DEF 14A of Mitek Systems Inc
Filed Aug 14, 2024 · FY20230000807863-24-000086
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Background
Background Pursuant to our Bylaws, the Board currently has fixed the number of authorized directors at six. The six director nominees receiving the highest number of votes at the Annual Meeting will be elected to the Board, to serve until our next annual meeting of stockholders and until their successors have been duly elected and qualified. Unless authorization to do so is withheld, it is intended that the persons named in this Proxy Statement will vote for the election of the six director nominees proposed by the Board. All proposed directors have been recommended by the Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”). If any of the director nominees should become unavailable for election prior to the Annual Meeting, the proxy will be voted for a substitute nominee or nominees, if any, designated by the Board.
Specific Skills and Attributes to Be Represented on the Board
Specific Skills and Attributes to Be Represented on the Board In consultation with our outside advisors, we have undertaken a review of the skills and attributes most critical for our Board of Directors to possess and evaluated each member of our current Board based on these qualities. The areas in which each Board member is most equipped to provide leadership are noted in their individual biographies. It is important to note that not every Board member needs to be a leader in every area, nor does leadership in a larger number of areas make a Board member “better”; it is only critical that each quality is represented on our Board.
Specific Skills and Attributes to Be Represented on the Board
| Skills and Attributes | Importance to Mitek | | Industry knowledge | Mitek benefits from significant trends across several sectors including financial services, e-commerce, mobile, cellular, identity solutions and technology. Relevant industry expertise helps identify areas for growth or improvement as well as to craft the best business responses to market conditions. | | Product marketing & sales | Mitek operates in competitive sectors and seeks to quickly launch and grow market share across its products. Product and marketing expertise helps in bringing new products to market & creating new markets as well as organizational design & delivery to achieve high revenue growth. | | Strategic planning | Mitek operates in a highly dynamic field. Board members who have experience making strategic decisions for companies of various sizes, in various industries and at various stages in their development aid our continued high performance. | | Technology leadership | The specific nature of Mitek’s businesses makes the ability to assess its technological competitiveness crucial. | | Operational excellence | Strong management and a commitment to high performance are critical to maintaining and growing Mitek’s competitive position. | | Human resources, compensation and succession planning | Mitek’s competitiveness depends on its ability to recruit and retain top-tier talent and to plan for its long-term needs. | | Investor relations and fund-raising ability | The ability to explain Mitek’s story to the market is critical to maximizing stockholder value and ensuring the company has adequate access to capital. | | Financial expertise | An understanding of Mitek’s financial position and outlook is essential to making informed strategic decisions for the Company. | | Corporate governance leadership | Expertise in corporate governance supports assessment of the effectiveness of Mitek’s Board and proposing any necessary changes. | | Mergers & acquisitions (M&A) experience | Ability to evaluate M&A opportunities is essential to delivering stockholder value. |
Specific Skills and Attributes to Be Represented on the Board
| Skills and Attributes | Importance to Mitek | | Diverse perspective | Diversity in perspective, background and experience is critical to our ability to serve our customers, identify opportunities and address problems. A demonstrated commitment to diversity of backgrounds and experiences is crucial to our ability to attract and retain talent. | | Global experience | Success in our industry requires constant expansion to new markets, and our Board members need to be equipped to evaluate the state of our business in global markets. | | Cyber oversight, cyber governance expertise | Protecting personal and business-critical data is essential to maintaining business resilience. Expertise in reviewing and assessing the design and effectiveness of cybersecurity policies and procedures at the board level ensures proper monitoring, reporting, and regular review of key risks within current and mature cybersecurity practices and systems. |
Specific Skills and Attributes to Be Represented on the Board
The following table includes the names and certain information about the nominees for director. All of the nominees named below have consented to being named herein and to serve on the Board, if elected.
Specific Skills and Attributes to Be Represented on the Board
| Name | Age | Position | | Scott Carter | 54 | Interim Chief Executive Officer and Executive Chair of the Board | | Rahul Gupta(1)(2) | 65 | Director | | James C. “Jim” Hale(1)(2) | 72 | Director | | Susan J. Repo(1)(3) | 57 | Director | | Kimberly S. Stevenson(1)(2) | 62 | Lead Independent Director | | Donna C. Wells(3) | 63 | Director |
Specific Skills and Attributes to Be Represented on the Board
——————— (1)Member of the Audit Committee of the Board (the “Audit Committee”) (2)Member of the Compensation Committee of the Board (the “Compensation Committee”) (3)Member of the Nominating Committee Scott Carter. Scott Carter has served as the Interim Chief Executive Officer and Executive Chair of the Board since June 1, 2024, as Chair of the Board from December 2023 through May 2024, as Executive Chair from January to December 2023, and as a director since March 2022, and as a special advisor to our former CEO and Board of Directors sharing his industry knowledge and assisting with product and market strategy since December 2020. From September 2014 to July 2018 he served as the Chief Executive Officer and previously Chief Operating Officer of ID Analytics, now LexisNexis, a provider of risk management solutions offering credit risk, consumer protection, risk identification, fraud detection, payment, and theft protection services. From May 2019 until December 2020, Mr. Carter served as the Chief Operating Officer and Advisor of Brain Corp, an artificial intelligence company which creates transformative core technology for the robotics industry. Mr. Carter previously served as our Chief Marketing Officer from July 2013 until September 2014. From January 2005 to June 2013, Mr. Carter served as Senior Vice President with Experian Decision Analytics, a consumer credit reporting company which sells decision analytic and marketing assistance to businesses. Mr. Carter is a member of the board of directors of Guardinex, Inc. and previously served on the board of directors of Vital4, and LendingUSA. Mr. Carter has also advised various private equity firms on prospective acquisitions of SaaS, FinTech and data and AI enabled companies. Mr. Carter also served as the Chair of the Board of Ubiq Security, Inc. from July of 2018 through June of 2019. Mr. Carter earned a Bachelor of Arts from the University of Delaware and a Masters in Business Administration from the University of Delaware, Lerner College of Business. In addition he has completed further executive education at the Kellogg School at Northwestern University and holds a Directorship Certification from NACD. Mr. Carter is a seasoned executive with a diverse range of experiences as a technology business leader, advisor and board member. Having held C-level positions for leading solution providers and previously in client-side industry roles, Mr. Carter has a uniquely 360-degree view and has a consistent track record of accelerating growth for organizations, utilizing client and market insight to inform strategy, corporate development product, technology, sales and marketing activities. Skills and attributes: Industry knowledge; product marketing & sales; strategic planning, technology leadership; operational excellence; human resources; compensation and succession planning; corporate governance leadership; and global experience. Rahul Gupta. Rahul Gupta has served as a director since March 2022. From January 2017 to March 2019, Mr. Gupta served as CEO of RevSpring, a high-growth technology services organization that provides intelligent financial engagement and payment solutions to 2,000 leading healthcare providers. Mr. Gupta also previously served as Group President, Billing and Payments at Fiserv, from November 2014 to December 2016, and as Group President, Digital Payments, at Fiserv from December 2006 to November 2014. Mr. Gupta is a current board member at Corpay (NYSE: CPAY) and the following private companies: Amount, Exact Payments, SavvyMoney, and Capital Good Fund. Mr. Gupta is a former board member after successful exits at Cardtronics, Zego/PayLease, and nContracts. Additionally, he is an advisor at NYCA, a venture capital fund, the following private equity funds: Platform Partners, and StoicLane, as well as several fintech companies. He is an Ambassador for the University of Southern California, a member of USC Provost Associates, and a mentor to multiple startup teams at the Viterbi School of Engineering. Mr. Gupta graduated Magna Cum Laude with a Masters of Business Administration from Indiana University and holds a Bachelor of Arts in Commerce from Delhi University as well as a CPA certification from India. Mr. Gupta is well qualified to serve on our Board of Directors due to his over 35 years of experience in the financial services and fintech industries having served in a variety of capacities at the board and executive levels. Skills and attributes: Industry knowledge; product marketing & sales; strategic planning; technology leadership; investor relations and fund-raising; financial expertise; M&A experience; cyber oversight; cyber governance expertise; and global experience. James C. Hale. Mr. Hale has served as a director since November 2014. Prior to joining the Board, Mr. Hale served on our advisory board from September 2012 until November 2014. Mr. Hale has launched and grown multiple businesses that leveraged his vision of the evolving financial services marketplace, knowledge of emerging financial technologies, and global network at top financial service companies built over several decades in commercial and investment banking. Since 2011, Mr. Hale has been advising growth companies as a consultant at Columbus Strategic Advisors, LLC, a firm he co-founded. In 1998, Mr. Hale co-founded and served as Senior Managing Member and Chief Executive Officer of Financial Technology Ventures, now FTV Capital, an investment firm specializing in venture capital and private growth equity investments in financial technology companies worldwide, where he is currently a Partner Emeritus. From 1982 to 1998, Mr. Hale was with BancAmerica Securities (formerly Montgomery Securities) where he was the Senior Managing Partner and Head of the Financial Services Group, a practice that he founded. From 2015, Mr. Hale has served as a director and risk committee chair of ACI Worldwide (Nasdaq: ACIW), a global software company, and as a director of Visual Edge Technology, a national provider of office technology solutions. From 2014, Mr. Hale has served as a director and audit committee chair of Bank of Marin Bancorp (Nasdaq: BMRC), an independent commercial and retail bank in Northern California. Mr. Hale was a director of ExlService Holdings, Inc. (Nasdaq: EXLS), a business process outsourcing company, from 2001 to 2009 and a director and board chair of Official Payments (Nasdaq: OPAY), a global electronic payments software company, from 2010 to 2014. In addition, Mr. Hale was a director of the State Bank of India (California), a California state chartered bank, and Public Radio International, a media company, among other private company boards. He holds a Bachelor of Science in Finance and Accounting from the University of California, Berkeley, an MBA from Harvard Business School, and is a Certified Public Accountant (inactive). Mr. Hale is well qualified to serve on our Board of Directors due to his 35 years of management experience in the banking, payments, financial services and technology industries, and expertise and experience as a corporate director and board chair of other public and private companies. Skills and attributes: Industry knowledge; strategic planning; technology leadership; investor relations and fundraising ability; financial expertise; corporate governance leadership; M&A experience; and global experience.
Specific Skills and Attributes to Be Represented on the Board
Susan J. Repo. Ms. Repo has served as a director since June 2021. Since February 2021 she has served as Chief Financial Officer of ICEYE, a Finnish micro satellite manufacturer. From 2013 to 2018, Ms. Repo held various positions at Tesla, an electric vehicle manufacturer, most recently serving as Corporate Treasurer and Vice President Finance. From 2019 to 2020, Ms. Repo served as the Chief Operating Officer of MariaDB Corporation, an open source storage company. In 2019, Ms. Repo served as the Chief Executive Officer and Chief Operating Officer of DriveOn, an automotive fintech company, and in 2018, Ms. Repo served as the Chief Financial Officer of Topia, a talent mobility platform. From 2007 to 2013, she served as Senior Director of International Tax at Juniper Networks, Inc., a multinational corporation that develops and markets networking products, including routers, switches, network management software, network security products, and software-defined networking technology. Ms. Repo currently serves on the board of directors of: GM Financial Bank, a member of the General Motors subsidiaries, Matterport, Inc., and previously served on the board of Call2Recycle, Inc., the largest battery stewardship and recycling organization in North America, where she chairs the audit & technology committee. Ms. Repo holds a Bachelor of Science in Business Administration and Finance from the University of Southern California and a JD from the Chicago-Kent College of Law, at the Illinois Institute of Technology University and a Masters of Law from Stanford Law School. The Board believes her diverse experiences in the technology industry make her well qualified to serve on the Board. Skills and attributes: Financial expertise; corporate governance leadership; M&A experience; strategic planning; global experience; operational excellence; investor relations and fundraising abilities; human resources; compensation and succession planning; technology leadership; and diverse perspective. Kimberly S. Stevenson. Ms. Stevenson has served as our lead independent director since June 2024 and previously from January 2023 to December 2023, and as a director since November 2020. Previously, Ms. Stevenson served as senior vice president and general manager of the Foundational Data Services Business Unit at NetApp, Inc., a publicly traded provider of cloud data services. Previously, Ms. Stevenson served as senior vice president and general manager of data center products and solutions for Lenovo, a multinational technology company, from March 2017 to October 2018. From September 2009 to February 2017, she served as a corporate vice president at Intel Corporation, holding various positions including chief operating officer for the client and internet of things businesses and systems architecture group from September 2016 to February 2017, chief information officer from February 2012 to August 2016, and general manager, IT operations and services, from September 2009 to January 2012. Prior to joining Intel, Ms. Stevenson spent seven years at the former Electronic Data Systems, now DXC Technology, with responsibility for global development and delivery of enterprise services. She also spent more than 17 years at IBM in various finance and operational roles. Ms. Stevenson currently serves as a director of Verisk Analytics, Inc., and Ambiq Micro Solutions. She previously held board positions with Quarterhill, Inc., Skyworks Solutions, Inc., Boston Private Financial Holdings and Riverbed Technology, all publicly traded companies at the time. She also served as a director of Cloudera, a private enterprise software company, and the National Center for Women and Information Technology, a non-profit organization. Ms. Stevenson holds a Bachelor of Science in Accounting and Business Management from Northeastern University and an MBA from Cornell. Skills and attributes: Industry knowledge; product marketing and sales; strategic planning; technology leadership; operational excellence; financial expertise; corporate governance leadership; diverse perspective; cyber oversight; cyber governance expertise; and global experience. Donna C. Wells. Ms. Wells has served as a director since November 2019. Prior to joining our Board, she served on our advisory board from September 2017 until November 2019. Ms. Wells is a serial entrepreneur, an experienced board director, and an innovator in the financial services, FinTech and cloud software industries. She is currently CEO of Valencia Ventures, a private company that provides strategic consulting and corporate governance services. From 2010-2017, Ms. Wells served as Board Director, President and CEO of Mindflash Technologies, Inc., an innovative venture-backed enterprise software startup that built a corporate training platform for businesses. In that capacity, she led the company from SaaS product launch to market leadership and to recognition as a Top 50 Small US Company to Work for by Fortune. Prior to her role at Mindflash, Ms. Wells was CMO at Mint Software, Inc. from 2007-2009. There, she led the growth strategy for this breakthrough, mobile personal finance software company from product launch to the company’s acquisition by Intuit. Prior to Mint, Ms. Wells had a 20-year career in strategic marketing with The American Express Company and The Charles Schwab Corporation and led marketing for two Fortune 500 companies, Intuit and the Expedia Group. She currently serves as a Board Member at Walker & Dunlop, a leading CRE Finance company, where she is chair of the Audit and Risk committee and a member of the Nominating and Corporate Governance committee. Ms. Wells also serves on the board of Betterment Holdings, Inc., an independent digital wealth management platform. She was previously a director at Boston Private Financial Holdings, Inc, a bank holding company, from 2014 to 2018 and Apex Technology Acquisition Corporation, a special purpose acquisition company, from 2019 to 2021. In September 2019, Ms. Wells was appointed by the Center for Entrepreneurial Studies at the Stanford University Graduate School of Business as a Lecturer in Management. In September 2021, she was named Board Director of the Year by the Women in Information Technology organization. She holds an MBA from Stanford University and a Bachelor of Science in Economics from The Wharton School at the University of Pennsylvania. Ms. holds a Director Certification from the National Association of Corporate Directors and was named Board Director of the Year by Women in Information Technology in 2021. The Board believes Ms. Wells is well qualified to serve as a director due to her wealth of experience in the FinTech and cloud software industries. Skills and attributes: Industry knowledge; product marketing and sales; strategic planning; technology leadership; operational excellence; financial expertise; and diverse perspective. None of our directors have any family relationships with any of our other directors or executive officers. There currently are no legal proceedings, and during the past 10 years there have been no legal proceedings, that are material to the evaluation of the ability or integrity of any of our directors.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Information Regarding Board Committees
Information Regarding Board Committees The Board has established standing Audit, Compensation, and Nominating Committees to devote attention to specific subjects and to assist it in the discharge of its responsibilities. The three committees operate under written charters adopted by the Board, each of which is available on our Internet website at www.miteksystems.com under “Investors.” The following table sets forth the number of meetings held and actions taken by written consent during the 2023 fiscal year for each of the committees of the Board and current membership for each of the committees of the Board. No member of the Board attended fewer than 75% of the aggregate number of board and committee meetings on which such board member served during the 2023 fiscal year.
Information Regarding Board Committees
| | Audit Committee | Nominating and Corporate Governance Committee | Compensation Committee | | Employee Director: | | | | | Scipio “Max” Carnecchia(1) | — | — | — | | Scott Carter(2) | — | — | — | | Non-Employee Directors: | | | | | James C. Hale | X | — | X | | Rahul Gupta | X | — | X | | Susan J. Repo | X(3) | X | — | | Kimberly S. Stevenson | X | — | X(3) | | Donna C. Wells | — | X(3) | — | | Total meetings in the 2023 fiscal year | 33 | 4 | 9 | | Total actions taken by written consent in the 2023 fiscal year | — | 1 | 1 |
Information Regarding Board Committees
——————— (1)Mr. Carnecchia’s employment with the Company was involuntarily terminated by the Board of Directors “without cause” as defined in Mr. Carnecchia’s employment agreement effective as of May 31, 2024. Mr. Carnecchia subsequently resigned from the Board of Directors effective as of June 9, 2024. (2)Mr. Carter served as Executive Chair from January 24, 2023 through December 1, 2023, as Non-Executive Chair of the Board from December 2, 2023 through May 31, 2024, and currently serves as Executive Chair and Interim Chief Executive Officer since June 1, 2024. Prior to his appointment as Executive Chair in January 2023, Mr. Carter served as a member of the Compensation and Audit Committees. (3)Committee chairperson.
Consideration of Director Nominees
Consideration of Director Nominees
Director Qualifications
Director Qualifications When evaluating nominees for election as directors (including all persons recommended by stockholders to become nominees for election as directors), the Nominating Committee takes into account: (i) all factors the Committee considers appropriate, which may include career specialization, relevant technical skills or financial acumen, diversity of viewpoint and industry knowledge; and (ii) the following minimum qualifications: •the highest personal and professional ethics, integrity and values and sound business judgment; •a background that demonstrates significant accomplishment in his or her respective field, with superior credentials and recognition and broad experience at the administrative and/or policy-making level in business, government, education, technology or public interest; •relevant expertise and experience and an ability to offer advice and guidance to our chief executive officer based on such expertise and experience; •independence from any particular constituency and an ability to be able to represent all of our stockholders and be committed to enhancing long-term stockholder value; and •sufficient time available to devote to activities of the Board and to enhance his or her knowledge of our business; The Nominating Committee retains the right to modify these criteria from time to time.
Current Director Qualifications
Current Director Qualifications
Current Director Qualifications
| | Carter | Gupta | Hale | Repo | Stevenson | Wells | | Corporate Governance Experience as a director of another publicly listed company. | | X | X | X | X | X | | Strategic Planning Experience as a senior executive or board member in the development of annual corporate strategic plans, including capital allocation, and mergers, acquisitions, or divestiture decision-making. | X | X | X | X | | X | | Executive Leadership Experience as a CEO/President or senior executive in a complex business. | X | X | X | X | X | X | | Industry Experience in enterprise software, financial services, identity verification, or fraud prevention. | X | X | X | | X | X | | Finance/ Accounting/ Audit Experience in preparing, auditing, analyzing, or evaluating financial statements for a complex business. | | X | X | X | X | X | | Capital Markets Experience in debt and equity markets, corporate finance, investor and analyst relations. | | | X | X | | | | Human Capital Management and Executive Compensation Experience in human resource strategy and planning, leadership management, development, and incentive plans, diversity, equity, and inclusion. | X | X | | X | X | | | Technology Experience as a senior executive in a software company responsible for strategy, product leadership, software development, corporate IT, or cybersecurity. | X | X | X | X | X | X | | Product/ Marketing/ Sales Experience as a CPO, CMO or senior Revenue/Growth/ Customer executive in a complex business. | X | X | | | X | X | | International Experience as a senior executive in a complex business with material operations outside the United States. | X | | | X | | |
Diversity
Diversity Consistent with its proactive evaluation of director performance, skills and attributes, the Board is committed to a policy of inclusiveness and actively seeks out highly qualified diverse candidates (including age, race, gender, sexual orientation, and ethnicity) to include in the pool from which director nominees are chosen. These diversity characteristics are, and will continue to be, a priority for the Nominating and Governance Committee and the Board in our director nomination process because we believe it is important for the Board’s composition to appropriately reflect the diversity of our Company, shareholders, workforce, customers and communities. The composition of our director nominees reflects these ongoing efforts and the importance of differentiating personal characteristics and diversity among our directors.
Stockholder Nominations
Stockholder Nominations The Nominating Committee will consider director candidates recommended by our stockholders of record. The Nominating Committee does not intend to alter the manner in which it evaluates candidates, including the criteria set forth above, based on whether or not a candidate was recommended by a stockholder of record. As we expect that the date of our 2025 Annual Meeting will be more than 30 days before the one year anniversary of our 2024 Annual Meeting, stockholders of record who wish to recommend individuals for consideration by the Nominating Committee to become nominees for election to the Board at an annual meeting of stockholders must do so by delivering a written recommendation and timely notice in accordance with our Bylaws to the Nominating and Corporate Governance Committee at Mitek Systems, Inc., 770 First Avenue, Suite 425, San Diego, California 92101, Attn: Corporate Secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting was first made. Each written recommendation must set forth, among other information: •the name and address of the stockholder of record and any beneficial owner on whose behalf the nomination is being made; •the class, series and number of shares of common stock of the Company, and any convertible securities of the Company, that are beneficially owned by the stockholder of record and any beneficial owner on whose behalf the nomination is being made; •any option, warrant, convertible security, stock appreciation rights, or similar right with an exercise or conversion privilege or settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived from the value of any class or series of shares of the Company, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise, directly or indirectly, owned beneficially by such stockholder of record and any beneficial owner on whose behalf the nomination is being made, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation; •any proxy, agreement, arrangement, understanding, or relationship pursuant to which such stockholder of record and any beneficial owner on whose behalf the nomination is being made has or shares a right to vote any shares of any security of any class or series of the Company; •any short interest in any security of the Company held by such stockholder of record and any beneficial owner on whose behalf the nomination is being made; •the proposed director candidate’s name, age, business address and residential address; •complete biographical information for the proposed director candidate, including the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years; •the class and number of shares of common stock of the Company that are beneficially owned by the proposed director candidate and any convertible securities of the Company that are beneficially owned by the director candidate as of the date of the written recommendation; •a completed and signed questionnaire, representation and agreement from the director candidate, as further described in our Bylaws; and •any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Exchange Act. Director candidate nominations from stockholders must be provided in writing and must include the written consent of each proposed nominee to serve as a director if so elected. Stockholders are advised to review our Bylaws, which contain additional requirements with respect to director nominations. If a proposed director candidate is recommended by a stockholder in accordance with the procedural requirements discussed above and more fully set forth in our Bylaws, the Secretary will provide the foregoing information to the Nominating Committee.
Evaluating Nominees for Director
Evaluating Nominees for Director Our Nominating Committee considers director candidates that are suggested by members of the committee, other members of the Board, members of management, advisors and our stockholders who submit recommendations in accordance with the requirements set forth above. The Nominating Committee may, in the future, also retain a third-party search firm to identify candidates on terms and conditions acceptable to the Nominating Committee, but to date it has not paid a fee to any third party to assist in the process of identifying or evaluating director candidates. The Nominating Committee evaluates all nominees for director under the same approach whether they are recommended by stockholders or other sources. The Nominating Committee reviews candidates for director nominees in the context of the current composition of the Board and committees of the Board, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the Nominating Committee considers the director nominee’s qualifications, diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board, the committees of the Board and the Company, to maintain a balance of knowledge, experience, diversity and capability. In addition, the Nominating Committee seeks candidates with significant experience in the Company’s targeted markets. In the case of incumbent directors whose terms of office are set to expire, the Nominating Committee reviews such directors’ overall service to the Board, the committees of the Board and the Company during their respective terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Nominating Committee will also determine whether the nominee meets the minimum director qualifications set forth above, has at least the same level of education and experience as the Company’s then-current directors, and whether such nominee is independent for Nasdaq purposes, which determination will be based upon applicable Nasdaq listing standards and applicable SEC rules and regulations. Although we do not have a formal diversity policy, when considering diversity in evaluating director nominees, the Nominating Committee focuses on whether the nominees can contribute varied perspectives, skills, experiences and expertise to the Board. The Nominating Committee will evaluate each proposed director’s candidacy, including proposed candidates recommended by security holders and recommend whether the Board should nominate such proposed director candidate for election by our stockholders.
Non-Employee Director Compensation
Non-Employee Director Compensation For the 2023 fiscal year, our non-employee directors were compensated on a retainer-based model. We also reimburse our non-employee directors for their reasonable expenses incurred in attending Board and committee meetings. Members of the Board who are also employees of the Company receive no compensation for their services as a director. Our non-employee directors are also eligible to participate in the Mitek Systems, Inc. Directors Deferral Plan (the “Deferral Plan”) pursuant to which they may make an irrevocable election to defer a portion of their equity pay, subject to rules and minimum and/or maximum deferrals set forth in the Deferral Plan. The following table sets forth summary information concerning compensation paid or accrued for services rendered to us by members of the Board in their capacities as such, for the fiscal year ended September 30, 2023:
Non-Employee Director Compensation
| Name(1) | Fees Earned or Paid in Cash ($)(2) | Stock Awards (3) | All Other Compensation ($) | Total Compensation ($) | | Scott Carter | $15,694 | $— | $— | $15,694 | | Rahul Gupta | $50,000 | $— | $— | $50,000 | | James C. Hale | $50,000 | $— | $— | $50,000 | | Bruce E. Hansen(4) | $70,403 | $— | $— | $70,403 | | Susan J. Repo | $62,500 | $— | $— | $62,500 | | Kimberly S. Stevenson | $67,792 | $— | $— | $67,792 | | Donna C. Wells | $55,000 | $— | $— | $55,000 |
Non-Employee Director Compensation
——————— (1)Scipio Maximus Carnecchia, a former director and our former Chief Executive Officer and a NEO, is not included in this table as he was an employee of the Company and therefore received no compensation for his service as a director. Mr. Carnecchia’s compensation is included in the “Summary Compensation Table” above. (2)Except as noted, this amount reflects an annual retainer of $50,000, which is paid on a quarterly basis. The amount for (a) Mr. Carter is prorated from October 2022 through January 23, 2023 as Mr. Carter served as Executive Chair of the Company for the remainder of fiscal 2023, (b) Mr. Hansen’s compensation includes an additional $20,403 for his role as Chair of the Board for part of fiscal 2023, (c) Ms. Repo’ s compensation contains an additional $12,500 for her role as chair of the Audit Committee for fiscal 2023, (d) Ms. Stevenson’ s compensation contains an additional $7,500 for her role as chair of the Compensation Committee, and an additional $10,292 for her role as Lead Independent Director for part of fiscal 2023, (e) Ms. Wells contains an additional $5,000 for her role as chair of the Nomination and Corporate Governance Committee for fiscal 2023. (3)As of September 30, 2023, our non-employee directors held restricted stock units for the following number of shares of our common stock: Mr. Carter—10,068; Mr. Gupta—10,068; Mr. Hale—82,459; Mr. Hansen—82,459; Ms. Repo—15,541; Ms. Stevenson—20,766; and Ms. Wells—38,152. As of September 30, 2023, Mr. Hale also held stock options to purchase 40,000 shares of our common stock. (4)Mr. Hansen opted not to stand for re-election at our 2023 annual meeting of stockholders (the “2023 Annual Meeting”) and consequently his service on our Board ended at the 2023 Annual Meeting.
Consideration of 2023 Stockholder Advisory Vote
Consideration of 2023 Stockholder Advisory Vote At our 2023 Annual Meeting of stockholders, our stockholders cast an advisory vote on the Company’s executive compensation decisions and policies, as disclosed in the proxy statement issued by the Company in August 2023, pursuant to Item 402 of Regulation S-K (commonly known as the “say-on-pay vote”). Our stockholders approved the compensation of our executive officers, with approximately 62% of the votes were cast in favor of the say-on-pay proposal. Due to delays in the filing of certain quarterly and annual reports with the SEC, our 2023 Annual Meeting was not held until after the end of our 2023 fiscal year. Consequently, we were not able to evaluate the say-on-pay vote results with respect to our 2023 compensation practices. During our 2023 fiscal year, our CEO, CFO, and Chair of the Board routinely meet with our stockholders (representing approximately 36% of our outstanding common stock) to obtain their input and feedback and to the extent questions or concerns were raised regarding the Company’s executive compensation practices these stockholders were offered a meeting with our Compensation Committee Chairperson. Following the say-on-pay vote, two stockholders requested a meeting with our lead independent director who also serves as the Chair of our Compensation Committee and then provided feedback on a variety of topics including the Company’s compensation practices. The specific concerns raised were around the Company’s short-term incentive practices (no material concerns were noted with respect to the long term incentive practices). These stockholders specifically requested the following: additional clarity around how acquired revenue impacts the annual cash incentive plan pay-outs; that performance based measures be based on operating income instead of operating margins; more weight be assigned to the operating income line in determining the annual cash incentive; and clarification on the Board’s ability to modify compensation in cases where financial metrics are met but overall performance issues (such as delayed financial filings) persist. Based on such input, the Compensation Committee decided to retain the general framework and criteria of our executive compensation program for fiscal 2024 but made a number of changes based on such stockholder feedback. This feedback resulted in a number of changes to our cash incentive program for fiscal 2024 including (i) changing the operating margin percentage target metric to operating income dollars target metric; (ii) clarifying that revenue and operating income targets will exclude the impact of in-year acquisitions; (iii) modifying the revenue and operating income mix weighting from 80/20 to 70/30 and (iv) providing the Board with discretion to reduce payouts to executives by up to ten percent in their discretion based upon individual performance. As always, we are mindful of the support our stockholders expressed for our philosophy of linking compensation to our financial, operational and strategic goals, as well as stockholder returns and these changes to our Cash Incentive program were designed to align with that philosophy. The Compensation Committee will continue to review the results of future advisory say on pay votes and will consider stockholder concerns in future determinations regarding the compensation of our NEOs and governance practices. The Compensation Committee intends to proactively request meetings with our 25 largest stockholders (representing approximately 55% of our outstanding common stock) prior to setting our NEO compensation for our 2025 fiscal year.
Named Executive Officers
Named Executive Officers For the fiscal year ended September 30, 2023, the NEOs were: •Scipio Maximus Carnecchia, our former Chief Executive Officer (“CEO”);(1) •Frank Teruel, our former Chief Financial Officer (“CFO”);(2) •Fuad Ahmad, our former Interim Chief Financial Officer;(3) •Scott Carter, our former Executive Chair of the Board (and current Executive Chair of the Board and Interim Chief Executive Officer);(4) •Michael E. Diamond, our Senior Vice President, General Manager —Digital Banking; •Christopher Briggs, our Senior Vice President, Identity; (1) Mr. Carnecchia’s employment was involuntarily terminated by the Board “without cause” (as defined in Mr. Carnecchia’s executive employment agreement) on May 31, 2024. Mr. Carnecchia subsequently provided the Company with a full release of claims as called for in his executive employment agreement and has been paid the severance amounts provided for under the agreement. (2) Mr. Teruel voluntarily resigned his employment as our CFO effective as of January 31, 2023. As his resignation was voluntary, Mr. Teruel was not provided with any severance payment. (3) Mr. Ahmad concluded his contract as Interim CFO as of January 2, 2024, and remained with the Company until June 8, 2024 to ensure a successful transition to David Lyle, the Company’s new CFO. As Mr. Ahmad was a contract employee and he was not eligible for, nor did he receive any severance payment. (4) Mr. Carter voluntarily resigned from his position as Executive Chair on December 1, 2023 but remained as the Chair of the Board until June 2024, at which point he was appointed Interim Chief Executive Officer and Executive Chair of the Board. Mr. Carter intends to transition to the role of non-Executive Chair of the Board once the Company hires a permanent Chief Executive Officer. Mr. Carter did not receive any severance pay in connection with this previous resignation as Executive Chair in December of 2023. In connection with his Interim CEO role, Mr. Carter is not eligible to participate in the Company’s Cash Incentive Program and is not eligible for severance pay.
Process for Establishing Compensation
Process for Establishing Compensation Role of the Compensation Committee and Executive Officers The current members of the Compensation Committee are Ms. Stevenson and Messrs. Gupta and Hale. Ms. Stevenson serves as chairperson of the Compensation Committee. Each of these individuals qualifies as (i) an “independent director” under the requirements of Nasdaq listing rules, (ii) a “non-employee director” under Rule 16b-3 of the Exchange Act and (iii) an “outside director” under Section 162(m) of the Code. The Compensation Committee is responsible for monitoring the performance and compensation of our NEOs, reviewing compensation plans and administering our incentive plans. The Compensation Committee operates under a written charter and is responsible for annually recommending, reviewing and approving (or recommending for the Board to approve) the amount and form of compensation of our CEO and our other executive officers. In so doing, the Compensation Committee considers recommendations from our CEO in determining executive compensation. Specifically, our CEO recommends base salary increases, annual cash incentive opportunities, and equity award levels for executives other than himself and advises the Compensation Committee regarding the compensation program’s ability to attract, retain and motivate executive talent. The Compensation Committee has, and exercises, the ability to materially increase or decrease the compensation amounts recommended by our CEO. Our CEO is also involved in our executive compensation process by providing input on the performance criteria applicable to other executives. Our Compensation Committee regularly meets in executive session, with our CEO not in attendance, where decisions are made regarding his compensation. The Compensation Committee also considers the input of our external compensation consultant. For the 2023 fiscal year, the Compensation Committee selected the consulting firm Frederic W. Cook & Company, Inc. (“F.W. Cook” or the “Compensation Consultant”) as our Compensation Consultant (see “Role of the Compensation Consultant” for additional information on our Compensation Consultant). The Compensation Committee has again engaged F.W. Cook as our compensation consultant for fiscal year 2024. Although the Compensation Committee considers the input of our CEO and Compensation Consultant, it is not bound by such recommendations. The Compensation Committee’s determinations with respect to the compensation of the CEO and other NEOs are submitted to the full Board for final approval. Role of the Compensation Consultant The Compensation Committee has assessed the independence of the Compensation Consultant and determined that no conflict of interest exists under the rules established by the SEC. The Compensation Committee reviews the independence of its advisors annually. In designing compensation programs and determining compensation levels for our NEOs for the 2023 fiscal year, the Compensation Committee retained the services of the Compensation Consultant to formulate a report and make recommendations regarding our compensation programs and executive compensation levels. The Chairperson of the Compensation Committee worked directly with the Compensation Consultant to determine the scope of the work needed to advise the Compensation Committee in its decision-making processes. The Compensation Consultant provided the Compensation Committee with benchmark comparative data for our NEOs with respect to base salaries, target and actual total cash compensation levels, long-term incentive values, and total direct compensation. In making compensation decisions for the 2023 fiscal year, the Compensation Committee compared each element of total direct compensation against a peer group of 14 publicly traded, technology companies with an emphasis on application software companies or well as internet services and infrastructure companies with which the Compensation Committee believes we compete for executive talent. We collectively refer to this group as the “Compensation Peer Group.” The pay data for this group was analyzed by the Compensation Consultant using each company’s recent public filings. This Compensation Peer Group was used, when available, for our NEOs. We generally select Compensation Peer Group companies with broadly similar revenues and 12-month trailing market capitalizations. For the fiscal year 2023, the specific criteria utilized were: (i) annual revenues between $81 million and $307 million; (ii) market capitalizations between $124 million to $1.14 billion; (iii) headquartered in major metropolitan areas (reflecting similar cost of living as the Company); and (iv) with broadly similar equity valuation relative to revenues. The following is a list of the 14 companies comprising our Compensation Peer Group (the “Compensation Peer Group”) for the 2023 fiscal year:
Process for Establishing Compensation
——————— Changes from the prior year Compensation Peer Group include the addition of A10 Holdings, and the elimination of Limelight and Zix due to acquisitions. The Compensation Committee used the peer group data provided by the Compensation Consultant to make an initial determination of the competitiveness of total direct compensation for each executive. Our Compensation Committee makes adjustments, down or up, from such market-based information based on its assessment of contribution and retention risk for each executive. This data is supplemented by reviewing relevant compensation survey data, namely that of AON/Radford’s Technology Benchmark Survey.
Components of Executive Compensation
Components of Executive Compensation The Company’s executive compensation program consists of the following elements: •base salary; •annual cash incentives; •equity-based incentives; •other benefits; and •severance and change of control plans. Base Salary We provide a base salary to our NEOs to compensate them for services rendered on a day-to-day basis during the fiscal year. Base salaries will typically reflect the experience, skills, knowledge and responsibilities of each named executive officer in keeping with competitive market practice. The initial base salaries of our executive officers are established through arm’s length negotiation at the time the individual executive officer is hired, taking into account his or her qualifications, experience and prior salary level. Thereafter, salary reviews are typically performed annually in conjunction with performance reviews. As necessary or appropriate, the Compensation Committee reviews and recommends adjustments to the base salaries of our executive officers to the Board. The Compensation Committee typically targets NEOs’ salaries at the median level of salaries of executives with similar roles at comparable companies, however other factors may lead to salaries that are higher or lower than the median. The Compensation Committee believes that the median for base salaries is generally the minimum cash compensation level that would allow us to attract and retain talented executives. For fiscal year 2023, Messrs. Carnecchia, Diamond and Briggs received increases of approximately 5.6%, 11.4% and 13.6%, respectively, of their respective base salaries consistent with market trends and practices. The following table summarizes the base salaries of our NEOs for the fiscal years ending September 30, 2022 and September 30, 2023:
Components of Executive Compensation
(1) Mr. Carnecchia received a 5.6% base salary increase reflective of the Company’s pay philosophy of setting total compensation levels near the mid-point of the Compensation Peer Group and survey market data range. Mr. Carnecchia’s employment was involuntarily terminated by the Board “without cause” (as defined in Mr. Carnecchia’s executive employment agreement) on May 31, 2024. (2) Reflects the annualized base salary of Mr. Teruel. Mr. Teruel resigned effective January 31, 2023, and accordingly, the cash salary actually paid to him for services during our fiscal year ended September 30, 2023, was less than the annualized base salary reflected herein. (3) Mr. Ahmad, who served as our Interim Chief Financial Officer, was paid an hourly rate as an outside consultant and was not eligible to receive any bonus, cash incentive, equity grants, or severance pay. Actual fees paid for Mr. Ahmad’s services for the period of January 12, 2023, through September 30, 2023, were $1,156,383. Mr. Ahmad concluded his contract as Interim CFO on January 2, 2024 following the appointment of our new Chief Financial Officer but continued to consultant to the Company until June 8, 2024. As Mr. Ahmad was a contract employee he was not eligible for, and did not receive, any severance pay. (4) Mr. Carter served as Executive Chair of the Board from January 24, 2023 through December 1, 2023 and was paid a monthly salary of $65,000. The cash salary actually paid to him for services during our fiscal year ended September 30, 2023 was less than the annualized base salary reflected herein. Annual Cash Incentive Our annual cash incentive plan is one of the key components of the “at-risk” compensation we offer to our executives. We utilize our annual cash incentive plan to reward performance achievements with a time horizon of one year or less. Our plan is intended to motivate and reward our executives for their contributions toward meeting longer-term corporate financial and strategic goals aligned with the interests of our stockholders. In developing our annual cash incentive plan, the Compensation Committee sets targets which it believes reflect the business opportunity within our industry and are consistent with achieving our short and long-term goals. The target achievement levels are based on the Board-approved operating plan, which reflects the Company’s target performance for the upcoming fiscal year and are calibrated such that they are challenging enough to require strong and consistent efforts by the executives in order to be achieved. In March 2023, based upon the recommendation of the Compensation Committee, the Board approved the Company’s executive annual cash incentive program for the fiscal year ended September 30, 2023 (the “2023 Annual Cash Incentive Plan”). Pursuant to the terms of the 2023 Annual Cash Incentive Plan, the Company’s executives were eligible to receive annual cash incentives based upon the achievement of certain corporate goals during the 2023 fiscal year. The Compensation Committee reviewed each executive’s target as a percentage of their base salary. As part of this review, the target for our CEO was set at 120% of his annualized salary and the targets for our Senior Vice President, General Manager—Digital Banking and Senior Vice President, Identity Product Marketing remained at 50% of their respective annualized salaries. For participants who are director-level and above, 80% of the target annual cash incentive is based upon achievement of the revenue component of the 2023 Annual Cash Incentive Plan (with either (i) the full 80% based upon the primary business area or (ii) 65% and 15% based upon the primary and secondary business areas, respectively) and the remaining 20% is based upon achievement of the non-GAAP operating income margin component of the 2023 Annual Cash Incentive Plan, subject to additional limitations, as set forth in the 2023 Annual Cash Incentive Plan. The maximum annual cash incentive payable to each executive under the 2023 Annual Cash Incentive Plan was 200% of their respective targets. Following the end of the 2023 fiscal year, the Compensation Committee assessed the Company’s performance against the established corporate performance components set forth in the Company’s 2023 Annual Cash Incentive Plan (as described above). The assessment showed that 94% of the target revenue had been achieved by the identity business area, 108% of the target revenue had been achieved by the deposits business area, and 82% of the target non-GAAP operating margin had been achieved. As the non-GAAP operating margin achievement was below the floor set by the Compensation Committee, NEOs were not awarded any cash incentive based on this component (which accounted for 20% of the target annual cash incentive for NEOs under the 2023 Annual Cash Incentive Plan). Based on the revenue achievement and excluding the non-GAAP operating margin component, pursuant to the formula provided for in the 2023 Annual Cash Incentive Plan, Mr. Diamond achieved an incentive plan payout of 112% and all other NEOs achieved an incentive plan payout of 79%. The Compensation Committee awarded the following annual cash incentive amounts which were paid in the fourth calendar quarter of 2023:
Components of Executive Compensation
| Named Executive Officer | 2023 Annual Cash Incentive Target (as a percentage of base salary) | 2023 Annual Cash Incentive Target (base * target %) (1) | 2023 Actual Annual Cash Incentive | | Scipio Maximus Carnecchia (2) | 120% | $570,000 | $449,531 | | Frank Teruel (3) | N/A | N/A | N/A | | Fuad Ahmad (4) | N/A | N/A | N/A | | Scott Carter (5) | N/A | N/A | N/A | | Michael E. Diamond | 50% | 175,000 | 195,300 | | Christopher Briggs | 50% | 162,500 | 128,213 |
Components of Executive Compensation
(1)Reflects the annualized 2023 Annual Cash Incentive Plan target of the named executive officer. (2)Mr. Carnecchia received a 20% increase in target cash incentive reflective of the Company’s pay philosophy of setting total compensation levels near the mid-point of the peer group and survey market data range. (3)Mr. Teruel resigned as our CFO effective as of January 31, 2023 and therefore was not eligible to receive a payment under the 2023 Annual Cash Incentive Plan. (4)Mr. Ahmad, an outside consultant, served as an interim CFO until his contract concluded on January 2, 2024 when we hired our permanent CFO (though Mr. Ahmad continued to consult for the Company until June 8 2024 to ensure a successful transition). Mr. Ahmad was paid on an hourly basis and was not eligible to participate, nor included, in the 2023 Annual Cash Incentive Plan. (5)Mr. Carter’s compensation for serving as the Executive Chair of the Board during fiscal 2023 was set in the form of a base salary and an equity grant and Mr. Carter was not eligible for nor included in the 2023 Annual Cash Incentive Plan. Equity-Based Incentives Our long-term equity incentives are another key component of our “at-risk” compensation and are intended to reward longer-term performance and further align the interests of our executive officers with those of our stockholders. We believe that long-term performance is achieved through an ownership culture that rewards performance by our executive officers through the use of equity incentives. The Company’s current equity-based incentive practice is to grant a combination of time-based RSUs and performance-based RSUs (“PSUs”) to its executives with 50% of the grant value designated as RSUs and 50% of the grant value designated as PSUs. Equity incentives are granted to our executive officers under the Mitek Systems, Inc. Amended and Restated 2020 Incentive Plan (the “2020 Plan”). RSUs granted under the 2020 Plan may be issued in consideration of the recipient’s past or future services performed for the Company. RSUs generally vest over a period of four years from the date of grant and PSU’s generally vest in equal annual installments over a period of three years from the date of grant (each such year, a “Performance Period”) if the Company meets annual performance criteria for the applicable Performance Period. The annual performance criteria for each annual Performance Period is tied to whether the percentage increase in the value of our common stock meets or exceeds the percentage increase in the value of the Russell 2000 Index during such Performance Period. In order to make a determination as to whether the annual performance criteria is met, the Company reviews a hypothetical investment in both our common stock and the Russell 2000 Index with a purchase price equal to the average closing price of each for the 20-trading days immediately preceding the start of the applicable Performance Period. At the end of the applicable Performance Period, the value of the hypothetical investment is determined by assuming the sale of each based on the average closing price of each from the immediately preceding 20-trading days. The percentage change is determined by comparing the increase in value to the starting investment. Additionally, a portion of the PSUs may vest during a later Performance Period if the cumulative percentage increase in value of our common stock measured over the current and all previous Performance Periods exceeds the cumulative percentage increase in value of the Russell 2000 Index. Typically, the size and form of the initial equity awards for our executive officers are established through arm’s length negotiation at the time the individual executive officer is hired. In order to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value, the Compensation Committee considers, among other things, the prospective role and responsibility, the competitive market for similar positions, and the amount of equity-based compensation which may have been forfeited by the executive officer at his or her former employer. Thereafter, the Compensation Committee reviews the equity holdings of our executive officers annually and recommends to the Board the grant of equity awards. The following table sets forth the number of equity awards granted during the fiscal year ended September 30, 2023:
Components of Executive Compensation
| Named Executive Officer | Restricted Stock Units(1) | Performance-based Restricted Stock Units(2) | | Scipio Maximus Carnecchia | 97,752 | 130,333 | | Frank Teruel | 14,663 | 19,550 | | Fuad Ahmad (3) | — | — | | Scott Carter (4) | 101,523 | — | | Michael E. Diamond | 24,438 | 32,584 | | Christopher Briggs | 24,438 | 32,584 |
Executive Compensation for the 2024 Fiscal Year
Executive Compensation for the 2024 Fiscal Year Reflective of our compensation philosophy and retention strategy, we routinely enter into terms of employment and separation agreements with key executives that contain the following elements: •Agreements do not contain multi-year guarantee provisions for salary increases, non-performance-based bonuses, or equity compensation •Agreements provide for change-in-control payments only in the event of loss of job or substantial diminution of •job duties •Agreements do not provide for change-in-control cash payments that exceed 3 times base salary plus target/average/most recent bonus (or that include equity gains or other pay elements) •Agreements do not provide for an excise tax gross-up or modified gross-up •Agreements do not contain broad change in control definitions which could result in payments to executives without an actual change in control occurring •Severance agreements do not provide for a "good reason" severance definition that is triggered by company bankruptcy or other actions indicative of performance failures Components of Executive Compensation Base Salary. Based on input from the Compensation Consultant relative to competitive market levels, the Compensation Committee recommended and the Board approved increases in the base salaries for some of our NEOs for the 2024 fiscal year. Messrs. Diamond and Briggs received increases of 7.1% and 3.1%, respectively. The base salaries of Messrs. Carnecchia, Ahmad and Carter remained unchanged from their 2023 levels as this component of compensation was deemed appropriate. The following table summarizes the base salaries of our NEOs for the fiscal years ending September 30, 2023 and 2024:
Executive Compensation for the 2024 Fiscal Year
——————— (1) These base salaries were effective beginning January 1, 2024. (2) Mr. Lyle’s employment with the Company began in January 2024. The cash salary actually paid to him for services during our fiscal year ending September 30, 2024 will be less than the annualized salary reflected herein. (3) Mr. Ahmad, an outside consultant, served as our Interim CFO on a contract basis from January 12, 2023, through January 2, 2024 and advisor through June 8, 2024. Amounts for 2024 will be based upon agreed contract terms previously disclosed. The actual consulting fees paid for Mr. Ahmad’s services during fiscal 2023 was $1,156,383. (4) Mr. Carter served as Executive Chair of the Board from January 24, 2023 through December 1, 2023 and was paid a monthly salary of $65,000. Mr. Carter began serving as Interim Chief Executive Officer and Executive Chair of the Board on June 1, 2024 and is being paid a monthly salary of $85,000. The cash salary actually paid to Mr. Carter in fiscal 2023 was less than, and in fiscal 2024 will be less than, the annualized base salary reflected herein. Annual Cash Incentive. In March 2024, the Board, based upon the recommendation of the Compensation Committee, approved the Company’s annual cash incentive program for the fiscal year ending September 30, 2024 (the “2024 Annual Cash Incentive Plan”). Pursuant to the terms of the 2024 Annual Cash Incentive Plan, the Company’s executive officers will be eligible to receive cash incentives based upon the achievement of certain corporate and individual performance goals during the 2024 fiscal year. These incentives are designed to attract, motivate, retain and reward the Company’s executives. Under the 2024 Annual Cash Incentive Plan, our Chief Executive Officer has a bonus target equal to 120% of his annualized salary (unchanged from our 2023 Annual Cash Incentive Plan); our permanent Chief Financial Officer hired in January of 2024 has a bonus target equal to 65% of his annualized salary; and our Senior Vice President, General Manager—Digital Banking and Senior Vice President, Identity Product Marketing have bonus targets equal to 50% of their annualized salaries (also unchanged from our 2023 Annual Cash Incentive Plan). Under the 2024 Annual Cash Incentive Plan, achievement is tied to two financial metrics, revenue and non-GAAP operating income calculated with respect to the Company’s key business areas, deposits, core identity and ID R&D, Inc., a direct wholly owned subsidiary of the Company ("ID R&D"). Participants in the plan are assigned both a primary business area target and/or a total company target for purposes of the revenue component of the 2024 Annual Cash Incentive Plan. For participants who are director-level and above, 70% of the target incentive is based upon achievement of the revenue component(s) of the 2024 Annual Cash Incentive Plan and the remaining 30% is based upon achievement of the non-GAAP operating income component of the 2024 Annual Cash Incentive Plan (in both instances excluding the impact of any in-year acquisitions). The maximum incentive payable to each executive under the 2024 Annual Cash Incentive Plan is 200% of their respective targets. Under the 2024 Annual Cash Incentive Plan, the Board maintains the sole discretion with respect to the Chief Executive Officer and his direct reports to modify individual achievement by up to 10% of a participant’s target incentive amount based upon individual performance and contribution. Equity-Based Incentives. The Board, based upon the recommendation of the Compensation Committee, approved the following grants of time-based RSUs and PSUs for the fiscal year ending September 30, 2024:
Executive Compensation for the 2024 Fiscal Year
| Named Executive Officer | Restricted Stock Units (1) | Performance-based Restricted Stock Units (2) | | Scipio Maximus Carnecchia (3) | 88,106 | 117,181 | | David Lyle (4) | 58,185 | 77,386 | | Scott Carter (5) | 40,355 | 40,355 | | Michael E. Diamond (3) | 35,243 | 46,873 | | Christopher Briggs (3) | 28,635 | 38,085 |
Executive Compensation for the 2024 Fiscal Year
(1)The RSUs will vest in equal installments over a period of four years from the date of grant. (2)The PSUs vest in equal annual installments over a period of three years from the date of grant should certain performance metrics be achieved. The PSUs will vest an additional 33% based on over-achievement of the aforementioned performance metrics. (3)This grant was approved by the Board on December 1, 2023. (4)This grant was approved by the Board on January 2, 2024. (5)This grant was approved by the Board on June 4, 2024. The PSUs vest on the one-year anniversary of the date of grant should certain performance metrics be achieved subject to Mr. Carter’s continuous service through such date; provided that if prior to the one-year anniversary of the date of grant (i) the Company appoints a new permanent Chief Executive Officer, (ii) Mr. Carter is removed by the Company as Interim Chief Executive Officer for any reason other than by the Company for cause or (iii) Mr. Carter resigns for “good reason” (as defined in his offer letter) (each of (i) through (iii) an “Acceleration Event”), then any then-unvested and outstanding PSUs shall remain outstanding and eligible to vest upon satisfaction of the applicable performance metrics, irrespective of Mr. Carter’s continuous service as an employee of the Company or as a member of the Board. The RSUs will vest in full on the one-year anniversary of the date of grant, subject to Mr. Carter’s continuous service through such date; provided that if an Acceleration Event occurs, then any then-unvested and outstanding RSUs shall vest in full on the date of such Acceleration Event.
Summary Compensation Table
Summary Compensation Table The following table sets forth certain information regarding the compensation earned by each of our NEOs during the fiscal years ended September 30, 2023, 2022 and 2021:
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total Compensation ($) | | Scipio Maximus Carnecchia | 2023 | 468,750 | — | 2,295,513 | — | 449,531 | 863 | 3,214,657 | | Former Chief | 2022 | 450,000 | — | 4,701,320 | — | 459,000 | 720 | 5,611,040 | | Executive Officer | 2021 | 450,000 | — | 2,283,961 | — | 724,500 | 2,580 | 3,461,041 | | Frank Teruel | 2023 | 120,000(4) | — | 344,329 | — | | 310 | 464,639 | | Former Chief Financial Officer | 2022 | 360,000 | — | 193,946 | | 183,600 | 1,470 | 739,016 | | | 2021 | 73,636 | 60,915(5) | 1,200,012 | — | — | 231 | 1,334,794 | | Fuad Ahmad | 2023 | 1,156,383(6) | — | — | — | — | — | 1,156,383 | | Former Interim Chief Financial Officer | | | | | | | | | | Scott Carter | 2023 | 536,250 | — | 1,000,002 | — | — | 16,247(7) | 1,552,499 | | Interim Chief Executive Officer and Executive Chair of the Board | | | | | | | | | | Michael E. Diamond | 2023 | 341,037 | — | 573,886 | — | 195,326 | 863 | 1,111,112 | | Senior Vice President, General Manager — Digital Banking | 2022 | 311,862 | — | 822,742 | — | 169,641 | 1,590 | 1,305,835 | | | 2021 | 302,750 | — | 399,698 | — | 173,316 | 1,080 | 876,844 | | Christopher Briggs | 2023 | 324,880 | — | 573,886 | — | 128,156 | 1,613 | 1,028,535 | | Senior Vice President, Identity Product Marketing | | | | | | | | |
Summary Compensation Table
(1)The amounts shown under the “Stock Awards” column and the “Option Awards” column represent the aggregate grant date fair value of RSUs (including certain Senior Executive Performance RSUs) and option awards, respectively, granted to each NEO in the year indicated, computed in accordance with FASB ASC Topic 718, Compensation—Stock Compensation. A discussion of the assumptions used in calculating the grant date fair value is set forth in Note 7 to our financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on March 19, 2024. As of November 2023, the performance period for our Senior Executive Performance RSUs ended and the Company’s stock performance during the performance period resulted in the partial vesting of the Senior Executive Performance RSUs. (2)The amounts shown under the Non-Equity Incentive Plan Compensation column represent annual cash bonuses earned pursuant to the Company’s annual cash incentive plans that were in effect for the applicable year. (3)Represents group term life insurance and long-term disability premiums and wellness benefits paid on behalf of our NEOs in the fiscal years ended September 30, 2023, 2022, and 2021, unless otherwise noted. (4)Represents a discretionary bonus of $60,915 with respect to Mr. Teruel’s service to the Company during the 2021 fiscal year. Mr. Teruel joined the Company during the 2021 fiscal year, and thus was not a participant in the Company’s annual cash incentive program for the fiscal year ended September 30, 2021 (the “2021 Annual Cash Incentive Plan”), but was awarded this discretionary bonus by the Board, based on recommendations of the Compensation Committee, consistent with the targets and criteria set forth in the 2021 Annual Cash Incentive Plan, pro-rated to reflect the portion of the year during which Mr. Teruel served in his position. (5)Represents the portion of Mr. Teruel’s base salary earned during the portion of the 2023 fiscal year prior to his resignation from the Company effective as of January 31, 2023. (6)Represents fees paid for Mr. Ahmad’s services as Interim Chief Financial Officer from January 12, 2023, through September 30, 2023. (7)Includes $15,694 of cash compensation for Mr. Carter’s services as a member of the Board from October 1, 2022 until January 24, 2023.
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table sets forth information regarding grants of plan-based awards to each of our NEOs during the fiscal year ended September 30, 2023:
Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2)(3) | | | All Other Stock Awards: Number of Shares of Stock or Units (3) | Grant Date Fair Value of Stock and Option Awards (4) | | | Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | | | | Scipio Maximus Carnecchia | 11/30/2022 | — | — | — | 48,876 | 97,752 | 130,333 | 97,752 | $2,295,513 | | | 3/15/2023 | 102,600 | 570,000 | 1,140,000 | — | — | — | — | — | | Frank Teruel(5) | 11/30/2022 | — | — | — | 7,332 | 14,663 | 19,550 | 14,663 | $344,329 | | Fuad Ahmad(6) | — | — | — | — | — | — | — | — | $— | | Scott Carter | 1/24/2023 | — | — | — | — | — | — | 101,523 | $1,000,002 | | Michael E. Diamond | 11/30/2022 | — | — | — | 12,219 | 24,438 | 32,584 | 24,438 | $573,886 | | | 3/15/2023 | 31,500 | 175,000 | 350,000 | — | — | — | — | — | | Christopher Briggs | 11/30/2022 | — | — | — | 12,219 | 24,438 | 32,584 | 24,438 | $573,886 | | | 3/15/2023 | 29,250 | 162,500 | 325,000 | — | — | — | — | — |
Grants of Plan-Based Awards
——————— (1)These NEOs, with the exception of Messrs. Carter and Ahmad, were participants in the 2023 Cash Incentive Plan and were eligible to receive cash bonuses based upon the achievement of certain corporate performance goals as described below. (2)This column sets forth the number of shares of common stock underlying the PSUs that were granted to the NEOs. If the NEOs do not satisfy the performance-based vesting conditions with respect to such PSU awards, such awards will not vest, and the NEOs will not receive any shares of Common Stock with respect to such awards. Once the performance-based vesting condition is achieved and the time-based vesting periods are complete, the full amount of the PSUs will become vested and payable to the NEOs. See section titled “Equity-Based Incentives” and footnote (3) below for further information. (3)RSUs and PSUs were granted to Messrs. Carnecchia, Teruel, Diamond, and Briggs on November 30, 2022. 50% of the grant value was designated as RSUs and 50% of the grant value designated as PSUs. RSUs and PSUs granted to Mr. Teruel were valued at $150,000 and $199,995, respectively. Mr. Teruel resigned as our CFO effective as of January 31, 2023 and none of these RSUs or PSUs vested. The RSUs will vest 25% of the shares over four years on each one-year anniversary of the respective date of grant. The PSUs will vest in equal annual installments over a period of three years from the respective date of grant should certain performance metrics be achieved during the applicable Performance Period. The performance metrics with respect to the vesting of the PSUs are tied to the percentage increase in the value of our common stock as compared to the percentage increase in the value of the Russell 2000 Index during the applicable Performance Period. In order to make a determination as to whether the annual performance criteria is met, the Company reviews a hypothetical investment in both our common stock and the Russell 2000 Index with a purchase price equal to the average closing price of each for the 20-trading days immediately preceding the start of the applicable Performance Period. At the end of the applicable Performance Period, the value of the hypothetical investment is determined by assuming the sale of each based on the average closing price of each from the immediately preceding 20-trading days. The percentage change is determined by comparing the increase in value to the starting investment. To the extent that our common stock performance is less than equal to, but at least 85% of, the performance of the Russell 2000 Index, a pro-rata portion of the shares will be vested. To the extent that our common stock performance is greater than 100% of the performance of the Russell 2000 Index, a pro-rata portion of additional shares will vest. Additionally, a portion of the PSUs may vest during a later Performance Period if the cumulative percentage increase in value of our common stock measured over the current and all previous Performance Periods exceeds the cumulative percentage increase in value of the Russell 2000 Index. RSUs were also granted to Mr. Carter on January 24, 2023 in connection with his prior service as Executive Chair. The RSUs granted to Mr. Carter will vest 50% of the shares over two years on each one-year anniversary of the date of grant. (4)The amounts disclosed in the “Grant Date Fair Value of Stock and Option Awards” column are equal to the aggregate grant date fair value of each RSU and PSU award computed in accordance with ASC Topic 718. A discussion of the assumptions used in calculating the grant date fair value is set forth in Note 7 to our financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on March 19, 2024. (5)Mr. Teruel resigned as our CFO effective as of January 31, 2023 and therefore was not eligible to receive a bonus under the 2023 Cash Incentive Plan. (6)As an outside consultant serving as our Interim Chief Financial Officer on a contract basis, Mr. Ahmad was not eligible to participate in the 2023 Cash Incentive Plan or Equity Plan.
Narrative Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table
Narrative Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table For a narrative discussion of the Summary Compensation Table and the Grants of Plan-Based Awards table, see the footnotes to the tables as well as the Compensation Discussion and Analysis of this Proxy Statement. In addition, below is a description of the material compensation-related terms of all employment arrangements in effect during the fiscal year ended September 30, 2023 with our NEOs, including annual base salaries during the fiscal year ended September 30, 2023 as well as their current annual base salaries. For a description of the payments and benefits that would be provided to our NEOs in connection with a termination of their employment or a change of control, see the section below entitled “Potential Payments Upon Termination or Change of Control.”
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth the outstanding equity awards held by our NEOs as of September 30, 2023:
Outstanding Equity Awards at Fiscal Year-End
| Outstanding Equity Awards at Fiscal Year-End | | | | | | | | | | Option Awards | | | | | Stock Awards | | | Name and Principal Position | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price ($) | Option Expiration Date(1) | Number of Shares or Units of Stock Not Yet Vested | Market Value of Shares or Units of Stock That Have Not Vested (2) | | Scipio Maximus Carnecchia | 90,393(3) | — | — | 9.50 | 11/6/2028 | — | — | | | 77,855(4) | 3,385 | — | 9.50 | 11/6/2028 | — | — | | | —(5) | — | 800,000 | 9.50 | 11/6/2028 | — | — | | | — | — | — | — | — | 11,843(6) | 126,957 | | | — | — | — | — | — | 27,503(7) | 294,832 | | | — | — | — | — | — | 42,230(8) | 452,706 | | | — | — | — | — | — | 56,308(9) | 603,622 | | | — | — | — | — | — | 88,497(10) | 948,688 | | | — | — | — | — | — | 78,664(11) | 843,278 | | | — | — | — | — | — | 97,752(12) | 1,047,901 | | | — | — | — | — | — | 130,333(13) | 1,397,170 | | Frank Teruel | — | — | — | — | — | —(14) | — | | Fuad Ahmad | — | — | — | — | — | —(14) | — | | Scott Carter | — | — | — | — | — | 101,523(15) | 1,088,327 | | Michael E. Diamond | 8,216(19) | — | — | 8.60 | 11/15/2027 | — | — | | | 60,626(3) | — | — | 9.50 | 11/6/2028 | — | — | | | — | — | — | — | — | 9,283(16) | 99,514 | | | — | — | — | — | — | 7,391(8) | 79,232 | | | — | — | — | — | — | 9,855(9) | 105,646 | | | — | — | — | — | — | 15,487(10) | 166,021 | | | — | — | — | — | — | 13,766(11) | 147,572 | | | — | — | — | — | — | 24,438(12) | 261,975 | | | — | — | — | — | — | 32,584(13) | 349,300 | | Christopher Briggs | — | — | — | — | — | 22,107(17) | 236,987 | | | — | — | — | — | — | 34,386(18) | 368,618 | | | — | — | — | — | — | 24,438(12) | 261,975 | | | — | — | — | — | — | 32,584(13) | 349,300 |
Outstanding Equity Awards at Fiscal Year-End
——————— (1)The option awards expire 10 years from the date of grant, and may be subject to earlier expiration in connection with a termination of employment. Mr. Carnecchia’s options will expire on September 30, 2025 if not exercised prior to that date. (2)The closing price of our common stock on the Nasdaq Capital Market as of September 29, 2023 was $10.72 per share. (3)The shares subject to the option award vested over a period of four years from November 6, 2018, the date of grant, with 25% of the shares subject to the award having vested on the first anniversary of the date of grant and the remaining shares subject to such option vesting in equal monthly installments thereafter, and were fully vested on November 6, 2022. (4)The shares subject to the option award vested over a period of five years from November 6, 2018, the date of grant, with 25% of the shares subject to the award having vested on the first anniversary of the date of grant and the remaining shares subject to such option vesting in equal monthly installments thereafter, and were fully vested on November 6, 2023. (5)The shares subject to the performance equity award vested upon the closing market price of the Company’s common stock achieving certain predetermined levels and Mr. Carnecchia’s serving as the CEO of the Company for at least three years. (6)The shares subject to the RSU award vest over a period of five years from November 6, 2018, the date of grant, with 25% of the shares subject to the award vesting on the second anniversary of the date of grant and thereafter in equal annual installments, and will be fully vested on November 6, 2023. (7)The shares subject to the PSU award vest over a period of four years from March 20, 2020, the date of grant, with 33.33% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments on the second and third anniversaries of the date of grant. The shares are also subject to an additional one-year vesting period and will be fully vested on March 20, 2024, subject to the achievement of the annual performance criteria. (8)The shares subject to the RSU award vest over a period of four years from November 27, 2020, the date of grant, with 25% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal installments, and will be fully vested on November 27, 2024. (9)The shares subject to the PSU award vested over a period of three years from November 27, 2020, the date of grant, with 33.33% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments, and were fully vested as of November 27, 2023. (10)The shares subject to the RSU award vest over a period of four years from November 26, 2021, the date of grant, with 25% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments, and will be fully vested on November 26, 2025. (11)The shares subject to the PSU award vest over a period of three years from November 26, 2021, the date of grant, with 33.33% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments, and will be fully vested on November 26, 2024, subject to the achievement of the annual performance criteria. (12)The shares subject to the RSU award vest over a period of four years from November 30, 2022, the date of grant, with 25% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal installments, and will be fully vested on November 30, 2026. (13)The shares subject to the PSU award vest over a period of three years from November 30, 2022, the date of grant, with 33.33% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments, and will be fully vested on November 30, 2025, subject to the achievement of the annual performance criteria. (14)Mr. Ahmad and Mr. Teruel had no equity awards outstanding at September 30, 2023. (15)The shares subject to the RSU award vest over a period of two years from January 24, 2023, the date of grant, with 50% of the shares subject to the award vesting on the first and second anniversaries of the date of grant and will be fully vested on January 24, 2025. (16)The shares subject to the RSU award vested as follows: 37.5% on the one-year anniversary of the date of grant of March 20, 2020, 12.5% on November 14, 2021, and 25% on each of November 14, 2022 and 2023. (17)The shares subject to the RSU award vest over a period of four years from May 16, 2022, the date of grant, with 25% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments, and will be fully vested on May 16, 2026. (18)The shares subject to the PSU award vest over a period of three years from May 16, 2022, the date of grant, with 33.33% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal annual installments, and will be fully vested on May 16, 2025, subject to the achievement of the annual performance criteria. (19)The shares subject to the option award vested over a period of four years from November 15, 2017, the date of grant, with 25% of the shares subject to the award vesting on the first anniversary of the date of grant and thereafter in equal monthly installments, and were fully vested on November 15, 2021.
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table sets forth information regarding exercise of option awards and vesting of shares underlying RSUs for our NEOs for the fiscal year ended September 30, 2023:
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name and Principal Position | Number of Shares Acquired on Exercise | Value Realized on Exercise(1) | Number of Shares Acquired on Vesting(2) | Value Realized on Vesting(3) | | Scipio Maximus Carnecchia | — | $— | 74,298 | $809,469 | | Scott Carter | — | — | — | — | | Frank Teruel | — | — | 1,217 | 13,034 | | Fuad Ahmad | — | — | — | — | | Michael E. Diamond | — | — | 26,034 | 291,107 | | Christopher Briggs | — | — | 12,281 | 111,021 |
Option Exercises and Stock Vested
——————— (1)The value realized equals the number of shares acquired on exercise multiplied by the difference between the per share closing price of the Company’s common stock on the date of exercise and the per share exercise price of the option. (2)Amounts include shares tendered to us for payment of payroll tax obligations. (3)The value realized equals the number of shares vested multiplied by the per share closing price of the Company’s common stock on the date of vesting.
Pension Benefits, Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation
Pension Benefits, Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation No pension benefits were paid to any of our NEOs during the fiscal year ended September 30, 2023. We do not currently sponsor any non-qualified defined contribution plans or non-qualified deferred compensation plans.
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control Scipio Maximus Carnecchia On November 6, 2018, we entered into an Executive Employment Agreement with Scipio Maximus Carnecchia ( the “Carnecchia Employment Agreement”). Under the terms of the Carnecchia Employment Agreement, if Mr. Carnecchia’s employment with the Company was terminated by the Company without “cause” or by Mr. Carnecchia for “good reason” (each as defined in the Carnecchia Employment Agreement), in each case, other than in connection with a Change of Control, then as long as Mr. Carnecchia signed a release of any claims against the Company, he was entitled to the following severance benefits: (i) a lump-sum cash amount equal to his earned but unpaid salary as of his termination date; (ii) a lump-sum cash amount equal to 100% of his base salary as of his termination date; (iii) a lump-sum cash amount equal to the value of twelve (12) months of COBRA continuation coverage; (iv) all equity awards granted to him were treated as set forth in the applicable award agreements and plan documents to which such equity awards are subject; and (v) a lump-sum pro-rated amount of his target bonus as of his termination date. Pursuant to the Carnecchia Employment Agreement, if Mr. Carnecchia’s employment with the Company was terminated without “cause” or for “good reason” at any time two months prior to or within 24 months after a Change of Control, then as long as Mr. Carnecchia signed a release of any claims against the Company, he was entitled to the following severance benefits: (i) a lump-sum cash amount equal to his earned but unpaid salary as of his termination date; (ii) a lump-sum cash amount equal to 200% of his base salary as of his termination date; (iii) a lump-sum cash amount equal to the value of twenty-four (24) months of COBRA continuation coverage; (iv) (A) all non-performance equity awards granted to him vested and became immediately exercisable, (B) (1) any time vesting requirement of any performance equity awards were deemed to be satisfied and (2) the share price for determining whether the performance vesting requirement of any performance equity awards had been satisfied was the per share price payable to the stockholders of the Company in connection with the Change of Control, and (C) any restrictions of any kind imposed by the Company or any Company equity award plan or equity award agreement that related to any equity securities or equity awards held by Mr. Carnecchia would lapse; and (v) a lump-sum pro-rated amount of his target bonus as of his termination date. The timing of severance payments and benefits under the Carnecchia Employment Agreement may be deferred to avoid incurring additional taxes and penalties pursuant to Section 409A. Mr. Carnecchia was terminated as Chief Executive Officer by the Board of Directors without cause (as defined in Mr. Carnecchia’s employment agreement) effective as of May 31, 2024. Mr. Carnecchia provided the release of liability required by the Carnecchia Employment Agreement and was paid a severance per the terms of the agreement and this agreement is therefore no longer in effect. Frank Teruel On May 10, 2021, we entered into an Executive Severance and Change of Control Plan with Frank Teruel, our Chief Financial Officer (the “Teruel Severance Plan”). Under the terms of the Teruel Severance Plan, if we terminated Mr. Teruel’s employment involuntarily without Cause (as defined below) or if Mr. Teruel terminated his employment for Good Reason (as defined below), Mr. Teruel would have been entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 50% of Mr. Teruel’s annual base salary then in effect; and (iii) a lump-sum cash amount equal to six months of premium payments for continuation coverage under the Company’s health plans for Mr. Teruel and his dependents. In addition, the Teruel Severance Plan provides that in the event that during the two month period prior to the consummation of a Change of Control (as defined below) or the 12 month period following the consummation of a Change of Control, the Company involuntarily terminated Mr. Teruel’s employment without Cause or if Mr. Teruel terminated his employment with the Company for Good Reason, Mr. Teruel would have been entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 50% of Mr. Teruel’s annual base salary then in effect; (iii) a lump-sum cash amount equal to six months of premium payments for continuation coverage under the Company’s health plans for Mr. Teruel and his dependents; and (iv) accelerated vesting of 100% of all outstanding equity awards then held by Mr. Teruel. The timing of severance payments and benefits under the Teruel Severance Plan could have been deferred to avoid incurring additional taxes and penalties pursuant to Section 409A. Mr. Teruel voluntarily resigned as our Chief Financial Officer effective as of January 31, 2023 and was not entitled to nor paid any severance. Consequently, this agreement is therefore no longer in effect. Fuad Ahmad As Mr. Ahmad was a contractor and not an employee of the Company he did not have an executive employment agreement and was not entitled to nor paid any severance payment. Scott Carter On January 24, 2023, we entered into an Executive Severance and Change of Control Plan with Scott Carter (the “Carter Severance Plan”). Under the terms of the Carter Severance Plan, if we involuntarily terminate Mr. Carter’s employment without Cause (as defined below) or if Mr. Carter terminates his employment for Good Reason (as defined below), Mr. Carter will be entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 50% of Mr. Carter’s annual base salary then in effect (ignoring any reduction that gives rise to a termination for Good Reason); and (iii) a lump-sum cash amount equal to six months of premium payments for continuation coverage under the Company’s health plans for Mr. Carter and his dependents, excluding any flexible spending account. In addition, the Carter Severance Plan provides that in the event that during the two month period prior to the consummation of a Change of Control (as defined below) or the 12 month period following the consummation of a Change of Control, the Company terminates Mr. Carter’s employment without Cause or if Mr. Carter terminates his employment with the Company for Good Reason, Mr. Carter will be entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 50% of Mr. Carter’s annual base salary then in effect (ignoring any reduction that gives rise to a termination for Good Reason); (iii) a lump-sum cash amount equal to six months of premium payments for continuation coverage under the Company’s health plans for Mr. Carter and his dependents, excluding any flexible spending account; and (iv) accelerated vesting of 100% of all outstanding equity awards then held by Mr. Carter. The timing of severance payments and benefits under the Carter Employment Agreement may be deferred to avoid incurring additional taxes and penalties pursuant to Section 409A. Mr. Carter resigned as Executive Chair effective as of December 1, 2023 and this agreement is no longer in effect.
Potential Payments Upon Termination or Change of Control
On June 1, 2024, following the termination of Mr. Carnecchia, Mr. Carter accepted the role of interim Chief Executive Officer while the Company conducts a search for a permanent Chief Executive Officer. In connection with his role as interim Chief Executive Officer, Mr. Carter did not enter into a severance and change of control agreement with the Company given the short-term temporary nature of his position and thus is not eligible for severance pay in connection with a termination of his interim role. The equity grants made by the Company generally have a minimum vesting period of one-year and Mr. Carter’s role as interim Chief Executive Officer is intended to be temporary in nature (with a goal of hiring his permanent replacement as soon as possible). Consequently, to properly reward Mr. Carter for his contributions and his assistance in hiring his permanent replacement in a timely manner, and based on input and a recommendation from the Company’s outside compensation consultant based upon market data for interim CEO roles, the equity awards (both performance-based and time-based awards) granted to Mr. Carter in connection with his interim role contain an acceleration clause related to the time-based elements of such awards in the event that a permanent Chief Executive Officer is hired within one-year (or in the event that Mr. Carter is terminated without cause within one-year). Mr. Carter’s interim role and such grants are described in more detail under “Executive Compensation for the 2024 Fiscal Year - Equity-Based Incentives”. Michael E. Diamond On August 10, 2017, we entered into an Executive Severance and Change of Control Plan with Michael E. Diamond, our General Manager (the “Diamond Severance Plan”). Under the terms of the Diamond Severance Plan, if we involuntarily terminate Mr. Diamond’s employment without Cause (as defined below) or if Mr. Diamond terminates his employment for Good Reason (as defined below), Mr. Diamond will be entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 100% of Mr. Diamond’s annual base salary then in effect (ignoring any reduction that gives rise to a termination for Good Reason); and (iii) a lump-sum cash amount equal to 12 months of premium payments for continuation coverage under the Company’s health plans for Mr. Diamond and his dependents, excluding any flexible spending account. In addition, the Diamond Severance Plan provides that in the event that during the two month period prior to the consummation of a Change of Control (as defined below) or the 12 month period following the consummation of a Change of Control, the Company involuntarily terminates Mr. Diamond’s employment without Cause or if Mr. Diamond terminates his employment with the Company for Good Reason, Mr. Diamond will be entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 100% of Mr. Diamond’s annual base salary then in effect (ignoring any reduction that gives rise to a termination for Good Reason); (iii) a lump-sum cash amount equal to 12 months of premium payments for continuation coverage under the Company’s health plans for Mr. Diamond and his dependents, excluding any flexible spending account; and (iv) accelerated vesting of 100% of all outstanding equity awards then held by Mr. Diamond. The timing of severance payments and benefits under the Diamond Severance Plan may be deferred to avoid incurring additional taxes and penalties pursuant to Section 409A. The Diamond Severance Plan also provides for the reduction of any severance payments and benefits to Mr. Diamond to the extent necessary to ensure that he will not receive any “excess parachute payments” under Section 280G. Christopher Briggs On April 25, 2022, we entered into an Executive Severance and Change of Control Plan with Christopher Briggs, our Senior Vice President, Identity Product Marketing (the “Briggs Severance Plan”). Under the terms of the Briggs Severance Plan, if we involuntarily terminate Mr. Briggs’s employment without Cause (as defined below) or if Mr. Briggs terminates his employment for Good Reason (as defined below), Mr. Briggs will be entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 50% of Mr. Briggs’s annual base salary then in effect (ignoring any reduction that gives rise to a termination for Good Reason); and (iii) a lump-sum cash amount equal to six months of premium payments for continuation coverage under the Company’s health plans for Mr. Briggs and his dependents, excluding any flexible spending account. In addition, the Briggs Severance Plan provides that in the event that during the two month period prior to the consummation of a Change of Control (as defined below) or the 12 month period following the consummation of a Change of Control, the Company involuntarily terminates Mr. Briggs’s employment without Cause or if Mr. Briggs terminates his employment with the Company for Good Reason, Mr. Briggs will be entitled to receive: (i) all compensation and benefits accrued, but unpaid, up to the effective date of termination; (ii) a lump-sum cash amount equal to 50% of Mr. Briggs’s annual base salary then in effect (ignoring any reduction that gives rise to a termination for Good Reason); (iii) a lump-sum cash amount equal to six months of premium payments for continuation coverage under the Company’s health plans for Mr. Briggs and his dependents, excluding any flexible spending account; and (iv) accelerated vesting of 100% of all outstanding equity awards then held by Mr. Briggs. The timing of severance payments and benefits under the Briggs Severance Plan may be deferred to avoid incurring additional taxes and penalties pursuant to Section 409A. The Briggs Severance Plan also provides for the reduction of any severance payments and benefits to Mr. Briggs to the extent necessary to ensure that he will not receive any “excess parachute payments” under Section 280G. For purposes of each of the foregoing severance plans: •“Cause” generally means: (i) any material failure on the part of the executive to faithfully and professionally carry out his duties, subject to a 10-day cure period; (ii) the executive’s dishonesty or other willful misconduct (or in the case of the Carnecchia Employment Agreement, other misconduct), if such dishonesty or other willful misconduct (or in the case of the Carnecchia Employment Agreement, other misconduct), is intended to or likely to materially injure the business of the Company (and in the case of the Carnecchia Employment Agreement, materially injure the reputation of the Company); (iii) the executive’s conviction of any felony or of any other crime, in each case, involving moral turpitude; (iv) the executive’s insobriety or illegal use of drugs, chemicals or controlled substances in the course of performing his duties and responsibilities or otherwise materially affecting his ability to perform the same; and (v) any wanton or willful dereliction of duties by the executive. In addition to the foregoing, under the Carnecchia Employment Agreement, “Cause” also means the executive’s material breach of any written agreement with the Company or any of its affiliates or material violation of the Company’s Code of Business Conduct or any other material written policy of the Company.
Potential Payments Upon Termination or Change of Control
•“Good Reason” generally means: (i) the Company’s breach of any of the material terms of the severance plan; (ii) the Company’s relocating its offices at which the executive is initially principally employed to a location either outside of the United States or more than 50 miles from both the executive’s residence and the offices of the Company (or in the case of the Carnecchia Employment Agreement, outside of the United States or outside of San Diego County), and that reassignment materially and adversely affects the executive’s commute and the executive is required to commute to such location without the executive’s written consent; (iii) a material diminution in the executive’s duties or responsibilities or conditions of employment (or in the case of the Carnecchia Employment Agreement, title); from those in effect on the effective date of the severance plan; (iv) any reductions which, in the aggregate, are more than 10% of the executive’s base salary in effect when any reduction is first imposed without the executive’s consent (other than such a reduction or reductions applicable generally to other senior executives of the Company) (or in the case of the Carnecchia Employment Agreement, a reduction of Mr. Carnecchia’s base salary or reduction of Mr. Carnecchia’s target bonus percentage without his consent); provided, however, that the executive must provide the Company with written notice of the executive’s intent to terminate his employment and a description of the event which the executive believes constitutes Good Reason within 60 days after the initial existence of the event, subject to a 30-day cure period in favor of the Company, and if the default is not cured, the executive must terminate within 90 days of the end of the cure period. •“Change of Control” generally means the occurrence of any of the following events: (i) any person or group (within the meaning of Section 13(d) or 14(d), as applicable, of the Exchange Act) (a “Person”), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities representing 50% or more of the voting power of our then outstanding securities (“Company Voting Securities”); (ii) the consummation of a share exchange or a merger or consolidation of the Company, where the Persons who were the beneficial owners of Company Voting Securities outstanding immediately prior to such transaction do not beneficially own more than 50% of the voting securities of the Company or the Acquiring Company (as defined in the applicable agreement) immediately after such transaction in substantially the same proportions as their ownership of Company Voting Securities immediately prior to such transaction; (iii) a sale or other disposition of all or substantially all of our assets; or (iv) such time as the Continuing Directors (as defined in the applicable agreement Severance Plan) do not constitute at least a majority of the Board (or, if applicable, of the board of directors of a successor to the Company). The table below estimates the amount of compensation and benefits to be provided to each of our NEOs in the event of termination of such executive’s employment under certain circumstances. These amounts are estimates of the amounts that would be paid or provided to the executives upon termination of employment or a change of control had the termination occurred on September 30, 2023, the last business day of the fiscal year end. The actual amounts can only be determined at the time of such executive’s separation from the Company. In the table below, the assumed payouts for the accelerated vesting of stock options were calculated by taking the difference between the exercise price of the unvested in-the-money stock option and $10.72, which was the per share closing price of our common stock on the Nasdaq Capital Market as of September 30, 2023, and multiplying that by the number of stock options which would become vested if the change of control had occurred on September 30, 2023. The assumed payouts for the accelerated vesting of RSUs were calculated by multiplying $10.72 by the number of shares of common stock underlying RSUs that would have vested if the change of control had occurred on September 30, 2023. These assumed payouts are determined for SEC disclosure purposes only and are not necessarily indicative of the actual benefit the executive would receive.
Potential Payments Upon Termination or Change of Control
| Name | Benefit | Involuntary Termination by the Company Without Cause or Resignation for Good Reason | Change of Control Involuntary Termination Without Cause or Resignation for Good Reason | | Scipio Maximus Carnecchia | Base Salary | $475,000(1) | $950,000(2) | | | Equity Plans | — | 5,402,172(3) | | | Health Benefits | 33,712(4) | 67,423(5) | | Frank Teruel(6) | Base Salary | — | — | | | Equity Plans | — | — | | | Health Benefits | — | — | | Fuad Ahmad | Base Salary | — | — | | | Equity Plans | — | — | | | Health Benefits | — | — | | Scott Carter(7) | Base Salary | 390,000(8) | 390,000 | | | Equity Plans | — | 1,088,327(9) | | | Health Benefits | — | — | | Michael Diamond | Base Salary | 350,000(1) | 350,000(1) | | | Equity Plans | — | 1,121,934(11) | | | Health Benefits | 16,918(4) | 16,918(4) | | Christopher Briggs | Base Salary | 167,500(8) | 167,500(8) | | | Equity Plans | — | 760,938(12) | | | Health Benefits | 6,093(10) | 6,093(10) |
Potential Payments Upon Termination or Change of Control
(1)Amount represents 100% of the executive’s annual base salary in effect September 30, 2023, unless otherwise noted. In addition to the amount above, Mr. Carnecchia would be entitled to a lump-sum prorated amount of the target bonus as of his termination date. (2)Amount represents twice the amount of the executive’s annual base salary in effect at September 30, 2023. In addition to the amount above, Mr. Carnecchia would be entitled to a lump-sum prorated amount of the target bonus as of his termination date. (3)Amount represents accelerated vesting of 500,549 unvested RSUs as of September 30, 2023. (4)Amount represents estimated payments for continued coverage under the Company’s health plans for up to 12 months, unless otherwise noted. (5)Amount represents estimated payments for continued coverage under the Company’s health plans for up to 24 months. (6)Mr. Teruel resigned from the Company effective January 31, 2023, and as no triggering event occurred in connection with his resignation, this reflects what Mr. Teruel actually received. (7)Mr. Carter resigned as Executive Chair effective December 1, 2023, and therefore this scenario cannot occur after this date. (8)Amount represents 50% of the executive’s annual base salary in effect as of September 30, 2023. (9)Amount represents accelerated vesting of 101,523 unvested RSUs as of September 30, 2023. (10)Amount represents estimated payments for continued coverage under the Company’s health plans for up to six months. (11)Amount represents accelerated vesting of 104,658 unvested RSUs as of September 30, 2023. (12)Amount represents accelerated vesting of 70,983 unvested RSUs as of September 30, 2023.
Principal Executive Officer (“PEO”) Pay Ratio
Principal Executive Officer (“PEO”) Pay Ratio Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and applicable SEC rules, we have prepared the ratio of the annual total compensation of our PEO to the median employee’s annual total compensation. Our PEO on July 31, 2023, the date on which the median employee was calculated, was Scipio Maximus Carnecchia. Mr. Carnecchia’s annualized total compensation for 2023 was $3,214,657. This amount equals Mr. Carnecchia’s compensation as reported in the Summary Compensation Table. The median employee’s (excluding the PEO) annual total compensation for 2023 was $66,911. Based on the foregoing, our estimate of the ratio of the annual total compensation of our PEO to the annual total compensation of our median employee was 48 to 1. The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to choose from a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, our pay ratio may not be comparable to the pay ratio reported by other companies. Our PEO to median employee ratio is a reasonable estimate calculated in a manner that is consistent with SEC rules based on a combination of compensation data from global payroll and human resources records and using the methodology, assumptions and estimates described below. In identifying our median employee, we used the annual base salary for each employee included in the Company’s payroll and other compensation records. All compensation amounts were annualized for permanent employees who did not work for the entire year, such as new hires and employees on paid or unpaid leaves of absence. We did not apply any cost-of-living adjustments nor did we use any form of statistical sampling. We captured employees as of July 31, 2023, consisting of approximately 596 individuals located worldwide (approximately 439 of which are located internationally). We did not exclude any employees from our determination of the median employee. During fiscal 2023, we paid our non-US employees in local foreign currency, which included Euros, GBPs, Pesos and Rubles. Amounts were converted into U.S. Dollars based on applicable exchange rates as of July 31, 2023 for purposes of calculating the PEO to median employee ratio.
Pay Versus Performance
Pay Versus Performance 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 actually paid (the “CAP”) to our principal executive officer (“PEO”) and our other NEOs (the “Non-PEO NEOs”) and certain financial performance of the Company. The CAP does not reflect the actual amount of compensation earned, realized or received by the PEOs or Non-PEO NEOs during the applicable fiscal year. The following table shows the past three fiscal years’ total compensation for our PEO, and on an average basis, our NEOs for the past three fiscal years as set forth in the “Summary Compensation Table”, the CAP to our PEO, and on an average basis, our Non-PEO NEOs (in each case, as determined under SEC rules) our total shareholder return (“TSR”), the TSR for companies in the Nasdaq Health Care Index, our net income, and our Company-Selected Measure, revenue. For further information concerning our pay-for-performance philosophy and how we align executive compensation with our performance, refer to “Executive Compensation—Compensation Discussion and Analysis” on page 24 of this Proxy Statement.
Pay Versus Performance
| Fiscal Year | Summary Compensation Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for non-PEO NEOs(3) | Average Compensation Actually Paid to non-PEO NEOs(4) | Value of Initial Fixed $100 Investment Based On: | | Net Income (in Thousands)(7) | Revenue (in Thousands)(8) | | | | | | | Total Shareholder Return(5) | Peer Group Total Shareholder Return(6) | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | $3,214,657 | $3,499,765 | $1,062,634 | 1,073,041 | $84.14 | $124.02 | $8,027 | $172,552 | | 2022 | $5,611,040 | $(264,226) | $1,201,439 | 337,407 | $71.90 | $89.41 | $3,694 | $144,804 | | 2021 | $3,461,041 | $9,567,265 | $973,850 | 1,492,359 | $145.21 | $134.44 | $7,978 | $119,797 |
Pay Versus Performance
————————— (1)The dollar amounts reported in this column are the amounts of total compensation reported for Scipio Maximus Carnecchia (our former Chief Executive Officer) for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation —Summary Compensation Table” for additional information. (2)The dollar amounts reported in this column represent the CAP to Mr. Carnecchia, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect actual compensation earned by or paid to Mr. Carnecchia during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Carnecchia’s total compensation reported in the Summary Compensation Table for each year to determine the CAP:
Pay Versus Performance
| Year | Reported Summary Compensation Table Total for PEO ($) | Reported Value of Equity Awards ($)(a) | Equity Award Adjustments ($)(b) | Compensation Actually Paid to PEO ($) | | 2023 | 3,214,657 | (2,295,513) | 2,580,621 | 3,499,765 | | 2022 | 5,611,040 | (4,701,320) | (1,173,946) | (264,226) | | 2021 | 3,461,041 | (2,283,961) | 8,390,185 | 9,567,265 |
Pay Versus Performance
(a)The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table for the applicable year. (b)The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows:
Pay Versus Performance
| Year | Year End Fair Value of Equity Awards ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) | | 2023 | 2,121,544 | 450,314 | — | 8,763 | — | — | 2,580,621 | | 2022 | 1,993,329 | (2,373,751) | — | (793,524) | — | — | (1,173,946) | | 2021 | 3,233,450 | 4,946,721 | — | 210,014 | — | — | 8,390,185 |
Pay Versus Performance
(3) The dollar amounts reported in this column represent the average of the amounts reported for the NEOs as a group (excluding Mr. Carnecchia) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the Non-PEO NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for fiscal year 2023, Frank Teruel, Michael Diamond, Christopher Briggs, Fuad Ahmad, and Scott Carter; (ii) for fiscal year 2022, Frank Teruel, Michael Diamond, Stephen Ritter and Scott Marcus; and (iii) for fiscal year 2021, Frank Teruel, Jeffrey Davison, Michael Diamond, Jason Gray, and Stephen Ritter. Refer to “Executive Compensation—Executive Compensation Tables—Summary Compensation Table” for additional information. (4) The dollar amounts reported in this column represent the average amount of the CAP to the Non-PEO NEOs, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs during the applicable fiscal year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation reported in the Summary Compensation Table for the Non-PEO NEOs for each year to determine the CAP, using the same methodology described above in Note (2):
Pay Versus Performance
| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | Average Reported Value of Equity Awards ($) | Average Equity Award Adjustments ($)(a) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2023 | 1,062,634 | (498,421) | 508,828 | 1,073,041 | | 2022 | 1,201,439 | (747,143) | (116,889) | 337,407 | | 2021 | 973,850 | (460,978) | 979,487 | 1,492,359 |
Pay Versus Performance
————————— (a) The amounts deducted or added in calculating the total average award adjustments are as follows:
Pay Versus Performance
| Year | Average Year End Fair Value of Equity Awards ($) | Average Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Average Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Average Value of Dividends of other Earnings Paid on Stock or Options Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Average Equity Award Adjustments ($) | | 2023 | 461,257 | 51,677 | — | 3,027 | (7,133) | — | 508,828 | | 2022 | 352,010 | (379,700) | — | (89,199) | — | — | (116,889) | | 2021 | 556,942 | 273,505 | — | 149,040 | — | — | 979,487 |
Pay Versus Performance
(5) Cumulative TSR is calculated by (i) dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by (ii) the Company’s share price at the beginning of the measurement period. (6) Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group for this purpose is the NASDAQ - 100 Technology Sector Index and is the same peer group used by the Company in the Stock Performance Graph in Part II, Item 5 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “Peer Group”). (7) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. (8) While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation program, the Company has determined that revenue is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link the CAP to the Company’s NEOs, for the most recently completed fiscal year. The dollar amounts reported represent the amount of revenue reflected in the Company’s audited financial statements for the applicable year.
Analysis of the Information Presented in the Pay versus Performance Table
Analysis of the Information Presented in the Pay versus Performance Table In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table above. CAP and Company’s TSR versus Peer TSR The following graph sets forth the relationship between the CAP to our PEO, the average of CAP to our Non-PEO NEOs, and the Company’s cumulative TSR over the three most recently completed fiscal years. In addition, the graph demonstrates the overall performance of the Company’s TSR as compared to the TSR of its Compensation Peer Group. CAP and Net Income The following graph sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and the Company’s net income over the three most recently completed fiscal years. CAP and Revenue The following graph sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and the Company’s revenue over the three most recently completed fiscal years.