and look
to the future
• We fail early, fail fast and
move forward
• We take risks, fearlessly
• We solve real problems with new ideas
• When we work
together, we win together
• We can rely on each other
• We ensure individual and
Company goals are aligned
• We seek to empower
• We open ourselves to accountability
• We strive tirelessly for
simplicity and usability
• We are committed to quality
• Our technology just works
as promised, always
• We are self-aware
• We take pride in our work
because we do it the right way
• We respect our customers, partners,
employees, and shareholders
• We are transparent and share with our teams
• We inspire trust and we live up to it
• We believe diversity
strengthens our ideas and
our business
• We support the
communities where we live,
work and operate
• We care about our employees
PXfge\iXgbeXǐXVgg[X
diversity of our customers
in the diversity of
our Company
“Best Company Culture” and
“Best Company for Women”
“Palo Alto Networks’ culture in
the Top 5% compared to similar
sized companies”
Recognized as a
Best Place to Work for
People with Disabilities
“Palo Alto Networks is on
InHerSight’s list of the 50 best
companies to work for. . .”
“Most Loved Workplace” -
“Palo Alto Networks puts its
people first . . . The company
is dedicated to employee
development, innovation
and collaboration”
December 2023
(Comparably)
July 2024
(Disability:IN)
July 2024
(InHerSight)
June 2024
(Newsweek)
FY24
FY22
FY23
RPO
($ in billions)
$12.7
FY23
FY22
Total Revenue
($ in billions)
$8.03
$6.89
$5.50
NGS ARR
($ in billions)
$4.22
$2.95
$1.89
FY22
FY23
FY24
Earnings Per Diluted Share
(5)
FY22
FY23
FY24
FY24
$7.28
--- -$0.90
About Us
Our 2024
Financial
and Business
Highlights
We delivered another year
of outstanding results for our
shareholders in fiscal 2024,
with a strong year of financial
performance and execution.
Highlights include:
Total revenue increased to
$8.03 billion, by16% compared
to fiscal 2023.
Next-Generation Security
annual recurring revenue, or
"NGS ARR", increased to $4.22
billion, by 43% compared to
fiscal 2023.(1)
Remaining performance
obligations, or "RPO", increased
to $12.7 billion, by 20%
compared to fiscal 2023.
GAAP net income per diluted
share ("EPS") increased to
$7.28, by 469% compared to
fiscal 2023.(2)
Continued to drive innovation
through the launch of our
Secure Al by Design product
offers and our Precision Al
security bundle.
Continued to return capital to
our shareholders through our
stock repurchase program,
totaling $4.1 billion over the last
six years.
Building a Stronger and More
Profitable Palo Alto Networks
RETURN OF CAPITAL
Fiscal 2019-2024
$4.1 Billion
NGS 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.
(2) EPS increased to $7.28 in fiscal 2024, 469% compared to fiscal 2023, primarily due to our recognition of a deferred tax benefit from the
net release of our valuation allowance on United States ("U.S.") federal, U.S. states other than California, and United Kingdom deferred
tax assets in fiscal 2024.
10
palomIto°
2024 Proxy Statement
Our 2024
Financial
and Business
Highlights
We delivered another year
of outstanding results for our
shareholders in fiscal 2024,
with a strong year of financial
performance and execution.
Highlights include:
y Total revenue increased to
$8.03 billion, by 16% compared
to fiscal 2023.
y Next-Generation Security
annual recurring revenue, or
“NGS ARR”, increased to $4.22
billion, by 43% compared to
fiscal 2023.(1)
y Remaining performance
obligations, or “RPO”, increased
to $12.7 billion, by 20%
compared to fiscal 2023.
y GAAP net income per diluted
share (“EPS”) increased to
$7.28, by 469% compared to
fiscal 2023.(2)
y Continued to drive innovation
through the launch of our
Secure AI by Design product
offers and our Precision AI
security bundle.
y Continued to return capital to
our shareholders through our
stock repurchase program,
totaling $4.1 billion over the last
six years.
Building a Stronger and More
Profitable Palo Alto Networks
Total Revenue
($ in billions)
NGS ARR
($ in billions)
FY24
FY23
FY22
$5.50
$6.89
$8.03
FY24
FY23
FY22
$1.89
$2.95
$4.22
RPO
($ in billions)
Earnings Per Diluted Share(2)
($)
FY24
FY23
FY22
$8.2
$10.6
$12.7
FY24
FY23
FY22
-$0.90
$1.28
$7.28
RETURN OF CAPITAL
Fiscal 2019-2024
։ҹҶ;\__\ba
(1) NGS 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.
(2) EPS increased to $7.28 in fiscal 2024, 469% compared to fiscal 2023, primarily due to our recognition of a deferred tax benefit from the
net release of our valuation allowance on United States ("U.S.") federal, U.S. states other than California, and United Kingdom deferred
tax assets in fiscal 2024.
10
2024 Proxy Statement
About Us
07/31/2019
07/31/2024
June 2018
Nikesh Arora
Appointed CEO
101%
101%
330%
350%
300%
250%
200%
150%
• S&P 500
• Compensation Peer Group
,
.
d Palo Alto Networks, Inc.
About Us
Delivering Superior Shareholder Returns
Five-Year Total Shareholder Return
As shown below, our total shareholder return over the past five years significantly outperformed our 2024 compensation
peer group and the S&P 500. See "Compensation Discussion and Analysis—Compensation Process—Competitive
Positioning"for a list of our 2024 compensation peer group.
Source: S&P Capital IQ, based on the latest closing price as of July 31, 2024. Our compensation peer group includes only
publicly-traded companies as of such date.
2024 Proxy Statement
*paloajtcy
ii
Delivering Superior Shareholder Returns
Five-Year Total Shareholder Return
As shown below, our total shareholder return over the past five years significantly outperformed our 2024 compensation
peer group and the S&P 500. See “Compensation Discussion and Analysis—Compensation Process—Competitive
Positioning” for a list of our 2024 compensation peer group.
S&P 500
Compensation Peer Group
Palo Alto Networks, Inc.
0%
50%
100%
150%
200%
250%
300%
350%
07/31/2024
07/31/2019
330%
101%
101%
June 2018
Nikesh Arora
Appointed CEO
Source: S&P Capital IQ, based on the latest closing price as of July 31, 2024. Our compensation peer group includes only
publicly-traded companies as of such date.
11
2024 Proxy Statement
About Us
Our Board 9t a Glance
Our Board comprises a diverse group of highly qualified leaders in their respective fields who bring unique perspectives.
All directors have either held senior leadership positions at large companies or otherwise gained significant and
wide-ranging management experience in their respective fields (including strategic, financial, public company financial
reporting, compliance, risk management, and leadership development). Many of our directors also have public company
experience (serving as chief executive officer, chief operating officer, or chief financial officer, or on boards of directors
and board committees), and as a result have a deep understanding of corporate governance practices, including risk and
management oversight.
The tenure, age and certain other information as
of July 31, 2024, for the members of the Board
are set forth below.
John M. Donovan
LEAD INDEPENDENT DIRECTOR
Former Chief Executive Officer, AT&T Communications,
AT&T Inc.
Director Since: 2012
Other Current Public Company Boards:
Lockheed Martin Corporation
CDC (Chair), GSC (Co-Chair), SC (Chair), CC
BOARD SNAPSHOT
Right Honorable Sir John Key
TENURE
INDEPENDENT
Average
Former Prime Minister of New Zealand
9.2 years
Director Since: 2019
Other Current Public Company Boards: None
0-5 years
5
CC (Chair), AC, SC
6-10 years
1
>10 years
An 4
AGE
Average
58.5 years
41-50 years
51-60 years
>60 years
GENDER DIVERSITY
1
5
MI 4
Mary Pat McCarthy
INDEPENDENT
Former Vice Chair, KPMG LLP
Director Since: 2016
Other Current Public Company Boards:
Micron Technology, Inc.
AC (Chair), CDC, SC
Women
'MD 4
Men
ETHNIC DIVERSITY
White
Asian
Black
•
6
Nir Zuk
Founder and Chief Technology Officer, Palo
Alto Networks
Director Since: 2005
7
Other Current Public Company Boards: None
2
Lorraine Twohill
INDEPENDENT
Chief Marketing Officer, Google
Director Since: 2019
Other Current Public Company Boards: None
12
*
palomIto°
2024 Proxy Statement
The tenure, age and certain other information as
bYCh_lҸҶҷҵҷҹYbeg[X`X`UXefbYg[X;bTeW
are set forth below.
C
O
N
T
N
O
M
I
N
E
E
D
I
R
E
C
T
O
R
S
C
L
A
S
S
I
BOARD SNAPSHOT
TENURE
Average
Ҿҷ years
6-10 years
5
1
4
>10 years
0-5 years
AGE
Average
ҺҽҺlXTef
51-60 years
1
5
4
>60 years
41-50 years
GENDER DIVERSITY
Men
4
6
Women
ETHNIC DIVERSITY
Asian
7
2
White
1
Black
Nir Zuk
Founder and Chief Technology Officer, Palo
Alto Networks
=\eXVgbeL\aVX ҷҵҵҺ
Other Current Public Company Boards: None
Mary Pat McCarthy
INDEPENDENT
Former Vice Chair, KPMG LLP
=\eXVgbeL\aVX ҷҵҶһ
Other Current Public Company Boards:
Micron Technology, Inc.
AC (Chair), CDC, SC
Right Honorable Sir John Key
INDEPENDENT
Former Prime Minister of New Zealand
=\eXVgbeL\aVX ҷҵҶҾ
Other Current Public Company Boards: None
CC (Chair), AC, SC
Lorraine Twohill
INDEPENDENT
Chief Marketing Officer, Google
=\eXVgbeL\aVX ҷҵҶҾ
Other Current Public Company Boards: None
GSC (Co-Chair), SC
John M. Donovan
LEAD INDEPENDENT DIRECTOR
Former Chief Executive Officer, AT&T Communications,
AT&T Inc.
=\eXVgbeL\aVX ҷҵҶҷ
Other Current Public Company Boards:
Lockheed Martin Corporation
CDC (Chair), GSC (Co-Chair), SC (Chair), CC
Our Board at a Glance
Our Board comprises a diverse group of highly qualified leaders in their respective fields who bring unique perspectives.
All directors have either held senior leadership positions at large companies or otherwise gained significant and
wide-ranging management experience in their respective fields (including strategic, financial, public company financial
reporting, compliance, risk management, and leadership development). Many of our directors also have public company
experience (serving as chief executive officer, chief operating officer, or chief financial officer, or on boards of directors
and board committees), and as a result have a deep understanding of corporate governance practices, including risk and
management oversight.
12
2024 Proxy Statement
Dr. Helene D. Gayle
INDEPENDENT
President of Spelman College
Director Since: 2021
Other Current Public Company Boards: Organon,
The Coca-Cola Company
GSC, SC
James J. Goetz
INDEPENDENT
Managing Member, Sequoia Capital
Director Since: 2005
Other Current Public Company Boards:
Intel Corporation
AC, CDC, SC
Nikesh Arora
Chair and Chief Executive Officer,
Palo Alto Networks
Director Since: 2018
Other Current Public Company Boards:
Compagnie Financiere Richemont S.A.
CDC
Aparna Bawa
INDEPENDENT
Chief Operating Officer and
Interim Chief Legal Officer, Zoom
Director Since: 2021
Other Current Public Company Boards: None
AC, CC, CDC, SC
Carl Eschenbach
INDEPENDENT
CEO, Workday, Inc.
Director Since: 2013
Other Current Public Company Boards: Workday, Inc.
AC
CC
GSC
SC
CDC
Our Board at a Glance
Audit Committee
Compensation and
People Committee
Governance and
Sustainability Committee
Security Committee
Corporate Development
Committee
2024 Proxy Statement
*paloajtcy
13
T
I
N
U
I
N
G
D
I
R
E
C
T
O
R
S
C
L
A
S
S
I
II
C
L
A
S
S
I
I
AC
Audit Committee
CC
Compensation and
People Committee
GSC
Governance and
Sustainability Committee
SC
Security Committee
CDC
Corporate Development
Committee
Nikesh Arora
Chair and Chief Executive Officer,
Palo Alto Networks
=\eXVgbeL\aVX ҷҵҶҽ
Other Current Public Company Boards:
Compagnie Financière Richemont S.A.
CDC
Aparna Bawa
INDEPENDENT
Chief Operating Officer and
Interim Chief Legal Officer, Zoom
=\eXVgbeL\aVX ҷҵҷҶ
Other Current Public Company Boards: None
AC, CC, CDC, SC
Dr. Helene D. Gayle
INDEPENDENT
President of Spelman College
=\eXVgbeL\aVX ҷҵҷҶ
Other Current Public Company Boards: Organon,
The Coca-Cola Company
GSC, SC
Carl Eschenbach
INDEPENDENT
CEO, Workday, Inc.
=\eXVgbeL\aVX ҷҵҶҸ
Other Current Public Company Boards: Workday, Inc.
SC
James J. Goetz
INDEPENDENT
Managing Member, Sequoia Capital
=\eXVgbeL\aVX ҷҵҵҺ
Other Current Public Company Boards:
Intel Corporation
AC, CDC, SC
13
2024 Proxy Statement
Our Board at a Glance
Global/International
1=1
Public Company Board
Experience
Experience and Corporate
1=1
1=1 Governance
9/10
10/10
Senior Leadership
Experience
10/10
Risk Management
Financial Knowledge
Experience
orit
and Expertise
10/10
9/10
Human Capital
000 Management
.........
10/10
0"0 Cybersecurity/Information
2 Security/Security
1
6/10
rh Management Experience
Sales, Marketing and Brand
8/10
Our Board at a Glance
Skills and Experience
Our directors have the breadth and depth of expertise necessary to guide our business strategy and create shareholder
value. The Board is independent, with diverse backgrounds, experience and perspectives.
Leadership & Governance
Risk Management
Financial Knowledge
and Expertise
Human Capital
Management
Strategic
Q p Industry and IT/Technical
Expertise
d b
6/10
Diverse Backgrounds
and Experiences
10/10
Emerging Technologies
and Business Models
Experience
8/10
14
palomIto°
2024 Proxy Statement
Skills and Experience
Our directors have the breadth and depth of expertise necessary to guide our business strategy and create shareholder
value. The Board is independent, with diverse backgrounds, experience and perspectives.
Leadership & Governance
Senior Leadership
Experience
10/10
Global/International
Experience
9/10
Public Company Board
Experience and Corporate
Governance
10/10
Risk Management
Financial Knowledge
and Expertise
Human Capital
Management
Risk Management
Experience
10/10
$
Financial Knowledge
and Expertise
9/10
Human Capital
Management
10/10
Strategic
Industry and IT/Technical
Expertise
6/10
Cybersecurity/Information
Security/Security
6/10
Diverse Backgrounds
and Experiences
10/10
Emerging Technologies
and Business Models
Experience
8/10
Sales, Marketing and Brand
Management Experience
8/10
14
2024 Proxy Statement
Our Board at a Glance
Our Corporate Governance at a Glance
Consider nominees and candidates in light of current skill sets and needs of the Board
All candidates and nominees evaluated and considered for their expertise, experience,
leadership and diversity, including gender, ethnicity and background
Board comprised of diverse directors, including gender, ethnic, racial and
experiential diversity
Appointed four new directors since 2019, including three who brought gender, ethnic
and/or racial diversity to the Board
Deliberate annual assessment of Board composition against anticipated future needs,
including succession planning
BOARD
COMPOSITION
See Page 53
• Board leadership reviewed annually
• Clearly defined roles for Board leadership
Strong Lead Independent Director, who leads executive sessions of the Board
Strong Board independence, with eight independent directors
Independent Board committees, with frequent executive sessions
Strong partnership between Chair and Lead Independent Director
Annual Board evaluation process includes assessments and reviews of the Board,
committees and individual directors
Director orientation and continuing director education
High standards of corporate governance
Board meeting agendas set by Chair in collaboration with Lead Independent Director
BOARD
EFFECTIVENESS
See Page 33
Transparent lines of accountability to our shareholders
A robust and interactive shareholder engagement program based on dialogue,
transparency and responsiveness to shareholder concerns
In response to shareholder feedback, adopted majority voting for uncontested elections
of directors, including a resignation policy in the event a director does not receive a
majority of the vote
BOARD
Updated executive compensation program to address shareholder feedback and further
ACCOUNTABILITY
align to the Company's strategy to focus on Platformization and profitability
See Page 22
Appropriate director compensation structured in a manner that is aligned with
shareholder interests and informed by market data provided by our independent
compensation consultant
2024 Proxy Statement
*paloajtcy
15
2
•
BOARD LEADERSHIP
•
AND STRUCTURE
•
See Page 25
•
ENGAGED
•
OVERSIGHT
•
See Page 35
•
Frequent review of oversight during the year, including over significant risks in
Culture, employee retention and human capital management (Compensation
and People Committee)
Sustainability and corporate governance (Governance and Sustainability Committee)
Security and cybersecurity (Security Committee)
Financial reporting, internal controls over financial reporting, and enterprise risk relating
to financial matters (Audit Committee)
Mergers, acquisitions and other strategic transactions (Corporate
Development Committee)
Engaged in setting corporate strategy
Engaged in management succession planning to ensure next generation of leadership
• Strong Lead Independent
who
engages in management oversight
Director,
actively
Our Corporate Governance at a Glance
y Consider nominees and candidates in light of current skill sets and needs of the Board
y All candidates and nominees evaluated and considered for their expertise, experience,
leadership and diversity, including gender, ethnicity and background
y Board comprised of diverse directors, including gender, ethnic, racial and
experiential diversity
{ Appointed four new directors since 2019, including three who brought gender, ethnic
and/or racial diversity to the Board
y Deliberate annual assessment of Board composition against anticipated future needs,
including succession planning
y Board leadership reviewed annually
y Clearly defined roles for Board leadership
y Strong Lead Independent Director, who leads executive sessions of the Board
y Strong Board independence, with eight independent directors
y Independent Board committees, with frequent executive sessions
y Strong partnership between Chair and Lead Independent Director
y Annual Board evaluation process includes assessments and reviews of the Board,
committees and individual directors
y Director orientation and continuing director education
y High standards of corporate governance
y Board meeting agendas set by Chair in collaboration with Lead Independent Director
y Frequent review of oversight during the year, including over significant risks in
{ Culture, employee retention and human capital management (Compensation
and People Committee)
{ Sustainability and corporate governance (Governance and Sustainability Committee)
{ Security and cybersecurity (Security Committee)
{ Financial reporting, internal controls over financial reporting, and enterprise risk relating
to financial matters (Audit Committee)
y Mergers, acquisitions and other strategic transactions (Corporate
Development Committee)
y Engaged in setting corporate strategy
y Engaged in management succession planning to ensure next generation of leadership
y Strong Lead Independent Director, who actively engages in management oversight
y Transparent lines of accountability to our shareholders
y A robust and interactive shareholder engagement program based on dialogue,
transparency and responsiveness to shareholder concerns
{ In response to shareholder feedback, adopted majority voting for uncontested elections
of directors, including a resignation policy in the event a director does not receive a
majority of the vote
y Updated executive compensation program to address shareholder feedback and further
align to the Company's strategy to focus on Platformization and profitability
y Appropriate director compensation structured in a manner that is aligned with
shareholder interests and informed by market data provided by our independent
compensation consultant
Ҷ
BOARD
COMPOSITION
See Page 53
Ҹ
BOARD
EFFECTIVENESS
See Page 33
ҹ
ENGAGED
OVERSIGHT
See Page 35
Һ
BOARD
ACCOUNTABILITY
See Page 22
ҷ
BOARD LEADERSHIP
AND STRUCTURE
See Page 25
15
2024 Proxy Statement
Our Lead Independent Director participated
in discussions with investors representing
33% of our outstanding shares (21 meetings),
while offering meetings to investors
representing 47% of our outstanding shares
Winter/Spring
• Consider voting results and investor feedback
• Consider changes to align with investor feedback
Investor meetings and conferences
Fall/Winter
• Engage with shareholders about voting matters
• Review proxy advisory firms' analyses of voting
matters and proxy disclosures
• Publish Environmental, Social and Governance
("ESG") Report
- Hold Annual Meeting of Shareholders in
December
Receive and publish voting results
• Investor meetings and conferences
1
Shareholder Engagement at Glance
We are proud of our investor engagement program and committed to maintaining outreach that is truly a dialogue with
our shareholders. Our relationship with our shareholders is an important part of our Company's success. In fiscal 2024, we
once again engaged in robust shareholder engagement, with a focus on executive compensation, corporate governance,
sustainability, and social responsibility, as well as other matters of particular import to our shareholders. Our Lead Independent
Director played a central role in developing and implementing our program, and once again actively participated in our
shareholder engagement efforts in fiscal 2024.
Our Lead Independent Director and management team regularly update our Board and its committees on our engagement
efforts, providing summaries and analyses of our shareholders' feedback. The feedback that we received from our
shareholders resulted in significant improvement in our compensation and corporate governance practices, as described in
detail in this proxy statement, including our adoption in May 2022 of majority voting for uncontested elections of our directors.
We believe that our approach to engaging directly and openly with our investors drives increased corporate accountability,
improves decision making, and ultimately creates long-term value.
We reached out to
shareholders representing 61%
of our outstanding shares
We engaged in discussions with
investors representing 55% of
our outstanding shares (which is
all shareholders that indicated a
willingness to engage with us)
* Shareholder ownership, to our knowledge, as of June 30, 2024.
Below are the key elements of our shareholder engagement cycle:
Spring/Summe
• Implement changes to align with
investor feedback
• Conduct proactive off-season investor outreach
• Investor meetings and conferences
A
Summer/Fall
• Prepare and publish Annual Report
• Engage with investors on enhanced proxy
disclosures
• Prepare and publish proxy statement
• Investor meetings and conferences
16
*PalomIto°
2024 Proxy Statement
Shareholder Engagement at a Glance
We are proud of our investor engagement program and committed to maintaining outreach that is truly a dialogue with
our shareholders. Our relationship with our shareholders is an important part of our Company’s success. In fiscal 2024, we
once again engaged in robust shareholder engagement, with a focus on executive compensation, corporate governance,
sustainability, and social responsibility, as well as other matters of particular import to our shareholders. Our Lead Independent
Director played a central role in developing and implementing our program, and once again actively participated in our
shareholder engagement efforts in fiscal 2024.
Our Lead Independent Director and management team regularly update our Board and its committees on our engagement
efforts, providing summaries and analyses of our shareholders’ feedback. The feedback that we received from our
shareholders resulted in significant improvement in our compensation and corporate governance practices, as described in
detail in this proxy statement, including our adoption in May 2022 of majority voting for uncontested elections of our directors.
We believe that our approach to engaging directly and openly with our investors drives increased corporate accountability,
improves decision making, and ultimately creates long-term value.
61%
55%
33%
We reached out to
shareholders representing 61%
of our outstanding shares
We engaged in discussions with
investors representing 55% of
our outstanding shares (which is
all shareholders that indicated a
willingness to engage with us)
Our Lead Independent Director participated
in discussions with investors representing
33% of our outstanding shares (21 meetings),
while offering meetings to investors
representing 47% of our outstanding shares
* Shareholder ownership, to our knowledge, as of June 30, 2024.
Below are the key elements of our shareholder engagement cycle:
Spring/Summer
y Implement changes to align with
investor feedback
y dh\glBaVXag\iXI_Ta
CORPORATE GOVERNANCE AND
CORPORATE RESPONSIBILITY
Read more about corporate governance and our approach to
corporate responsibility, including the roles of our Board and
management team in setting our programs and priorities.
PROPOSAL NO. 1
Read about our proposal
to elect Rt Hon Sir John
Key, Mary Pat McCarthy
and Nir Zuk to a new term,
and learn more about our
Board members, Board
committees and Board
compensation.
PROPOSAL NO. 2
Read about our proposal to
ratify Ernst & Young as our
independent registered public
TVVbhag\aZY\e`YbeY\fVT_ҷҵҷҺ
PROPOSAL NO. 3
Read about our “Say-When-on-Pay”
proposal to approve, on an advisory basis, the
frequency of holding future advisory votes on
executive compensation.
PROPOSAL NO. 4
Read about our “Say-on-Pay” proposal to approve,
on an advisory basis, the compensation of our
named executive officers as disclosed in this
proxy statement.
ABOUT US
Read about our corporate
iT_hXfY\fVT_ҷҵҷҹY\aTaV\T_
and business highlights,
and learn more about
our Board, corporate
governance, shareholder
engagement efforts,
executive compensation
and corporate responsibility
highlights at a glance.
PROPOSAL NO. 6
Read about the shareholder
proposal regarding a report
on climate risks to retirement
plan beneficiaries.
20
2024 Proxy Statement
THE BOARD'S CORPORATE GOVERNANCE PRACTICES AND SHAREHOLDER RIGHTS
INCLUDE THE FOLLOWING:
•
Majority Voting for Uncontested Elections of board
members, with an associated resignation policy
•
Strong Lead Independent Director
Board Composed of 80% Independent Directors
• 100% Independent Audit Committee, Governance
and Sustainability Committee, Compensation and
People Committee, and Security Committee
•
Annual Review of Board Leadership Structure
•
Board Refreshment
•
Director Changes in Circumstances
Actively Evaluated
Board and Committee Access to Management
•
Annual Board and Committee Evaluations
•
Independent Compensation and People
Committee Consultant
.# Board and Committee Authority to Retain Outside
Advisors
•
Board and Committee Risk Oversight,
including Security
•
Board Continuing Education Program
No "Poison Pill"
•
Single Class of Shares
Board-level Security Committee with oversight over
security issues, including cybersecurity
Annual Review of Committee Charters and
Governance Policies
Fair Director Compensation Practices
• Active Management Succession Oversight
• Active Management of Director Conflicts of Interest
• Annual Say-on-Pay Vote
• Continuous Shareholder Engagement Program
• Stock Ownership Guidelines for Directors and
Executive Officers
Code of Business Conduct and Ethics for Directors,
Officers and Employee
• Anti-Hedging Policy
Restrictive Pledging Policy
An SEC and Nasdaq-compliant Compensation
Recovery Policy and an additional Clawback Policy
Regular Meetings of Independent Directors Without
Management Present
Proxy Access Bylaws
Corporate Governance
Corporate Governance Highlights
Our Board is governed by our Corporate Governance Guidelines, which are amended from time to time to incorporate
certain current best practices in corporate governance. Our Corporate Governance Guidelines can be found on our
website at https://investors.paloaltonetworks.com.
In addition to a strong, independent Board, we are committed to corporate governance structures that promote long-term
shareholder value creation through a sound leadership structure and by providing our shareholders with both the
opportunity to provide direct feedback, and substantive rights and policies to ensure accountability.
2024 Proxy Statement
*paloajtcy
21
Corporate Governance
Corporate Governance Highlights
Our Board is governed by our Corporate Governance Guidelines, which are amended from time to time to incorporate
certain current best practices in corporate governance. Our Corporate Governance Guidelines can be found on our
website at https://investors.paloaltonetworks.com.
In addition to a strong, independent Board, we are committed to corporate governance structures that promote long-term
shareholder value creation through a sound leadership structure and by providing our shareholders with both the
opportunity to provide direct feedback, and substantive rights and policies to ensure accountability.
THE BOARD’S CORPORATE GOVERNANCE PRACTICES AND SHAREHOLDER RIGHTS
INCLUDE THE FOLLOWING:
%
Majority Voting for Uncontested Elections of board
members, with an associated resignation policy
%
Strong Lead Independent Director
%
Board Composed of 80% Independent Directors
%
100% Independent Audit Committee, Governance
and Sustainability Committee, Compensation and
People Committee, and Security Committee
%
Annual Review of Board Leadership Structure
%
Board Refreshment
%
Director Changes in Circumstances
Actively Evaluated
%
Board and Committee Access to Management
%
Annual Board and Committee Evaluations
%
Independent Compensation and People
Committee Consultant
%
Board and Committee Authority to Retain Outside
Advisors
%
Board and Committee Risk Oversight,
including Security
%
Board Continuing Education Program
%
No "Poison Pill"
%
Single Class of Shares
%
Board-level Security Committee with oversight over
security issues, including cybersecurity
%
Annual Review of Committee Charters and
Governance Policies
%
Fair Director Compensation Practices
%
Active Management Succession Oversight
%
Active Management of Director Conflicts of Interest
%
Annual Say-on-Pay Vote
%
Continuous Shareholder Engagement Program
%
Stock Ownership Guidelines for Directors and
Executive Officers
%
Code of Business Conduct and Ethics for Directors,
Officers and Employee
%
Anti-Hedging Policy
%
Restrictive Pledging Policy
%
An SEC and Nasdaq-compliant Compensation
Recovery Policy and an additional Clawback Policy
%
Regular Meetings of Independent Directors Without
Management Present
%
Proxy Access Bylaws
21
2024 Proxy Statement
Corporate Governance
Board Responsiveness to Shareholders
Our Board is committed to actively engaging with our shareholders, and committed to maintaining outreach that is truly a
dialogue with our shareholders. Through year-round engagement and outreach, we regularly provide shareholders with
opportunities to deliver feedback on our corporate governance, executive and director compensation, and environmental
and sustainability practices. We regularly meet with investors, prospective investors, and investment analysts. These
meetings can include participation by our Chair and Chief Executive Officer, Chief Financial Officer, Chief Product
Officer, General Counsel and Corporate Secretary or other business leaders, and can often focus on Company strategy,
financial performance, product strategy and ESG philosophy. Members of our Investor Relations team also participate in
meetings with our shareholders and, on occasion, members of the Board participate as appropriate. In fiscal 2024, our Lead
Independent Director participated in 21 meetings with investors representing 33% of our outstanding shares, while offering
meetings to investors representing 47% of our outstanding shares (each, as of June 30, 2024).
Following our 2021 annual meeting of shareholders, we reinvigorated our approach and practices to shareholder
engagement and implemented a strategy that focused on extensive engagement on a wide range of topics. Our Lead
Independent Director played an active and central role in our shareholder engagement efforts in fiscal 2024, and our
management team regularly communicated topics discussed and shareholder feedback to the Board and our Board
committees for consideration in their decision-making.
Who we
met with
Investors holding
of shares outstanding engaged with in discussions
Offered meetings with Lead Independent Director to shareholders holding 47% of
shares outstanding
Investors holding
of shares outstanding engaged with Lead
Independent Director
Our primary
engagement
team
• Lead Independent Director (participated in
meetings)
• Investor Relations team
• General Counsel & Corporate Secretary
• People team (human resources)
• Corporate Responsibility team
What we
• Executive compensation
discussed
• Board structure
• Board composition and governance, including Board refreshment and diversity
• Board risk oversight
• Board leadership
• Shareholder engagement
• ESG initiatives and disclosure
22
*paloalto.
2024 Proxy Statement
Board Responsiveness to Shareholders
Our Board is committed to actively engaging with our shareholders, and committed to maintaining outreach that is truly a
dialogue with our shareholders. Through year-round engagement and outreach, we regularly provide shareholders with
opportunities to deliver feedback on our corporate governance, executive and director compensation, and environmental
and sustainability practices. We regularly meet with investors, prospective investors, and investment analysts. These
meetings can include participation by our Chair and Chief Executive Officer, Chief Financial Officer, Chief Product
Officer, General Counsel and Corporate Secretary or other business leaders, and can often focus on Company strategy,
financial performance, product strategy and ESG philosophy. Members of our Investor Relations team also participate in
meetings with our shareholders and, on occasion, members of the Board participate as appropriate. In fiscal 2024, our Lead
Independent Director participated in 21 meetings with investors representing 33% of our outstanding shares, while offering
meetings to investors representing 47% of our outstanding shares (each, as of June 30, 2024).
Following our 2021 annual meeting of shareholders, we reinvigorated our approach and practices to shareholder
engagement and implemented a strategy that focused on extensive engagement on a wide range of topics. Our Lead
Independent Director played an active and central role in our shareholder engagement efforts in fiscal 2024, and our
management team regularly communicated topics discussed and shareholder feedback to the Board and our Board
committees for consideration in their decision-making.
Who we
met with
y Investors holding 55% of shares outstanding engaged with in discussions
y Offered meetings with Lead Independent Director to shareholders holding 47% of
shares outstanding
y Investors holding 33% of shares outstanding engaged with Lead
Independent Director
Our primary
engagement
team
y Lead Independent Director (participated in 21 meetings)
y Investor Relations team
y General Counsel & Corporate Secretary
y People team (human resources)
y Corporate Responsibility team
What we
discussed
y Executive compensation
y Board structure
y Board composition and governance, including Board refreshment and diversity
y Board risk oversight
y Board leadership
y Shareholder engagement
y ESG initiatives and disclosure
22
2024 Proxy Statement
Corporate Governance
Board Oversight of Risks, Including
Cybersecurity and ESG Risks
How the Board is addressing oversight
of increased, varied and new risks
.►ara imversity and Refreshment
The duration of Board service by
certain long-standing directors, and the
makeup of the Board and the rationale
therefore
iareholder Engagement
Continued 1:1 investor outreach on
executive compensation, ESG and other
matters of interest to our shareholders
Corporate Governance
WHAT WE HEARD OVER
THE YEARS
HOW WE RESPONDED
naa
Classified Board of Directors, dual role of
CEO and Chairman and annual election
of all Board members
Adopted a majority voting requirement for uncontested elections of
directors, including a resignation policy in the event a director does not
receive a majority of the vote
Annual review of our Board leadership structure, including whether an
independent director should be the Chair of our Board
Maintaining a strong Lead Independent Director
Annual review to determine whether maintaining a classified Board is
appropriate for our Company
Annual survey of the members of our Board and self-evaluation of the
Board and its committees
Reallocated ESG responsibilities among our Board committees, clearly
identifying the responsibilities of each committee
• Formed a Security Committee of our Board to enhance oversight over
security issues facing our Company, including cybersecurity
• Reconstituted our Nominating and Corporate Governance Committee as
the Governance and Sustainability Committee to enhance the Board's
oversight of ESG matters
Appointed Lorraine Twohill as co-Chair of our Governance and
Sustainability Committee
Added additional disclosure in this proxy statement relating to
Board oversight
Two long-standing directors did not stand for re-election at our 2022
Annual Meeting of Shareholders
The Board appointed Ms. Bawa and Dr. Gayle to our Board during fiscal
2021, increasing the gender, racial and ethnic diversity of the Board.
Presently, four of our ten directors are women
During the period between April 2019 and May 2021, we appointed
four new independent directors: Ms. Bawa, Dr. Gayle, Ms. Twohill and
Rt Hon Sir John Key
Expanded disclosure in our proxy statement of the rationales as to why
each of our directors continue to serve on our Board
Conducted extensive shareholder and investor outreach
In fiscal 2024, engaged in discussion with shareholders holding 55% of our
outstanding shares (as of June 30, 2024)
In fiscal 2024, our Lead Independent Director participated in 21 investor
meetings and engaged in discussion with shareholders holding 33% of our
outstanding shares, and offered meetings to 47% (each, as of June 30, 2024)
Modified our executive compensation program as a result of
shareholder feedback
2024 Proxy Statement
*palositn:
23
WHAT WE HEARD OVER
THE YEARS
HOW WE RESPONDED
Board Governance
Classified Board of Directors, dual role of
CEO and Chairman and annual election
of all Board members
y Adopted a majority voting requirement for uncontested elections of
directors, including a resignation policy in the event a director does not
receive a majority of the vote
y Annual review of our Board leadership structure, including whether an
independent director should be the Chair of our Board
y Maintaining a strong Lead Independent Director
y Annual review to determine whether maintaining a classified Board is
appropriate for our Company
y Annual survey of the members of our Board and self-evaluation of the
Board and its committees
Board Oversight of Risks, Including
Cybersecurity and ESG Risks
How the Board is addressing oversight
of increased, varied and new risks
y Reallocated ESG responsibilities among our Board committees, clearly
identifying the responsibilities of each committee
y Formed a Security Committee of our Board to enhance oversight over
security issues facing our Company, including cybersecurity
y Reconstituted our Nominating and Corporate Governance Committee as
the Governance and Sustainability Committee to enhance the Board’s
oversight of ESG matters
y Appointed Lorraine Twohill as co-Chair of our Governance and
Sustainability Committee
y Added additional disclosure in this proxy statement relating to
Board oversight
Board Diversity and Refreshment
The duration of Board service by
certain long-standing directors, and the
makeup of the Board and the rationale
therefore
y Mjb_baZ!fgTaW\aZW\eXVgbefW\WabgfgTaWYbeeX!X_XVg\baTgbheҷҵҷҷ
Annual Meeting of Shareholders
y The Board appointed Ms. Bawa and Dr. Gayle to our Board during fiscal
ҷҵҷҶ\aVeXTf\aZg[XZXaWXeeTV\T_TaWXg[a\VW\iXef\glbYg[X;bTeW
Presently, four of our ten directors are women
y =he\aZg[XcXe\bWUXgjXXa:ce\_ҷҵҶҾTaWFTlҷҵҷҶjXTccb\agXW
four new independent directors: Ms. Bawa, Dr. Gayle, Ms. Twohill and
Rt Hon Sir John Key
y Expanded disclosure in our proxy statement of the rationales as to why
each of our directors continue to serve on our Board
Shareholder Engagement
L@eXcbeg\aY\fVT_ҷҵҷҹ\aj[\V[jXeXcbegbabhe
carbon emissions and other sustainability initiatives
y :WWXW`beXW\fV_bfheX\abheTaahT_eXcbegba?be`Ҷҵ!DTaWbhecebkl
statement describing our ESG initiatives and oversight
y Advanced our science-based emissions reduction strategies, including
deployment of renewable energy at our Santa Clara, CA headquarters,
gbjTeWfbheҶҵҵ֣eXaXjTU_XXaXeZlZbT_TaWTWibVTVlYbeV_\`TgXTVg\ba
y BaY\fVT_ҷҵҷҹXfgTU_\f[XWan Inclusion and Diversity Steering Committee,
which is made up of members of our management to set objectives and
oversee program implementation
y Invested in nonprofit organizations and our social impact programs
to advance cybersecurity education and to help develop a diverse
talent pipeline
y Operationalized our ESG governance structure through an ESG Steering
Committee consisting of cross-functional leaders from management to
recommend strategies and lead implementation of ESG programs, which
reports regularly to our ESG Executive Council and the Board
Executive Compensation
Prioritize and ensure the retention of
Chief Executive Officer, stand by our
pay-for-performance philosophy and
g[XVb``\g`Xagf`TWX\abheҷҵҷҶ
ҷҵҷҷTaWҷҵҷҸcebklfgTgX`Xagf
relating to the structure of our executive
compensation program and enhanced
disclosure, and reduce stock-based
compensation expense as a percentage
of revenue
y Incentivized our Chief Executive Officer to remain at the Company
for the long term to enhance our prospects of delivering sustained
shareholder value
y Ҷҵҵ֣bYg[XXdh\glTjTeWfZeTagXWgbbheG>Hf\aY\fVT_ҷҵҷҹjXeX
performance-based, with different performance targets than the cash
incentive plan
y Maintained our robust stock ownership guidelines for our NEOs, including
our Chief Executive Officer
y Maintained an ESG modifier to our cash incentive plan, and in response
to shareholder feedback, expanded our disclosure in our Compensation
Discussion and Analysis to include data regarding the scorecard measures
y Maintained a one-year post-vesting holding period for all NEOs, including
our Chief Executive Officer
y Reduced stock-based compensation expense as a percentage of revenue
Yeb`ҷҶҽ֣\aY\fVT_ҷҵҷҶgbҶҸҹ֣bYeXiXahX\aY\fVT_ҷҵҷҹ
y ?beY\fVT_ҷҵҷҺjXfignificantly redesigned performance-based equity
TjTeWfgbeXWhVXg[X`Tk\`h`cTlbhgUlҸҸҸ֣TaWhcWTgXWg[X
financial measures to align with our Platformization strategy and drive
balanced focus on Platformization and profitability
y :_g[bhZ[jXf[\YgXWfgeTgXZlWhe\aZY\fVT_ҷҵҷҹjXW\WabgeXfXgg[X
Y\fVT_ҷҵҷҹcXeYbe`TaVXgTeZXgfYbebhgfgTaW\aZcXeYbe`TaVX!UTfXW
equity awards #g[XY\fVT_ҷҵҷҹcbeg\babYg[XY\fVT_ҷҵҷҸTaWY\fVT_ҷҵҷҹ
cXeYbe`TaVXfgbV^ha\gTjTeWfeXfh_gXW\aҵ֣cTlbhgYbeY\fVT_ҷҵҷҹ
performance, demonstrating our commitment to a pay-for-
performance philosophy
24
2024 Proxy Statement
Corporate Governance
Corporate Governance
Leadership Structure
Our Corporate Governance Guidelines provide that our Board is free to choose its chairperson (the "Chair") based on our
Board's view of what is in the best interest of the Company and our shareholders. The Chair and the Chief Executive Officer
may, but need not be, the same person.
Annual Evaluation of Leadership Structure and Annual
Appointment of Lead Independent Director
As part of its annual review and evaluation process, the Board reviews its leadership structure and whether combining or
separating the roles of Chair and Chief Executive Officer is in the best interests of the Company and our shareholders. The
Board also considers:
The effectiveness of the policies, practices, and people in place at the Company to help ensure strong, independent
Board oversight.
The importance of consistent, unified leadership to execute and oversee the Company's strategy.
The strength of Mr. Arora's vision for the Company and the quality of his leadership.
Our performance and the effect the leadership structure could have on our performance.
The Board's performance and the effect the leadership structure could have on the Board's performance.
The meaningful and robust responsibilities and the performance of our Lead Independent Director.
The views of our shareholders through our ongoing engagement efforts.
The practices at other companies and trends in governance.
The current state of our Company.
In the circumstance that the Board determines that it remains in the best interests of the Company and its shareholders that
our Chief Executive Officer serve as our Chair, the independent members of the Board then appoint a Lead Independent
Director as provided in our Corporate Governance Guidelines.
vVhy Ou. Lwaders Are Ideally Suited for Their Roles
The Board believes that the independent Board members should have the flexibility to respond to changing circumstances
and choose the Board leadership structure that best fits the then-current situation. As it does annually, in August 2024,
the Board reviewed our leadership structure. Following that review, the Board determined that the combination of the
Chairman and Chief Executive Officer roles, along with the robust authority given to our experienced Lead Independent
Director, effectively maintains independent oversight of management. The Board consists of eight independent directors,
and exercises a strong, independent oversight function through frequent executive sessions, independent Board
committees and by having a strong Lead Independent Director with clearly delineated and comprehensive duties.
The Board strongly believes that its leadership structure strikes the right balance of allowing our Chair and Chief Executive
Officer to promote a clear, unified vision of the Company's strategies, while ensuring robust, independent oversight by
the Board and our Lead Independent Director. The Board also believes there is value in presenting a single face to our
customers through combining the Chair and Chief Executive Officer roles, and that this structure of having the Board
and management operate under the unified leadership of a highly experienced Chief Executive Officer best positions the
Company to successfully implement its next phase of growth.
Accordingly, in August 2024, the Board determined that it is in the best interests of our shareholders for Mr. Arora to serve
as Chair and John Donovan to serve as Lead Independent Director.
2024 Proxy Statement
*paloajtcy
25
Leadership Structure
Our Corporate Governance Guidelines provide that our Board is free to choose its chairperson (the “Chair”) based on our
Board’s view of what is in the best interest of the Company and our shareholders. The Chair and the Chief Executive Officer
may, but need not be, the same person.
Annual Evaluation of Leadership Structure and Annual
Appointment of Lead Independent Director
As part of its annual review and evaluation process, the Board reviews its leadership structure and whether combining or
separating the roles of Chair and Chief Executive Officer is in the best interests of the Company and our shareholders. The
Board also considers:
y The effectiveness of the policies, practices, and people in place at the Company to help ensure strong, independent
Board oversight.
y The importance of consistent, unified leadership to execute and oversee the Company’s strategy.
y The strength of Mr. Arora’s vision for the Company and the quality of his leadership.
y Our performance and the effect the leadership structure could have on our performance.
y The Board’s performance and the effect the leadership structure could have on the Board’s performance.
y The meaningful and robust responsibilities and the performance of our Lead Independent Director.
y The views of our shareholders through our ongoing engagement efforts.
y The practices at other companies and trends in governance.
y The current state of our Company.
In the circumstance that the Board determines that it remains in the best interests of the Company and its shareholders that
our Chief Executive Officer serve as our Chair, the independent members of the Board then appoint a Lead Independent
Director as provided in our Corporate Governance Guidelines.
Why Our Leaders Are Ideally Suited for Their Roles
The Board believes that the independent Board members should have the flexibility to respond to changing circumstances
and choose the Board leadership structure that best fits the then-current situation. As it does annually, in August 2024,
the Board reviewed our leadership structure. Following that review, the Board determined that the combination of the
Chairman and Chief Executive Officer roles, along with the robust authority given to our experienced Lead Independent
Director, effectively maintains independent oversight of management. The Board consists of eight independent directors,
and exercises a strong, independent oversight function through frequent executive sessions, independent Board
committees and by having a strong Lead Independent Director with clearly delineated and comprehensive duties.
The Board strongly believes that its leadership structure strikes the right balance of allowing our Chair and Chief Executive
Officer to promote a clear, unified vision of the Company’s strategies, while ensuring robust, independent oversight by
the Board and our Lead Independent Director. The Board also believes there is value in presenting a single face to our
customers through combining the Chair and Chief Executive Officer roles, and that this structure of having the Board
and management operate under the unified leadership of a highly experienced Chief Executive Officer best positions the
Company to successfully implement its next phase of growth.
Accordingly, in August 2024, the Board determined that it is in the best interests of our shareholders for Mr. Arora to serve
as Chair and John Donovan to serve as Lead Independent Director.
25
2024 Proxy Statement
Corporate Governance
Chair and
Chief Executive Officer
• Substantial knowledge and deep understanding
of our business and the challenges we face
Substantial international business experience
and business acumen and valued strategic,
financial and operational insights
Day-to-day insight into our prospects,
opportunities, strategies and challenges
facilitates the timely deliberation by the Board of
the most important matters
• Brings a unique, shareholder-focused insight to
assist the Company to most effectively execute
its strategy and business plans to maximize
shareholder value
• Serves as an important bridge between the
Board and management, and provides critical
leadership for carrying out our strategic initiatives
and confronting our challenges
Provides the Board with more complete and
timely information about the Company
Provides a unified structure and consistent
leadership direction internally and
externally, allowing the Company to act
rapidly and proactively to address new and
evolving technology
Proven success in leading Palo Alto Networks
since joining the Company
John M. Donovan
Lead Independent Director
• Independence, confidence and gravitas, enabling
strong oversight of executive leadership
• Deep understanding of our business
• Strong working relationship with our Chair and
Chief Executive Officer
• Strength and effectiveness of communication
with our Chair and Chief Executive Officer,
resulting in active and visible oversight of the
issues, plans and prospects of the Company
• Strong working relationship with other
management and our independent directors
• Substantial experience leading a large
multinational company
• Strong background in corporate governance
• Strong background as a technologist
• Dedicated to his service as Lead Independent
Director, as demonstrated by the fact that,
during fiscal 2024, he held 21 meetings with
shareholders holding 33% of our outstanding
shares and offered to meet with shareholders
holding 47% of our outstanding shares
• Promotes a collaborative and collegial
environment for Board decision making
• Actively and effectively engages with our
shareholders on an annual basis
Corporate Governance
26
palomIto°
2024 Proxy Statement
Nikesh Arora
Chair and
Chief Executive Officer
y Substantial knowledge and deep understanding
of our business and the challenges we face
y Substantial international business experience
and business acumen and valued strategic,
financial and operational insights
y Day-to-day insight into our prospects,
opportunities, strategies and challenges
facilitates the timely deliberation by the Board of
the most important matters
y Brings a unique, shareholder-focused insight to
assist the Company to most effectively execute
its strategy and business plans to maximize
shareholder value
y Serves as an important bridge between the
Board and management, and provides critical
leadership for carrying out our strategic initiatives
and confronting our challenges
y Provides the Board with more complete and
timely information about the Company
y Provides a unified structure and consistent
leadership direction internally and
externally, allowing the Company to act
rapidly and proactively to address new and
evolving technology
y Proven success in leading Palo Alto Networks
since joining the Company
John M. Donovan
Lead Independent Director
y Independence, confidence and gravitas, enabling
strong oversight of executive leadership
y Deep understanding of our business
y Strong working relationship with our Chair and
Chief Executive Officer
y Strength and effectiveness of communication
with our Chair and Chief Executive Officer,
resulting in active and visible oversight of the
issues, plans and prospects of the Company
y Strong working relationship with other
management and our independent directors
y Substantial experience leading a large
multinational company
y Strong background in corporate governance
y Strong background as a technologist
y Dedicated to his service as Lead Independent
Director, as demonstrated by the fact that,
during fiscal 2024, he held 21 meetings with
shareholders holding 33% of our outstanding
shares and offered to meet with shareholders
holding 47% of our outstanding shares
y Promotes a collaborative and collegial
environment for Board decision making
y Actively and effectively engages with our
shareholders on an annual basis
26
2024 Proxy Statement
Corporate Governance
Corporate Governance
OVERVIEW OF LEAD INDEPENDENT DIRECTOR RESPONSIBILITIES
The responsibilities of the Lead Independent Director are well-defined. The Lead Independent Director engages
in regular communication between the independent directors and Mr. Arora, keeping Mr. Arora apprised of any
concerns, issues, or determinations made during the independent sessions, and consults with Mr. Arora on other
matters pertinent to the Company and the Board. As part of the Board's annual review and evaluation, the Board
further defined the role and responsibilities of our Lead Independent Director to include:
Presiding at meetings of the Board at which the Chair is not present, including calling and presiding over
executive sessions of the independent directors.
Serving as liaison between the Chair and the independent directors.
Developing agendas for Board meetings in collaboration with the Chair, communicating with independent Board
members to ensure that matters of interest are being included on agendas for Board meetings, and ensuring
adequate time is allocated for Board discussions.
• Communicating with independent Board members and with management to affirm that appropriate briefing
materials are being provided to Board members sufficiently in advance of Board meetings to allow for proper
preparation and participation at meetings.
Ensuring the Board exercises appropriate risk management oversight, including providing direction related
thereto to management.
• Having the authority to call meetings of the independent directors.
Preparing agendas for meetings of the independent directors.
• Organizing and leading the Board's evaluation of the Chief Executive Officer.
Leading the Board's annual self-evaluation and assessing areas of current and future improvement in
Board performance.
If requested by major shareholders, ensuring that he is available, as necessary, for consultation and
direct communication.
1
In addition to the responsibilities outlined above, our Lead Independent Director also:
Has biennial one-on-one discussions with each independent director, as part of the Board's annual evaluation process.
Has access to all committee materials.
Has the authority to engage independent consultants.
Interviews Board candidates, and assesses future Board needs.
Spends time with senior management outside of Board meetings (as necessary) to ensure a deep understanding of the
business and strategy of the Company.
• Participates in shareholder engagement planning and activities.
Independent Director Sessions
A meeting of the independent directors is scheduled at every regular Board meeting for the independent directors to meet
in an executive session. These independent sessions are organized and chaired by our Lead Independent Director, and our
Lead Independent Director provides direct feedback to Mr. Arora after these executive sessions.
2024 Proxy Statement
*paloajtcy
27
OVERVIEW OF LEAD INDEPENDENT DIRECTOR RESPONSIBILITIES
The responsibilities of the Lead Independent Director are well-defined. The Lead Independent Director engages
in regular communication between the independent directors and Mr. Arora, keeping Mr. Arora apprised of any
concerns, issues, or determinations made during the independent sessions, and consults with Mr. Arora on other
matters pertinent to the Company and the Board. As part of the Board’s annual review and evaluation, the Board
further defined the role and responsibilities of our Lead Independent Director to include:
y Presiding at meetings of the Board at which the Chair is not present, including calling and presiding over
executive sessions of the independent directors.
y Serving as liaison between the Chair and the independent directors.
y Developing agendas for Board meetings in collaboration with the Chair, communicating with independent Board
members to ensure that matters of interest are being included on agendas for Board meetings, and ensuring
adequate time is allocated for Board discussions.
y Communicating with independent Board members and with management to affirm that appropriate briefing
materials are being provided to Board members sufficiently in advance of Board meetings to allow for proper
preparation and participation at meetings.
y Ensuring the Board exercises appropriate risk management oversight, including providing direction related
thereto to management.
y Having the authority to call meetings of the independent directors.
y Preparing agendas for meetings of the independent directors.
y Organizing and leading the Board’s evaluation of the Chief Executive Officer.
y Leading the Board’s annual self-evaluation and assessing areas of current and future improvement in
Board performance.
y If requested by major shareholders, ensuring that he is available, as necessary, for consultation and
direct communication.
In addition to the responsibilities outlined above, our Lead Independent Director also:
y Has biennial one-on-one discussions with each independent director, as part of the Board’s annual evaluation process.
y Has access to all committee materials.
y Has the authority to engage independent consultants.
y Interviews Board candidates, and assesses future Board needs.
y Spends time with senior management outside of Board meetings (as necessary) to ensure a deep understanding of the
business and strategy of the Company.
y Participates in shareholder engagement planning and activities.
Independent Director Sessions
A meeting of the independent directors is scheduled at every regular Board meeting for the independent directors to meet
in an executive session. These independent sessions are organized and chaired by our Lead Independent Director, and our
Lead Independent Director provides direct feedback to Mr. Arora after these executive sessions.
27
2024 Proxy Statement
Corporate Governance
Corporate Governance
Independent Committee Leadership
The Audit, Compensation and People, Security, and Governance and Sustainability Committees are each composed solely
of, and led by, independent directors, and provide independent oversight of management. In addition:
Each committee chair meets with management in advance of meetings to review and refine agendas, add topics of
interest, and review and comment on materials to be delivered to the committee.
Every independent director has access to all committee materials.
Each committee chair provides a report summarizing committee meetings to the full Board at each regular meeting of
the Board.
Each committee meeting includes adequate time for executive session and the committees meet in executive session on
a regular basis with no members of management present (unless otherwise requested by the committee).
Each committee effectively manages its Board-delegated duties and communicates regularly with the Chair, Lead
Independent Director, the Board, and members of management.
Furthermore, the Compensation and People Committee has an effective process for monitoring and evaluating Mr. Arora's
compensation and performance, as well as succession planning.
Board Committees and Responsibilities
Our Board has a standing Audit Committee, Compensation and People Committee, Corporate Development Committee,
Governance and Sustainability Committee, and Security Committee, which have the composition and responsibilities
described below. Directors serve on these committees until their resignation or until otherwise determined by our Board.
The membership and meetings during fiscal 2024 and the primary functions of each of the standing committees are
described below.
Board of Directors
Compensation
Corporate
Governance and
Audit
and People
Development
Sustainability
Security
Committee
Committee
Committee
Committee
Committee
Nikesh Arora
•
Aparna Bawa*
•
•
•
John M. Donovan**
•
1
1
Carl Eschenbach*
•
Dr. Helene D. Gayle*
•
•
James J. Goetz*
•
•
Rt Hon Sir John Key*
•
•
Mary Pat McCarthy*W
1
•
•
Lorraine Twohill*
1
•
Nir Zuk
• Member
I
Committee Chair or Co-Chair
**Lead Independent Director
* Independent Director
Financial Expert
28
palosIto°
2024 Proxy Statement
Independent Committee Leadership
The Audit, Compensation and People, Security, and Governance and Sustainability Committees are each composed solely
of, and led by, independent directors, and provide independent oversight of management. In addition:
y Each committee chair meets with management in advance of meetings to review and refine agendas, add topics of
interest, and review and comment on materials to be delivered to the committee.
y Every independent director has access to all committee materials.
y Each committee chair provides a report summarizing committee meetings to the full Board at each regular meeting of
the Board.
y Each committee meeting includes adequate time for executive session and the committees meet in executive session on
a regular basis with no members of management present (unless otherwise requested by the committee).
y Each committee effectively manages its Board-delegated duties and communicates regularly with the Chair, Lead
Independent Director, the Board, and members of management.
Furthermore, the Compensation and People Committee has an effective process for monitoring and evaluating Mr. Arora’s
compensation and performance, as well as succession planning.
Board Committees and Responsibilities
Our Board has a standing Audit Committee, Compensation and People Committee, Corporate Development Committee,
Governance and Sustainability Committee, and Security Committee, which have the composition and responsibilities
described below. Directors serve on these committees until their resignation or until otherwise determined by our Board.
The membership and meetings during fiscal 2024 and the primary functions of each of the standing committees are
described below.
Board of Directors
Audit
Committee
Compensation
and People
Committee
Corporate
Development
Committee
Governance and
Sustainability
Committee
Security
Committee
Nikesh Arora
Aparna Bawa*
John M. Donovan**
Carl Eschenbach*
Dr. Helene D. Gayle*
James J. Goetz*
Rt Hon Sir John Key*
Mary Pat McCarthy* $
Lorraine Twohill*
Nir Zuk
Member
Committee Chair or Co-Chair
** Lead Independent Director
* Independent Director
$ Financial Expert
28
2024 Proxy Statement
Corporate Governance
Corporate Governance
Audit Committee
Chair:
Members:
Number of meetings
Mary Pat McCarthy
Aparna Bawa
Right Honorable Sir John Key
in fiscal 202t 7
James J. Goetz
Our Audit Committee is responsible for, among other things:
Selecting and hiring our independent registered public accounting firm, including leading the review and
selection of the lead audit engagement partner.
Evaluating the performance and independence of our independent registered public accounting firm.
Approving the audit and pre-approving any non-audit services to be performed by our independent registered
public accounting firm.
Reviewing our financial statements and related disclosures and reviewing our critical accounting policies
and practices.
Reviewing and participating in the selection of our chief audit executive and periodically reviewing the activities
and reports of the internal audit function and any major issues encountered in the course of the internal audit
function's work.
Reviewing the adequacy and effectiveness of our internal control policies and procedures and our disclosure
controls and procedures.
Overseeing procedures for the treatment of complaints on accounting, internal accounting controls, or
audit matters.
Reviewing and discussing with management and the independent registered public accounting firm the results
of our annual audit, our quarterly financial statements, and our publicly filed periodic reports.
Reviewing and approving or ratifying any proposed related person transactions.
Preparing the Audit Committee report that the SEC requires in our annual proxy statement.
The composition of our Audit Committee meets the requirements for independence for audit committee members under
the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our Audit Committee also
meets the financial literacy and sophistication requirements of the listing standards of Nasdaq. In addition, our Board has
determined that Ms. McCarthy is an "audit committee financial expert" within the meaning of the rules and regulations of
the SEC.
Our Audit Committee operates under a written charter that was adopted by our Board and satisfies the applicable rules and
regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our Audit Committee is available on our
website at http:llinvestors.paloaltonetworks.con .
2024 Proxy Statement
*paloajtp:
29
Audit Committee
Chair:
Mary Pat McCarthy
Members:
Aparna Bawa
James J. Goetz
Right Honorable Sir John Key
Number of meetings
in fiscal 2024: 7
Our Audit Committee is responsible for, among other things:
y Selecting and hiring our independent registered public accounting firm, including leading the review and
selection of the lead audit engagement partner.
y Evaluating the performance and independence of our independent registered public accounting firm.
y Approving the audit and pre-approving any non-audit services to be performed by our independent registered
public accounting firm.
y Reviewing our financial statements and related disclosures and reviewing our critical accounting policies
and practices.
y Reviewing and participating in the selection of our chief audit executive and periodically reviewing the activities
and reports of the internal audit function and any major issues encountered in the course of the internal audit
function’s work.
y Reviewing the adequacy and effectiveness of our internal control policies and procedures and our disclosure
controls and procedures.
y Overseeing procedures for the treatment of complaints on accounting, internal accounting controls, or
audit matters.
y Reviewing and discussing with management and the independent registered public accounting firm the results
of our annual audit, our quarterly financial statements, and our publicly filed periodic reports.
y Reviewing and approving or ratifying any proposed related person transactions.
y Preparing the Audit Committee report that the SEC requires in our annual proxy statement.
The composition of our Audit Committee meets the requirements for independence for audit committee members under
the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our Audit Committee also
meets the financial literacy and sophistication requirements of the listing standards of Nasdaq. In addition, our Board has
determined that Ms. McCarthy is an “audit committee financial expert” within the meaning of the rules and regulations of
the SEC.
Our Audit Committee operates under a written charter that was adopted by our Board and satisfies the applicable rules and
regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our Audit Committee is available on our
website at http://investors.paloaltonetworks.com.
29
2024 Proxy Statement
Corporate Governance
Corporate Governance
Compensation and People Committee
Chair:
Right Honorable Sir John Key
Members:
Aparna Bawa
John M. Donovan
Number of meetings
in fiscal 2024: 4
Our Compensation and People Committee is responsible for, among other things:
Reviewing and approving our Chief Executive Officer's and other executive officers' annual base salaries,
incentive compensation arrangements, including the specific goals and amounts, equity compensation,
employment agreements, severance arrangements and change in control agreements, and any other benefits,
compensation or arrangements.
• Establishing and administering our equity compensation plans.
Overseeing our overall compensation philosophy and compensation plans.
• Preparing the Compensation and People Committee report that the SEC requires to accompany the
Compensation Discussion and Analysis contained in this proxy statement.
Administering the Company's compensation recovery and clawback policies.
Overseeing our succession planning process for the Chief Executive Officer and members of the
management team.
Overseeing our talent management and people management, including the Company's inclusion and diversity
initiatives and results, the Company's pay equity reviews and results, and the Company's FLEXLearning and
FLEXBenefits initiatives.
Reviewing and discussing with management the risks arising from the Company's compensation philosophy and
practices applicable to employees to mitigate such risks.
The composition of our Compensation and People Committee meets the requirements for independence for compensation
committee members under the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our
Compensation and People Committee is also a "non-employee director," as defined pursuant to Rule lob-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Our Compensation and People Committee operates under a written charter that was adopted by our Board and
satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our
Compensation and People Committee is available on our website at nttp://investors.paloaltonetworks.com.
Corporate Development Committee
Chair:
Members:
John M. [X ,—..
Nikesh Arora
James J. Goetz
Aparna Bawa
Mary Pat McCarthy
Our Corporate Development Committee is responsible for, among other things:
Assisting the Board in fulfilling its responsibilities relating to the review, evaluation, and approval of strategic,
corporate development and other opportunities to enhance and complement the Company's product suite,
improve stakeholder satisfaction, and increase shareholder return.
Reviewing and evaluating proposed acquisition and investment strategies with management.
Reporting to the Board the Committee's approval or recommendation of acquisitions or investment transactions
and of such activity in general.
Our Corporate Development Committee operates under a written charter that was adopted by our Board.
30
palomito°
2024 Proxy Statement
Compensation and People Committee
Chair:
Right Honorable Sir John Key
Members:
Aparna Bawa
John M. Donovan
Number of meetings
in fiscal 2024: 4
Our Compensation and People Committee is responsible for, among other things:
y Reviewing and approving our Chief Executive Officer’s and other executive officers’ annual base salaries,
incentive compensation arrangements, including the specific goals and amounts, equity compensation,
employment agreements, severance arrangements and change in control agreements, and any other benefits,
compensation or arrangements.
y Establishing and administering our equity compensation plans.
y Overseeing our overall compensation philosophy and compensation plans.
y Preparing the Compensation and People Committee report that the SEC requires to accompany the
Compensation Discussion and Analysis contained in this proxy statement.
y Administering the Company’s compensation recovery and clawback policies.
y Overseeing our succession planning process for the Chief Executive Officer and members of the
management team.
y Overseeing our talent management and people management, including the Company’s inclusion and diversity
initiatives and results, the Company’s pay equity reviews and results, and the Company’s FLEXLearning and
FLEXBenefits initiatives.
y Reviewing and discussing with management the risks arising from the Company’s compensation philosophy and
practices applicable to employees to mitigate such risks.
The composition of our Compensation and People Committee meets the requirements for independence for compensation
committee members under the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our
Compensation and People Committee is also a “non-employee director,” as defined pursuant to Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Our Compensation and People Committee operates under a written charter that was adopted by our Board and
satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our
Compensation and People Committee is available on our website at http://investors.paloaltonetworks.com.
Corporate Development Committee
Chair:
John M. Donovan
Members:
Nikesh Arora
Aparna Bawa
James J. Goetz
Mary Pat McCarthy
Our Corporate Development Committee is responsible for, among other things:
y Assisting the Board in fulfilling its responsibilities relating to the review, evaluation, and approval of strategic,
corporate development and other opportunities to enhance and complement the Company’s product suite,
improve stakeholder satisfaction, and increase shareholder return.
y Reviewing and evaluating proposed acquisition and investment strategies with management.
y Reporting to the Board the Committee’s approval or recommendation of acquisitions or investment transactions
and of such activity in general.
Our Corporate Development Committee operates under a written charter that was adopted by our Board.
30
2024 Proxy Statement
Corporate Governance
Corporate Governance
Governance and Sustainability Committee
Co-Chairs:
Members:
Number of meetings
John M. Donovan
Dr. Helene D. Gayle
in fiscal 2024: 4
Lorraine Twohill
Our Governance and Sustainability Committee is responsible for, among other things:
Identifying and evaluating individuals who are qualified to become members of the board of directors and
selecting and recommending to the Board individuals as director nominees and appointments to the board of
directors.
Evaluating and making recommendations regarding the composition, organization, and governance of our board
of directors and its committees, including issues of integrity, experience, expertise and diversity of membership.
Considering board of director leadership structure, including the separation of the chairperson and chief
executive officer roles and the appointment of a lead independent director and making recommendations to the
board of directors.
Evaluating and making recommendations regarding the creation of additional committees or the change in
mandate or dissolution of committees.
Reviewing and making recommendations with regard to our corporate governance guidelines and compliance
with laws and regulations.
Reviewing and approving conflicts of interest of our directors and corporate officers, other than related person
transactions reviewed by our Audit Committee.
Overseeing our annual board of director and committee self-assessment process.
Overseeing our ESG efforts and priorities and related policies and programs.
The composition of our Governance and Sustainability Committee meets the requirements for independence under the
listing standards of Nasdaq and the rules and regulations of the SEC.
In February 2022, we reconstituted our Nominating and Corporate Governance Committee as the ESG and Nominating
Committee to enhance our focus on ESG matters, giving it oversight of our ESG strategies and initiatives, including
our short-and long-term goals, and to reinforce the important role that ESG practices play in our business. In
February 2024, the Committee's name was changed to the Governance and Sustainability Committee from the ESG and
Nominating Committee.
Our Governance and Sustainability Committee operates under a written charter that was adopted by our Board and
satisfies the applicable listing standards of Nasdaq. A copy of the charter of our Governance and Sustainability Committee
is available on our website at http://investors.paloaltonetworks.com.
2024 Proxy Statement
*paloajtp:
31
Governance and Sustainability Committee
Co-Chairs:
John M. Donovan
Lorraine Twohill
Members:
Dr. Helene D. Gayle
Number of meetings
in fiscal 2024: 4
Our Governance and Sustainability Committee is responsible for, among other things:
y Identifying and evaluating individuals who are qualified to become members of the board of directors and
selecting and recommending to the Board individuals as director nominees and appointments to the board of
directors.
y Evaluating and making recommendations regarding the composition, organization, and governance of our board
of directors and its committees, including issues of integrity, experience, expertise and diversity of membership.
y Considering board of director leadership structure, including the separation of the chairperson and chief
executive officer roles and the appointment of a lead independent director and making recommendations to the
board of directors.
y Evaluating and making recommendations regarding the creation of additional committees or the change in
mandate or dissolution of committees.
y Reviewing and making recommendations with regard to our corporate governance guidelines and compliance
with laws and regulations.
y Reviewing and approving conflicts of interest of our directors and corporate officers, other than related person
transactions reviewed by our Audit Committee.
y Overseeing our annual board of director and committee self-assessment process.
y Overseeing our ESG efforts and priorities and related policies and programs.
The composition of our Governance and Sustainability Committee meets the requirements for independence under the
listing standards of Nasdaq and the rules and regulations of the SEC.
In February 2022, we reconstituted our Nominating and Corporate Governance Committee as the ESG and Nominating
Committee to enhance our focus on ESG matters, giving it oversight of our ESG strategies and initiatives, including
our short-and long-term goals, and to reinforce the important role that ESG practices play in our business. In
February 2024, the Committee’s name was changed to the Governance and Sustainability Committee from the ESG and
Nominating Committee.
Our Governance and Sustainability Committee operates under a written charter that was adopted by our Board and
satisfies the applicable listing standards of Nasdaq. A copy of the charter of our Governance and Sustainability Committee
is available on our website at http://investors.paloaltonetworks.com.
31
2024 Proxy Statement
Corporate Governance
Security Committee
Chair:
Members:
John M. Donovan
Aparna Bawa
Carl Eschenbach
Dr. Helene D. Gayle
James J. Goetz
Rt Hon Sir John Key
Mary Pat McCarthy
Lorraine Twohill
Number of meetings
in fiscal 2024: 4
Corporate Governance
Our Security Committee is responsible for, among other things:
Overseeing (i) our policies, plans, metrics and programs relating to the physical security of our facilities and
employees, and enterprise cybersecurity and data protection risks associated with our security-related
infrastructure and related operations, and (ii) the effectiveness of our programs and practices for identifying,
assessing and mitigating such risks across our business operations.
Overseeing our cyber crisis preparedness, security breach and incident response plans, communication plans,
and disaster recovery and business continuity capabilities.
Overseeing the safeguards used to protect the confidentiality, integrity, availability, safety and resiliency of the
Company's employees, facilities, intellectual property and business operations.
Reviewing and discussing with management the cybersecurity risks associated with our outside partners (such
as vendors, suppliers, operations partners, etc.).
Overseeing our compliance with applicable information security and data protection laws and industry
standards, new or updated legal implications of security, data privacy, or other regulatory or compliance risks to
us or our employees, facilities and business operations and the threat landscape facing our business operations.
Reviewing and advising on our physical and cybersecurity strategy, crisis or incident management and
security-related information technology planning processes and review strategy for investing in our security
systems.
Reviewing and discussing with management our public disclosures relating to the Company's security of its
employees, facilities and information technology systems, including privacy, network security and data security.
In November 2021, our Board formed the Security Committee to facilitate Board oversight of security issues, including
product security, data security, cybersecurity, security risk management, risk exposure and related controls and enterprise
risk management related to these risks.
Our Security Committee operates under a written charter that was adopted by our Board. A copy of the charter of our
Security Committee is available on our website at http://investors.paloaltonetworks.corr.
32
palomIto°
2024 Proxy Statement
Security Committee
Chair:
John M. Donovan
Members:
Aparna Bawa
Carl Eschenbach
Dr. Helene D. Gayle
James J. Goetz
Rt Hon Sir John Key
Mary Pat McCarthy
Lorraine Twohill
Number of meetings
in fiscal 2024: 4
Our Security Committee is responsible for, among other things:
y Overseeing (i) our policies, plans, metrics and programs relating to the physical security of our facilities and
employees, and enterprise cybersecurity and data protection risks associated with our security-related
infrastructure and related operations, and (ii) the effectiveness of our programs and practices for identifying,
assessing and mitigating such risks across our business operations.
y Overseeing our cyber crisis preparedness, security breach and incident response plans, communication plans,
and disaster recovery and business continuity capabilities.
y Overseeing the safeguards used to protect the confidentiality, integrity, availability, safety and resiliency of the
Company’s employees, facilities, intellectual property and business operations.
y Reviewing and discussing with management the cybersecurity risks associated with our outside partners (such
as vendors, suppliers, operations partners, etc.).
y Overseeing our compliance with applicable information security and data protection laws and industry
standards, new or updated legal implications of security, data privacy, or other regulatory or compliance risks to
us or our employees, facilities and business operations and the threat landscape facing our business operations.
y Reviewing and advising on our physical and cybersecurity strategy, crisis or incident management and
security-related information technology planning processes and review strategy for investing in our security
systems.
y Reviewing and discussing with management our public disclosures relating to the Company’s security of its
employees, facilities and information technology systems, including privacy, network security and data security.
In November 2021, our Board formed the Security Committee to facilitate Board oversight of security issues, including
product security, data security, cybersecurity, security risk management, risk exposure and related controls and enterprise
risk management related to these risks.
Our Security Committee operates under a written charter that was adopted by our Board. A copy of the charter of our
Security Committee is available on our website at http://investors.paloaltonetworks.com.
32
2024 Proxy Statement
Corporate Governance
O
0
42-
0
Q
,k•
0
Policies and practices
updated as appropriate
gu
as a result of the annual
su
is.
self-assessment and
ongoing feedback
Provides director
feedback on the Board
and each of the
Committees as
well as each director
Results of the
self-assessment
analyzed by the Lead
Independent Director and
each Committee Chair
Directors are
encouraged to provide
ongoing feedback in
addition to the annual
self-assessment
Annual
Self-Assessment
Summary of the Board
and Committee
self-assessment results
provided to each
Committee and
the Board
Lead Independent
Director engages with
individual directors as
appropriate, and at
least biennially
Corporate Governance
Annual Board and Committee Self-Evaluations
Our Board and each of its committees perform an annual self-assessment to evaluate the effectiveness of our Board and
its committees in fulfilling their respective obligations. As part of this annual self-assessment, directors are able to provide
feedback on the performance of other directors.
Our Lead Independent Director, who is also Co-Chair of our Governance and Sustainability Committee, leads our Board in
its review of the results of the annual self-assessment and takes further action as needed. In connection with the annual
evaluation, each director receives a survey to complete to evaluate the Board and separate surveys for each committee
on which they serve. These surveys include detailed questions regarding: the effectiveness and performance of the Board
and committees; Board and committee composition and refreshment; timing, agenda, and content of Board and committee
meetings; Board dynamics and function; peer reviews of other members; access to and performance of management; and
executive succession planning. At least biennially our Lead Independent Director also conducts one-on-one meetings
with each director to receive their feedback and assessment of the Board and its committees. A summary of the results is
presented to the Board and each committee on an anonymous basis.
In addition, all members of our Board have the opportunity to attend director education programs to assist them in
remaining current with best practices and developments in corporate governance.
2024 Proxy Statement
*paloaitn:
33
Annual Board and Committee Self-Evaluations
Our Board and each of its committees perform an annual self-assessment to evaluate the effectiveness of our Board and
its committees in fulfilling their respective obligations. As part of this annual self-assessment, directors are able to provide
feedback on the performance of other directors.
Our Lead Independent Director, who is also Co-Chair of our Governance and Sustainability Committee, leads our Board in
its review of the results of the annual self-assessment and takes further action as needed. In connection with the annual
evaluation, each director receives a survey to complete to evaluate the Board and separate surveys for each committee
on which they serve. These surveys include detailed questions regarding: the effectiveness and performance of the Board
and committees; Board and committee composition and refreshment; timing, agenda, and content of Board and committee
meetings; Board dynamics and function; peer reviews of other members; access to and performance of management; and
executive succession planning. At least biennially our Lead Independent Director also conducts one-on-one meetings
with each director to receive their feedback and assessment of the Board and its committees. A summary of the results is
presented to the Board and each committee on an anonymous basis.
In addition, all members of our Board have the opportunity to attend director education programs to assist them in
remaining current with best practices and developments in corporate governance.
Summary of the Board
and Committee
self-assessment results
provided to each
Committee and
the Board
Directors are
encouraged to provide
ongoing feedback in
addition to the annual
self-assessment
Policies and practices
updated as appropriate
as a result of the annual
self-assessment and
ongoing feedback
Provides director
feedback on the Board
and each of the
Committees as
well as each director
Results of the
self-assessment
analyzed by the Lead
Independent Director and
each Committee Chair
Lead Independent
Director engages with
individual directors as
appropriate, and at
least biennially
SE
LF
-A
SS
ES
SM
EN
T
QU
ES
TI
ON
NA
IR
E
IN
DI
VI
DU
AL
D
IS
CU
SS
IO
NS
SU
M
MA
RY
O
F R
ES
UL
TS
ON
GO
IN
G
FE
ED
BA
CK
FE
ED
BA
CK
IN
CO
RP
OR
AT
ED
Annual
Self-Assessment
RE
SU
LT
S
AN
AL
YZ
ED
33
2024 Proxy Statement
Corporate Governance
Corporate Governance
ACTION ITEM
ANNUAL BOARD AND COMMITTEE ASSESSMENT
.-...assments and
Discussions
Analysis and
Discussion
Each director completes a survey to evaluate the Board and a separate survey for each committee on
which they serve.
Topics covered include, among others:
• Board size, composition, diversity, independence, and expertise
• Board culture, effectiveness, initiative, and strategic focus
• Board committee structure, membership, independence, responsibilities, and performance
• Board leadership structure
• Board education
• Board committee processes, including number of meetings, time allotted, sufficiency of executive
sessions, and availability of management
• Risk oversight, access to information, and ethics
• Relationship with management, access to management, and management responsiveness
• Corporate governance policies and procedures
• Board and management succession planning
• Lead Independent Director meets individually with members of Board at least biennially to evaluate the
Board and its committees
Results of these surveys are analyzed and processed as follows:
Our General Counsel reviews and summarizes the responses from each director's assessments for the
Chair, the Lead Independent Director, and each committee chair
Results are reviewed and robustly discussed with the full Board and each committee
Each director participates in a one-on-one, open ended interview facilitated by the Lead Independent
Director to discuss the results of the evaluations, and solicits input and feedback on the performance
and effectiveness of the Board and its committees
Directors are encouraged to provide ongoing feedback in addition to the annual self-assessment
These self-evaluations show that our Board and its committees operate effectively and help ensure
continued effectiveness.
These evaluation processes have led to various refinements over recent years, including, for example:
Ensuring the responsibilities of our Board committees are well defined, including with the establishment
of our Security Committee for dedicated risk oversight of security matters, and reconstitution of the
Governance and Sustainability Committee to oversee ESG matters
Ensuring the Board and committee agendas continue to be focused on the Company's key
strategic priorities
• Increasing Board focus on succession planning and board refreshment
• Prioritizing regular director education regarding our industry, the industry landscape, and current
events, including the impact of rapidly evolving technology (such as Al)
Incorporation of
Feedback and
Action Planning
34
*palomlur
2024 Proxy Statement
ACTION ITEM
ANNUAL BOARD AND COMMITTEE ASSESSMENT
Assessments and
Discussions
Each director completes a survey to evaluate the Board and a separate survey for each committee on
which they serve.
Topics covered include, among others:
• Board size, composition, diversity, independence, and expertise
• Board culture, effectiveness, initiative, and strategic focus
• Board committee structure, membership, independence, responsibilities, and performance
• Board leadership structure
• Board education
• Board committee processes, including number of meetings, time allotted, sufficiency of executive
sessions, and availability of management
• Risk oversight, access to information, and ethics
• Relationship with management, access to management, and management responsiveness
• Corporate governance policies and procedures
• Board and management succession planning
• Lead Independent Director meets individually with members of Board at least biennially to evaluate the
Board and its committees
Analysis and
Discussion
Results of these surveys are analyzed and processed as follows:
• Our General Counsel reviews and summarizes the responses from each director’s assessments for the
Chair, the Lead Independent Director, and each committee chair
• Results are reviewed and robustly discussed with the full Board and each committee
• Each director participates in a one-on-one, open ended interview facilitated by the Lead Independent
Director to discuss the results of the evaluations, and solicits input and feedback on the performance
and effectiveness of the Board and its committees
• Directors are encouraged to provide ongoing feedback in addition to the annual self-assessment
Incorporation of
Feedback and
Action Planning
These self-evaluations show that our Board and its committees operate effectively and help ensure
continued effectiveness.
These evaluation processes have led to various refinements over recent years, including, for example:
• Ensuring the responsibilities of our Board committees are well defined, including with the establishment
of our Security Committee for dedicated risk oversight of security matters, and reconstitution of the
Governance and Sustainability Committee to oversee ESG matters
• Ensuring the Board and committee agendas continue to be focused on the Company’s key
strategic priorities
• Increasing Board focus on succession planning and board refreshment
• Prioritizing regular director education regarding our industry, the industry landscape, and current
events, including the impact of rapidly evolving technology (such as AI)
34
2024 Proxy Statement
Corporate Governance
bob
Quarterly engagement
with senior management
on critical business
matters that tie to our
overall strategy
Corporate Governance
Board's Role in Strategy Oversight
Our Board is responsible for overseeing the development of the Company's strategy (including product development
roadmaps), which articulates objectives for the business, helps establish and maintain effective risk management and
internal controls frameworks, and provides direction to senior management to determine which business opportunities to
pursue. The Board is also actively engaged in ensuring that the Company's culture reflects our commitment to our core
values of disruption, execution, collaboration, inclusion, and integrity.
Annually holds a strategy
offsite, receiving detailed
presentations from,
and engagement with,
senior management
across the Company
Annually reviews and
approves the Palo Alto
Networks operating plan
Regularly interacts with
the next generation of
leadership to ensure the
talent pipeline remains
diverse, inclusive and up
to the task
Board's Role in Risk Oversight
Risk is inherent with every business, including strategic, financial, business and operational, legal and compliance, and
reputational. We have designed and implemented processes to manage risk in our operations. Management is responsible
for the day-to-day management of risks our Company faces, while our Board, as a whole and assisted by its committees,
has responsibility for the oversight of risk management. In its risk oversight role, our Board has the responsibility to satisfy
itself that the risk management processes designed and implemented by management are appropriate and functioning
as designed.
Our Board believes that open communication between management and our Board is essential for effective risk
management and oversight.
While our Board is ultimately responsible for risk oversight, our Board committees assist our Board in fulfilling its oversight
responsibilities in certain areas of risk.
2024 Proxy Statement
*palositp:
35
Board’s Role in Strategy Oversight
Our Board is responsible for overseeing the development of the Company’s strategy (including product development
roadmaps), which articulates objectives for the business, helps establish and maintain effective risk management and
internal controls frameworks, and provides direction to senior management to determine which business opportunities to
pursue. The Board is also actively engaged in ensuring that the Company’s culture reflects our commitment to our core
values of disruption, execution, collaboration, inclusion, and integrity.
Annually holds a strategy
offsite, receiving detailed
presentations from,
and engagement with,
senior management
across the Company
Annually reviews and
approves the Palo Alto
Networks operating plan
Quarterly engagement
with senior management
on critical business
matters that tie to our
overall strategy
Regularly interacts with
the next generation of
leadership to ensure the
talent pipeline remains
diverse, inclusive and up
to the task
Board’s Role in Risk Oversight
Risk is inherent with every business, including strategic, financial, business and operational, legal and compliance, and
reputational. We have designed and implemented processes to manage risk in our operations. Management is responsible
for the day-to-day management of risks our Company faces, while our Board, as a whole and assisted by its committees,
has responsibility for the oversight of risk management. In its risk oversight role, our Board has the responsibility to satisfy
itself that the risk management processes designed and implemented by management are appropriate and functioning
as designed.
Our Board believes that open communication between management and our Board is essential for effective risk
management and oversight.
While our Board is ultimately responsible for risk oversight, our Board committees assist our Board in fulfilling its oversight
responsibilities in certain areas of risk.
35
2024 Proxy Statement
Corporate Governance
Corporate Governance
BOARD OF
DIRECTORS
Meets with our Chief Executive Officer and other members of the senior management team at quarterly meetings of our Board, where,
among other topics, they discuss risks facing our Company, as well as at such other times as they deem appropriate
Reviews strategic and operational risk in the context of reports from the management team, including data privacy, information security
and cybersecurity, receives reports on all significant committee activities at each regular meeting, and evaluates the risks inherent in
significant transactions
GOVERNANCE
AND
SUSTAINABILITY
COMMITTEE
COMPENSATION
AND PEOPLE
COMMITTEE
AUDIT
COMMITTEE
SECURITY
COMMITTEE
Assists our Board in fulfilling
its oversight responsibilities
with respect to risk
management in the areas of
liquidity risk, internal control
over financial reporting
and disclosure controls
and procedures, legal and
regulatory compliance, and
discusses with management
and the independent auditor
guidelines and policies with
respect to risk assessment,
risk management and
risk mitigation
Reviews our antifraud
programs and controls
Reviews our major financial
risk exposures and the
steps management has
taken to monitor and control
these exposures
Assists our Board in
fulfilling its oversight
responsibilities with respect
to the management of risk
associated with Board
organization, leadership,
membership and structure,
and corporate governance
Reviews and monitors
compliance with the
Company's Code of
Business Conduct
and Ethics
Oversees and periodically
reviews the Company's
risks relating to corporate
social responsibility and
environmental sustainability
Oversees and discusses, as
needed, with management,
compliance with applicable
laws, regulations and internal
compliance programs
Assist our Board in fulfilling
its oversight responsibilities
with respect to our
compensation programs
Assesses risks created by
the incentives inherent in
our compensation programs
and policies, and determines
whether they encourage
excessive risk taking
Assists our Board in fulfilling its
oversight responsibilities with
respect to the management
of risk associated with
cybersecurity, information
security and physical security
of the Company
Responsible for the day-to-day management of risks our Company faces
36
palomIto°
2024 Proxy Statement
BOARD OF
DIRECTORS
y Meets with our Chief Executive Officer and other members of the senior management team at quarterly meetings of our Board, where,
among other topics, they discuss risks facing our Company, as well as at such other times as they deem appropriate
y Reviews strategic and operational risk in the context of reports from the management team, including data privacy, information security
and cybersecurity, receives reports on all significant committee activities at each regular meeting, and evaluates the risks inherent in
significant transactions
AUDIT
COMMITTEE
GOVERNANCE
AND
SUSTAINABILITY
COMMITTEE
COMPENSATION
AND PEOPLE
COMMITTEE
SECURITY
COMMITTEE
y Assists our Board in fulfilling
its oversight responsibilities
with respect to risk
management in the areas of
liquidity risk, internal control
over financial reporting
and disclosure controls
and procedures, legal and
regulatory compliance, and
discusses with management
and the independent auditor
guidelines and policies with
respect to risk assessment,
risk management and
risk mitigation
y Reviews our antifraud
programs and controls
y Reviews our major financial
risk exposures and the
steps management has
taken to monitor and control
these exposures
y Assists our Board in
fulfilling its oversight
responsibilities with respect
to the management of risk
associated with Board
organization, leadership,
membership and structure,
and corporate governance
y Reviews and monitors
compliance with the
Company’s Code of
Business Conduct
and Ethics
y Oversees and periodically
reviews the Company’s
risks relating to corporate
social responsibility and
environmental sustainability
y Oversees and discusses, as
needed, with management,
compliance with applicable
laws, regulations and internal
compliance programs
y Assist our Board in fulfilling
its oversight responsibilities
with respect to our
compensation programs
y Assesses risks created by
the incentives inherent in
our compensation programs
and policies, and determines
whether they encourage
excessive risk taking
y Assists our Board in fulfilling its
oversight responsibilities with
respect to the management
of risk associated with
cybersecurity, information
security and physical security
of the Company
MANAGEMENT
Responsible for the day-to-day management of risks our Company faces
36
2024 Proxy Statement
Corporate Governance
The Audit Committee reviews overall risk exposures as presented to the Board, considers
input from external advisors to assess and oversee identification and management of risks,
and reviews allocation of responsibilities between the Board and management. In addition,
the Audit Committee, at each quarterly meeting, discusses with management risks and steps
management has taken to monitor, control and mitigate exposures. The Audit Committee also
reviews periodic and annual reports on a quarterly basis for the sufficiency of risk factors and
known trends and uncertainties disclosure.
Enterprise Risk
Management
The Audit Committee oversees the internal audit function, receiving quarterly status reports
and annual internal plan reviews and on a regular basis, meets separately with the head of
the internal audit function to discuss any issues warranting additional attention.
Internal Audit
Cybersecurity
The Security Committee oversees our management of cybersecurity risk. The Security
Committee receives quarterly reports from management about the prevention, detection,
mitigation and remediation of cybersecurity incidents. Our Security Committee directly
oversees our cybersecurity program and receives regular updates from management on
cybersecurity risk.
The Board, in coordination with the Security Committee and the Governance and
Sustainability Committee, is responsible for overseeing our Al governance program, which
is focused on the responsible development and use of our Al products and services. In fiscal
year 2024, the Governance and Sustainability committee adopted our Policy for Responsible
Use of Al.
The Compensation and People Committee annually reviews and determines executive and
director compensation and reviews and approves executive goals and objectives, reviews
and administers, cash, equity incentive and benefits plans and reviews and approves the
Compensation Discussion and Analysis included in the annual proxy statement. In addition,
the Compensation and People Committee assesses and monitors whether compensation
policies and programs have the potential to encourage excessive or inappropriate risk-taking.
The Board oversees our ESG strategy, developed and implemented by our senior leadership
team. The Governance and Sustainability Committee reviews and discusses with management
on a quarterly basis the Company's ESG program, initiatives and progress against goals. In
addition, the Audit Committee reviews and discusses with management at least annually, risks
related to ESG, the regulatory environment and associated reporting requirements, as well as
the controls and procedures supporting the Company's financial disclosures.
The Compensation and People Committee annually reviews executive officer goals
and objectives, including attrition levels, annual internal pay equity reviews, and reviews
talent management and development, culture, employee engagement and inclusion and
diversity strategy.
The Governance and Sustainability Committee develops and administers the director
nominations process, reviews and recommends to the Board the appropriate size
and composition of the Board and its leadership structure and oversees Board
succession planning.
Artificial
Intelligence
Ur2
Dual
Dun
Compensation
Strategy
Environment and
Sustainability
c2
Human Capital
Management
8
.--H,
a a a
Board
Refreshment
and Leadership
Structure
Corporate Governance
Select Oversight Areas
2024 Proxy Statement
*paloajtcy
37
Select Oversight Areas
Enterprise Risk
Management
The Audit Committee reviews overall risk exposures as presented to the Board, considers
input from external advisors to assess and oversee identification and management of risks,
and reviews allocation of responsibilities between the Board and management. In addition,
the Audit Committee, at each quarterly meeting, discusses with management risks and steps
management has taken to monitor, control and mitigate exposures. The Audit Committee also
reviews periodic and annual reports on a quarterly basis for the sufficiency of risk factors and
known trends and uncertainties disclosure.
Internal Audit
The Audit Committee oversees the internal audit function, receiving quarterly status reports
and annual internal plan reviews and on a regular basis, meets separately with the head of
the internal audit function to discuss any issues warranting additional attention.
Cybersecurity
The Security Committee oversees our management of cybersecurity risk. The Security
Committee receives quarterly reports from management about the prevention, detection,
mitigation and remediation of cybersecurity incidents. Our Security Committee directly
oversees our cybersecurity program and receives regular updates from management on
cybersecurity risk.
Artificial
Intelligence
The Board, in coordination with the Security Committee and the Governance and
Sustainability Committee, is responsible for overseeing our AI governance program, which
is focused on the responsible development and use of our AI products and services. In fiscal
year 2024, the Governance and Sustainability committee adopted our Policy for Responsible
Use of AI.
$
Compensation
Strategy
The Compensation and People Committee annually reviews and determines executive and
director compensation and reviews and approves executive goals and objectives, reviews
and administers, cash, equity incentive and benefits plans and reviews and approves the
Compensation Discussion and Analysis included in the annual proxy statement. In addition,
the Compensation and People Committee assesses and monitors whether compensation
policies and programs have the potential to encourage excessive or inappropriate risk-taking.
Environment and
Sustainability
The Board oversees our ESG strategy, developed and implemented by our senior leadership
team. The Governance and Sustainability Committee reviews and discusses with management
on a quarterly basis the Company’s ESG program, initiatives and progress against goals. In
addition, the Audit Committee reviews and discusses with management at least annually, risks
related to ESG, the regulatory environment and associated reporting requirements, as well as
the controls and procedures supporting the Company’s financial disclosures.
Human Capital
Management
The Compensation and People Committee annually reviews executive officer goals
and objectives, including attrition levels, annual internal pay equity reviews, and reviews
talent management and development, culture, employee engagement and inclusion and
diversity strategy.
Board
Refreshment
and Leadership
Structure
The Governance and Sustainability Committee develops and administers the director
nominations process, reviews and recommends to the Board the appropriate size
and composition of the Board and its leadership structure and oversees Board
succession planning.
37
2024 Proxy Statement
Corporate Governance
IDENTIFY RISKS
PROVIDE ASSURANCE
ASSESS AND
WITH AUDIT PLAN
PRIORITIZE RISKS
Multi Lens Approach to ERM
Total Shareholder Return
Risk to our revenue growth,
reputation with investors,
operating margin and free cash
flow, and capital structure
'%lobal Risk and Compliance
Updates to risks, priorities and
challenges relevant to the function
Macro or Emerging Risli
Implications of changes in
macro environment
REPORT TO
AUDIT COMMITTEE
REVIEW MITIGATION
WITH SENIOR
MANAGEMENT
Enterprise Risk
Management
Process
Corporate Governance
Enterprise Risk Management Program
Our enterprise risk management program employs a multi-lens approach, and consists of guidance and input from
management, company-wide risk management teams, along with internal and external subject matter experts, to identify,
prioritize and mitigate risks that are applicable for the Company's operations and long term sustainability. Our enterprise risk
management is led by our Vice President of Internal Audit, who meets with, and receives input from, our Audit Committee
on a quarterly basis.
38
palomIto°
2024 Proxy Statement
Enterprise Risk Management Program
Our enterprise risk management program employs a multi-lens approach, and consists of guidance and input from
management, company-wide risk management teams, along with internal and external subject matter experts, to identify,
prioritize and mitigate risks that are applicable for the Company’s operations and long term sustainability. Our enterprise risk
management is led by our Vice President of Internal Audit, who meets with, and receives input from, our Audit Committee
on a quarterly basis.
IDENTIFY RISKS
ASSESS AND
PRIORITIZE RISKS
REVIEW MITIGATION
WITH SENIOR
MANAGEMENT
REPORT TO
AUDIT COMMITTEE
PROVIDE ASSURANCE
WITH AUDIT PLAN
Enterprise Risk
Management
Process
Multi Lens Approach to ERM
Global Risk and Compliance
Updates to risks, priorities and
challenges relevant to the function
Macro or Emerging Risks
Implications of changes in
macro environment
Total Shareholder Return
Risk to our revenue growth,
reputation with investors,
operating margin and free cash
flow, and capital structure
38
2024 Proxy Statement
Corporate Governance
Corporate Governance
Succession Planning
Our Board and management team recognize the importance of continually developing our talented employee base.
Accordingly, our management team regularly conducts talent reviews of the current senior leadership positions. In addition,
our Board regularly evaluates and discusses succession planning for our Chief Executive Officer, as well as other members
of senior management, including through evaluation of potential internal and external successors, as well as potential
interim candidates in the event of an emergency situation. In conducting its evaluation, our Board considers organizational
needs, competitive challenges, leadership and management potential, and development. As a result of succession
planning, William "BJ" Jenkins became our President in August 2021 and Dipak Golechha became Executive Vice President
and Chief Financial Officer in March 2021.
The Board also continues to engage
with management on the Company's
leadership pipeline more broadly,
o 0 o
including with respect to leadership
C(1(-1 pipeline health and the development
of the Company's "next generation
of leaders"
Developing the Company's Next Generation
of Leaders
Monitoring of careers to ensure appropriate
exposure to our Board and our business
Interaction with leaders in a variety of
settings, including at Board meetings
and the Board's annual offsite
business review and meeting
Executive succession planning
reviewed by our Compensation
r
and People Committee, ongoing
assessment of senior management
for potential executive positions
Additional engagement on broader leadership
pipeline for key roles across the Company
o0o
Communications with the Board of Directors
Interested parties wishing to communicate with our Board or with an individual member or members of our Board may do
so by writing to the Board or to the particular member or members of our Board, and mailing the correspondence to our
General Counsel or our Legal Department, at Palo Alto Networks, Inc., 3000 Tannery Way, Santa Clara, California 95054.
Our General Counsel or our Legal Department, in consultation with appropriate members of our Board, as necessary, will
review all incoming communications and, if appropriate, all such communications will be forwarded to the appropriate
member or members of our Board, or if none is specified, to the Chair.
2024 Proxy Statement
paloajtn:
39
Succession Planning
Our Board and management team recognize the importance of continually developing our talented employee base.
Accordingly, our management team regularly conducts talent reviews of the current senior leadership positions. In addition,
our Board regularly evaluates and discusses succession planning for our Chief Executive Officer, as well as other members
of senior management, including through evaluation of potential internal and external successors, as well as potential
interim candidates in the event of an emergency situation. In conducting its evaluation, our Board considers organizational
needs, competitive challenges, leadership and management potential, and development. As a result of succession
planning, William “BJ” Jenkins became our President in August 2021 and Dipak Golechha became Executive Vice President
and Chief Financial Officer in March 2021.
The Board also continues to engage
with management on the Company’s
leadership pipeline more broadly,
including with respect to leadership
pipeline health and the development
of the Company’s “next generation
of leaders”
Interaction with leaders in a variety of
settings, including at Board meetings
and the Board’s annual offsite
business review and meeting
Executive succession planning
reviewed by our Compensation
and People Committee, ongoing
assessment of senior management
for potential executive positions
Communications with the Board of Directors
Interested parties wishing to communicate with our Board or with an individual member or members of our Board may do
so by writing to the Board or to the particular member or members of our Board, and mailing the correspondence to our
General Counsel or our Legal Department, at Palo Alto Networks, Inc., 3000 Tannery Way, Santa Clara, California 95054.
Our General Counsel or our Legal Department, in consultation with appropriate members of our Board, as necessary, will
review all incoming communications and, if appropriate, all such communications will be forwarded to the appropriate
member or members of our Board, or if none is specified, to the Chair.
Monitoring of careers to ensure appropriate
exposure to our Board and our business
Additional engagement on broader leadership
pipeline for key roles across the Company
Developing the Company’s Next Generation
of Leaders
39
2024 Proxy Statement
Corporate Governance
Corporate Governance
Corporate Governance Guidelines and Code of Business
Conduct and Ethics
Our Board has adopted Corporate Governance Guidelines. These guidelines address items such as the qualifications and
responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us
in general. In addition, these guidelines describe the time commitment expected of our directors. In particular, we believe
that Board membership requires a significant time commitment and that our directors must devote sufficient time to carry
out their duties and responsibilities effectively. As a result, our Corporate Governance Guidelines generally provide that no
director should be a member of more than three public company boards, and that directors must notify the Governance
and Sustainability Committee prior to accepting membership on any other public or private company board, so that the
director's time commitments and potential conflicts of interest may be evaluated.
In addition, our Board has adopted a Code of Business Conduct and Ethics that applies to all our employees, officers and
directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. Our
Corporate Governance Guidelines and our Code of Business Conduct and Ethics are posted on the Investor Information
portion of our website at investors.paloaltonetworks.com. We will post amendments to our Code of Business Conduct and
Ethics or waivers of our Code of Business Conduct and Ethics for directors and executive officers on the same website.
Compensation and People Committee Interlocks and
Insider Participation
None of the members of our Compensation and People Committee is, or has been, an officer or employee of our Company.
None of our executive officers currently serves, or in the past year has served, as a member of the board or compensation
committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive
officers serving on our Board or Compensation and People Committee.
40
PalomIto°
2024 Proxy Statement
Corporate Governance Guidelines and Code of Business
Conduct and Ethics
Our Board has adopted Corporate Governance Guidelines. These guidelines address items such as the qualifications and
responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us
in general. In addition, these guidelines describe the time commitment expected of our directors. In particular, we believe
that Board membership requires a significant time commitment and that our directors must devote sufficient time to carry
out their duties and responsibilities effectively. As a result, our Corporate Governance Guidelines generally provide that no
director should be a member of more than three public company boards, and that directors must notify the Governance
and Sustainability Committee prior to accepting membership on any other public or private company board, so that the
director’s time commitments and potential conflicts of interest may be evaluated.
In addition, our Board has adopted a Code of Business Conduct and Ethics that applies to all our employees, officers and
directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. Our
Corporate Governance Guidelines and our Code of Business Conduct and Ethics are posted on the Investor Information
portion of our website at investors.paloaltonetworks.com. We will post amendments to our Code of Business Conduct and
Ethics or waivers of our Code of Business Conduct and Ethics for directors and executive officers on the same website.
Compensation and People Committee Interlocks and
Insider Participation
None of the members of our Compensation and People Committee is, or has been, an officer or employee of our Company.
None of our executive officers currently serves, or in the past year has served, as a member of the board or compensation
committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive
officers serving on our Board or Compensation and People Committee.
40
2024 Proxy Statement
Corporate Governance
Corporate Responsibility
An Overview of Our Environmental, Social and
Governance Strategies
Our values of disruption, execution, collaboration, inclusion, and integrity are the foundation of everything we do—which
extends into our approach to environmental, social and governance ("ESG") practices. We believe that integrating ESG
practices throughout our operations builds business resilience and helps manage risk. Our ESG strategy is designed
to enhance safety, security, and sustainability for our stakeholders: customers, investors, employees, suppliers, and our
broader communities. This includes advancing environmental sustainability, investing in people, and operating with
integrity. We work to keep our stakeholders informed and maintain their trust by publishing an annual ESG report aligned to
globally-recognized ESG reporting frameworks and standards.
ESG Oversight and Governance
ESG at Palo Alto Networks is overseen and governed at the highest levels and includes Board and committee oversight,
executive-level leadership, and subject-matter experts who lead efforts across our business.
Board Oversight. The Board and its applicable committees provide guidance and oversight to management with respect
to ESG matters. The Governance and Sustainability Committee is responsible for setting our ESG priorities and monitoring
our performance. Our Compensation and People Committee, Audit Committee and Security Committee also serve an
important role in ESG oversight, as discussed in more detail in the below visual. Our Lead Independent Director and
management team share feedback received from our shareholders with the Board.
AUDIT COMMITTEE
• Processes and controls to ensure financial
disclosures are complete and accurate
• Enterprise risk management (ERM)
pertaining to financial, accounting and
tax matters
Legal and regulatory compliance
related to financial and tax
matters
Internal ethics compliance,
including code of ethics and
whistleblower program
COMPENSATION AND
PEOPLE COMMITTEE
• Diversity and inclusion
• Pay equity
• Human capital management, including
recruitment, development and retention
• Integrating ESG goals into executive compensation
plans/arrangements
Compensation risk management
Management succession planning and development
SECURITY COMMITTEE
• Product security and
data security
Cybersecurity, risk exposure and
related Controls
ERM related to security, incident
response and business risk
GOVERNANCE AND
SUSTAINABILITY
COMMITTEE
• Primary responsibility for
ESG matters
Board recruiting,
including diversity
Sustainability
Legal and regulatory compliance
(excluding financial and tax)
Stakeholder engagement
2024 Proxy Statement
palositd:
41
Corporate Responsibility
An Overview of Our Environmental, Social and
Governance Strategies
Our values of disruption, execution, collaboration, inclusion, and integrity are the foundation of everything we do—which
extends into our approach to environmental, social and governance (“ESG”) practices. We believe that integrating ESG
practices throughout our operations builds business resilience and helps manage risk. Our ESG strategy is designed
to enhance safety, security, and sustainability for our stakeholders: customers, investors, employees, suppliers, and our
broader communities. This includes advancing environmental sustainability, investing in people, and operating with
integrity. We work to keep our stakeholders informed and maintain their trust by publishing an annual ESG report aligned to
globally-recognized ESG reporting frameworks and standards.
ESG Oversight and Governance
ESG at Palo Alto Networks is overseen and governed at the highest levels and includes Board and committee oversight,
executive-level leadership, and subject-matter experts who lead efforts across our business.
Board Oversight. The Board and its applicable committees provide guidance and oversight to management with respect
to ESG matters. The Governance and Sustainability Committee is responsible for setting our ESG priorities and monitoring
our performance. Our Compensation and People Committee, Audit Committee and Security Committee also serve an
important role in ESG oversight, as discussed in more detail in the below visual. Our Lead Independent Director and
management team share feedback received from our shareholders with the Board.
AUDIT COMMITTEE
y Processes and controls to ensure financial
disclosures are complete and accurate
y Enterprise risk management (ERM)
pertaining to financial, accounting and
tax matters
y Legal and regulatory compliance
related to financial and tax
matters
y Internal ethics compliance,
including code of ethics and
whistleblower program
SECURITY COMMITTEE
y Product security and
data security
y Cybersecurity, risk exposure and
related Controls
y ERM related to security, incident
response and business risk
nsure
nsu
financi
fina
ial
d accurate
ate
accu
d
t (ERM)
M)
t (ER
unting and
nd
unting
ance
nce
a
e
d
Pro
Pr
dat
dat
y Cy
Cy
rela
rela
y ER
ER
res
res
Board of
Directors
COMPENSATION AND
PEOPLE COMMITTEE
y Diversity and inclusion
y Pay equity
y Human capital management, including
recruitment, development and retention
y Integrating ESG goals into executive compensation
plans/arrangements
y Compensation risk management
y Management succession planning and development
GOVERNANCE AND
SUSTAINABILITY
COMMITTEE
y Primary responsibility for
ESG matters
y Board recruiting,
including diversity
y Sustainability
y Legal and regulatory compliance
(excluding financial and tax)
y Stakeholder engagement
41
2024 Proxy Statement
Corporate Responsibility
RilnagemPro I fififirchip. Our ESG Executive Council, a cross-functional, executive-level ESG leadership team sets our
overall ESG strategy, objectives and initiatives, provides guidance on program implementation, and oversees the continuing
enhancement of our approach to ESG. This Council, which is led by our Chief Executive Officer and includes our General
Counsel, Chief People Officer and Chief Financial Officer, receives analysis and presentations from subject matter experts
throughout the Company regarding current and emerging ESG-related risk topics and the status of our ESG programs.
Our ESG Executive Council empowers our ESG Steering Committee to implement our ESG programs and to pursue
activities to achieve our objectives and goals. The ESG Steering Committee is a cross functional team of employees,
consisting of representatives from our accounting, internal audit, corporate responsibility, legal, investor relations, people
and places, product, and operations teams, and oversees the work of our subject matter experts in the implementation of
our ESG programs.
ESG Governance Structure
BOARD OF DIRECTORS
Approves priorities, provides guidance and oversight,
and monitors performance in key areas of our ESG programs
Chair and Chief Executive Officer
Governance and Sustainability Committee
7.\
ESG EXECUTIVE COUNCIL
Sets ESG strategy, objectives and initiatives, and oversees
corporate-wide ESG program implementation
Chief Executive Officer
Chief Financial Officer
Chief People Officer
General Counsel
r•
Ni/
ESG STEERING COMMITTEE
Chair: Sr. Director, Global Corporate Responsibility
Recommends strategies, leads implementation of
ESG programs, and works toward ESG objectives.
Head of SOX and External Reporting Assurance
Senior Director, Global Corporate Responsibility
Senior Director, Hardware Engineering
SVP, Chief Accounting Officer
SVP, Investor Relations and Corporate Development
VP, Deputy General Counsel, Corporate
VP, Deputy General Counsel, Ethics and Compliance
VP, Global People
VP, Global Places and Security
VP, Internal Audit
VP, Worldwide Operations
42
palomIto°
2024 Proxy Statement
Management Leadership. Our ESG Executive Council, a cross-functional, executive-level ESG leadership team sets our
overall ESG strategy, objectives and initiatives, provides guidance on program implementation, and oversees the continuing
enhancement of our approach to ESG. This Council, which is led by our Chief Executive Officer and includes our General
Counsel, Chief People Officer and Chief Financial Officer, receives analysis and presentations from subject matter experts
throughout the Company regarding current and emerging ESG-related risk topics and the status of our ESG programs.
Our ESG Executive Council empowers our ESG Steering Committee to implement our ESG programs and to pursue
activities to achieve our objectives and goals. The ESG Steering Committee is a cross functional team of employees,
consisting of representatives from our accounting, internal audit, corporate responsibility, legal, investor relations, people
and places, product, and operations teams, and oversees the work of our subject matter experts in the implementation of
our ESG programs.
ESG Governance Structure
BOARD OF DIRECTORS
Approves priorities, provides guidance and oversight,
and monitors performance in key areas of our ESG programs
<[T\eTaW<[\XY>kXVhg\iXHǖVXe
Governance and Sustainability Committee
ESG EXECUTIVE COUNCIL
Sets ESG strategy, objectives and initiatives, and oversees
corporate-wide ESG program implementation
<[\XY>kXVhg\iXHǖVXe
<[\XY?\aTaV\T_HǖVXe
<[\XYIXbc_XHǖVXe
General Counsel
ESG STEERING COMMITTEE
Chair: Sr. Director, Global Corporate Responsibility
Recommends strategies, leads implementation of
ESG programs, and works toward ESG objectives.
Head of SOX and External Reporting Assurance
Senior Director, Global Corporate Responsibility
Senior Director, Hardware Engineering
LOI<[\XY:VVbhag\aZHǖVXe
SVP, Investor Relations and Corporate Development
VP, Deputy General Counsel, Corporate
VP, Deputy General Counsel, Ethics and Compliance
VP, Global People
VP, Global Places and Security
VP, Internal Audit
VP, Worldwide Operations
42
2024 Proxy Statement
Corporate Responsibility
Sustainable Operations V. Value Chain Partnership
Corporate Responsibility
Environmental
Palo Alto Networks acknowledges the risks and opportunities associated with climate change and remains committed to
doing our part to address the climate crisis by reaching our 1.5°C-aligned and externally verified Science-Based Targets
("SBTs"), procuring 100% renewable electricity to run our managed sites by 2030, and working collaboratively across our
value chain. We report progress towards our goals in our annual ESG report.
Our climate strategy focuses on three pillars.
Drive absolute emissions
reductions and meet our
science-based targets
through efficient and strategic
operations of our business
and sites
Collaborate with stakeholders
across our value chain
to reduce emissions and
waste, increase renewable
energy use, conserve natural
resources, and set and reach
science-based targets
Advance carbon emissions
reduction through
policy advocacy and
industry partnerships
Science-Based Targets: A Clearly Defined Pathway to
emissions Reduction
Palo Alto Networks uses science-based strategies to reduce our climate impacts. Our SBTs have been validated by the
Science Based Targets initiative ("SBTi") and are aligned to the United Nations Framework Convention on Climate Change
(UNFCCC) guidance. We conduct an annual greenhouse gas inventory to monitor our progress and adapt with evolving
business operations.
Our Science-Based Targets are:
scope 1 and z: Sustainable Operations. Palo Alto Networks commits to reduce absolute Scope 1 and 2 greenhouse
gas emissions by 35% by the end of fiscal 2027 from a fiscal 2021 base year.
• Scope 3: Sustainable Supply Chain. Palo Alto Networks commits that 65% of its suppliers (measured by total spend)
to set Science-Based Targets by the end of fiscal 2027.
ncope 3. qustainohlo rtilefon.o)rs (Usc
"IA Products). Palo Alto Networks commits to reduce Scope 3 emissions
from use of sold products by 40% per million USD value added within the same timeframe, by the end of fiscal 2027.
Our Net Zero Emissions targets, included below, were validated by SBTi in early fiscal 2025:
Palo Alto Networks commits to reduce absolute scope 1 and 2 GHG emissions 90% by the end of fiscal 2040 from a
fiscal 2021 base year. Palo Alto Networks also commits to reduce absolute scope 3 GHG emissions 90% within the
same timeframe.
2024 Proxy Statement
*paloajtb:
43
Environmental
Palo Alto Networks acknowledges the risks and opportunities associated with climate change and remains committed to
doing our part to address the climate crisis by reaching our 1.5°C-aligned and externally verified Science-Based Targets
(“SBTs”), procuring 100% renewable electricity to run our managed sites by 2030, and working collaboratively across our
value chain. We report progress towards our goals in our annual ESG report.
Our climate strategy focuses on three pillars.
Drive absolute emissions
reductions and meet our
science-based targets
through efficient and strategic
operations of our business
and sites
Sustainable Operations
Collaborate with stakeholders
across our value chain
to reduce emissions and
waste, increase renewable
energy use, conserve natural
resources, and set and reach
science-based targets
Value Chain Partnership
Advance carbon emissions
reduction through
policy advocacy and
industry partnerships
Ecosystem Engagement
Science-Based Targets: A Clearly Defined Pathway to
Emissions Reduction
Palo Alto Networks uses science-based strategies to reduce our climate impacts. Our SBTs have been validated by the
Science Based Targets initiative (“SBTi”) and are aligned to the United Nations Framework Convention on Climate Change
(UNFCCC) guidance. We conduct an annual greenhouse gas inventory to monitor our progress and adapt with evolving
business operations.
Our Science-Based Targets are:
y Scope 1 and 2: Sustainable Operations. Palo Alto Networks commits to reduce absolute Scope 1 and 2 greenhouse
gas emissions by 35% by the end of fiscal 2027 from a fiscal 2021 base year.
y Scope 3: Sustainable Supply Chain. Palo Alto Networks commits that 65% of its suppliers (measured by total spend)
to set Science-Based Targets by the end of fiscal 2027.
y Scope 3: Sustainable Customers (Use of Sold Products). Palo Alto Networks commits to reduce Scope 3 emissions
from use of sold products by 40% per million USD value added within the same timeframe, by the end of fiscal 2027.
Our Net Zero Emissions targets, included below, were validated by SBTi in early fiscal 2025:
y Palo Alto Networks commits to reduce absolute scope 1 and 2 GHG emissions 90% by the end of fiscal 2040 from a
fiscal 2021 base year. Palo Alto Networks also commits to reduce absolute scope 3 GHG emissions 90% within the
same timeframe.
43
2024 Proxy Statement
Corporate Responsibility
11.CDP
A LIST
a.
2023
CLIMATE
Earned placement on CDP
Climate Change A List (2023)
4GREEN
EPA
POWER
PARTNER
Recognized as Green Power
Leader Award Winner (2023)
CDP
SUPPLIER
ENGAGEMENT
LEADER 2023
Recognized as a Supplier
Engagement Leader 2023 by
CDP (2023)
Corporate Responsibility
Sustainable Operations: Driving Decarbonization
Our sustainable operations strategy includes a commitment to achieving 100% renewable
energy by 2030 and to materially reducing our operational greenhouse gas emissions.
We have a long history of providing our people with workplaces that have achieved LEED
(Leadership in Energy and Environmental Design) certification. New LEED-certified sites
opened to our employees in London and Amsterdam in early fiscal 2024. The Amsterdam
office, which serves as our EMEA HQ, was certified LEED-Silver, an accreditation that
commends the site for optimized energy performance.
Palo Alto Networks remains a participant in the Silicon Valley Power's (SVP) Large Customer
Renewable Energy Program (LCRE). This voluntary clean energy program gives companies
the ability to purchase additional renewable electricity above the amount already included
in SVP's energy delivery portfolio. Throughout fiscal 2024, as a participant in the SVP
LCRE, we purchased 100% renewable electricity to power our entire Santa Clara, California
headquarters. Our LCRE participation also led to Palo Alto Networks' listing on the U.S.
EPA's Green Power Partnership, and being recognized as a Green Power Leadership Award
Winner in September 2023.
Value Chain Partnership
Collaboration across our value chain promotes the large-scale action necessary to address
the climate crisis, reduce waste and conserve natural resources. Our environmental strategy
extends to our supply chain practices and how we partner with our suppliers. Two of our
own SBTs address Scope 3 emissions from our value chain, including purchased goods and
services, and our customers' use of our cybersecurity hardware products.
We expect our manufacturing partners to collect, measure and report greenhouse gas emissions, establish SBTs to reduce
emissions and transition to renewable energy sources. Additionally, suppliers are informed of our expectations to follow
responsible business practices while minimizing their impact on the environment and communities through our Global
Supplier Code of Conduct. Our primary contract manufacturer is ISO 14001 certified and a member of the Responsible
Business Alliance.
Ecosystem Engagement
Engaging with stakeholders - industry peers, non-governmental organizations, policy makers, local communities and our
own employees - is the foundation of our sustainable ecosystem strategy.
We work with the following organizations to promote mutual learning and amplify our impact: CDP, Information Technology
Industry Council (ITI), Science Based Targets Initiative, The Climate Pledge, World Economic Forum - CEO Alliance of
Climate Leaders and Ceres.
In fiscal 2024, we continued to support climate, clean energy, and reporting transparency policies, including the World
Economic Forum (WEF) Alliance of CEO Climate Leaders' COP28 letter, the Information Technology Industry Council's (ITI)
public comments supporting disclosure of Climate-Related Financial Risk, and Ceres support of California reporting policy
(CA SB 253 and 261).
We remain committed to transparency and submit our annual CDP Climate and Supply Chain disclosures.
44
palomIto°
2024 Proxy Statement
Sustainable Operations: Driving Decarbonization
Our sustainable operations strategy includes a commitment to achieving 100% renewable
energy by 2030 and to materially reducing our operational greenhouse gas emissions.
We have a long history of providing our people with workplaces that have achieved LEED
(Leadership in Energy and Environmental Design) certification. New LEED-certified sites
opened to our employees in London and Amsterdam in early fiscal 2024. The Amsterdam
office, which serves as our EMEA HQ, was certified LEED-Silver, an accreditation that
commends the site for optimized energy performance.
Palo Alto Networks remains a participant in the Silicon Valley Power’s (SVP) Large Customer
Renewable Energy Program (LCRE). This voluntary clean energy program gives companies
the ability to purchase additional renewable electricity above the amount already included
in SVP’s energy delivery portfolio. Throughout fiscal 2024, as a participant in the SVP
LCRE, we purchased 100% renewable electricity to power our entire Santa Clara, California
headquarters. Our LCRE participation also led to Palo Alto Networks’ listing on the U.S.
EPA’s Green Power Partnership, and being recognized as a Green Power Leadership Award
Winner in September 2023.
Value Chain Partnership
Collaboration across our value chain promotes the large-scale action necessary to address
the climate crisis, reduce waste and conserve natural resources. Our environmental strategy
extends to our supply chain practices and how we partner with our suppliers. Two of our
own SBTs address Scope 3 emissions from our value chain, including purchased goods and
services, and our customers’ use of our cybersecurity hardware products.
We expect our manufacturing partners to collect, measure and report greenhouse gas emissions, establish SBTs to reduce
emissions and transition to renewable energy sources. Additionally, suppliers are informed of our expectations to follow
responsible business practices while minimizing their impact on the environment and communities through our Global
Supplier Code of Conduct. Our primary contract manufacturer is ISO 14001 certified and a member of the Responsible
Business Alliance.
Ecosystem Engagement
Engaging with stakeholders – industry peers, non-governmental organizations, policy makers, local communities and our
own employees – is the foundation of our sustainable ecosystem strategy.
We work with the following organizations to promote mutual learning and amplify our impact: CDP, Information Technology
Industry Council (ITI), Science Based Targets Initiative, The Climate Pledge, World Economic Forum - CEO Alliance of
Climate Leaders and Ceres.
In fiscal 2024, we continued to support climate, clean energy, and reporting transparency policies, including the World
Economic Forum (WEF) Alliance of CEO Climate Leaders’ COP28 letter, the Information Technology Industry Council’s (ITI)
public comments supporting disclosure of Climate-Related Financial Risk, and Ceres support of California reporting policy
(CA SB 253 and 261).
We remain committed to transparency and submit our annual CDP Climate and Supply Chain disclosures.
Earned placement on CDP
Climate Change A List (2023)
Recognized as Green Power
Leader Award Winner (2023)
Recognized as a Supplier
Engagement Leader 2023 by
CDP (2023)
44
2024 Proxy Statement
Corporate Responsibility
Corporate Responsibility
Social
During fiscal 2024, we continued to invest in people, including our global workforce, supply chain and in the broader
community, further detailed below.
DeOPle
We believe our ongoing success depends on our employees. Development and investment in our people is central to who
we are, and will continue to be so. With a global workforce of 15,289 as of July 31, 2024, our People Strategy is a critical
element of our overall company strategy. Our People Strategy is a comprehensive approach to source, hire, onboard,
develop, listen, and engage employees. Our approach is grounded on core tenets: respect each employee as a unique
individual, demonstrate fairness and equity, facilitate personalization whenever possible, and nurture a culture where
employees have access to industry-leading professional development and are empowered to do the best work of their
careers. Our values of disruption, execution, collaboration, inclusion, and integrity were co-created with employees and
serve as the foundation of our culture.
We are proud to have earned multiple awards for our people programs and culture, many of which are based on
employee feedback.
Recognized as a
"Global Most Loved Workplaces"
Recognized in multiple categories including Culture. Leadership
by Newsweek (2024)
Happiness and Women by Comparably (2023 & 2024)
.
GLOBAL
MOST LOVED WORKPLACES
2024 11111=11 2124
CIRTIF110 et 100041106sse0M
•
22,
neat Company
Best Company
for
Best Company
Bost Company
g=1
LEADERSHIP
Source & Hire
At Palo Alto Networks, sourcing talent with the necessary skills and capabilities to contribute to our culture is central to our
talent acquisition strategy, known as "The Way We Hire."
We prioritize internal mobility to foster career growth within Palo Alto Networks, enabling employees to advance through
traditional career paths or explore roles across different business functions, at times leading to promotions.
We utilize structured interviewing practices, thorough job analyses and success profiles to identify high-quality candidates
and staff critical roles. Our Global Hiring Committees, introduced in fiscal 2023, plays a key role in maintaining our hiring
standards, which helps drive objectivity. This group of cross-functional senior leaders reviews finalist candidates to ensure
they meet our criteria and fit well with our Company.
Interviewer training is a critical component of our strategy. In fiscal 2024, we began to implement a structured three-tier
program to improve interviewer skills, save time across the hiring process, and enhance hiring quality. Interviewers receive
learning courses focused on effective feedback and practical assessments, hiring managers are provided with in-depth,
in-person training, and hiring champions receive a scenario-based training program.
To attract a diverse range of expertise and perspectives, and reach underrepresented talent, we promote job descriptions
across diverse hiring channels, conduct interviews with a diverse slate of panelists, and encourage employee referrals. Our
hiring managers also receive unconscious bias training, and our interviewing process emphasizes values and capabilities
that support our culture.
Onboard & Develop
Each member of our workforce is unique, and their integration into Palo Alto Networks and career journey involve individual
needs, interests, and goals. In response, our development programs are grounded on personalization, flexibility, and choice.
From onboarding to professional development, FLEXLearn, our comprehensive platform offers multiple paths to assess,
develop, and grow.
2024 Proxy Statement
*paloajt9:
45
Social
During fiscal 2024, we continued to invest in people, including our global workforce, supply chain and in the broader
community, further detailed below.
Our People
We believe our ongoing success depends on our employees. Development and investment in our people is central to who
we are, and will continue to be so. With a global workforce of 15,289 as of July 31, 2024, our People Strategy is a critical
element of our overall company strategy. Our People Strategy is a comprehensive approach to source, hire, onboard,
develop, listen, and engage employees. Our approach is grounded on core tenets: respect each employee as a unique
individual, demonstrate fairness and equity, facilitate personalization whenever possible, and nurture a culture where
employees have access to industry-leading professional development and are empowered to do the best work of their
careers. Our values of disruption, execution, collaboration, inclusion, and integrity were co-created with employees and
serve as the foundation of our culture.
We are proud to have earned multiple awards for our people programs and culture, many of which are based on
employee feedback.
Recognized as a
“Global Most Loved Workplaces”
by Newsweek (2024)
Recognized in multiple categories including Culture, Leadership
Happiness and Women by Comparably (2023 & 2024)
Source & Hire
At Palo Alto Networks, sourcing talent with the necessary skills and capabilities to contribute to our culture is central to our
talent acquisition strategy, known as “The Way We Hire.”
We prioritize internal mobility to foster career growth within Palo Alto Networks, enabling employees to advance through
traditional career paths or explore roles across different business functions, at times leading to promotions.
We utilize structured interviewing practices, thorough job analyses and success profiles to identify high-quality candidates
and staff critical roles. Our Global Hiring Committees, introduced in fiscal 2023, plays a key role in maintaining our hiring
standards, which helps drive objectivity. This group of cross-functional senior leaders reviews finalist candidates to ensure
they meet our criteria and fit well with our Company.
Interviewer training is a critical component of our strategy. In fiscal 2024, we began to implement a structured three-tier
program to improve interviewer skills, save time across the hiring process, and enhance hiring quality. Interviewers receive
learning courses focused on effective feedback and practical assessments, hiring managers are provided with in-depth,
in-person training, and hiring champions receive a scenario-based training program.
To attract a diverse range of expertise and perspectives, and reach underrepresented talent, we promote job descriptions
across diverse hiring channels, conduct interviews with a diverse slate of panelists, and encourage employee referrals. Our
hiring managers also receive unconscious bias training, and our interviewing process emphasizes values and capabilities
that support our culture.
Onboard & Develop
Each member of our workforce is unique, and their integration into Palo Alto Networks and career journey involve individual
needs, interests, and goals. In response, our development programs are grounded on personalization, flexibility, and choice.
From onboarding to professional development, FLEXLearn, our comprehensive platform offers multiple paths to assess,
develop, and grow.
45
2024 Proxy Statement
Corporate Responsibility
Corporate Responsibility
Before an employee's start date, they are provided access to foundational tools to help them prepare to join Palo Alto
Networks. We view pre-boarding as fundamental to introducing new employees to our culture, building trust, and
facilitating rapid productivity. Welcome Day is a combination of in-person, virtual learning platforms and communication
channels that provide new employees with inspirational, often personalized, onboarding experiences that carry on through
the first year of employment. We have specialized learning tracks for interns and new graduates that have been recognized
as best in class externally to support early-in-career individuals in acclimating to our culture as they progress on their career
journey. As part of our merger and acquisition strategy, we have established a robust integration program that works to
enable individuals joining our teams to feel part of our culture.
Following onboarding, there are a variety of ways that employees can assess their interests and skills, build a development
plan specific to those insights, and continue to grow using FLEXLearn. The platform contains curated content and
programs, such as assessment instruments, thousands of courses, workshops, and mentoring and coaching services.
Leaders and executives also have access to assessment tools that allow them to identify their strengths and areas
for development, and personalized learning tracks that help them deliver maximum personal and team performance.
Employees have agency to direct their growth at their pace and choosing. Development information about core business
elements, Company-wide compliance training, and information about and activities on topics ranging from inclusion
to well-being and collaboration, are also deployed through FLEXLearn. On average, employees completed 33 hours of
development through the FLEXLearn platform during fiscal 2024.
Listen & Engage
We aim to foster engagement and strive to meet our unique employees where they are, and in ways that help them feel
connected to our mission and values. Through our multifaceted approach, we collect, understand, and act on employee
feedback. We share and gather information through corporate and functional "All Hands" meetings, digital displays across
our sites, our intranet, regular email communications, an active Slack platform, and regular opportunities for two-way
dialogue - such as the small, in-person monthly listening sessions our CEO hosts. We also conduct ad-hoc pulse surveys
and offer a peer-to-peer recognition platform.
We also listen to and address engagement through external sources, such as Glassdoor, the Best Practice Institute,
Comparably, and others. In addition, based on employee participation in an anonymous survey, the Best Practice Institute
has certified Palo Alto Networks as "Top 100 Global Most Loved Workplaces" since 2021. Palo Alto Networks has been
recognized by Comparably, Human Rights Campaign, Disability: IN and others as an employer of choice. Our Chief
Executive Officer has also earned a 91% employee approval rating on Glassdoor, a top percentile score.
From recurring 1:1 sessions, quarterly performance feedback, semi-annual performance
reviews to use of our Cheers for Peers peer recognition program, employees get continuous
input about the value they bring to the organization. For our managers, we offer a 180 degree
self-awareness tool to help them identify development opportunities, and by investing in
the skills of our people leaders, we believe they are able to become force multipliers for all
employees. These listening and engagement strategies have informed our holistic People
Strategy. Based on employee feedback, ratings from external sources, our modest attrition
rate (compared to market trends), and strong participation in our development and Internal
Mobility program, we believe employees at Palo Alto Networks feel engaged.
Our comprehensive compensation program includes competitive base pay. In addition,
all employees participate in one of two main variable pay programs: our sales incentive
plans or our variable incentive program. All employees are also eligible to participate in our
stock-based offerings through a generous employee stock purchase plan and a competitive
equity incentive plan, both of which are generally available to all of our employees where
regulations permit. We conduct annual external audits of our pay practices. Our fairness
and equity analysis includes gender for all global employees and race and ethnicity for
employees in the U.S. As a result of these measures and corrections, we believe that
our employees are paid fairly and equitably regardless of race/ethnicity (in the U.S.) or
gender (globally).
Best Company
Recognized as a "Best
Companyfor Compensation"
by Comparably (2023)
Recognized as a "Best
Company for Perks & Benefits"
by Comparably (2023)
46
palomIto°
2024 Proxy Statement
Before an employee’s start date, they are provided access to foundational tools to help them prepare to join Palo Alto
Networks. We view pre-boarding as fundamental to introducing new employees to our culture, building trust, and
facilitating rapid productivity. Welcome Day is a combination of in-person, virtual learning platforms and communication
channels that provide new employees with inspirational, often personalized, onboarding experiences that carry on through
the first year of employment. We have specialized learning tracks for interns and new graduates that have been recognized
as best in class externally to support early-in-career individuals in acclimating to our culture as they progress on their career
journey. As part of our merger and acquisition strategy, we have established a robust integration program that works to
enable individuals joining our teams to feel part of our culture.
Following onboarding, there are a variety of ways that employees can assess their interests and skills, build a development
plan specific to those insights, and continue to grow using FLEXLearn. The platform contains curated content and
programs, such as assessment instruments, thousands of courses, workshops, and mentoring and coaching services.
Leaders and executives also have access to assessment tools that allow them to identify their strengths and areas
for development, and personalized learning tracks that help them deliver maximum personal and team performance.
Employees have agency to direct their growth at their pace and choosing. Development information about core business
elements, Company-wide compliance training, and information about and activities on topics ranging from inclusion
to well-being and collaboration, are also deployed through FLEXLearn. On average, employees completed 33 hours of
development through the FLEXLearn platform during fiscal 2024.
Listen & Engage
We aim to foster engagement and strive to meet our unique employees where they are, and in ways that help them feel
connected to our mission and values. Through our multifaceted approach, we collect, understand, and act on employee
feedback. We share and gather information through corporate and functional “All Hands” meetings, digital displays across
our sites, our intranet, regular email communications, an active Slack platform, and regular opportunities for two-way
dialogue - such as the small, in-person monthly listening sessions our CEO hosts. We also conduct ad-hoc pulse surveys
and offer a peer-to-peer recognition platform.
We also listen to and address engagement through external sources, such as Glassdoor, the Best Practice Institute,
Comparably, and others. In addition, based on employee participation in an anonymous survey, the Best Practice Institute
has certified Palo Alto Networks as “Top 100 Global Most Loved Workplaces” since 2021. Palo Alto Networks has been
recognized by Comparably, Human Rights Campaign, Disability: IN and others as an employer of choice. Our Chief
Executive Officer has also earned a 91% employee approval rating on Glassdoor, a top percentile score.
From recurring 1:1 sessions, quarterly performance feedback, semi-annual performance
reviews to use of our Cheers for Peers peer recognition program, employees get continuous
input about the value they bring to the organization. For our managers, we offer a 180 degree
self-awareness tool to help them identify development opportunities, and by investing in
the skills of our people leaders, we believe they are able to become force multipliers for all
employees. These listening and engagement strategies have informed our holistic People
Strategy. Based on employee feedback, ratings from external sources, our modest attrition
rate (compared to market trends), and strong participation in our development and Internal
Mobility program, we believe employees at Palo Alto Networks feel engaged.
Our comprehensive compensation program includes competitive base pay. In addition,
all employees participate in one of two main variable pay programs: our sales incentive
plans or our variable incentive program. All employees are also eligible to participate in our
stock-based offerings through a generous employee stock purchase plan and a competitive
equity incentive plan, both of which are generally available to all of our employees where
regulations permit. We conduct annual external audits of our pay practices. Our fairness
and equity analysis includes gender for all global employees and race and ethnicity for
employees in the U.S. As a result of these measures and corrections, we believe that
our employees are paid fairly and equitably regardless of race/ethnicity (in the U.S.) or
gender (globally).
Recognized as a “Best
Company for Compensation”
by Comparably (2023)
Recognized as a “Best
Company for Perks & Benefits”
by Comparably (2023)
46
2024 Proxy Statement
Corporate Responsibility
D
\
0
BEST PLACE 70 WORK FOR
DISABILITY INCLUSION
CS]
Best Companies to Work For
l36 Lk,* • Jul 2024
Corporate Responsibility
As a global employer with a diverse employee population, we understand everyone's benefit needs are different. Our
benefit plans include a variety of physical, mental and financial wellbeing, health, time-off, and voluntary options. And, our
FLEXBenefits program provides all employees with a funding allowance from which they can choose to obtain additional
benefits. The list of eligible benefits in this program was crowdsourced and expanded through employee feedback.
Inclusion & Diversity
We are intentional about including diverse points of view, perspectives, experiences, backgrounds, and ideas in our
decision-making processes. Our corporate I&D programs are designed to promote a workforce where employees feel safe
and where they are encouraged to understand, listen, support, and elevate one another. We also disclose our EEO-1 report
on our website.
We have eleven employee network groups ("ENG") that play a vital role in building understanding and awareness. As of
July 2024, 26% of our global workforce was involved in at least one ENG. We involve our ENGs in listening sessions with
executive teams and they contribute to our annual I&D plans.
Our I&D philosophy is integrated in our programs to source, hire, onboard, develop, listen and engage talent. The diversity of
our board of directors, with women representing 40% of our board as of July 31, 2024, is an example of our commitment to
inclusion and diversity.
Recognized as a "Best
Achieved a top score of 100
Recognized as a "Military
Recognized as a "Most
Company to Work For by
on the Disability Equality
Friendly Employer 2024" by
Loved Workplaces for
InHerSight (2024)
Index as evaluated by
Military Friendly (2023)
LGBTQ+" by Best Practice
Disability: IN (2024)
Institute (2024)
Our ,upply Chain
Our ESG strategy extends to supply chain practices and how we partner with our suppliers. Integrity is one of our core
values, and we expect our suppliers, and their suppliers, to comply with the standards set forth in our Global Supplier Code
of Conduct ("Code") and other applicable ESG policies and practices. This Code, which we make available on our website,
allows us to reach across our supply chain to communicate our expectations regarding responsible business practices,
labor standards, workplace health and safety conditions and environmental impact.
Palo Alto Networks partners with contract manufacturers to produce our hardware products. ESG is woven into our direct
material supplier framework, including a risk-based approach to our supplier selection process and, where appropriate,
incorporation of relevant contractual clauses and audit rights into our Master Purchasing Agreements. Where appropriate,
we request and review information provided in annual supplier surveys, scorecards and supplier business reviews.
Security and data protection are integral to Palo Alto Networks' mission and therefore are ingrained in our hardware
product lifecycle (design, sourcing, manufacturing, fulfillment and service). Knowing that a range of threats is possible at
any stage, we have created a framework and processes to prevent potential risks and disruptions. These include ongoing
periodic oversight and assessments of our contract manufacturers, original design manufacturing partners and direct
material suppliers.
During fiscal 2024, we maintained our affiliate membership in the Responsible Business Alliance. Through the alliance,
members, suppliers and stakeholders collaborate to improve working and environmental conditions as well as business
performance through leading standards and practices.
We also maintained our commitment to supplier diversity. We expect our manufacturing partners to establish inclusion and
diversity initiatives, to commit to fair and equitable pay practices and to transparently communicate the demographics of
their workforce.
2024 Proxy Statement
*paloajtcy
47
As a global employer with a diverse employee population, we understand everyone’s benefit needs are different. Our
benefit plans include a variety of physical, mental and financial wellbeing, health, time-off, and voluntary options. And, our
FLEXBenefits program provides all employees with a funding allowance from which they can choose to obtain additional
benefits. The list of eligible benefits in this program was crowdsourced and expanded through employee feedback.
Inclusion & Diversity
We are intentional about including diverse points of view, perspectives, experiences, backgrounds, and ideas in our
decision-making processes. Our corporate I&D programs are designed to promote a workforce where employees feel safe
and where they are encouraged to understand, listen, support, and elevate one another. We also disclose our EEO-1 report
on our website.
We have eleven employee network groups (“ENG”) that play a vital role in building understanding and awareness. As of
July 2024, 26% of our global workforce was involved in at least one ENG. We involve our ENGs in listening sessions with
executive teams and they contribute to our annual I&D plans.
Our I&D philosophy is integrated in our programs to source, hire, onboard, develop, listen and engage talent. The diversity of
our board of directors, with women representing 40% of our board as of July 31, 2024, is an example of our commitment to
inclusion and diversity.
Recognized as a “Best
Company to Work For” by
InHerSight (2024)
Achieved a top score of 100
on the Disability Equality
Index as evaluated by
Disability: IN (2024)
Recognized as a “Military
Friendly Employer 2024” by
Military Friendly (2023)
Recognized as a “Most
Loved Workplaces for
LGBTQ+” by Best Practice
Institute (2024)
Our Supply Chain
Our ESG strategy extends to supply chain practices and how we partner with our suppliers. Integrity is one of our core
values, and we expect our suppliers, and their suppliers, to comply with the standards set forth in our Global Supplier Code
of Conduct (“Code”) and other applicable ESG policies and practices. This Code, which we make available on our website,
allows us to reach across our supply chain to communicate our expectations regarding responsible business practices,
labor standards, workplace health and safety conditions and environmental impact.
Palo Alto Networks partners with contract manufacturers to produce our hardware products. ESG is woven into our direct
material supplier framework, including a risk-based approach to our supplier selection process and, where appropriate,
incorporation of relevant contractual clauses and audit rights into our Master Purchasing Agreements. Where appropriate,
we request and review information provided in annual supplier surveys, scorecards and supplier business reviews.
Security and data protection are integral to Palo Alto Networks’ mission and therefore are ingrained in our hardware
product lifecycle (design, sourcing, manufacturing, fulfillment and service). Knowing that a range of threats is possible at
any stage, we have created a framework and processes to prevent potential risks and disruptions. These include ongoing
periodic oversight and assessments of our contract manufacturers, original design manufacturing partners and direct
material suppliers.
During fiscal 2024, we maintained our affiliate membership in the Responsible Business Alliance. Through the alliance,
members, suppliers and stakeholders collaborate to improve working and environmental conditions as well as business
performance through leading standards and practices.
We also maintained our commitment to supplier diversity. We expect our manufacturing partners to establish inclusion and
diversity initiatives, to commit to fair and equitable pay practices and to transparently communicate the demographics of
their workforce.
47
2024 Proxy Statement
Corporate Responsibility
Corporate Responsibility
Our Communities
We value our role as a trusted corporate citizen and in fiscal 2024 remained committed to partnering with our communities
to make a lasting impact. We maintained our investments in cybersecurity education and programs to diversify the
cybersecurity talent pipeline. We also continued to invest in charitable causes that support the communities where we live
and work.
Investing in Cybersecurity
As a cybersecurity leader, we see firsthand how quickly the cybersecurity landscape is evolving through the adoption of
new and disruptive technologies. From more and increasingly sophisticated attacks to continual changes in how we learn,
work and socialize, many individuals are unaware of the fundamental but necessary habits that help keep themselves safe
online. Unfortunately, some communities, like youth and the elderly, are more vulnerable than others to cybercrime.
To help communities protect their digital way of life, we continue to provide free and age-appropriate educational content
and tools that demystify technical concepts and increase digital literacy through our interactive Cyber A.C.ES. - Activities
in Cybersecurity Education for Students - program and Pro{tech}ting Your Digital Life self-paced cybersecurity education
workbooks. We also continue to prepare young professionals to pursue future careers in cybersecurity through our
Cybersecurity Academy and provide opportunities to upskill the cyber workforce. We continue to strategically partner with
educational institutions and non-profit organizations to support historically underrepresented communities in tech.
Additionally, we continued charitable support for causes aligned with our ESG strategy.
Engaging Employees to Increase Impact
Through our volunteering, giving and matching programs, we engage employees to contribute to and make a difference in
the communities where we live and work.
As a part of our giving and matching programs, we allocate up to $1,000 USD per calendar year, per employee, to be
used between volunteer rewards and charitable donation matching. We continue to inspire employee community impact
through special giving campaigns and relief efforts for natural disasters. In fiscal 2024, we continued to partner with our
employee network groups (ENGs) to provide charitable donations to nonprofit organizations advancing causes aligned with
the ENG's focus areas.
Corporate Behavior
Ethics & Compliance
Palo Alto Networks is committed to conducting business with high degrees of honesty and integrity wherever we operate.
Integrity is one of our core values and is fundamental to our treatment of our customers, partners, employees and
shareholders.
Our website makes available our Code of Business Conduct and Ethics (Code), which summarizes the ethical standards
and key tenets of behavior guiding the business conduct of Company directors, officers and employees, and our Global
Supplier Code of Conduct. Our employees receive annual training on our Code, with additional online and instructor-led
training provided periodically on various Company policies, such as our Anti-Corruption Policy and our Business Courtesies
Policy among others, in order to reinforce our expectations for ethical behavior and business practices.
The Company has also implemented a Respect in the Workplace Policy, supported by corresponding training through
our FLEXLearn platform. All new hires must complete the training and existing global employees are required to complete
the training every other year. The training includes anti-discrimination, anti-harassment and anti-retaliation lessons and
hypotheticals. Our website also makes available our Human Rights, Conflict Minerals, and Slavery & Human Trafficking
Policies. Our Audit Committee and Governance and Sustainability Committee of the Board are responsible for oversight of
our Code of Business Conduct and Ethics compliance program. Our employees, our partners, and members of the general
public can report their concerns, including anonymously if they wish, through our publicly available Ethics Helpline.
48
palomIto°
2024 Proxy Statement
Our Communities
We value our role as a trusted corporate citizen and in fiscal 2024 remained committed to partnering with our communities
to make a lasting impact. We maintained our investments in cybersecurity education and programs to diversify the
cybersecurity talent pipeline. We also continued to invest in charitable causes that support the communities where we live
and work.
Investing in Cybersecurity
As a cybersecurity leader, we see firsthand how quickly the cybersecurity landscape is evolving through the adoption of
new and disruptive technologies. From more and increasingly sophisticated attacks to continual changes in how we learn,
work and socialize, many individuals are unaware of the fundamental but necessary habits that help keep themselves safe
online. Unfortunately, some communities, like youth and the elderly, are more vulnerable than others to cybercrime.
To help communities protect their digital way of life, we continue to provide free and age-appropriate educational content
and tools that demystify technical concepts and increase digital literacy through our interactive Cyber A.C.E.S. - Activities
in Cybersecurity Education for Students – program and Pro{tech}ting Your Digital Life self-paced cybersecurity education
workbooks. We also continue to prepare young professionals to pursue future careers in cybersecurity through our
Cybersecurity Academy and provide opportunities to upskill the cyber workforce. We continue to strategically partner with
educational institutions and non-profit organizations to support historically underrepresented communities in tech.
Additionally, we continued charitable support for causes aligned with our ESG strategy.
Engaging Employees to Increase Impact
Through our volunteering, giving and matching programs, we engage employees to contribute to and make a difference in
the communities where we live and work.
As a part of our giving and matching programs, we allocate up to $1,000 USD per calendar year, per employee, to be
used between volunteer rewards and charitable donation matching. We continue to inspire employee community impact
through special giving campaigns and relief efforts for natural disasters. In fiscal 2024, we continued to partner with our
employee network groups (ENGs) to provide charitable donations to nonprofit organizations advancing causes aligned with
the ENG’s focus areas.
Corporate Behavior
Ethics & Compliance
Palo Alto Networks is committed to conducting business with high degrees of honesty and integrity wherever we operate.
Integrity is one of our core values and is fundamental to our treatment of our customers, partners, employees and
shareholders.
Our website makes available our Code of Business Conduct and Ethics (Code), which summarizes the ethical standards
and key tenets of behavior guiding the business conduct of Company directors, officers and employees, and our Global
Supplier Code of Conduct. Our employees receive annual training on our Code, with additional online and instructor-led
training provided periodically on various Company policies, such as our Anti-Corruption Policy and our Business Courtesies
Policy among others, in order to reinforce our expectations for ethical behavior and business practices.
The Company has also implemented a Respect in the Workplace Policy, supported by corresponding training through
our FLEXLearn platform. All new hires must complete the training and existing global employees are required to complete
the training every other year. The training includes anti-discrimination, anti-harassment and anti-retaliation lessons and
hypotheticals. Our website also makes available our Human Rights, Conflict Minerals, and Slavery & Human Trafficking
Policies. Our Audit Committee and Governance and Sustainability Committee of the Board are responsible for oversight of
our Code of Business Conduct and Ethics compliance program. Our employees, our partners, and members of the general
public can report their concerns, including anonymously if they wish, through our publicly available Ethics Helpline.
48
2024 Proxy Statement
Corporate Responsibility
Corporate Responsibility
Information Security & Privacy
The Security Committee of our Board (which is made up of all our independent directors) oversees our Company's security matters,
including product security, data security, cybersecurity, and risk management related to these matters. The Security Committee meets
quarterly to review with our Chief Information Security Officer and other members of management, which may include our Chief Executive
Officer, Chief Product Officer, Chief Financial Officer, and General Counsel, our cybersecurity programs, cybersecurity risks, mitigation or
remediation strategies, and other matters impacting the committee's responsibilities. Our Chief Information Security Officer is responsible
for defining, overseeing, managing, implementing, and reviewing compliance with our information security programs. We maintain
a written information security program, which provides for policies, standards, guidelines, and administrative, technical and physical
safeguards that we believe are reasonably designed, in light of the nature, size and complexity of our operations, to protect the resiliency of
our operations and the confidentiality, integrity, and availability of our information systems, data, and information assets. The organizational,
administrative and technical measures we implement are based on recognized security frameworks established by the National Institute of
Standards and Technology, security measures aligned with the ISO/IEC 27000 series of standards, and other generally recognized industry
standards. The program is assessed regularly and in light of new and emerging cybersecurity risks.
We provide regular training for educating employees about corporate policies and procedures and information security designed to provide
our employees with knowledge of best practices and effective tools for safeguarding our data and assets and reducing security risks based
on the human threat vector. Our information security compliance training, data protection training, and code of conduct training is mandatory
for all employees. We also do role-based training, frequent awareness messages to the entire company, and multiple in-person learning
experiences each year. We also have a phishing simulation training program, which provides experiential and remedial training. We engage
external agencies to conduct background checks for personnel. We also maintain a security process to conduct appropriate due diligence
prior to engaging contractors: assess the security capabilities of subcontractors on a periodic basis: and require subcontractors to adhere to
our key information security policies and standards.
We also restrict access to, control and monitor physical areas where we process end user data. Data centers that we operate are in
alignment with industry standards such as ISO 27001 and SSAE 16 or ISAE 3402.
We deploy and maintain a variety of technologies to prevent and detect cybersecurity threats across the network, endpoint and cloud. We
also apply security-by-design principles in our software development lifecycle, track vulnerabilities of open-source software, and run internal
and external network scans regularly and after any meaningful change in our network configuration. We conduct regular application security
assessments, including our assessments for internet-facing applications that collect, transmit, or display end user data.
Palo Alto Networks also develops, implements and maintains a business continuity management program to address the needs of
the business and the products we provide to customers. To that end, we complete a minimum level of business impact analysis, crisis
management, business continuity and disaster recovery planning.
Privacy is important to our customers and helps us build trust. Our privacy practices are informed by several key principles including:
Accountability. We are responsible for the protection of personal information entrusted to us.
• Transparency and Control. We inform customers about our collection of their personal information and honor their preferences.
• Third Parties Processing Our Information. We choose vendors and suppliers we believe are trustworthy based on our due diligence of
their security capabilities to process personal information and we require them to commit to adequate privacy and data security standards.
• Privacy by Design. We continue to build on this principle when designing and implementing products.
• Data Integrity and Proportionality. We collect personal information for specific and legitimate business purposes and store it safely
and accurately.
• Customer Benefit/Value for Custom—. We share with our customers the benefits and value we derive from processing their
personal information.
• Security. We implement technical, organizational and physical security measures, including employee training, to confirm an
appropriate level of security of the personal information we process.
Our ESG Journey
Palo Alto Networks has always been a values-based company, and we consider ESG risks and opportunities throughout our day-to-day
operations. We are proud of the progress we have made and we recognize that there is always more work to do. We remain committed
to integrating environmental, social and governance practices through our operations and value chain to help manage ESG risks and
strengthen our business resilience.
Corporate ESG
Performance
MSCI
ESG RATINGS
ecc le
• ewe
•
ee•
ESG
INDUSTRY
TOP RATED
ISS SG
Recognized by Sustainalytics as "Industry Top
Recognized by Institutional Shareholder Services
Rated AA by MSCI (2024)
Rated" for our overall ESG performance (2024)
(ISS) as Prime (2024)
2024 Proxy Statement
*paloajt9:
49
Information Security & Privacy
The Security Committee of our Board (which is made up of all our independent directors) oversees our Company’s security matters,
including product security, data security, cybersecurity, and risk management related to these matters. The Security Committee meets
quarterly to review with our Chief Information Security Officer and other members of management, which may include our Chief Executive
Officer, Chief Product Officer, Chief Financial Officer, and General Counsel, our cybersecurity programs, cybersecurity risks, mitigation or
remediation strategies, and other matters impacting the committee’s responsibilities. Our Chief Information Security Officer is responsible
for defining, overseeing, managing, implementing, and reviewing compliance with our information security programs. We maintain
a written information security program, which provides for policies, standards, guidelines, and administrative, technical and physical
safeguards that we believe are reasonably designed, in light of the nature, size and complexity of our operations, to protect the resiliency of
our operations and the confidentiality, integrity, and availability of our information systems, data, and information assets. The organizational,
administrative and technical measures we implement are based on recognized security frameworks established by the National Institute of
Standards and Technology, security measures aligned with the ISO/IEC 27000 series of standards, and other generally recognized industry
standards. The program is assessed regularly and in light of new and emerging cybersecurity risks.
We provide regular training for educating employees about corporate policies and procedures and information security designed to provide
our employees with knowledge of best practices and effective tools for safeguarding our data and assets and reducing security risks based
on the human threat vector. Our information security compliance training, data protection training, and code of conduct training is mandatory
for all employees. We also do role-based training, frequent awareness messages to the entire company, and multiple in-person learning
experiences each year. We also have a phishing simulation training program, which provides experiential and remedial training. We engage
external agencies to conduct background checks for personnel. We also maintain a security process to conduct appropriate due diligence
prior to engaging contractors; assess the security capabilities of subcontractors on a periodic basis; and require subcontractors to adhere to
our key information security policies and standards.
We also restrict access to, control and monitor physical areas where we process end user data. Data centers that we operate are in
alignment with industry standards such as ISO 27001 and SSAE 16 or ISAE 3402.
We deploy and maintain a variety of technologies to prevent and detect cybersecurity threats across the network, endpoint and cloud. We
also apply security-by-design principles in our software development lifecycle, track vulnerabilities of open-source software, and run internal
and external network scans regularly and after any meaningful change in our network configuration. We conduct regular application security
assessments, including our assessments for internet-facing applications that collect, transmit, or display end user data.
Palo Alto Networks also develops, implements and maintains a business continuity management program to address the needs of
the business and the products we provide to customers. To that end, we complete a minimum level of business impact analysis, crisis
management, business continuity and disaster recovery planning.
Privacy is important to our customers and helps us build trust. Our privacy practices are informed by several key principles including:
y Accountability. We are responsible for the protection of personal information entrusted to us.
y Transparency and Control. We inform customers about our collection of their personal information and honor their preferences.
y Third Parties Processing Our Information. We choose vendors and suppliers we believe are trustworthy based on our due diligence of
their security capabilities to process personal information and we require them to commit to adequate privacy and data security standards.
y Privacy by Design. We continue to build on this principle when designing and implementing products.
y Data Integrity and Proportionality. We collect personal information for specific and legitimate business purposes and store it safely
and accurately.
y Customer Benefit/Value for Customers. We share with our customers the benefits and value we derive from processing their
personal information.
y Security. We implement technical, organizational and physical security measures, including employee training, to confirm an
appropriate level of security of the personal information we process.
Our ESG Journey
Palo Alto Networks has always been a values-based company, and we consider ESG risks and opportunities throughout our day-to-day
operations. We are proud of the progress we have made and we recognize that there is always more work to do. We remain committed
to integrating environmental, social and governance practices through our operations and value chain to help manage ESG risks and
strengthen our business resilience.
Recognized by Sustainalytics as “Industry Top
Rated” for our overall ESG performance (2024)
Recognized by Institutional Shareholder Services
(ISS) as Prime (2024)
Rated AA by MSCI (2024)
49
2024 Proxy Statement
Corporate Responsibility
PROPOSAL 1
Election of Directors
Our Board is comprised of ten members and is divided into three staggered classes of directors. At each annual meeting
of shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is
then expiring.
The following Class I directors have been nominated for election to the Board at the Annual Meeting:
Rt Hon Sir John Key
Mary Pat McCarthy
Nir Zuk
See Page 52
The Board recommends a vote
each of the nominees named above.
PROPOSAL 3
Advisory Vote on the Frequency of
Advisory Votes on Named Executive
Officer Compensation
We are providing our shareholders with the opportunity to vote to advise the board of directors, on an advisory or
non-binding basis, whether we should conduct an advisory (non-binding) vote to approve named executive officer
compensation every one, two or three years.
See Page 69
L
The Board recommends that you vote for a frequency of once every "ONE YEAR" for the advisory
vote on executive compensation.
Voting Roadmap
PROPOSAL 2
Ratification of Appointment of
Independent Registered Public
Accounting Firm
Our Audit Committee has appointed Ernst & Young LLP ("EY"), independent registered public accountants, to audit our
financial statements for our fiscal year ending July 31, 2025. EY has served as our independent registered public accounting
firm since 2009.
See Page 66
The Board recommends a vote
the ratification of the appointment of Ernst & Young LLP.
50 *
palomito°
2024 Proxy Statement
Voting Roadmap
The Board recommends a vote “FOR” each of the nominees named above.
PROPOSAL 1
Election of Directors
Our Board is comprised of ten members and is divided into three staggered classes of directors. At each annual meeting
of shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is
then expiring.
The following Class I directors have been nominated for election to the Board at the Annual Meeting:
y Rt Hon Sir John Key
y Mary Pat McCarthy
y Nir Zuk
See Page 52
The Board recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP.
PROPOSAL 2
Ratification of Appointment of
Independent Registered Public
Accounting Firm
Our Audit Committee has appointed Ernst & Young LLP (“EY”), independent registered public accountants, to audit our
financial statements for our fiscal year ending July 31, 2025. EY has served as our independent registered public accounting
firm since 2009.
See Page 66
The Board recommends that you vote for a frequency of once every “ONE YEAR” for the advisory
vote on executive compensation.
PROPOSAL 3
Advisory Vote on the Frequency of
Advisory Votes on Named Executive
Officer Compensation
We are providing our shareholders with the opportunity to vote to advise the board of directors, on an advisory or
non-binding basis, whether we should conduct an advisory (non-binding) vote to approve named executive officer
compensation every one, two or three years.
See Page 69
50
2024 Proxy Statement
PROPOSAL 6
Shareholder Proposal
We are asking shareholders to vote against a shareholder proposal for the Company to publish a report disclosing if and
how the Company is protecting 401(k) plan beneficiaries from increased future portfolio risk created by present-day
investments in high-carbon companies. Our 401(k) plan provides participants with a diverse array of investment options,
including a self-directed brokerage option that allows participants to invest outside of the plan, enabling participants to
choose investments in a way that aligns with their financial goals, risk tolerances and investment preferences. In addition,
the plan fiduciary is required to make investment determinations in a prudent manner and based on relevant risk-return
investment options. By focusing too narrowly on climate risks, the proposal risks putting undue pressure on the plan
fiduciary to make decisions that are not in the best interests of the participants.
See Page 138
The Board recommends a vote "AGAINST" the approval of a shareholder proposal for the
Company to report on climate risks to retirement plan beneficiaries.
PROPOSAL 4
Advisory Vote on the Compensation of
our Named Executive Officers
We are providing our shareholders with the opportunityto vote to approve, on an advisory or non-binding basis, the
compensation of our named executive officers as disclosed in the "Executive Compensation" section of this proxy statement.
See Page 70
The Board recommends a vote 'FOR" the approval, on an advisory basis, of the compensation of
our named executive officers.
PROPOSAL 5
Approve Amendment to Palo Alto
Networks, Inc. 2021 Equity Incentive Plan
We are asking shareholders to approve an amendment to our equity incentive plan to increase plan shares reserved for
issuance. The ability to grant equity awards is crucial to recruiting and retaining the best personnel. If shareholders do not
approve the amendment to our 2021 Equity Incentive Plan at the Annual Meeting, we may be unable to continue to grant
equity awards as needed, which could prevent us from successfully attracting and retaining the highly skilled talent we need.
See Page 126
r
The Board recommends a vote "FOR" the approval of an amendment to our 2021 Equity Incentive
Plan to increase plan shares reserved for issuance.
Voting Road map
2024 Proxy Statement
*paloajtcy
51
PROPOSAL 6
Shareholder Proposal
We are asking shareholders to vote against a shareholder proposal for the Company to publish a report disclosing if and
how the Company is protecting 401(k) plan beneficiaries from increased future portfolio risk created by present-day
investments in high-carbon companies. Our 401(k) plan provides participants with a diverse array of investment options,
including a self-directed brokerage option that allows participants to invest outside of the plan, enabling participants to
choose investments in a way that aligns with their financial goals, risk tolerances and investment preferences. In addition,
the plan fiduciary is required to make investment determinations in a prudent manner and based on relevant risk-return
investment options. By focusing too narrowly on climate risks, the proposal risks putting undue pressure on the plan
fiduciary to make decisions that are not in the best interests of the participants.
See Page 138
The Board recommends a vote “AGAINST” the approval of a shareholder proposal for the
Company to report on climate risks to retirement plan beneficiaries.
The Board recommends a vote “FOR” the approval of an amendment to our 2021 Equity Incentive
Plan to increase plan shares reserved for issuance.
PROPOSAL 5
Approve Amendment to Palo Alto
Networks, Inc. 2021 Equity Incentive Plan
We are asking shareholders to approve an amendment to our equity incentive plan to increase plan shares reserved for
issuance. The ability to grant equity awards is crucial to recruiting and retaining the best personnel. If shareholders do not
approve the amendment to our 2021 Equity Incentive Plan at the Annual Meeting, we may be unable to continue to grant
equity awards as needed, which could prevent us from successfully attracting and retaining the highly skilled talent we need.
See Page 126
The Board recommends a vote “FOR” the approval, on an advisory basis, of the compensation of
our named executive officers.
PROPOSAL 4
Advisory Vote on the Compensation of
our Named Executive Officers
We are providing our shareholders with the opportunity to vote to approve, on an advisory or non-binding basis, the
compensation of our named executive officers as disclosed in the “Executive Compensation” section of this proxy statement.
See Page 70
51
2024 Proxy Statement
Voting Roadmap
PROPOSAL NO.1
Election ar r)irectors
Our Board is composed of ten members and is divided into three staggered classes of directors. At each annual meeting
of shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then
expiring. Each director's term continues until the election and qualification of his or her successor, or such director's earlier
death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three
classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our Board
may have the effect of delaying or preventing changes in control of the Company.
The following Class I directors have been nominated for election to the Board at the Annual Meeting:
• Rt Hon Sir John Key
Mary Pat McCarthy
Nir Zuk
The sections titled "Board Skills and Experience MatriX' and "Directors" on pages 54 and 55 of this proxy statement
contain more information about the leadership skills and other experiences that helped the Governance and Sustainability
Committee and our Board to determine that these nominees should serve as directors of the Company.
RE011112F11 UAW
We have implemented a majority voting standard for uncontested elections of directors. Each director nominee will be elected
by a vote of the majority of the votes cast. A majority of the votes cast means the number of votes cast "For" such nominee's
election exceeds the number of votes cast "Against" that nominee. You may vote "For," "Against," or "Abstain" with respect to
each director nominee. Broker non-votes and abstentions, if any, will have no effect on the outcome of the election.
.ajority Votin6
In May 2022, adopted majority voting for uncontested elections of directors, including a
resignation policy in the event a director does not receive a majority of the vote.
Pursuant to our Corporate Governance Guidelines, a director shall promptly tender his or her resignation if he or she
fails to receive the required number of votes for re-election. The Governance and Sustainability Committee will act on a
prompt basis to determine whether to recommend that our Board accept the director's resignation and will submit such
recommendation for prompt consideration by our Board. Our Board may accept the resignation, refuse the resignation,
or refuse the resignation subject to such conditions as our Board may impose. The Board will act within 90 days following
certification of the shareholder vote, and will promptly publicly disclose its decision in a filing with the SEC. Additional
details about this process are specified in our Corporate Governance Guidelines, which are available on our Investor
Relations website at https://investors.paloaltonetworks.com.
If you are a shareholder of record and you sign your proxy card, or vote by telephone or over the Internet, but do not give
instructions with respect to the voting of directors, your shares will be voted "For" the re-election of Rt Hon Sir John Key,
Mary Pat McCarthy and Nir Zuk. We expect that each of Rt Hon Sir John Key, Mary Pat McCarthy and Nir Zuk will accept
such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxies will be voted for any nominee who shall be designated by our Board to fill such vacancy.
If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions
on your proxy card or when you vote by telephone or over the Internet. If you are a street name shareholder and you do not
give voting instructions to your broker or nominee, your shares will not be voted on this matter.
Recommendation of the Board
The Board recommends that you vote
each of the nominees named above.
52
palomIto°
2024 Proxy Statement
PROPOSAL NO. 1
Election of Directors
Our Board is composed of ten members and is divided into three staggered classes of directors. At each annual meeting
of shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then
expiring. Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier
death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three
classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our Board
may have the effect of delaying or preventing changes in control of the Company.
The following Class I directors have been nominated for election to the Board at the Annual Meeting:
y Rt Hon Sir John Key
y Mary Pat McCarthy
y Nir Zuk
The sections titled “Board Skills and Experience Matrix” and “Directors” on pages 54 and 55 of this proxy statement
contain more information about the leadership skills and other experiences that helped the Governance and Sustainability
Committee and our Board to determine that these nominees should serve as directors of the Company.
REQUIRED VOTE
We have implemented a majority voting standard for uncontested elections of directors. Each director nominee will be elected
by a vote of the majority of the votes cast. A majority of the votes cast means the number of votes cast “For” such nominee’s
election exceeds the number of votes cast “Against” that nominee. You may vote “For,” “Against,” or “Abstain” with respect to
each director nominee. Broker non-votes and abstentions, if any, will have no effect on the outcome of the election.
Majority Voting Standard
In May 2022, adopted majority voting for uncontested elections of directors, including a
resignation policy in the event a director does not receive a majority of the vote.
Pursuant to our Corporate Governance Guidelines, a director shall promptly tender his or her resignation if he or she
fails to receive the required number of votes for re-election. The Governance and Sustainability Committee will act on a
prompt basis to determine whether to recommend that our Board accept the director’s resignation and will submit such
recommendation for prompt consideration by our Board. Our Board may accept the resignation, refuse the resignation,
or refuse the resignation subject to such conditions as our Board may impose. The Board will act within 90 days following
certification of the shareholder vote, and will promptly publicly disclose its decision in a filing with the SEC. Additional
details about this process are specified in our Corporate Governance Guidelines, which are available on our Investor
Relations website at https://investors.paloaltonetworks.com.
If you are a shareholder of record and you sign your proxy card, or vote by telephone or over the Internet, but do not give
instructions with respect to the voting of directors, your shares will be voted “For” the re-election of Rt Hon Sir John Key,
Mary Pat McCarthy and Nir Zuk. We expect that each of Rt Hon Sir John Key, Mary Pat McCarthy and Nir Zuk will accept
such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxies will be voted for any nominee who shall be designated by our Board to fill such vacancy.
If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions
on your proxy card or when you vote by telephone or over the Internet. If you are a street name shareholder and you do not
give voting instructions to your broker or nominee, your shares will not be voted on this matter.
Recommendation of the Board
The Board recommends that you vote “FOR” each of the nominees named above.
52
2024 Proxy Statement
(all directors)
Since 2019:
4
50% of our Board can be
considered diverse based on
self-identified demographic
background
(independent directors)
new independent directors
DIRECTOR TENURE
9
years
BOARD DIVERSITY
8.4 years
Proposal No.1 Election of Directors
Director Tenure and Refreshment
The Board generally believes that a mix of long-and shorter-tenured directors
promotes an appropriate balance of views and insights and allows the Board
as a whole to benefit from the historical and institutional knowledge that
longer-tenured directors possess, and the fresh perspectives contributed
by newer directors. With the additions of Aparna Bawa, Dr. Helene Gayle,
Lorraine Twohill and Rt Hon Sir John Key in fiscal 2019 through fiscal 2021, we
added directors who have brought their experiences and fresh perspectives to
our Board's deliberations.
As of July 31, 2024, our independent directors will have served an average
of 8.4 years on the Board. Overall, our Board, including both independent
and non-independent directors, will have an average tenure of 9.2 years.
We believe that this mix of tenure on the Board represents a collection of
individuals with both new perspectives and deep institutional knowledge.
Board Diversity
Our Corporate Governance Guidelines embody our Board's commitment to
actively seek out women and minority candidates as well as candidates with
diverse backgrounds, experiences and skills. Our Board believes representation
of gender, race, ethnic, geographic, cultural or other diverse perspectives
expands the Board's understanding of the needs and viewpoints of our
customers, partners, employees and other stakeholders worldwide.
Our directors reflect diverse perspectives, including a complementary mix of
skills, experience and backgrounds that we believe are paramount to our ability
to represent your interests as shareholders. As part of our ongoing commitment
to creating a balanced Board with diverse viewpoints and deep industry
expertise, we added four new independent directors in fiscal 2019 through
fiscal 2021 to infuse new ideas and fresh perspectives in the boardroom, two
of whom are women of color. As of July 31, 2024, 50% of our independent
directors as a group and 50% of our full Board can be considered diverse
based on self-identified demographic background, and 40% of our Board
members self-identify as women.
2024 Proxy Statement
*paloajtcy
53
Director Tenure and Refreshment
The Board generally believes that a mix of long-and shorter-tenured directors
promotes an appropriate balance of views and insights and allows the Board
as a whole to benefit from the historical and institutional knowledge that
longer-tenured directors possess, and the fresh perspectives contributed
by newer directors. With the additions of Aparna Bawa, Dr. Helene Gayle,
Lorraine Twohill and Rt Hon Sir John Key in fiscal 2019 through fiscal 2021, we
added directors who have brought their experiences and fresh perspectives to
our Board’s deliberations.
As of July 31, 2024, our independent directors will have served an average
of 8.4 years on the Board. Overall, our Board, including both independent
and non-independent directors, will have an average tenure of 9.2 years.
We believe that this mix of tenure on the Board represents a collection of
individuals with both new perspectives and deep institutional knowledge.
Board Diversity
Our Corporate Governance Guidelines embody our Board’s commitment to
actively seek out women and minority candidates as well as candidates with
diverse backgrounds, experiences and skills. Our Board believes representation
of gender, race, ethnic, geographic, cultural or other diverse perspectives
expands the Board’s understanding of the needs and viewpoints of our
customers, partners, employees and other stakeholders worldwide.
Our directors reflect diverse perspectives, including a complementary mix of
skills, experience and backgrounds that we believe are paramount to our ability
to represent your interests as shareholders. As part of our ongoing commitment
to creating a balanced Board with diverse viewpoints and deep industry
expertise, we added four new independent directors in fiscal 2019 through
fiscal 2021 to infuse new ideas and fresh perspectives in the boardroom, two
of whom are women of color. As of July 31, 2024, 50% of our independent
directors as a group and 50% of our full Board can be considered diverse
based on self-identified demographic background, and 40% of our Board
members self-identify as women.
DIRECTOR TENURE
ҽҹ years
(independent directors)
Ҿҷ years
(all directors)
Since 2019:
ҹ
new independent directors
BOARD DIVERSITY
50%
50% of our Board can be
considered diverse based on
self-identified demographic
background
53
2024 Proxy Statement
Proposal No. 1 Election of Directors
1,4
Proposal No.1 Election of Directors
Board Skills and Experience Matrix
Our Board has taken a thoughtful approach to board composition to ensure that our directors have backgrounds that
collectively add significant value to the strategic decisions made by the Company and that enable them to provide
oversight of management to ensure accountability to our shareholders. The Board and the Governance and Sustainability
Committee believe the skills, qualities, attributes, experience and diversity of backgrounds of our directors provide
us with a diverse range of perspectives to effectively address our evolving needs and represent the best interests of
our shareholders.
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Industry and IT/Technical Expertise
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d b
oversee our business and the risks we face
Senior Leadership Experience
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Senior leaders with the experience to analyze, advise
r--1..."R
and oversee management in decision making, operations
and policies
Financial Knowledge and Expertise
Knowledge of financial markets, financing and accounting and
financial reporting processes
Diverse Backgrounds and Experiences
Diverse backgrounds and experiences provide unique
perspectives and enhance decision-making
C. 9 r0
Cybersecurity / Information Security / Security
:0
Expertise overseeing cybersecurity, privacy, and information
0.:0b
security management
Sales, Marketing and Brand Management Experience
Eau
Sales, marketing, and brand management experience
DE]
providing expertise and guidance to grow sales and enhance
our brand
Global/International Experience
Experience and knowledge of global operations, business
conditions and culture to advise and oversee our
global business
Risk Management
Experience in risk oversight and management
Emerging Technologies and Business Models Experience
Experience identifying and developing emerging technologies
and business models to advise, analyze and strategize
regarding emerging technologies, business models and
potential acquisitions
Human Capital Management
Experience attracting and retaining top talent to advise
o 0 o
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....... ..
competitive environment
Public Company Board Experience and
Corporate Governance
Experience understanding the dynamics and operation of a
public company, and corporate governance requirements
and compliance
((i
=
54
*palomlur
2024 Proxy Statement
Board Skills and Experience Matrix
Our Board has taken a thoughtful approach to board composition to ensure that our directors have backgrounds that
collectively add significant value to the strategic decisions made by the Company and that enable them to provide
oversight of management to ensure accountability to our shareholders. The Board and the Governance and Sustainability
Committee believe the skills, qualities, attributes, experience and diversity of backgrounds of our directors provide
us with a diverse range of perspectives to effectively address our evolving needs and represent the best interests of
our shareholders.
Arora
Bawa
Donovan
Eschenbach
Gayle
Goetz
Key
McCarthy
Twohill
Zuk
Industry and IT/Technical Expertise
Deep insight in the cybersecurity and IT technology industry to
oversee our business and the risks we face
Senior Leadership Experience
Senior leaders with the experience to analyze, advise
and oversee management in decision making, operations
and policies
Financial Knowledge and Expertise
Knowledge of financial markets, financing and accounting and
financial reporting processes
Diverse Backgrounds and Experiences
Diverse backgrounds and experiences provide unique
perspectives and enhance decision-making
Cybersecurity / Information Security / Security
Expertise overseeing cybersecurity, privacy, and information
security management
Sales, Marketing and Brand Management Experience
Sales, marketing, and brand management experience
providing expertise and guidance to grow sales and enhance
our brand
Global/International Experience
Experience and knowledge of global operations, business
conditions and culture to advise and oversee our
global business
Risk Management
Experience in risk oversight and management
Emerging Technologies and Business Models Experience
Experience identifying and developing emerging technologies
and business models to advise, analyze and strategize
regarding emerging technologies, business models and
potential acquisitions
Human Capital Management
Experience attracting and retaining top talent to advise
and oversee our people and compensation policies in our
competitive environment
Public Company Board Experience and
Corporate Governance
Experience understanding the dynamics and operation of a
public company, and corporate governance requirements
and compliance
54
2024 Proxy Statement
Proposal No. 1 Election of Directors
Skills and Experience:
A
&
A
p f-1
0 9,
Proposal No.1 Election of Directors
Directors
Nominee Directors
Right Honorable Sir John Key I 62
INDErtNutNI
Director Since: 2019
Other Current Public
Audit Committee. Compensation
Committee Membership:
Company Boards:
None
and People Committee (Chair).
Security Committee
BACKGROUND
Right Honorable SirJohn Key has served as a member of our Board since April 2019.
Sir John was a Member of Parliament for Helensville in New Zealand until April 2017. Sir
John served as Prime Minister of New Zealand from November 2008 to December 2016
having commenced his political career as a Member of Parliament for Helensville
in July 2002. Prior to his political career, he had a nearly twenty-year career in
international finance, primarily for Bankers Trust of New Zealand and Merrill Lynch in
Singapore. London and Sydney. Sir John serves on the board of directors of several
privately held companies. He previously served on the board of directors of Air New
Zealand Limited, a public airline, from 2017 to 2020 and ANZ Bank New Zealand Ltd
and was also a member of the board of directors of the parent Australia & New Zealand
Banking Group Ltd. a public bankthat provides various banking and financial products
and services. from 2018 to 2024. SirJohn has a Bachelor of Commerce in Accounting
from the University of Canterbury.
QUALIFICATIONS
AND EXPERIENCE
SirJohn was selected to serve on our Board
due to his global business leadership and
extensive financial, capital markets. and
management expertise as former Prime
Minister of New Zealand, his extensive
background in foreign affairs, and his career
in investment banking and finance. He brings
extensive experience in policy-making
and a global business perspective from his
experience and service on other boards,
which is especially valuable to us as we
grow internationally.
Industry and IT/Technical
Senior Leadership
Financial
Diverse Backgrounds
and Experiences
Global/International
Governance. Risk Oversight
and Compliance
Cybersecurity
Sales. Marketing and
Brand Management
Public Company Board Experience
Emerging Technologies
Human Capital Management
and Business Models
2024 Proxy Statement
paloajtcy
55
Industry and IT/Technical
Senior Leadership
Financial
Diverse Backgrounds
and Experiences
Cybersecurity
Sales, Marketing and
Brand Management
Global/International
Governance, Risk Oversight
and Compliance
Emerging Technologies
and Business Models
Human Capital Management
Public Company Board Experience
Directors
Nominee Directors
QUALIFICATIONS
:G=>QI>KB>G<>
Sir John was selected to serve on our Board
due to his global business leadership and
extensive financial, capital markets, and
management expertise as former Prime
Minister of New Zealand, his extensive
background in foreign affairs, and his career
in investment banking and finance. He brings
extensive experience in policy-making
and a global business perspective from his
experience and service on other boards,
which is especially valuable to us as we
grow internationally.
Right Honorable Sir John Key | 62
INDEPENDENT
Skills and Experience:
Director Since: 2019
Committee Membership:
Audit Committee, Compensation
and People Committee (Chair),
Security Committee
Hg[XeQI>KB>G<>
Ms. McCarthy was selected to serve on
our Board because of her deep technical
expertise in financial and accounting matters
from her experience as the Vice Chair of
KPMG LLP, advising numerous companies
on financial and accounting matters, as well
as her leadership experience as a member
of management at KPMG. She is an “audit
committee financial expert” with over 40
years of experience in finance, operations
and risk management oversight of technology
companies, particularly publicly traded
companies with knowledge of complex global
financial and business matters. In addition,
she brings a global business perspective
and contributes valuable insights and
perspectives to our business and operations
from her service on other boards.
Mary Pat McCarthy | 69
INDEPENDENT
Skills and Experience:
Director Since: 2016
Committee Membership:
Audit Committee (Chair),
Security Committee, Corporate
Development Committee
Hg[XeQI>KB>G<>
Mr. Zuk is a co-founder of Palo Alto Networks,
a network security expert and brings a wealth
of network security knowledge and industry
experience to Palo Alto Networks. He brings
business leadership, operational experience,
risk management oversight experience, and
experience developing technology. He has an
in-depth knowledge of the technology and
cybersecurity industries.
Nir Zuk | 53
Skills and Experience:
Director Since: 2005
Committee Membership:
None
Hg[XeQI>KB>G<>
Mr. Arora was chosen to serve on our Board
due to his leadership skills and experience as
the chief architect of the Company’s strategic
vision, as well as his thorough knowledge
of all aspects of our business. Through his
extensive career in executive leadership,
he brings expertise in leading and scaling
technology businesses, risk management
oversight, and in-depth knowledge of the
cybersecurity and technology sectors.
Nikesh Arora | 56
Skills and Experience:
Director Since: 2018
Committee Membership:
Corporate Development Committee
Hg[XeQI>KB>G<>
Ms. Bawa was selected to serve on
our Board due to her senior leadership
and management experience at public
technology companies, risk management
oversight expertise, and legal and business
operations expertise. She has extensive
experience in technology companies.
Aparna Bawa | 46
INDEPENDENT
Skills and Experience:
Director Since: 2021
Committee Membership:
Audit Committee, Compensation and
People Committee, Security Committee,
Corporate Development Committee
Hg[XeQI>KB>G<>
Mr. Donovan was selected to serve
on our Board because of his technical
knowledge and extensive business
leadership, management, operations and
risk management oversight experience, as
a result of serving as the Chief Technology
Officer and later the Chief Executive Officer
of AT&T Communications. He is skilled in
overseeing global information, software
development, supply chain, network
operations and big data organizations and
has expertise in cybersecurity, artificial
intelligence and machine learning.
John M. Donovan | 63
LEAD INDEPENDENT DIRECTOR
Skills and Experience:
Director Since: 2012
Committee Membership:
Compensation and People Committee,
Governance and Sustainability
Committee (Co-Chair), Security
Committee (Chair), Corporate
Development
Committee (Chair)
Hg[XeQI>KB>G<>
Mr. Eschenbach was selected to serve
on our Board because of his extensive
experience in the technology industry and
his previous public company management
experience. He brings to our Board over 30
years of operational and sales experience in
the technology industry, and has extensive
experience in risk management oversight
and scaling large organizations, as well as a
deep knowledge of high-growth companies.
Mr. Eschenbach also has extensive public
company board experience.
Carl Eschenbach | 57
INDEPENDENT
Skills and Experience:
Director Since: 2013
Committee Membership:
Security Committee
Hg[XeQI>KB>G<>
Dr. Gayle was selected to serve on our Board
because of her senior leadership and chief
executive officer experience and broad
international exposure and emerging market
experience, as well as her governmental
and non-profit expertise, risk management
expertise and corporate governance
experience as a director of private and
public companies.
Dr. Helene D. Gayle | 68
INDEPENDENT
Skills and Experience:
Director Since: 2021
Committee Membership:
Governance and Sustainability
Committee, Security Committee
Hg[XeQI>KB>G<>
Mr. Goetz was selected to serve on our Board
because of his senior leadership, technology,
information technology (IT), business
development and cybersecurity experience,
and knowledge of emerging technologies,
arising from his experience as a partner of
a venture capital firm, where he focuses on
cloud mobile, and enterprise technology
investments, as well as providing guidance
and counsel to a wide variety of internet
and technology companies. He also brings
his experience as a senior management
leader in network, data security and storage,
software, and manufacturing companies,
through various senior roles and other board
experiences. Mr. Goetz also has extensive
public company board experience.
James J. Goetz | 58
INDEPENDENT
Skills and Experience:
Director Since: 2005
Committee Membership:
Audit Committee, Corporate
Development Committee,
Security Committee
Hg[XeQI>KB>G<>
Ms. Twohill was selected to serve on our
Board due to her leadership skills and
extensive marketing knowledge, with over
25 years of experience. She has deep
management and business operations
experience, as well as risk management
oversight experience. She provides the
Board with valuable insights into brand
management and the global issues facing
technology companies today.
Lorraine Twohill | 53
INDEPENDENT
Skills and Experience:
Director Since: 2019
Committee Membership:
Governance and Sustainability
Committee (Co-Chair),
Security Committee
Hg[Xe
i
Our Compensation and People Committee committed not to grant
Mr. Arora additional one-time equity awards of any variety with
vesting or performance metrics that would overlap with the one-time
performance-based restricted stock unit retention award granted to him in
June 2023
For further information about the rationale for, and shareholder feedback
that our Board received prior to, awarding our CEO's five-year retention
grant, see the section titled: "-Our Approach to One-Time Awards to
NE0s-Fisca1 2023 CEO Retention Award"
For Fiscal 2025, decreased the maximum payout of long-term incentive
equity award for our CEO by 33%, from 600% to 400% of target payout, and
aligned our CEO's fi
123 and fiscal 2024 long-term incentive equity
awards to the reduced maximum target payout
For Fiscal 2024, carefully reviewed the aircraft and security related
expenses to ensure alignment with security needs and business
requirements, and consolidated security providers to capture efficiencies,
which helped contribute to the total amount of aircraft and security-related
perquisites and benefits for our CEO decreasing by approximately 55%
from $3,768,893 in fiscal 2023 to $1,684,666 in fiscal 2024
For Fiscal 2025, also decreased the maximum payout of long-term
incentive equity awards for our other NEOs by 33%, from 600% to 400%
of target payout, and aligned their fiscal 2023 and fiscal 2024 long-term
incentive equity awards to the reduced maximum target payout
Fiscal 2024 portion of fiscal 2023 and fiscal 2024 equity awards resulted
in 9% payout attributable to fiscal 2024 performance, demonstrating our
commitment to a pay-for-performance philosophy
In addition, even though the Company shifted strategy early in fiscal year
2024, we did not reset the fiscal 2024 performance targets
For Fiscal 2025 annual cash incentive plan design, we clearly identified
threshold performance levels for each metric so that performance more than
K 10% below either target financial performance measure results in no payment
Awards of the quantum of our
CEO's five-year performance-
based restricted stock unit
retention grant should not be used
regularly
CEO compensation has components
that are too high, when considering
the annual performance grant and
five-year retention grant
CEO aircraft and security-related
perquisites are too high and
examine whether the costs are
warranted
Performance-based equity
maximum payout for other NEOs is
too high and should be reduced
Performance measure targets do
not clearly indicate pay versus
performance connection
Disclosure of annual incentive plan
structure is not clear
76
I, palosIto°
2024 Proxy Statement
76
2024 Proxy Statement
Executive Compensation
61%
55%
33%
We reached out to shareholders
representing 61% of our
outstanding shares
We engaged in discussions with
investors representing 55% of
our outstanding shares (which is
all shareholders that indicated a
willingness to engage with us)
Our Lead Independent Director participated
in discussions (21 meetings) with investors
representing 33% of our outstanding
shares, while offering meetings to investors
representing 47% of our outstanding shares
* Shareholder ownership, to our knowledge, as of June 30, 2024
WHAT THEY SAID
WHAT WE DID
Awards of the quantum of our
CEO’s five-year performance-
based restricted stock unit
retention grant should not be used
regularly
Our Compensation and People Committee committed not to grant
Mr. Arora additional one-time equity awards of any variety with
vesting or performance metrics that would overlap with the one-time
performance-based restricted stock unit retention award granted to him in
June 2023
For further information about the rationale for, and shareholder feedback
that our Board received prior to, awarding our CEO’s five-year retention
grant, see the section titled: “–Our Approach to One-Time Awards to
NEOs–Fiscal 2023 CEO Retention Award”
CEO compensation has components
that are too high, when considering
the annual performance grant and
five-year retention grant
For Fiscal 2025, decreased the maximum payout of long-term incentive
equity award for our CEO by 33%, from 600% to 400% of target payout, and
aligned our CEO’s fiscal 2023 and fiscal 2024 long-term incentive equity
awards to the reduced maximum target payout
CEO aircraft and security-related
perquisites are too high and
examine whether the costs are
warranted
For Fiscal 2024, carefully reviewed the aircraft and security related
expenses to ensure alignment with security needs and business
requirements, and consolidated security providers to capture efficiencies,
which helped contribute to the total amount of aircraft and security-related
perquisites and benefits for our CEO decreasing by approximately 55%
from $3,768,893 in fiscal 2023 to $1,684,666 in fiscal 2024
Performance-based equity
maximum payout for other NEOs is
too high and should be reduced
For Fiscal 2025, also decreased the maximum payout of long-term
incentive equity awards for our other NEOs by 33%, from 600% to 400%
of target payout, and aligned their fiscal 2023 and fiscal 2024 long-term
incentive equity awards to the reduced maximum target payout
Performance measure targets do
not clearly indicate pay versus
performance connection
Fiscal 2024 portion of fiscal 2023 and fiscal 2024 equity awards resulted
in 0% payout attributable to fiscal 2024 performance, demonstrating our
commitment to a pay-for-performance philosophy
In addition, even though the Company shifted strategy early in fiscal year
2024, we did not reset the fiscal 2024 performance targets
Disclosure of annual incentive plan
structure is not clear
For Fiscal 2025 annual cash incentive plan design, we clearly identified
threshold performance levels for each metric so that performance more than
10% below either target financial performance measure results in no payment
ROBUST AND INDEPENDENT COMPENSATION DECISION-MAKING, ALIGNED WITH OUR
CORPORATE VALUES
100% independent Compensation and
Annual review of compensation strategy
People Committee
Consideration of annual say-on-pay vote and other
•
Independent compensation consultant
shareholder feedback
-"N
COMPENSATION BEST PRACTICES
•
Majority of compensation is performance-based
and at-risk
• 100% of short-term incentive cash compensation is
performance-based and at-risk
Inclusion of ESG modifier to cash incentive
plan, which modifies the annual incentive cash
compensation (plus or minus 10%), based on our
performance relative to an ESG scorecard with
climate, inclusion and human capital metrics
• 100% of equity awards granted to our NEOs in
fiscal 2024 were performance-based, based on
different performance metrics than the annual cash
incentive plan
No single trigger vesting of equity awards on
occurrence of a change in control
No dividends paid on unvested equity
Robust stock ownership guidelines
One-year post-vesting holding period for all NEOs,
including our Chief Executive Officer
No hedging or pledging, except limited pledging
permitted with the prior approval of the Governance
and Sustainability Committee
Meaningful compensation recovery and
clawback policies
Limited perquisites and personal benefits
No defined benefit plans or SERPs
Assessing and implementing the advice of
independent compensation consultant, including
a decision-making framework to further ensure
alignment of executive compensation decision with
our pay-for-performance philosophy
Executive Compensation
Our Compensation Best Practices
We believe our executive compensation program represents recognized best practice and reflects principles that align the
compensation of our NEOs with the long-term interests of our shareholders.
2024 Proxy Statement
*paloajtcy
77
77
2024 Proxy Statement
Executive Compensation
Our Compensation Best Practices
We believe our executive compensation program represents recognized best practice and reflects principles that align the
compensation of our NEOs with the long-term interests of our shareholders.
ROBUST AND INDEPENDENT COMPENSATION DECISION-MAKING, ALIGNED WITH OUR
CORPORATE VALUES
%
100% independent Compensation and
People Committee
%
Independent compensation consultant
%
Annual review of compensation strategy
%
Consideration of annual say-on-pay vote and other
shareholder feedback
COMPENSATION BEST PRACTICES
%
Majority of compensation is performance-based
and at-risk
%
100% of short-term incentive cash compensation is
performance-based and at-risk
%
Inclusion of ESG modifier to cash incentive
plan, which modifies the annual incentive cash
compensation (plus or minus 10%), based on our
performance relative to an ESG scorecard with
climate, inclusion and human capital metrics
%
100% of equity awards granted to our NEOs in
fiscal 2024 were performance-based, based on
different performance metrics than the annual cash
incentive plan
%
No single trigger vesting of equity awards on
occurrence of a change in control
%
No dividends paid on unvested equity
%
Robust stock ownership guidelines
%
One-year post-vesting holding period for all NEOs,
including our Chief Executive Officer
%
No hedging or pledging, except limited pledging
permitted with the prior approval of the Governance
and Sustainability Committee
%
Meaningful compensation recovery and
clawback policies
%
Limited perquisites and personal benefits
%
No defined benefit plans or SERPs
%
Assessing and implementing the advice of
independent compensation consultant, including
a decision-making framework to further ensure
alignment of executive compensation decision with
our pay-for-performance philosophy
Executive Compensation
We Followed Through on Our Commitments
Summarized below are our fiscal 2024 commitments, and our follow through in meeting those commitments.
OUR COMMITMENTS FOR FISCAL 2024
OUR FOLLOW
THROUGH
Maintain a robust shareholder outreach program
Provide more transparency in our executive compensation disclosures, as well as more robust
CD&A disclosures
Disclose the target value of equity grants to our NEOs for the completed fiscal year in the CD&A
Maintain robust stock ownership guidelines
Make any one-time awards to NEOs outside of the normal grant cycle (other than new hire
awards) a majority performance-based, and only make such grants in exceptional circumstances
Make annual equity grants to our NEOs at least 75% performance-based
Require a one-year minimum vesting period for all grants to our Chief Executive Officer
and other NEOs going forward, and implement a policy to require our Chief Executive Officer
and other NEOs to hold all net shares for one year after vesting subject to
certain exceptions
Use a performance-based restricted stock unit ("PSU") award design that requires sustained
performance over multiple years for any payout
Include a relative TSR modifier to our executive PSU awards
Ensure that ongoing incentive goals are considered challenging with targets set at or above
management guidance
For completed performance periods, disclose performance targets compared to actual results
and corresponding payout scale
Avoid duplicate performance metrics in our cash incentive plan and PSU awards
Do not make upward discretionary adjustments except for extraordinary circumstances
Include an ESG metric in fiscal 2024 cash incentive plan to ensure linkage between
compensation and our ESG goals
Responsible Use of Equity Compensation
In response to the feedback that we have received from our shareholders over the past several years, the Compensation
and People Committee has undertaken a concerted program of reducing our annual stock-based compensation expense
as a percentage of revenue. The graph below illustrates our stock-based compensation expense for fiscal years 2021, 2022,
2023 and 2024, including as a percentage of revenue.
78
palomIto°
2024 Proxy Statement
We Followed Through on Our Commitments
Summarized below are our fiscal 2024 commitments, and our follow through in meeting those commitments.
OUR COMMITMENTS FOR FISCAL 2024
OUR FOLLOW
THROUGH
Maintain a robust shareholder outreach program
Provide more transparency in our executive compensation disclosures, as well as more robust
CD&A disclosures
Disclose the target value of equity grants to our NEOs for the completed fiscal year in the CD&A
Maintain robust stock ownership guidelines
Make any one-time awards to NEOs outside of the normal grant cycle (other than new hire
awards) a majority performance-based, and only make such grants in exceptional circumstances
Make annual equity grants to our NEOs at least 75% performance-based
Require a one-year minimum vesting period for all grants to our Chief Executive Officer
and other NEOs going forward, and implement a policy to require our Chief Executive Officer
and other NEOs to hold all net shares for one year after vesting subject to
certain exceptions
Use a performance-based restricted stock unit (“PSU”) award design that requires sustained
performance over multiple years for any payout
Include a relative TSR modifier to our executive PSU awards
Ensure that ongoing incentive goals are considered challenging with targets set at or above
management guidance
For completed performance periods, disclose performance targets compared to actual results
and corresponding payout scale
Avoid duplicate performance metrics in our cash incentive plan and PSU awards
Do not make upward discretionary adjustments except for extraordinary circumstances
Include an ESG metric in fiscal 2024 cash incentive plan to ensure linkage between
compensation and our ESG goals
Responsible Use of Equity Compensation
In response to the feedback that we have received from our shareholders over the past several years, the Compensation
and People Committee has undertaken a concerted program of reducing our annual stock-based compensation expense
as a percentage of revenue. The graph below illustrates our stock-based compensation expense for fiscal years 2021, 2022,
2023 and 2024, including as a percentage of revenue.
78
2024 Proxy Statement
Executive Compensation
Executive Compensation
FY21-FY24 SBCE and Percent of Revenue
$1,250.0
21.8%
$1,000.0
$927
$750.0
$500.0
$250.0
$0.0
Annual SBCE
25.0%
$1,087
$1,079
20.0%
15.8%
15.0%
13.4%
10.0%
5.0%
0.0%
SBCE Percent of Revenue
Annual
Total
Share-Based Compensation ($ in millions)
FY21
FY22
FY23
FY24
Compensation-Setting Process
Compensation Timeline and Process
The compensation setting timeline and process of our Compensation and People Committee is summarized below.
August
Review preceding full fiscal year
performance and determine results of
completed performance periods
• Review and approve annual budget
and operating goals for fiscal year
• Set target compensation for fiscal year
• Determine and approve incentive
equity awards to NEOs
• Determine and approve cash
incentive plan
May-July
• Review year-to-date performance
relating to cash incentive plan and
equity awards to goals
• Engage with independent
compensation consultant and receive
recommendations regarding executive
compensation on design of cash incentive
plan (measures, targets and payout curves)
and annual PSU design (measures, targets
and payout curves)
September-February
Engage with shareholders and consider shareholder
feedback from outreach discussions
Consider results of say-on-pay vote
Review year to date performance to goals
Review trends in executive compensation
and governance
Engage with independent compensation
consultant, including peer group review
and analysis of shareholder feedback
March-April
Review executive compensation program
to ensure that it remains competitive and
aligned with shareholder interests
Engage with management to provide
feedback on design of cash incentive plan
(measures, targets and payout curves) and annual
PSU design (measures, targets and payout curves)
Work with independent compensation consultant on
peer group
Engage with independent compensation consultant
Review year to date performance to goals
j
regarding trends in compensation and governance
2024 Proxy Statement
*paloajtp:
79
Annual SBCE
SBCE Percent of Revenue
FY24
FY23
FY22
FY21
$0.0
$250.0
$500.0
$750.0
$1,000.0
$1,250.0
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
21.8%
$927
$1,013
$1,087
$1,079
18.4%
15.8%
13.4%
FY21-FY24 SBCE and Percent of Revenue
Annual Total Share-Based Compensation ($ in millions)
Compensation-Setting Process
Compensation Timeline and Process
The compensation setting timeline and process of our Compensation and People Committee is summarized below.
August
May-July
September-February
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79
2024 Proxy Statement
Executive Compensation
Executive Compensation
Our Compensation and People Committee makes compensation decisions after considering factors that include:
Our past business performance and future expectations;
Our long-term goals and strategies;
The performance and experience of each executive officer;
The scope and strategic impact of the executive officer's responsibilities;
The performance of our executive team as a whole;
An analysis of competitive market conditions, with the assistance of its external compensation consultant;
The incentives provided to our executives to remain with the Company and drive the Company's continued growth;
The value of each executive's unvested equity holdings;
For each executive officer, other than our CEO, the recommendation of our CEO based on an evaluation of
their performance;
The challenge and cost of replacing high-performing leaders with in-demand skills; and
The internal parity of compensation among our executive officers.
Our Compensation and People Committee does not apply a formula or assign relative weights to specific
compensation elements.
koleS anu Responsibilities
PARTICIPANT
ROLE IN COMPENSATION DETERMINATION PROCESS
Compensation and
People Committee
Management
• Review, evaluate and approve the compensation arrangements, plans, policies, and
practices for our NEOs
Oversee and administer cash-based and equity-based compensation plans
Review our executive compensation program, from time to time, to determine whether
they are appropriate, properly coordinated, achieve their intended purposes and to
make any modifications to existing plans and arrangements or to adopt new plans or
arrangements
Retain the services of external advisors, including compensation consultants, legal
counsel and other advisors, from time to time, as it sees fit, in connection with carrying
out its duties
Together with our independent compensation consultant, the Chief Executive Officer
and the Chief People Officer assist the Compensation and People Committee in the
execution of its responsibilities by providing information on corporate and individual
performance, market data with respect to compensation and management's
perspective and recommendations on compensation matters
Chief Executive Officer makes recommendations to the Compensation and People
Committee regarding compensation matters, including the compensation of executive
officers (other than himself)
Chief Executive Officer participates in meetings of the Compensation and People
Committee (other than portions of meetings that involve discussions of his own
compensation)
While our Compensation and People Committee solicits the recommendations and
proposals of our Chief Executive Officer with respect to compensation-related matters,
these recommendations and proposals are only one factor in our Compensation and
People Committee's decision-making process
80
palomito°
2024 Proxy Statement
Our Compensation and People Committee makes compensation decisions after considering factors that include:
y Our past business performance and future expectations;
y Our long-term goals and strategies;
y The performance and experience of each executive officer;
y The scope and strategic impact of the executive officer’s responsibilities;
y The performance of our executive team as a whole;
y An analysis of competitive market conditions, with the assistance of its external compensation consultant;
y The incentives provided to our executives to remain with the Company and drive the Company’s continued growth;
y The value of each executive’s unvested equity holdings;
y For each executive officer, other than our CEO, the recommendation of our CEO based on an evaluation of
their performance;
y The challenge and cost of replacing high-performing leaders with in-demand skills; and
y The internal parity of compensation among our executive officers.
Our Compensation and People Committee does not apply a formula or assign relative weights to specific
compensation elements.
Roles and Responsibilities
PARTICIPANT
ROLE IN COMPENSATION DETERMINATION PROCESS
Compensation and
People Committee
y Review, evaluate and approve the compensation arrangements, plans, policies, and
practices for our NEOs
y Oversee and administer cash-based and equity-based compensation plans
y Review our executive compensation program, from time to time, to determine whether
they are appropriate, properly coordinated, achieve their intended purposes and to
make any modifications to existing plans and arrangements or to adopt new plans or
arrangements
y Retain the services of external advisors, including compensation consultants, legal
counsel and other advisors, from time to time, as it sees fit, in connection with carrying
out its duties
Management
y Together with our independent compensation consultant, the Chief Executive Officer
and the Chief People Officer assist the Compensation and People Committee in the
execution of its responsibilities by providing information on corporate and individual
performance, market data with respect to compensation and management’s
perspective and recommendations on compensation matters
y Chief Executive Officer makes recommendations to the Compensation and People
Committee regarding compensation matters, including the compensation of executive
officers (other than himself)
y Chief Executive Officer participates in meetings of the Compensation and People
Committee (other than portions of meetings that involve discussions of his own
compensation)
y While our Compensation and People Committee solicits the recommendations and
proposals of our Chief Executive Officer with respect to compensation-related matters,
these recommendations and proposals are only one factor in our Compensation and
People Committee’s decision-making process
80
2024 Proxy Statement
Executive Compensation
Executive Compensation
PARTICIPANT
ROLE IN COMPENSATION DETERMINATION PROCESS
Independent
Compensation
Consultant
For fiscal 2024 advice,
the Compensation and
People Committee
engaged Meridian
Compensation Partners,
a national compensation
consulting firm
• Assist the Compensation and People Committee in executing the executive
compensation strategy and guiding principles, assessing the current target total direct
compensation opportunities of our executive officers, including comparing them
against competitive market practices, developing a compensation peer group and
advising on executive compensation decisions
Meridian Compensation Partners did not provide any services to the Company other
than the services provided to our Compensation and People Committee
Our Compensation and People Committee assessed the independence of Meridian
Compensation Partners taking into account, among other things, the factors set forth
in Exchange Act Rule 10C-1 and the listing standards of Nasdaq and has concluded
that no conflict of interest exists with respect to the work that Meridian Compensation
Partners performs for our Compensation and People Committee
Use of Competitive Data
To assess the competitiveness of our executive compensation program and to assist in setting compensation levels, at
the Compensation and People Committee's request, Meridian Compensation Partners, the committee's independent
compensation consultant, compiled market data from a compensation peer group approved by our Compensation and
People Committee and industry surveys, including the Radford Global Technology Executive Compensation Survey. The
Compensation and People Committee, with the assistance of Meridian Compensation Partners, then analyzed the market
and survey data when making fiscal 2024 compensation decisions.
Competitive Positioning
For fiscal 2024, our Compensation and People Committee continued to compare and analyze our executive compensation
program and each component of executive compensation against data from a formal compensation peer group of
companies.
In the context of our annual executive compensation review, with assistance from Meridian Compensation Partners and
input from management, in February 2023, our Compensation and People Committee reviewed the peer group of publicly-
traded technology companies used to provide information regarding compensation practices for fiscal 2023 to determine if
any changes were appropriate for use in considering fiscal 2024 pay decisions. In determining which companies to include
in the peer group, our Compensation and People Committee considered companies that met some or all of the following
updated criteria:
had (i) revenue between 0.33 to 3.0 times our revenue, (ii) a market capitalization between 0.33 to 3.0 times our market
capitalization, (iii) a market capitalization to revenue ratio greater than 2.0, and (iv) a number of employees between 0.5
to 2.0 times the number of our employees;
had revenue growth greater than 10% in at least two of the last three years and TSR growth greater than 10% in at least
two of the last three years;
was headquartered on the west coast of the United States, operated in the software industry, provided some
cybersecurity services, and was selected by Institutional Shareholder Services as one of our peer companies; and
whether we were included in the company's peer group, whether the company's chief executive officer was a founder
with an atypical compensation structure, and the company's relevant acquisition activity.
Based on this review, Twitter, Inc. was removed from our compensation peer group for fiscal 2024, and the Company
was at the 69th percentile of the peer group in terms of revenue and 61st percentile in terms of market capitalization as of
December 31, 2022.
2024 Proxy Statement
*paloajtcy
81
PARTICIPANT
ROLE IN COMPENSATION DETERMINATION PROCESS
Independent
Compensation
Consultant
For fiscal 2024 advice,
the Compensation and
People Committee
engaged Meridian
Compensation Partners,
a national compensation
consulting firm
y Assist the Compensation and People Committee in executing the executive
compensation strategy and guiding principles, assessing the current target total direct
compensation opportunities of our executive officers, including comparing them
against competitive market practices, developing a compensation peer group and
advising on executive compensation decisions
y Meridian Compensation Partners did not provide any services to the Company other
than the services provided to our Compensation and People Committee
y Our Compensation and People Committee assessed the independence of Meridian
Compensation Partners taking into account, among other things, the factors set forth
in Exchange Act Rule 10C-1 and the listing standards of Nasdaq and has concluded
that no conflict of interest exists with respect to the work that Meridian Compensation
Partners performs for our Compensation and People Committee
Use of Competitive Data
To assess the competitiveness of our executive compensation program and to assist in setting compensation levels, at
the Compensation and People Committee’s request, Meridian Compensation Partners, the committee’s independent
compensation consultant, compiled market data from a compensation peer group approved by our Compensation and
People Committee and industry surveys, including the Radford Global Technology Executive Compensation Survey. The
Compensation and People Committee, with the assistance of Meridian Compensation Partners, then analyzed the market
and survey data when making fiscal 2024 compensation decisions.
Competitive Positioning
For fiscal 2024, our Compensation and People Committee continued to compare and analyze our executive compensation
program and each component of executive compensation against data from a formal compensation peer group of
companies.
In the context of our annual executive compensation review, with assistance from Meridian Compensation Partners and
input from management, in February 2023, our Compensation and People Committee reviewed the peer group of publicly-
traded technology companies used to provide information regarding compensation practices for fiscal 2023 to determine if
any changes were appropriate for use in considering fiscal 2024 pay decisions. In determining which companies to include
in the peer group, our Compensation and People Committee considered companies that met some or all of the following
updated criteria:
y had (i) revenue between 0.33 to 3.0 times our revenue, (ii) a market capitalization between 0.33 to 3.0 times our market
capitalization, (iii) a market capitalization to revenue ratio greater than 2.0, and (iv) a number of employees between 0.5
to 2.0 times the number of our employees;
y had revenue growth greater than 10% in at least two of the last three years and TSR growth greater than 10% in at least
two of the last three years;
y was headquartered on the west coast of the United States, operated in the software industry, provided some
cybersecurity services, and was selected by Institutional Shareholder Services as one of our peer companies; and
y whether we were included in the company’s peer group, whether the company’s chief executive officer was a founder
with an atypical compensation structure, and the company’s relevant acquisition activity.
Based on this review, Twitter, Inc. was removed from our compensation peer group for fiscal 2024, and the Company
was at the 69th percentile of the peer group in terms of revenue and 61st percentile in terms of market capitalization as of
December 31, 2022.
81
2024 Proxy Statement
Executive Compensation
Performance
Stock Units (PSU)
CEO
Aol
Base Salary
Target
Annual Cash
Incentive
Opportunity
Target
Annual Cash
Incentive
Opportunity
Base Salary
88.4%
Performance
Stock Units (PSU)
Executive Compensation
The following publicly-traded companies made up our compensation peer group for fiscal 2024:
Akamai Technologies, Inc.
Fortinet, Inc.
Paychex, Inc.
SS&C Technologies
Autodesk, Inc.
Intuit Inc.
Roper Technologies, Inc.
Holdings, Inc.
Cadence Design
Juniper Networks, Inc.
ServiceNow, Inc.
VMWare, Inc.
Systems, Inc.
Keysight Technologies, Inc.
Snowflake Inc.
Workday, Inc.
CrowdStrike Holdings, Inc.
NetApp, Inc.
Splunk Inc.
Gen Digital Inc.
CEO and NEO Pay for Performance Alignment for
Fiscal 2024
Pay for performance is a cornerstone of our compensation philosophy. We balance our strong pay-for-
performance compensation philosophy - where the vast majority of our Chief Executive Officer and other NEO
compensation is at-risk and performance-based - with our need to recruit, incentivize, and retain talented
executives in a highly competitive market. The result is an executive compensation program that is significantly
weighted toward at-risk compensation tied to our financial and operational performance.
The graphs below illustrate the predominance of at-risk and performance-based components of our fiscal 2024
compensation program for our Chief Executive Officer and other NEOs, based on total target annual compensation.
Average of Other NEC,
In line with our pay for performance compensation philosophy, our Compensation and People Committee also focuses
on awarding compensation commensurate with the position and responsibilities held by our NEOs. If an NEO's position
or responsibilities change, our Compensation and People Committee undertakes a review of that NEO's compensation to
ensure that it remains commensurate with the new position and responsibilities.
How We Compensate Our Named Executive ()racers
In this section, we provide detailed insights into the compensation of our NEOs, including a summary of the rationale for the
decisions reached by our Board and Compensation and People Committee.
TRANSFORMATIONAL LEADERSHIP
During the past three years, our NEOs have provided transformational leadership across the Company, leading the
Company to become the cybersecurity partner of choice, to innovate and to stay ahead of the curve. Led by Mr. Arora,
the Company has focused on three strategic priorities, critical to our long-term success: transforming network security,
delivering comprehensive cloud native security and revolutionizing security operations, in each case powered by Precision
AlTM, driving our Platformization strategy. This has resulted in:
A significant increase in the trading price of our common stock, and leading to a $66 billion increase in market
capitalization over the past three years.
82
paloalto°
2024 Proxy Statement
The following publicly-traded companies made up our compensation peer group for fiscal 2024:
Akamai Technologies, Inc.
Autodesk, Inc.
Cadence Design
Systems, Inc.
CrowdStrike Holdings, Inc.
Gen Digital Inc.
Fortinet, Inc.
Intuit Inc.
Juniper Networks, Inc.
Keysight Technologies, Inc.
NetApp, Inc.
Paychex, Inc.
Roper Technologies, Inc.
ServiceNow, Inc.
Snowflake Inc.
Splunk Inc.
SS&C Technologies
Holdings, Inc.
VMWare, Inc.
Workday, Inc.
CEO and NEO Pay for Performance Alignment for
Fiscal 2024
Pay for performance is a cornerstone of our compensation philosophy. We balance our strong pay-for-
performance compensation philosophy – where the vast majority of our Chief Executive Officer and other NEO
compensation is at-risk and performance-based – with our need to recruit, incentivize, and retain talented
executives in a highly competitive market. The result is an executive compensation program that is significantly
weighted toward at-risk compensation tied to our financial and operational performance.
The graphs below illustrate the predominance of at-risk and performance-based components of our fiscal 2024
compensation program for our Chief Executive Officer and other NEOs, based on total target annual compensation.
CEO
Average of Other NEOs
2.4%
Target
Annual Cash
Incentive
Opportunity
2.4%
Base Salary
95.2%
Performance
Stock Units (PSU)
97.6%
At-Risk
88.4%
Performance
Stock Units (PSU)
5.8%
Base Salary
5.8%
Target
Annual Cash
Incentive
Opportunity
94.2%
At-Risk
In line with our pay for performance compensation philosophy, our Compensation and People Committee also focuses
on awarding compensation commensurate with the position and responsibilities held by our NEOs. If an NEO’s position
or responsibilities change, our Compensation and People Committee undertakes a review of that NEO’s compensation to
ensure that it remains commensurate with the new position and responsibilities.
How We Compensate Our Named Executive Officers
In this section, we provide detailed insights into the compensation of our NEOs, including a summary of the rationale for the
decisions reached by our Board and Compensation and People Committee.
TRANSFORMATIONAL LEADERSHIP
During the past three years, our NEOs have provided transformational leadership across the Company, leading the
Company to become the cybersecurity partner of choice, to innovate and to stay ahead of the curve. Led by Mr. Arora,
the Company has focused on three strategic priorities, critical to our long-term success: transforming network security,
delivering comprehensive cloud native security and revolutionizing security operations, in each case powered by Precision
AI™, driving our Platformization strategy. This has resulted in:
y A significant increase in the trading price of our common stock, and leading to a $66 billion increase in market
capitalization over the past three years.
82
2024 Proxy Statement
Executive Compensation
Executive Compensation
$4.1 billion returned to our shareholders in fiscal 2019 through fiscal 2024 through our stock repurchase program.
Compound annual growth rates of 49% and 24% in NGS ARR and RPO, respectively, over fiscal 2023 through fiscal
2024, culminating in fiscal year 2024 with record NGS ARR of $4.22 billion and record RPO of $12.7 billion at and as of
July 31, 2024.
Compound annual growth rates of 23% in revenue, over fiscal 2019 through fiscal 2024, culminating in fiscal year 2024
with record revenue of $8.03 billion.
An acceleration of our product development efforts, including the introduction in fiscal 2024 of solutions to Secure Al by
Design, including Al Access, Al-SPM and Al Runtime, in each of our platforms, and our Precision AITM Security Bundle.
Our Innovation Drives Our Success
Our Innovation Powered Platformization
Accelerated innovation that has born a
differentiated position that spans our
three platforms
• Network Security - Comprehensive Zero Trust
Network Security Platform with best-in-class
products in multiple form factors - hardware and
software next generation firewalls and SASE -
infused with Al for near real-time protection
Cloud Security - Scalable and comprehensive
security across the cloud application development
lifecycle through our Code to CloudTM platform,
Prisma® Cloud
• Security Operations - Built on category leading
next generation security operations capabilities
through our Cortex® platform with Cortex XDR®,
Cortex XSOAR®, Cortex Xpanse®, and our category
changing Al-driven security operations platform
Cortex XSIAM®
Continued accelerating innovation in fiscal 2024
by delivering
• Cortex XSIAM 2.0 - Using Al to reimagine how the
security operations center works
Cloud Detection and Response - Detect,
investigate, and respond to Cloud threats
• Prisma Cloud - Added 100+ cloud services API
ingestions across major hyperscalers
Prisma Cloud "Darwin" release - Prisma Cloud's
Code to CloudTM intelligence
Strata Cloud Manager - The industry's first
Al-Powered Zero Trust Management and
Operations Solution
• SASE 3.0 - Al-based innovations, including the
industry's first natively-integrated SASE Enterprise
Browser
Our Innovation Is Powered by Precision AITM
Announced solutions to Secure Al by Design
Al Access - Enables an organization's workforce to
use Al tools with confidence, giving security teams
full visibility, robust controls, data protection and
proactive threat prevention measures
• Al SPM - Secures your Al ecosystem by identifying
vulnerabilities and prioritizing misconfigurations in
models, applications and resources
• Al Runtime - Helps organizations confidently build
Al-powered applications by securing its entire Al
application ecosystem, protecting against runtime
threats, such as prompt injections, model DoS,
insecure outputs and others
Announced the Precision AITM Security Bundle -
Leverages inline Al to prevent sophisticated web-based
threats, zero-day threats, command-and-control
attacks and DNS hijacking attacks
Advanced DNS security - Identifies threats
hidden in DNS traffic by taking advantage of our
crowd-sourced threat intelligence and detections
Advanced URL filtering - Automatically detects
and prevents new malicious and targeted
web-based threats
Advanced Threat Prevention - Stops zero-day
attacks inline in real-time
Advanced Wildfire - Cloud-based malware
analysis and prevention engine that uses machine
learning and crowdsourced intelligence to protect
organizations from the hardest-to-detect threats
2024 Proxy Statement
*paloajtcy
83
y $4.1 billion returned to our shareholders in fiscal 2019 through fiscal 2024 through our stock repurchase program.
y Compound annual growth rates of 49% and 24% in NGS ARR and RPO, respectively, over fiscal 2023 through fiscal
2024, culminating in fiscal year 2024 with record NGS ARR of $4.22 billion and record RPO of $12.7 billion at and as of
July 31, 2024.
y Compound annual growth rates of 23% in revenue, over fiscal 2019 through fiscal 2024, culminating in fiscal year 2024
with record revenue of $8.03 billion.
y An acceleration of our product development efforts, including the introduction in fiscal 2024 of solutions to Secure AI by
Design, including AI Access, AI-SPM and AI Runtime, in each of our platforms, and our Precision AITM Security Bundle.
Our Innovation Drives Our Success
Our Innovation Powered Platformization
Accelerated innovation that has born a
differentiated position that spans our
three platforms
y Network Security - Comprehensive Zero Trust
Network Security Platform with best-in-class
products in multiple form factors - hardware and
software next generation firewalls and SASE -
infused with AI for near real-time protection
y Cloud Security - Scalable and comprehensive
security across the cloud application development
lifecycle through our Code to Cloud™ platform,
Prisma® Cloud
y Security Operations - Built on category leading
next generation security operations capabilities
through our Cortex® platform with Cortex XDR®,
Cortex XSOAR®, Cortex Xpanse®, and our category
changing AI-driven security operations platform
Cortex XSIAM®
Continued accelerating innovation in fiscal 2024
by delivering
y Cortex XSIAM 2.0 - Using AI to reimagine how the
security operations center works
y Cloud Detection and Response - Detect,
investigate, and respond to Cloud threats
y Prisma Cloud - Added 100+ cloud services API
ingestions across major hyperscalers
y Prisma Cloud “Darwin” release - Prisma Cloud’s
Code to Cloud™ intelligence
y Strata Cloud Manager - The industry’s first
AI-Powered Zero Trust Management and
Operations Solution
y SASE 3.0 - AI-based innovations, including the
industry’s first natively-integrated SASE Enterprise
Browser
Our Innovation Is Powered by Precision AITM
Announced solutions to Secure AI by Design
y AI Access - Enables an organization’s workforce to
use AI tools with confidence, giving security teams
full visibility, robust controls, data protection and
proactive threat prevention measures
y AI SPM - Secures your AI ecosystem by identifying
vulnerabilities and prioritizing misconfigurations in
models, applications and resources
y AI Runtime - Helps organizations confidently build
AI-powered applications by securing its entire AI
application ecosystem, protecting against runtime
threats, such as prompt injections, model DoS,
insecure outputs and others
Announced the Precision AITM Security Bundle –
Leverages inline AI to prevent sophisticated web-based
threats, zero-day threats, command-and-control
attacks and DNS hijacking attacks
y Advanced DNS security - Identifies threats
hidden in DNS traffic by taking advantage of our
crowd-sourced threat intelligence and detections
y Advanced URL filtering - Automatically detects
and prevents new malicious and targeted
web-based threats
y Advanced Threat Prevention - Stops zero-day
attacks inline in real-time
y Advanced Wildfire - Cloud-based malware
analysis and prevention engine that uses machine
learning and crowdsourced intelligence to protect
organizations from the hardest-to-detect threats
83
2024 Proxy Statement
Executive Compensation
$1.89
$2.95
1
FY22
FY23
FY24
84
*palomlur
2024 Proxy Statement
Accelerating Next-Gen Security
ARR Growth
($ in billions)
$4.22
Accelerating Revenue Growth
($ in billions)
Delivering Total Shareholder Return
1-Year TSR
Palo Alto Networks vs.
Percentiles of Peer Group
30
„ inc.
66th Percentile
75th Percentile
20
50th Percentile
10
25th Percentile
0
40
3-Year TSR
Palo Alto Networks vs.
Percentiles of Peer Group
Palo Alto
Networks, Inc.
100th Percentile
75th Percentile
50th Percentile
25th Percentile
0
-20
200
180
160
140
120
100
80
60
40
20
Accelerating Earnings Per Diluted Share ($)(1)
$7.28
$8.03
$6.89
$5.50
FY24
FY22
FY23
Delivered Strong Financial Performance and Shareholder Return
Accelerating Next-Gen Security
ARR Growth
($ in billions)
$1.89
$4.22
$2.95
FY24
FY23
FY22
Delivering Total Shareholder Return
Ҷ!RXTeMLK
Palo Alto Networks vs.
Percentiles of Peer Group
0
10
20
30
40
25th Percentile
50th Percentile
75th Percentile
Palo Alto
Networks, Inc.
66th Percentile
Accelerating Revenue Growth
($ in billions)
FY24
FY23
FY22
$5.50
$8.03
$6.89
Ҹ!RXTeTSR
Palo Alto Networks vs.
Percentiles of Peer Group
-20
0
20
40
60
80
100
120
140
160
180
200
25th Percentile
75th Percentile
Palo Alto
Networks, Inc.
100th Percentile
50th Percentile
Accelerating Earnings Per Diluted Share ($)(1)
FY24
FY23
FY22
$7.28
$1.28
-$0.90
(1) EPS increased to $7.28 in fiscal 2024, 469% compared to fiscal 2023, primarily due to our recognition of a deferred tax benefit
from the net release of our valuation allowance on U.S. federal, U.S. states other than California, and United Kingdom deferred
tax assets in fiscal 2024.
84
2024 Proxy Statement
Executive Compensation
Executive Compensation
Market Competitive Pay Levels and Evolving Compensation
In designing the compensation packages of our NEOs, our Board and Compensation and People Committee sought to
deliver market-competitive compensation commensurate with their capabilities and experience, and reflective of the
considerable challenge of leading the Company's transformation from a provider of hardware delivered security to a
provider of security delivered through the cloud, and taking advantage of Al, with three platforms of products to protect
our customers' enterprise, cloud, endpoints, security operation centers and more. When determining the compensation of
our NEOs, our Board and Compensation and People Committee listened carefully to shareholder feedback and modified
compensation structures in response to that feedback.
The tables below summarize the target compensation of our NEOs over the past three years.
FY23 Targetm
Nikesh Arora - Chief Executive Officer
Percentage Change
FY24 Target
FY23 to FY24 (%)
Annual Salary
$1.0M(2)
$1.OM
no change
Target Bonus
Time-Based RSUs
Performance Stock Units
$1.OM
n/a
$38M in PSUs vesting
at the end of 3 years
based on achievement
of billings growth and
relative TSR metric
$1.OM
n/a
$40M in PSUs vesting
at the end of 3 years
based on achievement
of billings growth and
relative TSR metric
no change
n/a
5%
+0.1%
-1 percentile points
Total Target
$40M
$42M
Performance-Based
(total compensation)(')
97.5%
97.6%
Percentile versus peer group -
target compensation
92nd
91st
0) Does not include the one-time long-term performance and retention award granted to Mr. Arora in June of our fiscal 2023.
(2) Mr. Arora forwent a portion of his annual salary in fiscal 2023 in connection with our funding efforts to support colleagues and
communities impacted by the COVID-19 pandemic. He opted to receive only approximately $0.75 million of his salary in fiscal 2023.
(3) These percentages do not take into account the amount of salary Mr. Arora forwent.
Mr. Arora's equity compensation was incrementally increased in fiscal 2024, due to Mr. Arora's strong performance
response to difficult business conditions. Mr. Arora has led the Company by developing and executing on multiple impactful
programs - in innovation, by launching Precision AlTM, and in go-to-market and business initiatives, by being the architect
of our Platformization strategy and developing new partnerships with industry leaders, such as with IBM and Accenture.
Accordingly, his level of compensation was increased incrementally so that he can continue to perform to the level
needed to execute the Company's long-term strategy. The Compensation and People Committee also determined that
Mr. Arora should be compensated appropriately in line with the Company's performance, as demonstrated by our one-year
TSR at the 99th percentile of our compensation peer group for fiscal 2023. Accordingly, the Compensation and People
Committee determined that an increase in Mr. Arora's compensation was warranted to reflect his and the Company's
strong performance relative to our compensation peer group. In fiscal 2024, our one-year TSR was at the 66th percentile of
our compensation peer group, and our three-year TSR was at the 100th percentile of our compensation peer group, further
demonstrating Mr. Arora's high level of performance as our Chief Executive Officer.
2024 Proxy Statement
paloajtn:
85
Market Competitive Pay Levels and Evolving Compensation
In designing the compensation packages of our NEOs, our Board and Compensation and People Committee sought to
deliver market-competitive compensation commensurate with their capabilities and experience, and reflective of the
considerable challenge of leading the Company’s transformation from a provider of hardware delivered security to a
provider of security delivered through the cloud, and taking advantage of AI, with three platforms of products to protect
our customers’ enterprise, cloud, endpoints, security operation centers and more. When determining the compensation of
our NEOs, our Board and Compensation and People Committee listened carefully to shareholder feedback and modified
compensation structures in response to that feedback.
The tables below summarize the target compensation of our NEOs over the past three years.
Nikesh Arora - Chief Executive Officer
FY23 Target(1)
FY24 Target
Percentage Change
FY23 to FY24 (%)
Annual Salary
։ҶҵF&ҷ'
։ҶҵF
no change
Target Bonus
։ҶҵF
։ҶҵF
no change
Time-Based RSUs
n/a
n/a
n/a
Performance Stock Units
։ҸҽF\aILNfiXfg\aZ
Tgg[XXaWbYҸlXTef
based on achievement
of billings growth and
relative TSR metric
։ҹҵF\aILNfiXfg\aZ
Tgg[XXaWbYҸlXTef
based on achievement
of billings growth and
relative TSR metric
Һ֣
Total Target
։ҹҵF
։ҹҷF
Һ֣
Performance-Based
(total Vb`cXafTg\ba'&Ҹ'
ҾҼҺ֣
ҾҼһ֣
֖ҵҶ֣
Percentile versus peer group -
target compensation
ҾҷaW
ҾҶfg
!Ҷ percentile points
(1) Does not include the one-time long-term performance and retention award granted to Fe:rora in June of our fiscal 2023.
(2) Fe:ebeTYbejXagTcbeg\babY[\fTaahT_fT_Tel\aY\fVT_ҡҟҡҢ\aVbaaXVg\baj\g[bheYhaW\aZXYYbegfgbfhccbegVb__XTZhXfTaW
communities impacted by the COVID-19 pandemic. He opted to receive only approximately $0.75 million of his salary in fiscal 2023.
(3) M[XfXcXeVXagTZXfWbabggT^X\agbTVVbhagg[XT`bhagbYfT_TelFe:ebeTYbejXag
Fe:ebeTfXdh\glVb`cXafTg\bajTf\aVeX`XagT__l\aVeXTfXW\aY\fVT_ҡҟҡңWhXgbFe:ebeTffgebaZcXeYbe`TaVX
eXfcbafXgbW\YY\Vh_gUhf\aXffVbaW\g\bafFe:ebeT[Tf_XWg[XkXVhg\iXHYY\VXe
85
2024 Proxy Statement
Executive Compensation
Executive Compensation
Dipak Golechha - Chief Financial Officer
FY23 Target
FY24 Target
Percentage Change
FY23 to FY24 (%)
Annual Salary
$O.6M
$O.6M
no change
Target Bonus
$O.6M
$O.6M
no change
Time-Based RSUs
n/a
n/a
n/a
Performance Stock Units
$9M in PSUs vesting
at the end of 3 years
based on achievement
of billings growth and
relative TSR metric
$10M in PSUs vesting 11%
at the end of 3 years
based on achievement
of billings growth and
relative TSR metric
Total Target
$10.2M
$11.2M
10%
Performance-Based
94.1%
94.6%
+01.
111"
(total compensation)
The incremental year-over-year increase in Mr. Golechha's equity compensation was to compensate him for leading the
Company's profitable growth strategy, which significantly contributed to our strong financial performance in fiscal 2023,
where our EPS increased to $1.28, compared to $(0.90) in fiscal 2022, non-GAAP operating margin increased to 24%,
compared to 19% in fiscal 2022, and non-GAAP adjusted free cash flow margin increased to 39%, compared to 33% in fiscal
2022. The calculations for non-GAAP operating margin and non-GAAP free cash flow margin are included on Appendix A.
In setting Mr. Golechha's fiscal 2024 compensation, the Compensation and People Committee also considered our
performance relative to our compensation peer group in fiscal 2023 — a one-year TSR at the 99th percentile of our
compensation peer group.
William "BU" Jenkins - President
FY23 Target
Percentage Change
FY24 Target
FY23 to FY24 (%)
Annual Salary
$O.75M
$0.75M
no change
Target Bonus
$O.75M
$0.75M
no change
Time-Based RSUs
n/a
n/a
n/a
Performance Stock Units
$10M in PSUs vesting
at the end of 3 years
based on achievement
of billings growth and
relative TSR metric
$10M in PSUs vesting
at the end of 3 years
based on achievement
of billings growth and
relative TSR metric
no change
Total Target
Performance-Based
(total compensation)
$11.5M
$11.5M
no change
93.5%
93.5%
no change
We maintained target compensation for Mr. Jenkins to compensate him for his leadership in the Company's go-to-market
efforts which significantly contributed to our strong financial performance in fiscal 2023, where total revenue increased to
$6.9 billion, or approximately 25% compared to fiscal 2022, total billings increased to $9.2 billion, or by 23% compared to fiscal
2022, and NGS ARR increased to $2.95 billion, or by approximately 56% compared to fiscal 2022. Mr. Jenkins was instrumental
in further developing and intensifying the Company's global reach and the implementation of our Platformization strategy.
The Compensation and People Committee determined that this level of compensation was warranted to reflect his and the
Company's strong performance relative to our compensation peer group, as demonstrated by our one-year TSR at the 99th
percentile of our compensation peer group at the end of fiscal 2023.
86
palomIto°
2024 Proxy Statement
Dipak Golechha - Chief Financial Officer
FY23 Target
FY24 Target
Percentage Change
FY23 to FY24 (%)
Annual Salary
։ҵһF
։ҵһF
no change
Target Bonus
։ҵһF
։ҵһF
no change
Time-Based RSUs
n/a
n/a
n/a
Performance Stock Units
։ҾF\aILNfiXfg\aZ
Tgg[XXaWbYҸlXTef
based on achievement
of billings growth and
relative TSR metric
։ҶҵF\aILNfiXfg\aZ
Tgg[XXaWbYҸlXTef
based on achievement
of billings growth and
relative TSR metric
ҶҶ֣
Total Target
։ҶҵҷF
։ҶҶҷF
Ҷҵ֣
Performance-Based
(total Vb`cXafTg\ba'
ҾҹҶ֣
Ҿҹһ֣
֖ҵҺ֣
M[X\aVeX`XagT_lXTe!biXe!lXTe\aVeXTfX\aFe@b_XV[[TfXdh\glVb`cXafTg\bajTfgbVb`cXafTgX[\`Ybe_XTW\aZg[X
Company’s profitable growth strategy, which significantly contributed to our strong financial performance in fiscal 2023,
where our EPS increased to $1.28, compared to $(0Ҩҟ'\aY\fVT_ҡҟҡҡaba!@::IbcXeTg\aZ`TeZ\a\aVeXTfXWgbҡң֣
Vb`cTeXWgbҠҨ֣\aY\fVT_ҡҟҡҡTaWaba!@::I adjustedYeXXVTf[Y_bj`TeZ\a\aVeXTfXWgbҢҨ֣Vb`cTeXWgbҢҢ֣\aY\fVT_
ҡҟҡҡM[XVT_Vh_Tg\bafYbeaba!@::IbcXeTg\aZ`TeZ\aTaWaba!@::IYeXXVTf[Y_bj`TeZ\aTeX\aV_hWXWba:ppendix A.
In setting Fe@b_XV[[TfY\fVT_ҡҟҡңVb`cXafTg\bag[XHf
y >dh\glVb`cXafTg\baZeTagXW\aY\fVT_ҡҟҡңjTfҠҟҟ֣cXeYbe`TaVX!UTfXWILNf
y Performance measures aligned with business strategy
y HfhaWXeg[XVTf[\aVXag\iXc_Ta
&\\'j\g[eXfcXVggbg[X
fXVbaWgeTaV[XbYg[XILNfZeTagXWgbbheG>Hf&bg[Xeg[TaFeCXa^\af'\aY\fVT_ҡҟҡҡTaWg[XY\aT_geTaV[XbYg[XILNf
ZeTagXWgbFeCXa^\af\aY\fVT_ҡҟҡҡTabiXeT__TV[\XiX`XagcXeVXagTZXbYҠҤң֣UTfXWbabheeXiXahXZebjg[Whe\aZY\fVT_
ҡҟҡҡg[ebhZ[Y\fVT_ҡҟҡңTaWTYgXeTcc_l\aZg[XeX_Tg\iXMLK`bW\Y\XeYbeg[Xg[eXX!lXTecXeYbe`TaVXcXe\bWg[TgXaWXW\a
Y\fVT_ҡҟҡңTaW&\\\'j\g[eXfcXVggbg[XILNfZeTagXWgbbheG>Hf\aY\fVT_ҡҟҡҢTaWY\fVT_ҡҟҡңTҟ֣TV[\XiX`XagYbeY\fVT_
ҡҟҡңUTfXWbaTaahT_U\__\aZfZebjg[Whe\aZY\fVT_ҡҟҡң
y :WbcgXWTaL><TaWGTfWTd!Vb`c_\TagVb`cXafTg\baeXVbiXelcb_\VlTaWVbag\ahXWTah`UXebYVb`cXafTg\baUXfg
practices, including NEO stock ownership guidelines, a minimum one year post-vesting holding period for all grants to NEOs,
g[XX_\`\aTg\babYWhc_\VTg\iXcXeYbe`TaVX`XTfheXfUXgjXXabheTaahT_TaW_baZ!gXe`\aVXag\iXc_TafTaWTa>L@`bW\Y\Xe
gbbheG>HfVTf[\aVXag\iXc_TagbXafheX_\a^TZXUXgjXXaVb`cXafTg\baTaWbhe>L@ZbT_f
Compensation Decision Making Framework
BaWXf\Za\aZg[XXkXVhg\iXVb`cXafTg\bacebZeT`YbeY\fVT_ҡҟҡңbhe:L>BG;:L>L:E:KR?HK:GRG>HBG?BL<:Eҡҟҡң
M[XgTU_XUX_bjf[bjfg[XUTfXfT_TelYbeXTV[G>HYbeY\fVT_ҡҟҡң and fiscal 2023.
Name
Base Salary
End of Fiscal 2023
Base Salary
End of Fiscal 2024
Fe:ebeT
։Ҷҵҵҵҵҵҵ
։Ҷҵҵҵҵҵҵ
Fe@b_XV[[T
։
һҵҵҵҵҵ
։
һҵҵҵҵҵ
FeCXa^\af
։
ҼҺҵҵҵҵ
։
ҼҺҵҵҵҵ
FeD_Te\V[
։
ҺҺҵҵҵҵ
։
ҺҺҵҵҵҵ
FeSh^&Ҷ'
ˀҶҹҽҷҵҵҵ
ˀҶҹҽҷҵҵҵ
(1) FeSh^\fX`c_blXWUlone of our Israel subsidiaries and his base salary is expressed in Israeli currency for the purposes of this table.
89
2024 Proxy Statement
Executive Compensation
Target
Award
x
Achievement
of Corporate
Performance Metrics
x
I
Payment Amount
Executive Compensation
Annual Cash Incentive Compensation
We use annual cash incentive compensation to motivate our NEOs to achieve our annual financial and operational
objectives, while making progress towards our longer-term strategic and growth goals. Generally, we establish the target
annual cash incentive compensation opportunities of our executive officers through arm's-length negotiation at the time
of hire taking into account his or her position, qualifications, experience, prior target annual cash incentive compensation
opportunity, and the target annual cash incentive compensation opportunities of our other executive officers. Thereafter,
our Compensation and People Committee reviews the target annual cash incentive compensation opportunities of each
NEO annually and makes adjustments as it determines to be reasonable and necessary in line with the factors described
under "—Compensation-Setting Process—Compensation Timeline and Process" above.
Fiscal 2024 Cash Incentive Plan
In August 2023, our Compensation and People Committee adopted a cash incentive plan for all employees not paid
commissions (including our NEOs) and approved the target levels for the annual financial objectives that were challenging
and required substantial skill and effort on the part of senior management to achieve. As illustrated in the graphic below,
payouts under the cash incentive plan for our NEOs are based on a target award multiplied by a factor based on the
achievement of two corporate performance metrics, annual revenue and annual organic operating margin, which are
defined further below. The payout can further be increased or decreased by ten percent, based on measured progress
toward certain ESG goals that are set by the Compensation and People Committee at the beginning of the fiscal year.
Depending on achievement of the factors, annual cash incentive payouts can range from 0% to 165% of target.
Annual
Annual
-10%
0%
+10%
0%
Payout
165%
Revenue
Organic
Range
Operating
Margin
90
palosito°
2024 Proxy Statement
Annual Cash Incentive Compensation
We use annual cash incentive compensation to motivate our NEOs to achieve our annual financial and operational
bU]XVg\iXfj[\_X`T^\aZcebZeXffgbjTeWfbhe_baZXe!gXe`fgeTgXZ\VTaWZebjg[ZbT_f@XaXeT__ljXXfgTU_\f[g[XgTeZXg
annual cash incentive compensation opportunities of our executive officers through arm’s-length negotiation at the time
bY[\eXgT^\aZ\agbTVVbhag[\fbe[Xecbf\g\badhT_\Y\VTg\bafXkcXe\XaVXce\begTeZXgTaahT_VTf[\aVXag\iXVb`cXafTg\ba
opportunity, and the target annual cash incentive compensation opportunities of our other executive officers. Thereafter,
our Compensation and People Committee reviews the target annual cash incentive compensation opportunities of each
NEO annually and makes adjustments as it determines to be reasonable and necessary in line with the factors described
under “—Compensation-Setting Process—Compensation Timeline and Process” above.
Fiscal 2024 Cash Incentive Plan
In August 2023, our Compensation and People Committee adopted a cash incentive plan for all employees not paid
commissions (including our NEOs) and approved the target levels for the annual financial objectives that were challenging
TaWeXdh\eXWfhUfgTag\T_f^\__TaWXYYbegbag[XcTegbYfXa\be`TaTZX`XaggbTV[\XiX:f\__hfgeTgXW\ag[XZeTc[\VUX_bj
payouts under the cash incentive plan for our NEOs are based on a target award multiplied by a factor based on the
achievement of two corporate performance metrics, annual revenue and annual organic operating margin, which are
defined further below. The payout can further be increased or decreased by ten percent, based on measured progress
gbjTeWVXegT\a>L@ZbT_fg[TgTeXfXgUlg[XL@FbW\Y\Xe
=
Payment Amount
Annual
Revenue
Annual
Organic
Operating
FTeZ\a
!Ҷҵ֣
ҵ֣
֖Ҷҵ֣
ҵ֣
Payout
Range
ҶһҺ֣
90
2024 Proxy Statement
Executive Compensation
7, 41), Fiscal 2024 revenue as reported in our Annual
C c
Q
>
e
Revenue is an important growth metric that is directly
tied to shareholder value creation
Report on Form 10-K
Fiscal 2024 non-GAAP operating margin,
excluding the effects of acquisitions and
dispositions in fiscal 2024 and bonus payout
in excess of 100% of the target cash incentive
under our cash incentive plan
This profitability measure is tied to management
performance and profit we generate for shareholders
2
co
8 co
8 E
0.
Executive Compensation
Corporate Performance Measures
For fiscal 2024, our Compensation and People Committee selected annual revenue and annual organic operating margin
as the corporate performance measures.
What It Is
Why It's Important
Potential payouts under the incentive cash compensation plan were based on a set of curves representing different levels
of organic operating margin and revenue performance.
Design. To provide an incentive to management to make appropriate trade off decisions between balancing investments
in growth and profitability.
Pay and Performance Relationship. The curves were designed to require significant performance above each
curve to move to the next curve level so that performance slightly above target would not result in an above target
payout. Performance below the threshold performance goal for either performance metric results in 0% of target
payout, and performance above the maximum curve results in a formulaic payment maximum of 150% regardless of
the level of overperformance. The threshold performance goals were $7,525 million of revenue and 23.69% of organic
operating margin.
Target Setting. Our fiscal 2024 operating plan approved in August 2023, which was used to set the incentive plan
targets, provided revenue and organic operating margin targets. Performance above the high end of the targets was
required for an above 100% payout.
Difficulty of Achieving Targets. Fiscal 2024 target for revenue represented growth of approximately19% above the
prior year revenue. When we set the targets in August 2023, we decided that these targets were set at an appropriate
level of stretch performance based on our internal financial projections and the macroeconomic environment.
The fiscal 2024 target for revenue growth was set at the high-end of the guidance we provided in our August 18, 2023
earnings release.
2024 Proxy Statement
*palogitp;
91
Corporate Performance Measures
?beY\fVT_ҡҟҡңbheL@`bW\Y\Xe
described in the following paragraph.
MbXafheXT_\a^TZXUXgjXXaVb`cXafTg\baTaWbhe>L@ZbT_fjX\aV_hWXWTa>L@`bW\Y\XeYbebheG>Hf\ag[XVTf[
\aVXag\iXc_TaYbeY\fVT_ҡҟҡңj[\V[cebi\WXWYbeg[XVT_Vh_TgXWeXfh_ggbUXTW]hfgXWhcbeWbjaUlhcgbҠҟ֣UTfXWba
Ta>L@fVbeXVTeWj\g[V_\`TgX\aV_hf\baTaWW\iXef\glTaW[h`TaVTc\gT_`Xge\Vf?beY\fVT_ҡҟҡңabTW]hfg`Xagfgbbhe
G>HfVT_Vh_TgXWcTlbhgfhaWXeg[XVTf[\aVXag\iXc_TajXeX`TWXTfTeXfh_gbYg[X>L@`bW\Y\XeTaWbheL@`bW\Y\XegbbheY\fVT_ҡҟҡң
cash incentive plan.
>L@FbW\Y\Xe
&Ҩҟ֣gbҠҠҟ֣
modifier)
FY24 ESG Scorecard
Measures
FY24 Results
Climate
Ҡ ?RҡңcebZeXff
towards our
2030 climate
commitment
Strong Progress
y Ҡҟҟ֣eXaXjTU_XXaXeZlYbeAJYbeY\fVT_ҡҟҡң
through Silicon Valley Power’s Large Customer
Renewable Energy Program
y Achieved CDP's "Climate Change A-List" and
Lhcc_\Xe>aZTZX`XagEXTWXeFLai\eba`Xag
category score of 10 (out of 10)
Inclusion &
Diversity
ҡ Leadership
Representation
#=\eXVgbe֖
Pb`XaZ_bUT__l
underrepresented
`\abe\g\Xf&NKF'
in US
Slower Progress
y Launched 6 proactive inclusive recruiting initiatives,
j[\V[Uh\_gTcbb_bY֖ңҤҟXaZTZXWTaW[\Z[_l
dhT_\Y\XWjb`Xa;_TV^ETg\akTaWBaW\ZXabhf
candidate leads globally
y Launched I&D Steering Committee and created
stronger alignment with business impact and
X_XiTg\aZ>`c_blXXGXgjbe^@ebhcf&>G@f'
y =\eXVgbe֖Pb`Xa BaVeXTfXWUlҟҡ֣gbҡңҤ֣
y =\eXVgbe֖NKF =XVeXTfXWUlҠҧ֣gbҨҧ֣
Human
Capital
Practices
Ң Employee
engagement
Strong Progress
y Recognition of our human capital practices via
51 public accolades
y ҨҠ֣<>H:ccebiT_eTg\aZba@_TffWbbe
y XGILfVbeXbYңҡ֖Ҡҟcb\agfTUbiX\aWhfgel
benchmarks, highlighting relative strength compared
to other companies
y L@`bW\Y\Xe
y In response to shareholder feedback, we have continued to include detailed disclosure of the
scorecard measures (as set forth above)
93
2024 Proxy Statement
Executive Compensation
Executive Compensation
Target Annual Incentive Compensation Opportunities
As in prior years, the target annual cash incentive compensation opportunities for our NEOs were expressed as a
percentage of their respective base salaries.
NO INCREASE IN TARGET ANNUAL CASH INCENTIVE COMPENSATION FOR ANY NEO IN FISCAL 2024
The table below shows the target annual cash incentive compensation percentage for fiscal 2024 and the corresponding
target and maximum dollar values:
Target Annual Incentive
Compensation Opportunity
(as a % of base salary) at
Fiscal 2024 Target
Annual Incentive
Compensation
Fiscal 2024 Maximum
Annual Incentive
Compensation
Name
end of Fiscal 2024
Opportunity
Opportunity
Mr. Arora
100%
$1,000,000
$1,650,000
Mr. Golechha
100%
$ 600,000
$ 990,000
Mr. Jenkins
100%
$ 750,000
$1,237,500
Mr. I(larich
100%
$ 550,000
$ 907,500
Mr. Zukil)
100%
m1,482,000
in 2,445,300
0) Mr. Zuk is employed by our Israel subsidiary and his target annual cash incentive compensation opportunity is expressed in
Israeli currency.
LONG-TERM EQUITY COMPENSATION
Our long-term equity compensation is designed to encourage
executives to achieve stretch goals in key performance metrics
selected to drive long-term performance of our Company and
value creation for shareholders.
FISCAL 2024 EQUITY COMPENSATION
(
Over the past four years,
100% of the long-term equity
compensation granted to our
NEOs was performance-based
(aside from Mr. Jenkins's new
hire RSU award).
100% OF ANNUAL EQUITY GRANTED TO NEOs IN FISCAL 2024 WAS PERFORMANCE-BASED
In fiscal 2024,100% of the annual equity awards granted to our NEOs continued to be in the form of PSUs, resulting in the
entirety of such equity awards being at risk and performance-based. The Compensation and People Committee determined
the size of the awards based on the strong performance, leadership skills and valuable contributions to the Company of our
NEOs, especially in the context of the significant transition in our business to expand to a more cloud-centric platform.
To determine the size of the fiscal 2024 PSU awards, the Compensation and People Committee utilized the framework
developed in partnership with Meridian Compensation Partners, its independent compensation consultant, to identify
objective factors - financial performance, shareholder returns and achievement of strategic objectives - that should be
considered in determining the size of any compensation. In addition to this assessment, the Compensation and People
Committee also considered the individual performance of each NEO to determine the appropriate fiscal 2024 target
compensation levels.
94
palosIto°
2024 Proxy Statement
Target Annual Incentive Compensation Opportunities
As in prior years, the target annual cash incentive compensation opportunities for our NEOs were expressed as a
percentage of their respective base salaries.
GHBG:L>BGM:K@>M:GGN:E<:LABG<>GMBO>GL:MBHG?HK:GRG>HBG?BL<:Eҡҟҡң
M[XgTU_XUX_bjf[bjfg[XgTeZXgTaahT_VTf[\aVXag\iXVb`cXafTg\bacXeVXagTZXYbeY\fVT_ҡҟҡңTaWg[XVbeeXfcbaW\aZ
target and maximum dollar values:
Name
Target Annual Incentive
Compensation Opportunity
(as a % of base salary) at
end of Fiscal 2024
Fiscal 2024 Target
Annual Incentive
Compensation
Opportunity
Fiscal 2024 Maximum
Annual Incentive
Compensation
Opportunity
Fe:ebeT
Ҷҵҵ֣
։Ҷҵҵҵҵҵҵ
։ҶһҺҵҵҵҵ
Fe@b_XV[[T
Ҷҵҵ֣
։
һҵҵҵҵҵ
։
ҾҾҵҵҵҵ
FeCXa^\af
Ҷҵҵ֣
։
ҼҺҵҵҵҵ
։ҶҷҸҼҺҵҵ
FeD_Te\V[
Ҷҵҵ֣
։
ҺҺҵҵҵҵ
։
ҾҵҼҺҵҵ
FeSh^(Ҷ'
Ҷҵҵ֣
ˀҶҹҽҷҵҵҵ
ˀҷҹҹҺҸҵҵ
(1) FeSh^\fX`c_blXWUlbheBfeTX_fhUf\W\TelTaW[\fgTeZXgTaahT_VTf[\aVXag\iXVb`cXafTg\babccbegha\gl\fXkceXffXW\a
Israeli currency.
LONG-TERM EQUITY COMPENSATION
Hhe_baZ!gXe`Xdh\glVb`cXafTg\ba\fWXf\ZaXWgbXaVbheTZX
executives to achieve stretch goals in key performance metrics
selected to drive long-term performance of our Company and
value creation for shareholders.
?BL<:Eҡҟҡң>JNBMRGL:MBHG
Ҡҟҟ֣H?:GGN:E>JNBMR@K:GM>=MHG>HfBG?BL<:EҡҟҡңP:LI>K?HKF:G<>!;:L>=
BaY\fVT_ҡҟҡңҠҟҟ֣bYg[XTaahT_Xdh\glTjTeWfZeTagXWgbbheG>HfVbag\ahXWgbUX\ag[XYbe`bYILNfeXfh_g\aZ\ag[X
Xag\eXglbYfhV[Xdh\glTjTeWfUX\aZTge\f^TaWcXeYbe`TaVX!UTfXWM[XHgbWXgXe`\aXg[XTccebce\TgXY\fVT_ҡҟҡңgTeZXg
compensation levels.
Over the past four years,
Ҡҟҟ֣ of the long-ter`Xdh\gl
compensation granted to our
NEOs was performance-based
(aside from FeCenkins's new
hire RSU award).
100%
94
2024 Proxy Statement
Executive Compensation
Executive Compensation
The table below shows the targeted value of PSU grants made to our NEOs in fiscal 2023 and fiscal 2024, with the actual
target number of shares subject to the fiscal 2024 PSUs determined based on the trailing 14-day average closing price as of
the date of grant, rounded down to the nearest whole share.
Name
Targeted Value for PSUs
Granted for fiscal 2023
(8)
Targeted Value for PSUs
Granted in fiscal 2024
(8)
Percentage change
(%)
Mr. Arora
38,000,000
40,000,000
5
Mr. Golechha
9,000,000
10,000,000
11
Mr. Jenkins
10,000,000
10,000,000
0
Mr. Klarich
15,000,000
7,500,000
-50
Mr. Zuk
8,000,000
8,000,000
0
Similar to the fiscal 2023 PSUs, the Compensation and People Committee set a three-year performance period for the fiscal
2024 PSUs and determined that such PSUs will vest based on the achievement of the performance goals for each of the
Company's 2024, 2025, and 2026 fiscal years as modified by the Company's relative total shareholder return during the
entirety of the three fiscal years. The Compensation and People Committee determined that continuing our design of a three-
year measurement period for relative TSR and three one-year measurement periods for the financial metric(s) aligns with our
pay-for-performance philosophy and provides an appropriate balance of requiring sustained performance while providing the
Compensation and People Committee the ability to set annual targets aligned to the Company's financial plan.
The number of fiscal 2024 PSUs that become eligible to vest ("Eligible PSUs") will be equal to the product of (i) the target
number of PSUs and (ii) the average of the achievement percentages for the financial metrics each fiscal year in the
performance period. For each fiscal year, performance will be measured over the entire fiscal year.
On the first day of the month after our Board or Compensation and People Committee certifies the level of achievement of
the billings growth, annual NGS ARR and annual Non-GAAP EPS(1) and rTSR performance measures, the number of fiscal
2024 PSUs that vest (up to a maximum of 400%(2) of the target number) will be equal to the product of (x) the number of
Eligible PSUs and (y) the rTSR modifier, subject to the applicable NEO's continued service through the vesting date.
A tentative rTSR modifier will be determined based on the TSR of the Company during the performance period relative
to the TSRs of the indexed companies (which are the companies that are a component of the S&P 500 Index or any
successor index on the last day of the performance period and were also a component of such index on the first day of the
performance period) during the performance period, as follows: (i) if the relative TSR is at the 90th percentile or above, the
tentative rTSR modifier will be 2.0, (ii) if the relative TSR is at the 75th percentile, the tentative rTSR modifier will be 1.50,
(iii) if the relative TSR is at the 50th percentile, the tentative rTSR modifier will be 1.0, and (iv) if the relative TSR is at the
25th percentile or below, the tentative rTSR modifier will be 0.75. If the relative TSR is between any of these thresholds, the
tentative rTSR modifier will be determined based on linear interpolation between the corresponding numbers for those
thresholds. The rTSR modifier will be equal to the tentative rTSR modifier if the Company's TSR is 0% or greater, but if the
Company's TSR is less than 0%, then the rTSR modifier will be the lower of the tentative TSR modifier or1.0. For purposes
of the PSU awards granted by the Company that include a rTSR modifier, the beginning stock price and ending stock price
with respect to the Company and each indexed company for purposes of determining our and each indexed company's
TSR over the relevant performance period is determined based on the average of the closing trading prices of the relevant
company for the thirty consecutive trading days ending with the last trading day before the beginning of the performance
period (for the beginning price) and the last trading day of the performance period (for the ending price).(3)
Any fiscal 2024 PSUs that do not become Eligible PSUs due to the minimum performance metrics threshold not being
achieved are forfeited without consideration.
(1) The financial performance measure for the fiscal 2024 PSUs was initially billings growth for all performance periods. However, the
financial performance measures for the remaining performance periods under the fiscal 2024 PSUs were aligned to the new design for
fiscal 2025 PSUs. See "—Fiscal 2025 Compensation Decisions" and -Alignment of Remaining Performance Periods to Fiscal 2025 PSU
Design" below for more information.
(2) The total maximum payout percentage was initially set at 600%. However, the total maximum payout percentage was reduced by 33.3%,
from 600% to 400% of target payout, for the fiscal 2024 PSUs.
(3) This calculation method for determining the starting and ending trading prices for the performance period that contribute to a
company's TSR applies to each of the fiscal 2024, fiscal 2023, and fiscal 2022 PSU awards.
2024 Proxy Statement
*palositn:
95
M[XgTU_XUX_bjf[bjfg[XgTeZXgXWiT_hXbYILNZeTagf`TWXgbbheG>Hf\aY\fVT_ҡҟҡҢTaWY\fVT_ҡҟҡңj\g[g[XTVghT_
gTeZXgah`UXebYf[TeXffhU]XVggbg[XY\fVT_ҡҟҡңILNfWXgXe`\aXWUTfXWbag[XgeT\_\aZҠң!WTlTiXeTZXV_bf\aZce\VXTfbY
the date of grant, rounded down to the nearest whole share.
Name
Targeted Value for PSUs
Granted for fiscal 2023
&պ'
Targeted Value for PSUs
Granted in fiscal 2024
&պ'
Percentage change
&֣'
Fe:ebeT
Ҹҽҵҵҵҵҵҵ
ҹҵҵҵҵҵҵҵ
Һ
Fe@b_XV[[T
Ҿҵҵҵҵҵҵ
Ҷҵҵҵҵҵҵҵ
ҶҶ
FeCXa^\af
Ҷҵҵҵҵҵҵҵ
Ҷҵҵҵҵҵҵҵ
ҵ
FeD_Te\V[
ҶҺҵҵҵҵҵҵ
ҼҺҵҵҵҵҵ
!Һҵ
FeSh^
ҽҵҵҵҵҵҵ
ҽҵҵҵҵҵҵ
ҵ
Similar to the fiscal 2023 PSUs, the Compensation and People Committee set a three-year performance period for the fiscal
ҡҟҡңILNfTaWWXgXe`\aXWg[TgfhV[ILNfj\__iXfgUTfXWbag[XTV[\XiX`XagbYg[XcXeYbe`TaVXZbT_fYbeXTV[bYg[X
_\Z\U_XILNf'j\__UXXdhT_gbg[XcebWhVgbY&\'g[XgTeZXg
number of PSUs and (ii) the average of the achievement percentages for the financial metrics each fiscal year in the
performance period. For each fiscal year, performance will be measured over the entire fiscal year.
On the first day of the month after our Board or Compensation and People Committee certifies the level of achievement of
g[XU\__\aZfZebjg[TaahT_G@L:KKTaWTaahT_Gba!@::I>IL(1) and rTSR performance measures, the number of fiscal
ҡҟҡңILNfg[TgiXfg&hcgbT`Tk\`h`bYңҟҟ֣(2)bYg[XgTeZXgah`UXe'j\__UXXdhT_gbg[XcebWhVgbY&k'g[Xah`UXebY
Eligible PSUs and (y) the rTSR modifier, subject to the applicable NEO’s continued service through the vesting date.
A tentative rTSR modifier will be determined based on the TSR of the Company during the performance period relative
to the TSRs of the indexed companies (which are the companies that are a component of the S&P 500 Index or any
successor index on the last day of the performance period and were also a component of such index on the first day of the
performance period) during the performance period, as follows: (i) if the relative TSR is at the 90th percentile or above, the
tentative rTSR modifier will be 2.0, (ii) if the relative TSR is at the 75th percentile, the tentative rTSR modifier will be 1.50,
(iii) if the relative TSR is at the 50th percentile, the tentative rTSR modifier will be 1.0, and (iv) if the relative TSR is at the
25th percentile or below, the tentative rTSR modifier will be 0.75. If the relative TSR is between any of these thresholds, the
tentative rTSR modifier will be determined based on linear interpolation between the corresponding numbers for those
g[eXf[b_WfM[XeMLK`bW\Y\Xej\__UXXdhT_gbg[XgXagTg\iXeMLK`bW\Y\Xe\Yg[X_\Z\U_XILNfWhXgbg[X`\a\`h`cXeYbe`TaVX`Xge\Vfg[eXf[b_WabgUX\aZ
achieved are forfeited without consideration.
(1) M[XY\aTaV\T_cXeYbe`TaVX`XTfheXYbeg[XY\fVT_ҡҟҡңILNfjTf\a\g\T__lU\__\aZfZebjg[YbeT__cXeYbe`TaVXcXe\bWfAbjXiXeg[X
Y\aTaV\T_cXeYbe`TaVX`XTfheXfYbeg[XeX`T\a\aZcXeYbe`TaVXcXe\bWfhaWXeg[XY\fVT_ҡҟҡңILNfjXeXT_\ZaXWgbg[XaXjWXf\ZaYbe
fiscal 2025 PSUs. See “—Fiscal 2025 Compensation Decisions" and "—Alignment of Remaining Performance Periods to Fiscal 2025 PSU
Design" below for more information.
(2) M[XgbgT_`Tk\`h`cTlbhgcXeVXagTZXjTf\a\g\T__lfXgTgҥҟҟ֣AbjXiXeg[XgbgT_`Tk\`h`cTlbhgcXeVXagTZXjTfeXWhVXWUlҢҢҢ֣
Yeb`ҥҟҟ֣gbңҟҟ֣bYgTeZXgcTlbhgYbeg[XY\fVT_ҡҟҡңILNf
(3) This calculation method for determining the starting and ending trading prices for the performance period that contribute to a
Vb`cTalfMLKTcc_\XfgbXTV[bYg[XY\fVT_ҡҟҡңY\fVT_ҡҟҡҢTaWY\fVT_ҡҟҡҡILNTjTeWf
95
2024 Proxy Statement
Executive Compensation
Executive Compensation
FISCAL 202A DERFORMAN`
2ERIOD
The achievement percentage for the fiscal 2024 performance period of the fiscal 2024 PSUs was determined based on
whether year-over-year billings growth for that period was below, at or exceeds the target year-over-year billings growth
for that period, as follows: (i) if the year-over-year billings growth is less than the threshold level (which is 400 basis points
("bps") below the target year-over-year billings growth), the achievement percentage will be 0%, (ii) if the year-over-year
billings growth is equal to the target year-over-year billings growth, the achievement percentage will be 100%, (iii) if the
year-over-year billings growth is 600 bps above the target year-over-year billings growth, the achievement percentage will
be 280%, and (iv) if the year-over-year billings growth is at least 700 bps above the target year-over-year billings growth,
the achievement percentage will be 300%. If the year-over-year billings growth is both above the threshold level and
between any of the levels described above, the achievement percentage will be determined based on linear interpolation
between the corresponding achievement percentages for those levels.
Year-over-year billings growth is the percentage increase in billings in a portion of a fiscal year over the billings in the
corresponding portion of the immediately preceding fiscal year. For these purposes, billings is the amount of billings
reported on our annual report on Form 10-K or quarterly report on Form 10-Q, which is defined as the total revenue plus the
change in total deferred revenue, net of acquired deferred revenue, during the relevant period. The calculation of billings is
provided in Appendix A to this Proxy Statement.
Based on our actual billings growth of 11.0% in fiscal 2024 (compared to a target of 17.9%), our Compensation and People
Committee determined an achievement percentage of 0% for the fiscal 2024 performance period of the fiscal 2024 PSUs.
The Compensation and People Committee believes that the achievement percentage for fiscal 2024 demonstrates the
intensity and rigor of our annual performance targets and our commitment to a pay-for-performance philosophy.
The Compensation and People Committee confirmed no adjustments were warranted or appropriate to the fiscal 2024
financial performance target for outstanding equity awards, even though the Company shifted strategy to focus even more
intentionally on Platformization during fiscal 2024.
ALIGNMENT OF REMAINING PERFORMANCE PERIODS TO FISCAL 2025 PSU DESIGN
Although the fiscal 2024 PSUs originally used year-over-year billings growth as the financial performance metric for each
fiscal year of the fiscal 2024 PSU's three-year performance period, our Compensation and People Committee determined
to make changes to our executive equity compensation programs beginning in fiscal 2025 as a result of the shift in
Company strategy to accelerate Platformization. In particular, and as further described under the section titled "—Fiscal
2025 Compensation Decisions,"the maximum target payout for the fiscal 2024 PSUs was reduced consistent with the
design for the fiscal 2025 awards, and the financial performance metrics for the remaining performance periods under the
fiscal 2024 PSUs were aligned to the design for the fiscal 2025 PSU awards. Accordingly, the maximum payout for the fiscal
2024 PSUs has been lowered by 33.3%, from 600% to 400% of target payout, and the financial metrics for the fiscal 2025
and fiscal 2026 performance periods will be based on achievement of annual NGS ARR and annual Non-GAAP EPS targets
(in lieu of billings growth rate targets), with each financial metric given equal weighting.
The achievement percentage (the "Payout Percentage") used to determine Eligible PSUs for the remaining performance
periods of the fiscal 2024 PSUs will be determined based on the average of the annual NGS ARR achievement percentage
and the annual Non-GAAP EPS achievement for such fiscal period:
The annual NGS ARR achievement portion of the Payout Percentage is determined based on whether our annual NGS
ARR for the relevant fiscal period is below, at or exceeds the target annual NGS ARR for that period, as follows: (i) if the
annual NGS ARR is equal to or less than the threshold level, which is $300 million below the target NGS ARR for the
period, the achievement percentage will be 0%, (ii) if the annual NGS ARR is equal to the target annual NGS ARR for the
period, then the achievement percentage will be 100%, and (iii) if the annual NGS ARR is at least $300 million above the
target annual NGS ARR for the period, then the achievement percentage will be 300%.
The annual Non-GAAP EPS achievement portion of the Payout Percentage is determined based on whether our annual
Non-GAAP EPS for the fiscal period is below, at or exceeds the target annual Non-GAAP EPS for that period, as follows:
(a) if the annual Non-GAAP EPS is equal to or less than the threshold level, which is 90% of the target Non-GAAP EPS
for the period, the achievement percentage will be 0%, (b) if the annual Non-GAAP EPS is equal to the target annual
Non-GAAP EPS for the period, then the achievement percentage will be 100%, (c) if the annual Non-GAAP EPS is at least
110% (or greater) of the target annual Non-GAAP EPS for the period, then the achievement percentage will be 300%.
96
palomIto°
2024 Proxy Statement
?BL<:EҡҟҡңI>K?HKF:G<>I>KBH=
M[XTV[\XiX`XagcXeVXagTZXYbeg[XY\fVT_ҡҟҡңcXeYbe`TaVXcXe\bWbYg[XY\fVT_ҡҟҡңILNfjTfWXgXe`\aXWUTfXWba
whether year-over-year billings growth for that period was below, at or exceeds the target year-over-year billings growth
Ybeg[TgcXe\bWTfYb__bjf &\'\Yg[XlXTe!biXe!lXTeU\__\aZfZebjg[\f_Xffg[Tag[Xg[eXf[b_W_XiX_&j[\V[\fңҟҟUTf\fcb\agf
&Ucf'UX_bjg[XgTeZXglXTe!biXe!lXTeU\__\aZfZebjg['g[XTV[\XiX`XagcXeVXagTZXj\__UXҟ֣&\\'\Yg[XlXTe!biXe!lXTe
U\__\aZfZebjg[\fXdhT_gbg[XgTeZXglXTe!biXe!lXTeU\__\aZfZebjg[g[XTV[\XiX`XagcXeVXagTZXj\__UXҠҟҟ֣&\\\'\Yg[X
year-over-year billings growth is 600 bps above the target year-over-year billings growth, the achievement percentage will
UXҡҧҟ֣TaW&\i'\Yg[XlXTe!biXe!lXTeU\__\aZfZebjg[\fTg_XTfgҦҟҟUcfTUbiXg[XgTeZXglXTe!biXe!lXTeU\__\aZfZebjg[
g[XTV[\XiX`XagcXeVXagTZXj\__UXҢҟҟ֣BYg[XlXTe!biXe!lXTeU\__\aZfZebjg[\fUbg[TUbiXg[Xg[eXf[b_W_XiX_TaW
between any of the levels described above, the achievement percentage will be determined based on linear interpolation
between the corresponding achievement percentages for those levels.
Year-over-year billings growth is the percentage increase in billings in a portion of a fiscal year over the billings in the
corresponding portion of the immediately preceding fiscal year. For these purposes, billings is the amount of billings
eXcbegXWbabheTaahT_eXcbegba?be`Ҡҟ!DbedhTegXe_leXcbegba?be`Ҡҟ!J which is defined as the total revenue plus the
change in total deferred revenue, aXgbYTVdh\eXWWXYXeeXWeXiXahXWhe\aZg[XeX_XiTagcXe\bW The calculation of billings is
provided in Appendix A to this Proxy Statement.
;TfXWbabheTVghT_U\__\aZfZebjg[bYҠҠҟ֣\aY\fVT_ҡҟҡң&Vb`cTeXWgbTgTeZXgbYҠҦҨ֣'bheGMH?K>F:BGBG@I>K?HKF:G<>I>KBH=LMH?BL<:EҡҟҡҤILN=>LB@G
:_g[bhZ[g[XY\fVT_ҡҟҡңILNfbe\Z\aT__lhfXWlXTe!biXe!lXTeU\__\aZfZebjg[Tfg[XY\aTaV\T_cXeYbe`TaVX`Xge\VYbeXTV[
Y\fVT_lXTebYg[XY\fVT_ҡҟҡңILNfg[eXX!lXTecXeYbe`TaVXcXe\bWbheIL targets
(in lieu of billings growth rate targets)j\g[XTV[Y\aTaV\T_`Xge\VZ\iXaXdhT_jX\Z[g\aZ
The achievement percentage (the “Payout Percentage”) used to determine Eligible PSUs for the remaining performance
cXe\bWfbYg[XY\fVT_ҡҟҡңILNfj\__UXWXgXe`\aXWUTfXWbag[XTiXeTZXbYg[XTaahT_G@L:KKTV[\XiX`XagcXeVXagTZX
TaWg[XTaahT_Gba!@::I>ILTV[\XiX`XagYbefhV[Y\fVT_cXe\bW
y M[XTaahT_G@L:KKTV[\XiX`Xagcbeg\babYg[XITlbhgIXeVXagTZX\fWXgXe`\aXWUTfXWbaj[Xg[XebheTaahT_G@L
:KKYbeg[XeX_XiTagY\fVT_cXe\bW\fUX_bjTgbeXkVXXWfg[XgTeZXgTaahT_G@L:KKYbeg[TgcXe\bWTfYb__bjf &\'\Yg[X
TaahT_G@L:KK\fXdhT_gbbe_Xffg[Tag[Xg[eXf[b_W_XiX_j[\V[\fպҢҟҟ`\__\baUX_bjg[XgTeZXgG@L:KKYbeg[X
cXe\bWg[XTV[\XiX`XagcXeVXagTZXj\__UXҟ֣&\\'\Yg[XTaahT_G@L:KK\fXdhT_gbg[XgTeZXgTaahT_G@L:KKYbeg[X
cXe\bWg[Xag[XTV[\XiX`XagcXeVXagTZXj\__UXҠҟҟ֣TaW&\\\'\Yg[XTaahT_G@L:KK\fTg_XTfgպҢҟҟ`\__\baTUbiXg[X
gTeZXgTaahT_G@L:KKYbeg[XcXe\bWg[Xag[XTV[\XiX`XagcXeVXagTZXj\__UXҢҟҟ֣
y M[XTaahT_Gba!@::I>ILTV[\XiX`Xagcbeg\babYg[XITlbhgIXeVXagTZX\fWXgXe`\aXWUTfXWbaj[Xg[XebheTaahT_
Gba!@::I>ILYbeg[XY\fVT_cXe\bW\fUX_bjTgbeXkVXXWfg[XgTeZXgTaahT_Gba!@::I>ILYbeg[TgcXe\bWTfYb__bjf
&T'\Yg[XTaahT_Gba!@::I>IL\fXdhT_gbbe_Xffg[Tag[Xg[eXf[b_W_XiX_j[\V[\fҨҟ֣bYg[XgTeZXgGba!@::I>IL
Ybeg[XcXe\bWg[XTV[\XiX`XagcXeVXagTZXj\__UXҟ֣&U'\Yg[XTaahT_Gba!@::I>IL\fXdhT_gbg[XgTeZXgTaahT_
Gba!@::I>ILYbeg[XcXe\bWg[Xag[XTV[\XiX`XagcXeVXagTZXj\__UXҠҟҟ֣&V'\Yg[XTaahT_Gba!@::I>IL\fTg_XTfg
ҠҠҟ֣&beZeXTgXe'bYg[XgTeZXgTaahT_Gba!@::I>ILYbeg[XcXe\bWg[Xag[XTV[\XiX`XagcXeVXagTZXj\__UXҢҟҟ֣
96
2024 Proxy Statement
Executive Compensation
a •
`um•er o
Is ran e•
X
a $300
million
above
target
300%
300%
= $150
million
above
target
200%
200%
100%
100%
50%
50%
0%
0%
= target
= $150
million
below
target
4300
million
below
target
a110% of
target
=105% of
target
= target
= 95% of
target
5 90% of
target
Average of
achievement
percentages
Achievement
Percentage
Annual
Non-
GAAP
EPS
Achievement
Percentage
Annual
NGS ARR
rTSR
percentile
rank within
S&P 500
TSRs
over the
three-year
performance
period
PSU
Achievement
Level (as a
Percentage
of Target
Award)
rTSR
modifier
PSU
Achievement
Level
= or >90th
percentile
2.0x
Maximum
400%
= or >75th
percentile
1.5x
High
300%
equal to 50th
percentile
Target
100%
= or <25th
percentile
0.75x
Threshold
37.5%
_\Z\U_XILNf
that result from the Payout Percentage on the financial performance metrics and the rTSR modifier would otherwise
excXXWңҟҟ֣
The following chart illustrates how the new financial performance metrics and rTSR modifier contribute to the PSU
TV[\XiX`Xag_XiX_Ybeg[XeX`T\a\aZcXeYbe`TaVXcXe\bWf#Y\fVT_ҡҟҡҤTaWY\fVT_ҡҟҡҥ#bYg[XY\fVT_ҡҟҡңILNf
Target Number of PSUs Granted
X
Annual
NGS ARR
Achievement
Percentage
Average of
achievement
percentages
Annual
Non-
GAAP
EPS
Achievement
Percentage
X
rTSR
percentile
rank within
L2IҺҵҵ
TSRs
over the
three-year
performance
period
rTSR
modifier
=
PSU
Achievement
Level
PSU
Achievement
Level (as a
Percentage
of Target
:jTeW'
֚։Ҹҵҵ
million
above
target
Ҹҵҵ֣
֚ҶҶҵ֣bY
target
Ҹҵҵ֣
֛be֘Ҿҵg[
percentile
ҷҵk
FTk\`h`
ҹҵҵ֣
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ҷҵҵ֣
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ҷҵҵ֣
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percentile
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Ҹҵҵ֣
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Ҷҵҵ֣
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percentile
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Ҷҵҵ֣
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percentile
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ҸҼ.Һ֣
֙։Ҹҵҵ
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target
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IL\fg[XILYbefhV[Y\fVT_lXTeTfTW]hfgXWgbXkV_hWXg[X\`cTVgbY`XeZXeTaW
TVdh\f\g\bageTafTVg\bafVbafh``TgXW\ag[XeX_XiTagY\fVT_lXTe&XkVXcggbg[XXkgXagfhV[TgeTafTVg\ba\fgT^Xa\agb
account by the Compensation and People Committee when establishing the target Nba!@::I>ILYbeg[XeX_XiTag
fiscal year).
y For purposes of the rTSR modifier, the beginning stock price and ending stock price with respect to the Company
and each indexed company for purposes of determining our and each indexed company's TSR over the relevant
performance period is determined based on the average of the closing trading prices of the relevant company for the
thirty consecutive trading days ending with the last trading day before the beginning of the performance period (for the
beginning price) and the last trading day of the performance period (for the ending price).
97
2024 Proxy Statement
Executive Compensation
_.,=110
ill
Executive PSU Program I Fiscal 2024 PSU Award
FY24 Grant
(Made
August 2023)
100%
Financial Metrics
Relative TSR
3 Year Relative TSR vs S&P 500
Start and End of Performance Period
Average of
Annual NGS
ARR* vs. Target
and
Non-GAAP
EPS* vs. Target
Average of
Annual NGS ARR*
vs. Target
and
Non-GAAP EPS*
vs. Target
Billings Growth
FY24 Target:
17.9%
FY24 Actual:
11.0%
FY24 Achievement:
0%
*In August 2024, financial metrics were aligned with those
adopted for the fiscal 2025 awards to further align NEO
compensation to the success of our Platformization strategy
and our focus on profitability.
Final Payout = Average of Annual Financial Metric
Payouts
X
Relative TSR Modifier
(with final payout capped at a
maximum of 400% of target PSUs)
Executive Compensation
The following table shows both the achievement percentage of 0% for the fiscal 2024 performance period of the fiscal 2024
PSUs based on our actual billings growth in fiscal 2024 and the alignment to the new financial performance metrics for the
remaining performance periods.
% of Total
Grant
PSU Grant
Measure Type
FY24
FY25
FY26
FISCAI 9n9A. An1-11PI/PRA MUT WITH REQDPnT TA P I_ SCAL 9n91 DSUt.
The fiscal 2023 PSUs vest based on the achievement of the performance goals for the Company's 2023, 2024, and 2025
fiscal years. The number of PSUs that become Eligible PSUs will be equal to the product of (i) the target number of PSUs
and (ii) the average of the achievement percentages for the financial metric for each fiscal year in the performance period.
Average of Three-Year Performance
Achievements based on Year-over-Year Billings
Growth for fiscal 2023, 2024 and 2025
rTSR Modifier
Target Number
of PSUs
GRANTED
X
X
Number of
PSUs
VESTED
Based on our actual year-over-year billings growth of 11.0% in fiscal 2024 (compared to a target of 17.9%), our Compensation
and People Committee determined an achievement percentage of 0% for fiscal 2024. The Compensation and People
Committee believes that the achievement percentage for fiscal 2024 demonstrates the intensity and rigor of our annual
performance targets and our commitment to a pay-for-performance philosophy.
98
palosIto°
2024 Proxy Statement
M[XYb__bj\aZgTU_Xf[bjfUbg[g[XTV[\XiX`XagcXeVXagTZXbYҟ֣Ybeg[XY\fVT_ҡҟҡңcXeYbe`TaVXcXe\bWbYg[XY\fVT_ҡҟҡң
ILNfUTfXWbabheTVghT_U\__\aZfZebjg[\aY\fVT_ҡҟҡңTaWg[XT_\Za`Xaggbg[XaXjfinancial performance metrics for the
remaining performance periods.
Grant
% of Total
PSU Grant
Measure Type
FY24
FY25
FY26
Executive PSU Program | Fiscal 2024 PSU Award
?Rҡң@eTag
&FTWX
August 2023)
Ҡҟҟ֣
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ҠҦҨ֣
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ҠҠҟ֣
?Rҡң:V[\XiX`Xag
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Average of
:aahT_G@L:KK
vs. Target
and
Gba!@::I>IL
vs. Target
Average of
:aahT_G@L
ARR* vs. Target
and
Gba!@::I
EPS* vs. Target
Relative TSR
3 Year Relative TSR vs S&P 500
*In :hZhfgҡҟҡң, financial metrics were aligned with those
adopted for the fiscal 2025 awards to further align NEO
compensation to the success of our Platformization strategy
and our focus on profitability.
?\aT_ITlbhg֛:iXeTZXbY:aahT_?\aTaV\T_FXge\V
Payouts
X
KX_Tg\iXMLKFbW\Y\Xe
(with final payout capped at a
maximum of ңҟҟ֣bYgTeZXgILNf'
Start and End of Performance Period
FISCAL 2024 ACHIEVEMENT WITH RESPECT TO FISCAL 2023 PSUS
M[XY\fVT_ҡҟҡҢILNfiXfgUTfXWbag[XTV[\XiX`XagbYg[XcXeYbe`TaVXZbT_fYbeg[X_\Z\U_XILNfj\__UXXdhT_gbg[XcebWhVgbY&\'g[XgTeZXgah`UXebYILNf
and (ii) the average of the achievement percentages for the financial metric for each fiscal year in the performance period.
Target Number
of PSUs
@K:GM>=
X
Average of Three-Year Performance
Achievements based on Year-over-Year Billings
@ebjg[YbeY\fVT_ҡҟҡҢҡҟҡңTaWҡҟҡҤ
X
eMLKFbW\Y\Xe
=
Number of
PSUs
VESTED
;TfXWbabheTVghT_lXTe!biXe!lXTeU\__\aZfZebjg[bYҠҠҟ֣\aY\fVT_ҡҟҡң&Vb`cTeXWgbTgTeZXgbYҠҦҨ֣'bheIL
vs. Target
Relative TSR
3 Year Relative TSR vs S&P 500
*In :hZhfgҡҟҡң, financial metrics were aligned with those adopted
for the fiscal 2025 awards to further align NEO compensation to the
success of our Platformization strategy and our focus on profitability.
?\aT_ITlbhg֛:iXeTZXbY:aahT_?\aTaV\T_FXge\VITlbhgf
X
KX_Tg\iXMLKFbW\Y\Xe
(with final payout capped at a
maximum of ңҟҟ֣bYgTeZXgILNf'
Start and End of Performance Period
As further described under the section titled “–Fiscal 2025 Compensation Decisions,” the maximum target payout for
the fiscal 2023 PSUs was reduced consistent with the design for the fiscal 2025 awards, and the financial performance
metrics for the last remaining performance period under the fiscal 2023 PSUs was aligned to the fiscal 2025 PSU awards.
:VVbeW\aZ_lg[X`Tk\`h`cTlbhgYbeg[XY\fVT_ҡҟҡҢILNf[TfUXXa_bjXeXWUlҢҢҢ֣Yeb`ҥҟҟ֣gbңҟҟ֣bYgTeZXg
cTlbhgTaWg[XY\aTaV\T_`Xge\VfYbeg[XY\fVT_ҡҟҡҤcXeYbe`TaVXcXe\bWj\__UXUTfXWbaTV[\XiX`XagbYTaahT_G@L:KK
TaWTaahT_Gba!@::I>ILj\g[XTV[Y\aTaV\T_`Xge\VZ\iXaXdhT_jX\Z[g\aZThe calculation for the rTSR modifier for the
Y\fVT_ҡҟҡҢILNfeX`T\afhaV[TaZXWTaW\fWXgXe`\aXW\ag[XfT`X`TaaXeTfg[XeMLK`bW\Y\XWYbeg[XY\fVT_ҡҟҡңILNf
as described in the section above titled "—Fiscal 2024 Equity Compensation." However, the ultimate payout under the fiscal
ҡҟҡҢILNf\fabjVTccXWTgңҟҟ֣bYg[XgTeZXgah`UXebYILNf&eXWhVXWYeb`ҥҟҟ֣bYgTeZXg'XiXa\Yg[XcebWhVgbYg[X
number of Eligible PSUs that result from the Payout Percentage on the financial performance metrics and the rTSR modifier
jbh_Wbg[Xej\fXXkVXXWңҟҟ֣For a more detailed discussion of these new performance metrics see the section below
titled "–Fiscal 2025 Compensation Decisions" and section above titled “—Fiscal 2024 Equity Compensation—Alignment of
Remaining Performance Periods to Fiscal 2025 PSU Design.”
FISCAL 2024 ACHIEVEMENT WITH RESPECT TO FISCAL 2022 PSUS
Ңң֣bYg[XY\fVT_ҡҟҡҡILNfZeTagXWgbFeCXa^\afTaWҤҟ֣bYg[XY\fVT_ҡҟҡҡILNfZeTagXWgbXTV[bYbhebg[XeG>Hf
iXfgUTfXWbag[XTV[\XiX`XagbYg[XcXeYbe`TaVXZbT_fYbeg[X_\Z\U_XILNfj\__UXXdhT_gbg[XcebWhVgbY&\'
the target number of PSUs, and (ii) the average of the achievement percentages for the financial metric for each fiscal year
in the performance period.
The payout of the second tranche of the Fiscal 2022 PSUs was determined as follows:
Target Number
of PSUs
@K:GM>=
X
Average of the Three-Year Performance
Achievements based on Year-over-Year
KXiXahX@ebjg[YbeY\fVT_ҡҟҡҡҡҟҡҢTaWҡҟҡң
X
eMLKFbW\Y\Xe
=
Number of
PSUs
VESTED
99
2024 Proxy Statement
Executive Compensation
Executive Compensation
The following charts show three-year results for the final tranche of the fiscal 2022 PSU awards granted to our NEOs.
Our 16.5% year-over-year annual revenue growth in fiscal 2024 (compared to a target of 18.9%), resulted in an achievement
percentage of 76% for fiscal 2024. Our revenue growth during the fiscal 2022 performance period resulted in an
achievement percentage of 136% for fiscal 2022, and our revenue growth during the fiscal 2023 performance period
resulted in an achievement percentage of 96% for fiscal 2023. This results in an average achievement percentage for the
fiscal 2022 PSU award financial measure of 102.7%. The number of PSUs that vested (up to a maximum of 300% of the
target number of PSUs) was equal to the product of (x) the number of Eligible PSUs and (y) the rTSR modifier, subject to
the applicable NEO's continued service through the certification date. The rTSR modifier was determined based on rTSR
during the 3-year performance period ending on July 31, 2024, which, as reflected in the graph below, was at the 98th
percentile.(') Based on this rTSR, the rTSR modifier was 1.5x, and the number of PSUs that vested was 154% of target.
Average of the Three-Year Performance
rTSR Modifier
Achievements based on Year-over-Year
Revenue Growth for fiscal 2022, 2023
and 2024
125%
t 100%
a)
102.7%
98th
90th
percentile
1.50x
E
a)
a)
a)
75th
1.25x
LE
a)
75%
C
a)
2
a)
C
co
50th
1.00x
E
8
a)
50%
25%
25th
0.75x
OUR APPROACH TO ONE-TIME AWARDS TO NEOs
The Compensation and People Committee believes it may be necessary from time-to-time to make one-time awards
outside of the normal grant cycle in certain circumstances, primarily to attract new executives, internally promote an
executive or counter an external competing offer to one of our existing executives for retention purposes.
In considering these awards, the Compensation and People Committee follows the following principles:
For new hire awards, time-vested equity should compensate the executive for a portion of the unvested equity they
would forfeit from their current role or forgo from a competing offer. Any additional upside should be delivered through
performance-based equity, such that a majority of the total equity value is performance-based.
For promotion and retention awards, the majority of the award should be performance-based and anytime vested equity
should be granted only if the employee's existing unvested equity is low compared to market or internal peers.
No one-time equity awards were made in fiscal 2024 to any of our NEOs.
0) As described above in the section "—Fiscal 2024 Equity Compensation,"the beginning stock price and ending stock price with respect
to the Company and each indexed company for purposes of determining our and each indexed company's TSR over the relevant
performance period is determined based on the average of the closing trading prices of the relevant company for the thirty consecutive
trading days ending with the last trading day before the beginning of the performance period (for the beginning price) and the last
trading day of the performance period (for the ending price).
100
PalomIto°
2024 Proxy Statement
JewPoIN dS1J
The following charts show three-year results for the final tranche of the fiscal 2022 PSU awards granted to our NEOs.
Our ҠҥҤ֣lXTe!biXe!lXTeTaahT_eXiXahXZebjg[\aY\fVT_ҡҟҡң&Vb`cTeXWgbTgTeZXgbYҠҧҨ֣'eXfh_gXW\aTaTV[\XiX`Xag
cXeVXagTZXbYҦҥ֣YbeY\fVT_ҡҟҡңHheeXiXahXZebjg[Whe\aZg[XY\fVT_ҡҟҡҡcXeYbe`TaVXcXe\bWeXfh_gXW\aTa
TV[\XiX`XagcXeVXagTZXbYҠҢҥ֣YbeY\fVT_ҡҟҡҡTaWbheeXiXahXZebjg[Whe\aZg[XY\fVT_ҡҟҡҢcXeYbe`TaVXcXe\bW
eXfh_gXW\aTaTV[\XiX`XagcXeVXagTZXbYҨҥ֣YbeY\fVT_ҡҟҡҢM[\feXfh_gf\aTaTiXeTZXTV[\XiX`XagcXeVXagTZXYbeg[X
Y\fVT_ҡҟҡҡILNTjTeWY\aTaV\T_`XTfheXbYҠҟҡҦ֣M[Xah`UXebYILNfg[TgiXfgXW&hcgbT`Tk\`h`bYҢҟҟ֣bYg[X
gTeZXgah`UXebYILNf'jTfXdhT_gbg[XcebWhVgbY&k'g[Xah`UXebY>_\Z\U_XILNfTaW&l'g[XeMLK`bW\Y\XefhU]XVggb
the applicable NEO’s continued service through the certification date. The rTSR modifier was determined based on rTSR
during the 3-year performance period ending on July 31ҡҟҡңj[\V[TfeXY_XVgXW\ag[XZeTc[UX_bjjTfTgg[XҨҧg[
percentile.(1);TfXWbag[\feMLKg[XeMLK`bW\Y\XejTfҠҤkTaWg[Xah`UXebYILNfg[TgiXfgXWjTfҠҤң֣bYgTeZXg
Average of the Three-Year Performance
Achievements based on Year-over-Year
Revenue Growth for fiscal 2022, 2023
and 2024
102.7%
Performance Achievement
25%
50%
75%
100%
125%
rTSR Modifier
98th percentile
Percentile
90th
1.50x
1.25x
1.00x
0.75x
75th
50th
25th
rTSR Modifier
OUR APPROACH TO ONE-TIME AWARDS TO NEOs
The Compensation and People Committee believes it may be necessary from time-to-time to make one-time awards
outside of the normal grant cycle in certain circumstances, primarily to attract new executives, internally promote an
executive or counter an external competing offer to one of our existing executives for retention purposes.
In considering these awards, the Compensation and People Committee follows the following principles:
y ?beaXj[\eXTjTeWfg\`X!iXfgXWXdh\glf[bh_WVb`cXafTgXg[XXkXVhg\iXYbeTcbeg\babYg[XhaiXfgXWXdh\glg[Xl
would forfeit from their current role or forgo from a competing offer. Any additional upside should be delivered through
cXeYbe`TaVX!UTfXWXdh\glfhV[g[TgT`T]be\glbYg[XgbgT_Xdh\gliT_hX\fcXeYbe`TaVX!UTfXW
y ?beceb`bg\baTaWeXgXag\baTjTeWfg[X`T]be\glbYg[XTjTeWf[bh_WUXcXeYbe`TaVX!UTfXWTaWTalg\`XiXfgXWXdh\gl
f[bh_WUXZeTagXWba_l\Yg[XX`c_blXXfXk\fg\aZhaiXfgXWXdh\gl\f_bjVb`cTeXWgb`Te^Xgbe\agXeaT_cXXef
GbbaX!g\`XXdh\glTjTeWfjXeX`TWX\aY\fVT_ҡҟҡңgbTalbYbheG>Hf
(1) As described above in the section “—Fiscal 2024 Equity Compensation,” the beginning stock price and ending stock price with respect
to the Company and each indexed company for purposes of determining our and each indexed company's TSR over the relevant
performance period is determined based on the average of the closing trading prices of the relevant company for the thirty consecutive
trading days ending with the last trading day before the beginning of the performance period (for the beginning price) and the last
trading day of the performance period (for the ending price).
100
2024 Proxy Statement
Executive Compensation
Executive Compensation
FISCAL 2023 CEO'
'ITION AWARD
During fiscal 2023, our Compensation and People Committee granted Mr. Arora, our Chief Executive Officer, a significant
performance-based restricted stock unit retention award. The decision was reached following a rigorous and data-driven
assessment by our Compensation and People Committee, concluding that Mr. Arora had typified our leadership ethos—one
that values high integrity and high performance for the benefit of our shareholders and all company stakeholders. The
committee also recognized that he led our transformation from a market leader in next generation firewalls into the world's
cybersecurity leader, with best-of-breed products across network security, cloud security and security operations. During
Mr. Arora's tenure, our financial performance and product innovation has accelerated, and our market capitalization
increased from $19.1 billion (as of May 31, 2018, the last trading day prior to announcing Mr. Arora as our Chief Executive
Officer) to $76.5 billion (as of July 31, 2023, the last day of fiscal 2023), and it continued to increase substantially throughout
fiscal 2024. With Nikesh at the helm, Palo Alto Networks has delivered extraordinary value creation for our shareholders
and has become the largest pure-play cybersecurity company in the world. We firmly believe that Mr. Arora is one of only a
few executive leaders who can deliver the caliber of performance critical to our successful attainment of our next phase of
growth. Accordingly, in making the performance-based grant to Mr. Arora in fiscal 2023, we sought to retain and engage a
provide, successful and industry-leading Chief Executive Officer for the long term so that our shareholder can continue to
experience the financial results that we expect to result from Mr. Arora's vision, strategic acumen and operational excellence.
Prior to making the performance-based grant to Mr. Arora, during fiscal 2022 and 2023, John Donovan, our Lead Independent
Director, held 30 and 21 meetings with shareholders, representing 39% and 31% of our outstanding shares (as of June 30, 2022
and June 30, 2023), respectively. When doing so, he personally took on the responsibility of soliciting input and guidance
from our shareholders as it relates to Mr. Arora's compensation. Sir John Key, the Chair of our Compensation and People
Committee, often joined Mr. Donovan in these meetings.
During these meetings, we sought shareholder input regarding the form and quantum of compensation paid to Mr. Arora,
and in particular, our shareholders' views as to whether the Board should seek to retain Mr. Arora for the long term,
including through a significant equity award. As a result of these meetings, it became apparent to the Board, as well as
the Compensation and People Committee, that our shareholders were very pleased with Mr. Arora's performance as our
Chief Executive Officer. Our shareholders also consistently expressed a desire for the Company to retain Mr. Arora for the
long term, and recognized that doing so would represent a significant financial commitment on behalf of the Company.
Our shareholders also expressed a strong recommendation that Mr. Arora's compensation, including any retention
compensation, should be consistent with the Company's pay-for-performance philosophy, with vesting events aligning
with performance levels that deliver significant value creation for the Company's shareholders. In addition, shareholders
expressed the view that Mr. Arora's retention compensation should also be subject to reduction or risk if the Company failed
to deliver expected financial performance.
Following their meetings with our shareholders, Mr. Donovan and Sir John Key informed the Compensation and People
Committee and the independent members of our Board of their engagement with shareholders, including the feedback
received from them. The Compensation and People Committee sought to align Mr. Arora's long-term performance and
retention award with the guidance and input provided by our shareholders. In this respect, the Committee included the
following features, which it believed aligned with the feedback received by numerous of our shareholders:
A five-year cliff, which enhances retention benefits of the award, and only pays out based on sustained performance.
Mr. Arora must remain in the employ of the Company throughout the entire duration of the five-year performance period.
Failure to do so will result in Mr. Arora receiving no value or compensation from the award.
A minimum level of required performance, where the award can result in as few as zero shares, if the Company's
performance is less than 40% of the companies in the S&P 500 over the five-year performance period.
A median performance level that is tied to performance at the 55th percentile of the S&P 500 index, rather than the
50th percentile.
A graduated payout curve, where Mr. Arora will only receive the maximum level of compensation if the Company delivers
exceptional stock price performance, as measured against the S&P 500 index.
During fiscal 2023, the Board's primary responsibility was to oversee the Company's efforts to deliver meaningful and
sustainable value to our shareholders. Our Board continues to believe that retaining Mr. Arora as our Chief Executive Officer
for the long-term is critical to fulfilling that responsibility. Our Compensation and People Committee has committed not to
grant Mr. Arora, our Chief Executive Officer, additional one-time equity awards of any variety with vesting or performance
metrics that would overlap with the one-time performance-based restricted stock unit retention award granted to him in
June 2023.
2024 Proxy Statement
*paloajtcy
101
FISCAL 2023 CEO RETENTION AWARD
During fiscal 2023, our Compensation and People Committee granted Fe:rora, our Chief Executive Officer, a significant
performance-based restricted stock unit retention award. The decision was reached following a rigorous and data-driven
assessment by our Compensation and People Committee, concluding that Fe:rora had typified our leadership ethos—one
that values high integrity and high performance for the benefit of our shareholders and all company stakeholders. The
committee also recognized that he led our transformation from a market leader in next generation firewalls into the world’s
cybersecurity leader, with best-of-breed products across network security, cloud security and security operations. During
Fe:rora's tenure, our financial performance and product innovation has accelerated, and our market capitalization
increased from $19.1 billion (as of FTlҢҠ, 2018, the last trading day prior to announcing Fe:rora as our Chief Executive
Officer) to $76.5 billion (as of July 31, 2023, the last day of fiscal 2023), and it continued to increase substantially throughout
Y\fVT_ҡҟҡңP\g[G\^Xf[Tgg[X[X_`IT_b:_gbGXgjbe^f[TfWX_\iXeXWXkgeTbeW\aTeliT_hXVeXTg\baYbebhef[TeX[b_WXef
and has become the largest pure-play cybersecurity company in the world. We firmly believe that Fe:rora is one of only a
few executive leaders who can deliver the caliber of performance critical to our successful attainment of our next phase of
growth. Accordingly, in making the performance-based grant to Fe:rora in fiscal 2023, we sought to retain and engage a
provide, successful and industry-leading Chief Executive Officer for the long term so that our shareholder can continue to
experience the financial results that we expect to result from Fe:rora's vision, strategic acumen and operational excellence.
Prior to making the performance-based grant to Fe:rora, during fiscal 2022 and 2023, John Donovan, our Lead Independent
=\eXVgbe[X_WҢҟTaWҡҠ`XXg\aZfj\g[f[TeX[b_WXefeXceXfXag\aZҢҨ֣TaWҢҠ֣bYbhebhgfgTaW\aZf[TeXf&TfbYJune 30, 2022
and June 30, 2023), respectively. When doing so, he personally took on the responsibility of soliciting input and guidance
from our shareholders as it relates to Fe:ebeTfVb`cXafTg\baL\eCb[aDXlg[X<[T\ebYbhekXVhg\iXHYY\VXeTWW\g\baT_baX!g\`XXdh\glTjTeWfbYTaliTe\Xglj\g[iXfg\aZbecXeYbe`TaVX
metrics that would overlap with the one-time performance-based restricted stock unit retention award granted to him in
June 2023.
101
2024 Proxy Statement
Executive Compensation
Executive Compensation
Fiscal 2025 Compensation Decisions
In connection with the continuing evolution of our compensation programs in response to the results of our
shareholder "Say-on-Pay" advisory vote at the 2023 annual meeting of shareholders, shareholder feedback and
the advice our Compensation and People Committee received from its independent compensation consultant,
we distilled a number of important changes to our executive compensation programs, particularly to the equity
compensation program. to support the Company's goals and reflect our pay-for-performance philosophy.
While some of the changes we are making in response to shareholder feedback, including the results of the "Say-on-Pay"
advisory vote, could not be fully reflected in compensation decisions made for fiscal 2024 because certain of our fiscal 2024
pay decisions had already been made when that feedback was received, we have fully implemented these changes in our
fiscal 2025 pay decisions.
Reduced Total Potential Payout. For fiscal 2025, we have redesigned the PSU awards to lower the maximum payout
by 33.3%, from 600% to 400% of the target payout.
Updated PSU Financial Metric Design to Align with our Strategy. The Compensation and People Committee
believes that NEO compensation should be aligned with (i) the strategic plan and initiatives approved by the Board,
(ii) the key financial metrics approved by the Board and communicated to investors, and (iii) the strategies that will fuel
our long-term growth. During fiscal 2024, the Board approved an ambitious plan to accelerate Platformization - our
strategy to accelerate customer adoption of our platforms across our portfolio - which the Board believes will be a
driving force toward our long-term financial goal of $15 billion in NGS ARR by 2030, and meaningfully increase long-
term shareholder value. Accordingly, for fiscal 2025, the Compensation and People Committee changed the financial
measures of our PSUs to better align with this long-term strategy by linking executive compensation to an equal
weighting of NGS ARR and Non-GAAP EPS. NGS ARR has become one of the Company's key metrics, and our key top-
line guidance metric in addition to revenue. We believe NGS ARR represents the return on the investments we make in
next-generation security that will disproportionality drive our growth and profitability. The Compensation and People
Committee introduced Non-GAAP EPS to ensure our growth is balanced, not overly weighted towards the top-line, and
is profitable. By aligning NEO compensation to NGS ARR and Non-GAAP EPS, the Compensation and People Committee
believes that we are fulfilling our pay-for-performance philosophy commitment to our shareholders by linking our
executive's long-term equity compensation with our long-term goals.
Aligned Prior Awards to New Design. For our fiscal 2023 and fiscal 2024 PSU awards for NEOs, we reduced the
maximum target payout consistent with the design for the fiscal 2025 awards, and we aligned the financial performance
metrics for the remaining performance periods with the financial performance metrics adopted for the fiscal 2025 PSU
awards. Accordingly, the maximum payout for these prior PSUs has been lowered by 33.3%, from 600% to 400% of
target number of PSUs, and the financial performance metrics - annual NGS ARR and Non-GAAP EPS - will further align
NEO equity compensation to the success of our Platformization strategy and our focus on profitability. We believe that
adopting the fiscal 2025 award financial metrics for all remaining performance periods in the fiscal 2023 and fiscal 2024
PSU awards will ensure our NEOs are focused on the metrics we believe will be most useful to evaluate the success of
current business strategy. In addition, beginning in the first fiscal quarter of 2025, billings will no longer be a key financial
metric of the Company and will no longer be reported by the Company. For a more detailed discussion of these new
financial performance metrics, particularly as they apply to the remaining performance periods for the fiscal 2024 PSUs,
see the section above titled "—Fiscal 2024 Equity Compensation—Alignment of Remaining Performance Periods to Fiscal
2025 PSU Design."
Clearly Defined Cash Incentive Plan Performance Thresholds. For our fiscal 2025 annual cash incentive plan
design, we clearly identified the threshold performance levels for each metric required for the funding and payout of
the cash incentive plan. If the performance of either metric in the fiscal 2025 cash incentive plan (revenue and organic
operating margin) is more than 10% below its respective target for fiscal 2025, then there will be no funding or payout of
the cash incentive plan.
102
palomlur
2024 Proxy Statement
Fiscal 2025 Compensation Decisions
In connection with the continuing evolution of our compensation programs in response to the results of our
shareholder “Say-on-Pay” advisory vote at the 2023 annual meeting of shareholders, shareholder feedback and
the advice our Compensation and People Committee received from its independent compensation consultant,
we distilled a number of important changes to our executive compensation programs, particularly to the equity
compensation program, to support the Cb`cTalfZbT_fTaWeXY_XVgbhecTl!Ybe!cXeYbe`TaVXc[\_bfbc[l
While some of the changes we are making in response to shareholder feedback, including the results of the “Say-on-Pay”
TWi\fbelibgXVbh_WabgUXYh__leXY_XVgXW\aVb`cXafTg\baWXV\f\baf`TWXYbeY\fVT_ҡҟҡңUXVThfXVXegT\abYbheY\fVT_ҡҟҡң
pay decisions had already been made when that feedback was received, we have fully implemented these changes in our
fiscal 2025 pay decisions.
y KXWhVXWMbgT_IbgXag\T_ITlbhg For fiscal 2025, we have redesigned the PSU awards to lower the maximum payout
UlҢҢҢ֣Yeb`ҥҟҟ֣gbңҟҟ֣bYg[XgTeZXgcTlbhg
y NcWTgXWILN?\aTaV\T_FXge\V=Xf\Zagb:_\Zaj\g[bheLgeTgXZlThe Compensation and People Committee
believes that NEO compensation should be aligned with (i) the strategic plan and initiatives approved by the Board,
(ii) the key financial metrics approved by the Board and communicated to investors, and (iii) the strategies that will fuel
bhe_baZ!gXe`Zebjg[=he\aZY\fVT_ҡҟҡңg[X;bTeWTccebiXWTaT`U\g\bhfc_TagbTVVX_XeTgXI_TgYbe`\mTg\ba#bhe
strategy to accelerate customer adoption of our platforms across our portfolio – which the Board believes will be a
We\i\aZYbeVXgbjTeWbhe_baZ!gXe`Y\aTaV\T_ZbT_bYպҠҤU\__\ba\aG@L:KKUlҡҟҢҟTaW`XTa\aZYh__l\aVeXTfX_baZ!
term shareholder value. Accordingly, for fiscal 2025, the Compensation and People Committee changed the financial
`XTfheXfbYbheILNfgbUXggXeT_\Zaj\g[g[\f_baZ!gXe`fgeTgXZlUl_\a^\aZXkXVhg\iXVb`cXafTg\bagbTaXdhT_
jX\Z[g\aZbYG@L:KKTaWGba!@::I>ILG@L:KK[TfUXVb`XbaXbYg[XILgbXafheXbheZebjg[\fUT_TaVXWabgbiXe_ljX\Z[gXWgbjTeWfg[Xtop-line, and
\fcebY\gTU_X;lT_\Za\aZG>HVb`cXafTg\bagbG@L:KKTaWGba!@::I>ILg[XIL#j\__Yheg[XeT_\Za
NEO Xdh\glcompensation to the success of our Platformization strategy and our focus on profitability. We believe that
TWbcg\aZg[XY\fVT_ҡҟҡҤTjTeWY\aTaV\T_`Xge\VfYbeT__eX`T\a\aZcXeYbe`TaVXcXe\bWf\ag[XY\fVT_ҡҟҡҢTaWY\fVT_ҡҟҡң
PSU awards will ensure our NEOs are focused on the metrics we believe will be most useful to evaluate the success of
VheeXagUhf\aXfffgeTgXZlBaTWW\g\baUXZ\aa\aZ\ag[XY\efgY\fVT_dhTegXebYҡҟҡҤU\__\aZfj\__ab_baZXeUXT^XlY\aTaV\T_
metric of the Company and will no longer be reported by the Company. For a more detailed discussion of these new
financial cXeYbe`TaVX`Xge\VfcTeg\Vh_Te_lTfg[XlTcc_lgbg[XeX`T\a\aZcXeYbe`TaVXcXe\bWfYbeg[XY\fVT_ҡҟҡңILNf
see the section above titled “—Fiscal 2024 Equity Compensation—Alignment of Remaining Performance Periods to Fiscal
2025 PSU Design.”
y <_XTe_l=XY\aXW`c_blXXf[b_W\aZg[Xg\g_XbYLXa\beO\VXIeXf\WXagbe[\Z[XeTeXX_\Z\U_XYbeVbag\ahXWiXfg\aZbYXdh\glTjTeWf\YfhV[
X`c_blXX&\'ib_hagTe\_leXf\ZafYeb`Yh__!g\`XX`c_bl`Xag
&\\'[TfTggT\aXWg[XTZXbYҤҤlXTefTaW[TfUXXaVbag\ahbhf_l
employed by the Company as a full-time employee for at least five years as of the date of such resignation or has been
continuously employed by the Company as a full-time employee for at least 10 years as of the date of such resignation or
geTaf\g\ba
TaW&\\\'`T\agT\afTVbag\ahXWfXei\VXeX_Tg\baf[\cj\g[g[Xdh\glBaVXag\iXI_TaLhei\ibe;XaXY\gIb_\Vl&g[XLhei\ibe
Benefit Policy"), which provides that upon the death of an employee, VXegT\aXdh\glTjTeWfbYg[XX`c_blXXwill fully
accelerate and vest, unless prohibited by applicable laws. For any awards with performance-based vesting terms that are
accelerated, unless otherwise specified in an award agreement, a Company policy that applies to the employee,
a determination made by the Company, our Board, or our Compensation and People Committee before the employee’s death,
beTje\ggXaTZeXX`Xagj\g[g[XX`c_blXXT__cXeYbe`TaVXZbT_fbebg[XeiXfg\aZVe\gXe\Tj\__UXWXX`XWTV[\XiXWTgҠҟҟ֣bY
target levels and any multipliers (whether based on TSR or otherwise) will not impact the award. For further details regarding
this policy, please see the section below titled: “ –Termination of Employment and Potential Payments Unrelated to a Change
in Control –Potential Payments in connection with Termination of Employment Due to Death.”
Under the cash incentive plan, participants who did not elect to defer any portion of their cash incentive plan payouts
haWXebheaba!dhT_\Y\XWWXYXeeXWVb`cXafTg\bac_Taare eligible to receive a cash incentive plan payout upon their death,
as described in further detail in the section titled “—Termination of Employment and Potential Payments Unrelated to a
Change in Control.”
103
2024 Proxy Statement
Executive Compensation
Executive Compensation
Executive Officer Stock Ownership GuidelineF
Purpose. Our Board believes that our executive officers should hold a meaningful financial stake in our Company to closely
align their interests with those of our shareholders and has therefore adopted stock ownership guidelines as part of our
corporate governance guidelines.
Ownership Definition. Unvested PSUs, RSUs, and unexercised stock options do not count toward satisfying these
ownership guidelines.
Ownership Requirement. Our Chief Executive Officer and executive officers who report directly to our Chief Executive
Officer must accumulate and hold shares of our common stock based on a multiple of base salary within five years of their
appointment as, or promotion to, an executive officer.
As of September 23, 2024, each of our NEOs have met their respective stock ownership guideline.
The following table lists the specific ownership requirements for our NEOs, their status in meeting the guidelines, and their
deadlines to meet the current requirements.
Multiple of
Base Salary
Officer
Requirement
Status
Deadline
Nikesh Arora
10)c
Met
June 2023
Dipak Golechha
lx
Met
March 2026
William "Br Jenkins
lx
Met
August 2026
Lee Klarich
lx
Met
May 2011
Nir Zuk
lx
Met
February 2010
Risk Assessment and Compensation Practices
Our management assesses and discusses with our Compensation and People Committee our compensation policies and
practices as they relate to our risk management. Based upon this assessment, the Compensation and People Committee
believes that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect
on us.
In reaching this conclusion, we have considered, among other things, the following factors:
our cash incentive plan reflects a "pay for performance philosophy" that rewards our NEOs and other eligible employees
for achievement of performance targets;
discretionary bonuses are reserved for extraordinary performance and achievement;
total compensation features a balance of short- and long-term incentives (LTI), with the majority of pay delivered in LTI
for senior executives;
our equity awards include multi-year vesting schedules requiring long-term employee commitment;
our performance expectations reward long-term value creation, profitability and excellence;
our use of multiple performance measures in incentive plans;
our regular monitoring of short-term and long-term compensation practices to determine whether management's
objectives are satisfied;
performance goals require sufficient "stretch," yet are achievable;
both the short-term and long-term incentive programs have caps for significant upside performance; and
our independent compensation consultant evaluated and assessed our compensation policies and practices and
confirmed that our practices do not encourage excessive risk taking.
104
palomlur
2024 Proxy Statement
Executive Officer Stock Ownership Guidelines
Purpose. Our Board believes that our executive officers should hold a meaningful financial stake in our Company to closely
align their interests with those of our shareholders and has therefore adopted stock ownership guidelines as part of our
corporate governance guidelines.
Ownership Definition. Unvested PSUs, RSUs, and unexercised stock options do not count toward satisfying these
ownership guidelines.
Ownership Requirement. Our Chief Executive Officer and executive officers who report directly to our Chief Executive
Officer must accumulate and hold shares of our common stock based on a multiple of base salary within five years of their
appointment as, or promotion to, an executive officer.
As of September 23ҡҟҡңXTV[bYbheG>Hf[TiX`Xgg[X\eeXfcXVg\iXfgbV^bjaXef[\cZh\WX_\aX
M[XYb__bj\aZgTU_X_\fgfg[XfcXV\Y\VbjaXef[\ceXdh\eX`XagfYbebheG>Hfg[X\efgTghf\a`XXg\aZg[XZh\WX_\aXfTaWg[X\e
WXTW_\aXfgb`XXgg[XVheeXageXdh\eX`Xagf
Officer
Multiple of
Base Salary
Requirement
Status
Deadline
Nikesh Arora
Ҷҵk
FXg
ChaXҷҵҷҸ
Dipak Golechha
Ҷk
FXg
FTeV[ҷҵҷһ
William “BJ” Jenkins
Ҷk
FXg
:hZhfgҷҵҷһ
Lee Klarich
Ҷk
FXg
FTlҷҵҶҶ
Nir Zuk
Ҷk
FXg
?XUehTelҷҵҶҵ
Risk Assessment and Compensation Practices
Our management assesses and discusses with our Compensation and People Committee our compensation policies and
practices as they relate to our risk management. Based upon this assessment, the Compensation and People Committee
believes that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect
on us.
In reaching this conclusion, we have considered, among other things, the following factors:
y our cash incentive plan reflects a “pay for performance philosophy” that rewards our NEOs and other eligible employees
YbeTV[\XiX`XagbYcXeYbe`TaVXgTeZXgf
y W\fVeXg\baTelUbahfXfTeXeXfXeiXWYbeXkgeTbeW\aTelcXeYbe`TaVXTaWTV[\XiX`Xag
y total compensation features a balance of short- and long-term incentives (LTI), with the majority of pay delivered in LTI
YbefXa\beXkXVhg\iXf
y bheXdh\glTjTeWf\aV_hWX`h_g\!lXTeiXfg\aZfV[XWh_XfeXdh\e\aZ_baZ!gXe`X`c_blXXVb``\g`Xag
y bhecXeYbe`TaVXXkcXVgTg\bafeXjTeW_baZ!gXe`iT_hXVeXTg\bacebY\gTU\_\glTaWXkVX__XaVX
y bhehfXbY`h_g\c_XcXeYbe`TaVX`XTfheXf\a\aVXag\iXc_Taf
y our regular monitoring of short-term and long-term compensation practices to determine whether management’s
bU]XVg\iXfTeXfTg\fY\XW
y cXeYbe`TaVXZbT_feXdh\eXfhYY\V\XagfgeXgV[lXgTeXTV[\XiTU_X
y Ubg[g[Xf[beg!gXe`TaW_baZ!gXe`\aVXag\iXcebZeT`f[TiXVTcfYbef\Za\Y\VTaghcf\WXcXeYbe`TaVX
TaW
y our independent compensation consultant evaluated and assessed our compensation policies and practices and
confirmed that our practices do not encourage excessive risk taking.
104
2024 Proxy Statement
Executive Compensation
Executive Compensation
Compensation Recovery Policies
In December 2023, we adopted a new Compensation Recovery Policy in accordance with the SEC requirements under
the Dodd-Frank Wall Street Reform and Consumer Protection Act and Nasdaq's listing standards. The new Compensation
Recovery Policy supplements our existing Clawback Policy that was first adopted in August 2017 (the "2017 Clawback
Policy"), and provides for the non-discretionary recovery on a pre-tax basis of excess incentive-based compensation
received on or after October 2, 2023 by current and former executive officers (as defined in Rule 10D-1(d) under the
Securities and Exchange Act of 1934, as amended) ("Covered Officers") in the event of an accounting restatement to
correct the Company's material noncompliance with any financial reporting requirement under securities laws, whether
or not the Covered Officer was at fault for the restatement. Recovery of such excess compensation is required unless it is
determined that recovery is impractical in certain limited circumstances or the excess compensation was received prior to
the beginning of the Company's three fiscal years most recently completed before the date on which it is determined an
accounting restatement is required.
In connection with the adoption of the Compensation Recovery Policy, we amended the 2017 Clawback Policy through
which we may seek the recovery of performance-based incentive compensation paid by us under certain circumstances.
The amendment clarified that the 2017 Clawback Policy would no longer apply to excess incentive-based compensation
covered by our new Compensation Recovery Policy received on or after October 2, 2023 by Covered Officers. The
Compensation and People Committee determined that removing the overlap that would have otherwise existed would not
affect the Company's rights because there would not be a scenario in which there is compensation recoverable under the
2017 Clawback Policy that would not be recoverable under the new Compensation Recovery Policy after October 2, 2023.
Other than the change described above, the 2017 Clawback Policy remains unchanged otherwise and continues to apply
to our Chief Executive Officer and to all our officers who report directly to our Chief Executive Officer. The 2017 Clawback
Policy provides that if we restate our financial statements as a result of a material error, a covered executive received
excess compensation as a result, no more than two years have elapsed since the original filing date of the relevant financial
statements and the Compensation and People Committee unanimously concludes that fraud or intentional misconduct by
the covered executive caused the material error and it would be in our best interests to seek from such covered executive
recovery of the excess compensation, then our Compensation and People Committee may, in its sole discretion, seek
repayment from such covered executive.
insider Trading volicy
We have adopted an insider trading policy governing the purchase, sale, and/or other disposition of securities by our
directors, officers, employees, and other covered persons. We believe this policy is reasonably designed to promote
compliance with insider trading laws, rules, and regulations, as well as the exchange listing standards applicable to
us. A copy of our insider trading policy is filed as an exhibit to our Annual Report on Form 10-K for our fiscal year ended
July 31, 2024.
Hedging ana rieaging rolicies
Our insider trading policy prohibits our executive officers and members of our board of directors from engaging in derivative
securities transactions, including hedging or other transactions that offset, or are designed to hedge or offset, any decrease
in the market value of our equity securities and from pledging Company securities as collateral or holding Company
securities in a margin account, except, in the case of pledging, with the prior approval of the Governance and Sustainability
Committee. This policy does not restrict ownership of, or transactions related to, Company-granted awards, such as PSUs,
RSUs, employee stock options, and other securities issued by the Company or the deferral of equity awards pursuant to our
non-qualified deferred compensation plan.
Our executive officers have significant holdings of our stock to align their interests to those of our shareholders. Establishing
a conservative pledging policy enables our executive officers to continue to hold those shares, while providing them
flexibility in financial planning and allowing them to achieve financial diversification. By enabling our executives to maintain
their stock ownership in the Company, our conservative pledging program helps ensure that they continue to have a
meaningful financial interest in the success of the Company under their leadership. For these reasons, in fiscal 2022, the
Board adopted a conservative policy that allows limited pledging of our stock by our executive officers.
2024 Proxy Statement
*paloajt0; 105
Compensation Recovery Policies
Ba=XVX`UXeҡҟҡҢjXTWbcgXWTaXj<eXdh\eX`XagfhaWXe
g[X=bWW!?eTa^PT__LgeXXgKXYbe`TaWkV[TaZX:VgbYҠҨҢңTfT`XaWXW'&H
with such a “gross-up” or other reimbursement in the future.
Accounting for Share-Based Compensation. We follow ASC Topic 718 for our share-based compensation awards. ASC
Mbc\VҦҠҧeXdh\eXfVb`cTa\Xfgb`XTfheXg[XVb`cXafTg\baXkcXafXYbeT__f[TeX!UTfXWVb`cXafTg\baTjTeWf`TWXgb
employees and directors, including stock options and other stock-based awards, based on the grant date “fair value” of
these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even
g[bhZ[bheG>Hf`TlaXiXeeXT_\mXTaliT_hXYeb`g[X\eTjTeWf:L<Mbc\VҦҠҧT_fbeXdh\eXfVb`cTa\XfgbeXVbZa\mXg[X
compensation cost of their share-based compensation awards in their income statements over the period that an executive
bYY\VXe\feXdh\eXWgbeXaWXefXei\VX\aXkV[TaZXYbeg[Xbcg\babebg[XeTjTeW
106
2024 Proxy Statement
Executive Compensation
Executive Compensation
Perquisites and Other Personal Benefit
Retirement Plans. We have established a U.S. tax-qualified Section 401(k) retirement plan for all employees who satisfy
certain eligibility requirements, including requirements relating to age and length of service. We currently match
contributions made to the plan by our employees up to $1,000, including our NEOs. In fiscal 2024, Messrs. Golechha,
Jenkins and Klarich participated in our Section 401(k) retirement plan and each received a matching contribution of $1,000.
We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code, or the Code, so that contributions
by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from
the plan. We made payments for Mr. Zuk to certain Israeli pension and severance funds available to employees of our
Israel subsidiaries.
Health and Welfare Plans. In addition, we provide other benefits to our NEOs on the same basis as all of our full-time
employees in the country in which they are resident. These benefits include medical, dental, and vision benefits, medical
and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and
dismemberment insurance, and basic life insurance coverage. We design our employee benefits programs to be affordable
and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee
benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
We made payments for Mr. Zuk to certain Israeli health insurance plans available to employees of our Israel subsidiaries.
Deferred Compensation Plan. We have adopted a deferred compensation plan, which is a non-qualified deferred
compensation plan established in compliance with Section 409A of the Code. Participation in the deferred compensation
plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the Vice President level or above, as
determined by the Compensation and People Committee, which administers the deferred compensation plan, and includes
the Company's executive officers. For a summary of the material terms and conditions of the deferred compensation plan,
see the section titled "—Executive Compensation Tables."
Other Personal Benefits. Our Compensation and People Committee determined that if any harm occurred to our Chief
Executive Officer, our business operations, investor confidence and employee productivity would be severely impacted.
Accordingly, the Board continued to take reasonable steps to ensure the safety and security of Mr. Arora, considering the
nature of the position and its criticality to the operation of the Company.
We previously retained a leading global risk management and security consulting firm to analyze and determine if there
was a bona-fide business related security concern for Mr. Arora. Based on the results of its investigation (which included
investigation of a personal security incident involving Mr. Arora), this firm determined that there was a bona-fide, business
related security concern for Mr. Arora and credible threat actors existed with both the willingness and resources necessary
for conducting an attack on Mr. Arora. Accordingly, the firm recommended that the Company take various steps to ensure
the safety of Mr. Arora. Our chartered aircraft policy requires the use of chartered aircraft for both business and personal-
related air travel by Mr. Arora. To further ensure Mr. Arora's safety during vehicular travel, as part of the overall security
program, Mr. Arora is driven by a member of his security protection detail in a Company-leased automobile (including
during his commute, which is considered a personal benefit under the relevant disclosure rules).
Our Compensation and People Committee periodically reviews the nature and cost of this program in relation to his security
profile. In fiscal 2024, the Compensation and People Committee undertook an examination of the personal benefits of our
NEOs, which resulted in meaningful decreases to the personal benefits accrued by Mr. Arora. The amount of personal benefits
accrued by Mr. Arora decreased to a total of $1,686,522 in fiscal 2024 (reported in the "All Other Compensation" column
of the Summary Compensation Table), an approximately 56% decrease when compared to the total amount reported for
fiscal 2023 of $3,800,885. The decrease in personal benefits to Mr. Arora is in part due to a reduction in personal use of the
private aircraft, as well as the result of a careful review of vendors under our security program and efficiencies gained from
the decision to use a single vendor. This helped contribute to an approximate 55% decrease in the total amount of aircraft
and security-related perquisites and benefits for Mr. Arora when compared to fiscal 2023 - from $3,768,893 in fiscal 2023 to
$1,684,666 in fiscal 2024.
2024 Proxy Statement
*
paloajt9:
107
Perquisites and Other Personal Benefits
Retirement Plans.PX[TiXXfgTU_\f[XWTNLgTk!dhT_\Y\XWLXVg\baңҟҠ&^'eXg\eX`Xagc_TaYbeT__X`c_blXXfj[bfTg\fYl
VXegT\aX_\Z\U\_\gleXdh\eX`Xagf\aV_hW\aZeXdh\eX`XagfeX_Tg\aZgbTZXTaW_XaZg[bYfXei\VXPXVheeXag_l`TgV[
Vbage\Uhg\baf`TWXgbg[Xc_TaUlbheX`c_blXXfhcgbպҠҟҟҟ\aV_hW\aZbheG>HfBaY\fVT_ҡҟҡңFXffef@b_XV[[T
CXa^\afTaWD_Te\V[cTeg\V\cTgXW\abheLXVg\baңҟҠ&^'eXg\eX`Xagc_TaTaWXTV[eXVX\iXWT`TgV[\aZVbage\Uhg\babYպҠҟҟҟ
PX\agXaWYbeg[Xc_TagbdhT_\YlhaWXeLXVg\baңҟҠ&T'bYg[XBagXeaT_KXiXahXHf\aXTV[eXcbegXWY\fVT_lXTeTfVb`chgXW\a
TVVbeWTaVXj\g[:L<Mbc\VҦҠҧM[XW\fV_bfheXeh_XfYbefgbV^TjTeWf\ag[Xfh``TelVb`cXafTg\bagTU_XTeXUTfXWbaj[Xag[XeX\f
a measurement date under financial accounting rules, because that is when it is possible to determine grant date fair value. As a result,
performance-based stock awards are not always disclosed in the summary compensation table during the year that they were legally
granted if performance metrics for a portion of the awards are set in a subsequent year. In the table above:
&\' M[XT`bhagf\aV_hWXWYbeY\fVT_ҡҟҡҡ\aV_hWXfg[XZeTagWTgXYT\eiT_hXbYTccebk\`TgX_lңҡ֣&be\aFeCXa^\afVTfXҥҠ֣'bYg[XILNf
legally granted in fiscal 2022 because the performance metrics for those PSUs were set in fiscal 2022.
&\\' M[XT`bhagf\aV_hWXWYbeY\fVT_ҡҟҡҢ\aV_hWXfg[XZeTagWTgXYT\eiT_hXbYTccebk\`TgX_lңҡ֣&be\aFeCXa^\afVTfXҡҧ֣'bYg[XILNf
legally granted in fiscal 2022, the grant date fair value of 1/3rd of the PSUs legally granted in August 2022 and the grant date fair value
of all of the PSUs legally granted to Mr. Arora in June 2023 because the performance metrics for those PSUs were set in fiscal 2023.
&\\\'M[XT`bhagf\aV_hWXWYbeY\fVT_ҡҟҡң\aV_hWXfg[XZeTagWTgXYT\eiT_hXbYTccebk\`TgX_lҠҥ֣&be\aFeCXa^\afVTfXҠҠ֣'bYg[XILNf
_XZT__lZeTagXW\aY\fVT_ҡҟҡҡg[XZeTagWTgXYT\eiT_hXbYԾbYg[XILNf_XZT__lZeTagXW\aY\fVT_ҡҟҡҢTaWg[XZeTagWTgXYT\eiT_hXbY
1/3 of the PSUs legally granted in fiscal 2024 because the performance metrics for those PSUs were set in fiscal 2024.
The result of this disclosure regime is that the increase in our stock price year over year results in larger grant date fair values reported
in years subsequent to the year awards were legally granted because the higher stock price is used to establish the grant date fair
value of the portion of an award that is set in those subsequent years. The grant date value of the awards that were considered to
have been granted in fiscal 2024haWXe:L<Mbc\VҦҠҧ, assuming that the highest level of performance conditions will be achieved, is
պҠҤҤҢҦҧҟҥҧYbeMr. AebeTպҢҧҟҠҦҟҧҟYbeMr. Gb_XV[[TպңңҧҤңҡҟҡYbeMr. Jenkins, $52,663,491 for Mr. K_Te\V[TaWպҢҡҢҨҧңҢҡ
for Mr. Zuk.M[Xcbeg\bafbYTalTjTeWfg[TgiXfgUTfXWbag[XTV[\XiX`XagbYcXeYbe`TaVXZbT_f&bg[Xeg[TaeX_Tg\iXMLK'Ybe
fiscal years after fiscal 2024Wbabg[TiXTeXcbegTU_XZeTagWTgXYT\eiT_hXhaWXe:L<Mbc\VҦҠҧTaWTeXabg\aV_hWXW\ag[\fgTU_X
The assumptions used in calculating the grant date fair value of the awards reported in this column are set forth in the notes to our
audited consolidated financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2024. For
more information, see footnote 3 to the Fiscal 2024 Grants of Plan-Based Awards Table. Note that the amounts reported in this
column do not correspond to the actual economic value that may be received by our NEOs from their equity awards.
&ҡ' BaV_hWXf_\YX\afheTaVXceX`\h`fbYպҦҦҟcXefbaT_fXVhe\glVbfgfbYպҠҠҠҤҢҠҤUTfXWba\aib\VXfcebi\WXWUlTg[\eW!cTeglfXVhe\gl
Vb`cTalTccebk\`TgX_lպҢҦҤҧҢҨYbeVbfgfTgge\UhgXWgbcXefbaT_hfTZXbYce\iTgXT\eVeTYgTaWTHUlg[XV_bf\aZ`Te^Xgce\VXbYbheVb``bafgbV^baGTfWTdbaCh_lҢҠҡҟҡң&g[X_TfggeTW\aZWTlbYbheҡҟҡңY\fVT_lXTe'
j[\V[jTfպҢҡңҦҢcXef[TeX
&ҡ' Represents PSUs that were granted under our ҡҟҡҠ>dh\glBaVXag\iXI_Ta&ҡҟҡҠI_Ta'. PSUs have a three-year performance period
and will vest at the end of the performance period based on the achievement of performance goals for the Company’s 2024, 2025 and
2026 fiscal years. Values included in the Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have
Not Vested and Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
columns include the threshold values for number of shares and market value. For more information, see the section titled “Fiscal 2024
Executive Compensation Program—Fiscal 2024 Executive Compensation Program Components—Fiscal 2024 Equity Compensation.”
&Ң' Represents PSUs that were granted under our 2021 Plan. Following the completion of a five-year performance period, the
Compensation and People Committee will make the final determination of performance in connection with the award, after which the
shares will fully vest. Values included in the Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have
Not Vested and Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
columns include the maximum values for number of shares and market value (i.e., calculated assuming the highest relative TSR target
jTf`Xg'
&ң' Represents PSUs that were granted under our 2021 Plan. PSUs have a three-year performance period and will vest at the end of the
performance period based on the achievement of the performance goals for the Company’s 2023, 2024 and 2025 fiscal years. Values
included in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” and “Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested” columns include the
maximum values for number of shares and market value (i.e., calculated assuming all maximum performance targets were met and the
eX_Tg\iXMLK`bW\Y\XejTfT_fbTgg[X`Tk\`h`iT_hX', based on the terms of such PSUs as in effect on July 31, 2024. As discussed in the
section titled “Compensation Discussion and Analysis–Fiscal 2025 Compensation Decisions,” following the end of our fiscal 2024, the
maximum payout for the PSUs granted in our fiscal 2023 (which have a grant date of August 23ҡҟҡҡ'jTf_bjXeXWYeb`ҥҟҟ֣gbңҟҟ֣
of the target number of shares subject to the PSUs. Taking into account the reduced maximum payout, the maximum values for number
bYf[TeXfTaW`Te^XgiT_hXg[Tgjbh_W[TiXUXXaeXcbegXWYbeg[XfXILNfjbh_W[TiXUXXa &\'YbeMr. AebeTҧҦҟҟҥҟILNfj\g[T
iT_hXbYպҡҧҡҤҢңҤҧң&\\'YbeMr. Gb_XV[[TҡҟҥҟҥңILNfj\g[TiT_hXbYպҥҥҨҠҤҠҥҢ&\\\'YbeMr. JXa^\afҡҡҧҨҥҟILNfj\g[TiT_hXbY
պҦңҢҤҟҠҧҠ&\i'YbeMr. K_Te\V[ҢңҢңңҟILNfj\g[TiT_hXbYպҠҠҠҤҡҤҡҦҠTaW&i'YbeMr. Zh^ҠҧҢҠҥҧILNfj\g[TiT_hXbYպҤҨңҧҟҠңҤ
&Ҥ' KXceXfXagfILNfg[TgjXeXZeTagXWhaWXebheҡҟҠҡ>dh\glBaVXag\iXI_Ta&g[XҡҟҠҡI_Ta'LcXV\Y\XWcXeYbe`TaVX`Xge\Vf[Ti\aZ
been achieved, the PSUs that became eligible to vest will vest upon the Compensation and People Committee’s final determination of
performance in connection with the award. Values included in the “Stock Awards—Number of Shares or Units of Stock That Have Not
Vested” and “Stock Awards—Market Value of Shares or Units of Stock That Have Not Vested” columns reflect the PSUs that were eligible
to vest, as of July 31, 2024, based upon achievement of the specified performance metric.
&ҥ' Represents PSUs that were granted under our 2012 Plan. A specified performance metric having been achieved, the PSUs that became
eligible to vest will vest over a four-year period, with 15% of such PSUs having vested in equal quarterly increments during year two with
the first vesting on January 20, 2022; 42.5% of such PSUs having vested in equal quarterly increments during year three; and 42.5% of
such PSUs vesting in equal quarterly increments during year four, in each case subject to the executive’s continued service through the
applicable vesting date.
&Ҧ' OXfgXWTfgbҠ.Ҧg[bYg[XeXfge\VgXWfgbV^ha\gfbaChaXҦҡҟҠҨTaWg[XeX`T\a\aZeXfge\VgXWfgbV^ha\gfiXfg\aXdhT_\aVeX`XagfXTV[
dhTegXeg[XeXTYgXej\g[Yh__iXfg\aZbVVhee\aZbaChaXҦҡҟҡҤ\aXTV[VTfXfhU]XVggbg[XXkXVhg\iXfVbag\ahXWfXei\VXg[ebhZ[g[X
applicable vesting date.
&ҧ' All shares subject to this PSO have vested due to the achievement of certain stock price targets and continued service. Under the terms
of Mr. Arora’s PSO, 1/4th of the PSOs have an option expiration date of December 6, 2025 as reflected in the table, while the remaining
3/4ths of the PSOs have an option expiration date of June 6, 2025.
&Ҩ' A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period with one
Ybheg[&Ҡ.ңg['bYfhV[ILNf[Ti\aZiXfgXWbag[XbaX!lXTeTaa\iXefTelbYg[XZeTagWTgX
TaWbaX!f\kgXXag[&Ҡ.Ҡҥg['bYfhV[ILNfiXfg\aZ
quarterly thereafter, in each case subject to the executive’s continued service through the applicable vesting date.
113
2024 Proxy Statement
Executive Compensation
Executive Compensation
003 Vests over a four-year period, with one fourth (1/4th) of the restricted stock units having vested on the one-year anniversary of the
grant date; and one-sixteenth (1/16th) of the restricted stock units vesting quarterly thereafter, in each case subject to the executive's
continued service through the applicable vesting date.
013 Vests over a four-year period, with forty percent (40%) of the restricted stock units having vested on the one-year anniversary of the
grant date; thirty percent (30%) of the restricted stock units vesting in equal quarterly increments during the second year; twenty
percent (20%) of the restricted stock units vesting in equal quarterly increments during the third year; and ten percent (10%) of the
restricted stock units vesting in equal quarterly increments during the fourth year, in each case subject to the executive's continued
service through the applicable vesting date.
023 A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period, with 25%
of such PSUs having vested on October 20, 2021; 25% of such PSUs having vested in equal quarterly increments during year two; 25% of
such PSUs vesting in equal quarterly increments during year three; and 25% of such PSUs vesting in equal quarterly increments during
year four, in each case subject to the executive's continued service through the applicable vesting date.
033 A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period, with
20% of such PSUs having vested during year two with the first vest on January 20, 2022; 40% of such PSUs vesting in equal quarterly
increments during year three; and 40% of such PSUs vesting in equal quarterly increments during year four, in each case subject to the
executive's continued service through the applicable vesting date.
Fiscal 2024 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and the vesting of stock awards by our
NEOs during our fiscal year ended July 31, 2024.
Named Executive Officer
Option Awards—
Number of Shares
Acquired on
Exercise (#)
Option
Awards—Value
Realized on
Exercise ($)
Stock Awards—
Number of Shares
Acquired on Vesting
(#)
Stock Awards—
Value Realized on
Vesting (Sr
Mr. Arora
621,908
141,536,802
407,771(2)
114,198,499
Mr. Golechha
—
—
54,895
14,762,227
Mr. Jenkins
—
—
78,753(2)
19,799,205
Mr. Klarich
830,000
186,674,807
131,246
36,061,937
Mr. Zuk
—
—
53,835
14,990,119
(1) Based on the market price of our Company's common stock on the vesting date, multiplied by the number of shares vested.
(2) Settlement of these shares, issuable pursuant to RSUs that vested during fiscal 2024, have been deferred under the Company's
deferred compensation plan, as described in the Nonqualified Deferred Compensation section below.
We did not sponsor any defined benefit pension or other actuarial plan for our NEOs during our fiscal year ended July31, 2024.
roiicies anci rracuces Related to urants 01- OIOCK up-Lions or Similar /Awards
We have not granted options, stock appreciation rights, or other similar option-like instruments since 2020; however, it is
our policy not to time any grants of equity awards in relation to the release of material non-public information.
Nonqualified Deferred Compensation
In May 2022, our Compensation and People Committee adopted a deferred compensation plan, which is a non-qualified
deferred compensation plan established in compliance with Section 409A of the Code. Participation in the deferred
compensation plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the Vice President
level or above, as determined by the administrator of the deferred compensation plan, and includes the Company's
executive officers, except Mr. Zuk who is not a U.S. employee. The plan allows eligible participants to defer salary, annual
bonuses, commissions, other cash compensation approved by the administrator, and certain RSUs and PSUs, excluding
any compensation that has already been deferred and cash compensation that is not paid through U.S. payroll.
The administrator may permit different deferral amounts for each component of compensation and may establish a
minimum or maximum deferral amount for each component. Unless otherwise specified by the administrator, participants
may defer (i) a minimum of 5% and a maximum of 50% of their annual base salary, (ii) a minimum of 5% and a maximum of
100% of their annual cash bonuses and commission, and (iii) a minimum of 5% and a maximum of 100% of any equity award
or, to the extent a participant is permitted to defer the unvested tranche(s) of an equity award, the applicable unvested
114
palosito°
2024 Proxy Statement
&Ҡҟ'OXfgfbiXeTYbhe!lXTecXe\bWj\g[baXYbheg[&Ҡ.ңg['bYg[XeXfge\VgXWfgbV^ha\gf[Ti\aZiXfgXWbag[XbaX!lXTeTaa\iXefTelbYg[X
ZeTagWTgX
TaWbaX!f\kgXXag[&Ҡ.Ҡҥg['bYg[XeXfge\VgXWfgbV^ha\gfiXfg\aZdhTegXe_lg[XeXTYgXe\aXTV[VTfXfhU]XVggbg[XXkXVhg\iXf
continued service through the applicable vesting date.
&ҠҠ' OXfgfbiXeTYbhe!lXTecXe\bWj\g[YbeglcXeVXag&ңҟ֣'bYg[XeXfge\VgXWfgbV^ha\gf[Ti\aZiXfgXWbag[XbaX!lXTeTaa\iXefTelbYg[X
ZeTagWTgX
g[\eglcXeVXag&Ңҟ֣'bYg[XeXfge\VgXWfgbV^ha\gfiXfg\aZ\aXdhT_dhTegXe_l\aVeX`XagfWhe\aZg[XfXVbaWlXTe
gjXagl
cXeVXag&ҡҟ֣'bYg[XeXfge\VgXWfgbV^ha\gfiXfg\aZ\aXdhT_dhTegXe_l\aVeX`XagfWhe\aZg[Xg[\eWlXTe
TaWgXacXeVXag&Ҡҟ֣'bYg[X
restricted stock units vesting in equal quarterly increments during the fourth year, in each case subject to the executive’s continued
service through the applicable vesting date.
&Ҡҡ' A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period, with 25%
of such PSUs having vested on October 20, 2021; 25% of such PSUs having vested in equal quarterly increments during year two; 25% of
such PSUs vesting in equal quarterly increments during year three; and 25% of such PSUs vesting in equal quarterly increments during
year four, in each case subject to the executive’s continued service through the applicable vesting date.
&ҠҢ' A specified performance metric having been achieved, the PSUs that became eligible to vest will vest over a four-year period, with
20% of such PSUs having vested during year two with the first vest on January 20, 2022; 40% of such PSUs vesting in equal quarterly
increments during year three; and 40% of such PSUs vesting in equal quarterly increments during year four, in each case subject to the
executive’s continued service through the applicable vesting date.
Fiscal 2024 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and the vesting of stock awards by our
NEOs during our fiscal year ended July 31, 2024.
Named Executive Officer
Option Awards—
Number of Shares
Acquired on
Exercise (#)
Option
Awards—Value
Realized on
Exercise ($)
Stock Awards—
Number of Shares
Acquired on Vesting
(#)
Stock Awards—
Value Realized on
Vesting ($)(1)
Mr. Arora
һҷҶҾҵҽ
ҶҹҶҺҸһҽҵҷ
ҹҵҼҼҼҶ&ҷ'
ҶҶҹҶҾҽҹҾҾ
Mr. Golechha
—
—
ҺҹҽҾҺ
ҶҹҼһҷҷҷҼ
Mr. Jenkins
—
—
ҼҽҼҺҸ&ҷ'
ҶҾҼҾҾҷҵҺ
Mr. Klarich
ҽҸҵҵҵҵ
ҶҽһһҼҹҽҵҼ
ҶҸҶҷҹһ
ҸһҵһҶҾҸҼ
Mr. Zuk
—
—
ҺҸҽҸҺ
ҶҹҾҾҵҶҶҾ
&Ҡ' Based on the market price of our Company’s common stock on the vesting date, multiplied by the number of shares vested.
&ҡ' Settlement of these shares, issuable pursuant to RSUs that vested during fiscal 2024, have been deferred under the Company’s
deferred compensation plan, as described in the Nonqualified Deferred Compensation section below.
We did not sponsor any defined benefit pension or other actuarial plan for our NEOs during our fiscal year ended July 31, 2024.
Policies and Practices Related to Grants of Stock Options or Similar Awards
We have not granted options, stock appreciation rights, or other similar option-like instruments since 2020; however, it is
our policy not to time any grants of equity awards in relation to the release of material non-public information.
Nonqualified Deferred Compensation
In May 2022, our Compensation and People Committee adopted a deferred compensation plan, which is a non-qualified
deferred compensation plan established in compliance with Section 409A of the Code. Participation in the deferred
compensation plan is voluntary and limited to U.S. employees of the Company and affiliates that are at the Vice President
level or above, as determined by the administrator of the deferred compensation plan, and includes the Company’s
executive officers, except Mr. Zuk who is not a U.S. employee. The plan allows eligible participants to defer salary, annual
bonuses, commissions, other cash compensation approved by the administrator, and certain RSUs and PSUs, excluding
any compensation that has already been deferred and cash compensation that is not paid through U.S. payroll.
The administrator may permit different deferral amounts for each component of compensation and may establish a
minimum or maximum deferral amount for each component. Unless otherwise specified by the administrator, participants
`TlWXYXe&\'T`\a\`h`bYҤ֣TaWT`Tk\`h`bYҤҟ֣bYg[X\eTaahT_UTfXfT_Tel&\\'T`\a\`h`bYҤ֣TaWT`Tk\`h`bY
Ҡҟҟ֣bYg[X\eTaahT_VTf[UbahfXfTaWVb``\ff\baTaW&\\\'T`\a\`h`bYҤ֣TaWT`Tk\`h`bYҠҟҟ֣bYTalXdh\glTjTeW
begbg[XXkgXagTcTeg\V\cTag\fcXe`\ggXWgbWXYXeg[XhaiXfgXWgeTaV[X&f'bYTaXdh\glTjTeWg[XTcc_\VTU_XhaiXfgXW
114
2024 Proxy Statement
Executive Compensation
Executive Compensation
tranche(s). Participants' deferrals will be credited to their accounts on the date that deferred compensation would have
been paid. Participants will be 100% vested at all times in their deferred cash compensation. Each participant may allocate
his or her deferrals to accounts under the deferred compensation plan that provide for payment of deferred amounts upon
specified events, such as the participant's separation from service or a date specified by the participant. Participants may
elect to receive payment of their account balances in a single lump-sum distribution or in annual installments (as elected by
the participant in accordance with the deferred compensation plan), except in certain limited circumstances and provided
that payments upon a participant's death will be provided in a single lump sum.
The Company may make discretionary matching, profit sharing, or other contributions to any participant account under the
deferred compensation plan, and these contributions will vest according to the schedule specified by the administrator on
or before the time the contributions are made. The Company has the discretion to accelerate the vesting of any of these
contributions at any time.
Each account under the deferred compensation plan will be credited with earnings on each business day (unless another
period is specified by the administrator with respect to a particular investment option), based upon the participant's
investment allocation, with respect to each deferral, among a menu of investment options selected in advance by the
administrator. If a participant fails to make an investment allocation with respect to a deferral of an equity award, the deferral
will be invested in notional shares of the Company's common stock. If a participant fails to make an investment allocation
with respect to a deferral of any other compensation, the deferral will be invested in a notional mutual fund specified by
the administrator.
Upon a participant's death, the balances under all of the participant's accounts will be paid in a single lump sum no later
than the end of the following year. In addition, the administrator has the discretion to accelerate or delay the payment of
account balances, as long as such changes are permitted under applicable tax rules and requirements.
All accounts will be paid in fully vested RSUs settled in shares of the Company's common stock issued under the
Company's equity plan, except that an account will be paid in cash to the extent there are not enough shares available
under the Company's equity plan to make such payment in shares.
The following table summarizes the activity under the deferred compensation plan in fiscal 2024.
Executive
contributions in
last fiscal year
Aggregate
earnings
or loss in last
fiscal
Aggregate
balance
at last fiscal
year end
Named Executive Officer
($)(1)
year ($)(2)
($)(3)
Mr. Arora
Mr. Golechha
114,198,499
36,585,948
212,192,870
Mr. Jenkins
Mr. I(larich
19,799,205
10,657,709
46,782,552
0) Represents the value of the RSUs that vested and were earned and deferred by our NEOs in fiscal 2024. The value of each vested
deferred RSU is based on the closing price of the Company's common stock on the applicable vesting date. No portion of the amount
for any NEO is included as compensation for fiscal 2024 in the Fiscal 2024 Summary Compensation Table.
For Mr. Arora, (i) $23,990,689 of this amount represents the value of 85,116 RSUs granted to him in fiscal 2018, which were included in
the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2018, (ii) $64,506,063 of this amount
represents the value of 216,930 PSUs granted to him in fiscal 2021, which were included in the amount reported in the Stock Award
column of the Summary Compensation Table for fiscal 2021 and (iii) $25,701,748 of this amount represents the value of 105,725 PSUs
granted to him in fiscal 2022, which were included in the amounts reported in the Stock Award column of the Summary Compensation
Table for fiscal 2022 and fiscal 2023.
For Mr. Jenkins, (i) $4,840,533 of this amount represents the value of 17,220 RSUs granted to him in fiscal 2022, which were included in
the amount reported in the Stock Award column of the Summary Compensation Table for fiscal 2022, and (ii) $14,958,672 of this amount
represents the value of 61,533 PSUs granted to him in fiscal 2022, which were included in the amounts reported in the Stock Award
column of the Summary Compensation Table for fiscal 2022 and fiscal 2023.
(2) Represents the net increase in the value of the shares underlying our NEOs' vested deferred RSUs from the vesting date to July 31, 2024.
No portion of the amount for any NEO is included as compensation for fiscal 2024 in the Fiscal 2024 Summary Compensation Table.
(3) Represents the aggregate value of the vested deferred RSUs held by our NEOs as of July 31, 2024. The value of each vested deferred
RSU is based on the closing market price of our common stock on Nasdaq on July 31, 2024 (which was $324.73).
2024 Proxy Statement
*paloajtcy
115
geTaV[X&f'ITeg\V\cTagfWXYXeeT_fj\__UXVeXW\gXWgbg[X\eTVVbhagfbag[XWTgXg[TgWXYXeeXWVb`cXafTg\bajbh_W[TiX
been paid. Participants will be 100% vested at all times in their deferred cash compensation. Each participant may allocate
his or her deferrals to accounts under the deferred compensation plan that provide for payment of deferred amounts upon
specified events, such as the participant’s separation from service or a date specified by the participant. Participants may
elect to receive payment of their account balances in a single lump-sum distribution or in annual installments (as elected by
g[XcTeg\V\cTag\aTVVbeWTaVXj\g[g[XWXYXeeXWVb`cXafTg\bac_Ta'XkVXcg\aVXegT\a_\`\gXWV\eVh`fgTaVXfTaWcebi\WXW
that payments upon a participant’s death will be provided in a single lump sum.
The Company may make discretionary matching, profit sharing, or other contributions to any participant account under the
deferred compensation plan, and these contributions will vest according to the schedule specified by the administrator on
or before the time the contributions are made. The Company has the discretion to accelerate the vesting of any of these
contributions at any time.
Each account under the deferred compensation plan will be credited with earnings on each business day (unless another
cXe\bW\ffcXV\Y\XWUlg[XTW`\a\fgeTgbej\g[eXfcXVggbTcTeg\Vh_Te\aiXfg`Xagbcg\ba'UTfXWhcbag[XcTeg\V\cTagf
investment allocation, with respect to each deferral, among a menu of investment options selected in advance by the
administrator. If a participant fails to make an investment allocation with respect to a deferral of an equity award, the deferral
will be invested in notional shares of the Company’s common stock. If a participant fails to make an investment allocation
with respect to a deferral of any other compensation, the deferral will be invested in a notional mutual fund specified by
the administrator.
Upon a participant’s death, the balances under all of the participant’s accounts will be paid in a single lump sum no later
than the end of the following year. In addition, the administrator has the discretion to accelerate or delay the payment of
account balances, as long as such changes are permitted under applicable tax rules and requirements.
All accounts will be paid in fully vested RSUs settled in shares of the Company’s common stock issued under the
Company’s equity plan, except that an account will be paid in cash to the extent there are not enough shares available
under the Company’s equity plan to make such payment in shares.
The following table summarizes the activity under the deferred compensation plan in fiscal 2024.
Named Executive Officer
Executive
contributions in
last fiscal year
($)(1)
Aggregate
earnings
or loss in last
fiscal
year ($)(2)
Aggregate
balance
at last fiscal
year end
($)(3)
Mr. Arora
ҶҶҹҶҾҽҹҾҾ
ҸһҺҽҺҾҹҽ
ҷҶҷҶҾҷҽҼҵ
Mr. Golechha
—
—
—
Mr. Jenkins
ҶҾҼҾҾҷҵҺ
ҶҵһҺҼҼҵҾ
ҹһҼҽҷҺҺҷ
Mr. Klarich
—
—
—
&Ҡ' Represents the value of the RSUs that vested and were earned and deferred by our NEOs in fiscal 2024. The value of each vested
deferred RSU is based on the closing price of the Company’s common stock on the applicable vesting date. No portion of the amount
for any NEO is included as compensation for fiscal 2024 in the Fiscal 2024 Summary Compensation Table.
For Mr. AebeT&\'պҡҢҨҨҟҥҧҨbYg[\fT`bhageXceXfXagfg[XiT_hXbYҧҤҠҠҥKLNfZeTagXWgb[\`\aY\fVT_ҡҟҠҧj[\V[jXeX\aV_hWXW\a
g[XT`bhageXcbegXW\ag[XLgbV^:jTeWVb_h`abYg[XLh``TelKFBG:MBHGH?>FIEHRF>GMհHMA>KG:F>=>Q>H??B<>KL
None of the remaining NEOs are eligible to receive any specific payments or benefits in the event of an involuntary
termination of employment unrelated to a change in control.
116
2024 Proxy Statement
Executive Compensation
Executive Compensation
POTENTIAL PAYMENTS UPON TERMINATION OF EMPP ( IR1ENT UNREI. ATED TO A CHAW:tc
IN CONTROL
The following table summarizes the potential payments to Mr. Arora upon a termination of employment unrelated to a
change in control.
Named Executive Officer
Value of Accelerated Equity
Value of
Awards ($)
Continued
Restricted
Health Care
Salary
Target Annual
Stock and
Coverage
Continuation
Cash Bonus
Restricted
Premiums
Total
($)
($)
Stock Unite
Options
($)
($)
Mr. Arora
1,000,000
75,638,709
32,662
76,671,371
(1) The amounts reported in the table reflect the aggregate market value of the unvested shares of our common stock underlying
outstanding RSUs and PSUs which remain subject to time-based vesting only. The aggregate market value is computed by multiplying
(i) the number of unvested shares of our common stock, subject to outstanding RSUs and PSUs which remain subject to time-based
vesting only on July 31, 2024, that would become vested by (ii) $324.73 (the closing market price of our common stock on Nasdaq on
July 31, 2024).
POTENTIAL PAYMENTS IN CONNECTION WITH TERMINATION OF EMPLOYMENT DUE TO DEATH
In August 2023, we adopted the Survivor Benefit Policy, which provides that if an individual's death occurs while the
individual is providing services as an employee to the Company or any subsidiary of the Company, all of the equity awards
(other than equity awards issued in accordance with or subject to the provisions of the Israel Income Tax Ordinance and
its applicable rules, regulations, orders or procedures (the "ITO")) that the individual holds as of the date of death will be
accelerated in accordance with the terms of the Survivor Benefit Policy. With respect to performance-based vesting terms
that accelerate under the terms of the policy (unless otherwise specified in an award agreement, a Company policy that
applies to the employee, a determination made by the Company, our Board, or our Compensation and People Committee
before the employee's death, or a written agreement with the employee), all performance goals or other vesting criteria
are assumed achieved at 100% of target levels and any TSR modifier (or similar modifiers) are deemed not to impact the
relevant award. The terms of the Survivor Benefit Policy were extended to our Israel-based employees beginning for new
equity awards made to such employees (in accordance with or subject to the ITO) from and after April 2024. Accordingly,
the Survivor Benefit Policy now applies to all our employees, including our NEOs.
The cash incentive plan adopted by our Compensation and People Committee for all employees not paid commissions,
including NEOs (collectively, "eligible employees"), in August 2023 also provides that, if an employee (i) did not elect to
defer any portion of their cash incentive plan payouts under our non-qualified deferred compensation plan and (ii) at the
time of the employee's death, was an eligible employee, then the eligible employee's estate would be entitled to receive
a prorated portion of the cash incentive plan payout. The amount payable is the amount that the eligible employee would
have otherwise been entitled to receive for the fiscal half in which the eligible employee's death occurred, assuming the
employee's individual performance results in a cash incentive plan payout at target levels and, to the extent the funding of
the cash incentive plan for that fiscal half had not yet been determined at the time of the employee's death, assuming the
cash incentive plan was funded at 100% of the target funding amount for that fiscal half. The amount payable is prorated
based on the number of days the relevant employee was alive and an eligible employee during the semi-annual period. For
more information regarding our cash incentive plan, please see the section above titled "Executive Compensation—Fiscal
2024 Executive Compensation Program Components—Fiscal 2024 Cash Incentive Plan."
2024 Proxy Statement
*paloajtcr
117
IHM>GMB:EI:RF>GMLNIHGM>KFBG:MBHGH?>FIEHRF>GMNGK>E:M>=MH:
BGGMB:EI:RF>GMLBGKFBG:MBHGH?>FIEHRF>GM=N>MH=>:MA
In August 2023, we adopted the Survivor Benefit Policy, which provides that if an individual’s death occurs while the
individual is providing services as an employee to the Company or any subsidiary of the Company, all of the equity awards
(other than equity awards issued in accordance with or subject to the provisions of the Israel Income Tax Ordinance and
\gfTcc_\VTU_Xeh_XfeXZh_Tg\bafbeWXefbecebVXWheXf&g[XBMH'' that the individual holds as of the date of death will be
accelerated in accordance with the terms of the Survivor Benefit Policy. With respect to performance-based vesting terms
that accelerate under the terms of the policy (unless otherwise specified in an award agreement, a Company policy that
applies to the employee, a determination made by the Company, our Board, or our Compensation and People Committee
UXYbeXg[XX`c_blXXfWXTg[beTje\ggXaTZeXX`Xagj\g[g[XX`c_blXX'T__cXeYbe`TaVXZbT_fbebg[XeiXfg\aZVe\gXe\T
TeXTffh`XWTV[\XiXWTgҠҟҟ֣bYgTeZXg_XiX_fTaWTalMLK`bW\Y\Xe&bef\`\_Te`bW\Y\Xef'TeXWXX`XWabggb\`cTVgg[X
relevant award. The terms of the Survivor Benefit Policy were extended to our Israel-based employees beginning for new
equity awards made to such employees &\aTVVbeWTaVXj\g[befhU]XVggbg[XBMH'from and after April 2024. Accordingly,
the Survivor Benefit Policy now applies to all our employees, including our NEOs.
The cash incentive plan adopted by our Compensation and People Committee for all employees not paid commissions,
\aV_hW\aZG>Hf&Vb__XVg\iX_lX_\Z\U_XX`c_blXXf'\aAugust 2023T_fbcebi\WXfg[Tg\YTaX`c_blXX&\'W\WabgX_XVggb
WXYXeTalcbeg\babYg[X\eVTf[\aVXag\iXc_TacTlbhgfhaWXebheaba!dhT_\Y\XWWXYXeeXWVb`cXafTg\bac_TaTaW&\\'Tgg[X
time of the employee’s death, was an eligible employee, then the eligible employee’s estate would be entitled to receive
a prorated portion of the cash incentive plan payout. The amount payable is the amount that the eligible employee would
have otherwise been entitled to receive for the fiscal half in which the eligible employee’s death occurred, assuming the
employee’s individual performance results in a cash incentive plan payout at target levels and, to the extent the funding of
the cash incentive plan for that fiscal half had not yet been determined at the time of the employee’s death, assuming the
cash incentive plan was funded at 100% of the target funding amount for that fiscal half. The amount payable is prorated
based on the number of days the relevant employee was alive and an eligible employee during the semi-annual period. For
more information regarding our cash incentive plan, please see the section above titled “Executive Compensation—Fiscal
2024 Executive Compensation Program Components—Fiscal 2024 Cash Incentive Plan.”
117
2024 Proxy Statement
Executive Compensation
Executive Compensation
The following table summarizes the potential value of accelerated equity awards for our NEOs upon their death.
Bonus
Value of Accelerated Equity Awards
($)
Restricted Stock and
Total
Named Executive Officer
(S)(1) Restricted Stock Units(z)
Options
($)
Mr. Arora
500,000
368,661,098
—
369,161,098
Mr. Golechha
300,000
45,523,899
—
45,823,899
Mr. Jenkins
375,000
55,542,144
—
55,917,144
Mr. Klarich
275,000
64,327,065
—
64,602,065
Mr. Zuk
200,070
—
—
200,070
The amounts reported in this column assume the relevant NEO's date of death is the last day of our fiscal 2024. Mr. Zuk's cash bonus
would be paid in Israeli currency. The amounts set forth for Mr. Zuk in the table for fiscal 2024 reflect the conversion from Israeli currency
to U.S. dollars using an average exchange rate of approximately 0.27 U.S. dollars for one Israeli new shekel for fiscal 2024.
The amounts reported in this column reflect the aggregate market value of the unvested shares of our common stock underlying
eligible outstanding RSUs and PSUs (in the case of PSUs, with all performance goals or other vesting criteria deemed achieved at 100%
of target levels but any multipliers based on total shareholder return or otherwise deemed to not impact the PSUs). The aggregate
market value is computed by multiplying (i) the number of unvested shares of our common stock subject to outstanding RSUs and
PSUs that would become vested by (ii) $324.73 (the closing market price of our common stock on Nasdaq on July 31, 2024). The terms
of the Survivor Benefit Policy were only extended to our Israel-based employees beginning for equity awards granted from and after
April 2024: therefore, Mr. Zuk had no awards eligible under the Survivor Benefit Policy as of the end of our fiscal 2024.
Termination of Employment and Potential Payments in Connection
with a Change in Control
MR. ARORA
In the event of an involuntary termination of employment (a termination of employment by us or our successor without
"cause or a termination of employment for "good reason") within 12 months following a "change in control," provided that he
executes an appropriate release and waiver of claims, Mr. Arora will be entitled to receive:
a lump sum payment equal to his then-current annual base salary;
100% of his incentive compensation for that fiscal year;
reimbursement of 12 months of COBRA premiums;
accelerated vesting of each of his awards of time-based restricted stock units or investment restricted stock units as
to the greater of: (x) 50% of the then-unvested portion of such award or (y) the portion of such award that would vest
through the date 24 months after termination of employment; and
accelerated vesting of 100% of his eligible option shares subject to the performance option.
MESSRS. GOLECHHA, JENKINS, KLARICH, AND ZUK
In the event of an involuntary termination of employment (a termination of employment by us without "cause" or a
termination of employment for "good reason") within 12 months following a "change in control," provided that the executive
officer executes an appropriate release and waiver of claims, provided that they each execute an appropriate release and
waiver of claims, Messrs. Golechha, Jenkins, Klarich and Zuk will each be entitled to receive:
a lump sum cash payment equal to 12 months of his base salary as in effect as of the date of termination;
a lump sum cash payment equal to 100% of his target incentive payment for that fiscal year;
a lump sum cash payment equal to the amount payable for premiums for continued COBRA benefits for a period of 12
months (except Mr. Zuk); and
accelerated vesting of each of his then outstanding time-based equity awards, as to (i) in the cases of Messrs. Golechha
and Jenkins,12 months' vesting of such award, or (ii) in the cases of Messrs. Klarich and Zuk, the greater of 12 months'
vesting of such award and 50% of the then-unvested portion of such award.
118
PalomIto°
2024 Proxy Statement
The following table summarizes the potential value of accelerated equity awards for our NEOs upon their death.
Named Executive Officer
Bonus
($)(1)
Value of Accelerated Equity Awards
($)
Total
($)
Restricted Stock and
Restricted Stock Units(2)
Options
Mr. Arora
Һҵҵҵҵҵ
ҸһҽһһҶҵҾҽ
—
ҸһҾҶһҶҵҾҽ
Mr. Golechha
Ҹҵҵҵҵҵ
ҹҺҺҷҸҽҾҾ
—
ҹҺҽҷҸҽҾҾ
Mr. Jenkins
ҸҼҺҵҵҵ
ҺҺҺҹҷҶҹҹ
—
ҺҺҾҶҼҶҹҹ
Mr. Klarich
ҷҼҺҵҵҵ
һҹҸҷҼҵһҺ
—
һҹһҵҷҵһҺ
Mr. Zuk
ҷҵҵҵҼҵ
—
—
ҷҵҵҵҼҵ
&Ҡ' The amounts reported in this column assume the relevant NEO’s date of death is the last day of our fiscal 2024. Mr. Zuk’s cash bonus
would be paid in Israeli currency. The amounts set forth for Mr. Zuk in the table for fiscal 2024 reflect the conversion from Israeli currency
gbNLWb__Tefhf\aZTaTiXeTZXXkV[TaZXeTgXbYTccebk\`TgX_lҟҡҦNLWb__TefYbebaXBfeTX_\aXjf[X^X_YbeY\fVT_ҡҟҡң
&ҡ' The amounts reported in this column reflect the aggregate market value of the unvested shares of our common stock underlying
eligible outstanding RSUs and PSUs (in the case of PSUs, with all performance goals or other vesting criteria deemed achieved at 100%
bYgTeZXg_XiX_fUhgTal`h_g\c_\XefUTfXWbagbgT_f[TeX[b_WXeeXgheabebg[Xej\fXWXX`XWgbabg\`cTVgg[XILNf'M[XTZZeXZTgX
`Te^XgiT_hX\fVb`chgXWUl`h_g\c_l\aZ&\'g[Xah`UXebYhaiXfgXWf[TeXfbYbheVb``bafgbV^fhU]XVggbbhgfgTaW\aZKLNfTaW
ILNfg[Tgjbh_WUXVb`XiXfgXWUl&\\'պҢҡңҦҢ&g[XV_bf\aZ`Te^Xgce\VXbYbheVb``bafgbV^baGTfWTdbaJuly 31ҡҟҡң' The terms
of the Survivor Benefit Policy were only extended to our Israel-based employees beginning for equity awards granted from and after
April 2024; therefore, Mr. Zuk had no awards eligible under the Survivor Benefit Policy as of the end of our fiscal 2024.
Termination of Employment and Potential Payments in Connection
with a Change in Control
MR. ARORA
In the event of an involuntary termination of employment (a termination of employment by us or our successor without
VThfXbeTgXe`\aTg\babYX`c_bl`XagYbeZbbWeXTfba'j\g[\aҠҡ`bag[fYb__bj\aZTV[TaZX\aVbageb_cebi\WXWg[Tg[X
executes an appropriate release and waiver of claims, Mr. Arora will be entitled to receive:
y a lump sum payment equal to his then-current annual base salary;
y 100% of his incentive compensation for that fiscal year;
y reimbursement of 12 months of COBRA premiums;
y accelerated vesting of each of his awards of time-based restricted stock units or investment restricted stock units as
gbg[XZeXTgXebY &k'Ҥҟ֣bYg[Xg[Xa!haiXfgXWcbeg\babYfhV[TjTeWbe&l'g[Xcbeg\babYfhV[TjTeWg[Tgjbh_WiXfg
through the date 24 months after termination of employment; and
y accelerated vesting of 100% of his eligible option shares subject to the performance option.
F>LLKL@HE>GDBGLDE:KB=>?BGBMBHGL
Generally, for purposes of the foregoing provisions, a “change in control” means:
y the sale or other disposition of all or substantially all of our assets;
y any sale or exchange of our capital stock by shareholders in a transaction or series of related transactions where more
than 50% of the outstanding voting power of our Company is acquired by a person or entity or group of related persons
or entities;
y any reorganization, consolidation, or merger of our Company where our outstanding voting securities immediately before
the transaction represent or are converted into less than 50% of the outstanding voting power of the surviving entity (or
\gfcTeXagbeZTa\mTg\ba'\``XW\TgX_lTYgXeg[XgeTafTVg\ba
be
y the consummation of the acquisition of 51% or more of our outstanding stock pursuant to a tender offer validly made
haWXeTalfgTgXbeYXWXeT__Tj&bg[Xeg[TaTgXaWXebYYXeUlhf'
Generally, for purposes of the foregoing provisions, “cause” is limited to:
y conviction of any felony or any crime involving moral turpitude or dishonesty;
y participation in intentional fraud or an act of willful dishonesty against us;
y willful breach of our policies that materially harms us;
y intentional damage of a substantial amount of our property;
y willful and material breach of the NEO’s employment offer letter, employment agreement or his employee invention
assignment and confidentiality agreement; or
y a willful failure or refusal in a material respect to follow the lawful, reasonable policies or directions of us as specified
by our board of directors or Chief Executive Officer after being provided with notice of such failure, which failure is not
remedied within 30 days after receipt of written notice from us.
Generally, for purposes of the foregoing provisions, “good reason” means a resignation within 12 months following the
occurrence, without the NEO’s written consent, of one or more of the following:
y there is a material reduction in the NEO’s authority, status, obligations, or responsibilities;
y there is a reduction in the NEO’s total annual compensation of more than 10% unless such reduction is no greater (in
cXeVXagTZXgXe`f'g[TaVb`cXafTg\baeXWhVg\baf\`cbfXWbafhUfgTag\T__lT__bYbheX`c_blXXfchefhTaggbTW\eXVg\iX
of our board of directors;
y any failure by us to pay the NEO’s base salary; or
y the relocation of the principal place of our business to a location that is more than a specified number of miles further
away from the NEO’s home than our current location.
A resignation for “good reason” will not be deemed to have occurred unless the NEO gives us written notice of one of
the above conditions within 90 days of its occurrence, and we fail to remedy the condition within 30 days of receipt of
such notice.
119
2024 Proxy Statement
Executive Compensation
Executive Compensation
PCITCRITIAI
'ANTS Uncw TcRMINATION r
"RiRicnTinril WITH A 'we'
'' ,ONTROL
The following table summarizes the potential payments to our NEOs upon a termination of employment in connection with
a change in control.
Salary
Target Annual
Continuation
Cash Bonus
Named Executive Officer
($)
($)
Mr. Arora
1,000,000
1,000,000
Mr. Golechha
600,000
600,000
Mr. Jenkins
750,000
750,000
Mr. Klarich
550,000
550,000
Mr. Zuk(2)
400,140
400,140
Value of
Continued
Health Care
Coverage
Premiums
Total
($)
($)
32,662
77,671,371
13,789,335
—
32,662
15,021,996
21,327,292
—
32,919
22,860,211
25,191,254
—
32,662
26,323,916
9,459,385
—
—
10,259,665
Value of Accelerated Equity
Awards ($)
Restricted
Stock and
Restricted
Stock Unite
Options
75,638,709
(1) The amounts reported in this column reflect the aggregate market value of the unvested shares of our common stock underlying
outstanding RSUs and PSUs which remain subject to time-based vesting only. The aggregate market value is computed by multiplying
(i) the number of unvested shares of our common stock subject to outstanding RSUs and PSUs which remain subject to time-based
vesting only on July 31, 2024, that would become vested by (ii) $324.73 (the closing market price of our common stock on Nasdaq on
July 31, 2024).
(2) Mr. Zuk's base salary and target annual cash bonus would be paid in Israeli currency. The amounts set forth for these items in the table
for fiscal 2024 reflect the conversion from Israeli currency to U.S. dollars using an average exchange rate of approximately 0.27 U.S.
dollars for one Israeli new shekel for fiscal 2024.
Pay vs. Perfoni lance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of
Regulation S-K, we are providing the following information about the relationship between executive compensation
and certain financial performance measures of the Company. For further information concerning the Company's
pay-for-performance philosophy and how executive compensation aligns with the Company's performance, please see the
"Executive Compensation — Compensation Discussion and Analysis" section of this proxy statement.
Pay vs. Performance Table
Yeara)
Summary
Comp Table
Total for
PEOM
Compensation
Actually Paid
to PEOM
Average
Summary
Comp Table
Total for Non-
PEO NE0e)
Average
Compensation
Actually Paid
to Non-
PEO NE0e)
Value of $100 initial
investment based on
PANW Net
Peer
Income
Annual
PANW
Group
(Loss) (in
Billings
TSR(5)
TSRM
millions)(') GrowthM
2024
$ 58,036,875 $105,275,811
$16,323,792
$14,485,907
$380.66
$226.91
$2,577.6
11.0%
2023
$151,425,203 $266,368,755
$12,145,914
$31,768,696
$293.01
$167.84
$439.7
23.1%
2022
$ 10,410,477 $208,514,831 $ 8,058,186
$56,805,285
$195.02
$132.31
-$267.0
37.0%
2021
$ 23,283,858 $219,731,970
$10,279,163
$54,811,159
$155.93
$140.03
-$498.9
26.7%
During each of the years presented, our PEO was Nikesh Arora. During fiscal 2024, fiscal 2023 and fiscal 2022, our non-PEO NEOs were
Dipak Golechha, William "Br Jenkins, Lee Klarich and Nir Zuk. During fiscal 2021, our non-PEO NEOs were Dipak Golechha, Lee Klarich,
Amit Singh, Luis Felipe Visoso and Nir Zuk.
Amounts reported in this column represent (i) the total compensation, as reported in the Summary Compensation Table in our annual
proxy statement ("SCT"), for the applicable year for Mr. Arora and (ii) the average of the total compensation, as reported in the SCT in our
annual proxy statement, for the applicable year for our non-PEO NEOs.
"Compensation actually paid" is calculated in accordance with Item 402(v) of Regulation S-K The table below sets forth the adjustments
made during our fiscal 2024 presented in the table to calculate the "Compensation Actually Paid" to our PEO (Mr. Arora) for fiscal 2024.
120
PalomIto°
2024 Proxy Statement
IHM>GMB:EI:RF>GMLNIHGM>KFBG:MBHGBGBG<eh_Xfg[XV[TegfUX_bj\__hfgeTgX[bjVb`cXafTg\baTVghT__lcT\W&<:I'gbbheG>HfT_\Zafj\g[
our Company’s financial performance as measured by our total shareholder return, our peer group total shareholder return,
our net income, and annual billings growth rate.
CAP vs. TSR
Peer Group TSR
Avg. Compensation Actually Paid (Non-PEO NEO)
Compensation Actually Paid (PEO)
2024
2023
2022
2021
$219.7M
$54.8M
$56.8M
$14.5M
$105.3M
$266.4M
$208.5M
$31.8M
$293.01
$380.66
$195.02
$132.31
$226.91
$155.93
$140.03
$167.84
Company TSR
122
2024 Proxy Statement
Executive Compensation
Executive Compensation
CAP vs. Net Income (Loss)
$2,577.6M
-$498.9M
-$267.0M
$439.7M
$266.4M
$219.7M
$208.5M
$105.3M
$54.8M
$56.8M
$31.8M
$14.5M
2021
2022
2023
2024
Compensation Actually Paid (PEO)
Avg. Compensation Actually Paid (Non-PEO NEO)
Net income (loss) (millions)
CAP vs. Annual Billings urowtn
37.0%
26.7%
23.1%
$266.4M
$219.7M
Or $208.5M
11.0%
$105.3M
$54.8M
$56.8M
$31.8M
$14.5M
2021
2022
2023
2024
Compensation Actually Paid (PEO)
Avg. Compensation Actually Paid (Non-PEO NEO)
Annual Billings Growth
2024 Proxy Statement
opaloajto•
123
CAP vs. Net Income (Loss)
2024
2023
2022
2021
Avg. Compensation Actually Paid (Non-PEO NEO)
Compensation Actually Paid (PEO)
Net income (loss) (millions)
$439.7M
$2,577.6M
-$498.9M
-$267.0M
$219.7M
$54.8M
$56.8M
$14.5M
$105.3M
$266.4M
$208.5M
$31.8M
CAP vs. Annual Billings Growth
2024
2023
2022
2021
Avg. Compensation Actually Paid (Non-PEO NEO)
Compensation Actually Paid (PEO)
Annual Billings Growth
26.7%
23.1%
11.0%
37.0%
$219.7M
$54.8M
$56.8M
$14.5M
$105.3M
$266.4M
$208.5M
$31.8M
123
2024 Proxy Statement
Executive Compensation
Executive Compensation
Executive Officers
The following table identifies certain information about our executive officers as of October 18, 2024. Officers are appointed
by our board of directors to hold office until their successors are elected and qualified.
Name
Age
Position(s)
Nikesh Arora
56
Chief Executive Officer and Chairman
Dipak Golechha
50
Executive Vice President and Chief Financial Officer
William "BJ" Jenkins
58
President
Lee Klarich
49
Chief Product Officer
Nir Zuk
53
Chief Technology Officer and Director
Nikesh Arora. For a brief biography of Mr. Arora, please see "Proposal No.1 - Election of Directors - Directors -
Continuing Directors."
Dipak Golechha has served as our Chief Financial Officer since March 2021. Mr. Golechha joined the Company in
December 2020 as Senior Vice President, Finance. Prior to joining the Company, from August 2020 until December 2020,
Mr. Golechha served as senior advisor at Boston Consulting Group, a management consulting firm. From December 2016 to
April 2020, Mr. Golechha was President and Chief Executive Officer of Excelligence Learning Corporation, a tech-enabled
platform company in early childhood education. From August 2014 through July 2016, Mr. Golechha served as the chief
financial officer of NBTY Inc., also known as The Nature's Bounty Company, a manufacturer of vitamins, minerals and health
supplements. During 2014, Mr. Golechha served as the chief financial officer of Chobani, a yogurt company. Prior to Chobani,
Mr. Golechha worked at The Procter & Gamble Company, an American multinational consumer goods corporation, for
18 years, most recently serving as chief financial officer / chief operating officer of the Global Feminine Care / Adult Care
Division from August 2012 to December 2013. Mr. Golechha holds a bachelor's degree and a master's degree from St. John's
College, Cambridge University in Economics.
William "EIJ" Jenkins has served as our President since August 2021. Prior to joining the Company, Mr. Jenkins served
as President and CEO of Barracuda Networks, Inc., a computer security and data storage company, from November 2012
through July 2021. Prior to this position, Mr. Jenkins held multiple business unit and sales and marketing leadership roles
at EMC Corporation, a provider of enterprise storage systems, software, and networks. Mr. Jenkins holds an engineering
degree from the University of Illinois and an M.B.A. from Harvard Business School.
Lee Klarich has served as our Chief Product Officer since August 2017. Prior to this appointment, Mr. Klarich served as
our Executive Vice President of Product Management, a role he held since November 2015. From November 2012 to
November 2015, Mr. Klarich served as our Senior Vice President, Product Management and our Vice President, Product
Management from May 2006 to November 2012. Prior to joining us, Mr. Klarich held various positions at NetScreen
Technologies, Juniper Networks, Excite@Home, and Packard Bell-NEC. Mr. Klarich holds a B.S. in Engineering from
Cornell University.
Nir Zuk. For a brief biography of Mr. Zuk, please see "Proposal No.1 - Election of Directors - Directors - Nominee Directors."
124
palosIto°
2024 Proxy Statement
Executive Officers
The following table identifies certain information about our executive officers as of October 18, 2024. Officers are appointed
by our board of directors to hold office until their successors are elected and qualified.
Name
Age
Position(s)
Nikesh Arora
56
Chief Executive Officer and Chairman
Dipak Golechha
50
Executive Vice President and Chief Financial Officer
William “BJ” Jenkins
58
President
Lee Klarich
49
Chief Product Officer
Nir Zuk
53
Chief Technology Officer and Director
Nikesh Arora. For a brief biography of Mr. Arora, please see “Proposal No. 1 - Election of Directors - Directors -
Continuing Directors.”
Dipak Golechha has served as our Chief Financial Officer since March 2021. Mr. Golechha joined the Company in
December 2020 as Senior Vice President, Finance. Prior to joining the Company, from August 2020 until December 2020,
Mr. Golechha served as senior advisor at Boston Consulting Group, a management consulting firm. From December 2016 to
April 2020, Mr. Golechha was President and Chief Executive Officer of Excelligence Learning Corporation, a tech-enabled
platform company in early childhood education. From August 2014 through July 2016, Mr. Golechha served as the chief
financial officer of NBTY Inc., also known as The Nature’s Bounty Company, a manufacturer of vitamins, minerals and health
supplements. During 2014, Mr. Golechha served as the chief financial officer of Chobani, a yogurt company. Prior to Chobani,
Mr. Golechha worked at The Procter & Gamble Company, an American multinational consumer goods corporation, for
18 years, most recently serving as chief financial officer / chief operating officer of the Global Feminine Care / Adult Care
Division from August 2012 to December 2013. Mr. Golechha holds a bachelor’s degree and a master’s degree from St. John’s
College, Cambridge University in Economics.
William “BJ” Jenkins has served as our President since August 2021. Prior to joining the Company, Mr. Jenkins served
as President and CEO of Barracuda Networks, Inc., a computer security and data storage company, from November 2012
through July 2021. Prior to this position, Mr. Jenkins held multiple business unit and sales and marketing leadership roles
at EMC Corporation, a provider of enterprise storage systems, software, and networks. Mr. Jenkins holds an engineering
degree from the University of Illinois and an M.B.A. from Harvard Business School.
Lee Klarich has served as our Chief Product Officer since August 2017. Prior to this appointment, Mr. Klarich served as
our Executive Vice President of Product Management, a role he held since November 2015. From November 2012 to
November 2015, Mr. Klarich served as our Senior Vice President, Product Management and our Vice President, Product
Management from May 2006 to November 2012. Prior to joining us, Mr. Klarich held various positions at NetScreen
Technologies, Juniper Networks, Excite@Home, and Packard Bell-NEC. Mr. Klarich holds a B.S. in Engineering from
Cornell University.
Nir Zuk. For a brief biography of Mr. Zuk, please see “Proposal No. 1 - Election of Directors - Directors - Nominee Directors.”
124
2024 Proxy Statement
Executive Compensation
Executive Compensation
Equity Compensation Plan Information
The following table provides information as of July 31, 2024, with respect to the shares of our common stock that may be
issued under our existing equity compensation plans.
Plan Category
Equity compensation plans approved
by shareholdersol
Equity compensation plans not approved
by shareholders
Total
(a) Number
of Securities
to be Issued
Upon Exercise
of Outstanding
Options, Warrants
and Rights
19,731,229
57,941
19,789,170
(b) Weighted
Average Exercise
Price of Outstanding
Options, Warrants
and Rights ($)(2)
$65.33
(c) Number of
Securities Remaining
Available for Future
Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
31,509,432
31,509,432
0) Includes the following plans: the 2012 Plan, 2021 Plan and 2012 Employee Stock Purchase Plan ("2012 ESPP").
Our 2012 ESPP provides that on the first day of each fiscal year beginning with fiscal year 2014 the number of shares authorized for
issuance under the 2012 ESPP is automatically increased by a number equal to the lesser of (i) 6,000,000 shares of common stock,
(ii) one percent (1.0%) of the aggregate number of shares of common stock outstanding on such date, or (iii) an amount determined by
our board of directors or a duly authorized committee of our board of directors.
(2) The weighted average exercise price does not take into account outstanding restricted stock, PSUs or time-based RSUs, which have no
exercise price.
2024 Proxy Statement
*paloajt9: 125
Equity Compensation Plan Information
The following table provides information as of July 31, 2024, with respect to the shares of our common stock that may be
issued under our existing equity compensation plans.
Plan Category
(a) Number
of Securities
to be Issued
Upon Exercise
of Outstanding
Options, Warrants
and Rights
(b) Weighted
Average Exercise
Price of Outstanding
Options, Warrants
and Rights ($)(2)
(c) Number of
Securities Remaining
Available for Future
Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))
Equity compensation plans approved
by shareholders&Ҷ'
ҶҾҼҸҶҷҷҾ
։һҺҸҸ
ҸҶҺҵҾҹҸҷ
Equity compensation plans not approved
by shareholders
ҺҼҾҹҶ
—
—
Total
ҶҾҼҽҾҶҼҵ
ҸҶҺҵҾҹҸҷ
&Ҡ' BaV_hWXfg[XYb__bj\aZc_Taf g[XҡҟҠҡI_TaҡҟҡҠI_TaTaWҡҟҠҡ>`c_blXXLgbV^IheV[TfXI_Ta&ҡҟҠҡ>LII'
Our 2012 ESPP provides that on the first day of each fiscal year beginning with fiscal year 2014 the number of shares authorized for
\ffhTaVXhaWXeg[XҡҟҠҡ>LII\fThgb`Tg\VT__l\aVeXTfXWUlTah`UXeXdhT_gbg[X_XffXebY&\'ҥҟҟҟҟҟҟf[TeXfbYVb``bafgbV^
&\\'baXcXeVXag&Ҡҟ֣'bYg[XTZZeXZTgXah`UXebYf[TeXfbYVb``bafgbV^bhgfgTaW\aZbafhV[WTgXbe&\\\'TaT`bhagWXgXe`\aXWUl
our board of directors or a duly authorized committee of our board of directors.
&ҡ' The weighted average exercise price does not take into account outstanding restricted stock, PSUs or time-based RSUs, which have no
exercise price.
125
2024 Proxy Statement
Executive Compensation
PROPOSAL NO. 5
Amendment to Our 2021 Equity
Incentive plan
We are asking our shareholders to approve an amendment to our 2021 Equity Incentive Plan ("2021 Plan") to increase
the number of shares of our common stock ("Shares") reserved for issuance under the 2021 Plan by 3,000,000
Shares. Other than this increase, no changes have been made to the 2021 Plan.
Why Should Shareholders Vote to Approve the
Amendment to the 2021 Plan?
I he Amendment to the 2U21 Han Will Allow Us to Continue
All-ranting and Retaining the Best Talent
Our Board believes that our success depends on the ability to attract and retain the best available personnel for
positions of substantial responsibility and that the ability to grant equity awards is crucial to recruiting and retaining
the services of these individuals. In addition, our Board believes that equity awards provide additional incentive to
our employees, directors and consultants and promote our success. Without a motivated and dedicated workforce,
we could not deliver the strong financial performance we experienced in fiscal 2024 (as described elsewhere in this
proxy). If shareholders do not approve the amendment to the 2021 Plan at the Annual Meeting, we may be unable to
continue granting equity awards as needed, which could prevent us from successfully attracting and retaining the
highly skilled talent we need.
A Principled and Disciplined Approach
The Compensation and People Committee has adopted a principled and disciplined approach to increasing the
shares authorized for issuance under our 2021 Plan, which we believe aligns with best practices. This approach
consists of the following principles:
Share requests should align with our commitments to reduce stock-based compensation expense as a
percentage of revenue.
Share reserves should be sufficient to cover one and a half to two years of grants, which the Committee believes
is aligned with best practices and provides the Company with a reasonable buffer in case of extraordinary
circumstances (e.g., stock price volatility, changes in hiring, acquisitions, etc.).
• Share requests should be subject to shareholder approval on an annual basis, which the Committee believes
provides transparency to our shareholders and more flexibility to manage our needs.
A Reasonable Nurnhar of Sharac Will R, ided to the 2n91 plan
If our shareholders approve the amendment to the 2021 Plan, 3,000,000 Shares will be added to the 2021 Plan. We
anticipate these Shares will be enough to meet our expected needs for the next one to two years.
- Number of Shares Remaining under the 2021 Plan. As of October 18, 2024,12,391,895 Shares remained
available for grant under the 2021 Plan.
• Overhang. As of October 18, 2024, outstanding equity awards under our 2012 Plan and the 2021 Plan covered
18,457,466 Shares which represented approximately 5.6% of our outstanding Shares as of that date.
• Historical Grant Practices. In fiscal 2022, 2023 and 2024, we granted equity awards (excluding RSUs we have
assumed in acquisitions) covering 6.7 million, 9.3 million, and 6.3 million Shares, respectively, for approximately
22.3 million equity awards over that three-year period.
1
126
PalomIto°
2024 Proxy Statement
PROPOSAL NO. 5
Amendment to Our 2021 Equity
Incentive Plan
We are asking our shareholders to approve an amendment to our ҡҟҡҠ>dh\glBaVXag\iXI_Ta&ҡҟҡҠI_Ta' to increase
g[Xah`UXebYf[TeXfbYbheVb``bafgbV^&L[TeXf'eXfXeiXWYbe\ffhTaVXhaWXeg[XҡҟҡҠI_TaUl3,000,000
Shares. Other than this increase, no changes have been made to the 2021 Plan.
Why Should Shareholders Vote to Approve the
Amendment to the 2021 Plan?
The Amendment to the 2021 Plan Will Allow Us to Continue
Attracting and Retaining the Best Talent
Our Board believes that our success depends on the ability to attract and retain the best available personnel for
positions of substantial responsibility and that the ability to grant equity awards is crucial to recruiting and retaining
the services of these individuals. In addition, our Board believes that equity awards provide additional incentive to
our employees, directors and consultants and promote our success. Without a motivated and dedicated workforce,
we could not deliver the strong financial performance we experienced in fiscal 2024 (as described elsewhere in this
cebkl'BYf[TeX[b_WXefWbabgTccebiXg[XT`XaW`Xaggbg[XҡҟҡҠI_TaTgg[X:aahT_FXXg\aZjX`TlUXhaTU_Xgb
continue granting equity awards as needed, which could prevent us from successfully attracting and retaining the
highly skilled talent we need.
A Principled and Disciplined Approach
The Compensation and People Committee has adopted a principled and disciplined approach to increasing the
shares authorized for issuance under our 2021 Plan, which we believe aligns with best practices. This approach
consists of the following principles:
y Share requests should align with our commitments to reduce stock-based compensation expense as a
percentage of revenue.
y Share reserves should be sufficient to cover one and a half to two years of grants, which the Committee believes
is aligned with best practices and provides the Company with a reasonable buffer in case of extraordinary
V\eVh`fgTaVXf&XZfgbV^ce\VXib_Tg\_\glV[TaZXf\a[\e\aZTVdh\f\g\bafXgV'
y Share requests should be subject to shareholder approval on an annual basis, which the Committee believes
provides transparency to our shareholders and more flexibility to manage our needs.
A Reasonable Number of Shares Will Be Added to the 2021 Plan
If our shareholders approve the amendment to the 2021 Plan, 3,000,000 Shares will be added to the 2021 Plan. We
anticipate these Shares will be enough to meet our expected needs for the next one to two years.
y Number of Shares Remaining under the 2021 Plan. As of October 18, 2024, 12,391,895 Shares remained
available for grant under the 2021 Plan.
y Overhang. As of October 18, 2024, outstanding equity awards under our 2012 Plan and the 2021 Plan covered
18,457,466 Shares which represented approximately Ҥҥ֣ of our outstanding Shares as of that date.
y Historical Grant Practices. In fiscal 2022, 2023 and 2024, we granted equity awards (excluding RSUs we have
Tffh`XW\aTVdh\f\g\baf'VbiXe\aZ6.7 million, 9.3 million, and 6.3 million Shares, respectively, for approximately
22.3 million equity awards over that three-year period.
126
2024 Proxy Statement
Forecasted Grants. To determine how long the Shares to be added to the 2021 Plan will enable us to make
grants of equity awards, our Compensation and People Committee and our Board reviewed a forecast that
considered these factors: (i) the remaining number of Shares available for future grants under the 2021 Plan and
(ii) forecasted future grants, with the future grant numbers determined based on assumptions about stock price
and the competitive dollar value to be delivered to the grant recipient. Because we generally determine the size
of equity awards to be granted based on the value of the award, if the stock price used to determine the number
of Shares subject to an award differs significantly from the stock price assumed in the forecast (which was $315 to
$365 per share), our actual Share usage will deviate significantly from our forecasted Share usage. For example, if
our stock price used to determine the number of Shares subject to an award is lower than the stock price assumed
in the forecast, we would need a larger number of Shares than anticipated to deliver the same intended value
to participants.
We Have Used Our Equity Plans Responsibly
We recognize the dilutive impact of our equity compensation on our shareholders and continuously strive to balance
this concern with the competition for talent. In the process it used to determine the number of Shares to be added
to the 2021 Plan, our Compensation and People Committee and Board reviewed analyses prepared by Meridian
Compensation Partners, independent compensation consultant, which included analysis of the burn rate and
overhang metrics discussed below. If approved, the Shares added to the 2021 Plan would represent approximately
0.9% of our 327,250,757 outstanding Shares as of October18, 2024. Our Board believes the potential dilution to
shareholders is reasonable and sustainable to meet our business goals.
Gross burn rate can be used by some to assess a company's use of equity compensation. Gross burn rate is defined
as the number of shares underlying equity awards granted in a given fiscal year (excluding any RSUs we have
assumed in acquisitions) divided by the number of shares of weighted average common stock outstanding ("CSO").
Potential actual dilution to shareholders is often measured by analyzing the net burn rate. Net burn rate is defined
as (i) the number of shares underlying equity awards granted in a given fiscal year (excluding any RSUs we have
assumed in acquisitions) minus shares subject to outstanding equity awards forfeited during the year and returned to
the plan divided by (ii) CSO. This measure indicates the rate at which we actually create potential future shareholder
dilution. We have managed our net burn rate to 1.1% in fiscal 2022, 2.4% in fiscal 2023, and 1.3% in fiscal 2024.
The following table shows our gross and net burn rate over the past three fiscal years and the average CSO of those
three years.
in millions
Fiscal 2022
Fiscal 2023
Fiscal 2024
Average
Performance-based stock options ("PSOs") granted
0
0
0
0
PSOs earned
5.6
1.2
0
2.3
RSUs granted')
5.9
5.7
4.1
5.2
PSUs granted(2)
0.8
3.6
2.2
2.3
PSUs earned
1.1
1.3
1.6
1.3
Total awards granted3)
6.7
9.3
6.3
7.4
Weighted average common stock outstanding
295.6
303.2
319.2
306.0
Gross Burn Rate
2.3%
3.1%
2.0%
2.4%
Forfeitures of Options
0
0
0
0
Forfeitures of PSOs
0.3
0
0
0.1
Forfeitures of PSUs and time-based RSUs
3.2
1.9
2.0
2.4
Net Burn Rate
1.1%
2.4%
1.3%
1.6%
() Excludes approximately 0.1 million RSUs assumed in acquisitions in each of fiscal 2023 and fiscal 2024.
(2) For PSUs, shares granted represent the aggregate maximum number of shares that may be earned and issued with respect to
these awards over their full terms.
(3) Includes time-based RSUs and PSUs granted.
Proposal No. 5 Amendment to Our 2021 Equity Incentive Plan
2024 Proxy Statement
*paloajtn:
127
y Forecasted Grants. To determine how long the Shares to be added to the 2021 Plan will enable us to make
grants of equity awards, our Compensation and People Committee and our Board reviewed a forecast that
Vbaf\WXeXWg[XfXYTVgbef &\'g[XeX`T\a\aZah`UXebYL[TeXfTiT\_TU_XYbeYhgheXZeTagfhaWXeg[XҡҟҡҠI_TaTaW
&\\'YbeXVTfgXWYhgheXZeTagfj\g[g[XYhgheXZeTagah`UXefWXgXe`\aXWUTfXWbaTffh`cg\bafTUbhgfgbV^ce\VX
and the competitive dollar value to be delivered to the grant recipient. Because we generally determine the size
of equity awards to be granted based on the value of the award, if the stock price used to determine the number
of Shares subject to an award differs significantly from the stock price assumed in the forecast (which was $315 to
$365cXef[TeX'bheTVghT_L[TeXhfTZXj\__WXi\TgXf\Za\Y\VTag_lYeb`bheYbeXVTfgXWL[TeXhfTZX?beXkT`c_X\Y
our stock price used to determine the number of Shares subject to an award is lower than the stock price assumed
in the forecast, we would need a larger number of Shares than anticipated to deliver the same intended value
to participants.
We Have Used Our Equity Plans Responsibly
We recognize the dilutive impact of our equity compensation on our shareholders and continuously strive to balance
this concern with the competition for talent. In the process it used to determine the number of Shares to be added
to the 2021 Plan, our Compensation and People Committee and Board reviewed analyses prepared by Meridian
Compensation Partners, independent compensation consultant, which included analysis of the burn rate and
overhang metrics discussed below. If approved, the Shares added to the 2021 Plan would represent approximately
ҟҨ֣bYbheҢҡҦҡҤҟҦҤҦ outstanding Shares as of October 18, 2024. Our Board believes the potential dilution to
shareholders is reasonable and sustainable to meet our business goals.
Gross burn rate can be used by some to assess a company’s use of equity compensation. Gross burn rate is defined
as the number of shares underlying equity awards granted in a given fiscal year (excluding any RSUs we have
Tffh`XW\aTVdh\f\g\baf'W\i\WXWUlg[Xah`UXebYf[TeXfbYjX\Z[gXWTiXeTZXVb``bafgbV^bhgfgTaW\aZ&dh\glBaVXag\iXI_Ta
ҶҷҸҾҶҽҾҺ
For more information regarding our equity compensation plans, including the Employee Stock Purchase Plan, please see
“Equity Compensation Plan Information.”
137
2024 Proxy Statement
Proposal No. 5 Amendment to Our 2021 Equity Incentive Plan
I
PROPOSAL NO .6
Shareholder Proposal
Report on
Climate Risks to Retirement
Plan Beneficiaries
As You Sow has advised us that they intend to present the following proposal for consideration at the Annual
Meeting on behalf of:
• Frances L. Bell T/W fbo Graham de Freitas, a beneficial owner of 25 shares of our common stock; and
Roy A. Hunt Foundation, a beneficial owner of 87 shares of our common stock.
The Board accepts no responsibility for the contents of the proposal or the supporting statement. The Board opposes
the proposal for the reasons stated after the proposal.
Shareholder's Proposal and Supporting Statement
WHEREAS: Greenhouse gas emissions and the resulting warming is causing significant, deleterious consequences
for the global economy. Those harms are predicted to grow. Prior studies estimate that unmitigated climate change
will cut the world economy by $23 trillion by 2050; a recent study indicates that the long-term costs may be six times
higher than previously estimated'•2
These effects will have a particularly significant impact on workers saving for retirement. Retirement plan
beneficiaries have long investment horizons, and "[t]he longer term the investment horizon, the more likely it is that
climate will not only be a material risk, but the most material risk."3 Climate portfolio risk to retirement plans will be
difficult to mitigate. An International Finance Corporation report concludes that "...the traditional way of managing
risk through a shift in asset allocation into increased holdings of more conservative, lower risk, lower return, asset
classes may do little to offset climate risks."4
While our Company has taken actions to address its operational greenhouse gas emissions,5 it has not acted to
meaningfully address the emissions generated by its retirement plan investments. The plan's most popular option by
assets invested is the Fidelity Freedom Index series. The funds in this series account for 53% of plan assets .° These
funds invest heavily in high-carbon companies and companies contributing to deforestation?
High-carbon and deforestation-risk retirement plan investments are especially perverse when made on behalf of
younger workers with longer term investment time horizons.5 Such investments help fuel the climate crisis and make
worst-case economic scenarios more likely by locking in future temperature increases. The retirement savings of
younger workers will therefore suffer relatively higher impact from climate-related declines in global GDP than older
workers' retirement savings.
' https://www.nytimes.com/2021/04/22/climate/climate-change-economy.html
2 https://www.ucl.ac.uk/news/2021/sep/economic-cost-climate-change-could-be-six-times-higher-previously-thought
3 https://www.plansponsor.com/in-depth/climate-change-benchmarking-risk-retirement-plans/
4 https://www.calpers.ca.gov/docs/forms-publications/mercer-asset-allocation-report.pdf, p.2
5 https://www.paloaltonetworks.com/about-us/corporate-responsibility#modal-planet
6 https://investyourvalues.org/retirement-plans/palo-alto-networks
7 https://investyourvalues.org/retirement-plans/palo-alto-networks
https://www.bloomberg.com/news/features/2022-10-20/how-to-purge-fossil-fuel-investments-from-your-401-k-or-ira#xj4y7vzkg
138
PalomIto°
2024 Proxy Statement
PROPOSAL NO. 6
Shareholder Proposal – Report on
Climate Risks to Retirement
Plan Beneficiaries
As You Sow has advised us that they intend to present the following proposal for consideration at the Annual
Meeting on behalf of:
y Frances L. Bell T/W fbo Graham de Freitas, a beneficial owner of 25 shares of our common stock; and
y Roy A. Hunt Foundation, a beneficial owner of 87 shares of our common stock.
The Board accepts no responsibility for the contents of the proposal or the supporting statement. The Board opposes
the proposal for the reasons stated after the proposal.
Shareholder’s Proposal and Supporting Statement
WHEREAS: Greenhouse gas emissions and the resulting warming is causing significant, deleterious consequences
for the global economy. Those harms are predicted to grow. Prior studies estimate that unmitigated climate change
will cut the world economy by $23 trillion by 2050; a recent study indicates that the long-term costs may be six times
higher than previously estimated.1,2
These effects will have a particularly significant impact on workers saving for retirement. Retirement plan
beneficiaries have long investment horizons, and “[t]he longer term the investment horizon, the more likely it is that
climate will not only be a material risk, but the most material risk.”3 Climate portfolio risk to retirement plans will be
difficult to mitigate. An International Finance Corporation report concludes that “…the traditional way of managing
risk through a shift in asset allocation into increased holdings of more conservative, lower risk, lower return, asset
classes may do little to offset climate risks.”4
While our Company has taken actions to address its operational greenhouse gas emissions,5 it has not acted to
meaningfully address the emissions generated by its retirement plan investments. The plan’s most popular option by
assets invested is the Fidelity Freedom Index series. The funds in this series account for 53% of plan assets.6 These
funds invest heavily in high-carbon companies and companies contributing to deforestation.7
High-carbon and deforestation-risk retirement plan investments are especially perverse when made on behalf of
younger workers with longer term investment time horizons.8 Such investments help fuel the climate crisis and make
worst-case economic scenarios more likely by locking in future temperature increases. The retirement savings of
younger workers will therefore suffer relatively higher impact from climate-related declines in global GDP than older
workers’ retirement savings.
1
https://www.nytimes.com/2021/04/22/climate/climate-change-economy.html
2 https://www.ucl.ac.uk/news/2021/sep/economic-cost-climate-change-could-be-six-times-higher-previously-thought
3 https://www.plansponsor.com/in-depth/climate-change-benchmarking-risk-retirement-plans/
4 https://www.calpers.ca.gov/docs/forms-publications/mercer-asset-allocation-report.pdf, p.2
5 https://www.paloaltonetworks.com/about-us/corporate-responsibility#modal-planet
6 https://investyourvalues.org/retirement-plans/palo-alto-networks
7 https://investyourvalues.org/retirement-plans/palo-alto-networks
8 https://www.bloomberg.com/news/features/2022-10-20/how-to-purge-fossil-fuel-investments-from-your-401-k-or-ira#xj4y7vzkg
138
2024 Proxy Statement
Proposal No. 6 Shareholder Proposal - Report on Climate Risks to Retirement Plan Beneficiaries
4
The Company's high carbon retirement plan may also contribute to difficulty in worker recruitment and retention, as
polling indicates employee demand for responsible retirement options.°
Federal law requires that retirement plan fiduciaries act in beneficiaries' best interests and ensure prudence of
the plan's investments. Recent regulatory amendments have confirmed that managing material climate risk is
an appropriate consideration for retirement plan fiduciaries 10 The Company can best ensure that it is meeting its
obligations to employees — especially younger employees — by appropriately mitigating climate risk in its retirement
plan investments.
BE IT RESOLVED: Shareholders request Palo Alto Networks publish a report disclosing if and how the Company
is protecting plan beneficiaries — especially those with a longer investment time horizon — from increased future
portfolio risk created by present-day investments in high-carbon companies.
Company Opposing Statement
The Board believes that the report requested by the shareholder proposal would not do more to protect participants
in our 401(k) plan or provide any meaningful additional information to our shareholders. As described in more detail
below, the Board recommends a vote "AGAINST" the proposal for the following reasons:
• Our 401(k) Plan Offers Flexibility to Participants. Our 401(k) plan provides participants with a diverse array
of investment options, including a self-directed brokerage option that allows participants to invest outside of the
plan. Participants in our 401(k) plan are able to choose investments in a way that aligns with their financial goals,
risk tolerances and investment preferences.
Investment Determinations are Required to be Based on Relevant Risk-Return Factors. A plan fiduciary is
responsible for selecting 401(k) investment options. Federal law requires that the plan fiduciary make investment
determinations in a prudent manner and based on relevant risk-return investment options. By focusing too
narrowly on climate risks, the proposal risks putting undue pressure on the plan fiduciary to make decisions that
are not in the best interests of the participants.
Our 401(k) Plan Offers Flexibility to Participants
Our 401(k) plan provides participants with a variety of investment options, including target retirement trusts,
index-based funds, a money market fund, actively managed funds, and a self-directed brokerage option that
gives participants access to individual stocks, bonds, mutual funds from hundreds of fund families, and exchange-
traded funds. The primary investment manager, Fidelity Investments, and nearly all of the subadvisors of the funds
offered by our 401(k) plan are signatories of the UN Principles for Responsible Investment, and already incorporate
ESG factors into their investment process and practices, to varying extents. In addition, our 401(k) plan offers plan
participants an ESG index fund as an investment option, and our 401(k) plan's self-directed brokerage account
option enables participants to invest according to their personal investment goals, including any ESG strategies, and
provides access to an array of ESG-themed investment opportunities. As a result, plan participants already have the
ability to invest their plan accounts according to their personal preferences, which may or may not include climate
L.
risk or ESG-related outcomes.
9 https://www.benefitnews.com/news/employees-want-retirement-plans-to-include-esg-investing
10 https://www.federalregistergov/documents/2022/12/01/2022-25783/prudence-and-loyalty-in-selecting-plan-invest ments-and-
exercising-shareholder-rights
2024 Proxy Statement
*paloaitp;
139
The Company’s high carbon retirement plan may also contribute to difficulty in worker recruitment and retention, as
polling indicates employee demand for responsible retirement options.9
Federal law requires that retirement plan fiduciaries act in beneficiaries’ best interests and ensure prudence of
the plan’s investments. Recent regulatory amendments have confirmed that managing material climate risk is
an appropriate consideration for retirement plan fiduciaries.10 The Company can best ensure that it is meeting its
obligations to employees — especially younger employees — by appropriately mitigating climate risk in its retirement
plan investments.
BE IT RESOLVED: Shareholders request Palo Alto Networks publish a report disclosing if and how the Company
is protecting plan beneficiaries — especially those with a longer investment time horizon — from increased future
portfolio risk created by present-day investments in high-carbon companies.
Company Opposing Statement
The Board believes that the report requested by the shareholder proposal would not do more to protect participants
in our 401(k) plan or provide any meaningful additional information to our shareholders. As described in more detail
below, the Board recommends a vote “AGAINST” the proposal for the following reasons:
y Our 401(k) Plan Offers Flexibility to Participants. Our 401(k) plan provides participants with a diverse array
of investment options, including a self-directed brokerage option that allows participants to invest outside of the
plan. Participants in our 401(k) plan are able to choose investments in a way that aligns with their financial goals,
risk tolerances and investment preferences.
y Investment Determinations are Required to be Based on Relevant Risk-Return Factors. A plan fiduciary is
responsible for selecting 401(k) investment options. Federal law requires that the plan fiduciary make investment
determinations in a prudent manner and based on relevant risk-return investment options. By focusing too
narrowly on climate risks, the proposal risks putting undue pressure on the plan fiduciary to make decisions that
are not in the best interests of the participants.
Our 401(k) Plan Offers Flexibility to Participants
Our 401(k) plan provides participants with a variety of investment options, including target retirement trusts,
index-based funds, a money market fund, actively managed funds, and a self-directed brokerage option that
gives participants access to individual stocks, bonds, mutual funds from hundreds of fund families, and exchange-
traded funds. The primary investment manager, Fidelity Investments, and nearly all of the subadvisors of the funds
offered by our 401(k) plan are signatories of the UN Principles for Responsible Investment, and already incorporate
ESG factors into their investment process and practices, to varying extents. In addition, our 401(k) plan offers plan
participants an ESG index fund as an investment option, and our 401(k) plan’s self-directed brokerage account
option enables participants to invest according to their personal investment goals, including any ESG strategies, and
provides access to an array of ESG-themed investment opportunities. As a result, plan participants already have the
ability to invest their plan accounts according to their personal preferences, which may or may not include climate
risk or ESG-related outcomes.
9 https://www.benefitnews.com/news/employees-want-retirement-plans-to-include-esg-investing
10 https://www.federalregister.gov/documents/2022/12/01/2022-25783/prudence-and-loyalty-in-selecting-plan-investments-and-
exercising-shareholder-rights
139
2024 Proxy Statement
Proposal No. 6 Shareholder Proposal – Report on Climate Risks to Retirement Plan Beneficiaries
Proposal No. 6 Shareholder Proposal - Report on Climate Risks to Retirement Plan Beneficiaries
Investment Determinations are Required to be Based on
Relevant Risk-Return Factors
The Board does not have responsibility for, or other control over, our 401(k) plan investment options. Instead,
employees' contributions made to our 401(k) plan, as well as the Company's matching contributions, are deposited
and held for the participating employees' benefit in plan accounts maintained in trust by Fidelity Management Trust
Company. As is customary for large retirement plans like our 401(k) plan, a management-level committee serves as
the plan fiduciary responsible for selecting the 401(k) investment options, and consults with a third party investment
advisor in exercising its responsibilities.
U.S. federal law mandates that a responsible plan fiduciary select 401(k) investment options based on economic
factors the fiduciary "reasonably determines are relevant to a risk and return analysis" for the particular investment
or investment course of action. This may include the economic risk and return effects of climate change or
carbon-emissions on a particular investment. However, the law provides that a fiduciary may not sacrifice the interest
of plan participants' retirement income or other financial benefits by compromising investment returns or taking on
additional investment risks to promote unrelated benefits or goals. The weight given to a risk factor should be based
on the facts and a reasonable assessment of its impact on risk and return.
We believe this proposal, and the report it suggests, focuses too narrowly on climate risks and carbon emissions.
Instead, and in accordance with the law, the plan fiduciary offers participants a broad range of investment strategies
across different asset classes and investment styles — taking into account a variety of potential risks, reward
opportunities, and goals, including, but not limited to those related to climate change — to allow participants to
diversify their investments and pursue their individual retirement objectives and financial interests.
REOUIRED VOTE
The approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present
virtually or by proxy at the Annual Meeting and entitled to vote thereon to be approved. You may vote "for," "against,"
or "abstain" with respect to this proposal. Abstentions are considered votes present and entitled to vote on this
proposal, and thus will have the same effect as votes "against" this proposal. Broker non-votes will have no effect on
the outcome of this proposal.
Recommendation of the Board
The Board recommends that you vote "AGAINST" this shareholder proposal.
140
Paloalto°
2024 Proxy Statement
Recommendation of the Board
The Board recommends that you vote “AGAINST” this shareholder proposal.
Investment Determinations are Required to be Based on
Relevant Risk-Return Factors
The Board does not have responsibility for, or other control over, our 401(k) plan investment options. Instead,
employees’ contributions made to our 401(k) plan, as well as the Company’s matching contributions, are deposited
and held for the participating employees’ benefit in plan accounts maintained in trust by Fidelity Management Trust
Company. As is customary for large retirement plans like our 401(k) plan, a management-level committee serves as
the plan fiduciary responsible for selecting the 401(k) investment options, and consults with a third party investment
advisor in exercising its responsibilities.
U.S. federal law mandates that a responsible plan fiduciary select 401(k) investment options based on economic
factors the fiduciary “reasonably determines are relevant to a risk and return analysis” for the particular investment
or investment course of action. This may include the economic risk and return effects of climate change or
carbon-emissions on a particular investment. However, the law provides that a fiduciary may not sacrifice the interest
of plan participants’ retirement income or other financial benefits by compromising investment returns or taking on
additional investment risks to promote unrelated benefits or goals. The weight given to a risk factor should be based
on the facts and a reasonable assessment of its impact on risk and return.
We believe this proposal, and the report it suggests, focuses too narrowly on climate risks and carbon emissions.
Instead, and in accordance with the law, the plan fiduciary offers participants a broad range of investment strategies
across different asset classes and investment styles — taking into account a variety of potential risks, reward
opportunities, and goals, including, but not limited to those related to climate change — to allow participants to
diversify their investments and pursue their individual retirement objectives and financial interests.
REQUIRED VOTE
The approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present
virtually or by proxy at the Annual Meeting and entitled to vote thereon to be approved. You may vote “for,” “against,”
or “abstain” with respect to this proposal. Abstentions are considered votes present and entitled to vote on this
proposal, and thus will have the same effect as votes “against” this proposal. Broker non-votes will have no effect on
the outcome of this proposal.
140
2024 Proxy Statement
Proposal No. 6 Shareholder Proposal – Report on Climate Risks to Retirement Plan Beneficiaries
Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of
September 23, 2024 for:
each of our directors and nominees for director;
each of our NEOs;
all of our current directors and executive officers as a group; and
each person or group, who beneficially owned more than 5% of our common stock.
We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information
is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below,
we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting
and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable
community property laws.
Applicable percentage ownership is based on 327,002,601 shares of our common stock outstanding at September 23,
2024. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership
of such person, we deemed to be outstanding all shares of common stock subject to options held by the person that are
currently exercisable or exercisable (or issuable upon vesting of restricted stock units or performance stock unit awards)
within 60 days of September 23, 2024. However, we did not deem such shares outstanding for the purpose of computing
the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Palo Alto Networks, Inc.,
3000 Tannery Way, Santa Clara, California 95054. The information provided in the table below is based on our records,
information filed with the SEC and information provided to us, except where otherwise noted.
Number of
Shares
Percent of Shares
Outstanding
5% Shareholders:
The Vanguard Group'
27,568,500
8.4%
BlackRock, Inc (2)
24,622,005
7.5%
Named Executive Officers and Directors:
NiKest, ptruram
3,420,767
1.0%
William "Br Jenkinsm
213,457
Dipak Golechha(n
79,034
Lee IGarichen
1,383,471
Nir Zukm
2,957,370
Aparna Balsam
3,501
John M. Donovanen
17,778
Carl Eschenbachon
17,914
Helene D. Gaylen
11,808
James J. Goetzmn
201,132
Rt Hon Sir John Kee
8,280
Mary Pat McCarthe
31,167
Irraine Twohillm
19,914
All current directors and executive officers as a group (13 persons)(")
8,365,593
2.5%
* Represents beneficial ownership of less than one percent (1%).
2024 Proxy Statement
*paloajtp:
141
Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of
September 23, 2024 for:
y each of our directors and nominees for director;
y each of our NEOs;
y all of our current directors and executive officers as a group; and
y each person or group, who beneficially owned more than 5% of our common stock.
We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information
is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below,
we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting
and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable
community property laws.
Applicable percentage ownership is based on 327,002,601 shares of our common stock outstanding at September 23,
2024. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership
of such person, we deemed to be outstanding all shares of common stock subject to options held by the person that are
currently exercisable or exercisable (or issuable upon vesting of restricted stock units or performance stock unit awards)
within 60 days of September 23, 2024. However, we did not deem such shares outstanding for the purpose of computing
the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Palo Alto Networks, Inc.,
3000 Tannery Way, Santa Clara, California 95054. The information provided in the table below is based on our records,
information filed with the SEC and information provided to us, except where otherwise noted.
Number of
Shares
Percent of Shares
Outstanding
Һ֣L[TeX[b_WXef
The Vanguard Group&Ҷ'
ҷҼҺһҽҺҵҵ
ҽҹ֣
BlackRock, Inc&ҷ'
ҷҹһҷҷҵҵҺ
ҼҺ֣
Named Executive Officers and Directors:
G\^Xf[:ebeT&Ҹ'
ҸҹҷҵҼһҼ
Ҷҵ֣
William “BJ” Jenkins&ҹ'
ҷҶҸҹҺҼ
*
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*
EXXD_Te\V[&һ'
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ҷҾҺҼҸҼҵ
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Helene D. Gayle(ҽ)
ҶҶҽҵҽ
*
James J. Goetz&Ҷҵ)
ҷҵҶҶҸҷ
*
KgAbaL\eCb[aDXl(ҽ)
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161
2024 Proxy Statement
Appendix B
Appendix B
(v) Tolling Expiration. A Participant's Award Agreement may also provide that:
(1) if the exercise of the Option following the cessation of the Participant's status as a Service Provider
(other than upon the Participant's death or Disability) would result in liability under Section 16(b), then the
Option will terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award
Agreement, or (B) the 10th day after the last date on which such exercise would result in liability under
Section 16(b); or
(2) if the exercise of the Option following the cessation of the Participant's status as a Service Provider
(other than upon the Participant's death or Disability) would be prohibited at any time solely because the
issuance of Shares would violate the registration requirements under the Securities Act, then the Option
will terminate on the earlier of (A) the expiration of the term of the Option or (B) the expiration of a period
of 30 days after the cessation of the Participant's status as a Service Provider during which the exercise
of the Option would not be in violation of such registration requirements.
7. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from
time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator
determines in its sole discretion.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that
will specify any Period of Restriction, the number of Shares granted, and such other terms and conditions as the
Administrator determines in its sole discretion. Unless the Administrator determines otherwise, the Company as
escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c) Transferability. Except as provided in this Section 7 of the Award Agreement, Shares of Restricted Stock may not
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of any applicable
Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of
Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered
by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after
the last day of any applicable Period of Restriction or at such other time as the Administrator may determine.
Notwithstanding the foregoing, at any time after the grant of an Option, the Administrator, in its sole discretion,
may accelerate the time at which any restrictions will lapse or be removed.
Voting Rights. During any applicable Period of Restriction, Service Providers holding Shares of Restricted
Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator
determines otherwise.
(g) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for
which restrictions have not lapsed will revert to the Company and again will become available for grant under
the Plan.
8. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the
Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it will
advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant,
including the number of Restricted Stock Units.
(b) Restricted Stock Unit Agreement. Each Award of Restricted Stock Units will be evidenced by an Award
Agreement that will specify vesting criteria, the number of Restricted Stock Units granted, and such other terms
and conditions as the Administrator determines in its sole discretion.
(c) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending
on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide,
divisional, business unit, or individual goals (including, but not limited to, continued employment or service),
applicable U.S. or non-U.S. federal or state securities laws or any other basis determined by the Administrator in
its discretion.
162
palomlur
2024 Proxy Statement
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163
2024 Proxy Statement
Appendix B
Appendix B
(c) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting
provisions (including, without limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or value of Performance Units/
Shares that will be paid out to the Service Providers. The time period during which the performance objectives
or other vesting provisions must be met will be called the "Performance Period." Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such
other terms and conditions as the Administrator determines in its sole discretion. The Administrator may set
performance objectives based upon the achievement of Company-wide, divisional, business unit or individual
goals (including, but not limited to, continued employment or service), applicable U.S. or non-U.S. federal or state
securities laws, or any other basis determined by the Administrator in its discretion.
(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of
Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/ Shares
earned by the Participant over the Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives or other vesting provisions have been achieved. Notwithstanding the
foregoing, at any time after the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may
reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.
(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/ Shares will
be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator,
in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an
aggregate Fair Market Value equal to the value of the earned Performance Units/ Shares at the close of the
applicable Performance Period) or in a combination thereof.
(f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or
unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under
the Plan.
11. Award Limitations.
(a) Outside Director Award Limitations. No Outside Director may be paid compensation for service as an Outside
Director that, in the aggregate, exceeds $2,000,000, increased to $4,000,000 for such Outside Director for
the Fiscal Year in which he or she joins the Board as an Outside Director. Compensation includes equity awards,
including any Awards issued under this Plan, the value of which will be based on their grant date fair value
determined in accordance with U.S. generally accepted accounting principles and any other compensation
(including without limitation any cash retainers or fees). Any Awards or other compensation paid or provided to
an individual for his or her services as an Employee, or for his or her services as a Consultant (other than as an
Outside Director), will not count for purposes of the limitation under this Section 11(a).
(b) Dividends and Other Distributions. No dividends or other distributions shall be paid with respect to any Shares
underlying any unvested portion of an Award.
12. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise or Applicable Laws require
otherwise, vesting of Awards will be suspended during any unpaid leave of absence. A Participant will not cease to
be an Employee in the case of (i) any leave of absence approved by the Company or the Participant's employer or (ii)
transfers between locations of the Company or between the Company, its Parent, or any of its Subsidiaries. For purposes
of Incentive Stock Options, no such leave may exceed 3 months, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company or
the Participant's employer is not so guaranteed, then 6 months following the lst day of such leave any Incentive Stock
Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes
as a Nonstatutory Stock Option.
13. Transferability of Awards.
(a) General Rule. Unless determined otherwise by the Administrator, or otherwise required by Applicable Laws, an
Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only
by the Participant. If the Administrator makes an Award transferable, the Award will be limited by any additional
terms and conditions imposed by the Administrator. Any unauthorized transfer of an Award will be void.
164
palomIto.
2024 Proxy Statement
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- 3 -
Table of Contents
Item 1. Business
General
Palo Alto Networks, Inc. is a global cybersecurity provider with a vision of a world where each day is safer and more
secure than the one before. We were incorporated in 2005 and are headquartered in Santa Clara, California.
We empower enterprises, organizations, service providers, and government entities to protect themselves against
today's most sophisticated cyber threats. Our cybersecurity platforms and services help secure enterprise users,
networks, clouds, and endpoints by delivering comprehensive cybersecurity backed by artificial intelligence (Al')
"
and
automation. A key element of our strategy is to help our customers simplify their security architectures through
consolidating disparate point products. We execute on this strategy by developing our capabilities and packaging our
offerings into platforms which are able to cover many of our customers' needs in the markets in which we operate. Our
platformization strategy combines various products and services into a tightly integrated architecture and makes
security faster, less complex, and more cost-effective. We focus on delivering value in four sectors of the cybersecurity
industry:
Network Security:
Our network security platform, designed to deliver complete zero trust solutions to our customers, includes our
hardware and software ML-Powered Next-Generation Firewalls, Al Runtime Security, as well as a cloud-delivered
Secure Access Service Edge ("SASE"). Prisma® Access, our Security Services Edge ("SSE") solution, when combined
with Prisma SD-WAN, provides a comprehensive single-vendor SASE offering that is used to secure remote
workforces and securely enable the cloud-delivered branch. Our network security platform also includes our cloud-
delivered security services, such as Advanced Threat Prevention, Advanced WildFire®, Advanced URL Filtering,
Advanced DNS Security, loT/OT Security, GlobalProtect®, Enterprise Data Loss Prevention ("Enterprise DLP"), Al for IT
Operations ("AlOps"), SaaS Security, and Al Access Security. Through these add-on security services, our customers
are able to secure their content, applications, users, and devices across their entire organization. Strata Cloud
Manager, our network security management solution, can centrally manage our network security platform
irrespective of form factor, location, or scale. Strata Cloud Manager includes the Strata Copilot which provides a
natural language interface to simplify and accelerate platform management.
Cloud Security.
We deliver scalable and comprehensive security across the cloud application development lifecycle through our
Code to CloudTM platform, Prisma Cloud. As a comprehensive Cloud Native Application Protection Platform
("CNAPP"), Prisma Cloud secures multi- and hybrid-cloud environments for applications, data, generative Al ("GenAll
ecosystem, and the entire cloud native technology stack across the full development lifecycle, from code to cloud.
We also offer our VM-Series and CN-Series virtual firewalls for inline network security on multi- and hybrid-cloud
environments.
Security Operations:
We deliver the next generation of security operations capabilities that combine security analytics, endpoint security,
automation, and attack surface management ("ASM") solutions through our Cortex® platform. These include Cortex
XSIAM®, our AI-driven security operations platform, Cortex XDR® for the prevention, detection, and response to
complex cybersecurity attacks, Cortex XSOAR® for security orchestration, automation, and response ("SOAR"), and
Cortex Xpanse® for ASM. These products are delivered as software as a service ("SaaS") or software subscriptions.
Threat Intelligence and Advisory Services (Unit 42):
Unit 42® brings together world-renowned threat researchers with an elite team of incident responders and security
consultants to create an intelligence-driven, response-ready organization to help customers manage cyber risk. Our
consultants serve as trusted advisors to our customers by assessing and testing their security controls against the
right threats, transforming their security strategy with a threat-informed approach, and responding to security
incidents on behalf of our clients. Additionally, Unit 42 offers managed detection and response and managed threat
hunting services.
- 4 -
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Table of Contents
Advanced URL Filtering. This cloud-delivered security service offers the industry's first Inline Deep Learning powered
web protection engine. It delivers real-time detection and prevention of unknown, evasive, and targeted web-based
threats, such as phishing, malware, and C2. While many vendors use machine learning to categorize web content or
prevent malware downloads, Advanced URL Filtering is the industry's first inline web protection engine capable of
detecting never-before-seen web-based threats and preventing them in real-time. In addition, it includes a cloud-
based URL filtering database which consists of millions of URLs across many categories and is designed to analyze
web traffic and prevent web-based threats, such as phishing, malware, and C2.
Advanced DNS Security. This cloud-delivered security service uses machine learning to proactively block malicious
domains and stop attacks in progress. Unlike other solutions, it does not require endpoint routing configurations to
be maintained and therefore cannot be bypassed. It allows our network security platform access to Domain Name
System ("DNS") signatures that are generated using advanced predictive analysis, machine learning, and malicious
domain data from a growing threat intelligence sharing community of which we are a part. Expanded categorization
of DNS traffic and comprehensive analytics allow deep insights into threats, empowering security personnel with the
context to optimize their security posture. It offers comprehensive DNS attack coverage and includes industry-first
protections against multiple emerging DNS-based network attacks, including real-time analysis of DNS response to
prevent DNS hijacking.
loT/OT Security. This cloud-delivered security service uses machine learning to accurately identify and classify various
loT and operational technology (OT") devices, including never-been-seen-before devices, mission-critical OT devices,
and unmanaged legacy systems. It uses machine learning to baseline normal behavior, identify anomalous activity,
assess risk, and provide policy recommendations to allow trusted behavior with a new Device-ID policy construct on
our network security platform. Other subscriptions have also been enhanced with loT context to prevent threats on
various devices, including loT and OT devices.
SaaS Security APL SaaS Security API (formerly Prisma SaaS) is a multi-mode, cloud access security broker ("CASB")
that helps govern sanctioned SaaS application usage across all users and helps prevent breaches and non-
compliance. Specifically, the service enables the discovery and classification of data stored in supported SaaS
applications, protects sensitive data from accidental exposure, identifies and protects against known and unknown
malware, and performs user activity monitoring to identify potential misuse or data exfiltration. It delivers complete
visibility and granular enforcement across all user, folder, and file activity within sanctioned SaaS applications, and
can be combined with SaaS Security Inline for a complete integrated CASB.
SaaS Security lnline. SaaS Security Inline adds an inline service to automatically gain visibility and control over
thousands of known and new sanctioned, unsanctioned and tolerated SaaS applications in use within organizations
today. It provides enterprise data protection and compliance across all SaaS applications and prevents cloud threats
in real time with best-in-class security. The solution is easy to deploy being natively integrated on network security
platform, eliminating the architectural complexity of traditional CASB products, while offering low total cost of
ownership. It can be combined with SaaS Security API as a complete integrated CASB.
GlobalProtect. This subscription provides protection for users of both traditional laptop and mobile devices. It
expands the boundaries of the end-users' physical network, effectively establishing a logical perimeter that
encompasses remote laptop and mobile device users irrespective of their location. When a remote user logs into the
device, GlobalProtect automatically determines the closest gateway available to the roaming device and establishes
a secure connection. Regardless of the operating systems, laptops, tablets, and phones will stay connected to the
corporate network when they are on a network of any kind and, as a result, are protected as if they never left the
corporate campus. GlobalProtect ensures that the same secure application enablement policies that protect users at
the corporate site are enforced for all users, independent of their location.
Enterprise DLP. This cloud-delivered security service provides consistent, reliable protection of sensitive data, such as
personally identifiable information and intellectual property, for all traffic types, applications, and users. Native
integration with our products makes it simple to deploy, and advanced machine learning minimizes management
complexity. Enterprise DLP allows organizations to consistently discover, classify, monitor, and protect sensitive data,
wherever it may reside. It helps minimize the risk of a data breach both on-premises and in the cloud—such as in
Office/Microsoft 365TM, Salesforce®, and Box—and assists in meeting stringent data privacy and compliance
regulations, including the E.U. General Data Protection Regulation, the California Consumer Privacy Act, the Payment
Card Industry Data Security Standard , H I PAA (Health Insurance Portability and Accountability Act) requirements,
and others.
Al Access Security. GenAl applications can inadvertently expose sensitive company data, such as intellectual
property, trade secrets, source code, financial records and customer information, leading to significant business and
compliance risks. In addition, public GenAl tools can be exploited to spread malware and compromise cybersecurity
defenses. Al Access Security classifies and prioritizes GenAl applications to assess risk, detect anomalies and visualize
insights across multiple GenAl-specific attributes. It prevents sensitive data loss and defends against malicious
responses, ensuring safe and effective Al adoption.
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Table of Contents
AlOps: AlOps is available in both free and licensed premium versions. AlOps redefines network operational
experience by empowering security teams to proactively strengthen security posture and resolve network
disruptions. AlOps provides continuous best practice recommendations powered by machine learning based on
industry standards, security policy context, and advanced telemetry data collected from our network security
customers to improve security posture. It also intelligently predicts health, performance, and capacity problems up to
seven days in advance and provides actionable insights to resolve the predicted disruptions.
Secure Access Service Edge:
Prisma Access. Prisma Access is a cloud-delivered security offering that helps organizations deliver consistent
security to remote networks and mobile users. Located in more than 100 locations around the world, Prisma Access
consistently inspects all traffic across all ports and provides bidirectional networking to enable branch-to-branch and
branch-to-headquarter traffic. Prisma Access consolidates point-products into a single converged cloud-delivered
offering, transforming network security and allowing organizations to enable secure hybrid workforces. Prisma
Access protects all application traffic with complete, best-in-class security while ensuring an exceptional user
experience with industry-leading service-level agreements ("SLA"s). With native SASE integration, Prisma Access
Browser extends Zero Trust to any device—managed or unmanaged—in minutes. Prisma Access delivers exceptional
user experience with a combination of application acceleration—up to 5x faster than direct-to-internet—and
Autonomous Digital Experience Management. With these capabilities, Prisma Access delivers an optimized digital
experience and application performance to end users.
Prisma SD-WAN. Our Prisma SD-WAN solution is a next-generation SD-WAN solution that makes the secure cloud-
delivered branch possible. Prisma SD-WAN enables organizations to replace traditional Multiprotocol Label
Switching based WAN architectures with affordable broadband and internet transport types that promote improved
bandwidth availability, redundancy and performance at a reduced cost. Prisma SD-WAN leverages real-time
application performance SLAs and visibility to control and intelligently steer application traffic to deliver an
exceptional user experience. Prisma SD-WAN also provides the flexibility of deploying with an on-premises controller
to help businesses meet their industry-specific security compliance requirements and manage deployments with
application-defined policies. Our Prisma SD-WAN simplifies network and security operations using machine learning
and automation.
Al Runtime Security:
Al applications and large language model ("LLM") models challenge traditional security. Increasingly sophisticated
attacks on Al ecosystems require protection from Al applications, models and datasets. Al Runtime Security
continuously monitors Al applications, models and datasets for potential threats and anomalies. It quickly adjusts to
evolving attack techniques and detects suspicious activities in real time. It shields customers' Al application
ecosystem from AI-specific and conventional network attacks by leveraging real-time, AI-powered security.
Strata Cloud Manager:
Strata Cloud Manager enables our customers to easily manage their Palo Alto Networks' Network Security
infrastructure—including NGFWs and SASE environment—from the cloud, via one unified management interface. In
addition to getting complete visibility, with Strata Cloud Manager, customers can predict and prevent network health
issues, strengthen security, and configure and manage their entire network security estate. Strata Copilot, a part of
Strata Cloud Manager, helps security teams quickly and easily find, understand and address threats leveraging the
power and simplicity of natural language.
Cloud Security:
Prisma Cloud. Prisma Cloud is a comprehensive CNAPP, securing both cloud-native and lift-and-shift applications
across multi- and hybrid-cloud environments. With broad security and compliance coverage and a flexible agentless,
as well as agent-based, architecture, Prisma Cloud protects cloud-native applications across their lifecycle from code
to cloud. The platform helps developers prevent risks as they code and build the application, secures the software
supply chain and the continuous integration and continuous development ("Cl/CD") pipeline, and provides complete
visibility and real-time protection for applications running in the cloud.
With its code-to-cloud security capabilities, Prisma Cloud creates a complete security picture by tracing back
thousands of cloud risks and vulnerabilities that occur in the application runtime to their origin in the code-and-build
phase of the application. Prisma Cloud does this by consolidating multiple code and cloud security technologies such
as Software Composition Analysis, Infrastructure as Code security, Cl/CD security, secrets scanning, Cloud Security
Posture Management, Cloud Identity and Entitlements Management, API security, Vulnerability Management, Cloud
Workload Protection, Web Application and API Security, Cloud Network Security, and Cloud Discovery and Exposure
Management into a single unified platform. The platform enables organizations to "shift security left" and fix issues at
the source (in code) before they proliferate as a large number of risks in the cloud. The contextualized visibility to
alerts, attack paths, and vulnerabilities delivered by Prisma Cloud facilitates collaboration between security and
development teams to drive down risks and deliver better security outcomes. The context helps security teams block
attacks in the cloud runtime and developers fix risks in source code.
A comprehensive library of compliance frameworks included in Prisma Cloud vastly simplifies the task of maintaining
compliance. Seamless integration with security orchestration tools ensures rapid remediation of vulnerabilities and
security issues.
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Further, the Code to Cloud Platform is positioned to secure AI-powered applications for enterprises. In March 2024,
we announced limited general availability of data security posture management ("DSPM") capabilities and in May
2024, we released the early preview of Al security posture management ("AI-SPM") capabilities to our customers.
These features were made available to all customers in our August 2024 software release. Prisma Cloud customers
can activate them within the platform to discover, classify, protect, and govern AI-powered applications. DSPM and
AI-SPM together provide visibility into the entire GenAl ecosystem, identify LLM vulnerabilities, prioritize
misconfigu ration risks, reduce the risk of data exposure, and surface compliance violations. The native integration of
Prisma Cloud with Cortex XSIAM is further expanded with the recent addition of cloud detection and response
("CDR") capabilities, providing a broader context to protect, detect, and respond to advanced cloud threats. It also
brings together cloud security and security operations teams, fostering strong collaboration.
With a flexible, integrated platform that enables customers to license and activate cloud security capabilities that
match their need, Prisma Cloud helps secure organizations at every stage in their cloud adoption journey. The
platform enables security teams to consolidate multiple products that address individual risks with an integrated
solution that also delivers best-in-class capabilities. Prisma Cloud's code-to-cloud CNAPP delivers comprehensive
protection for applications and their code, infrastructure (workloads, network, and storage), data, APIs, and associated
identities.
Security Operations:
Cortex XS1AM. This cloud-based AI-driven security operations platform for the modern SOC harnesses the power of Al
to radically improve security outcomes and transform security operations. Cortex XSIAM customers can consolidate
multiple products into a single unified platform that delivers security information and event management, extended
detection and response ("XDR"), SOAR, network traffic analysis, ASM, threat intelligence management ("TIM"), identity
threat detection and response, and CDR. CDR is the latest addition to Cortex XSIAM and XDR that addresses the
growing need for security teams to respond to cloud threats with purpose-built SOC tools that seamlessly integrate
with their security programs. Cortex XSIAM integrates these capabilities into a single, converged platform built for
security operations, enabling organizations to simplify operations, stop threats at scale, and accelerate incident
remediation. Cortex XSIAM automates data integration, analysis, and triage to respond to most alerts, enabling
analysts to focus on only the incidents that require human intervention.
Cortex XDR. This cloud-based subscription enables organizations to collect telemetry from endpoint, network,
identity and cloud data sources and apply advanced analytics and machine learning, to quickly find and stop
targeted attacks, insider abuse, and compromised endpoints. Cortex XDR has two product tiers: XDR Prevent and
XDR Pro. XDR Prevent delivers enterprise-class endpoint security focused on preventing attacks. XDR Pro extends
endpoint detection and response ("EDR") to include cross-data analytics for network, cloud, and identity data. Going
beyond EDR, Cortex XDR detects the most complex threats using analytics across key data sources and reveals the
root cause, which can significantly reduce investigation time as compared to siloed tools and manual processes.
Cortex XSOAR. Available as a stand-alone cloud-based subscription, an on-premises appliance, or delivered natively
through Cortex XSIAM, Cortex XSOAR is a comprehensive SOAR offering that unifies playbook automation, case
management, real-time collaboration, and TIM to serve security teams across the incident lifecycle. With Cortex
XSOAR, security teams can standardize processes, automate repeatable tasks, and manage incidents across their
security product stack to improve response time and analyst productivity. Cortex XSOAR learns from the real-life
analyst interactions and past investigations to help SOC teams with analyst assignment suggestions,
playbook enhancements, and best next steps for investigations. Many of our customers see significantly faster SOC
response times and a significant reduction in the number of SOC alerts which require human intervention.
Cortex Xpanse. Available as a stand-alone cloud-based subscription and a cloud-based subscription module within
Cortex XSIAM, Cortex Xpanse provides ASM, which is the ability for an organization to identify what an attacker would
see among all of its sanctioned and unsanctioned Internet-facing assets. In addition, Cortex Xpanse detects risky or
out-of-policy communications between Internet-connected assets that can be exploited for data breaches or
ransomware attacks. Cortex Xpanse continuously identifies Internet assets, risky services, or misconfigurations in
third parties to help secure a supply chain or identify risks for mergers and acquisitions due diligence. Finally,
compliance teams use Cortex Xpanse to improve their audit processes and stay in compliance by assessing their
access controls against regulatory frameworks.
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SUPPORT
Customer Support. Global customer support helps our customers achieve their security outcomes with services and
support capabilities covering the customer's entire journey with Palo Alto Networks. This post-sales, global organization
advances our customers' security maturity, supporting them when, where, and how they need it. We offer Standard
Support, Premium Support, and Platinum Support to our end-customers and channel partners. Our channel partners
that operate a Palo Alto Networks Authorized Support Center typically deliver level-one and level-two support. We
provide level-three support 24 hours a day, seven days a week through regional support centers that are located
worldwide. We also offer a service offering called Focused Services that includes Customer Success Managers to
provide support for end-customers with unique or complex support requirements. We offer our end-customers
ongoing support for hardware, software, and certain cloud offerings, which includes ongoing security updates, PAN-OS
upgrades, bug fixes, and repairs. End-customers typically purchase these services for a one-year or longer term at the
time of the initial product sale and typically renew for successive one-year or longer periods. Additionally, we provide
expedited replacement for any defective hardware. We use a third-party logistics provider to manage our worldwide
deployment of spare appliances and other accessories.
Threat Intelligence, Incident Response and Security Consulting. Unit 42 brings together world-renowned threat
researchers, incident responders, and security consultants to create an intelligence-driven, response-ready organization
that is passionate about helping clients proactively manage cyber risk. We help security leaders assess and test their
security controls, transform their security strategy with a threat-informed approach, and respond to incidents rapidly.
The Unit 42 Threat Intelligence team provides threat research that enables security teams to understand adversary
intent and attribution, while enhancing protections offered by our products and services to stop advanced attacks. Our
security consultants serve as trusted partners with state-of-the-art cyber risk expertise and incident response
capabilities, helping customers build effective security programs, uncover critical exposures to prevent incidents, and,
should incidents occur, respond to them with speed and confidence.
Professional Services. Professional services are primarily delivered directly by Palo Alto Networks and through a global
network of authorized channel partners to our end-customers and include on-location and remote, hands-on experts
who plan, design, and deploy effective security solutions tailored to our end-customers' specific requirements. These
services include architecture design and planning, implementation, configuration, and firewall migrations for all our
products, including Prisma and Cortex deployments. Customers can also purchase on-going technical experts to be
part of customer's security teams to aid in the implementation and operation of their Palo Alto Networks capabilities.
Our education services include certifications, as well as free online technical courses and in-classroom training, which
are primarily delivered through our authorized training partners.
RESEARCH AND DEVELOPMENT
Our research and development efforts are focused on developing new hardware and software and on enhancing and
improving our existing product and subscription offerings. We believe that hardware and software are both critical to
expanding our leadership in the enterprise security industry. Our engineering team has deep networking security,
cloud security, endpoint security, security operations, and incident response expertise as well as expertise in Al and
machine learning capabilities that are applied across these areas. Our scale and position in multiple areas of the
security market enable us to leverage core competencies across hardware, software, and SaaS and also share expertise
and research around threats, which allows us to respond to the rapidly changing threat landscape. We supplement our
own research and development efforts with technologies and products that we license from third parties. We test our
products thoroughly to certify and ensure interoperability with third-party hardware and software products.
We believe that innovation and timely development of new features and products is essential to meeting the needs of
our end-customers and improving our competitive position. During fiscal 2024, we introduced several new offerings,
including: Prisma Cloud Darwin release with newly integrated Code to Cloud intelligence capabilities, PAN-OS 11.2
Quasar, Cortex XSIAM 2.0, new Cortex XSIAM features, Prisma SASE 3.0, and Precision AIIM. Additionally, we acquired
productive investments that fit well within our long-term strategy. For example, in December 2023, we acquired Dig
Security Solutions Ltd. ("Dig"), which we expect will enhance our Prisma Cloud capabilities with a DSPM solution; and
we acquired Talon Cyber Security Ltd. ("Talon"), which will support Prisma SASE's approach to provide secure access to
business applications for unmanaged and personal devices with an enterprise browser.
We plan to continue to significantly invest in our research and development efforts as we evolve and extend the
capabilities of our portfolio.
- 9 -
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- 9 -
Table of Contents
INTELLECTUAL PROPERTY
We believe that our intellectual property rights are valuable and important to our business, and that our success
depends, in part, on our ability to protect and use our core technology and intellectual property rights. We rely on a
combination of trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment
agreements, confidentiality procedures, non-disclosure agreements, and employee non-disclosure and invention
assignment agreements to establish, protect and control the use of our proprietary technology and intellectual
property rights. We continue to grow our global portfolio of intellectual property rights in connection with our products,
services, research and development. We file patent applications to protect our intellectual property and believe that the
duration of our issued patents is sufficient when considering the expected lives of our products. We have registered
various trademarks for our company and our products in the United States ("U.S.") and other jurisdictions
internationally. We intend to continue pursuing additional protections for our proprietary technology and intellectual
property to the extent we believe it would be beneficial and cost-effective.
Despite our efforts to protect our proprietary technology and intellectual property rights, our rights may not be
respected in the future or may be invalidated, circumvented, or challenged. Our industry is characterized by the
existence of a large number of patents and frequent claims and related litigation based on allegations of patent
infringement or other violations of intellectual property rights. We believe that competitors will try to develop products
that are similar to ours and that may infringe our intellectual property rights. Our competitors, third-parties and non-
practicing entities, may also claim that our cybersecurity platforms and services infringe their intellectual property
rights. From time to time, third parties have in the past and may in the future assert claims of infringement,
misappropriation and other violations of intellectual property rights against us or our customers, with whom our license
or other agreements may obligate us to indemnify against these claims. Successful claims of infringement by a third
party could prevent us from offering certain products or features, require us to develop alternate, non-infringing
technology, which could require significant time and during which we could be unable to continue to offer our affected
products or solutions, require us to obtain a license, which may not be available on reasonable terms or at all, or force us
to pay substantial damages, royalties, or other fees. For additional information, see the section titled "Risks Related to
Intellectual Property and Technology Licensing" in Part I, Item 1A "Risk Factors" in this Form 10-K.
GOVERNMENT REGULATION
We are subject to numerous U.S. federal, state, and foreign laws and regulations covering a wide variety of subject
matters. Like other companies in the technology industry, we face scrutiny from both U.S. and foreign governments
with respect to our compliance with laws and regulations. Our compliance with these laws and regulations may be
onerous and could, individually or in the aggregate, increase our cost of doing business, impact our competitive
position relative to our peers, and/or otherwise have an adverse impact on our business, reputation, financial condition,
and operating results. For additional information about government regulation applicable to our business, see Part I,
Item 1A "Risk Factors" in this Form 10-K.
COMPETITION
We operate in the intensely competitive enterprise security industry that is characterized by constant change and
innovation. Changes in the application, threat, and technology landscape result in evolving customer requirements for
the protection from threats and the safe enablement of applications. Our main competitors fall into four categories:
large companies that incorporate security features in their products, such as Cisco Systems, Inc. ("Cisco"), Microsoft,
Alphabet, or those that have acquired, or may acquire, security vendors and have the technical and financial
resources to bring competitive solutions to the market;
independent security vendors, such as Check Point Software Technologies Ltd. ("Check Point"), Fortinet, Inc.
("Fortinet"), CrowdStrike Holdings, Inc. ("CrowdStrike"), Zscaler, Inc. ("Zscaler"), and Wiz, Inc. ("Wiz"), that offer a mix of
security products;
startups and point-product vendors that offer independent or emerging solutions across various areas of security;
and
public cloud vendors and startups that offer solutions for cloud security (private, public, and hybrid cloud).
As our market grows, it will attract more highly specialized vendors, as well as larger vendors that may continue to
acquire or bundle their products more effectively.
-10-
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- 10 -
Table of Contents
The principal competitive factors in our market include:
product features, reliability, performance, and effectiveness;
product line breadth, diversity, and applicability,
product extensibility and ability to integrate with other technology infrastructures;
price and total cost of ownership;
adherence to industry standards and certifications;
strength of sales and marketing efforts; and
brand awareness and reputation.
We believe we generally compete favorably with our competitors on the basis of these factors as a result of the features
and performance of our portfolio, the ease of integration of our security solutions with technological infrastructures,
and the relatively low total cost of ownership of our products. However, many of our competitors have substantially
greater financial, technical, and other resources, greater name recognition, larger sales and marketing budgets, broader
distribution, more diversified product lines, and larger and more mature intellectual property portfolios.
SALES, MARKETING, SERVICES, AND SUPPORT
Customers. Our end-customers are predominantly medium to large enterprises, service providers, and government
entities. Our end-customers operate in a variety of industries, including education, energy, financial services,
government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Our end-
customers deploy our portfolio of solutions for a variety of security functions across a variety of deployment scenarios.
Typical deployment scenarios include the enterprise network, the enterprise data center, cloud locations, and branch or
remote locations. No single end-customer accounted for more than 10% of our total revenue in fiscal 2024, 2023, or 2022.
Distribution. We primarily sell our products and subscription and support offerings to end-customers through our
channel partners utilizing a two-tier, indirect fulfillment model whereby we sell our products and subscription and
support offerings to our distributors, which, in turn, sell to our resellers, which then sell to our end-customers. Sales are
generally subject to our standard, non-exclusive distributor agreement, which provides for an initial term of one year,
one-year renewal terms, termination by us with 30 to 90 days written notice prior to the renewal date, and payment to
us from the channel partner within 30 to 45 calendar days of the date we issue an invoice for such sales. For fiscal 2024,
59.0% of our total revenue was derived from sales to four distributors.
We also sell our VM-Series virtual firewalls directly to end-customers through Amazon's AWS Marketplace, Microsoft's
Azure Marketplace, and Alphabet's Google Cloud Marketplace under a usage-based licensing model.
Sales. Our sales organization is responsible for large-account acquisition and overall market development, which
includes the management of the relationships with our channel partners, working with our channel partners in winning
and supporting end-customers through a direct-touch approach, and acting as the liaison between our end-customers
and our marketing and product development organizations. We pursue sales opportunities both through our direct
sales force and as assisted by our channel partners, which include resellers, global and regional systems integrators,
service providers, and cloud providers. We expect to continue to grow our sales headcount to expand our reach in all
key growth sectors.
Our sales organization is supported by sales engineers with responsibility for pre-sales technical support, solutions
engineering for our end-customers, and technical training for our channel partners.
Channel Program. Our NextWave Channel Partner program is focused on building in-depth relationships with
solutions-oriented distributors and channel partners that have strong security expertise. The program rewards these
partners based on a number of attainment goals, as well as provides them access to marketing funds, technical and
sales training, and support. To promote optimal productivity, we operate a formal accreditation program for our
channel partners' sales and technical professionals. As ofJuly 31, 2024, we had more than 6,500 channel partners.
Global Customer Success. Our Global Customer Success organization is responsible for delivering professional,
educational, and support services directly to our channel partners and end-customers. We leverage the capabilities of
our channel partners and train them in the delivery of professional, educational, and support services to enable these
services to be locally delivered. We believe that a broad range of support services is essential to the successful customer
deployment and ongoing support of our products, and we have hired support engineers with proven experience to
provide those services.
-11-
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Table of Contents
Sales to large enterprise end-customers, which is part of our growth strategy, involve risks that may not be present, or
that are present to a lesser extent, with sales to smaller entities, such as (a) longer sales cycles and the associated risk
that substantial time and resources may be spent on a potential end-customer that elects not to purchase our
products, subscriptions, and support, and (b) increased purchasing power and leverage held by large end-customers in
negotiating contractual arrangements. Deployments for large enterprise end-customers are also more complex,
require greater product functionality, scalability, and a broader range of services, and are more time-consuming. All
of these factors add further risk to business conducted with these end-customers. Failure to realize sales from large
enterprise end-customers could materially and adversely affect our business, operating results, and financial condition.
If we are unable to attract new customers, our future results of operations could be harmed.
To increase our revenue and maintain profitability, we must add new customers. To do so, we must successfully
convince prospective customers of the value of adopting our solutions. We are engaging in costly marketing and sales
efforts to accelerate platformization and attract new customers, which may fail or may not be as successful as intended
or at all. Additionally, prospective customers' decisions to purchase our solutions depend on a variety of factors, many of
which are out of our control. These factors significantly impact our ability to add new customers and increase the time,
resources and sophistication required to do so. For example, prospective customers may face real or perceived
switching costs when switching to our solutions from legacy security vendors and products. Deployment of our
solutions may require a significant commitment of resources from our customers. Any deterioration in general
economic conditions, including as a result of the geopolitical environment or inflation (as well as government policies
such as raising interest rates in response to inflation), have in the past caused, and may in the future cause, our current
and prospective customers to delay or cut their overall security and IT operations spending. If our efforts to attract new
customers are not successful, our sales may not grow as quickly as anticipated, or at all, and our business, operating
results, and financial condition will be harmed.
We rely on revenue from subscription and support offerings, and because we recognize revenue from subscription
and support over the term of the relevant service period, downturns or upturns in sales or renewals of these
subscription and support offerings are not immediately reflected in full in our operating results.
Subscription and support revenue accounts for a significant portion of our revenue, comprising 80.0% of total revenue
in fiscal 2024, 77.1% of total revenue in fiscal 2023, and 75.2% of total revenue in fiscal 2022. Sales and renewals of
subscription and support contracts may decline and fluctuate as a result of a number of factors, including end-
customers' level of satisfaction with our products and subscriptions, the frequency and severity of subscription outages,
our product uptime or latency, the prices of our products and subscriptions, and reductions in our end-customers'
spending levels. Existing end-customers have no contractual obligation to, and may not, renew their subscription and
support contracts after the completion of their initial contract period. Additionally, our end-customers may renew their
subscription and support agreements for shorter contract lengths or on other terms that are less economically
beneficial to us. If our sales of new or renewal subscription and support contracts decline, our total revenue and revenue
growth rate may decline, and our business will suffer. In addition, because we recognize subscription and support
revenue over the term of the relevant service period, which is typically one to five years, a decline in subscription or
support contracts in any one fiscal quarter will not be fully or immediately reflected in revenue in that fiscal quarter but
will negatively affect our revenue in future fiscal quarters.
The sales prices of our products, subscriptions, and support offerings may decrease, which may reduce our revenue
and gross profits and adversely impact our financial results.
The sales prices for our products, subscriptions, and support offerings may decline for a variety of reasons, including
competitive pricing pressures, discounts, a change in our mix of products, subscriptions, and support offerings,
anticipation of the introduction of new products, subscriptions, or support offerings, or promotional programs or pricing
pressures. Furthermore, we anticipate that the sales prices and gross profits for our products could decrease over
product life cycles. Declining sales prices could adversely affect our revenue, gross profits, and profitability.
We rely on our channel partners to sell substantially all of our products, including subscriptions and support, and if
these channel partners fail to perform, our ability to sell and distribute our products and subscriptions will be
limited and our operating results will be harmed.
Substantially all of our revenue is generated by sales through our channel partners, including distributors and resellers.
For fiscal 2024, four distributors individually represented 10% or more of our total revenue and in the aggregate
represented 59.0% of our total revenue. As ofJuly 31, 2024, two distributors individually represented 10% or more of our
gross accounts receivable and in the aggregate represented 31.5% of our gross accounts receivable.
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Table of Contents
Issues in the development and deployment of Al may result in reputational harm and legal liability and could
adversely affect our results of operations.
We have incorporated, and are continuing to develop and deploy, Al into many of our products and solutions, including
services that support our products and solutions. We are also incorporating Al into the operations of our business. Al
presents challenges and risks that could affect our products and solutions, and the operations of our business. For
example, Al algorithms may have flaws, and datasets used to train models may be insufficient or contain biased
information. The Al that is being incorporated into our products, solutions, and business operation tools may not be
successful or beneficial, and instead may cause technical, legal or ethical problems or result in increased costs. The
investments that we are making across our business in Al reflect our ongoing efforts to innovate and provide products
and services that are useful to our customers, as well as provide efficiencies in our business. Such investments
ultimately may not be commercially viable or may not result in an adequate return of capital and we may incur
unanticipated liabilities. These efforts could subject us to regulatory risk, legal liability, including under new proposed
legislation regulating Al in jurisdictions such as the E.U. and regulations being considered in other jurisdictions, or
brand or reputational harm.
The rapid evolution of Al, including potential government regulation of Al, requires us to invest significant resources to
develop, test, and maintain Al in our products and services in a manner that meets evolving requirements and
expectations. The rules and regulations adopted by policymakers over time may require us to make changes to our
business practices. Developing, testing, and deploying Al systems may also increase the cost profile of our offerings due
to the nature of the computing costs involved in such systems.
The intellectual property ownership and license rights surrounding Al technologies, as well as data protection laws
related to the use and development of AI, are currently not fully addressed by courts or regulators. The use or adoption
of AI technologies in our products may result in exposure to claims by third parties of copyright infringement or other
intellectual property misappropriation, which may require us to pay compensation or license fees to third parties. The
evolving legal, regulatory, and compliance framework for Al technologies may also impact our ability to protect our own
data and intellectual property against infringing use.
A network or data security incident may allow unauthorized access to our network or data, harm our reputation,
create additional liability, and adversely impact our financial results.
Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis. In addition to
traditional computer "hackers," malicious code (such as viruses and worms), phishing attempts, employee theft or
misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in intrusions
and attacks (including advanced persistent threat intrusions and supply chain attacks), and add to the risks to our
internal networks, cloud-deployed enterprise and customer-facing environments and the information they store and
process. Incidences of cyberattacks and other cybersecurity breaches and incidents have increased and are likely to
continue to increase. We and our third-party service providers face security threats and attacks from a variety of
sources. Despite our efforts and processes to prevent breaches of our internal networks, systems, and websites, our
data, corporate systems, and security measures, as well as those of our third-party service providers, are still vulnerable
to computer viruses, break-ins, phishing attacks, ransomware attacks, or other types of attacks from outside parties, or
breaches due to employee error, malfeasance, or some combination of these. We cannot guarantee that the measures
we have taken to protect our networks, systems, and websites will provide adequate security. Furthermore, as a well-
known provider of security solutions, we may be a more attractive target for such attacks. The conflict in Ukraine and
associated activities in Ukraine and Russia may increase the risk of cyberattacks on various types of infrastructure and
operations, and the United States government has warned companies to be prepared for a significant increase in
Russian cyberattacks in response to the Sanctions on Russia.
A security breach or incident, or an attack against our service availability suffered by us, or our third-party service
providers, could impact our networks or networks secured by our products and subscriptions, creating system
disruptions or slowdowns and exploiting security vulnerabilities of our products. In addition, the information stored or
otherwise processed on our networks, or those of our third-party service providers, could be accessed, publicly
disclosed, altered, lost, stolen, rendered unavailable, or otherwise used or processed without authorization, which could
subject us to liability and cause us financial harm. Any actual or perceived breach of security in our systems or networks,
or any other actual or perceived data security incident we or our third-party service providers suffer, could result in
significant damage to our reputation, negative publicity, loss of channel partners, end-customers, and sales, loss of
competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any
incident, regulatory investigations and enforcement actions, demands, costly litigation, and other liability. In addition,
we may incur significant costs and operational consequences of investigating, remediating, eliminating, and putting in
place additional tools, devices, and other measures designed to prevent actual or perceived security breaches and other
security incidents, as well as the costs to comply with any notification obligations resulting from any security incidents.
Any of these negative outcomes could adversely impact the market perception of our products and subscriptions and
end-customer and investor confidence in our company and could seriously harm our business or operating results.
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Defects, errors, or vulnerabilities in our products, subscriptions, or support offerings, the failure of our products or
subscriptions to block a virus or prevent a security breach or incident, misuse of our products, or risks of product
liability claims could harm our reputation and adversely impact our operating results.
Because our products and subscriptions are complex, they have contained and may contain design or manufacturing
defects or errors that are not detected until after their commercial release and deployment by our end-customers. For
example, from time to time, certain of our end-customers have reported defects in our products related to
performance, scalability, and compatibility. Additionally, defects or vulnerabilities may cause our products or
subscriptions to become temporarily unavailable, to be vulnerable to security attacks, cause them to fail to help secure
networks, or temporarily interrupt end-customers' networking traffic, or the availability of other information technology
infrastructure or systems. For example, in April 2024, we became aware of a command injection vulnerability in the
Global Protect feature of certain versions of our PAN-OS software. To remediate the matter, we published a security
advisory to advise customers, provided software updates for affected PAN-OS versions, and are actively engaged in
customer outreach, support and remediation efforts for potentially impacted customers. Because the techniques used
by computer hackers to access or sabotage networks change frequently and generally are not recognized until
launched against a target, we may be unable to anticipate these techniques and provide a solution in time to protect
our end-customers' networks. In addition, due to the Russian invasion of Ukraine, there could be a significant increase
in Russian cyberattacks against our customers, resulting in an increased risk of a security breach of our end-customers'
systems.
Furthermore, defects or errors in products or software or updates to those products or software could result in a failure
to effectively update end-customers' hardware and cloud-based products or otherwise cause problems in our
customers hardware, networks or information technology infrastructure or systems. The data centers, networks, and
cloud infrastructure that we use to deliver our products and services may experience technical failures and downtime
or may fail to meet the increased requirements of a growing installed end-customer base, any of which could
temporarily or permanently expose our end-customers' networks, leaving their networks unprotected against the latest
security threats. Moreover, our products must interoperate with our end-customers' existing infrastructure, which often
have varied specifications, utilize multiple protocol standards, deploy products from multiple vendors, and contain
multiple generations of products that have been added over time. As a result, when problems occur in a network, it
may be difficult to identify the sources of these problems. Any such technical failure, downtime or failures in general
may temporarily or permanently disable our end-customers' networks, information technology infrastructure or other
systems, or expose our end-customers' networks to attacks from security threats.
The occurrence of any such problem in our products and subscriptions, whether real or perceived, could result in:
expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or
work-around errors or defects or to address and eliminate vulnerabilities;
loss of existing or potential end-customers or channel partners;
delayed or lost revenue;
delay or failure to attain market acceptance;
an increase in warranty claims compared with our historical experience, or an increased cost of servicing warranty
claims, either of which would adversely affect our gross margins; and
litigation, regulatory inquiries, investigations, or other proceedings, each of which may be costly and harm
our reputation.
Further, our products and subscriptions may be misused by end-customers or third parties that obtain access to our
products and subscriptions. For example, our products and subscriptions could be used to censor private access to
certain information on the Internet. Such use of our products and subscriptions for censorship could result in negative
press coverage and negatively affect our reputation.
The limitation of liability provisions in our standard terms and conditions of sale may not fully or effectively protect us
from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the United States
or other countries. The sale and support of our products and subscriptions also entails the risk of product liability claims.
Although we may be indemnified by our third-party manufacturers for product liability claims arising out of
manufacturing defects, because we control the design of our products and subscriptions, we may not be indemnified
for product liability claims arising out of design defects. While we maintain insurance coverage for certain types of
losses, our insurance coverage may not adequately cover any claim asserted against us, if at all. In addition, even claims
that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert management's time and
other resources, and harm our reputation.
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Table of Contents
In addition, our classifications of application type, virus, spyware, vulnerability exploits, data, or URL categories may
falsely detect, report, and act on applications, content, or threats that do not actually exist. This risk is heightened by the
inclusion of a "heuristics" feature in our products and subscriptions, which attempts to identify applications and other
threats not based on any known signatures but based on characteristics or anomalies which indicate that a particular
item may be a threat. These false positives may impair the perceived reliability of our products and subscriptions and
may therefore adversely impact market acceptance of our products and subscriptions and could result in damage to
our reputation, negative publicity, loss of channel partners, end-customers and sales, increased costs to remedy any
problem, and costly litigation.
Our ability to sell our products and subscriptions is dependent on the quality of our technical support services and
those of our channel partners, and the failure to offer high-quality technical support services could have a material
adverse effect on our end-customers' satisfaction with our products and subscriptions, our sales, and our
operating results.
After our products and subscriptions are deployed within our end-customers' networks, our end-customers depend on
our technical support services, as well as the support of our channel partners, to resolve any issues relating to our
products. Many larger enterprise, service provider, and government entity end-customers have more complex networks
and require higher levels of support than smaller end-customers. If our channel partners do not effectively provide
support to the satisfaction of our end-customers, we may be required to provide direct support to such end-customers,
which would require us to hire additional personnel and to invest in additional resources. If we are not able to hire such
resources fast enough to keep up with unexpected demand, support to our end-customers will be negatively impacted,
and our end-customers' satisfaction with our products and subscriptions will be adversely affected. Additionally, to the
extent that we may need to rely on our sales engineers to provide post-sales support while we are ramping up our
support resources, our sales productivity will be negatively impacted, which would harm our revenues. Accordingly, our
failure, or our channel partners' failure, to provide and maintain high-quality support services could have a material
adverse effect on our business, financial condition, and operating results.
RISKS RELATED TO INTELLECTUAL PROPERTY AND TECHNOLOGY LICENSING
Claims by others that we infringe their intellectual property rights could harm our business.
Companies in the enterprise security industry own large numbers of patents, copyrights, trademarks, domain names,
and trade secrets and frequently enter into litigation based on allegations of infringement, misappropriation, or other
violations of intellectual property rights. In addition, non-practicing entities also frequently bring claims of infringement
of intellectual property rights. Third parties are asserting, have asserted, and may in the future assert claims of
infringement of intellectual property rights against us. For example, on January 31, 2024, in the Centripetal Networks,
Inc. lawsuit against us, a jury returned a verdict of non-willful infringement with a lump sum amount of $151.5 million,
plus statutory interest, for which we have accrued $184.4 million for the verdict amount and estimated interest as of
July 31, 2024. Additional examples of patent infringement cases have been disclosed in Note12. Commitments and
Contingencies in Part II, Item 8 of this Annual Report on Form 10-K
Third parties may also assert such claims against our end-customers or channel partners, whom our standard license
and other agreements obligate us to indemnify against claims that our products and subscriptions infringe the
intellectual property rights of third parties. In addition, to the extent we hire personnel from competitors, we may be
subject to allegations that they have been improperly solicited, that they have divulged proprietary or other confidential
information, or that their former employers own their inventions or other work product. Furthermore, we may be
unaware of the intellectual property rights of others that may cover some or all of our technology, products,
subscriptions, and services. As we expand our footprint, both in our platforms, products, subscriptions, and services and
geographically, more overlaps occur and we may face more infringement claims both in the United States and abroad.
While we have been increasing the size of our patent portfolio, our competitors and others may now and in the future
have significantly larger and more mature patent portfolios than we have. In addition, litigation has involved and will
likely continue to involve patent-holding companies or other adverse patent owners who have no relevant product
revenue and against whom our own patents may therefore provide little or no deterrence or protection. In addition, we
have not registered our trademarks in all of our geographic markets and failure to secure those registrations could
adversely affect our ability to enforce and defend our trademark rights. Any claim of infringement by a third party, even
those without merit, could cause us to incur substantial costs defending against the claim, could distract our
management from our business, and could require us to cease use of such intellectual property. Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. A successful
claimant could secure a judgment, or we may agree to a settlement that prevents us from distributing certain products
or performing certain services or that requires us to pay substantial damages, royalties, or other fees. Any of these
events could seriously harm our business, financial condition, and operating results.
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Table of Contents
Managing the supply of our hardware products and product components is complex. Insufficient supply and
inventory would result in lost sales opportunities or delayed revenue, while excess inventory would harm our
gross margins.
Our manufacturing partners procure components and build our hardware products based on our forecasts, and we
generally do not hold inventory for a prolonged period of time. These forecasts are based on estimates of future
demand for our products, which are in turn based on historical trends and analyses from our sales and product
management organizations, adjusted for overall market conditions. In order to reduce manufacturing lead times and
plan for adequate component supply, from time to time we may issue forecasts for components and products that are
non-cancelable and non-returnable.
Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to
forecast accurately and effectively manage supply of our hardware products and product components. If we ultimately
determine that we have excess supply, we may have to reduce our prices and write-down inventory, which in turn
could result in lower gross margins. If our actual component usage and product demand are lower than the forecast we
provide to our manufacturing partners, we accrue for losses on manufacturing commitments in excess of forecasted
demand. Alternatively, insufficient supply levels may lead to shortages that result in delayed hardware product revenue
or loss of sales opportunities altogether as potential end-customers turn to competitors' products that are readily
available. If we are unable to effectively manage our supply and inventory, our operating results could be adversely
affected.
Because some of the key components in our hardware products come from limited sources of supply, we are
susceptible to supply shortages or supply changes, which, in certain cases, have disrupted or delayed our
scheduled product deliveries to our end-customers, increased our costs and may result in the loss of sales and end-
customers.
Our hardware products rely on key components, including integrated circuit components, which our manufacturing
partners purchase on our behalf from a limited number of component suppliers, including sole source providers. The
manufacturing operations of some of our component suppliers are geographically concentrated in Asia and elsewhere,
which makes our supply chain vulnerable to regional disruptions, such as natural disasters, fire, political instability, civil
unrest, power outages, or health risks. In the past, we experienced supply chain disruption and have incurred increased
costs resulting from inflationary pressures. We are also monitoring the tensions between China and Taiwan, and
between the U.S. and China, which could have an adverse impact on our business or results of operations in
future periods.
Further, we do not have volume purchase contracts with any of our component suppliers, and they could cease selling
to us at any time. If we are unable to obtain a sufficient quantity of these components in a timely manner for any
reason, sales of our hardware products could be delayed or halted, or we could be forced to expedite shipment of such
components or our hardware products at dramatically increased costs. Our component suppliers also change their
selling prices frequently in response to market trends, including industry-wide increases in demand. Because we do not
have, for the most part, volume purchase contracts with our component suppliers, we are susceptible to price
fluctuations related to raw materials and components and may not be able to adjust our prices accordingly.
Additionally, poor quality in any of the sole-sourced components in our products could result in lost sales or
sales opportunities.
If we are unable to obtain a sufficient volume of the necessary components for our hardware products on commercially
reasonable terms or the quality of the components do not meet our requirements, we could also be forced to redesign
our products and qualify new components from alternate component suppliers. The resulting stoppage or delay in
selling our hardware products and the expense of redesigning our hardware products would result in lost sales
opportunities and damage to customer relationships, which would adversely affect our business and operating results.
If we are unable to attract, retain, and motivate our key technical, sales, and management personnel, our business
could suffer.
Our future success depends, in part, on our ability to continue to attract, retain, and motivate the members of our
management team and other key employees. For example, we are substantially dependent on the continued service of
our engineering personnel because of the complexity of our offerings. Competition for highly skilled personnel,
particularly in engineering, including in the areas of AI and machine learning, is often intense, especially in the San
Francisco Bay Area, where we have a substantial presence and need for such personnel. In addition, the industry in
which we operate generally experiences high employee attrition. Our future performance depends on the continuing
services and contributions of our senior management to execute on our business plan and to identify and pursue new
opportunities and product innovations. If we are unable to hire, integrate, train, or retain the qualified and highly skilled
personnel required to fulfill our current or future needs, our business, financial condition, and operating results could be
harmed.
- 28 -
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Further, we believe that a critical contributor to our success and our ability to retain highly skilled personnel has been
our corporate culture, which we believe fosters innovation, inclusion, teamwork, passion for end-customers, focus on
execution, and the facilitation of critical knowledge transfer and knowledge sharing. As we grow and change, we may
find it difficult to maintain these important aspects of our corporate culture. While we are taking steps to develop a
more inclusive and diverse workforce, there is no guarantee that we will be able to do so. Any failure to preserve our
culture as we grow could limit our ability to innovate and could negatively affect our ability to retain and recruit
personnel, continue to perform at current levels or execute on our business strategy.
We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the
United States, and we are therefore subject to a number of risks associated with international sales and
operations.
Our ability to grow our business and our future success will depend to a significant extent on our ability to expand our
operations and customer base worldwide. Many of our customers, resellers, partners, suppliers, and manufacturers
operate around the world. Operating in a global marketplace, we are subject to risks associated with having an
international reach and compliance and regulatory requirements. We may experience difficulties in attracting,
managing, and retaining an international staff, and we may not be able to recruit and maintain successful strategic
distributor relationships internationally. Business practices in the international markets that we serve may differ from
those in the United States and may require us in the future to include terms other than our standard terms related to
payment, warranties, or performance obligations in end-customer contracts.
Additionally, our international sales and operations are subject to a number of risks, including the following:
political, economic, and social uncertainty around the world, health risks such as epidemics and pandemics like
COVID-19, macroeconomic challenges, terrorist activities, Russia's invasion of Ukraine, tensions between China and
Taiwan, the hostilities in Israel and the surrounding region, and continued hostilities in the Middle East;
unexpected changes in, or the application of, foreign and domestic laws and regulations (including intellectual
property rights protections), regulatory practices, trade restrictions, and foreign legal requirements, including those
applicable to the importation, certification, and localization of our products, tariffs, and tax laws and treaties,
including regulatory and trade policy changes adopted by the current administration, such as the Sanctions on
Russia, or foreign countries in response to regulatory changes adopted by the current administration; and
non-compliance with U.S. and foreign laws, including antitrust regulations, anti-corruption laws, such as the U.S.
Foreign Corrupt Practices Act and the United Kingdom ("U.K.") Bribery Act, U.S. or foreign sanctions regimes and
export or import control laws, and any trade regulations ensuring fair trade practices.
These and other factors could harm our future international revenues and, consequently, materially impact our
business, operating results, and financial condition. The expansion of our existing international operations and entry
into additional international markets will require significant management attention and financial resources. Our failure
to successfully manage our international operations and the associated risks effectively could limit the future growth of
our business.
We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial
condition and operating results.
Our sales contracts are denominated in U.S. dollars, and therefore, our revenue is not subject to foreign currency risk;
however, in the event of a strengthening of the U.S. dollar against foreign currencies in which we conduct business, the
cost of our products to our end-customers outside of the United States would increase, which could adversely affect our
financial condition and operating results. In addition, increased international sales in the future, including through our
channel partners and other partnerships or as a result of our acquisitions, may result in foreign currency denominated
sales, increasing our foreign currency risk.
Our operating expenses incurred outside the United States and denominated in foreign currencies are generally
increasing and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to
successfully hedge against the risks associated with foreign currency fluctuations, our financial condition and operating
results could be adversely affected. We have entered into forward contracts in an effort to reduce our foreign currency
exchange exposure related to our foreign currency denominated expenditures. As ofJuly 31, 2024, the total notional
amount of our outstanding foreign currency forward contracts was $1.2 billion. For more information on our hedging
transactions, refer to Note 6. Derivative Instruments in Part II, Item 8 of this Annual Report on Form 10-K The
effectiveness of our existing hedging transactions and the availability and effectiveness of any hedging transactions we
may decide to enter into in the future may be limited and we may not be able to successfully hedge our exposure,
which could adversely affect our financial condition and operating results.
-29-
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We face risks associated with having operations and employees located in Israel.
We have business operations in Israel and intend to continue growing our presence in Israel. Our operations in Israel
could be disrupted by political instability, civil unrest, terrorist attacks, acts of violence, acts of war, or other military
actions, including the hostilities in Israel and the surrounding region. The future of peace efforts between Israel and its
Arab neighbors remains uncertain. The effects of hostilities and violence on the Israeli economy and our operations in
Israel are unclear, and we cannot predict the effect on us of further increases in these hostilities or future armed conflict,
political instability, or violence in the region. Current or future tensions and conflicts in the Middle East could adversely
affect our business, operating results, financial condition, and cash flows.
In addition, many of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and are
subject to being called for active duty under emergency circumstances, which has occurred as a result of hostilities in
Israel and the surrounding region. We cannot predict the full impact of these conditions on us in the future, particularly
if emergency circumstances or an escalation in the political situation occurs. If many of our employees in Israel are
called for active duty for a significant period of time, our operations and our business could be disrupted and may not
be able to function at full capacity. Any disruption in our operations in Israel could adversely affect our business.
We are subject to governmental export and import controls that could subject us to liability or impair our ability to
compete in international markets.
Because we incorporate encryption technology into our products, certain of our products are subject to U.S. export
controls and may be exported outside the United States only with the required export license or through an export
license exception. If we were to fail to comply with U.S. export licensing requirements, U.S. customs regulations, U.S.
economic sanctions, or other laws, we could be subject to substantial civil and criminal penalties, including fines,
incarceration for responsible employees and managers, and the possible loss of export or import privileges. Obtaining
the necessary export license for a particular sale may be time-consuming and may result in the delay or loss of sales
opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products
to U.S. embargoed or sanctioned countries, governments, and persons. Even though we take precautions to ensure that
our channel partners comply with all relevant regulations, any failure by our channel partners to comply with such
regulations could have negative consequences for us, including reputational harm, government investigations, and
penalties.
In addition, various countries regulate the import of certain encryption technology, including through import permit
and license requirements, and have enacted laws that could limit our ability to distribute our products or could limit our
end-customers' ability to implement our products in those countries. Changes in our products or changes in export and
import regulations may create delays in the introduction of our products into international markets, prevent our end-
customers with international operations from deploying our products globally or, in some cases, prevent or delay the
export or import of our products to certain countries, governments, or persons altogether. Any change in export or
import regulations, economic sanctions, such as the Sanctions on Russia, or related legislation, shift in the enforcement
or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such
regulations could result in decreased use of our products by, or in our decreased ability to export or sell our products to,
existing or potential end-customers with international operations. Any decreased use of our products or limitation on
our ability to export to or sell our products in international markets would likely adversely affect our business, financial
condition, and operating results.
RISKS RELATED TO PRIVACY AND DATA PROTECTION
We may incur increased costs to comply with privacy and data protection laws and, if we fail to comply, we could
be subject to government enforcement actions, private litigation and adverse publicity.
A wide variety of laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other
processing of personal data in jurisdictions where we and our customers operate. Compliance with these laws and
regulations is difficult and costly. These laws and regulations are also subject to frequent, inconsistent and unexpected
changes; new, modified or additional laws or regulations may be adopted; and rulings that invalidate prior laws,
regulations, or interpretations of such laws or regulations may be issued. For example, we are subject to the E.U.
General Data Protection Regulation ("E.U. GDPR") and the U.K. General Data Protection Regulation ("U.K. GDPR," and
collectively the "GDPR"), both of which impose stringent data protection requirements, provide for costly penalties for
noncompliance (up to the greater of (a) €20 million under the "E.U. GDPR" or £17.5 million under the "U.K. GDPR," and
(b) 4% of annual worldwide turnover), and confer the right upon data subjects and consumer associations to lodge
complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from
violations.
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Table of Contents
Our reputation and/or business could be negatively impacted by ESC matters and/or our reporting of such matters.
There is an increasing focus from regulators, certain investors, and other stakeholders concerning ESG matters, both in
the United States and internationally. We communicate certain ESG-related initiatives, goals, and/or commitments
regarding environmental matters, diversity, responsible sourcing and social investments, and other matters in our
annual ESG Report, on our website, in our filings with the SEC, and elsewhere. These initiatives, goals, or commitments
could be difficult to achieve and costly to implement. We could fail to achieve, or be perceived to fail to achieve, our
ESG-related initiatives, goals, or commitments. In addition, we could be criticized for the timing, scope or nature of
these initiatives, goals, or commitments, or for any revisions to them. To the extent that our required and voluntary
disclosures about ESG matters increase, we could be criticized for the accuracy, adequacy, or completeness of such
disclosures. Our actual or perceived failure to achieve our ESG-related initiatives, goals, or commitments could
negatively impact our reputation, result in ESG-focused investors not purchasing and holding our stock, or otherwise
materially harm our business.
In addition, we are or may become subject to various new and proposed climate-related and other sustainability-
related laws and regulations, including, for example, the E.U.'s Corporate Sustainability Reporting Directive. Additional
regulation may require us to incur significant additional costs associated with increased compliance burdens, including
the implementation of additional internal controls processes and procedures, and impose increased oversight
obligations on our management and board of directors, as well as require us to retain third-party experts.
Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement
actions, fines or litigation, which could negatively impact our business, operating results or financial condition.
Failure to comply with governmental laws and regulations could harm our business.
Our business is subject to regulation by various federal, state, local, and foreign governmental agencies, including
agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety,
environmental laws, consumer protection laws, privacy, data security, and data-protection laws, anti-bribery laws
(including the U.S. Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act), import/export controls, federal securities
laws, and tax laws and regulations. These laws and regulations may also impact our innovation and business drivers in
developing new and emerging technologies (e.g., Al and machine learning). In certain jurisdictions, these regulatory
requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or
requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions,
disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions. If any governmental sanctions are
imposed, or if we do not prevail in any possible civil or criminal litigation resulting from any alleged noncompliance, our
business, operating results, and financial condition could be materially adversely affected. In addition, responding to
any action will likely result in a significant diversion of management's attention and resources and an increase in
professional fees. Enforcement actions, litigation, and sanctions could harm our business, operating results, and
financial condition.
Risks Related to Our Notes and Common Stock
We may not have the ability to raise the funds necessary to settle conversions of our Notes, repurchase our Notes
upon a fundamental change, or repay our Notes in cash at their maturity, and our future debt may contain
limitations on our ability to pay cash upon conversion or repurchase of our Notes.
In June 2020, we issued our 0.375% Convertible Senior Notes due 2025 (the "2025 Notes"). We will need to make cash
payments (a) if holders of our 2025 Notes require us to repurchase all, or a portion of, their 2025 Notes upon the
occurrence of a fundamental change (e.g., a change of control of Palo Alto Networks, Inc.) before the maturity date,
(b) upon conversion of our 2025 Notes, or (c) to repay our 2025 Notes in cash at their maturity unless earlier converted or
repurchased. Effective August 1, 2024 through October 31, 2024, all of the 2025 Notes are convertible. If all of the note
holders decided to convert their 2025 Notes, we would be obligated to pay the $1.0 billion principal amount of the 2025
Notes in cash. Under the terms of the 2025 Notes, we also have the option to settle the amount of our conversion
obligation in excess of the aggregate principal amount of the 2025 Notes in cash or shares of our common stock. If our
cash provided by operating activities, together with our existing cash, cash equivalents, and investments, and existing
sources of financing, are inadequate to satisfy these obligations, we will need to obtain third-party financing, which may
not be available to us on commercially reasonable terms or at all, to meet these payment obligations.
In addition, our ability to repurchase or to pay cash upon conversion of our 2025 Notes may be limited by law, regulatory
authority, or agreements governing our future indebtedness. Our failure to repurchase our 2025 Notes at a time when
the repurchase is required by the applicable indenture governing such 2025 Notes or to pay cash upon conversion of
such 2025 Notes as required by the applicable indenture would constitute a default under the indenture. A default
under the applicable indenture or the fundamental change itself could also lead to a default under agreements
governing our future indebtedness. If the payment of the related indebtedness were to be accelerated after any
applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase our
2025 Notes or to pay cash upon conversion of our 2025 Notes.
- 33 -
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- 36 -
Table of Contents
Item 1C. Cybersecurity
As a global cybersecurity provider, cybersecurity risk management is an integral part of our overall enterprise risk
management program. We recognize the critical importance that a strong cybersecurity risk management program
plays in maintaining the trust and confidence of our customers, end users, business partners, stockholders and
employees. We have established processes and procedures for identifying, evaluating, and responding to risks from
cybersecurity threats, including any potential unauthorized access to our information systems that may result in
adverse effects on the confidentiality, integrity, or availability of our information systems, data, or information assets.
Cybersb‘...irity Risk Mar
d Sth
Our cybersecurity risk management program includes written policies, standards, and procedures for maintaining data
privacy, product security and information security to mitigate cybersecurity risks, and to identify, evaluate and respond
to cybersecurity threats, vulnerabilities and incidents. Our cybersecurity risk management program and strategy is
implemented across several areas, which include, but are not limited to, the following:
Information Security. We maintain a written information security program, which provides for policies, standards,
guidelines, and administrative, technical and physical safeguards that we believe are reasonably designed, in light of
the nature, size and complexity of our operations, to protect the resiliency of our operations and the confidentiality,
integrity, and availability of our information systems, data, and information assets. The organizational, administrative
and technical measures we implement are based on recognized security frameworks established by the National
Institute of Standards and Technology, security measures aligned with the ISO/I EC 27000 series of standards, and
other generally recognized industry standards. The program is assessed regularly and in light of new and emerging
cybersecurity risks.
Technical Safeguards and Product Security. We deploy and maintain a variety of technologies to prevent and
detect cybersecurity threats across the network, endpoint and cloud. We also apply security-by-design principles in
our software development lifecycle, track vulnerabilities of open-source software, and run internal and external
network scans at least weekly and after any meaningful change in our network configuration. We conduct regular
application security assessments, including our assessments for internet-facing applications that collect, transmit, or
display end user data. We also employ tooling in certain areas to help prevent deviations from policy.
Incident Response and Reporting. We maintain incident response and recovery protocols to enable prompt,
effective and orderly identification, evaluation, management, and disposition of actual and potential security threats
and incidents, including for purposes of escalation and internal and external-notification steps. We maintain a cross-
functional incident response team, including senior representatives from information security, information
technology, product, legal, privacy, communications and accounting, that is involved in assessing cybersecurity
threats and incidents, assigning severity levels, and evaluating the potential impact, including the potential impact
on our business strategy, results of operations and financial condition. This allows for prompt direction of appropriate
personnel and resources for incident management and response, and internal notification to appropriate members
of management, which may include our chief executive officer, chief product officer, chief information security
officer, general counsel, chief financial officer, and/or chief accounting officer, and the security committee of our
board of directors (the "Security Committee"). The protocols also establish steps designed to publicly report and/or
alert external stakeholders as and when required by applicable law or otherwise determined appropriate.
Third-Party Risk Management. We maintain a risk-based approach to identifying and overseeing cybersecurity risks
presented by certain third parties, including vendors, service providers, suppliers, operations parties, and other
external users of our systems, as well as the systems of third parties that could adversely impact our business in the
event of a cybersecurity incident affecting those third-party systems. This includes a security process to conduct due
diligence prior to engaging contractors and vendors and assess the security capabilities of subcontractors and
vendors on a periodic basis.
Risk and Readiness Assessments. We engage in at least quarterly assessments and testing of the effectiveness of
our cybersecurity risk management program and incident response protocols that are designed to identify and
evaluate vulnerabilities and weaknesses, address cybersecurity threats and test our readiness to respond to
cybersecurity incidents. These efforts include, but are not limited to, threat modeling, vulnerability scans, penetration
testing, audits, and tabletop exercises. We regularly engage third parties to perform assessments on our
cybersecurity measures, such as audits and independent reviews of our compliance with various security compliance
standards, including those established by the American Institute of Certified Public Accountants, operating
effectiveness and penetration tests. The results of such assessments are reported to management and we adjust our
cybersecurity policies, standards, processes and practices as necessary based on the information provided by these
assessments, audits and reviews.
Awareness and Training. We provide regular training for educating employees about corporate policies and
procedures and information security designed to provide our employees with knowledge of best practices and
effective tools for safeguarding our data and assets and reducing security risks based on the human threat vector.
Our information security compliance training, data protection training, and code of conduct training is mandatory for
all employees.
-37-
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Table of Contents
• Governance. As discussed in more detail below under the heading, "Cybersecurity Governance," our board of
directors' has delegated oversight of enterprise security risk management, including, but not limited to, cybersecurity
risk management to the Security Committee. As part of our cybersecurity risk management procedures, senior
members of management and the Security Committee are informed regarding security events based on established
reporting thresholds, and are provided ongoing updates regarding any such meaningful threat or incident.
We have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents,
that have materially impacted or are reasonably likely to materially impact us, including our business strategy, results of
operations, or financial condition, to date. However, we face ongoing and increasing cybersecurity risks, including from
threat actors that are becoming more sophisticated and effective over time, and we can provide no assurance that
there will not be incidents in the future or that past or future threats or incidents will not materially affect us, including
our business strategy, results of operations, or financial conditions. For additional information regarding these risks,
please refer to Part I, Item 1A, "Risk Factors," in this Form 10-K, including, but not limited to, the risk factor entitled "A
network or data security incident may allow unauthorized access to our network or data, harm our reputation, create
additional liability, and adversely impact our financial results."
CykArscurity Lovu.. Mel 141.0
The Security Committee, which is composed of all of our independent directors, facilitates our board of directors'
responsibility for oversight of security matters, including product security, data security, cybersecurity, security risk
management, risk exposure and related controls and enterprise risk management related to these risks. The Security
Committee reports regularly to the Board following meetings of the Security Committee with respect to its review and
assessment of security matters and other matters that are relevant to the Security Committee's discharge of its
responsibilities. The Security Committee meets quarterly to review with our chief information security officer and other
members of management, which may include our chief executive officer, chief product officer, chief financial officer,
and general counsel, our cybersecurity programs, cybersecurity risks, mitigation or remediation strategies, and other
matters impacting the committee's responsibilities.
Management is responsible for day-to-day risk management activities, including identifying, assessing and managing
our exposure to cybersecurity risks, establishing processes and procedures to ensure that potential cybersecurity risk
exposures are monitored, implementing appropriate mitigation or remediation measures as needed, and maintaining
cybersecurity risk management programs. Our chief information security officer is responsible for defining, overseeing,
managing, implementing, and reviewing compliance with the information security programs described above under
the heading "Cybersecurity Risk Management and Strategy." Our chief information security officer receives regular
reports from our information security team and monitors the prevention, detection, and mitigation or remediation of
cybersecurity risks. In addition, as described in further detail above under the heading "Cybersecurity Risk Management
and Strategy," a cross functional team is involved in assessing and managing the risks from cybersecurity threats and
incidents, and reporting information about risks to the Security Committee.
Our information security team consists of dedicated personnel who are experienced information systems security
professionals and information security managers with many years of experience across a variety of technology sub-
specialties. In particular, our chief information security officer has extensive experience in the management of
cybersecurity risk management programs, having served in various roles in information technology and security for
over 20 years, including having previously served as the chief security officer of two other publicly traded technology
companies. In addition, six of the ten members of our board of directors have expertise in overseeing cybersecurity and
information security management.
- 38 -
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Table of Contents
Item 2. Properties
Our corporate headquarters is located in Santa Clara, California, where we lease approximately 941,000 square feet of
space under three lease agreements that expire in July 2028, with options to extend the lease terms through July 2046.
We also lease space for personnel around the world, including Israel and India. In addition, we provide our cloud-based
subscription offerings through data centers operated under co-location arrangements in the United States, Europe, and
Asia. Refer to Note 11. Leases in Part II, Item 8 of this Annual Report on Form 10-K for more information on our operating
leases. Additionally, we own 10.4 acres of land adjacent to our headquarters in Santa Clara, California, which we intend
to develop to accommodate future expansion, the speed of which development has been slowed due to the current
environment.
We believe that our current facilities are adequate to meet our current needs. We intend to expand our facilities or add
new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or
alternative space will be available as needed to accommodate ongoing operations and any such growth. However, we
expect to incur additional expenses in connection with such new or expanded facilities.
Item 3. Legal Proceedings
The information set forth under the "Litigation" subheading in Note12. Commitments and Contingencies in Part II,
Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
-39-
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Table of Contents
Part II
Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases
of Equity Securities
Market I nformatio
Our common stock, $0.0001 par value per share, is traded on the Nasdaq Global Select Market under the symbol
"PANW." Prior to October 22, 2021, our common stock traded on the New York Stock Exchange under the symbol
"PAN W."
Holders of Record
As of August 19, 2024, there were 502 holders of record of our common stock. Because many of our shares of common
stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number
of stockholders represented by these record holders.
Dividend Policy
We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends
on our capital stock. Any future determination as to the declaration and payment of dividends, if any, will be at the
discretion of our board of directors, subject to applicable laws, and will depend on then existing conditions, including
our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other
factors our board of directors may deem relevant.
Securities Authorized for Issuance under Equity
Compensation Plans
See Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters" of this Annual Report on Form 10-K for more information regarding securities authorized for issuance.
Recent Sales of Unregistered Equity Securities
During the three months ended July 31, 2024, holders of the 2025 Notes converted $199.6 million in aggregate principal
amount of the 2025 Notes, which we repaid in cash. We also issued 1.3 million shares of our unregistered common stock
to the holders of the 2025 Notes for the conversion value in excess of the principal amount. These shares of our
common stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities
Act of 1933, as amended (the "Securities Act").
Additionally, during the three months ended July 31, 2024, we issued a total of 12,841 shares of our unregistered
common stock in connection with certain of our acquisitions (the "Transactions").The Transactions did not involve any
underwriters, any underwriting discounts or commissions, or any public offering. The issuances of the securities
pursuant to the Transactions were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the
Act and Rule 506 of Regulation D promulgated thereunder.
-40-
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- 43 -
Table of Contents
Security Operations:
We deliver the next generation of security operations capabilities that combine security analytics, endpoint security,
automation, and ASM solutions through our Cortex platform. These include Cortex XSIAM, our AI-driven security
operations platform, Cortex XDR® for the prevention, detection, and response to complex cybersecurity attacks,
Cortex XSOAR® for SOAR, and Cortex XpanseTM for ASM. These products are delivered as SaaS or software
subscriptions.
Threat Intelligence and Advisory Services (Unit 42):
Unit 42 brings together world-renowned threat researchers with an elite team of incident responders and security
consultants to create an intelligence-driven, response-ready organization to help customers manage cyber risk. Our
consultants serve as trusted advisors to our customers by assessing and testing their security controls against the
right threats, transforming their security strategy with a threat-informed approach, and responding to security
incidents on behalf of our clients. Additionally, Unit 42 offers managed detection and response and managed threat
hunting services.
For fiscal 2024 and 2023, total revenue was $8.0 billion and $6.9 billion, respectively, representing year-over-year growth
of 16.5%. Our growth reflects the increased adoption of our portfolio, which consists of product, subscriptions, and
support. We believe our portfolio will enable us to benefit from recurring revenues and new revenues as we continue to
grow our end-customer base. As ofJuly 31, 2024, we had end-customers in over 180 countries. Our end-customers
represent a broad range of industries, including education, energy, financial services, government entities, healthcare,
Internet and media, manufacturing, public sector, and telecommunications, and include almost all of the Fortune 100
companies and a majority of the Global 2000 companies. We maintain a field sales force that works closely with our
channel partners in developing sales opportunities. We primarily use a two-tiered, indirect fulfillment model whereby
we sell our products, subscriptions, and support to our distributors, which, in turn, sell to our resellers, which then sell to
our end-customers.
Our product revenue grew to $1.6 billion or 20.0% of total revenue for fiscal 2024, representing year-over-year growth of
1.6%. Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall.
Product revenue also includes revenue derived from software licenses of Panorama®, SD-WAN, and the VM-Series. Our
ML-Powered Next-Generation Firewall incorporates our PAN-OS operating system, which provides a consistent set of
capabilities across our entire network security product line. Our appliances and software licenses include a broad set of
built-in networking and security features and functionalities. Our products are designed for different performance
requirements throughout an organization, ranging from our PA-410, which is designed for small organizations and
remote or branch offices, to our top-of-the-line PA-7500, which is designed for large-scale data centers and service
provider use. The same firewall functionality that is delivered in our physical appliances is also available in our VM-Series
virtual firewalls, which secure virtualized and cloud-based computing environments, and in our CN-Series container
firewalls, which secure container environments and traffic.
Our subscription and support revenue grew to $6.4 billion or 80.0% of total revenue for fiscal 2024, representing year-
over-year growth of 20.9%. Our subscriptions provide our end-customers with near real-time access to the latest
antivirus, intrusion prevention, web filtering, modern malware prevention, data loss prevention, CASB and Al security
capabilities across the network, endpoints, and the cloud. When customers purchase our physical, virtual, or container
firewall appliances, or certain cloud offerings, they typically purchase support in order to receive ongoing security
updates, upgrades, bug fixes, and repairs. In addition to the subscriptions purchased with these appliances, customers
may also purchase other subscriptions on a per-user, per-endpoint, or capacity-based basis. We also offer professional
services, including incident response, risk management, and digital forensic services.
We continue to invest in innovation as we evolve and further extend the capabilities of our portfolio, as we believe that
innovation and timely development of new features and products are essential to meeting the needs of our end-
customers and improving our competitive position. During fiscal 2024, we introduced several new offerings, including:
Prisma Cloud Darwin release with newly integrated Code to Cloud intelligence capabilities, PAN-OS 11.2 Quasar, Cortex
XSIAM 2.0, new Cortex XSIAM features, Prisma SASE 3.0, and Precision AIIM. Additionally, we acquired productive
investments that fit well within our long-term strategy. For example, in December 2023, we acquired Dig, which we
expect will enhance our Prisma Cloud capabilities with a DSPM solution that is intended to provide customers with
visibility into, and secure data stored across, their multi-cloud environments; and we acquired Talon, which will support
Prisma SASE's approach to provide secure access to business applications for unmanaged and personal devices with an
enterprise browser. In May 2024, we announced an expanded partnership with International Business Machines
Corporation
BM") to deliver AI-powered security outcomes for customers, as part of which we agreed to acquire IBM's
QRadar SaaS assets, including QRadar intellectual property rights, customer relationships and customer contracts. On
August 31, 2024, we completed the acquisition of IBM's QRadar SaaS assets and we expect the acquisition will help
accelerate the growth of our Cortex XSIAM business.
-44-
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- 44 -
Table of Contents
We believe that the growth of our business and our short-term and long-term success are dependent upon many
factors, including our ability to extend our technology leadership, grow our base of end-customers, expand deployment
of our portfolio and support offerings within existing end-customers, focus on end-customer satisfaction, and address
any product vulnerabilities. To manage any future growth effectively, we must continue to improve and expand our
information technology and financial infrastructure, our operating and administrative systems and controls, and our
ability to manage headcount, capital, and processes in an efficient manner. While these areas present significant
opportunities for us, they also pose challenges and risks that we must successfully address in order to sustain the
growth of our business and improve our operating results. For additional information regarding the challenges and
risks we face, see the "Risk Factors" section in Part I, Item 1A of this Annual Report on Form 10-K.
impact of Macroeconomic Developments aria utner Factors on
Our Business
Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on
customer behavior. Worsening economic conditions, including inflation, higher interest rates, slower growth,
fluctuations in foreign exchange rates, supply chain disruptions, and other conditions, may adversely affect our results
of operations and financial performance.
The hostilities in Israel and the surrounding region have increased the levels of economic and political uncertainty.
While we have business operations in Israel, and intend to continue growing our presence in Israel, we currently do not
expect significant business disruption. We are actively monitoring, evaluating, and responding to the developing
situation.
We are also monitoring the impact of inflationary pressures and the tensions between China and Taiwan, and between
the U.S. and China, which could have an adverse impact on our business or results of operations in future periods.
Key Financial Metrics
We monitor the key financial metrics set forth in the tables below to help us evaluate growth trends, establish budgets,
measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. We discuss revenue,
gross margin, and the components of operating income (loss) and margin below under "Results of Operations."
July 31,
2024
2023
(in millions)
Total deferred revenue
11,480.5 $
9,296.4
Cash, cash equivalents, and investments
6,752.0 $
5,437.9
Year Ended July 31,
2024
2023
2022
(dollars in millions)
Total revenue
$
8,027.5
$
6,892.7
$
5,501.5
Total revenue year-over-year percentage increase
16.5%
25.3%
293%
Gross margin
74.3%
723%
68.8%
Operating income (loss)
$
683.9
$
387.3
$
(188.8)
Operating margin
8.5%
5.6 %
(3.4)%
Billings
$ 10,208.1
$
9,194.4
$
7,471.5
Billings year-over-year percentage increase
11.0%
23.1%
37.0%
Cash flow provided by operating activities
$
3,257.6
$
2,777.5
$
1,984.7
Free cash flow (non-GAAP)
$
3,100.8
$
2,631.2
$
1,791.9
Deferred Revenue. Our deferred revenue primarily consists of amounts that have been invoiced but have not been
recognized as revenue as of the period end. The majority of our deferred revenue balance consists of subscription
and support revenue that is recognized ratably over the contractual service period. We monitor our deferred revenue
balance because it represents a significant portion of revenue to be recognized in future periods.
- 45 -
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- 45 -
Table of Contents
• Billings. We define billings as total revenue plus the change in total deferred revenue, net of acquired deferred
revenue, during the period. We have considered billings to be a key metric used by management to manage our
business. There are inherent limitations in using billings to evaluate our operating results as the variability in payment
terms may cause fluctuation in billings. Beginning in the first fiscal quarter of 2025, billings will no longer be a key
financial metric and will no longer be reported. We calculate billings in the following manner:
Year Ended July 31,
2024
2023
2022
(in millions)
Billings:
Total revenue
$
8,027.5 $
6,892.7 $
5,501.5
Add: change in total deferred revenue, net of acquired deferred revenue
2,180.6
2,301.7
1,970.0
Billings
$
10,208.1 $
9,194.4 $
7,471.5
Cash Flow Provided by Operating Activities. We monitor cash flow provided by operating activities as a measure of
our overall business performance. Our cash flow provided by operating activities is driven in large part by sales of our
products and from up-front payments for subscription and support offerings. Monitoring cash flow provided by
operating activities enables us to analyze our financial performance without the non-cash effects of certain items
such as share-based compensation costs, depreciation and amortization, thereby allowing us to better understand
and manage the cash needs of our business.
Free Cash Flow (non-CAAP). We define free cash flow, a non-GAAP financial measure, as cash provided by operating
activities less purchases of property, equipment, and other assets. We consider free cash flow to be a profitability and
liquidity measure that provides useful information to management and investors about the amount of cash
generated by the business after necessary capital expenditures. A limitation of the utility of free cash flow as a
measure of our financial performance and liquidity is that it does not represent the total increase or decrease in our
cash balance for the period. In addition, it is important to note that other companies, including companies in our
industry, may not use free cash flow, may calculate free cash flow in a different manner than we do, or may use other
financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a
comparative measure. A reconciliation of free cash flow to cash flow provided by operating activities, the most
directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is provided below:
Year Ended July 31,
2024
2023
2022
(in millions)
Free cash flow (non-GAAP):
Net cash provided by operating activities
$
3,257.6 $
2,777.5 $
1,984.7
Less: purchases of property, equipment, and other assets
156.8
146.3
192.8
Free cash flow (non-GAAP)
$
3,100.8 $
2,631.2 $
1,791.9
Net cash used in investing activities
$
(1,509.9) $
(2,033.8) $
(933.4)
Net cash used in financing activities
$
(1,343.1) $
(1,726.3) $
(806.6)
-46-
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- 46 -
Table of Contents
Results of Operations
The following table summarizes our results of operations for the periods presented and as a percentage of our total
revenue for those periods based on our consolidated statements of operations data. The period-to-period comparison
of results is not necessarily indicative of results for future periods.
Year Ended July 31,
2024
2023
2022
Amount
% of
Revenue
Amount
% of
Revenue
Amount
% of
Revenue
(dollars in millions)
Revenue:
Product
$ 1,603.3
20.0% $ 1,578.4
22.9% $ 1,363.1
24.8%
Subscription and support
6,424.2
80.0%
5,314.3
77.1%
4,138.4
75.2%
Total revenue
8,027.5
100.0%
6,892.7
100.0%
5,501.5
100.0%
Cost of revenue:
Product
348.2
4.3%
418.3
6.1%
455.5
83%
Subscription and support
1,711.0
21.4%
1,491.4
21.6%
1,263.2
22.9%
Total cost of revenue
2,059.2
25.7%
1,909.7
27.7%
1,718.7
31.2%
Total gross profit
5,968.3
74.3%
4,983.0
72.3%
3,782.8
68.8%
Operating expenses:
Research and development
1,809.4
22.5%
1,604.0
23.3%
1,417.7
25.8%
Sales and marketing
2,794.5
34.8%
2,544.0
36.9%
2,148.9
39.0%
General and administrative
680.5
8.5%
447.7
6.5%
405.0
7.4%
Total operating expenses°)
5,284.4
65.8%
4,595.7
66.7%
3,971.6
72.2%
Operating income (loss)
683.9
8.5%
387.3
5.6 %
(188.8)
(3.4)%
Interest expense
(8.3)
(0.1)%
(27.2)
(0.4)%
(27.4)
(0.5)%
Other income, net
312.7
3.9%
206.2
3.0%
9.0
0.1%
Income (loss) before income taxes
988.3
12.3%
566.3
8.2 %
(207.2)
(3.8)%
Provision for (benefit from) income taxes
(1,589.3)
(19.8)%
126.6
1.8%
59.8
1.1%
Net income (loss)
$ 2,577.6
32.1% $
439.7
6.4 % $ (267.0)
(4.9)%
(1) Includes share-based compensation as follows:
Year Ended July 31,
2024
2023
2022
(in millions)
Cost of product revenue
$
7.3 $
9.8 $
9.3
Cost of subscription and support revenue
121.0
123.4
110.2
Research and development
525.5
488.4
471.1
Sales and marketing
300.8
335.3
304.7
General and administrative
124.1
130.4
118.1
Total share-based compensation
$
1,078.7 $
1,0873 $
1,013.4
- 47 -
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- 47 -
Table of Contents
REVENUE
Our revenue consists of product revenue and subscription and support revenue. Revenue is recognized upon transfer of
control of the corresponding promised products and subscriptions and support to our customers in an amount that
reflects the consideration we expect to be entitled to in exchange for those products and subscriptions and support.
We expect our revenue to vary from quarter to quarter based on seasonal and cyclical factors.
PRODUCT REVENUE
Product revenue is derived from sales of our appliances, primarily our ML-Powered Next-Generation Firewall. Product
revenue also includes revenue derived from software licenses of Panorama, SD-WAN, and the VM-Series. Our
appliances and software licenses include a broad set of built-in networking and security features and functionalities. We
recognize product revenue at the time of hardware shipment or delivery of software license.
Year Ended July 31,
Year Ended July 31,
2024
2023
Change
2023
2022
Change
Amount
Amount
Amount
%
Amount
Amount
Amount
%
(dollars in millions)
Product
$ 1,603.3 $ 1,578.4 $
24.9
1.6% $ 1,578.4 $ 1,363.1 $
215.3
15.8%
Product revenue increased for fiscal 2024 compared to fiscal 2023 driven by increased software revenue primarily due
to our go-to-market strategy for certain Network Security offerings, and a change in mix shift within our new
generation of hardware products, partially offset by decreased demand for our prior generation of hardware products.
SUBSCRIPTION AND SUPPORT REVENUE
Subscription and support revenue is derived primarily from sales of our subscription and support offerings. Our
subscription and support contracts are typically one to five years. We recognize revenue from subscriptions and support
over time as the services are performed. As a percentage of total revenue, we expect our subscription and support
revenue to vary from quarter to quarter and increase over the long term as we introduce new subscriptions, renew
existing subscription and support contracts, and expand our installed end-customer base.
Year Ended July 31,
Change
Year Ended July 31,
Change
2024
2023
2023
2022
Amount
Amount
Amount
%
Amount
Amount
Amount
%
(dollars in millions)
Subscription
$ 4,188.5 $ 3,335.4 $
853.1
25.6% $ 3,335.4 $ 2,539.0 $ 796.4
31.4%
Support
Total subscription and support
2,235.7
1,978.9
256.8
13.0%
1,978.9
1,599.4
379.5
23.7%
28.4%
$6,424.2 $ 5,314.3 $ 1,109.9
20.9% $ 5,314.3
$ 4,138.4 $ 1,175.9
Subscription and support revenue increased for fiscal 2024 compared to fiscal 2023 due to increased demand for our
subscription and support offerings from our end-customers. The mix between subscription revenue and support
revenue will fluctuate over time, depending on the introduction of new subscription offerings, renewals of support
services, and our ability to increase sales to new and existing end-customers.
- 48 -
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- 49 -
Table of Contents
GROSS MARGIN
Gross margin has been and will continue to be affected by a variety of factors, including the introduction of new
products, manufacturing costs, the average sales price of our products, cloud hosting service costs, personnel costs, the
mix of products sold, and the mix of revenue between product and subscription and support offerings. Our virtual and
higher-end firewall products generally have higher gross margins than our lower-end firewall products within each
product series. We expect our gross margins to vary over time depending on the factors described above.
Year Ended July 31,
2024
2023
2022
Cross
Cross
Cross
Amount
Margin
Amount
Margin
Amount
Margin
(dollars in millions)
Product
$
1,255.1
78.3% $
1,160.1
73.5% $
907.6
66.6%
Subscription and support
4,713.2
73.4%
3,822.9
71.9%
2,875.2
69.5%
Total gross profit
$
5,968.3
74.3% $
4,983.0
72.3% $
3,782.8
68.8%
Product gross margin increased for fiscal 2024 compared to fiscal 2023 primarily due to increased software revenue and
lower costs largely driven by an easing of supply chain challenges.
Subscription and support gross margin increased for fiscal 2024 compared to fiscal 2023 primarily due to our growth in
subscription and support revenue, which outpaced the subscription and support costs.
OPERATING EXPENSES
Our operating expenses consist of research and development, sales and marketing, and general and administrative
expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits,
bonuses, share-based compensation, travel and entertainment, and with regard to sales and marketing expense, sales
commissions. Our operating expenses also include shared costs, which consist of certain facilities, depreciation,
benefits, recruiting, and information technology costs that we allocate based on headcount to each department. We
expect operating expenses generally to increase in absolute dollars and to decrease over the long term as a percentage
of revenue as we continue to scale our business. As ofJuly 31, 2024, we expect to recognize approximately $2.0 billion of
share-based compensation expense over a weighted-average period of approximately 2.6 years, excluding additional
share-based compensation expense related to any future grants of share-based awards. Share-based compensation
expense is generally recognized on a straight-line basis over the requisite service periods of the awards.
RESEARCH AND DEVELOPMENT
Research and development expense consists primarily of personnel costs. Research and development expense also
includes prototype-related expenses and shared costs. We expect research and development expense to increase in
absolute dollars as we continue to invest in our future products and services, although our research and development
expense may fluctuate as a percentage of total revenue.
Year Ended July 31,
Year Ended July 31,
2024
2023
Change
2023
2022
Change
Amount
Amount
Amount
%
Amount
Amount
Amount
%
(dollars in millions)
Research and development
$1,809.4 $1,604.0 $ 205.4
12.8 % $1,604.0 $ 1,417.7
$ 186.3
13.1%
Research and development expense increased for fiscal 2024 compared to fiscal 2023 primarily due to increased
personnel costs, which grew $143.4 million, largely due to headcount growth. The remaining increase in research and
development expense was further driven by increased shared costs.
- 50 -
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- 50 -
Table of Contents
SALES AND MARKETING
Sales and marketing expense consists primarily of personnel costs, including commission expense. Sales and marketing
expense also includes costs for market development programs, promotional and other marketing costs, professional
services, and shared costs. We continue to strategically invest in headcount and have grown our sales presence. We
expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our sales and
marketing organizations to grow our customer base, increase touch points with end-customers, and expand our global
presence, although our sales and marketing expense may fluctuate as a percentage of total revenue.
Year Ended July 31,
Year Ended July 31,
2024
2023
Change
2023
2022
Change
Amount
Amount
Amount
%
Amount
Amount
Amount
%
(dollars in millions)
Sales and marketing
$ 2,794.5 $2,544.0 $ 250.5
9.8% $2,544.0 $ 2,148.9 $
395.1
18.4%
Sales and marketing expense increased for fiscal 2024 compared to fiscal 2023 primarily due to increased personnel
costs, which grew $117.3 million, largely due to headcount growth. The increase in sales and marketing expense was
further driven by increased costs associated with sales and marketing events and go-to-market initiatives.
GENERAL AND ADMINISTRATIVE
General and administrative expense consists primarily of personnel costs and shared costs for our executive, finance,
human resources, information technology, and legal organizations, and professional services costs, which consist
primarily of legal, auditing, accounting, and other consulting costs. We expect general and administrative expense to
increase in absolute dollars over time as we increase the size of our general and administrative organizations and incur
additional costs to support our business growth, although our general and administrative expense may fluctuate as a
percentage of total revenue.
Year Ended July 31,
Year Ended July 31,
2024
2023
Change
2023
2022
Change
Amount
Amount
Amount
%
Amount
Amount
Amount
%
(dollars in millions)
General and administrative
$ 680.5 $ 447.7 $ 232.8
52.0% $ 447.7 $ 405.0 $
42.7
10.5%
General and administrative expenses increased for fiscal 2024 compared to fiscal 2023 primarily due to litigation-related
charges of $204.4 million in fiscal 2024. Refer to Note 12. Commitments and Contingencies in Part II, Item 8 of this
Annual Report on Form 10-K for more information.
INTEREST EXPENSE
Interest expense primarily consists of interest expense related to our 0.75% Convertible Senior Notes due 2023 (the
"2023 Notes") and our 0.375% Convertible Senior Notes due 2025 (the "2025 Notes," and together with "2023 Notes," the
"Notes").
Year Ended July 31,
Year Ended July 31,
2024
2023
Change
2023
2022
Change
Amount
Amount
Amount
%
Amount
Amount
Amount
%
(dollars in millions)
Interest expense
$
8.3 $
27.2 $
(18.9)
(69.5)% $
27.2 $
27.4 $
(0.2)
(0.7)%
Interest expense decreased for fiscal 2024 compared to fiscal 2023 primarily due to maturity of our 2023 Notes in July
2023 and early conversion of our 2025 Notes in fiscal 2024. Refer to Note10. Debt in Part II, Item 8 of this Annual Report
on Form 10-K for more information on the Notes.
-51-
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- 52 -
Table of Contents
Beginning in fiscal 2023, we were required to capitalize and amortize research and development expenses as required
by the Tax Cuts and Jobs Act. As a result of this change and our increased profitability, we have paid significantly more
U.S. cash taxes during fiscal 2024 and we expect our cash tax payments to increase in future periods.
DEBT
In June 2020, we issued the 2025 Notes with an aggregate principal amount of $2.0 billion. The 2025 Notes mature on
June 1, 2025; however, under certain circumstances, holders may surrender their 2025 Notes for conversion prior to the
maturity date. Upon conversion of the 2025 Notes, we will pay cash equal to the aggregate principal amount of the 2025
Notes to be converted, and, at our election, we will pay or deliver cash and/or shares of our common stock for the
amount of our conversion obligation in excess of the aggregate principal amount of the 2025 Notes being converted.
During fiscal 2024, we repaid in cash $1.0 billion in aggregate principal amount of the 2025 Notes and issued 7.0 million
shares of common stock to the holders for the conversion value in excess of the principal amount of the 2025 Notes
converted, which were fully offset by shares we received from our exercise of the associated note hedges. Subsequent
to July 31, 2024, through the filing date of this Annual Report on Form 10-K, $285.8 million in aggregate principal
amount of the 2025 Notes was converted or had been submitted by the holders for conversion and will settle during the
fiscal quarter ending October 31, 2024.
The sale price condition for the 2025 Notes was met during the fiscal quarter ended July 31, 2024, and as a result, holders
may convert their 2025 Notes during the fiscal quarter ending October 31, 2024. If all of the holders convert their 2025
Notes during this period, we would be obligated to settle the $1.0 billion principal amount of the 2025 Notes in cash. We
believe that our cash provided by operating activities, our existing cash, cash equivalents and investments, and existing
sources of and access to financing will be sufficient to meet our anticipated cash needs should the holders choose to
convert their 2025 Notes during the fiscal quarter ending October 31, 2024 or hold the 2025 Notes until maturity on June
1, 2025. As of Ju ly 31, 2024, $1.0 billion of our 2025 Notes remained outstanding. Refer to Note 10. Debt in Part II, Item 8 of
this Annual Report on Form 10-K for more information on the Notes.
In April 2023, we entered into a credit agreement (the "Credit Agreement") that provides for a $400.0 million unsecured
revolving credit facility (the "Credit Facility"), with an option to increase the amount of the Credit Facility by up to an
additional $350.0 million, subject to certain conditions. The interest rates and commitment fees are also subject to
upward and downward adjustments based on our progress towards the achievement of certain sustainability goals
related to greenhouse gas emissions. As ofJuly 31, 2024, there were no amounts outstanding, and we were in
compliance with all covenants under the Credit Agreement. Refer to Note10. Debt in Part II, Item 8 of this Annual
Report on Form 10-K for more information on the Credit Agreement.
CAPITAL RETURN
In February 2019, our board of directors authorized a $1.0 billion share repurchase program. In December 2020, August
2021, August 2022, and November 2023, our board of directors authorized additional $700.0 million, $676.1 million,
$915.0 million, and $316.7 million increases to this share repurchase program, respectively, bringing the total
authorization under this share repurchase program to $3.6 billion. Repurchases will be funded from available working
capital and may be made at management's discretion from time to time. As ofJuly 31, 2024, $500.0 million remained
available for future share repurchases under this repurchase program. On August 15, 2024, our board of directors
authorized a $500.0 million increase to our share repurchase program, bringing the total remaining authorization for
future share repurchases to $1.0 billion. The repurchase authorization will expire on December 31, 2025, and may be
suspended or discontinued at any time without prior notice. Refer to Note 13. Stockholders' Equity in Part II, Item 8 of
this Annual Report on Form 10-K for more information on this repurchase program.
LEASES AND OTHER MATERIAL CASH REQUIREMENTS
We have entered into various non-cancelable operating leases, primarily for our offices and data centers, with lease
terms expiring through fiscal 2036. As ofJuly 31, 2024, we have total operating lease obligations of $446.4 million
recorded on our consolidated balance sheet.
As ofJuly 31, 2024, our commitments to purchase products, components, cloud and other services totaled $4.8 billion.
Refer to Note 12. Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K for more
information on these commitments.
- 53 -
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- 58 -
Table of Contents
Report of Independent Registered Public
Accounting Firm
To the Stockholders and the Board of Directors of Palo Alto Networks, Inc.
WIJI111U11 Vii WC r111c1111.;1c11 al.c1LCII1C111.5
We have audited the accompanying consolidated balance sheets of Palo Alto Networks, Inc. (the Company) as ofJuly 31,
2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity
and cash flows for each of the three years in the period ended July 31, 2024, and the related notes (collectively referred
to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at J uly 31, 2024 and 2023, and the results of its operations and
its cash flows for each of the three years in the period ended July 31, 2024, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as ofJuly 31, 2024, based on criteria established
in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework), and our report dated September 6, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
-59-
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- 59 -
Table of Contents
REVENUE RECOGNITION
Description
of the Matter
How We
Addressed
the Matter in
Our Audit
As described in Note 1 to the consolidated financial statements, the Company's contracts with
customers sometimes contain multiple performance obligations, which are accounted for separately if
they are distinct. In such cases, the transaction price is then allocated to the distinct performance
obligations on a relative standalone selling price basis, and revenue is recognized when control of the
distinct performance obligation is transferred. For example, product revenue is recognized at the time
of hardware shipment or delivery of software license, and subscription and support revenue is
recognized over time as the services are performed.
Auditing the Company's revenue recognition was complex, including the identification and
determination of distinct performance obligations and the timing of revenue recognition. For
example, there were certain customer arrangements with nonstandard terms and conditions that
required judgment to determine the distinct performance obligations and the impact on the timing
of revenue recognition.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company's process and controls to identify and determine the distinct performance obligations and
the timing of revenue recognition.
To test the identification and determination of the distinct performance obligations and the timing of
revenue recognition, our audit procedures included, among others, reading the executed contract
and purchase order to understand the contract, identifying the performance obligation(s),
determining the distinct performance obligations, and evaluating the timing of revenue recognition
for a sample of individual sales transactions. We evaluated the accuracy of the Company's contract
summary documentation, specifically related to the identification and determination of distinct
performance obligations and the timing of revenue recognition.
/5/ Ernst & Young LLP
We have served as the Company's auditor since 2009.
San Mateo, California
September 6, 2024
-60-
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- 60 -
Table of Contents
Report of Independent Registered Public
Accounting Firm
To the Stockholders and the Board of Directors of Palo Alto Networks, Inc.
WIJI111‘,11 Vrl 1111.CF11c11
‘OVWF Firunicial Reporting
We have audited Palo Alto Networks, Inc.'s internal control over financial reporting as ofJuly 31, 2024, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Palo Alto Networks, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as ofJuly 31, 2024, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as ofJuly 31, 2024 and 2023, the related consolidated
statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years
in the period ended July 31, 2024, and the related notes and our report dated September 6, 2024 expressed an
unqualified opinion thereon.
Oasis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company's internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAO B.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definitioi. and Limitations _if Internal Control Over
Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/5/ Ernst & Young LLP
San Mateo, California
September 6, 2024
- 61 -
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- 61 -
Table of Contents
PALO ALTO NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
July 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
1,535.2 $
1,135.3
Short-term investments
1,043.6
1,254.7
Accounts receivable, net of allowance for credit losses of $7.5 and $7.8 as of July 31,
2024 and July 31, 2023, respectively
2,618.6
2,463.2
Short-term financing receivables, net
725.9
388.8
Short-term deferred contract costs
369.0
339.2
Prepaid expenses and other current assets
557.4
466.8
Total current assets
6,849.7
6,048.0
Property and equipment, net
361.1
354.5
Operating lease right-of-use assets
385.9
263.3
Long-term investments
4,173.2
3,047.9
Long-term financing receivables, net
1,182.1
653.3
Long-term deferred contract costs
5620
547.1
Goodwill
3,350.1
2,926.8
Intangible assets, net
374.9
315.4
Deferred tax assets
2,399.0
23.1
Other assets
352.9
321.7
Total assets
$
19,990.9 $
14,501.1
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
$
116.3
$
132.3
Accrued compensation
554.7
548.3
Accrued and other liabilities
506.7
390.8
Deferred revenue
5,541.1
4,674.6
Convertible senior notes, net
963.9
1,991.5
Total current liabilities
7,682.7
7,737.5
Long-term deferred revenue
5,939.4
4,621.8
Deferred tax liabilities
387.7
28.1
Long-term operating lease liabilities
380.5
279.2
Other long-term liabilities
430.9
86.1
Total liabilities
14,821.2
12,752.7
Commitments and contingencies (Note 12)
Stockholders' equity.
Preferred stock; $0.0001 par value; 100.0 shares authorized; none issued and
outstanding as of July 31, 2024 and July 31, 2023
Common stock and additional paid-in capital; $0.0001 par value; 1,000.0 shares
authorized; 325.1 and 308.3 shares issued and outstanding as ofJu ly 31, 2024 and
July 31, 2023, respectively
3,821.1
3,019.0
Accumulated other comprehensive loss
(1.6)
(43.2)
Retained earnings (accumulated deficit)
Total stockholders' equity
Total liabilities and stockholders' equity
1,350.2
(1,227.4)
5,169.7
1,748.4
$
19,990.9 $
14,501.1
See notes to consolidated financial statements.
- 62 -
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- 62 -
Table of Contents
PALO ALTO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Year Ended July 31,
2024
2023
2022
Revenue:
Product
$
1,603.3 $
1,578.4 $
1,363.1
Subscription and support
6,424.2
5,314.3
4,138.4
Total revenue
8,027.5
6,892.7
5,501.5
Cost of revenue:
Product
348.2
418.3
455.5
Subscription and support
1,711.0
1,491.4
1,263.2
Total cost of revenue
2,059.2
1,909.7
1,718.7
Total gross profit
5,968.3
4,983.0
3,782.8
Operating expenses:
Research and development
1,809.4
1,604.0
1,417.7
Sales and marketing
2,794.5
2,544.0
2,148.9
General and administrative
680.5
447.7
405.0
Total operating expenses
5,284.4
4,595.7
3,971.6
Operating income (loss)
683.9
387.3
(188.8)
Interest expense
(8.3)
(27.2)
(27.4)
Other income, net
312.7
206.2
9.0
Income (loss) before income taxes
988.3
566.3
(207.2)
Provision for (benefit from) income taxes
(1,589.3)
126.6
59.8
Net income (loss)
Net income (loss) per share, basic
Net income (loss) per share, diluted
Weighted-average shares used to compute net income (loss)
per share, basic
Weighted-average shares used to compute net income (loss)
per share, diluted
$
2,577.6 $
439.7 $
(267.0)
$
8.07 $
1.45 $
(0.90)
$
7.28 $
1.28 $
(0.90)
319.2
303.2
295.6
354.0
342.3
295.6
See notes to consolidated financial statements.
- 63 -
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- 64 -
Table of Contents
PALO ALTO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions)
Common Stock
and
Accumulated
Retained
Additional Paid-In Capital
Other
Earnings
Total
Comprehensive (Accumulated
Stockholders'
Shares
Amount
Income (Loss)
Deficit)
Equity
Balance as ofJ uly 31, 2021
291.9 $
2,311.2 $
(9.9) $
(1,666.8) $
634.5
Cumulative-effect adjustment from
adoption of new accounting
pronouncement
(581.9)
266.7
(315.2)
Net loss
(267.0)
(267.0)
Other comprehensive loss
(45.7)
(45.7)
Issuance of common stock in connection
with employee equity incentive plans
12.3
137.3
137.3
Taxes paid related to net share settlement
of equity awards
(50.3)
(50.3)
Share-based compensation for equity-
based awards
1,031.4
1,031.4
Repurchase and retirement of common
stock
(5.4)
(915.0)
(915.0)
Balance as ofJ uly 31, 2022
298.8
1,932.7
(55.6)
(1,667.1)
210.0
Net income
439.7
439.7
Other comprehensive income
12.4
12.4
Issuance of common stock in connection
with employee equity incentive plans
11.3
259.7
259.7
Taxes paid related to net share settlement
of equity awards
(20.4)
(20.4)
Share-based compensation for equity-
based awards
1,097.0
1,097.0
Repurchase and retirement of common
stock
(1.8)
(250.0)
(250.0)
Settlement of convertible notes
11.4
Settlement of note hedges
(11.4)
Balance as ofJ uly 31, 2023
308.3
3,019.0
(43.2)
(1,227.4)
1,748.4
Net income
2,577.6
2,577.6
Other comprehensive income
41.6
41.6
Issuance of common stock in connection
with employee equity incentive plans
9.8
282.7
282.7
Taxes paid related to net share settlement
of equity awards
(26.6)
(26.6)
Share-based compensation for equity-
based awards
1,115.3
1,115.3
Repurchase and retirement of common
stock
(2.0)
(566.7)
(566.7)
Settlement of convertible notes
7.0
(2.6)
(2.6)
Settlement of note hedges
(7.0)
Settlement of warrants
9.0
Balance as ofJ uly 31, 2024
325.1 $
3,821.1 $
(1.6) $
1,350.2 $
5,169.7
See notes to consolidated financial statements.
- 65 -
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- 65 -
Table of Contents
PALO ALTO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Year Ended July 31,
2024
2023
2022
Cash flows from operating activities
Net income (loss)
$
2,577.6 $
439.7 $
(267.0)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Share-based compensation for equity-based awards
1,075.4
1,074.5
1,011.1
Deferred income taxes
(2,033.7)
12.5
(3.1)
Depreciation and amortization
283.3
282.2
282.6
Amortization of deferred contract costs
446.0
413.4
362.1
Amortization of debt issuance costs
3.5
6.7
7.2
Reduction of operating lease right-of-use assets
55.3
49.9
54.4
Amortization of investment premiums, net of accretion of purchase
discounts
(60.1)
(52.2)
13.5
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net
(154.3)
(320.3)
(902.0)
Financing receivables, net
(865.9)
(738.7)
(30.1)
Deferred contract costs
(489.3)
(431.9)
(458.8)
Prepaid expenses and other assets
(134.1)
(270.6)
(110.0)
Accounts payable
(15.0)
1.0
69.3
Accrued compensation
3.8
84.4
30.4
Accrued and other liabilities
Deferred revenue
Net cash provided by operating activities
384.5
2,180.6
(74.8)
2,301.7
(44.9)
1,970.0
3,257.6
2,777.5
1,984.7
Cash flows from investing activities
Purchases of investments
(3,551.3)
(5,460.4)
(2,271.7)
Proceeds from sales of investments
956.2
965.9
449.2
Proceeds from maturities of investments
1,852.6
2,811.5
1,118.9
Business acquisitions, net of cash and restricted cash acquired
(610.6)
(204.5)
(37.0)
Purchases of property, equipment, and other assets
Net cash used in investing activities
Cash flows from financing activities
(156.8)
(146.3)
(192.8)
(1,509.9)
(2,033.8)
(933.4)
Repayments of convertible senior notes
(1,033.7)
(1,692.0)
(0.6)
Repurchases of common stock
(566.7)
(272.7)
(892.3)
Proceeds from sales of shares through employee equity incentive plans
283.9
258.8
136.6
Payments for taxes related to net share settlement of equity awards
Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash-beginning of period
Cash, cash equivalents, and restricted cash-end of period
(26.6)
(20.4)
(50.3)
(1,343.1)
(1,726.3)
(806.6)
404.6
1,142.2
(982.6)
2,124.8
244.7
1,880.1
$
1546.8 $
1142.2 $
2124.8
Reconciliation of cash, cash equivalents, and restricted cash to the
consolidated balance sheets
Cash and cash equivalents
$
1,535.2 $
1,135.3
$
2,118.5
Restricted cash included in prepaid expenses and other current assets
11.6
6.9
6.3
Total cash, cash equivalents, and restricted cash
Non-cash investing and financing activities
Equity consideration for business acquisitions
Supplemental disclosures of cash flow information
$
1546.8 $
1142.2 $
2124.8
(27.4) $
(0.3) $
(2.5)
Cash paid for income taxes
$
342.3 $
147.1 $
34.6
Cash paid for contractual interest
5.6 $
20.2 $
20.2
See notes to consolidated financial statements.
- 66 -
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- 72 -
Table of Contents
We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that
the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second
step requires us to estimate and measure the tax benefit as the largest amount that is more likely than not to be
realized upon ultimate settlement.
Loss Contingencies
We are subject to the possibility of various loss contingencies arising in the ordinary course of business. In determining
loss contingencies, we consider the likelihood of loss or impairment of an asset, or the incurrence of a liability, as well as
our ability to reasonably estimate the amount of loss. An estimated loss contingency is accrued when it is probable that
an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. If we
determine that a loss is reasonably possible, then we disclose the possible loss or range of the possible loss or state that
such an estimate cannot be made. We regularly evaluate current information available to us to determine whether an
accrual is required, an accrual should be adjusted, or a range of possible loss should be disclosed.
Recently Issued Accounting Pronouncements
Segment Reporting
In November 2023, the Financial Accounting Standards Board ("FASB") issued authoritative guidance that expands
annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about
significant segment expenses. The standard is effective for our annual periods beginning in fiscal 2025 and interim
periods beginning in the first quarter of fiscal 2026, and requires retrospective application for all prior periods presented
in the financial statements. Early adoption is permitted. We are currently evaluating the impact of this standard on our
disclosures in the consolidated financial statements.
Income Tax Disclosures
In December 2023, the FASB issued authoritative guidance that requires consistent categories and greater
disaggregation of information in the effective tax rate reconciliation and additional disclosures of income taxes paid by
jurisdiction. The standard is effective for our annual periods beginning in fiscal 2026 and could be applied either
prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact of this standard on
our disclosures in the consolidated financial statements.
2. Revenue
Disaggregation of Revenue
The following table presents revenue by geographic theater (in millions):
Year Ended July 31,
2024
2023
2022
Revenue:
Americas
United States
$
5,134.0 $
4,424.2 $
3,560.3
Other Americas
Total Americas
348.9
295.7
242.3
5,482.9
4,719.9
3,802.6
Europe, the Middle East, and Africa ("EM EA")
1,602.0
1,359.6
1,055.8
Asia Pacific and Japan ("APAC")
Total revenue
942.6
813.2
643.1
$
8,027.5 $
6,892.7 $
5,501.5
The following table presents revenue for groups of similar products and services (in millions):
Year Ended July 31,
2024
2023
2022
Revenue:
Product
$
1,603.3
$
1,578.4 $
1,363.1
Subscription and support
Subscription
4,188.5
3,335.4
2,539.0
Support
2,235.7
1,978.9
1,599.4
Total subscription and support
6,424.2
5,314.3
4,138.4
Total revenue
$
8,027.5 $
6,892.7 $
5,501.5
- 73 -
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- 74 -
Table of Contents
July 31, 2024
July 31, 2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Other assets:
Foreign currency forward
contracts
0.1
0.1
1.7
1.7
Total other assets
0.1
0.1
1.7
1.7
Total assets measured at fair
value
$ 494.0 $5,688.4 $
- $ 6,182.4 $
476.1 $4,474.8 $
- $4,950.9
Accrued and other liabilities:
Foreign currency forward
contracts
$
$
15.3
$
$
15.3
$
$
18.7
$
$
18.7
Total accrued and other
liabilities
15.3
15.3
18.7
18.7
Other long-term liabilities:
Foreign currency forward
contracts
0.9
0.9
1.6
1.6
Total other long-term
liabilities
0.9
0.9
1.6
1.6
Total liabilities measured at fair
value
$
- $
16.2 $
- $
16.2 $
- $
20.3 $
- $
20.3
The total estimated fair value of our financing receivables approximates their carrying amounts as ofJuly 31, 2024 and
2023. We consider the fair value of our financing receivables to be a Level 3 measurement as we use unobservable
inputs in determining discounted cash flows to estimate the fair value.
Refer to Note 10. Debt, for the carrying amount and estimated fair value of our convertible senior notes as ofJuly 31,
2024 and 2023.
4. Cash Equivalents and Investments
Available-for-sale Debt Securities
The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale
debt securities (in millions):
July 31, 2024
Amortized Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Cash equivalents:
Commercial paper
Corporate debt securities
U.S. government and agency securities
Total available-for-sale cash equivalents
$
299.6
18.2
149.6
$
$
$
299.6
18.2
149.6
$
467.4 $
$
$
467.4
Investments:
Certificates of deposit
$
20.6 $
$
$
20.6
Commercial paper
79.9
0.1
(0.1)
79.9
Corporate debt securities
4,065.5
28.3
(6.6)
4,087.2
U.S. government and agency securities
21.9
(0.2)
21.7
Non-U.S. government and agency securities
57.9
0.7
58.6
Asset-backed securities
943.1
6.3
(0.6)
948.8
Total available-for-sale investments
$
5,188.9 $
35.4 $
(7.5) $
5,216.8
- 75 -
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- 76 -
Table of Contents
5. Financing Receivables
The following table summarizes our short-term and long-term financing receivables (in millions):
July 31,
2024
2023
Short-term financing receivables, gross
$
830.2 $
435.1
Unearned income
(95.7)
(42.9)
Allowance for credit losses
(8.6)
(3.4)
Short-term financing receivables, net
$
725.9 $
388.8
Long-term financing receivables, gross
$
1,286.4 $
698.6
Unearned income
(94.6)
(39.2)
Allowance for credit losses
(9.7)
(6.1)
Long-term financing receivables, net
$
1,182.1 $
653.3
The following table presents amortized cost basis of our financing receivables categorized by internal risk rating and
year of origination (in millions):
July 31, 2024
July 31, 2023
Fiscal Years Ended July 31,
Fiscal Years Ended July 31,
Internal Risk Rating03
2024
2023
2022
2021
Total
2023
2022
2021
2020
Total
1 to 4
$ 885.9 $ 477.3 $ 14.7 $ 44.4 $ 1,422.3 $ 595.8 $ 50.6 $ 114.5 $
1.2 $ 762.1
5 to 6
272.2
172.0
21.1
1.1
466.4
219.4
40.1
4.4
1.5
265.4
7 to 10
3.2
25.0
0.3
9.1
37.6
5.6
0.6
17.9
24.1
Amortized cost basis of
financing receivables
$1,161.3 $ 674.3 $ 36.1 $ 54.6 $1,926.3 $820.8 $
91.3 $ 136.8 $
2.7 $1,051.6
CI) Internal risk ratings are categorized as 1 through 10, with the lowest rating representing the highest quality.
There was no significant activity in allowance for credit losses during the years ended July 31, 2024 and 2023. Past due
amounts on financing receivables were not material as ofJuly 31, 2024 and 2023.
6. Derivative Instruments
As ofJuly 31, 2024 and 2023, the notional amount of our outstanding foreign currency forward contracts designated as
cash flow hedges was $804.8 million and $824.1 million, respectively. Refer to Note 3. Fair Value Measurements for the
fair value of our derivative instruments as reported on our consolidated balance sheets as ofJuly 31, 2024 and 2023.
As ofJuly 31, 2024, unrealized gains and losses in AOCI related to our cash flow hedges were a $10.6 million net loss, of
which $7.9 million in losses are expected to be recognized into earnings within the next 12 months. As ofJuly 31, 2023,
unrealized gains and losses in AOCI related to our cash flow hedges were a $0.7 million net gain.
As ofJuly 31, 2024 and 2023, the notional amount of our outstanding foreign currency forward contracts not designated
as hedging instruments was $375.6 million and $133.4 million, respectively.
7. Acquisitions
Fiscal 2024
Dig Security Solutions Ltd.
On December 5, 2023, we completed our acquisition of Dig Security Solutions Ltd. ("Dig"), a privately-held cyber security
company. We expect the acquisition will enhance our Prisma Cloud capabilities with a data security posture
management solution that is intended to provide customers with visibility into, and secure data stored across, their
multi-cloud environments. The total purchase consideration for the acquisition of Dig was $255.4 million, which
consisted of the following (in millions):
Amount
Cash
$
247.6
Fair value of replacement awards
7.8
Total
$
255.4
- 77 -
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- 79 -
Table of Contents
8. Goodwill and Intangible Assets
Goodwill
The following table presents details of our goodwill during the year ended July 31, 2024 (in millions):
Amount
Balance as ofJ uly 31, 2023
$
2,926.8
Goodwill acquired
423.3
Balance as of July 31, 2024
$
3,350.1
Purchased Intangible Assets
The following table presents details of our purchased intangible assets (in millions):
July 31,
2024
2023
Cross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Cross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets subject to amortization:
Developed technology
$
813.9 $
(526.2) $
287.7 $
633.2 $
(429.4) $ 203.8
Customer relationships
172.7
(96.1)
76.6
172.7
(73.9)
98.8
Acquired intellectual property
18.2
(7.9)
10.3
14.6
(6.2)
8.4
Trade name and trademarks
9.4
(9.4)
9.4
(9.4)
Other
Total intangible assets subject to
amortization
0.9
(0.6)
0.3
0.9
(0.4)
0.5
1,015.1
(640.2)
374.9
830.8
(519.3)
311.5
Intangible assets not subject to amortization:
In-process research and development
Total purchased intangible assets
3.9
3.9
$ 1,015.1 $
(640.2) $ 374.9 $ 834.7 $
(519.3) $
315.4
We recognized amortization expense of $120.9 million, $104.9 million, and $126.9 million for the years ended July 31,
2024, 2023, and 2022, respectively.
The following table summarizes estimated future amortization expense of our intangible assets subject to amortization
as ofJu ly 31, 2024 (in millions):
Fiscal years ending July 31,
2030 and
Total
2025
2026
2027
2028
2029
Thereafter
Future amortization expense
$
374.9 $
120.6 $
98.8 $
71.8 $
50.2 $
24.2 $
9.3
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Table of Contents
9. Property and Equipment
The following table presents details of our property and equipment, net (in millions):
July 31,
2024
2023
Computers, equipment, and software
466.0 $
432.9
Leasehold improvements
274.0
268.9
Land
87.2
87.2
Demonstration units
44.4
46.9
Furniture and fixtures
48.7
46.9
Total property and equipment, gross
920.3
882.8
Less: accumulated depreciation
(559.2)
(528.3)
Total property and equipment, net
361.1 $
354.5
We recognized depreciation expense of $85.1 million, $95.9 million, and $92.8 million related to property and equipment
during the years ended July 31, 2024, 2023, and 2022, respectively.
10. Debt
Convertible Senior Notes
In July 2018, we issued $1.7 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2023 (the "2023
Notes") and in June 2020, we issued $2.0 billion aggregate principal amount of 0.375% Convertible Senior Notes due
2025 (the "2025 Notes," and together with the 2023 Notes, the "Notes"). The 2023 Notes bear interest at a fixed rate of
0.75% per year, payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2019. The
2023 Notes were converted prior to or settled on the maturity date of July 1, 2023 in accordance with their terms. The
2025 Notes bear interest at a fixed rate of 0.375% per year, payable semi-annually in arrears on June 1 and December 1 of
each year, beginning on December 1, 2020. The 2025 Notes are governed by an indenture between us, as the issuer, and
U.S. Bank National Association, as Trustee (the "Indenture"). The 2025 Notes are unsecured, unsubordinated obligations
and the Indenture governing the 2025 Notes does not contain any financial covenants or restrictions on the payments
of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries.
The 2025 Notes mature on June 1, 2025. We may redeem for cash all or any portion of the 2025 Notes, at our option, on
or after June 5, 2023 and prior to the 31st scheduled trading day immediately preceding the maturity date if the last
reported sale price of our common stock has been at least130% of the conversion price then in effect for at least
20 trading days during any 30 consecutive trading day period ending on and including the trading day preceding the
date on which we provide notice of redemption. The redemption will be at a price equal to100% of the principal
amount of the 2025 Notes and adjusted for interest. If we call any or all of the 2025 Notes for redemption, holders may
convert such 2025 Notes called for redemption at any time prior to the close of business on the second scheduled
trading day immediately preceding the redemption date.
The following table presents details of our Notes (number of shares in millions):
Conversion Rate
per $1,000 Principal
Initial Conversion
Price
Convertible Date
Initial Number of
Shares
2023 Notes(1)
11.2635 $
88.78
April 1, 2023
19.1
2025 Notes
10.0806 $
99.20
March 1, 2025
20.1
(1) The 2023 Notes were converted prior to or settled on the maturity date ofJ u ly 1, 2023.
Holders of the 2025 Notes may surrender their 2025 Notes for conversion at their option at any time prior to the close of
business on the business day immediately preceding March 1, 2025 only under the following circumstances:
during any fiscal quarter commencing after the fiscal quarter ending on October 31, 2020 (and only during such fiscal
quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive)
during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal
quarter is greater than or equal to 130% of the conversion price for the 2025 Notes on each applicable trading day (the
"sale price condition");
during the five business day period after any five consecutive trading day period (the "measurement period") in
which the trading price per $1,000 principal amount of the 2025 Notes for each trading day of the measurement
period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate
for the 2025 Notes on each such trading day; or
upon the occurrence of specified corporate events.
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