DEF 14A of JFrog Ltd
Filed Apr 10, 2024 · FY20230000950170-24-043357
Nominees for Director
Nominees for Director Shlomi Ben Haim. Mr. Ben Haim is one of our co-founders and has served as a member of our board of directors and as our Chief Executive Officer since April 2008 and as Chairman of our board of directors since January 2020. From October 2000 to June 2009, he was with AlphaCSP Ltd. (“AlphaCSP”), a company implementing software applications that was acquired by Malam Group, most recently as Chief Executive Officer from June 2006 to June 2009 and as an executive director from October 2000 to June 2006. Prior to joining AlphaCSP, Mr. Ben Haim served in the Israeli Air Force from October 1988 to October 2000 where he led several military units and reached the rank of Major. Mr. Ben Haim holds a B.A. in Business Administration and Management from Ben-Gurion University, Israel and an M.Sc. from Clark University, MA USA. We believe that Mr. Ben Haim is qualified to serve on our board of directors because of the perspective and experience he brings as our co-founder and Chief Executive Officer. Jessica Neal. Ms. Neal has served as a member of our board of directors since March 2020. She has held her current position as Venture Partner at Technology Crossover Ventures (“TCV”) since November 2021. Prior to TCV, Ms. Neal served in various executive positions at Netflix, Inc., a media-services provider and production company, including as Chief Talent Officer from October 2017 to November 2021, Vice President of Talent from June 2017 to October 2017 and Vice President of Talent and Talent Acquisition from May 2006 to September 2013. From September 2015 to June 2017, Ms. Neal served as Chief People Officer at Scopely, Inc., an interactive entertainment company and mobile games developer and publisher. From October 2013 to July 2015, she served as Vice President-Talent at Coursera Inc., an online learning platform. Since December 2021, Ms. Neal has served on the boards of Public.com and Humu.com. Ms. Neal holds a B.F.A. in Fine Arts from the School of Visual Arts New York City. We believe that Ms. Neal is qualified to serve on our board of directors because of her knowledge and experience in the software industry and professional experience as an executive of various technology companies. Yvonne Wassenaar. Yvonne Wassenaar has served as a member of our board of directors since September 2022. Ms. Wassenaar served as Chief Executive Officer of Puppet, Inc., an information technology automation software company from January 2019 to May 2022. From June 2017 to September 2018, Ms. Wassenaar served as Chief Executive Officer of Airware, an enterprise drone solutions company. From August 2014 to May 2017, Ms. Wassenaar served in various roles at New Relic, Inc., or New Relic, a public cloud-based observability platform company, most recently as Chief Information Officer. Prior to New Relic, Ms. Wassenaar held various senior positions at VMware, Inc., a public cloud computing and virtualization technology company. Ms. Wassenaar currently serves on the board of directors of Arista Networks, Inc. (NASDAQ:ANET), a public cloud networking company, Forrester Research, Inc. (NASDAQ:FORR), a public research and advisory company, Alation, Inc., a private data intelligence company, and Rubrik, a private zero trust data management company. Ms. Wassenaar previously served on the boards of directors of Anaplan, Inc., a public cloud-based business planning software company, acquired by Thoma Bravo, LLC, and Mulesoft, Inc., a public enterprise software company, acquired by Salesforce, Inc. Ms. Wassenaar also currently serves on the boards of directors of various non-profit institutions. We believe that Ms. Wassenaar is qualified to serve on our board of directors because of her knowledge and experience in the software industry and professional experience as an executive of various technology companies.
Continuing Directors
Continuing Directors Frederic Simon. Mr. Simon is one of our co-founders and has served as a member of our board of directors since April 2008 and numerous other roles including as our Chief Architect from April 2008 to August 2013, Chief Presale Engineer from August 2013 to July 2018, and most recently as Chief Data Scientist since January 2019. Prior to joining us, Mr. Simon co-founded AlphaCSP where he was global Chief Technology Officer from September 1998 to September 2000 and main consultant for the Israel branch from October 2000 to July 2008. He holds a first degree from Prytanée National Militaire de La Flèche in France and a Masters in Computer Science from École Centrale de Lille, France. We believe that Mr. Simon is qualified to serve on our board of directors because of the perspective and experience he brings as a co-founder and his knowledge of the industry in which we operate. Andy Vitus. Mr. Vitus has served as a member of our board of directors since January 2016. He joined Scale Venture Partners, a venture capital fund, in January 2003, and has served as a Partner of the firm since April 2010. Mr. Vitus currently serves as a director of several privately held companies. He holds a B.S. in Electrical Engineering from the University of Cape Town and an M.S. in Electrical Engineering from Stanford University. We believe that Mr. Vitus is qualified to serve on our board of directors because of his business expertise gained from his experience in the venture capital industry. Barry Zwarenstein. Barry Zwarenstein has served as a member of our board of directors since January 2020. He has served as Chief Financial Officer of Five9, Inc., a provider of cloud software for contact centers, since January 2012 and as Interim Chief Executive Officer from December 2017 to May 2018. Mr. Zwarenstein served as Senior Vice President and Chief Financial Officer of SMART Modular Technologies, Inc., a designer, manufacturer and supplier of electronic subsystems to original equipment manufacturers acquired by Silver Lake Partners in August 2011, and previously served as director of Dealertrack Technologies, Inc. Since July 2020, Mr. Zwarenstein has served on the board of directors of Aria Systems, Inc., a provider of a cloud-based billing and monetization platform. Since August 2020, Mr. Zwarenstein has served on the board of directors of On24, Inc. (NYSE:ONTF), a provider of a cloud-based digital experience platform used to market products and services. Mr. Zwarenstein holds a Bachelor of Commerce from the University of KwaZulu-Natal, South Africa and an M.B.A. from the Wharton School at the University of Pennsylvania. Mr. Zwarenstein is qualified as a Chartered Accountant, South Africa. We believe that Mr. Zwarenstein is qualified to serve on our board of directors because of his corporate finance and business expertise. Yoav Landman. Mr. Landman is one of our co-founders and has served as a member of our board of directors and as our Chief Technology Officer since April 2008. From January 2002 to December 2008, he was with AlphaCSP, where he served as a Senior Consultant and as a member of management. Mr. Landman is also the creator of JFrog Artifactory. Mr. Landman holds a Masters of Computing from The Royal Melbourne Institute of Technology, Australia and an LL.B. from the University of Haifa, Israel. We believe that Mr. Landman is qualified to serve on our board of directors because of the perspective and experience he brings as our co-founder and Chief Technology Officer. Yossi Sela. Yossi Sela has served as a member of our board of directors since May 2012 and as our lead independent director since January 2020. He has been with Gemini Israel Ventures, a venture capital fund, since January 1993 and Managing Partner since 1999 and the Chairman of Bridges Israel, an impact investment fund, since March 2018. Mr. Sela currently serves on the board of directors of Technion R&D Foundation, a subsidiary of the Technion Israel Institute of Technology, as well as several privately held companies. He holds a B.Sc. in Electrical Engineering from the Technion - Israel Institute of Technology, Israel and an M.B.A. from Tel Aviv University, Israel. We believe that Mr. Sela is qualified to serve on our board of directors because of his business expertise gained from his experience in the venture capital industry, including his time spent serving on boards of directors of various companies and familiarity with Israeli companies. Elisa Steele. Ms. Steele has served as a member of our board of directors since March 2020. Ms. Steele previously served as Chief Executive Officer of Namely, Inc., (“Namely”) a financial and human capital management software company, from August 2018 to July 2019. Prior to joining Namely, Ms. Steele served as Chief Executive Officer and President of Jive Software, Inc. (“Jive Software”) a communication and collaboration software company acquired by Aurea Software, Inc., from February 2015 to July 2017. From January 2014 to February 2015, Ms. Steele served in various executive positions at Jive Software, including President; Executive Vice President, Strategy and Chief Marketing Officer; and Executive Vice President, Marketing and Products. Prior to joining Jive Software, from August 2013 to December 2013, she served as Corporate Vice President and Chief Marketing Officer of Consumer Applications and Services at Microsoft Corporation, a provider of software, services and solutions. Ms. Steele joined Microsoft through its acquisition of Skype, an Internet communications company, where she served as Chief Marketing Officer from July 2012 to August 2013. From 2017 to its acquisition in March 2024, Ms. Steele served on the board of directors of Splunk Inc., a provider of real-time operational intelligence software. Ms. Steele currently serves on the boards of Amplitude (NASDAQ:AMPL), Bumble (NASDAQ:BMBL) and Procore Technologies (NYSE:PCOR). Ms. Steele holds a B.S. in Business Administration from the University of New Hampshire and holds an M.B.A. from San Francisco State University. We believe that Ms. Steele is qualified to serve on our board of directors because of her knowledge and experience in the software industry and professional experience as an executive of various technology companies.
Considerations in Evaluating Director Nominees
Considerations in Evaluating Director Nominees In its evaluation of director candidates, including the members of the board of directors eligible for re-election, our nominating and corporate governance committee considers the current composition, organization and governance of the board, the needs of the board and its respective committees, and the desired board qualifications, expertise and characteristics, such as character, professional ethics and integrity, judgment, business acumen, proven achievement and competence in one’s field, the ability to exercise sound business judgment, tenure on the board and skills that are complementary to the board, an understanding of the Company’s business, an understanding of the responsibilities that are required of a member of the board, other time commitments, diversity with respect to professional background, education, race, ethnicity, gender, age and geography, as well as other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on the board. Consistent with criteria approved by the board of directors and the qualification requirements set forth under the Companies Law, our nominating and corporate governance committee evaluates each individual in the context of the membership of the board of directors as a group, with the objective of having a group that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of viewpoints and experience in the various areas. Each director should be an individual of high character and integrity. The board of directors annually evaluates the performance of the board of directors and its committees. Our nominating and corporate governance committee reviews the self-assessment questionnaires to evaluate the performance of individual members. In determining whether to recommend a director for re-election, our nominating and corporate governance committee also considers the director’s participation in and contributions to the activities of the board of directors and the company, the director’s other time commitments, and other qualifications and characteristics determined by the board of directors. After completing their review and evaluation of director candidates, in accordance with Nasdaq rules and the Companies Law, our nominating and corporate governance committee will recommend a director nominee for selection by our board of directors. Our board of directors has the final authority in determining the selection of director candidates for nomination to our board of directors.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Non-Employee Director Compensation Policy
Non-Employee Director Compensation Policy Pursuant to our non-employee director compensation policy, each non-employee director is eligible to receive compensation for his or her service consisting of cash retainers and equity awards. Our board of directors or our compensation committee has the discretion to amend, suspend or terminate the non-employee director compensation policy as it deems necessary or appropriate, subject to the terms of our Compensation Policy and the Companies Law.
Director Compensation Table
Director Compensation Table The following table provides information regarding compensation of our non-employee directors for service as directors, for the year ended December 31, 2023. Each non-employee director’s reasonable, customary and properly documented travel expenses to attend board meetings is reimbursed by the company.
Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Total ($) | | Jeff Horing(2) | 28,614 | 174,989 | 203,603 | | Jessica Neal | 45,000 | 174,989 | 219,989 | | Meerah Rajavel(3) | 13,500 | — | 13,500 | | Yossi Sela | 50,000 | 174,989 | 224,989 | | Elisa Steele | 47,500 | 174,989 | 222,489 | | Andy Vitus | 40,000 | 174,989 | 214,989 | | Yvonne Wassenaar | 36,000 | 174,989 | 210,989 | | Barry Zwarenstein | 50,000 | 174,989 | 224,989 |
Director Compensation Table
____________________________________________ (1) Amounts represent the grant date fair value of such awards, calculated based on the closing price of our ordinary shares on the applicable date of grant in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 718. (2) Mr. Horing was our director until December 14, 2023. (3) Ms. Rajavel was our director until May 15, 2023. The following table lists all outstanding equity awards held by our non-employee directors as of December 31, 2023.
Director Compensation Table
| Name | Option Awards (#) | Stock Awards (#) | | Jessica Neal | 50,000(1) | 3,913(2) | | Yossi Sela | — | 3,913(2) | | Elisa Steele | 50,000(1) | 3,913(2) | | Andy Vitus | — | 3,913(2) | | Yvonne Wassenaar | — | 13,516(3) | | Barry Zwarenstein | 43,750(1) | 3,913(2) |
Director Compensation Table
____________________________________________ (1) The share option award vests in 16 equal quarterly installments in accordance with each three-month anniversary of the respective director’s initial start date, in each case subject to the director continuing to be a member of our board of directors through the applicable vesting date. (2) The RSUs vest in 4 equal quarterly installments in accordance with each three-month anniversary of the date of grant, in each case subject to the director continuing to be a member of our board of directors through the applicable vesting date. The RSUs consist of (i) 9,603 RSUs that vest in 12 equal quarterly installments in accordance with each three-month anniversary of the director’s initial start date, in each case subject to the director continuing to be a member of our board of directors through the applicable vesting date; and (ii) 3,913 RSUs that vest in 4 equal quarterly installments in accordance with each three-month anniversary of the date of grant, in each case subject to the director continuing to be a member of our board of directors through the applicable vesting date.
ELECTION OF CLASS I DIRECTORS
ELECTION OF CLASS I DIRECTORS Our board of directors is currently comprised of nine directors and is divided into three staggered classes of directors. At the Annual General Meeting, three Class I directors will be elected to our board of directors by the holders of our ordinary shares to succeed the same class whose term is then expiring. Each director’s term continues until the expiration of the term for which such director was elected or until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.
External Directors
External Directors Under the Companies Law, Israeli public companies are generally required to appoint at least two external directors, who need to meet certain criteria and be appointed according to a specific procedure. However, according to the Israeli Companies Regulations (Relief for Companies whose Securities are Listed for Trading on a Stock Exchange Outside Israel), 2000 (the “Relief Regulations”), a company whose shares are traded on certain stock exchanges outside Israel (including the Nasdaq, such as us) that does not have a controlling shareholder and that complies with the requirements of the laws of the foreign jurisdiction where the company’s shares are listed, as they apply to domestic issuers, with respect to the appointment of independent directors and the composition of the audit committee and compensation committee, may elect to exempt itself from the requirements of Israeli law with respect to, among other things, (i) the requirement to appoint external directors and that one external director serve on each committee of the board of directors; and (ii) certain limitations on the employment or service of an external director or his or her spouse, children or other relatives, following the cessation of his or her service as an external director, by or for the company, its controlling shareholder or an entity controlled by the controlling shareholder. Prior to the effectiveness of our initial public offering, our board decided to opt out of these requirements. Under the Relief Regulations, these concessions will continue to be available to us so long as (i) our shares are traded on a U.S. stock exchange, including the Nasdaq; (ii) we do not have a “controlling shareholder” (as such term is defined under the Companies Law), and; (iii) we comply with the majority board independence requirements and audit committee and compensation committee requirements under U.S. laws applicable to U.S. domestic issuers.
Nominees for Director
Nominees for Director Our Class I directors, whose terms will expire at the Annual General Meeting, are Shlomi Ben Haim, Jessica Neal, and Yvonne Wassenaar. Our nominating and corporate governance committee has recommended director nominees for selection by our board of directors, and our board of directors has nominated, Mr. Ben Haim and Mses. Neal and Wassenaar for election as Class I directors. If elected, Mr. Ben Haim and Mses. Neal and Wassenaar will serve as Class I directors until the 2027 annual general meeting or until their respective successors are duly elected and qualified or until their earlier death, resignation or removal. For more information concerning the nominees, please see the section entitled “Board of Directors and Corporate Governance.” Mr. Ben Haim and Mses. Neal and Wassenaar have agreed to serve as directors if elected, and management has no reason to believe that they will be unavailable to serve.
Executive Summary
Executive Summary Who We Are JFrog’s vision is to power a world of continuously updated, version-less software – we call this Liquid Software. We provide an end-to-end, hybrid, universal Software Supply Chain Platform that enables organizations to continuously and securely create and deliver software updates across any system. This platform is the critical bridge between software development and deployment of that software, paving the way for modern software supply chain management and software release processes. We enable organizations to build and release software faster and more securely while empowering developers, security teams and Machine Learning Operations teams to be more efficient. Digital transformation has become an imperative for all organizations, and as such, organizations of all types and sizes are increasingly dependent upon software to better engage with their customers, partners, and employees. As a result, the continuous and trusted release of new software has become mission critical. An organization’s failure to keep software current or react to problems with timely software updates, whether feature oriented or security-demanded, can lead to lost revenue and reputational damage, and even threaten human safety and lives. We believe the end state of digital transformation is a non-stop, always-on, secure, continuous delivery of value to users, enabled by a world of version-less software. DevOps and DevSecOps enables the software innovation that is driving digital transformation. The need for organizations to better serve their customers, partners, and employees through software is driving the demand for constant innovation of the software build and release workflow. As the pace and variety of software creation have increased, the domains of software “developers” and IT “operators” have converged, rapidly including “security” professionals. Since our inception, we have embraced the culture and methodologies of modern software development and delivered a platform that connects developers, security teams and operators, thus providing the foundation for DevOps and DevSecOps. These paradigms have become the approach modern digital organizations take to software development and operations, shortening, automating, securing and improving the software build and release workflow. Software as it is written by a developer, in source code, cannot be deployed in a runtime environment. In order for software to run in production, source code is transformed into or packaged into executable binary files that can be understood by and run on a server or device. Organizations need tools that can turn source code and other resources into binary files, store, manage, and secure these binaries, and then create software packages, or combinations of one or more binary files, that can be released and deployed to runtime environments. Our platform is designed to universally manage and deploy all types of software packages, including machine learning models, within an organization, making it the system of record for an organization’s secure software release processes, often called the “database of DevOps.” Fiscal Year 2023 Financial Highlights Our 2023 performance showcases our solid execution across our strategic pillars, driving growth in the cloud, leveraging complete software supply chain capabilities, and enhancing our security offerings – all supported by our focused transition to enterprise sales while building an efficient business. Our fiscal year 2023 financial and business highlights included the following: • Revenue equaled $349.9 million, up 25% year-over-year. • GAAP Gross Profit was $272.8 million; Non-GAAP Gross Profit was $293.0 million.* • Operating Cash Flow was $74.2 million; Free Cash Flow of $72.2 million.* • Customers with greater than annual recurring revenue (“ARR”) of $100,000 increased to 886 customers as of December 31, 2023, compared with 736 as of December 31, 2022.** • Customers with greater than $1 million ARR increased to 37 customers as of December 31, 2023, up from 19 customers as of December 31, 2022.** Net Dollar Retention rate for the trailing four quarters was 119%.** Approximately 7,400 customers as of December 31, 2023, compared with 7,200 as of December 31, 2022. * See Appendix A for a reconciliation of non-GAAP financial measures to the comparable GAAP measures. ** See Appendix B for explanations of operating metrics. Executive Compensation Highlights Consistent with the Companies Law, our Compensation Policy and compensation objectives, and following a review of data summarizing the competitive market environment and the other factors described below, our compensation committee and board of directors took the following key actions with respect to the compensation of our Named Executive Officers for and during fiscal year 2023: • Base Salaries – As part of the annual review of our executive compensation program, our compensation committee and board of directors determined that the base salary of our Named Executive Officers would remain unchanged during fiscal year 2023. • Target Bonus – As part of the annual review of our executive compensation program, our compensation committee and board of directors determined that the annual target bonus for our other Named Executive Officers would remain unchanged during fiscal year 2023. • Long-Term Incentive Compensation of Named Executive Officers – As part of the annual review of our executive compensation program, our compensation committee and board of directors granted long-term incentive compensation in the form of restricted stock unit (“RSU”) awards that may be settled for ordinary shares to each of our Named Executive Officers with aggregate grant date fair values of approximately $4.0 million with respect to Mr. Ben Haim, $4.0 million with respect to Ms. Notman, $5.0 million with respect to Mr. Shulman, and $2.0 million with respect to Mr. Landman. In addition, our compensation committee and board of directors granted a performance-based RSU award (“PSU”) to Mr. Ben Haim with a grant date fair value of approximately $2.6 million that would become eligible to vest based on the achievement of a total shareholder return target for 2023. The RSU and PSU awards granted to Mr. Ben Haim and RSU awards to Mr. Landman were approved by the compensation committee and the board of directors in March 2023 and took effect in May 2023 following approval by our shareholders pursuant to the Companies Law. The RSU awards granted to Ms. Notman and Mr. Shulman were approved by the compensation committee and the board of directors and took effect in May 2023. The compensation committee and the board of directors determined the size of each Named Executive Officer’s RSU awards based on consideration of the equity grant practices of the Company’s compensation peer group, as well as internal parity, scope and complexity of roles, experience, qualifications, skills and individual performance. Relationship Between Pay and Performance We strive to design our executive compensation program to balance the goals of attracting, motivating, rewarding and retaining our Named Executive Officers with the goal of promoting the interests of our stakeholders, such as our users, customers, employees, creditors, shareholders and other stakeholders. To ensure this balance and to motivate and reward individual initiative and effort, we seek to ensure that our program is designed so that a meaningful portion of our Named Executive Officers’ annual target total direct compensation is both “at-risk” and variable in nature. While we do not determine either “variable” or “fixed” pay for each Named Executive Officer with reference to a specific percentage of target total direct compensation, consistent with our “pay-for-performance” philosophy, generally, we seek to emphasize variable pay over fixed pay.
Executive Summary
The equity-based compensation under our Compensation Policy for our executive officers (including members of our board of directors) is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the executive officers’ interests with our long-term interests and those of our shareholders and to strengthen the retention and the motivation of executive officers in the long term. Our Compensation Policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and restricted share units, in accordance with our share incentive plan then in place. All equity-based incentives granted to executive officers shall be subject to vesting periods in order to promote long-term retention of the awarded executive officers. The equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role, and the personal responsibilities of the executive officer. In addition, our Compensation Policy contains compensation recovery, or clawback provisions, in the event of an accounting restatement, provisions which allow us under certain conditions to recover bonuses, bonus compensation or performance-based equity compensation paid in excess, enable our Chief Executive Officer to approve an immaterial change in the terms of employment of an executive officer who reports directly him (provided that the changes of the terms of employment are in accordance with our Compensation Policy) and allow us to exculpate, indemnify, and insure our executive officers and directors to the maximum extent permitted by Israeli law, subject to certain limitations set forth therein. Our Compensation Policy also provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in our Compensation Policy. Under the Companies Law, our Compensation Policy will initially remain in effect for a term of five years (i.e., until August 30, 2025, unless amended earlier), and thereafter, our Compensation Policy will be re-approved at least once every three years. Executive Compensation Policies and Practices We endeavor to maintain sound governance standards consistent with our Compensation Policy, executive compensation programs and practices. The compensation committee reviews our executive compensation program on an annual basis to ensure consistency with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation-related policies and practices that were in effect during fiscal year 2023: What We Do: • Compensation Policy Adoption. The compensation committee and the board of directors adopts a compensation policy that is approved by shareholders. • Independent Compensation Committee. The compensation committee is composed solely of independent directors who determine our compensation policies and practices and who have established effective means for communicating with our shareholders regarding their executive compensation views and concerns, as described in this proxy statement. • Periodic Executive Compensation Review. The compensation committee reviews and, together with the Board, approves our compensation strategy periodically, including a review of our compensation peer group used for comparative purposes. Maintain Independent Compensation Advisor. The compensation committee has engaged Compensia, a nationally-recognized compensation consulting firm to advise it on executive compensation matters. Compensia performed no services for the company other than those performed at the direction of the compensation committee. Compensation At-Risk. Our executive compensation program is designed so that in setting or recommending our Named Executive Officers’ compensation in a given year, the compensation committee considers whether a sufficient portion of their compensation is “at risk” based on corporate performance to align the interests of our Named Executive Officers and shareholders. • Multi-Year Vesting Requirements. The annual equity awards granted to our Named Executive Officers vest over multi-year periods, consistent with current market practice and our retention objectives. • Only “Double-Trigger” Change-in-Control Arrangements. Under our severance arrangements with our Named Executive Officers, there are no payments made only because of the occurrence of a change-in-control. All change-in-control payments and benefits are based on a “double-trigger” arrangement (that is, they require both a change-in-control of the Company plus a qualifying termination of employment before payments and benefits are paid). • Health or Welfare Benefits. Our Named Executive Officers participate in broad-based Company-sponsored health and welfare benefit programs on the same basis as our other employees in the country of their employment. • Succession Planning. The Board and the compensation committee review the risks associated with our executive officer positions to ensure adequate succession plans are in place, including prioritizing key executives and their impact on the continuity of the Company. What We Don’t Do: • No Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, any special retirement plans, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our Named Executive Officers other than the plans and arrangements that are available to all employees in the country in which they work. Our Named Executive Officers located in the United States are eligible to participate in our Section 401(k) plan on the same basis as our other employees in the United States. • No “Golden Parachute” Tax Payments on Change-in-Control Arrangements. We do not provide any excise tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company that our Named Executive Officers might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code (the “Code”). • No Hedging or Pledging of our Securities. We prohibit our employees, including our officers, and the members of the Board from engaging in hedging transactions or pledging our securities as collateral for a loan or holding our securities in a margin account.
Executive Compensation Philosophy and Objectives
Executive Compensation Philosophy and Objectives Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. We strive to provide an executive compensation program that is competitive, rewards achievement of our business objectives and aligns our Named Executive Officers’ interests with those of our shareholders. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives: • provide market competitive compensation and benefit levels that will attract, motivate, reward and retain a highly talented team of executives within the context of responsible cost management; • establish a direct link between our financial and operational results and strategic objectives and the compensation of our executives; • align the interests and objectives of our executives with those of our shareholders by linking their long-term incentive compensation opportunities to shareholder value creation and their cash incentives to our annual performance; and offer total compensation opportunities to our executives that, while competitive, are internally consistent and fair. We structure the annual compensation of our Named Executive Officers using base salary and long-term incentive compensation in the form of equity awards. In addition, each of our Named Executive Officers are eligible to earn annual cash incentive awards. The design of our executive compensation program is influenced by a variety of factors, with the primary goals being to align the interests of our Named Executive Officers and shareholders and to link pay with performance. We have not adopted policies or employed guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. As described below, the compensation committee and the board of directors consider a variety of factors in determining the appropriate yearly mix among such compensatory elements, including our compensation philosophy and the value of unvested equity awards granted previously. All compensation decisions by our compensation committee and board of directors with respect to our Named Executive Officers conform to the requirements of our Compensation Policy and the Companies Law.
Compensation-Setting Process
These factors provide the framework for compensation decision-making regarding the compensation opportunity for each Named Executive Officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable. The compensation committee does not weigh these factors in any predetermined manner, nor does it apply any formulas in developing its compensation decisions and recommendations. The members of the compensation committee consider this information in view of their individual experience, knowledge of the Company, knowledge of the competitive market, knowledge of each Named Executive Officer and business judgment in making their decisions and recommendations. The compensation committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions and recommendations with respect to our Named Executive Officers. Instead, in making its determinations, the compensation committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment, as well as from more broad-based compensation surveys to gain a general understanding of market compensation levels. Role of Management In discharging its responsibilities, the compensation committee works with members of our management, including our CEO. Our management assists the compensation committee by providing information on corporate and individual performance, market compensation data and management’s perspective on compensation matters. The compensation committee solicits and reviews our CEO’s proposals with respect to program structures, as well as his recommendations for adjustments to annual cash compensation, long-term incentive compensation and other compensation-related matters for our Named Executive Officers (except with respect to his own compensation) based on his evaluation of their performance for the prior year. The compensation committee reviews and discusses such proposals and recommendations with our CEO and considers them as one factor in determining and approving the compensation of our Named Executive Officers. Our CEO also attends meetings of the Board and the compensation committee at which executive compensation matters are addressed, except with respect to discussions involving his own compensation. Role of the Compensation Consultant The compensation committee has the authority to retain an external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review, including the authority to approve the consultant’s reasonable fees and other retention terms. The compensation consultant reports directly to the compensation committee and its chair, and serves at the discretion of the compensation committee, which reviews the engagement annually. In fiscal year 2023, the compensation committee engaged Compensia to serve as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for our Named Executive Officers, and with the data analysis and selection of the compensation peer group. During fiscal year 2023, Compensia attended meetings of the compensation committee as requested and provided various services including the following: • the review, analysis and updating of our compensation peer group; • the review and analysis of the base salary levels, target annual cash incentive awards and long-term incentive compensation of our Named Executive Officers against competitive market data based on the companies in our compensation peer group and/or selected broad-based compensation surveys; an assessment of executive compensation trends within our industry, and updating on corporate governance and regulatory issues and developments; assisting in the risk assessment of our compensation programs; and • support on other ad hoc matters throughout the year. The terms of Compensia’s engagement includes reporting directly to the compensation committee chair. Compensia also coordinated with our management for data collection and job matching for our executive officers. In fiscal year 2023, Compensia performed no services for the company other than those performed at the direction of the compensation committee. The compensation committee has evaluated its relationship with Compensia to ensure that it believes that such firm is independent from management. This review process included a review of the services that Compensia provided, the quality of those services and the fees associated with the services provided during fiscal year 2023. Based on this review, as well as consideration of the factors affecting independence set forth in Exchange Act Rule 10C-1(b)(4), Section 5605(d)(3) of the Nasdaq Stock Market Listing Rules relating to the independence of the compensation committee’s compensation advisors and such other factors as were deemed relevant under the circumstances, the compensation committee has determined that no conflict of interest was raised as a result of the work performed by Compensia. Competitive Positioning The compensation committee believes that peer group comparisons are useful guides to measure the competitiveness of our executive compensation program and related policies and practices. For purposes of assessing our executive compensation against the competitive market, the compensation committee reviews and considers the compensation levels and practices of a select group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization and industry focus. The competitive data drawn from this compensation peer group is one of several factors that the compensation committee considers in making its decisions and recommendations with respect to the compensation of our Named Executive Officers. The compensation peer group for fiscal year 2023, which was developed in February 2023 with the assistance of Compensia to analyze the compensation of our Named Executive Officers, was composed of publicly-traded technology companies against which we compete for executive talent. This peer group was used to assess performance for Mr. Ben Haim’s 2023 PSU, but the compensation peer group identified in Proposal 3 above was used for assessing pay. In identifying and selecting the companies for the compensation peer group, Compensia considered the following primary criteria: • publicly-traded U.S.-based software companies identified on a national basis; • similar revenues – within a range of ~0.5x to ~3.0x our trailing four fiscal quarters’ revenue (subject to certain exceptions for companies with similar businesses, revenue growth and certain other factors); and • similar market capitalization – within a range of ~0.5x to ~3.0x our then-market capitalization based on a 30-day trading average (subject to certain exceptions for companies with similar businesses, revenue growth and certain other factors). After consultation with Compensia, the compensation committee approved the following compensation peer group for use when making its fiscal year 2023 executive compensation decisions:
Compensation-Setting Process
The compensation committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from custom data cuts drawn from the Radford Global Technology Survey database that are similar to us in revenue, market capitalization and industry for purposes of providing additional perspective in the case of executive positions where the compensation peer group offered a limited number of relevant data points. This data permitted us to evaluate the competitive market when determining the total direct compensation packages for our Named Executive Officers, including base salary, target annual cash incentive awards and long-term incentive compensation. The compensation committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group.
Compensation Elements
Compensation Elements Our executive compensation program consists principally of base salary and long-term incentive compensation in the form of equity awards. In addition, each of our Named Executive Officers are also eligible to receive target annual cash incentive awards. Base Salary Base salary represents the fixed portion of the compensation of our Named Executive Officers and is an important element of compensation intended to attract and retain highly talented individuals. Generally, we use base salary to provide each Named Executive Officer with a specified level of cash compensation during the year with the expectation that he or she will perform his or her responsibilities to the best of his or her ability and in our best interests. Generally, we establish the initial base salaries of our Named Executive Officers through arm’s-length negotiation at the time we hire the individual, taking into account his or her position, qualifications, experience and the base salaries of our other executive officers. Thereafter, the compensation committee reviews the base salaries of our Named Executive Officers each year as part of its annual review of our executive compensation program, with input from our CEO (except with respect to his own base salary), and makes adjustments (other than with respect to our CEO) that it determines are reasonable and necessary to reflect the scope of a Named Executive Officer’s performance, individual contributions and responsibilities, position in the case of a promotion and market conditions. An amendment to an existing arrangement with an office holder who is not the CEO, or a director requires the approval of our compensation committee and board of directors, if the amendment is consistent with the company’s compensation policy; otherwise the approval of the shareholders shall also be required. However, according to regulations promulgated under the Companies Law, an amendment to an existing arrangement with an office holder (who is not a director) who is subordinate to the CEO shall not require the approval of the compensation committee and board of directors if (i) the amendment is approved by the CEO and the company’s compensation policy provides that a non-material amendment to the terms of service of an office holder (other than the CEO) may be approved by the CEO and (ii) the engagement terms are consistent with the company’s compensation policy. Our Compensation Policy allows for the CEO’s approval of immaterial amendments to agreements with executive officers (other than the CEO). Under the Companies Law, the compensation of a public company’s Chief Executive Officer is required to be approved by: (i) the company’s compensation committee; (ii) the company’s board of directors, and (iii) the company’s shareholders (by a special majority vote as required by the Companies Law). However, if the shareholders of the company do not approve the compensation arrangement with the CEO, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and board of directors provide a detailed report for their decision. The approval of each of the compensation committee and board of directors should be in accordance with the company’s stated compensation policy; however, in special circumstances, they may approve compensation terms of a CEO that are inconsistent with such policy provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained (by a special majority vote as required by the Companies Law). In addition, the compensation committee may waive the shareholder approval requirement with regards to the approval of the engagement terms of a candidate for the CEO position, if they determine that the compensation arrangement is consistent with the company’s stated compensation policy and that the CEO did not have a prior business relationship with the company or a controlling shareholder of the company and that subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to employ the CEO candidate. In the event that the CEO also serves as a member of the board of directors, his or her compensation terms as CEO will be approved in accordance with the rules applicable to approval of compensation of directors (i.e., shareholders’ approval will be required). In March 2023, the compensation committee reviewed the base salaries of our Named Executive Officers employed by the Company at such time. Based on the compensation committee’s review, our compensation committee and board of directors determined that the base salary of each of our Named Executive Officers should be increased to be more competitive with the base salaries of similarly-situated executives at companies of comparable size and stage of maturity. In making these decisions, our compensation committee and board of directors took into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own base salary) and the current retention risks and challenges facing us, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Subsequently, our shareholders approved the increase in the base salary of Messrs. Ben Haim and Landman in May 2023 at our annual shareholder meeting. The base salary increases for each of our Named Executive Officers took effect on April 1, 2023. The base salaries of our incumbent Named Executive Officers as determined in February for fiscal year 2023 were as follows. The base salary for each Named Executive Officer was effective April 1, 2023.
Compensation Elements
____________________________________________ (1) Mr. Landman’s base salary is paid as a fixed amount in NIS. For comparative purposes, his base salary for both 2023 and 2022 was converted into United States Dollars (“USD”) at an exchange rate of 3.690 NIS for each 1.000 USD, which was the average exchange rate in effect for fiscal year 2023. The base salaries paid to our Named Executive Officers during fiscal year 2023 are set forth in “Executive Compensation Tables—2023 Summary Compensation Table” below. Annual Cash Incentives The Compensation Policy enables our compensation committee and board of directors to provide cash incentive awards to selected employees, including our Named Executive Officers, based upon our actual achievement as measured against performance metrics established by the compensation committee. The compensation committee and board of directors believe that the financial performance measures used in the Compensation Policy contribute to driving the creation of long-term stakeholder value, including shareholder value, and play an important role in influencing the performance of our Named Executive Officers, who are most directly responsible for our overall success. Incentive cash bonuses are entirely performance-based, are not guaranteed, and may vary materially from year-to-year. Typically, our compensation committee and board of directors, with input from our CEO (except with respect to his own cash bonus opportunity), establishes cash bonus opportunities under the Compensation Policy pursuant to an annual cash bonus plan that measures and rewards our executive officers for our actual corporate and individual performance over our fiscal year. The cash bonus plan is designed to pay below-target bonuses when we do not achieve our objectives and above-target bonuses when we exceed our objectives. In March and May 2023, our compensation committee and board of directors determined to award cash bonus opportunities to our executive officers, including our Named Executive Officers, pursuant to the cash bonus plan for 2023 (the “Fiscal Year 2023 Bonus Plan”). Under the Fiscal Year 2023 Bonus Plan, our compensation committee and board of directors had the authority to select the performance measures and related target levels applicable to the annual cash bonus opportunities for our executive officers, subject to the terms of the Compensation Policy and the Companies Law. Target Annual Cash Incentive Award Opportunities For fiscal year 2023, the target annual cash bonus opportunities for each of our Named Executive Officers under the Fiscal Year 2023 Bonus Plan, were as follows:
Compensation Elements
| Named Executive Officer | Annual Base Salary for 2022 ($) | Annual Base Salary for 2023 ($) | Target Bonus Opportunity for 2022 (as a percentage of base salary) | Target Bonus Opportunity for 2023 (as a percentage of base salary) | Target Bonus Opportunity for 2022(1) ($) | Target Bonus Opportunity for 2023(1) ($) | Percentage Point Increase in Target Bonus Opportunity from 2022 to 2023 (as a percentage of base salary) | | Shlomi Ben Haim | 500,000 | 500,000 | 75% | 75% | 348,750 | 375,000 | 8% | | Tali Notman | 460,000 | 460,000 | 100% | 100% | 445,000 | 460,000 | 3% | | Jacob Shulman | 460,000 | 460,000 | 60% | 60% | 270,900 | 276,000 | 2% | | Yoav Landman(2) | 320,865 | 320,865 | 60% | 60% | 190,162 | 192,519 | 1% |
Compensation Elements
____________________________________________ (1) This amount is calculated with respect to each Named Executive Officer as 25% based on the year prior to the listed year’s base salary and target bonus opportunity and 75% based on the listed year’s base salary and target bonus opportunity. Accordingly, the incremental increase of each Named Executive Officer’s Target Bonus Opportunity for 2023 over 2022 reflects the upward adjustment to each Named Executive Officer’s annual base salary that occurred in 2022. (2) Mr. Landman’s base salary is paid as a fixed amount in NIS. For comparative purposes, his base salary for 2023, 2022 and 2021 was converted into USD at an exchange rate of 3.690 NIS for each 1.000 USD, which was the average exchange rate in effect for fiscal year 2023. Base salary for 2021 was used to compute the “Target Bonus Opportunity for 2022” in the table. For purposes of the Fiscal Year 2023 Bonus Plan, target annual cash incentive awards were to be based upon a specific percentage of each eligible Named Executive Officer’s annual base salary. In March and May 2023, as part of its annual review of our executive compensation program, the compensation committee reviewed the target annual cash incentive award opportunities of each Named Executive Officer. The compensation committee and board of directors determined that the target annual cash incentive award opportunity of each Named Executive Officer other than Mr. Ben Haim remain at the level set for fiscal year 2022. The compensation committee and board of directors determined that the target annual cash incentive award opportunity for Mr. Ben Haim remained unchanged, but its payment is contingent upon JFrog’s achievement of a target level of net new annual recurring revenue, effective as of April 1, 2023. Subsequently, our shareholders approved the target annual cash incentive award opportunity of Mr. Ben Haim in May 2023 at our annual shareholder meeting. In determining to change the approach for Mr. Ben Haim’s target annual cash incentive award opportunity and in making the decisions for the target annual cash incentive award opportunities of the other Named Executive Officers, our compensation committee and board of directors took into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own target annual cash incentive opportunity) and the current retention risks and challenges facing us, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Under the Fiscal 2023 Bonus Plan, the target annual cash bonus opportunities of our executive officers, including the Named Executive Officers, were weighted 100% on corporate financial objectives. The compensation committee and board of directors determined this allocation to be appropriate to focus our executive officers on our short-term financial objectives as reflected in our annual operating plan while, at the same time, recognizing their contributions to the achievement of these objectives and the successful execution of their individual roles and responsibilities. Corporate Performance Metrics For purposes of the Fiscal Year 2023 Bonus Plan, the sole corporate performance measure was based on net new annual recurring revenue (see Appendix B for a description of this operating metric) with corporate performance targets measured both quarterly and annually. The compensation committee and board of directors believed this performance measure was appropriate for our business given the criticality of company growth in 2023, our third full year as a public company, which it believes most directly influences long-term shareholder value. At the same time, the compensation committee established target performance levels for this measure that it believed to be challenging, but attainable, through the successful execution of our annual operating plan. Each of our Named Executive Officers other than Mr. Ben Haim was eligible to receive 75% of their annual target bonus opportunity under the Fiscal Year 2023 Bonus Plan based on achievement of quarterly net new annual recurring revenue goals. The payment amount for each fiscal quarter was generally to be calculated as a percentage of each such Named Executive Officer’s target bonus amount based on the degree to which the applicable quarterly net new annual recurring revenue target was achieved for such quarter, provided that the four quarterly portions of each such Named Executive Officer’s annual target bonus opportunity could not exceed 75% of the annual target bonus opportunity. There was no threshold or maximum level of achievement. By way of example, if the quarterly net new annual recurring revenue target was achieved at the 50% level of attainment with respect to a quarter, each Named Executive Officer’s payment amount with respect to such quarter would be approximately equal to the product of (i) 50% (representing the level of attainment) multiplied by (ii) the Named Executive Officer’s annual target bonus opportunity, multiplied by (iii) a percentage equal to quarterly net new annual recurring revenue target as a percentage of the total annual net new annual recurring revenue target, multiplied by (iv) 75% (representing that the four quarterly portions of the annual target bonus opportunity could not exceed 75% of the annual target bonus opportunity). Bonus amounts under the Fiscal Year 2023 Bonus Plan based on achievement of our quarterly net new recurring revenue goals were calculated quarterly and distributed to our executive officers, including our Named Executive Officers (other than Mr. Ben Haim), following the end of each fiscal quarter. Each of our Named Executive Officers other than Mr. Ben Haim was eligible to receive 25% of their annual target bonus opportunity under the Fiscal Year 2023 Bonus Plan based on achievement of the net new annual recurring revenue goal. The payment amount for such annual goal was generally to be calculated as a percentage of each such Named Executive Officer’s target bonus amount based on the degree to which the net new annual recurring revenue target was achieved for fiscal 2023, less any amounts already paid due to achievement of quarterly net new annual recurring revenue targets. There was no threshold or maximum level of achievement. By way of example, if the net new annual recurring revenue target was achieved at the 50% level of attainment with respect to fiscal year 2023, each Named Executive Officer’s payment amount would be approximately equal to the sum of (i) 50% (representing the level of attainment) multiplied by (ii) the Named Executive Officer’s annual target bonus opportunity, less (iii) the amounts already paid to the Named Executive Officer based on achievement of quarterly net new annual recurring revenue targets. Mr. Ben Haim was eligible to receive 100% of his annual target bonus opportunity under the Fiscal 2023 Bonus Plan based on achievement of the net new annual recurring revenue goal. The payment amount for such annual goal was generally to be calculated as a percentage of Mr. Ben Haim’s target bonus amount based on the degree to which the net new annual recurring revenue target was achieved for fiscal year 2023. The threshold level of achievement was the target level of achievement, and there was no maximum level of achievement. Bonus amounts under the Fiscal Year 2023 Bonus Plan based on achievement of our net new annual recurring revenue goal were calculated and distributed to our executive officers, including our Named Executive Officers (other than Mr. Ben Haim), following the end of fiscal 2023. 2023 Performance Results and Decisions
Compensation Elements
For fiscal year 2023, the overall level of achievement of the Company’s net new annual recurring revenue goal was approximately 98%, with quarterly levels of achievement of 125% for the first quarter, 90% for the second quarter, 109% for the third quarter, and 76% for the fourth quarter, respectively. Consequently, the achievement of the corporate performance metrics for fiscal year 2023 generated a payout percentage of approximately 98% of the target annual cash incentive award opportunity, except with respect to Shlomi Ben Haim. Consistent with his 2023 annual cash incentive award opportunity, Shlomi Ben Haim did not receive an annual cash incentive award for fiscal year 2023 because we did not achieve our target level of net new annual recurring revenue. This resulted in the total annual cash incentive awards paid to our Named Executive Officers for fiscal year 2023 set forth below in “Executive Compensation Tables—2023 Summary Compensation Table.” Long-Term Incentive Compensation We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use equity awards to incentivize and reward our Named Executive Officers for long-term corporate performance based on the value of our ordinary shares and, thereby, to align their interests with the interests of our stakeholders. The realized value of these equity awards bears a direct relationship to our ordinary share price, and, therefore, these awards are an incentive for our Named Executive Officers to create value for our shareholders. Equity awards also help us retain our Named Executive Officers in a highly competitive market and as such contribute to the long-term value creation for all our shareholders. For 2023, we primarily used RSU awards with time-based vesting requirements that may be settled for ordinary shares to motivate, reward and retain our Named Executive Officers for long-term increases in the value of our ordinary shares. The compensation committee and board of directors believe that because RSU awards have value to the recipient even in the absence of ordinary share price appreciation, we are able to incentivize and retain our Named Executive Officers using fewer ordinary shares than would be necessary if we used stock options to provide an equity stake in the Company. Since the value of RSU awards increases or decreases with any increase or decrease in the value of the underlying ordinary shares, RSU awards also provide incentives to our Named Executive Officers that are aligned with the interests of our stakeholders. For 2023, as described below, 50% of Mr. Ben Haim’s equity awards had a performance requirement. For 2024, we expanded the use of performance-based equity awards to our other Named Executive Officers with a split of 70% time-based and 30% performance-based for Named Executive Officers other than Mr. Ben Haim. Subject to the Companies Law, to date, our compensation committee and board of directors have not applied a rigid formula in determining the size of the equity awards to be granted to our Named Executive Officers as part of our annual focal review of equity awards (all subject to the ratio limitation within our Compensation Policy). Instead, in making these decisions, our compensation committee and board of directors have exercised their judgment as to the amount of the awards after considering the unvested equity holdings of each Named Executive Officer and the ability of these unvested holdings to satisfy our retention objectives, as well as the fierce market for senior executive talent in the San Francisco Bay Area and Israel. In addition, in granting equity awards to all of our employees, including our Named Executive Officers, our compensation committee and board of directors consider the proportion of our total ordinary shares outstanding used for annual employee long-term incentive compensation awards (our “burn rate”) in relation to the annual burn rate ranges of the companies in our compensation peer group and other recently-public technology companies with which the members of our compensation committee and board of directors are familiar, the potential economic and voting power dilution to our shareholders in relation to the median practice of the companies in our compensation peer group and other recently-public technology companies and the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Annual Equity Awards In March 2023, as part of its annual review of our executive compensation program, and after taking into consideration a competitive market analysis prepared by Compensia and the recommendations of our CEO (except with respect to his own equity award), as well as the factors described in the preceding paragraph, our compensation committee and board of directors determined that equity awards should be granted to each of our Named Executive Officers in the form of RSU awards with time-based vesting requirements that may be settled for ordinary shares and to Mr. Ben Haim in the form of PSU awards which will be eligible to vest if JFrog’s total shareholder return for 2023 was greater than the median of the total shareholder return for its compensation peer group at the time. If JFrog’s total shareholder return did not meet that goal, no portion of the PSU awards would be eligible to vest. Accordingly, Mr. Ben Haim, Ms. Notman, and Messrs. Shulman and Landman each received an RSU award with time-based vesting requirements that may be settled for ordinary shares with a grant date fair value of approximately $4.0 million, $4.0 million, $5.0 million, and $2.0 million, respectively. Mr. Ben Haim received a PSU award with a grant date fair value of approximately $2.6 million. The RSU and PSU awards were all granted following our May 2023 annual shareholder meeting (with Messrs. Ben Haim and Landman’s awards granted following approval by shareholders). Each RSU award will vest over a four-year period with 25% of the total original number of shares subject to the applicable RSU award vesting on the one-year anniversary of the applicable vesting commencement date and the remainder vesting ratably thereafter on designated vesting dates over the following three years in accordance with our equity grant practices, subject to the Named Executive Officer’s continued service through each vesting date. The PSU Award granted to Mr. Ben Haim was only eligible to vest if our total shareholder return for 2023 was greater than the median of the total shareholder return for the companies in our 2023 compensation peer group, calculated as the volume-weighted average price for shares traded in December 2023, assuming any dividends paid in 2023 were reinvested, divided by the volume-weighted average price for shares traded in December 2022. As we achieved the total shareholder return performance goal under the PSU Award, 25% of the total original number of shares subject to the PSU Award vested on March 1, 2024, and the PSU Award will continue to vest on a quarterly basis over the following three years, subject to Mr. Ben Haim’s continued service through each vesting date. The compensation committee and board of directors believed that these RSU and PSU awards would help us to achieve our incentive and retention objectives and generally aligned with market practice among similarly situated executives at the companies in our compensation peer group. The equity awards granted to our Named Executive Officers for fiscal year 2023 were as follows:
Compensation Elements
| Named Executive Officer | 2023 RSU Awards (number of shares) | 2023 RSU Awards (approximate aggregate grant date fair value) | 2023 PSU Awards (number of shares) | 2023 PSU Awards (approximate aggregate grant date fair value) | | Shlomi Ben Haim | 174,596 | $4.0 million | 174,596 | $2.6 million | | Tali Notman | 174,596 | $4.0 million | — | — | | Jacob Shulman | 218,245 | $5.0 million | — | — | | Yoav Landman | 87,298 | $2.0 million | — | — |
Post-Employment Compensation
Post-Employment Compensation We entered into change in control and severance agreements with each of Mr. Ben Haim, Ms. Notman and, prior to his termination of employment, Mr. Shulman, our Named Executive Officers located in the United States (collectively, the “Severance Arrangements”). The Severance Arrangements provide (or with respect to Mr. Shulman, provided) for certain protections in the event of specified involuntary terminations of employment, including an involuntary termination of employment in connection with a change in control of the Company, in exchange for executing a separation agreement and release of claims in our favor that becomes effective and irrevocable. Mr. Shulman’s Severance Arrangement terminated in connection with his voluntary termination of employment in December 2023. The Severance Arrangements provide reasonable compensation in the form of severance pay and certain limited benefits to a Named Executive Officer if he or she leaves our employ under certain circumstances to facilitate his or her transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing Named Executive Officer to sign a separation agreement and release of claims in a form and with terms acceptable to us providing for a general release of all claims as a condition to receiving post-employment compensation payments or benefits. We also believe that the Severance Arrangements help maintain our Named Executive Officers’ continued focus and dedication to their assigned duties to maximize stakeholder value if there is a potential transaction that could involve a change in control of the Company. Under the Severance Arrangements, all payments and benefits in the event of a change in control of the Company are payable only if there is a connected involuntary loss of employment by a Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention value following a change in control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction. The “double-trigger” equity vesting acceleration is documented in each Named Executive Officer’s award grant letters. In the event of a change in control of the Company, to the extent that any of the amounts provided for under the Severance Arrangements would constitute a “parachute payment” within the meaning of Section 280G of the Code and could be subject to the related excise tax under Section 4999 of the Code, a Named Executive Officer will receive such payment as would entitle him or her to receive the greatest after-tax benefit, even if it means that we pay the Named Executive Officer a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code. We have entered into an employment letter with Mr. Landman, our Named Executive Officer located in Israel, that provides for certain severance benefits in connection with an involuntary termination of employment that are generally consistent with the severance benefits we provide to our Named Executive Officers located in the United States pursuant to the Severance Agreements, although Mr. Landman’s employment letter does not provide for equity vesting acceleration. Mr. Landman’s “double-trigger” equity vesting acceleration is documented in his award grant letter. We do not provide any tax reimbursement payments (or “gross-ups”) on excise taxes relating to a change in control of the Company with respect to any of our executive officers, including our Named Executive Officers. We believe that having in place reasonable and competitive post-employment compensation arrangements, including in the event of a change in control of the Company, are essential to attracting and retaining highly qualified executive officers. The compensation committee does not consider the specific amounts payable under the post-employment compensation arrangements when determining the annual compensation for our Named Executive Officers. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive. For detailed descriptions of the post-employment compensation arrangements with our Named Executive Officers, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Executive Compensation Tables—Potential Payments upon Termination or Change in Control” below.
Tax and Accounting Considerations
Tax and Accounting Considerations The compensation committee takes the applicable tax and accounting requirements into consideration in designing and overseeing our executive compensation program. Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), generally limits the amount a public company may deduct for federal income taxes purposes for compensation paid to its chief executive officer, chief financial officer, and certain other executive officers up to $1 million per executive office per year, subject to certain exceptions. As a publicly-traded company, the compensation committee and the board of directors are mindful of the benefits of full deductibility of compensation, and intend to operate our executive compensation program to be most efficient and effective for our shareholders, which may include compliance with Section 162(m) of the Code. The compensation committee and the board of directors believe it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation. Accounting for Stock-Based Compensation The compensation committee and the board of directors take accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record a compensation expense in our income statement for all equity awards granted to our executive officers and other employees. This compensation expense is based on the grant date “fair value” of the equity award and, in most cases, will be recognized ratably over the award’s requisite service period (which, generally, will correspond to the award’s vesting schedule). This compensation expense is also reported in the compensation tables below, even though recipients may never realize any value from their equity awards.
2023 Summary Compensation Table
2023 Summary Compensation Table The following table presents information concerning the total compensation of our Named Executive Officers for services rendered to us in all capacities during the years ended December 31, 2023, 2022 and 2021.
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards(1) ($) | Non-Equity Incentive Plan Compensation(2) ($) | All Other Compensation ($) | Total ($) | | Shlomi Ben Haim, Chief Executive Officer | 2023 | 500,000 | 6,638,140 | — | 26,890(3) | 7,165,030 | | | 2022 | 483,958 | 3,051,728 | 229,487 | 42,949 | 3,808,122 | | | 2021 | 449,292 | 2,598,710 | 247,903 | 65,297 | 3,361,202 | | Tali Notman, Chief Revenue Officer | 2023 | 460,000 | 3,999,994 | 448,730 | 9,200(4) | 4,917,924 | | | 2022 | 445,000 | 2,989,246 | 295,183 | 8,900 | 3,738,329 | | | 2021 | 396,250 | 3,779,475 | 385,534 | 7,925 | 4,569,184 | | Jacob Shulman, Chief Financial Officer | 2023 | 460,000 | 5,264,475(5) | 269,238 | 44,410(6) | 6,038,123 | | | 2022 | 451,500 | 2,241,941 | 180,411 | 9,684 | 2,883,536 | | | 2021 | 422,000 | 5,096,595 | 245,378 | 9,159 | 5,773,132 | | Yoav Landman, Chief Technology Officer(7) | 2023 | 320,865 | 1,999,997 | 198,271 | 69,509(8) | 2,588,642 | | | 2022 | 348,063 | 1,464,834 | 150,730 | 75,470 | 2,039,097 | | | 2021 | 344,159 | 1,173,722 | 205,802 | 75,789 | 1,799,472 |
2023 Summary Compensation Table
Amounts reported represent the aggregate grant date fair value of equity awards granted to our executives, calculated in accordance with ASC Topic 718. For more information regarding the valuation of these awards, please refer to the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 15, 2024. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the executive officers. (2) The amounts reported represent payments made to applicable Named Executive Officers under our annual incentive bonus arrangements, which generally provided for quarterly and annual payments based on achievement of quarterly and annual net new annual recurring revenue goals, as described in more detail in the Compensation Discussion and Analysis. (3) The amount reported represents expenses in the amount of $18,211 reimbursed by us to Mr. Ben Haim for expenses and an additional amount of $8,679 sufficient to make such reimbursements tax neutral to Mr. Ben Haim. (4) The amount reported represents the company contributions made under our 401(k) plan. (5) The amount reported represents grant date fair value of $4,999,993 with an additional $264,482 reflecting the incremental value resulting from acceleration of vesting of a pro-rata portion of his time-based RSUs, pursuant to the Consulting Services Agreement, dated December 16, 2023 (the “Consulting Agreement”). In connection with his separation, Mr. Shulman forfeited 186,418 RSUs from his 2023 grant with his total forfeitures detailed under the description of his Executive Employment Agreement below. (6) The amount reported represents (i) accrued vacation payout of $34,510, and (ii) company contributions of $9,900 made under our 401(k) plan. (7) All amounts reported for Mr. Landman with respect to “Salary,” “Non-Equity Incentive Plan Compensation” and “All Other Compensation” were paid in NIS. All compensation paid in NIS to Mr. Landman has been converted into USD at an annual average exchange rate of 3.690 NIS for each 1.000 USD for fiscal year 2023, 3.360 for fiscal year 2022, and 3.238 for fiscal year 2021. (8) The amount reported represents (i) contributions by us of $26,728 in NIS to a severance fund under a Section 14 Arrangement pursuant to Israeli Severance Pay Law, (ii) contributions by us of $21,062 in NIS to a pension and manager’s insurance fund pursuant to Israeli labor laws, (iii) contributions by us of $3,832 in NIS to an education savings fund, and (iv) travel allowance for commuting costs of $17,887 in NIS. For purposes of satisfying requirements under the Companies Law, the total compensation of Mr. Frederic Simon, our departing Chief Data Scientist, for fiscal year 2023 was $2,486,963, comprised of salary of $262,332, stock awards of $1,999,997, non-equity incentive plan compensation of $164,012, and all other compensation of $60,622, with each such amount calculated pursuant to the same applicable methodology as under our 2023 Summary Compensation Table. Mr. Simon’s salary, non-equity incentive plan compensation, and all other compensation were paid in NIS which were converted into USD at an annual average exchange rate of 3.690 NIS for each 1.000 USD.
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023 The following table summarizes RSU awards granted to our Named Executive Officers during the fiscal year ended December 31, 2023.
Grants of Plan-Based Awards in 2023
| | | Date of Approval | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares | Grant Date Fair Value | | Name | Grant Date | by Board of Directors | Threshold (#) | Target (#) | Maximum (#) | Threshold (#) | Target (#) | Maximum (#) | of Stock or Units(2) (#) | of Stock Awards(3) ($) | | Shlomi Ben Haim | 5/15/2023 | 3/9/2023 | — | — | — | — | — | — | 174,596 | 3,999,994 | | Shlomi Ben Haim | 5/15/2023 | 3/9/2023 | — | — | — | — | 174,596(4) | 174,596(4) | — | 2,638,146 | | Shlomi Ben Haim | N/A | 3/9/2023 | 375,000 | 375,000 | None | — | — | — | — | — | | Tali Notman | 5/15/2023 | 5/15/2023 | — | — | — | — | — | — | 174,596 | 3,999,994 | | Tali Notman | N/A | 5/2/2023 | — | 460,000 | None | — | — | — | — | — | | Jacob Shulman | 5/15/2023 | 5/15/2023 | — | — | — | — | — | — | 218,245 | 4,999,993 | | Jacob Shulman | N/A | 5/2/2023 | — | 276,000 | None | — | — | — | — | — | | Yoav Landman | 5/15/2023 | 3/9/2023 | — | — | — | — | — | — | 87,298 | 1,999,997 | | Yoav Landman | N/A | 3/9/2023 | — | 203,251(5) | None | — | — | — | — | — |
Grants of Plan-Based Awards in 2023
____________________________________________ (1) The amounts reported represent payments made to applicable Named Executive Officers under our annual incentive bonus arrangements which provide the target payouts with no threshold or maximum (except for a threshold level of achievement with respect to Mr. Ben Haim), as described in more detail in the Compensation Discussion and Analysis. (2) Shares reported represent awards of RSUs granted under the 2020 Plan. Each award of RSUs is subject to service-based vesting criteria described in the footnotes to the table below titled “Outstanding Equity Awards at Fiscal Year End,” except as otherwise indicated in the footnotes to this table. (3) Amounts reported represent the aggregate grant date fair value of stock awards granted to our executives, calculated in accordance with ASC Topic 718. The fair value of RSUs is measured based on the closing price of the Company’s ordinary shares, and the fair value of PSU is measured using a Monte Carlo simulation model, as discussed in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 15, 2024. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the executive officers. (4) Shares reported represent PSUs granted under the 2020 Plan. As of December 31, 2023, the performance condition was satisfied. Thus the PSUs are further subject to service-based vesting criteria described in the footnotes to the table below titled “Outstanding Equity Awards at Fiscal Year End.” Amount reported was calculated based on 2023 salary and travel allowance as presented in the “2023 Summary Compensation Table.”
Outstanding Equity Awards at Fiscal 2023 Year-End
Outstanding Equity Awards at Fiscal 2023 Year-End The following table presents information concerning all outstanding equity awards held by each of our Named Executive Officers as of December 31, 2023:
Outstanding Equity Awards at Fiscal 2023 Year-End
| | | Options Awards | | | | Share Awards | | | Names of Executive Officer | Grant Date | Number of Securities Underlying Unexercised Options # Exercisable | Number of Securities Underlying Unexercised Options # Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares That Have Not Vested | Market Value of Shares That Have Not Vested(1) ($) | | Shlomi Ben Haim | 5/15/2023(2) | — | — | — | — | 174,596(3) | 6,042,768 | | | 5/15/2023(2) | — | — | — | — | 174,596(4) | 6,042,768 | | | 5/16/2022(2) | — | — | — | — | 107,758(5) | 3,729,504 | | | 5/13/2021(2) | — | — | — | — | 28,312(6) | 979,878 | | Tali Notman | 5/15/2023(2) | — | — | — | — | 174,596(4) | 6,042,768 | | | 2/9/2022(2) | — | — | — | — | 68,965(5) | 2,386,879 | | | 11/3/2021(2) | — | — | — | — | 12,136(7) | 420,027 | | | 2/22/2021(2) | — | — | — | — | 17,962(6) | 621,665 | | | 7/29/2020(8) | 64,999(9) | 35,001(9) | 23.00 | 7/29/2030 | — | — | | | 2/3/2020(8) | 37,500(9) | 12,500(9) | 15.12 | 2/3/2030 | — | — | | | 11/27/2018(8) | 91,177 | — | 5.44 | 11/27/2028 | — | — | | | 5/12/2015(8) | 68,000 | — | 0.18 | 5/12/2025 | — | — | | Jacob Shulman | 5/15/2023(2) | — | — | — | — | 31,827(10) | 1,101,532 | | | 7/29/2020(8) | 55,249 | — | 23.00 | 7/29/2030 | — | — | | | 2/3/2020(8) | 27,500 | — | 15.12 | 2/3/2030 | — | — | | | 7/31/2018(8) | 284,985 | — | 2.38 | 7/31/2028 | — | — | | Yoav Landman | 5/15/2023(2) | — | — | — | — | 87,298(4) | 3,021,384 | | | 5/16/2022(2) | — | — | — | — | 51,724(5) | 1,790,168 | | | 5/13/2021(2) | — | — | — | — | 12,787(6) | 442,558 |
Outstanding Equity Awards at Fiscal 2023 Year-End
____________________________________________ (1) The market value of the share awards that have not vested is calculated by multiplying the number of shares by the fair market value per share of ordinary shares on December 31, 2023, or $34.61 per share. (2) Each of the awards was granted pursuant to our 2020 Plan. (3) Shares represent PSUs for which the performance-based vesting condition was satisfied, one-fourth of which vest on March 1, 2024 and one-sixteenth vest quarterly thereafter until the award fully vests, subject to continued service with us through the applicable vesting date. (4) One-fourth of the shares vest on June 1, 2024 and one-sixteenth vest quarterly thereafter until the award fully vests, subject to continued service with us through the applicable vesting date. (5) One-fourth of the shares vest on June 1, 2023 and one-sixteenth vest quarterly thereafter until the award fully vests, subject to continued service with us through the applicable vesting date. (6) One-fourth of the shares vest on June 1, 2022 and one-sixteenth vest quarterly thereafter until the award fully vests, subject to continued service with us through the applicable vesting date. (7) One-fourth of the shares vest on December 1, 2022 and one-sixteenth vest quarterly thereafter until the award fully vests, subject to continued service with us through the applicable vesting date. (8) Each of the outstanding option awards was granted pursuant to our 2011 Israeli Share Option Plan (“2011 Plan”). (9) One-fifth of the shares subject to the option vested on the first anniversary of grant date, and the remaining shares subject to the option vest in sixteen equal quarterly installments thereafter, subject to continued service through the applicable vesting date. The shares represent RSUs which accelerated and fully vested upon the effectiveness of a full release of claims by Mr. Shulman in favor of the Company no later than January 31, 2024.
Option Exercises and Stock Vested in 2023
Option Exercises and Stock Vested in 2023 The following table shows certain information regarding option exercises and the vesting of RSU grants by our Named Executive Officers during the fiscal year ended December 31, 2023:
Option Exercises and Stock Vested in 2023
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(2) ($) | | Shlomi Ben Haim | — | — | 83,531 | 2,156,229 | | Tali Notman | — | — | 59,423 | 1,536,609 | | Jacob Shulman | 102,500 | 2,564,515 | 54,052 | 1,401,574 | | Yoav Landman | — | — | 39,560 | 1,020,941 |
Option Exercises and Stock Vested in 2023
____________________________________________ (1) The aggregate value realized is calculated by multiplying (i) the number of ordinary shares acquired upon exercise by (ii) the difference between the closing price of our ordinary shares on the date of exercise, as reported by Nasdaq, and the applicable exercise price of the option, and does not represent actual amounts received by our Named Executive Officers as a result of the option exercises. (2) The aggregate value realized is calculated by multiplying (i) the number of ordinary shares acquired upon vesting of RSUs by (ii) the closing price of our ordinary shares on the vest date (or, in the event the vest date occurs on a holiday or weekend, the closing price of our ordinary shares on the immediately preceding trading day), as reported by Nasdaq.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control In September 2020, we entered into a new change in control and severance agreement with Messrs. Ben Haim and Shulman and Ms. Notman, our Named Executive Officers located in the United States, with each agreement effective on September 1, 2020. Mr. Shulman’s change in control and severance agreement was superseded by his Consulting Agreement in connection with his voluntary termination of employment. Pursuant to each change in control and severance agreement, if we terminate the employment of an executive without “cause” (excluding terminations due to death or disability) or the executive resigns for “good reason” (as such terms are defined in the applicable agreement), and, within 60 days following such termination, the executive executes a waiver and release of claims in our favor that becomes effective and irrevocable, the executive will be entitled to receive (i) a lump sum payment equal to 6 months (12 months with respect to Mr. Ben Haim) of the executive’s then current annual base salary, (ii) reimbursement of premiums to maintain group health insurance continuation benefits pursuant to “COBRA” for the executive and the executive’s respective dependents for up to 6 months (12 months with respect to Mr. Ben Haim), and (iii) with respect to Mr. Ben Haim, a lump sum severance relocation payment of $35,000. Additionally, we have entered into an employment letter with Mr. Landman, our Named Executive Officer located in Israel, that provides for certain severance benefits in connection with an involuntary termination of employment that are generally consistent with the severance benefits we provide to our Named Executive Officers located in the United States pursuant to the change in control and severance agreements, although Mr. Landman’s employment letter does not provide for equity vesting acceleration. Mr. Landman’s “double-trigger” equity vesting acceleration is documented in his award grant letter. Mr. Shulman’s Consulting Agreement provides that, subject to Mr. Shulman’s execution of a full release of claims in favor of the Company that becomes effective by January 31, 2024, 31,827 of the unvested and outstanding RSUs held by Mr. Shulman would accelerate and fully vest on the effective date of such release. The following table describes (i) the potential payments that would have been provided to each of Messrs. Ben Haim and Notman, pursuant to the applicable change in control and severance agreements, and Mr. Landman, pursuant to his employment agreement (with amounts converted into USD at an annual average exchange rate of 3.690 NIS for each 1.000 USD) in the event that they were terminated without “cause” or resigned for “good reason” and executed a waiver and release of claims in our favor, as described above, assuming such termination occurred on December 31, 2023, and (ii) the actual payments that were provided to Mr. Shulman pursuant to his Consulting Agreement in connection with his voluntary termination of employment which occurred on December 31, 2023, as described above:
Potential Payments upon Termination or Change in Control
| Named Executive Officer | Cash Compensation ($) | Health Benefits ($) | Social and Other Benefits ($) | Acceleration of Outstanding Equity Awards ($) | Relocation Payment ($) | Total ($) | | Shlomi Ben Haim | 500,000 | 29,355 | — | — | 35,000 | 564,355 | | Tali Notman | 230,000 | 14,676 | — | — | — | 244,676 | | Jacob Shulman | — | — | — | 1,101,532(1) | — | 1,101,532 | | Yoav Landman | 160,433 | — | 25,708 | — | — | 186,141 |
Potential Payments upon Termination or Change in Control
____________________________________________ (1) Amount reflects the fair market value of the 31,827 shares subject to RSUs that accelerated in connection with Mr. Shulman’s voluntary termination of employment on December 31, 2023 pursuant to Mr. Shulman’s Consulting Agreement, calculated by multiplying the number of accelerating shares by the fair market value per share of ordinary shares on December 31, 2023, or $34.61 per share. Pursuant to each change in control and severance agreement, if, within the 3 month period prior to or the 12 month period following a “change of control” (as defined in the applicable agreement), we terminate the employment of an executive without cause (excluding death or disability) or the executive resigns for good reason, and, within 60 days following such termination, the executive executes a waiver and release of claims in our favor that becomes effective and irrevocable, the executive will be entitled to receive (i) a lump sum payment equal to 12 months (18 months with respect to Mr. Ben Haim) of the executive’s then current annual base salary, (ii) a lump sum payment equal to the executive’s pro rata target annual bonus amount for the year of termination, (iii) reimbursement of premiums to maintain group health insurance continuation benefits pursuant to “COBRA” for the executive and the executive’s respective dependents for up to 12 months (18 months with respect to Mr. Ben Haim), (iv) vesting acceleration as to 100% of the then-unvested shares subject to each of the executive’s then outstanding equity awards (and in the case of awards with performance vesting, unless specified in the applicable award agreement governing such award, all performance goals will be deemed achieved at target levels), and (v) with respect to Mr. Ben Haim, a lump sum severance relocation payment of $35,000 (this payment would be made because Mr. Ben Haim moved to the U.S. at the Company’s request, so it is appropriate to relocate him back to Israel if his employment is terminated). The following table describes (i) the potential payments that would have been provided to each of Messrs. Ben Haim and Notman, pursuant to the applicable change in control and severance agreements, and Mr. Landman, pursuant to his employment agreement (with amounts converted into USD at an annual average exchange rate of 3.690 NIS for each 1.000 USD), in the event that they were terminated within the 3 month period prior to or the 12 month period following a “change of control” without “cause” or resigned for “good reason” and executed a waiver and release of claims in our favor, as described above, assuming such termination occurred on December 31, 2023, and (ii) the actual payments that were provided to Mr. Shulman pursuant to his Consulting Agreement in connection with his voluntary termination of employment which occurred on December 31, 2023:
Potential Payments upon Termination or Change in Control
| Named Executive Officer | Cash Compensation ($) | Pro Rata Bonus Payment ($) | Health Benefits ($) | Social and Other Benefits ($) | Acceleration of Outstanding Equity Awards ($) | Relocation Payment ($) | Total ($) | | Shlomi Ben Haim | 750,000 | 562,500 | 44,032 | — | 16,794,918 | 35,000 | 18,186,450 | | Tali Notman | 460,000 | 460,000 | 29,351 | — | 10,121,326 | — | 11,070,677 | | Jacob Shulman | — | — | — | — | 1,101,532(1) | — | 1,101,532 | | Yoav Landman | 320,865 | 192,519 | — | 51,417 | 5,254,110 | — | 5,818,911 |
Potential Payments upon Termination or Change in Control
Amount reflects the fair market value of the 31,827 shares subject to RSUs that accelerated in connection with Mr. Shulman’s voluntary termination of employment on December 31, 2023 pursuant to Mr. Shulman’s Consulting Agreement, calculated by multiplying the number of accelerating shares by the fair market value per share of ordinary shares on December 31, 2023, or $34.61 per share. Pursuant to each change in control and severance agreement, in the event any payment to an executive would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, as amended (the “Code”) (as a result of a payment being classified as a parachute payment under Section 280G of the Code), the executive will receive such payment as would entitle the executive to receive the greatest after-tax benefit, even if it means that we pay the executive a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code.
CEO Pay Ratio
CEO Pay Ratio Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, we are reporting the ratio of annual total compensation of our median compensated employee to that of Shlomi Ben Haim, our current CEO. The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules and applicable guidelines. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. The pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. As a result, and as explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, shareholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow shareholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures. As permitted under the SEC rules, we are using the same median employee as was identified for purposes of our fiscal year 2022 CEO pay ratio, as we believe the changes in our employee population and compensation arrangements have not significantly impacted our pay ratio disclosure. To identify the median employee in fiscal year 2022, we aggregated the annual base salary or base wages, actual commission and bonus earned, and equity awards received for each of our employees as of December 31, 2022, whether on a full-time or part-time basis, excluding our CEO. For employees paid other than in U.S. dollars, we converted their annual base salary and base wages to U.S. dollars using the applicable average annual exchange rate for fiscal year 2022. With respect to equity awards, we granted RSUs during 2022 and determined the grant date fair value in accordance with FASB ASC Topic 718. We calculated annual total compensation for the median employee according to the methodology used to report the annual compensation of our Named Executive Officers in the Summary Compensation Table. For fiscal year 2023, the total compensation for our CEO, Mr. Ben Haim, was $7,165,030, as reported in the “Total” column of the 2023 Summary Compensation Table of this proxy statement. The fiscal year 2023 annual total for our median employee was $225,180. Thus, the ratio of our CEO’s total fiscal year 2023 compensation to our median employee’s total fiscal year 2023 compensation was 31.8:1. Neither the compensation committee nor our management used this pay ratio in making compensation decisions.
Pay Versus Performance
Pay Versus Performance Under rules adopted pursuant to the Dodd-Frank Act, we are required to disclose certain information about the relationship between the compensation actually paid to our named executive officers and certain measures of company performance. The material that follows is provided in compliance with these rules; however, additional information regarding our compensation philosophy, the structure of our performance-based compensation programs, and compensation decisions made this year is described above in our “Compensation Discussion and Analysis”. The following table presents information concerning the compensation of our CEO and other Named Executive Officers for the years ended December 31, 2023, 2022, 2021 and 2020.
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | | Summary Compensation Table Total for PEO(1) ($) | Compensation Actually Paid to PEO(2)(3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(4) ($) | Average Compensation Actually Paid to Non-PEO NEOs(2)(5) ($) | Total Shareholder Return(6) ($) | Peer Group Total Shareholder Return(7) ($) | Net Income (Loss)(8) (in thousand, $) | Company-Selected Measure(9) | | 2023 | 7,165,030 | 14,793,949 | 4,514,896 | 4,436,706 | 53 | 169 | (61,256) | None | | 2022 | 3,808,122 | 3,756,514 | 2,886,987 | 665,379 | 33 | 108 | (90,184) | None | | 2021 | 3,361,202 | (10,664,266) | 4,047,263 | (4,973,525) | 46 | 152 | (64,203) | None | | 2020 | 26,671,048 | 40,040,525 | 2,793,376 | 19,607,565 | 97 | 114 | (9,405) | None |
Pay Versus Performance
____________________________________________ (1) Amounts present total compensation reported for Mr. Ben Haim, who served as CEO for each year presented. (2) Compensation actually paid does not mean that the identified individual was actually paid those amounts in the listed year, but this is a dollar amount derived from the starting point of summary compensation table total compensation under the methodology prescribed under the relevant rules as shown in the adjustment table below, computed in accordance with Item 402(v) of Regulation S-K. The amounts include (i) the year-end value of equity awards granted during the reported year, and (ii) the change in the value of equity awards that were unvested at the end of the prior year, measured through the date the awards vested, or through the end of the reported fiscal year. Equity awards consist of share options, RSU awards and PSU awards. On each valuation date, the fair value of each share option is estimated using the Black-Scholes option pricing model, the fair value of each RSU award is based on the fair value of the underlying ordinary shares, and the fair value of Mr. Ben Haim’s PSU award for 2023 is based on the fair value of the underlying ordinary shares because the performance condition was satisfied on the measurement date. (3) The following table presents adjustments to Mr. Ben Haim’s total compensation for each year to determine the compensation actually paid to him:
Pay Versus Performance
| | 2023 | 2022 | 2021 | 2020 | | Summary Compensation Table Total for PEO | $7,165,030 | $3,808,122 | $3,361,202 | $26,671,048 | | Equity Award Adjustments: | | | | | | Less: Reported grant date fair value of equity awards | (6,638,140) | (3,051,728) | (2,598,710) | (25,969,446) | | Add: Vesting date fair value of equity awards granted and vested in the year | — | — | — | 6,089,600 | | Add: Year-end fair value of outstanding and unvested equity awards granted in the year | 12,085,536 | 3,677,591 | 2,242,350 | 33,249,323 | | Add: Change in fair value between the end of the prior year and the vesting date of equity awards granted in prior years that vested in the year | 374,513 | (282,516) | (13,669,108) | — | | Add: Year over year change in fair value of outstanding and unvested equity awards granted in prior years | 1,807,010 | (394,955) | — | — | | Compensation Actually Paid to PEO | $14,793,949 | $3,756,514 | $(10,664,266) | $40,040,525 |
Pay Versus Performance
Amounts reported present the average of total compensation reported for our Named Executive Officers other than Mr. Ben Haim, which included Ms. Notman, Mr. Shulman and Mr. Landman for 2023, 2022 and 2021 and Ms. Notman and Mr. Shulman for 2020. The following presents adjustments to the average total compensation to our non-CEO Named Executive Officers for each year to determine the average compensation actually paid to them:
Pay Versus Performance
| | 2023 | 2022 | 2021 | 2020 | | Summary Compensation Table Total for Non-PEO | $4,514,896 | $2,886,987 | $4,047,263 | $2,793,376 | | Equity Award Adjustments: | | | | | | Less: Reported grant date fair value of equity awards | (3,666,662) | (2,232,007) | (3,349,931) | (2,176,156) | | Add: Vesting date fair value of equity awards granted and vested in the year | — | — | — | — | | Add: Year-end fair value of outstanding and unvested equity awards granted in the year | 3,388,561 | 1,961,386 | 1,963,566 | 7,109,580 | | Add: Change in fair value between the end of the prior year and the vesting date of equity awards granted in prior years that vested in the year | 243,329 | (809,996) | (1,836,322) | 221,200 | | Add: Year over year change in fair value of outstanding and unvested equity awards granted in prior years | 835,263 | (1,140,991) | (5,798,101) | 11,659,565 | | Less: Fair value at end of prior year of awards granted in prior years that were forfeited during year | (790,520) | — | — | — | | Less: Incremental fair value of awards modified during year | (88,161) | — | — | — | | Compensation Actually Paid to Non-PEO | $4,436,706 | $665,379 | $(4,973,525) | $19,607,565 |
Pay Versus Performance
(6) Presents the cumulative total shareholder return (“TSR”) since our initial public offering on September 16, 2020 (the “IPO”).TSR is calculated by assuming that a $100 investment was made on at the close of trading on the first full day of trading of our stock (September 16, 2020) and reinvesting all dividends until the last day of each reported fiscal year. (7) Presents the TSR of S&P Information Technology Index since September 16, 2020. S&P Information Technology Index is a peer group presented in accordance with Item 201(e) of Regulation S-K under the Exchange Act in our Annual Report on Form 10-K for the year ended December 31, 2023. TSR is calculated by assuming that a $100 investment was made at the close of trading on the first full day of trading of our stock (September 16, 2020) and reinvesting all dividends until the last day of each reported fiscal year. (8) The dollar amounts reported are our net loss reflected in our audited financial statements. (9) We did not use a financial performance measure as defined in the Section 402(v) rules, other than our ordinary share price, to link the compensation actually paid to our CEO or other named executive officers for each year presented. As noted in the tabular list below, the operating metric net new annual recurring revenue links compensation actually paid to performance. Tabular List of Performance Measures
Pay Versus Performance
| Our ordinary share price was the only financial performance measure used to link compensation actually paid to performance | | Additionally, we used the operating metric, net new annual recurring revenue, to link compensation actually paid to performance |
Description of Relationships of Information Presented in the Pay Versus Performance Table
Description of Relationships of Information Presented in the Pay Versus Performance Table Compensation Actually Paid vs. TSR As reflected in the following graph, the compensation actually paid (the “CAP”) to our CEO and other Named Executive Officers correlated to our TSR because equity awards constituted a significant part of the compensations for our Named Executive Officers. Equity awards strongly align our Named Executive Officers’ interests with those of our shareholders by providing a continuing financial incentive to maximize long-term value for our shareholders and by encouraging our executive officers to continue their service for the long-term. Compensation Actually Paid vs. Net loss Since our IPO, we have continued to invest in our business and incurred losses for the years presented. Historically, we have not looked to net income or loss as a performance measure for our Named Executive Officers. As discussed under Compensation Discussion and Analysis above, net new annual recurring revenue goal is utilized to determine part of our executives’ cash bonus.