DEF 14A of Outset Medical, Inc.
Filed Apr 11, 2024 · FY20230000950170-24-043692
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General Our Board currently consists of eight directors and is divided into three classes of directors that serve staggered three-year terms, currently Class I, with a term expiring in 2024, Class II, with a term expiring in 2025 and Class III, with a term expiring in 2026. At the Annual Meeting, our stockholders will vote on the election of three Class I directors for an additional three-year term expiring at our 2027 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the expiration of his or her three-year term and the election and qualification of his or her successor. The three directors currently serving on our Board in Class I, the class whose term of office expires in 2024, have each been nominated by our Board, upon the recommendation of our Nominating and Corporate Governance Committee, to stand for election at the Annual Meeting: Karen Drexler, Dale E. Jones and Leslie Trigg. Each of these three nominees has consented to being named as a nominee in this proxy statement and has agreed to serve, if elected, until our 2027 annual meeting of stockholders and until the election and qualification of his or her successor. For more information about each of the director nominees and continuing directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of our Board, please refer to the section below entitled “Overview of Our Nominees and Continuing Directors.”
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| Vote Required: | Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the three nominees receiving the highest number of affirmative votes (from the holders of votes of shares present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withhold” votes will have no effect on the outcome of this vote. | | | Board Recommendation: | OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE THREE (3) CLASS I DIRECTOR NOMINEES NAMED ABOVE. | |
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Overview of Our Nominees and Continuing Directors The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each director nominee and each continuing director:
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| | | | | | | | | Current Committee Membership* | | | | | Age | Position(s) | Director Since | Class | Current Term Expires | Expiration of Term for Which Nominated | Independent | AC | CC | NCG | | Director Nominees | | | | | | | | | | | | Karen Drexler | 64 | Director | 2021 | I | 2024 | 2027 | Yes | | X | X | | Dale E. Jones | 64 | Director | 2022 | I | 2024 | 2027 | Yes | | Chair | | | Leslie Trigg | 53 | President, CEO and Chair of the Board | 2014 | I | 2024 | 2027 | No | | | | | Continuing Directors | | | | | | | | | | | | D. Keith Grossman | 63 | Lead Independent Director | 2014 | II | 2025 | — | Yes | | X | X | | Patrick T. Hackett | 62 | Director | 2019 | II | 2025 | — | Yes | X | | Chair | | Jim Hinrichs | 56 | Director | 2020 | III | 2026 | — | Yes | Chair | | | | Brent D. Lang | 56 | Director | 2024 | III | 2026 | — | Yes | X | | | | Andrea L. Saia | 66 | Director | 2021 | III | 2026 | — | Yes | X | | |
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* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate Governance Committee
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| Our director nominees and continuing directors (which we refer to as our “directors” in these charts) bring diverse viewpoints and perspectives to our boardroom and exhibit a balance of tenure, skills, experiences and backgrounds that we believe enhances the deliberation and decision-making processes of our Board and allows our Board to effectively fulfill its oversight function. Our directors bring a balance of skills and experience, including those listed in the skills matrix on the following page. The matrix identifies the most prominent skills and core competencies of each director (reflected on an aggregate basis). Each director possesses numerous other skills and competencies not reflected in the matrix below, however, we believe that representing only the most prominent skills and core competencies of our Board provides a more meaningful presentation of the key contributions and value that our directors bring to their service on our Board and committees and to our stockholders. | Independence | Gender Diversity | | | 7 of 8 directors are Independent Independent Management 1 7 | 3 of 8 directors are women (incl. our Chair) Women Men 5 3 | | | Tenure | Age | | | 4.3 yrs Average tenure of directors 2 2 4 < 3 yr 3-6 yrs 7+ yrs | 60.5 yrs Average age of directors 5 3 < 60 years 60+ years |
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| Board Diversity Matrix (as of April 11, 2024)* | | | | | | Board Size: | | | | | | Total number of directors: 8 | | | | | | Gender: | Female | Male | Non-Binary | Gender Undisclosed | | Number of directors based on gender identity: | 3 | 5 | — | — | | Number of directors who identify in any of the categories below: | | | | | | African American or Black | — | 1 | — | — | | Alaskan Native or Native American | — | — | — | — | | Asian | — | 1 | — | — | | Hispanic or Latinx | — | — | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | 3 | 2 | — | — | | Two or More Races or Ethnicities | — | — | — | — | | LGBTQ+ | — | — | — | — | | Undisclosed | — | 1 | — | — |
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* Self-identified diversity statistics for our Board in the format required by Nasdaq Listing Rule 5605(f).
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Skills Matrix
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| | Public Company Board Service | | | | A deep understanding of the Board’s oversight responsibilities enhances transparency and accountability for management and the Board | | | | Public Company CEO or CFO Experience | | | | Critical to our Board’s understanding of the demands and challenges of managing a large public organization | | | | Other Senior Leadership Role | | | | Enhances our Board’s ability to oversee management’s performance, and understand organizations, processes and strategy | | | | Healthcare / Medical Device Industries | | | | Enables our Board to understand strengths and challenges specific to the healthcare and medical device industries in which we operate | | | | Financial Literacy / Accounting | | | | Crucial to our Board’s ability to advise on and oversee capital management, financial transactions, financial reporting and internal controls | | | | FDA / Regulatory | | | | Critical to enable effective oversight by our Board of our compliance with the complex regulations that apply to our business, including FDA | | | | Sales & Marketing | | | | Crucial to our Board’s understanding of how to effectively sell our products in existing markets and expand to new ones | | | | Supply Chain / Manufacturing | | | | Helps our Board effectively oversee our manufacturing operations and navigate any supply chain challenges | | | | Human Capital Management | | | | Enables effective oversight of culture development, succession planning and our ability to attract, retain and motivate key talent | | | | M&A / Strategic Transactions | | | | Essential to our Board’s ability to advise on and guide our strategic transactions and long-term growth | | | | Risk Management | | | | Critical to our Board’s ability to oversee, understand and help mitigate key risks to Outset | | | | International Business | | | | Important to our Board’s ability to advise on and help guide our long-term growth strategy | | | | Environmental & Social | | | | Helps us operate within a responsible, sustainable business model and create long-term value for our stockholders | |
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Director Nominees at the Annual Meeting – Class I Directors
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| Karen Drexler Director since: 2021 Age: 64 Committees: · Compensation · Nominating & Corporate Governance Other Current Public Boards: · ResMed Inc. · Tivic Health Systems, Inc. · EBR Systems, Inc. | BACKGROUND: Karen Drexler has served on our Board since January 2021. Ms. Drexler has served on the board of directors of ResMed Inc., a medical device company, since November 2017, on the board of directors of Tivic Health Systems, Inc., a bioelectronic medicine company, since August 2019, and on the board of directors of EBR Systems, Inc., a cardiac pacing company, since October 2021. She also currently serves on the boards of directors of two private companies: VIDA Health, a lung intelligence solutions and analytics company and Huma.AI, a healthcare artificial intelligence company. Ms. Drexler previously served as CEO of Sandstone Diagnostics, Inc., a private company developing instruments and consumables for point-of-care medical testing, from June 2016 until July 2020. From 2011 to 2017, she served as chair of the board of Hygieia, Inc., a private digital insulin therapy company. Ms. Drexler has also served on the board of directors of a number of private companies in the fields of diagnostics, medical devices, and digital health. Ms. Drexler was founder, president, and CEO of Amira Medical Inc., a private company focused on glucose monitoring technology, from 1996 until it was sold to Roche Holding AG in 2001. Prior to that, she held management roles at LifeScan, a medical device company, including leading its manufacturing function, and played a key role in its sale to Johnson & Johnson. Ms. Drexler is also a member of the G100 Network and Stanford Women on Boards. Ms. Drexler holds a B.S.E. from Princeton University and an M.B.A from the Stanford University Graduate School of Business. Key Qualifications: We believe that Ms. Drexler is qualified to serve on our Board because of her corporate leadership and industry experience gained through chief executive officer and other management roles at medical device companies, as well as her experience as a board member at several companies in the medical device industry. Ms. Drexler also brings to the Board experience in business development and strategic transactions, a background in manufacturing operations, and a deep understanding of using data analytics coupled with a consumer-centric approach to create a better patient experience. |
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| Dale E. Jones Director since: 2022 Age: 64 Committees: · Compensation (Chair) | BACKGROUND: Dale E. Jones has served on our Board since April 2022. Mr. Jones has served as Chief Executive Officer of Magna Vista Partners, a global leadership consulting firm, since September 2022. He has also served as a senior advisor to Diversified Search Group, an executive search firm, since January 2022, where he previously served as President and Chief Executive Officer from January 2015 to December 2021 and as President from October 2013 to January 2015. Prior to that, Mr. Jones served as Vice Chairman and partner of the CEO and Board Practice in the Americas at Heidrick & Struggles from 2009 to 2013. From 2007 to 2009, he served as Chief Executive Officer of PlayPumps International and as Executive Vice President of Revolution LLC, a venture capital firm that funded a philanthropic initiative to provide clean drinking water to Africa. Mr. Jones held several executive leadership positions at Heidrick & Struggles from 1999 to 2007. Mr. Jones has served on the board of directors of Chick-fil-A, Inc. a fast food restaurant chain, since January 2021. Previously, he served on the boards of directors of Northwestern Mutual, a financial services company, from 2007 to May 2022, of Kohl’s Corporation, an omnichannel retailer, from 2008 to 2016, and of Hughes Supply from 2003 to 2006 (prior to its acquisition by The Home Depot). Mr. Jones holds a B.A. from Morehouse College. Key Qualifications: We believe Mr. Jones is qualified to serve on our Board because of his extensive experience as a senior advisor to chief executives, other senior leaders and boards of directors around the globe on human capital issues including executive recruiting, retention, succession planning, talent management and corporate governance. Mr. Jones also brings to the Board broad-based knowledge in the areas of consumer products and executive compensation, decades of experience in building diverse and dynamic teams, as well as experience as a corporate board member. |
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| Leslie Trigg Director since: 2014 President, CEO and Board Chair Age: 53 Other Current Public Boards: · ARYA Sciences Acquisition Corp IV | BACKGROUND: Leslie Trigg has served as our President and CEO and a member of our Board since November 2014 and as Chair of our Board since February 2022. Ms. Trigg joined the Company from Warburg Pincus, a private equity firm, where she was an Executive in Residence from March 2012 to March 2014. Prior to that, Ms. Trigg served in several roles at Lutonix (acquired by CR Bard), a medical device company, from January 2010 to February 2012, most recently as Executive Vice President, and as Chief Business Officer of AccessClosure (acquired by Cardinal Health), a medical device company, from September 2006 to June 2009. She also previously held positions with FoxHollow Technologies (acquired by ev3/Covidien), a manufacturer of devices to treat peripheral artery disease, Cytyc, a diagnostic and medical device company, Pro-Duct Health (acquired by Cytyc), a medical device company, and Guidant, a cardiovascular medical device company. Ms. Trigg has served on the board of directors of ARYA Sciences Acquisition Corp IV, a special purpose acquisition company, since March 2021. Ms. Trigg also serves as the Chair of the board of directors of the Medical Device Manufacturers Association (MDMA). Previously, Ms. Trigg served on the board of directors of Adaptive Biotechnologies Corporation, a biotechnology company, from March 2021 to June 2023. Ms. Trigg holds a B.S. degree from Northwestern University and an M.B.A. from The Haas School of Business, University of California, Berkeley. Key Qualifications: We believe that Ms. Trigg is qualified to serve on our Board because of her corporate leadership, regulatory, commercial and industry experience gained through chief executive officer and other management roles at medical technology companies, including global businesses, as well as her experience as a corporate board member in the healthcare sector and as Chair of the MDMA board. As President and CEO of Outset for over eight years, Ms. Trigg’s broad and deep knowledge of Outset, its day-to-day business operations and the competitive landscape provides valuable insights to our Board. |
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Continuing Class II Directors – Term Expiring at the 2025 Annual Meeting
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| D. Keith Grossman Director since: 2014 Lead Independent Director Age: 63 Committees: · Compensation · Nominating & Corporate Governance Other Current Public Boards: · Nevro Corp. · Alcon Inc. | BACKGROUND: D. Keith Grossman has served as our Lead Independent Director since February 2022 and served as Chairman of our Board from April 2014 to February 2022. Mr. Grossman has served as Chairman of the board of directors of Nevro Corp. (“Nevro”), a global medical device company, since October 2023 where he previously served as Executive Chairman from April 2023 to October 2023 and as Chairman and Chief Executive Officer from March 2019 to April 2023. Mr. Grossman has also served as Vice Chairman of Alcon Inc., an eye care products company, since April 2019. Previously, he was Chief Executive Officer and President of Thoratec, a medical device company, from September 2014 to December 2015 and from January 1996 to January 2006; Chief Executive Officer and President of Conceptus, a manufacturer and developer of medical devices, from December 2011 to June 2013; and Managing Director for TPG, a private equity firm, from September 2007 to December 2011. He also previously held positions with Eon Labs, a pharmaceutical company, SulzerMedica, a manufacturer of implantable medical devices, and American Hospital Supply/McGaw Labs, a medical supply company. Mr. Grossman served on the board of directors of ViewRay, a medical device company in the field of cancer therapy, from July 2018 to February 2021; Zeltiq (acquired by Allergan), a company that markets and licenses devices used for cryolipolysis procedures, from October 2013 to May 2017; Kyphon (acquired by Medtronic plc), a medical device company, from May 2007 to November 2007; Intuitive Surgical, a medical device company, from April 2003 to April 2010; and Tandem Diabetes Care, a medical device company, from April 2010 to January 2012. Mr. Grossman has also served on the board of directors of a number of private companies. Mr. Grossman holds a B.S. from Ohio State University and an M.B.A. from the George L. Graziadio School of Business and Management, Pepperdine University. Key Qualifications: We believe that Mr. Grossman is qualified to serve on our Board because of his corporate leadership, regulatory, commercial and industry experience gained through chief executive officer roles at medical technology companies, including his prior experience as Chairman and Chief Executive Officer of a global public company in the medical device field. Mr. Grossman also brings to the Board experience as a board member and investor at a range of private and public companies in the medical technology industry, as well as experience in business development and strategic transactions. We believe Mr. Grossman’s extensive experience leading medical device companies through commercial growth aligns with our commercial strategies in both the acute and home markets. |
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| Patrick T. Hackett Director since: 2019 Age: 62 Committees: · Audit · Nominating & Corporate Governance (Chair) | BACKGROUND: Patrick T. Hackett has served on our Board since May 2019. Mr. Hackett has served on the board of directors of Intelligent Medical Objects, a private healthcare software company, since January 2017. Previously, Mr. Hackett served as a Managing Director at Warburg Pincus, a private equity firm, from June 1990 to July 2017, where he focused on investments in the technology and healthcare services fields across the firm’s global territories, and he currently serves as a senior advisor to Warburg Pincus. He previously held positions with Cove Capital Associates, a private merchant banking partnership, Acadia Partners, a private equity firm, and Donaldson, Lufkin and Jenrette, an investment bank. Mr. Hackett has served on the board of directors of Stamford Health System, a nonprofit community hospital in Connecticut, since May 2016, including as its Chair from October 2020 to September 2022. He also served on the board of directors of Bridgepoint Education, a provider of post-secondary education services, from February 2008 to November 2017; Yodlee (acquired by Envestnet), a data aggregation and data analytics platform company, from January 2008 to October 2015; and Nuance Communications (acquired by Microsoft), a provider of voice and language software, from January 2009 to September 2014. Mr. Hackett has also served on the board of directors of a number of private companies. Mr. Hackett holds a B.A. from the University of Pennsylvania and a B.S. from The Wharton School, University of Pennsylvania. Key Qualifications: We believe that Mr. Hackett is qualified to serve on our Board because of his industry knowledge and significant experience in business development and strategic transactions gained as a corporate board member and investor in healthcare services companies. Through his global private equity role, Mr. Hackett’s extensive involvement in the investment and transaction evaluation processes requires a deep understanding of the financial and operational performance of companies across various industries and geographic territories that we believe provides valuable insight to our Board. |
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Continuing Class III Directors – Term Expiring at the 2026 Annual Meeting
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| Jim Hinrichs Director since: 2020 Age: 56 Committees: · Audit (Chair) Other Current Public Boards: · Orthofix Medical Inc. · Integer Holdings Corporation | BACKGROUND: Jim Hinrichs has served on our Board since February 2020. Mr. Hinrichs has served as Co-Founder of Atmas Health, a healthcare partnership focused on acquiring healthcare assets, since September 2022. He has also served on the board of directors of Orthofix Medical Inc., a spinal care solutions company, since April 2014, and on the board of directors of Integer Holdings Corporation, a medical device manufacturing company, since February 2018. Mr. Hinrichs previously served as Chief Financial Officer of Cibus from May 2018 to July 2019 and Executive Vice President and Chief Financial Officer of Alere (acquired by Abbott Labs), a diagnostics company, from April 2015 to October 2017. Mr. Hinrichs previously held various positions at CareFusion (acquired by Becton Dickinson), a medical device company, serving as Chief Financial Officer from December 2010 to March 2015, Senior Vice President Global Customer Support from December 2009 to December 2010, and SVP Controller from January 2009 to December 2009. Before that, Mr. Hinrichs held various financial leadership positions at Cardinal Health and Merck & Co. Mr. Hinrichs served on the board of directors of Acutus Medical, Inc., a dynamic arrhythmia care company, from September 2019 to August 2022. Mr. Hinrichs holds a B.S. from Carnegie Mellon University and an M.S. from The Tepper School of Business, Carnegie Mellon University. Key Qualifications: We believe that Mr. Hinrichs is qualified to serve on our Board because of his corporate leadership and industry experience gained through chief financial officer and other executive roles at global healthcare and medical technology companies, his extensive experience in business development and strategic transactions, and his experience as a board member and investor in the medical technology industry. Mr. Hinrichs also brings to the Board significant expertise in financial operations, accounting, governance and general risk management matters gained through his career as a financial executive, and as an audit committee member of multiple other public companies. |
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| Brent D. Lang Director since: 2024 Age: 56 Committees: · Audit Other Current Public Boards: · Movella Holdings, Inc. | BACKGROUND: Brent D. Lang has served on our Board since March 2024. Mr. Lang has served as Chairman of the board of directors of Movella Holdings Inc., a company specializing in movement digitization, since November 2021, and also currently serves on the board of directors of Thriveworks, a private company that provides mental health services. Mr. Lang previously served as President and Chief Executive Officer, and on the board of directors of Vocera Communications, Inc. (“Vocera”), a global provider of clinical communication and workflow solutions, from June 2013, and as Chairman of the board of directors from June 2018 until February 2022 when the company was acquired by Stryker Corporation (“Stryker”), a multinational medical technology corporation. Mr. Lang served as a Strategic Advisor to Stryker from February 2022 to December 2022. Prior to being named Chief Executive Officer of Vocera, Mr. Lang held various leadership positions at Vocera beginning in 2001, including as its President and Chief Operating Officer and Vice President of Marketing and Business Development. Earlier in his career, Mr. Lang held leadership roles at 3Com Corporation, a networking company, and worked as a strategy consultant for Monitor Company, Inc., a consulting firm advising Fortune 500 companies. Mr. Lang holds a B.S. from the University of Michigan and an M.B.A. from the Stanford University Graduate School of Business. Key Qualifications: We believe that Mr. Lang is qualified to serve on our Board because of his corporate leadership, commercial and industry experience, including his prior experience as Chairman and Chief Executive Officer of a global provider of clinical communication and workflow solutions primarily for healthcare providers. Mr. Lang also brings to the Board significant experience in business development and strategic transactions. We believe Mr. Lang’s wealth of healthcare expertise, including in growing and scaling software-enabled business models, aligns with our recurring revenue business model and will help guide our continued growth as we execute on our commercial strategies. |
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| Andrea L. Saia Director since: 2021 Age: 66 Committees: · Audit Other Current Public Boards: · Align Technology, Inc. | BACKGROUND: Andrea L. Saia has served on our Board since March 2021. Ms. Saia has served on the board of directors of Align Technology, Inc., a global medical technology company, since July 2013. She previously served as the Global Head of Vision Care in the Alcon division of Novartis AG, a global healthcare company, from 2011 until her retirement in 2012. Prior to that role, she served as President and Chief Executive Officer of CibaVision, a subsidiary of Novartis, from 2008 to 2011, and prior to that, she held various positions at CibaVision since joining in 2002, including President of Europe, Middle East and Africa operations, President of the Global Lens Business and Global Head of Marketing. Ms. Saia was the Chief Marketing Officer for GCG Partners and also held senior management and marketing positions with global consumer products companies such as Procter & Gamble, Unilever and Revlon. Previously, Ms. Saia served on the boards of directors of LivaNova PLC, a global medical technology company, from July 2016 to December 2023, and of Coca-Cola Enterprises, Inc., the marketer, producer and distributor of Coca-Cola products in European markets from 2012 to 2016. Ms. Saia is also a member of the National Association of Corporate Directors, Women Corporate Directors, the Signature Program and serves on the board of visitors for the Farmer School of Business at Miami University. Ms. Saia holds a B.S. from Miami University and an M.B.A. from Northwestern University’s J.L. Kellogg Graduate School of Management. Key Qualifications: We believe that Ms. Saia is qualified to serve on our Board because of her significant global business experience, her corporate leadership, regulatory, industry and commercial experience gained through chief executive officer and other management roles, as well as her experience as a board member at companies in the healthcare, medical technology and consumer products industries. Ms. Saia also brings to the Board a background in building multinational brands with a consumer health focus and extensive knowledge in both the medical technology and consumer products spaces, which we believe align with our vision to create a differentiated experience in the home for dialysis patients. |
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Board Structure and Composition Our Board currently consists of eight members and is divided into three classes of directors that serve staggered three-year terms. At each annual meeting of stockholders, a class of directors is elected for a three-year term to succeed the same class whose term is then expiring. As a result, only one class of directors is elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors are divided among the three classes as follows: • the Class I directors are Karen Drexler, Dale E. Jones and Leslie Trigg, whose terms expire at the Annual Meeting; • the Class II directors are D. Keith Grossman and Patrick T. Hackett, whose terms will expire at the 2025 annual meeting of stockholders; and • the Class III directors are Jim Hinrichs, Brent D. Lang and Andrea L. Saia, whose terms will expire at the 2026 annual meeting of stockholders. Each director’s term continues until the end of his or her three-year term and the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. Our amended and restated certificate of incorporation and bylaws authorize only our Board to fill vacancies on our Board. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. Director Independence Our Board has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board determined that, with the exception of our CEO, Leslie Trigg, each member of our Board is an “independent director” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the Nasdaq stock market (“Nasdaq”). Ms. Trigg is not an independent director because she is an employee of the Company. In addition, Catherine Szyman, who served on our Board during 2023 and resigned in March 2024, was also determined to be independent. In making these determinations, our Board reviewed and discussed information provided by the directors and by us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our common stock by each non-employee director and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.” There are no family relationships among any of our executive officers or directors. Board Leadership Structure Our bylaws provide our Board with the flexibility to determine the appropriate leadership structure of our Board, including by combining or separating the positions of Chair of the Board and CEO and/or implementing a Lead Independent Director position. Since 2022, our Board has been chaired by Leslie Trigg, who has served as our CEO and a member of our Board since 2014, and D. Keith Grossman has served as Lead Independent Director. Given the dynamic and competitive environment in which the Company operates, our Board believes that our stockholders are best served by a Board Chair who has broad and deep knowledge of the Company’s day-to-day business operations and the competitive landscape, the ability to identify strategic issues and the vision to create sustainable long-term value for our stockholders. Based on these considerations, our Board has determined that, at this time, Ms. Trigg, our CEO, is best qualified to serve in the role of Board Chair. Our Board believes that Ms. Trigg’s combined role enables decisive leadership and effective execution of our strategic initiatives and business plans, helps ensure clear accountability for Company performance, enhances the Board’s ability to focus on the issues most critical to the Company’s success, creates a strong bridge between management and the Board by facilitating a regular flow of information, allows consistent communication and coordination throughout the Company and helps unify our stockholders, employees, customers and other stakeholders behind a consistent vision.
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Our Board believes the Lead Independent Director position helps maintain an appropriate level of independent checks and balances, enables independent oversight of management and encourages objective oversight of management’s performance, reinforcing the independence of the Board as a whole and enhancing its overall effectiveness. In accordance with our bylaws and corporate governance guidelines, in the role of Lead Independent Director, Mr. Grossman (i) presides over Board meetings at which the Board Chair is not present, (ii) presides over executive sessions of the independent directors, (iii) serves as a liaison between the independent directors and the Board Chair, (iv) is authorized to call meetings of the independent directors, (v) leads the Board in discussions concerning our CEO’s performance and CEO succession, (vi) consults with the Board Chair regarding meeting agendas and meeting schedules for the Board, (vii) is available for consultation and direct communication if requested by major stockholders and (viii) performs such other duties as requested by the Board. Our Board continues to believe this leadership structure strikes an appropriate balance between strong Company leadership through a combined Board Chair and CEO, and independent oversight through a Lead Independent Director position. While our Board has concluded that its current leadership structure is appropriate for us at this time, our Nominating and Corporate Governance Committee is charged with periodically reviewing the Board’s leadership structure. With the committee’s support, our Board will continue to regularly evaluate its leadership structure and may exercise its discretion to make changes designed to ensure an appropriate and effective framework of governance and accountability, taking into consideration the needs of our business and the long-term interests of our stockholders. Role of our Board in Risk Oversight One of the key functions of our Board is informed oversight of our risk management process. Our Board’s role in risk oversight is consistent with our leadership structure, with management having day-to-day responsibility for assessing and managing our risk exposure and our Board actively overseeing management of our risks – both at the Board and committee level. The risk oversight process includes receiving regular reports from committees and management to enable our Board to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, information technology (including cybersecurity and data privacy), finance, legal, regulatory, strategic and reputational risks. Our Board focuses on the overall risks affecting us, and each of its standing committees has been delegated responsibility for oversight of specific risks that fall within its areas of responsibility. For example: • Our Audit Committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which spans a variety of areas including litigation, regulatory compliance, financial reporting and insurance, as well as data privacy, cybersecurity and other information technology risks. Our Audit Committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and policies for assessing and managing risk and related compliance efforts. • Our Nominating and Corporate Governance Committee oversees the management of risks associated with our overall compliance and corporate governance practices and the independence and composition of our Board, including monitoring the effectiveness of our corporate governance guidelines and other policies such as our code of conduct and overseeing our environmental and sustainability efforts and progress and associated risks. • Our Compensation Committee regularly assesses risks arising from our compensation plans, policies and programs, including whether any such plans encourage excessive or inappropriate risk-taking. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the full Board is regularly informed through committee reports about such risks.
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Environmental, Social and Governance Oversight and Highlights Consistent with our commitment to patients and providers, we are committed to implementing and advancing various policies related to corporate responsibility, sustainability and environmental, social and governance (“ESG”) efforts. At the Board level, our Nominating and Corporate Governance Committee, per its written charter, is responsible for overseeing our ESG efforts and the related risks, helping to ensure that we consistently execute on our ESG related priorities and initiatives, and providing regular updates to the full Board on related matters. To satisfy these oversight responsibilities, our Nominating and Corporate Governance Committee receives regular updates from management on progress and strategy. Relevant topics that have been discussed by our Nominating and Corporate Governance Committee and/or our Board include general corporate governance, environmental, health and safety matters, product quality and safety matters, environmental sustainability, access to care and health equity, and our diversity, equity and inclusion strategy. We are committed to continuing to share information related to our corporate responsibility and ESG programs via our website at https://investors.outsetmedical.com/environmental-social-and-governance. In 2023, we published our third standalone ESG disclosure publication (“2023 ESG Report”), a process that began with our inaugural ESG report published in 2021. We developed the report with the aim of aligning our disclosures with ESG information we believe is most useful to investors and other stakeholders. Our ESG Report addresses the Sustainability Accounting Standards Board (“SASB”) standards for the Medical Equipment and Supplies industry and is structured around relevant, industry-specific issues defined by SASB. Please note that nothing contained on or accessible through our website, including our 2023 ESG Report or sections thereof, shall be deemed incorporated by reference into this proxy statement. We look forward to continued engagement with our stockholders on ESG topics. Cybersecurity Oversight Oversight of our information security program, including oversight of risks related to cybersecurity threats and the assessment and management of such risks, is accomplished through a governance structure which includes our Board, Audit Committee, and executive management:
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| Board: | One of the key functions of our Board is informed oversight of our risk management process. Our Board focuses on the overall risks affecting us and delegates responsibility for oversight of certain specific risks to its standing committees. For significant risks related to cybersecurity, the Board has delegated oversight responsibility to the Audit Committee. | Our full Board and Audit Committee are kept informed about significant risks related to cybersecurity, including enterprise-level risks from cybersecurity threats. The Board receives written updates, generally on a quarterly basis, regarding the status of our information security program. In addition, the Audit Committee receives in-person updates on our information security programs on at least an annual basis. | | Audit Committee: | Our Audit Committee is responsible for overseeing our major financial, legal, and regulatory risk exposures, which span a variety of areas, including cybersecurity. | | | Management: | Executive management plays a significant role in assessing and managing material risks from cybersecurity threats. Our Chief Technology Officer (“CTO”) manages our information security program. Our CTO and the information security team periodically present information about the Company’s information security program to our executive leadership team. Significant risks related to cybersecurity are escalated to the Audit Committee and/or the full Board as appropriate. We have also established a committee comprised of leaders from key functions across the Company that provides cross-functional input to facilitate the development, articulation, implementation and operation of information security risk management programs. In addition, we have established a risk governance committee that, among other things, reviews and manages certain cybersecurity-related risks facing the Company. | |
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For additional information related to our cybersecurity risk management, strategy and governance, see the section entitled "Cybersecurity" under Part I, Item 1C of our 2023 annual report. Meetings of our Board Our Board held six (6) meetings during 2023. Each incumbent director attended at least 75% of the aggregate total number of meetings of the Board and the committees on which he or she served, held during the portion of 2023 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of stockholders. Committees of our Board Our Board has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Members serve on these committees until their resignation or until otherwise determined by our Board. Our Board may establish other committees as it deems necessary or appropriate from time to time. The composition and responsibilities of each of the committees of our Board are described below and copies of the charter of each committee are available on our corporate website at www.outsetmedical.com in the Investors section under “Corporate Governance.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. Committee Composition and Meetings The following table provides current membership and 2023 meeting information for each committee of our Board:
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| Name: | Audit Committee | Compensation Committee(1) | Nominating and Corporate Governance Committee | | Karen Drexler | | X | X | | D. Keith Grossman | | X | X | | Patrick T. Hackett | X | | Chair | | Jim Hinrichs | Chair | | | | Dale E. Jones | | Chair | | | Brent D. Lang(2) | X | | | | Andrea L. Saia | X | | | | Total meetings held in 2023 | 8 | 6 | 4 |
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(1) In addition to the current Compensation Committee members reflected in the table above, Catherine Szyman served as a member of our Compensation Committee during 2023, but transitioned off of the Compensation Committee in February 2024, and resigned from our Board effective March 12, 2024. (2) Mr. Lang was appointed to our Board and as a member of the Audit Committee effective March 12, 2024. Audit Committee Our Audit Committee currently consists of Patrick T. Hackett, Jim Hinrichs, Brent D. Lang and Andrea L. Saia, with Mr. Hinrichs serving as the chairperson. Mr. Lang was appointed to our Audit Committee when he joined the Board in March 2024. Our Audit Committee met eight (8) times during 2023 and operates under a written charter. The general purpose of our Audit Committee is to assist the Board in its oversight of our accounting and financial reporting processes and audits of its financial statements. Specific responsibilities of our Audit Committee include: • appointing, retaining, compensating and overseeing the work of our independent registered public accounting firm, assessing the firm’s qualifications, independence and performance and, when appropriate, terminating our independent registered public accounting firm; discussing with management and the independent registered public accounting firm our annual audited financial statements and quarterly financial statements, as well as related disclosures;
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pre-approving audit and permitted non-audit and tax services to be provided to us by the independent public accounting firm; • reviewing with our independent registered public accounting firm the scope and results of the firm’s annual audit of our financial statements, including our critical accounting policies; • reviewing our financial reporting processes and internal controls over financial reporting, as well as compliance with legal and regulatory requirements; • establishing and reviewing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal accounting controls or auditing matters, and reviewing any significant complaints received with management; • reviewing and approving any transaction between us and any related person (as defined by the Securities Act of 1933, as amended) in accordance with our related person transaction approval policy; • discussing policies with respect to risk assessment and risk management (including with respect to data privacy, cybersecurity and other information technology risks); and • such other matters that are specifically designated to the Audit Committee by our Board from time to time. Our Board has determined that each member of our Audit Committee is independent within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (“Exchange Act”) and Nasdaq listing rules, and that each member is also financially literate. Our Board has also determined that Mr. Hinrichs is an “audit committee financial expert” as defined by the applicable SEC rules. Compensation Committee Our Compensation Committee currently consists of Karen Drexler, D. Keith Grossman and Dale E. Jones, with Mr. Jones serving as the chairperson. While Catherine Szyman served as a member of our Compensation Committee during 2023, she transitioned off of the Compensation Committee in February 2024, and resigned from our Board in March 2024. Our Compensation Committee met six (6) times during 2023 and operates under a written charter. The general purpose of our Compensation Committee is to review, adopt or recommend and oversee our compensation plans, policies and programs. Specific responsibilities of our Compensation Committee include: • reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, evaluating our CEO’s compensation in light of those goals, and determining and approving our CEO’s compensation based on this evaluation; • reviewing, determining and approving the compensation of our other executive officers; • reviewing and administering our employee and management compensation and benefit plans and policies; • administering and approving grants of equity awards under our equity-based incentive plans; • reviewing and approving, for the CEO and other executive officers, employment agreements, severance agreements, consulting agreements and change in control or termination agreements; • evaluating and recommending compensation for our non-employee directors; and • such other matters that are specifically designated to the Compensation Committee by our Board from time to time. Our Board has determined that each member of our Compensation Committee is independent under applicable Nasdaq listing standards and a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.
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Compensation Committee Interlocks and Insider Participation None of the directors who are currently or who were members of our Compensation Committee during 2023, are either currently, or have been at any time, one of our officers or employees. None of our executive officers currently serves, or served during 2023, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee. Nominating and Corporate Governance Committee Our Nominating and Corporate Governance Committee currently consists of Karen Drexler, D. Keith Grossman and Patrick T. Hackett, with Mr. Hackett serving as the chairperson. Our Nominating and Corporate Governance Committee met four (4) times during 2023 and operates under a written charter. The general purpose of our Nominating and Corporate Governance Committee is to oversee matters related to board composition, director nominations and corporate governance. Specific responsibilities of our Nominating and Corporate Governance Committee include: • identifying and evaluating candidates to serve as members of our Board; • making recommendations to our Board for selection of director nominees to stand for election or reelection at our annual stockholder meetings or to fill board vacancies; • considering and making recommendations to our Board regarding changes to the size, composition and leadership structure of our Board; • considering and making recommendations to our Board regarding the composition and chairmanship of the committees of our Board; • instituting plans or programs for the continuing education of our Board and orientation of new directors; • establishing procedures to exercise oversight of, and oversee the performance evaluation process of, our Board (including committees) and management; • developing and making recommendations to our Board regarding corporate governance guidelines and certain other policies such as our code of conduct, and monitoring compliance with such guidelines and policies; • overseeing our environmental, sustainability and governance efforts and progress; and • such other matters that are specifically designated to the Nominating and Corporate Governance Committee by our Board from time to time. Our Board has determined that each member of our Nominating and Corporate Governance Committee is independent under the applicable Nasdaq listing standards.
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Director Nomination Process Selection and Nomination Process Our Board is responsible for nominating members for election to our Board by our stockholders at our annual meetings of stockholders. Whenever a vacancy occurs on our Board, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our Board is authorized to select a person to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. Criteria for Board Membership Our Nominating and Corporate Governance Committee is responsible for identifying, reviewing, evaluating and recommending to our Board candidates to serve as members of our Board, in accordance with its charter and board-approved criteria as set forth in our corporate governance guidelines. Our Nominating and Corporate Governance Committee believes that director candidates should meet certain minimum qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In assessing and selecting candidates and incumbent directors for service on our Board, our Nominating and Corporate Governance Committee also considers such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the Company’s affairs, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. In conducting this assessment, our Nominating and Corporate Governance Committee considers diversity, age, skills and such other factors deemed appropriate given the current needs of our Board and the Company to maintain a balance of knowledge, experience and capability. While we do not have a formal policy regarding diversity on our Board, our Board and Nominating and Corporate Governance Committee value the importance of nominating persons with different perspectives and experiences to enhance the deliberation and decision-making processes of our Board and diversity attributes such as race and gender are among the factors considered. In the case of incumbent directors whose terms of office are set to expire, the committee reviews such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the committee also determines whether the nominee is independent under applicable Nasdaq listing standards. In addition, to help ensure that it has access to a broad range of qualified, experienced and diverse candidates, our Nominating and Corporate Governance Committee may use the services of an independent search firm to help identify and assist in the evaluation of candidates. The committee conducts any appropriate inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of our Board, and then selects a nominee for recommendation to our Board. Our Board and Nominating and Corporate Governance Committee may modify the criteria used to assess director candidates and incumbent directors from time to time. Candidates for director nomination are reviewed in the context of the current composition of our Board, the operating requirements of the Company and the long-term interests of our stockholders, consistent with our commitment to maintaining a board of directors composed of members who can productively contribute to the Company’s success. Existing members of our Board will also be evaluated on the basis of any new criteria.
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Stockholder Recommendations and Nominations Stockholders who wish to recommend candidates may contact the Nominating and Corporate Governance Committee in the manner described below under “Board and Corporate Governance Matters—Stockholder Communications with our Board.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these procedures will be evaluated by our Nominating and Corporate Governance Committee in the same manner as other nominees. Stockholder Engagement We value an open dialogue with our stockholders and believe that regular communication with our stockholders is a critical part of enabling our long-term success. We engage with our stockholders though a proactive stockholder outreach program designed to solicit and address feedback on matters relevant to our business, including corporate governance, executive compensation and ESG issues. Our goal is to better understand the views and interests of our stockholders, as well as share our perspectives on these important topics. Our stockholder outreach program is supplemented by our year-round investor relations program that includes quarterly financial and operational updates, post-earnings communications, investor meetings and presentations at conferences, and general availability to respond to investor inquiries. Our stockholder outreach program is led by management and overseen by our Board. Our Board believes that, in most circumstances, members of our senior management are best positioned to speak with our stockholders on behalf of the Company. However, our Board and its committees receive regular reports on our stockholder engagement activities and are provided with the opportunity to discuss and ask questions about stockholder feedback we receive. In 2022, we initiated outreach to our largest institutional stockholders to specifically request feedback on various topics, including board composition and other governance matters, executive compensation and ESG issues. This outreach continued in 2023 and into 2024 with the goal of seeking input from holders of approximately 80% of shares outstanding. Since the inception of our program in 2022, including new entrants since that time, more than 90% of stockholders we contacted have responded, and we met with or received direct feedback from approximately 60% of those contacted. In these conversations, our Company was represented by senior leaders with responsibility for our investor relations and legal functions, and investor comments were discussed with the Nominating and Corporate Governance Committee and summarized for the Board. We regularly review vote results from our most recent annual meeting of stockholders and incorporate related insights into our stockholder engagement program. At our 2023 annual meeting, our stockholders expressed strong support for our executive compensation program, with approximately 93% of stockholder votes cast in favor of our say-on-pay proposal. The feedback we have received from investors in connection with our stockholder outreach reinforced the strong support our stockholders expressed with their 2023 say-on-pay vote. For further information on our 2023 say-on-pay vote, please see the section of this proxy statement entitled “Compensation Discussion and Analysis – Executive Summary – Stockholder Advisory Votes on NEO Compensation.” Code of Ethics and Business Conduct We have adopted a code of conduct applicable to our employees, officers and directors, including our principal executive, financial and accounting officers and all persons performing similar functions. A copy of our code of conduct is available on our corporate website at www.outsetmedical.com in the Investors section under “Corporate Governance.” We intend to post any required disclosures regarding an amendment to, or waiver from, a provision of our code of conduct on the same website. Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement.
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Corporate Governance Guidelines We have adopted written corporate governance guidelines which provide the framework for our corporate governance, along with our amended and restated certificate of incorporation, bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics including, but not limited to, board composition, independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board leadership, board assessment, director compensation and succession planning. Our corporate governance guidelines are reviewed at least annually by our Nominating and Corporate Governance Committee and any proposed changes are recommended to our full Board for approval. A copy of our corporate governance guidelines is available on our corporate website at www.outsetmedical.com in the Investors section under “Corporate Governance.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. Stock Ownership Guidelines Effective February 2, 2023, our Board adopted Stock Ownership Guidelines applicable to all of our executive officers designated as such for purposes of Section 16 of the Exchange Act (“covered executives”) and non-employee directors of our Board (“covered directors”). Pursuant to these guidelines, each covered executive and covered director is required to own shares of our common stock having an aggregate value of at least the following amount (as a multiple of base salary or annual cash retainer, as applicable):
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| Position | Stock Ownership Guidelines | | Chief Executive Officer | 3 times annual base salary | | Other Covered Executives | 1 times annual base salary | | Covered Directors | 3 times annual cash retainer for Board service(1) |
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(1) Excludes additional retainers for services as Board Chair or Lead Independent Director, a committee chairperson or committee membership. In addition to shares owned outright by the covered executive or covered director, shares held in trust, unvested time-based RSUs and deferred stock units count towards required ownership levels. Covered executives and covered directors are required to achieve the applicable ownership level within five years from February 2, 2023, the effective date of the guidelines, or the date the individual becomes a covered executive or covered director, whichever is later. Compliance with these Stock Ownership Guidelines will be measured as of the last business day of each fiscal year. As of the record date for the Annual Meeting, all of our covered executives and covered directors were still within the five-year accumulation period under the Stock Ownership Guidelines, and therefore in compliance with the Stock Ownership Guidelines. Recoupment Policy In April 2023, our Board adopted a recoupment (or “clawback”) policy that applies to certain incentive compensation paid to current and certain former executive officers that was paid based on incorrect financial performance information. Under the policy, if we are required to prepare an accounting restatement due to the material noncompliance of any financial reporting requirement under applicable securities laws, the Compensation Committee is required to cause us to recoup from each executive officer the excess of the incentive compensation received by such executive officer during the three-year period preceding the date on which we are required to prepare the financial restatement, based on the erroneous financial information, over the incentive compensation that would have been received by the executive if it had been calculated based on the restated financial information. The policy is intended to comply with the requirements of SEC rules and Nasdaq listing standards implementing Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
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Anti-Hedging and Anti-Pledging Policy Our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan. Stockholder Communications with our Board Any stockholder or other interested party who wishes to communicate with our Board or any individual director may send written communications to our Board or such director c/o Corporate Secretary, Outset Medical, Inc., 3052 Orchard Drive, San Jose, California 95134. The communication must include the stockholder’s name, address and an indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our Board, based on the subject matter. Communications that are deemed inappropriate (such as communications that are commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will not be forwarded. Certain Relationships and Related Party Transactions The following is a summary of the transactions since January 1, 2023 to which we have been a participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, other than compensation arrangements which are under the sections of this proxy statement entitled “Director Compensation” and “Executive Compensation.” Indemnification of Directors and Executive Officers We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements and our bylaws require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by the Delaware General Corporation Law, and have purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws also require us to advance expenses incurred by our directors and officers. Policies and Procedures for Related Party Transactions Our Audit Committee has the primary responsibility for the review, approval and oversight of any “related person transaction,” which is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or will have a direct or indirect material interest. We have adopted a written related person transaction policy under which our management is required to submit any related person transaction not previously approved or ratified by our Audit Committee to our Audit Committee. In approving or rejecting the proposed transactions, our Audit Committee takes into account all of the relevant facts and circumstances available.
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Director Compensation
Director Compensation Non-Employee Director Compensation Policy Our non-employee directors receive annual cash retainers and equity awards as compensation for Board and committee service in accordance with our non-employee director compensation policy (our “director compensation policy”). Our director compensation policy applies only to our non-employee directors; our employee directors receive no additional compensation for serving on our Board. Our Board originally adopted our director compensation policy in 2020 in connection with our initial public offering (“IPO”) after consultation with an independent compensation consultant. Our Compensation Committee periodically reviews our director compensation policy and recommends any adjustments to our Board for approval. In early 2023, the Compensation Committee engaged Pearl Meyer & Partners LLC (“Pearl Meyer”), an independent compensation consultant, to review our director compensation policy and prepare an updated benchmarking analysis relative to our 2023 peer group. In February 2023, the Compensation Committee reviewed the benchmarking report prepared by Pearl Meyer and recommended the following changes to our then-current director compensation policy, which were approved by the Board: (i) an increase in the annual cash retainer for non-employee directors for Board service from $40,000 to $45,000, effective January 1, 2023, and (ii) an increase in the value of the annual restricted stock unit grant for non-employee directors from $150,000 to $160,000, effective for annual grants awarded in 2023. During 2023, each of our non-employee directors was entitled to compensation in accordance with the following director compensation policy: • Annual Cash Compensation: Each non-employee director is entitled to receive annual cash compensation in the amounts summarized in the table below. These amounts are payable in equal quarterly installments, in arrears following the end of each quarter in which the service was performed, and are pro-rated for any partial months of service.
Director Compensation
| Position | Annual Cash Retainer | | Board Member | $45,000 | | Chair of the Board or Lead Independent Director (additional) | $45,000 | | Committee Chairs: | | | Audit | $20,000 | | Compensation | $20,000 | | Nominating and Corporate Governance | $10,000 | | Committee Members: | | | Audit | $10,000 | | Compensation | $10,000 | | Nominating and Corporate Governance | $5,000 |
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• Equity Compensation: o Upon appointment to our Board, each non-employee director is entitled to receive an initial grant of time-based restricted stock units (“RSUs”) valued at $262,500 as of the grant date, which will vest quarterly over three years, subject to such director’s continuous service on each applicable vesting date. o Each non-employee director continuing his or her service on our Board following the annual meeting of stockholders is entitled to receive an annual grant of RSUs valued at $160,000 as of the grant date, which will vest upon the earlier of the one-year anniversary of the grant date or the date of our next annual meeting of stockholders, subject to such director’s continuous service until such date. Notwithstanding the vesting schedules described above, each non-employee director who remains in continuous service until a change in control (as defined in our 2020 Equity Incentive Plan) will become fully vested in all then-outstanding equity awards.
Director Compensation
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Director Compensation
Expense Reimbursement: Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in-person attendance at and participation in Board and committee meetings. In February 2024, the Compensation Committee reviewed an updated benchmarking analysis prepared by Pearl Meyer based on our 2024 peer group, and recommended that no changes be made to our director compensation policy, except to place a 25,000 share cap on the number of shares underlying the annual RSU grant to non-employee directors, which modification was approved by the Board. 2023 Director Compensation Table The following table summarizes, for 2023, certain information regarding the compensation of our non-employee directors. Ms. Trigg, our CEO, does not receive any separate compensation for her service on our Board. Please see “Executive Compensation—2023 Summary Compensation Table” for a summary of the compensation received by Ms. Trigg in 2023 in her capacity as an executive officer.
Director Compensation
| Name: | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(4) | Total ($) | | Karen Drexler | 64,176 | 159,995 | — | 224,171 | | D. Keith Grossman | 105,000 | 159,995 | — | 264,995 | | Patrick T. Hackett | 65,000 | 159,995 | — | 224,995 | | Jim Hinrichs | 65,000 | 159,995 | — | 224,995 | | Dale E. Jones | 60,824 | 159,995 | — | 220,819 | | Andrea L. Saia | 55,000 | 159,995 | — | 214,995 | | Catherine Szyman(5) | 55,000 | 159,995 | — | 214,995 |
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(1) Cash amounts represent cash fees paid to each non-employee director during 2023 for his or her Board or committee service. Cash fees are paid quarterly in arrears. (2) Dollar amounts represent the aggregate grant date fair value of stock awards granted during 2023, computed in accordance with the Financial Accounting Standards Board (“FASB”) ASC 718, Compensation—Stock Compensation (“ASC 718”) and the assumptions outlined in Note 8 of our financial statements included in our 2023 annual report. (3) The aggregate number of shares subject to stock awards outstanding as of December 31, 2023 for each of the non-employee directors was as follows: Ms. Drexler, 8,129; Mr. Grossman, 7,681; Mr. Hackett, 7,681; Mr. Hinrichs, 7,681; Mr. Jones, 10,858; Ms. Saia, 8,101; and Ms. Szyman, 8,638. (4) No options were granted to the non-employee directors in 2023. The aggregate number of shares subject to outstanding stock options held by each of the non-employee directors as of December 31, 2023 was as follows: Ms. Drexler, 0; Mr. Grossman, 284,502; Mr. Hackett, 37,974; Mr. Hinrichs, 94,936; Mr. Jones, 0; Ms. Saia, 0; and Ms. Szyman, 0. Ms. Szyman resigned from our Board effective March 12, 2024.
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2023 Executive Compensation Highlights
Annual Performance-Based Cash Bonuses: The Compensation Committee decided not to make any changes to the NEOs’ target annual cash bonus opportunities for 2023, as a percentage of base salary, as compared to the prior year, as they remained market competitive. Under our 2023 cash bonus program, bonuses could be earned based on achievement against multiple pre-established 2023 corporate performance goals tied to revenue (weighted 50%), gross margin (weighted 25%), home patients (weighted 15%) and reduction in service costs per console (weighted 10%). Based on performance against the 2023 corporate performance goals, the Compensation Committee approved overall payouts under our annual cash bonus program equal to 60.1% of each NEO’s target bonus opportunity. In December 2023, our CEO and CFO each requested to receive 100% and 50%, respectively, of their cash bonuses in the form of fully-vested RSUs in lieu of cash. After consideration, in February 2024, the Compensation Committee granted fully vested RSUs to our CEO and CFO with a target value equal to 100% and 50%, respectively, of the dollar amount of their earned cash bonuses (converted into shares based on the average closing price of our common stock over the 20 trading days ending on the last trading day preceding the grant date). • Equity Incentive Awards: - As reflected in the charts below, in 2023, the Compensation Committee granted each of our NEOs a mix of RSUs and performance-based restricted stock units (“PSUs”) with performance and vesting terms substantially similar to the equity awards granted to our executives in the prior year except that in the case of the PSUs, the performance and vesting periods were rolled forward to extend through 2025. For 2023, the Compensation Committee approved a mix of 50% PSUs and 50% RSUs for our CEO, and a mix of 20% PSUs and 80% RSUs for our other NEOs, in each case, based on target value. Of the PSU awards granted to each NEO, 70% were comprised of Home PSUs and 30% were comprised of TSR PSUs (each as defined below). These were the same equity mix ratios that the Compensation Committee approved for 2022 equity awards to our executives.
2023 Executive Compensation Highlights
| TSR PSUs(1) Home PSUs(2) RSUs(3) 15% 35% 50% 50% 6% 14% 80% 20% CEO Other NEOs |
2023 Executive Compensation Highlights
| (1) TSR PSUs: Shares subject to these PSU awards are earned and vest based on our relative total stockholder return (“relative TSR”) over a two-year performance period as compared to companies in a pre-determined index of medical device companies, with 100% of earned units vesting at the end of 2025 (“TSR PSUs”). The number of TSR PSUs earned vary based on actual performance from 75% to 250% of the target number for our CEO and from 75% to 150% of the target number for our other NEOs. (2) Home PSUs: Shares subject to these PSU awards are earned and vest based on achievement against an operational metric tied to the number of patients treating at home on Tablo (“home patients”) as of the end of 2024, with 50% of earned units vesting after certification of the achievement level following the end of 2024 and the remaining 50% of earned units vesting at the end of 2025 (“Home PSUs”). The number of Home PSUs earned vary based on actual performance from 0% to 250% of the target number for our CEO and from 0% to 200% of the target number for our other NEOs. (3) RSUs: Shares subject to these RSU awards vest over a three-year period with one-third vesting on the first anniversary of the grant date and the remaining two-thirds vesting quarterly over the following two years. |
Preview of Certain 2024 Executive and Director Compensation Actions
Preview of Certain 2024 Executive and Director Compensation Actions In early 2024, the Compensation Committee took certain actions with respect to executive officer and director compensation, including the following: • In light of cost reduction efforts we implemented in the fourth quarter of 2023 to better align our operating expenses with our expected rate of revenue growth, including an organizational restructuring we substantially completed during the quarter, the Compensation Committee decided not to change the annual base salaries of our CEO and other executive officers for 2024 as compared to 2023. • The Compensation Committee considered and approved the requests of our CEO and CFO to receive 100% and 50%, respectively, of their cash bonuses earned for 2023 in the form of fully-vested RSUs in lieu of cash. • In order to strengthen the alignment of executive compensation with long-term performance, the Compensation Committee made certain modifications to the PSUs granted to our executive officers in 2024 as compared to the PSUs granted in 2023, including (i) elongating the performance periods and (ii) adjusting the threshold for PSUs tied to relative TSR such that achievement below the 25th percentile results in no shares being earned. • To further motivate and reward performance directly aligned with the creation of long-term stockholder value and the Company’s key goal of generating operating income, the Compensation Committee granted a new type of PSU award to executive officers which is earned and vests based on appreciation of the Company’s stock price above pre-determined stock price triggers or achievement of specified operating income targets over a performance period of up to three years. • Further reflecting our pay for performance philosophy, the Compensation Committee approved equity award grants to our executive officers in 2024 with values significantly below the prior year grants to the NEOs. In particular, based on the target number of shares underlying RSUs and PSUs times the closing price of our common stock on the respective grant dates, 2024 equity award grants had a total value approximately 50% below the prior year grant in the case of our CEO and more than 30% below the prior year grants, on average, in the case of our other executive officers. • To help mitigate stockholder dilution in light of the recent decline in our stock price, in reviewing our director compensation policy, the Compensation Committee recommended, and the Board approved, placing a 25,000 share cap on the number of shares underlying the annual RSU grant to non-employee directors.
Linking Pay to Performance; Our Program Design
89% At-Risk or Variable Annual Base Salary (11%) Target Annual Cash Bonus (11%) PSUs (39%) RSUs (39%) 80% At-Risk or Variable Annual Base Salary (20%) Target Annual Cash Bonus (11%) PSUs (14%) RSUs (55%) “Target pay” consists of each NEO’s (i) annualized base salary for 2023, (ii) target annual cash bonus as a percentage of annualized base salary for 2023, assuming payout at 100% and excluding potential overachievement, and (iii) target values of equity awards granted to such NEO during 2023 (which were converted to share numbers using the mechanism described below in the section entitled “2023 Equity Award Determinations”).
Elements of Our Executive Compensation Program
Elements of Our Executive Compensation Program For 2023, the material elements of compensation for our NEOs were base salary, annual cash bonuses tied to corporate performance goals, and equity-based compensation in the form of RSUs and PSUs. The following table outlines these principal elements, including the primary objectives of each element, any associated performance measures, and whether each element is categorized as “fixed,” “at-risk” or “variable” based on corporate performance (including stock price appreciation).
Elements of Our Executive Compensation Program
| Compensation Element | Form | Type | Primary Objectives | Performance Measures | | Base Salary | Cash | Fixed | • Provide base amount of market competitive pay to attract, retain and motivate an effective leadership team • Provide a predictable level of financial stability for our executives | Not applicable | | Annual Cash Incentive | Cash | At-risk | • Focus executives on key annual corporate goals • Motivate and reward performance in achievement of these goals • Create a “pay for performance” culture | Pre-established performance metrics based on achievement of multiple one-year financial, operational and strategic goals (tied to revenue, gross margin, home patients, and reduction in service costs per console, subject to a minimum threshold tied to the Company’s cash holdings) | | Equity Incentive Awards | RSUs | Variable | • Attract, incentivize and retain executives through time-based multi-year vesting • Align interests of stockholders and executives by linking realized value to stock price performance • Focus our executives on performance that creates long-term value for our stockholders | Stock price appreciation | | | PSUs | Generally at-risk(1) | • Incentivize and retain executives • Focus executives on key corporate goals considered to be critical drivers of our growth and creation of long-term stockholder value • Motivate and reward performance that creates long-term value for our stockholders (generally no payout if performance measures are not met)(1) • Align interests of stockholders and executives | Performance metrics based on achievement against two metrics: (1) an operational metric tied to home patients at the end of 2024 and (2) our relative stockholder return over a two-year performance period compared to companies in a pre-determined index of medical device companies |
Elements of Our Executive Compensation Program
22.5% of the target number of shares subject to each NEO’s PSU award (i.e., 75% of the target number of shares underlying the TSR PSU portion of such award) are variable because they are earned and vest at the end of 2025 if achievement is at or below threshold.
Our Executive Compensation Practices
| WHAT WE DO: | WHAT WE DON’T DO: | | ✓ A significant majority of our NEOs’ annual target pay is at-risk or variable in the form of annual cash bonuses and long-term equity compensation tied to corporate performance and/or stock price appreciation ✓ Annual cash bonuses contingent on multiple pre-established financial, operational and strategic performance metrics that align with key corporate goals intended to create long-term stockholder value, subject to a cap on payout ✓ PSUs tied to multiple performance metrics over multi-year performance periods, with additional vesting thereafter ✓ Our short-term and long-term incentive programs are tied to different measures of performance ✓ Annual advisory vote for stockholders to approve NEO compensation ✓ Maintain a fully (100%) independent Compensation Committee ✓ Retain independent compensation consultant reporting directly to the Compensation Committee ✓ Annual executive compensation review (including market comparison against a relevant peer group) ✓ Meaningful stock ownership guidelines for our directors and executive officers ✓ Compensation recoupment (“clawback") policy | ✗ No guaranteed bonuses or base salary increases ✗ No employment contracts that guarantee continued employment of our executive officers ✗ No “single trigger” change of control arrangements ✗ No excessive perquisites provided to our executive officers ✗ No repricing, cash-out or exchange of “underwater” stock options without stockholder approval ✗ No health, welfare or retirement plans for executive officers that are not available to all employees ✗ We prohibit our employees and directors from engaging in hedging or other speculative transactions in our securities, and from pledging our securities ✗ No dividend or dividend equivalent payments on unearned equity awards |
Stockholder Advisory Votes on NEO Compensation
Stockholder Advisory Votes on NEO Compensation At our annual meeting of stockholders held in May 2023, we held a non-binding stockholder advisory vote on the compensation of our NEOs (commonly known as a “say-on-pay” vote). Our stockholders approved, on an advisory basis, the compensation of our NEOs, with approximately 93% of stockholder votes cast in favor of our say-on-pay resolution. In evaluating our compensation practices during the remainder of 2023 and in early 2024, we were mindful of the strong support our stockholders expressed for our philosophy of linking executive pay to short-term and long-term performance of the Company and aligning the interests of management and stockholders. In light of this strong support, the Compensation Committee retained our general approach to executive compensation and has continued to apply the same general principles and philosophy in determining executive compensation. In early 2024, the Compensation Committee did make certain changes to the Company’s executive compensation program in order to strengthen the alignment of executive compensation with long-term performance, including certain modifications to the PSUs granted to executive officers in 2024 (as compared to the PSUs granted to the NEOs in 2023), in particular, elongating the performance periods and adjusting the threshold for PSUs tied to relative TSR such that achievement below the 25th percentile results in no shares being earned.
Role of the Compensation Committee and Management
Role of the Compensation Committee and Management Our Board has delegated to the Compensation Committee responsibility for overseeing and administering our executive compensation program, including reviewing, determining and approving the compensation of our CEO and other executive officers (including our NEOs). In setting the compensation of our CEO, the Compensation Committee is charged with reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, evaluating our CEO’s performance in light of those goals, and determining and approving our CEO’s compensation based on this evaluation and other factors. Our CEO does not participate in discussions regarding her own compensation. Our Compensation Committee also approves the compensation of our executive officers other than our CEO. In doing so, the Compensation Committee takes into account our CEO’s evaluation of each executive officer’s performance and her recommendations with respect to their compensation. While our Compensation Committee solicits and reviews our CEO’s recommendations and proposals with respect to compensation of our executive officers (other than her own), the committee uses these recommendations and proposals as one of several factors in making such compensation decisions, and exercises its discretion in accepting, rejecting or modifying any such recommendations and proposals. In addition, from time to time, various members of management and other employees may be invited by the Compensation Committee to provide financial or other information or advice to the committee or otherwise participate in committee meetings. In setting executive compensation, the Compensation Committee considers a number of factors, including the recommendations of our CEO (other than with respect to herself), market data and competitive benchmarking assessments prepared by the Company’s independent compensation consultant (as discussed below in the section entitled “Benchmarking Comparison to Peer Group”), current and past total compensation, current equity holdings and the retention value thereof, overall forecast and budget considerations, current market conditions and the talent market environment, company performance and growth, the specific needs of the business at critical points in time, each executive’s role, criticality and relative scope of responsibility, individual performance and contributions, longevity and depth in role, overall experience and expertise, as well as internal equity considerations.
Guidance from Independent Compensation Consultant
Guidance from Independent Compensation Consultant In accordance with its written charter, the Compensation Committee has authority to retain or obtain the advice of an independent compensation consultant, legal counsel or other advisors to assist with the execution of its duties including as it relates to executive officer compensation. The Compensation Committee believes that working with an independent compensation consultant furthers its objectives to recruit and retain qualified executives, align their interests with those of stockholders and help design compensation packages that will appropriately motivate and reward ongoing achievement of business goals. The Compensation Committee engaged the services of Pearl Meyer as an independent executive compensation consultant to assist in its evaluation of executive and director compensation for 2023. At the request of the Compensation Committee, Pearl Meyer advised on principal aspects of our 2023 executive compensation program, including reviewing our executive compensation philosophy, developing a comparative group of peer companies, reviewing peer group trends with respect to levels and types of compensation elements, and performing competitive benchmarking assessments of executive
Guidance from Independent Compensation Consultant
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Guidance from Independent Compensation Consultant
officer compensation against our peer group and certain industry-specific survey data. In addition, Pearl Meyer reviewed and benchmarked our non-employee director compensation policy, reviewed competitive market practices and trends for equity compensation of our non-executive employees, conducted pay for performance assessments with respect to our 2023 CEO compensation, and provided support on other ad hoc matters throughout the year, including advice in connection with the stock ownership guidelines and compensation clawback policy we adopted during 2023. Pearl Meyer is retained by and continues to report to the Compensation Committee and, at the request of the committee, participates in committee meetings. Based on consideration of the various factors set forth in applicable Nasdaq and SEC rules, the Compensation Committee does not believe that its relationship with Pearl Meyer and the work of Pearl Meyer on behalf of the committee have raised any conflicts of interest. The Compensation Committee reviews these factors and receives written confirmation from Pearl Meyer stating its belief that it remains an independent compensation consultant to the Compensation Committee.
Benchmarking Comparison to Peer Group
Benchmarking Comparison to Peer Group In order to obtain a broad view of compensation practices among industry peers and competitors for executive talent, and to help design a competitive executive compensation program to attract, motivate and retain effective leadership, our Compensation Committee worked closely with Pearl Meyer to identify an appropriate group of comparable publicly traded peer companies against which to benchmark our 2023 executive officer compensation. In selecting the peer group to be used to help guide 2023 executive compensation decisions, the Compensation Committee, in consultation with Pearl Meyer, reviewed and updated the peer group selection criteria designed to capture a meaningful cross-section from which to benchmark executive officer compensation as follows:
Benchmarking Comparison to Peer Group
| Step | Criteria | | Starting Pool | An initial group of U.S.-based public companies traded on a major exchange was identified | | Filtering Criteria | The initial group was filtered to focus on companies operating in comparable industries, with comparable revenue and market capitalization generally within the following ranges: • Trailing twelve-month revenue ranging from $50 million to $350 million • 6-month average market capitalization ranging from $500 million to $5 billion | | Selection Criteria | Peer companies meeting the above filtering criteria were prioritized and selected using selection criteria based on geography (west-coast based companies) and sector (capital equipment providers and companies with disruptive products or technology) |
Benchmarking Comparison to Peer Group
In August 2022, following consultation with Pearl Meyer and based on the above selection criteria, our Compensation Committee approved the following peer group of companies for evaluating 2023 executive officer compensation (the “2023 peer group”):
Benchmarking Comparison to Peer Group
| | 2023 Peer Group | | | AtriCure, Inc. | Inspire Medical Systems, Inc. | SI-BONE, Inc. | | Axonics, Inc. | iRhythm Technologies, Inc. | Silk Road Medical, Inc. | | PhenomeX Inc. (formerly Berkeley Lights, Inc.) | NanoString Technologies, Inc. | STAAR Surgical Company | | CareDx, Inc. | Pacific Biosciences of California, Inc. | Tactile Systems Technology, Inc. | | Glaukos Corporation | Pulmonx Corporation | ViewRay, Inc. | | Inari Medical, Inc. | Shockwave Medical, Inc. | Veracyte, Inc. |
Benchmarking Comparison to Peer Group
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Benchmarking Comparison to Peer Group
The Compensation Committee reviews our peer group on an annual basis to make adjustments if warranted based on changes in both our business and the businesses of the companies in our peer group, while maintaining year-over-year continuity in the list for comparability of competitive analysis. As part of this review process, the Compensation Committee made the following changes to the 2022 peer group in determining the 2023 peer group: Removed Intersect ENT, Inc. as it was acquired during 2022; and • Added ViewRay, Inc., a healthcare equipment company, with revenue and market capitalization that is within our selection criteria ranges (but is at the smaller end of the range) in order to offset some of the larger companies in the peer group, replace the removal of Intersect ENT, Inc. and maintain our target peer group size. While ViewRay was included in our 2023 peer group, it was removed from our peer group for 2024 after it filed for bankruptcy and ceased operations later in 2023. In late 2022, Pearl Meyer prepared reports summarizing a benchmarking review and assessment of our executive compensation program, including base salary, annual incentive bonus and equity award levels for our NEOs as compared to our 2023 peer group and certain industry-specific survey data. The Compensation Committee considered these reports, among other factors, in determining the size, components and mix of compensation elements for the NEOs in 2023. Our Compensation Committee believes competitive market data is a useful tool in its deliberations to help design an executive compensation program that is competitive in relation to our peers, enabling us to attract, motivate and retain a qualified leadership team. The Compensation Committee generally considers the 25th, 50th and 75th percentiles of market data, and makes individual compensation decisions based on comparable positions at our peer group. However, the committee does not rely solely on competitive market data to determine any element of executive compensation or overall compensation. In making executive compensation decisions, the Compensation Committee considers a number of additional factors, including those discussed above in the section entitled “Role of the Compensation Committee and Management” as well as below in the section entitled “Elements of NEO Compensation and 2023 Determinations.” Elements of NEO Compensation and 2023 Determinations The principal elements of our NEOs’ 2023 compensation consisted of cash compensation in the form of base salary and annual cash bonuses tied to corporate performance goals, as well as equity-based compensation in the form of RSUs and PSUs. Each of these compensation elements is discussed in further detail below, including a description of how it fits into our overall executive compensation program and a discussion of the amounts of compensation paid or awarded to our NEOs during 2023 under each of these elements. In addition, our NEOs are eligible to participate in our standard retirement, health and welfare and other available employee benefit plans on the same basis as our other employees. We also maintain severance and change in control arrangements with our executive officers (including our NEOs) as described below.
Base Salary
In connection with its annual review of executive compensation levels in late 2022 and early 2023, the Compensation Committee reviewed the base salaries of our NEOs, including against market data prepared by Pearl Meyer based on our 2023 peer group and certain industry-specific survey data, and approved the increases reflected in the table below. In determining these increases, the Compensation Committee intended to maintain alignment of our executives’ salaries with competitive pay practices of our publicly traded peers, and set base salaries of certain NEOs within a competitive range of the 50th percentile based on comparable positions within our 2023 peer group and certain industry-specific survey data. The Compensation Committee also took into consideration individual performance, contributions, current and future duties and responsibilities within the Company and scope expansion, as well as the criticality of retaining strong and stable leadership at this stage of the Company’s growth in a competitive talent market. With respect to our CEO, the Compensation Committee decided that it was critical to approve a base salary increase sufficient to (i) acknowledge her strong performance and nearly ten years of transformative leadership of the Company through commercialization, transition into the public company arena and recent challenges including a global pandemic, (ii) incentivize continued excellence and growth as a public company CEO and (iii) increase retentive value by setting her base salary closer to the 75th percentile among chief executive roles within our 2023 peer group, particularly in light of an increasingly broad demand for her within a challenging and highly competitive market environment. The table below sets forth the annual base salaries in effect for each NEO in 2022 and 2023, and the percentage increase.
Annual Cash Incentive
Annual Cash Incentive We provide our executives with short-term incentive compensation through our annual cash bonus program. Consistent with our executive compensation philosophy, our annual incentive program is designed to focus our employees (including our executives) on key strategic corporate goals and motivate and reward performance in achievement of these goals, helping to create a goal-oriented and “pay for performance” environment. We believe that company-wide goals help to foster effective cross-functional performance and a culture of collaboration, in furtherance of our philosophy that we drive for success as a team, not as individuals. Our annual cash bonus program provides cash incentive award opportunities based on the level of achievement of financial, operational and strategic corporate performance goals established by our Compensation Committee at the beginning of the fiscal year. Payout varies depending on company performance as compared to the threshold and target performance goals established by the Compensation Committee. Our bonus program is designed to pay above-target bonuses when we exceed our target annual corporate objectives and below-target bonuses when we do not meet these objectives, with no payout in the event that we fail to meet any of the threshold objectives.
Annual Cash Incentive
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Annual Cash Incentive
Target annual cash bonus opportunities for our NEOs were set by our Compensation Committee as a percentage of their respective base salaries. In connection with its annual review of our executives’ compensation in late 2022 and early 2023, our Compensation Committee reviewed the 2023 bonus targets of our NEOs, taking into consideration market data prepared by Pearl Meyer based on our 2023 peer group and certain industry-specific survey data, each executive’s scope of responsibilities and individual and company performance, as well as the recommendation of our CEO (except with respect to herself), with a view towards generally maintaining consistent bonus percentages amongst our non-CEO executive officers. The Compensation Committee decided not to change the NEOs’ 2023 bonus targets as compared to the prior year, concluding that they remained market competitive. The following table sets forth the bonus targets (as a percentage of annual base salary) for each NEO during 2023, which were unchanged from the prior year as reflected below:
Annual Cash Incentive
| Name: | 2022 Bonus Target Percentage | 2023 Bonus Target Percentage | Increase | | Leslie Trigg | 100% | 100% | — | | Nabeel Ahmed | 50% | 50% | — | | John Brottem | 50% | 50% | — | | Jean-Olivier Racine | 50% | 50% | — | | Steve Williamson | 60% | 60% | — |
Annual Cash Incentive
Corporate Performance Goals The payment of awards under our 2023 annual cash bonus program applicable to our NEOs was subject to the attainment of several pre-established corporate milestones and goals relating to the Company’s financial and operational performance, which we refer to as “performance goals.” These performance goals were approved by our Compensation Committee in January 2023 and related to revenue (weighted 50%), gross margin (weighted 25%), home patients (weighted 15%) and a reduction in service costs per console (weighted 10%), all subject to achievement of a minimum cash threshold tied to year-end cash holdings. Our Compensation Committee established “threshold” and “target” achievement levels for each performance goal with resulting payouts for each such goal ranging from 75% (at threshold) to 100% (at target), plus an overachievement opportunity for achievement levels above target. The Compensation Committee capped each individual’s maximum possible payout under the cash bonus program at 200% of such individual’s target bonus opportunity. In addition, payout under the bonus program was subject to achievement of a “minimum cash threshold” tied to year-end cash (including cash, cash equivalents, restricted cash and short-term investments) such that, even if one or more of the performance goals were met at or above threshold, no payouts would be made under the bonus program if 2023 year-end cash fell below $140 million (excluding proceeds from any financing activities by the Company). Our Compensation Committee designed these threshold and target corporate performance goals for 2023 to (i) be challenging, but attainable with superior performance as well as focused effort and execution by our executives, (ii) appropriately drive successful execution of key strategic company objectives, namely driving revenue growth, expanding gross margins to deliver improved profitability, expanding within the home dialysis market, reducing the cost of service and improving the customer experience, while effectively managing cash within our operating budget, and (iii) effectively balance near-term financial performance with strategic financial and operational objectives designed to increase long-term stockholder value consistent with our overall growth strategies. Each performance goal was weighted according to the Compensation Committee’s assessment of its relative significance to our short-term and long-term success and strategy. In order to incentivize and proportionately reward exceptional above-target performance of each goal, while balancing fiscal responsibility and the desire to discourage excessive risk taking by our executives, the Compensation Committee allowed for over-achievement opportunities for each goal based on pre-determined payout curves, while capping individual payouts under the 2023 cash bonus program at 200% of each executive’s target bonus opportunity.
Annual Cash Incentive
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Annual Cash Incentive
The 2023 cash bonus program, including the corporate performance goals, threshold and target achievement levels and over-achievement opportunities for each goal, is summarized in the table below:
Annual Cash Incentive
| Performance Goal(1) | Weighting | Threshold: 75% Payout(2) | Target: 100% Payout(2) | Over-achievement Opportunity(3) | | Revenue (2023) | 50% | $145 million | $155 million | If 2023 revenue is achieved at or above target, each additional $1 million of 2023 revenue above target results in an additional 6.25% payout for this goal | | Gross margin (non-GAAP 2023) | 25% | 20.0% | 23.0% | Each 1% of gross margin above target results in an additional 35% payout for this goal | | Home patients (at 2023 year-end)(4) | 15% | Threshold goal | Target goal | Each specified number of patients above target results in an additional 0.67% payout for this goal | | Reduction in service costs per console per year(4) | 10% | Threshold goal | Target goal | Each specified number of dollars of reduction above target results in an additional 13.33% payout for this goal |
Annual Cash Incentive
(1) Even if one or more of the performance goals is met at or above threshold, no payouts would be made if cash holdings at 2023 year-end fall below the minimum cash holdings threshold of $140 million (excluding proceeds from any financing activities by the Company). (2) Achievement of each performance goal below threshold results in no payout for such goal. Payouts for each performance goal scale linearly from 75% to 100% for achievement between threshold and target levels for each performance goal. (3) Each NEO’s individual payouts under the cash bonus program are capped at a maximum of 200% of such NEO’s target bonus opportunity. (4) Because of the competitively sensitive nature of this information, we are not disclosing the specifics of our goals related to home patients and reduction in service costs. These goals were intended to be challenging, but attainable with superior performance and focused effort and execution by our executives. 2023 Cash Bonus Payouts In February 2024, our Compensation Committee, based on achievement of our 2023 corporate performance goals, approved overall payouts under our 2023 annual cash bonus program equal to 60.1% of each NEO’s target bonus opportunity. This determination was based on the following: • Minimum Cash Threshold: 2023 year-end cash (including cash, cash equivalents, restricted cash and short-term investments), excluding proceeds from any financing activities by the Company, of approximately $170 million exceeded the minimum cash threshold and, therefore, bonuses were eligible to be paid out based on achievement of the corporate performance goals. • Achievement of Performance Goals: The table below reflects the achievement and corresponding payout levels (including the additional over-achievement levels), with respect to each of our 2023 corporate performance goals, and the total payout level under the 2023 cash bonus program:
Annual Cash Incentive
| Corporate Performance Goal | Weighting | Attainment at 2023 Year-End | Over-achievement Contribution | Payout Level | Weighted Payout | | Revenue (2023) | 50% | Below threshold ($130.4 million) | None | 0.0% | 0.0% | | Gross margin (non-GAAP 2023) | 25% | Above target (23.6%)(1) | 21% | 121% | 30.3% | | Home patients (at 2023 year-end) | 15% | Above target | 19% | 119% | 17.9% | | Reduction in service costs per console per year | 10% | Above target | 20% | 120% | 12.0% | | Total payout | | | | | 60.1% |
Annual Cash Incentive
Appendix A includes a reconciliation of gross margin as prepared and presented under GAAP to non-GAAP gross margin.
Annual Cash Incentive
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Annual Cash Incentive
The following table summarizes the 2023 target bonus opportunities (assuming 100% payout at target) for each NEO, as well actual cash bonus amounts earned by each NEO during 2023 under our cash bonus program that were paid in February 2024.
Annual Cash Incentive
| Name: | Actual Base Salary Paid in 2023 ($) | 2023 Bonus Target Percentage (%) | 2023 Target Bonus Opportunity at 100% Payout ($) | 2023 Actual Bonus Payout Level (%) | 2023 Actual Bonus Amount ($)(1) | | Leslie Trigg | 723,077 | 100% | 723,077 | 60.1% | 434,569(2) | | Nabeel Ahmed | 459,521 | 50% | 229,761 | 60.1% | 138,086(2) | | John Brottem | 415,208 | 50% | 207,604 | 60.1% | 124,770 | | Jean-Olivier Racine | 401,481 | 50% | 200,741 | 60.1% | 120,645 | | Steve Williamson | 529,765 | 60% | 317,859 | 60.1% | 191,033 |
Annual Cash Incentive
(1) Actual cash bonus amounts earned by each NEO during 2023 were calculated based on such NEO’s actual salary paid during 2023, multiplied by the product of (i) such NEO’s 2023 bonus target percentage and (ii) the actual bonus payout level (60.1%). (2) In December 2023, Ms. Trigg and Mr. Ahmed each requested to receive 100% and 50%, respectively, of their 2023 actual cash bonus amounts in the form of fully-vested RSUs in lieu of cash. After consideration, in February 2024, the Compensation Committee granted fully-vested RSUs for 131,687 shares to Ms. Trigg and 20,922 shares to Mr. Ahmed. The number of shares was determined by dividing the dollar value of 100% of Ms. Trigg's 2023 actual cash bonus amount and 50% of Mr. Ahmed's 2023 actual cash bonus amount by the average closing price of our common stock over the 20 trading days ending on the last trading day preceding the grant date. Based on the closing price of our common stock on the grant date, the RSUs granted to Ms. Trigg had a market value of $489,876 and the RSUs granted to Mr. Ahmed had a market value of $77,830 (which he received in addition to $69,043 for the 50% portion of his bonus he received in cash).
Equity Incentive Awards
Equity Incentive Awards Our equity-based compensation is intended to attract, motivate and retain our executive officers, align the interests of our executive officers with the interests of our stockholders and focus our executive officers on performance that creates long-term value for our stockholders, using a mix of both time-based vesting and performance-based vesting. We typically grant equity awards to executive officers on an annual basis, as well as upon hire of a new executive and upon promotion to an executive position. 2023 Equity Award Types During 2023, we granted equity-based compensation to our NEOs in the form of RSUs and PSUs. Key elements of equity awards granted to our NEOs during 2023, including the target mix of equity awards and vesting schedules, are summarized in the following table:
Equity Incentive Awards
| | | Target Equity Mix(1) | | | | | Equity Award Type | Recipients | CEO | Other NEOs | At-Risk or Variable | Vesting(3) | | RSUs | All NEOs | 50% | 80% | Variable: Value varies based on stock price performance | Time-based vesting over three years, with one third vesting on the first anniversary of the grant date and then vesting quarterly over the following two years | | PSUs | All NEOs | 50%(2) | 20%(2) | Generally at-risk: Generally no payout if threshold performance measure is not met(4) | Performance-based vesting, with PSUs earned and vesting through 2025 based on achievement against two separate metrics tied to: (1) home patients and (2) relative TSR |
Equity Incentive Awards
(1) Percentages are based on the target value of each award type as described below in the section entitled “2023 Equity Award Determinations.” (2) Of the PSU awards granted to each NEO, 70% were comprised of Home PSUs and 30% were comprised of TSR PSUs. (3) All vesting is subject to continued service through the applicable vesting date(s). 22.5% of the target number of shares subject to each NEO’s PSU award (i.e., 75% of the target number of shares underlying the TSR PSU portion of such award) are variable because they are earned and vest at the end of 2025 if achievement is at or below threshold.
Equity Incentive Awards
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Design of 2023 PSUs
Design of 2023 PSUs In designing the PSUs awarded to the NEOs in early 2023, the Compensation Committee, in consultation with Pearl Meyer, decided to maintain the same key features (including performance metrics, performance periods and post-achievement vesting periods) as the PSUs granted to our executives in 2022, except that the performance and vesting periods were rolled forward one year to extend through 2025. The Compensation Committee concluded that the structure of these PSU awards continued to be appropriate for various reasons as outlined in the table below. The table below summarizes key features of the two types of PSUs awarded to the NEOs in 2023, and the Compensation Committee’s rationale:
Design of 2023 PSUs
| | Home PSUs | TSR PSUs | Rationale | | Performance metrics | Home patients | Relative TSR compared to companies in the Russell 2000 Medical Device Index | • Home patients is an operational metric the Compensation Committee determined would appropriately incentivize, reward and drive focused execution and performance by our executives against the Company’s key strategic goal of expanding within the home hemodialysis market, a goal the committee considers to be a critical driver of the Company’s future growth and long-term stockholder value. • Relative TSR, in addition to being a common incentive metric amongst peer group companies, is an effective measure of the Company’s long-term success and creation of stockholder value as compared to a pre-determined index of medical device companies which the Compensation Committee determined to be most comparable in sector and company size. The relative nature of the metric helps normalize external macroeconomic factors that fall outside of management’s control. • The use of multiple metrics (one absolute and one relative) helps balance the PSU structure, focusing executives and incentivizing and rewarding performance based on more than a single metric. | | Weighting | 70% | 30% | • The Compensation Committee determined the split between Home PSUs and TSR PSUs based on relative significance of the performance metrics to the Company’s short-term and long-term success and strategy, placing greater emphasis on home patients as a critical operational metric. | | Payout scale and maximum | 0% to 250% (CEO) 0% to 200% (other NEOs) | 75% to 250% (CEO) 75% to 150% (other NEOs) | • Incentivizes and proportionately rewards exceptional above-target performance, while discouraging excessive risk-taking by our executives. | | Performance period | Nearly 2 years (through December 31, 2024), subject to the vesting described below | 2 Years (January 6, 2023 through January 6, 2025), subject to the vesting described below | • The Compensation Committee determined that a multi-year performance period of 2 years was the appropriate time horizon over which to measure performance, balancing the one-year performance period for the annual cash bonus program and the three-year vesting period for the time-based RSUs, for an overall compensation program that appropriately aligns executive pay with both short-term and long-term performance of the Company. | | Post-achievement vesting | 50% of earned units vest upon certification of achievement following the performance period, with the remaining 50% subject to approximately 1-year of additional vesting (at end of 2025, the third year following the grant date) | 100% of earned units subject to approximately 1-year of additional vesting (at end of 2025, the third year following the grant date) | • For additional retentive value and risk management beyond the 2-year performance period, the Compensation Committee decided to require an additional year of time-based vesting for 50% of the Home PSUs earned and 100% of the TSR PSUs earned. |
Design of 2023 PSUs
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Home PSUs
Home PSUs Of the PSUs awarded to our NEOs in 2023, 70% were comprised of Home PSUs. Shares subject to Home PSUs awarded to our NEOs during 2023 are earned and vest based on achievement against an operational metric tied to the number of home patients as of the end of 2024, with 50% of earned units vesting after certification of the achievement level following the end of 2024 and the remaining 50% vesting at the end of 2025, subject to continued service through the applicable vesting date. The number of Home PSUs earned at the end of the nearly two-year performance period ending December 31, 2024 (“Earned Home Units”) varies based on actual performance from 0% to 250% in the case of our CEO and from 0% to 200% in the case of our other NEOs. The table below summarizes the payout opportunities for the Home PSUs:
Home PSUs
| | Number of Home Patients at end of 2024 | Earned Home Units | | Level of Achievement | (as a Percentage of Target)(1) | (as a Percentage of Target) | | Below Threshold | Less than 62.5% | 0% | | Threshold | 62.5% | 75% | | Target | 100% | 100% | | Above Target | Each additional 0.31% above Target | Additional 1.25%, up to a maximum of 250% (for our CEO) or 200% (for our other NEOs) |
Home PSUs
(1) Payouts scale linearly for achievement between threshold and target levels. At the time the Home PSUs were granted to the NEOs in January 2023, the Compensation Committee determined that, given the Company’s relatively limited experience selling Tablo in the home care setting, it did not have sufficient visibility into future home patient enrollment following a nearly two-year performance period ending December 31, 2024 to be able to set a definitive and meaningful target number of home patients that would be challenging, but reasonably achievable with superior performance, and that would appropriately incentivize the NEOs. As a result, the Compensation Committee determined to establish the 2024 home target by early 2024. On February 7, 2024, the Compensation Committee approved the 2024 target for the Home PSUs. The committee set a target it believed would be challenging, but attainable with superior performance as well as focused effort and execution by our executives.
TSR PSUs
TSR PSUs Of the PSUs awarded to our NEOs in 2023, 30% were comprised of TSR PSUs. Shares subject to TSR PSUs awarded to our NEOs during 2023 are earned and vest based on our relative TSR over a two-year performance period (beginning January 6, 2023 and ending January 6, 2025) as compared to companies included in the Russell 2000 Medical Device Index as of January 6, 2023, with 100% of earned units vesting at the end of 2025, subject to continued service through the vesting date. The number of TSR PSUs earned at the end of the two-year performance period ending January 6, 2025 (“Earned TSR Units”) will vary based on actual performance from 75% to 250% in the case of our CEO and from 75% to 150% in the case of our other NEOs. The table below summarizes the payout opportunities for the TSR PSUs:
TSR PSUs
| Level of Achievement | TSR Percentile(1) | Earned TSR Units (as a Percentage of Target) | | Threshold | 25th percentile or lower | 75% | | Target | 50th percentile | 100% | | Maximum | 75th percentile or above | 250% for our CEO; 150% for the other NEOs |
TSR PSUs
Payouts scale linearly for achievement between threshold and target levels and for achievement between target and maximum levels.
TSR PSUs
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TSR PSUs
2023 Equity Award Determinations For equity awards granted to our NEOs during 2023, the Compensation Committee approved the total target value of equity awards for each NEO, and then allocated such target value as applicable between RSUs and PSUs (and between Home PSUs and TSR PSUs) to achieve the desired target equity award mix. As approved by the Compensation Committee, to determine the total number of shares underlying each RSU and PSU award, the target value of the stock award was divided by the average closing price of a share of our common stock over 20 trading days ending on the last trading day preceding the grant date. For the actual grant date fair values of the equity awards granted to our NEOs in 2023, computed in accordance with ASC 718, please see the “Stock Awards” column of the 2023 Summary Compensation Table below. The terms of the RSUs and PSUs are described above in “2023 Equity Award Types.” In setting the target equity award values of the annual grants for each NEO, the Compensation Committee considered a number of factors, including competitive market data prepared by Pearl Meyer based on our peer group and certain industry-specific survey data, each executive’s current holdings and the retention value thereof, each executive’s scope of responsibilities, depth in role, individual contributions and performance, the criticality of retaining strong and stable leadership at this stage of the Company’s growth in an increasingly challenging and highly competitive talent market environment and the recommendations of our CEO (except with respect to herself). Taking into consideration all of the above factors, the Compensation Committee approved the following annual equity awards to our NEOs on January 6, 2023.
TSR PSUs
| | Aggregate Target Value | Number of RSUs | Target Number of Home PSUs | Target Number of TSR PSUs | | Leslie Trigg | $5.25 million | 106,189 | 74,332 | 31,857 | | Nabeel Ahmed | $1.75 million | 56,634 | 9,911 | 4,247 | | John Brottem | $1.20 million | 38,834 | 6,796 | 2,912 | | Jean-Olivier Racine | $1.20 million | 38,834 | 6,796 | 2,912 | | Steve Williamson(1) | $2.00 million | 64,724 | 11,327 | 4,854 |
TSR PSUs
(1) Mr. Williamson departed the Company as of February 23, 2024, at which time of the awards reflected in this table, 26,971 shares underlying the RSUs had vested, and all remaining unvested shares (including shares underlying all of the PSUs reflected in this table) were cancelled. Please see below the table entitled “Grants of Plan-Based Awards in 2023” for further details on equity awards granted to our NEOs in 2023, and the table entitled “Outstanding Equity Awards at 2023 Fiscal Year-End” for a summary of the outstanding stock option and stock awards held by each of our NEOs as of December 31, 2023, including a summary of the applicable vesting terms. 2022 PSU Achievement Levels In January and February 2024, the Compensation Committee certified achievement levels with respect to the Home PSUs and TSR PSUs awarded to the NEOs in 2022 (the “2022 Home PSUs” and “2022 TSR PSUs”) as follows: • Based on the number of home patients at the end of 2023 which fell above the target achievement level, 123.4% of the target 2022 Home PSUs became earned as of December 31, 2023. 50% of these earned units vested immediately upon certification of this achievement by the Compensation Committee on January 12, 2024, and the remaining 50% of earned units will vest at the end of 2024, subject to the NEO's continued service through the vesting date; and Based on our relative TSR at the end of the two-year performance period ending January 26, 2024 which was achieved below the threshold 25th percentile, 75% of the target 2022 TSR PSUs became earned as of January 26, 2024 as certified by the Compensation Committee in February 2024, with 100% of such earned units vesting at the end of 2024, subject to the NEO's continued service through the vesting date.
TSR PSUs
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Change in Control and Severance Agreements
Change in Control and Severance Agreements During 2023, we were party to Change in Control and Severance Agreements with each of our NEOs that provide for severance benefits upon certain qualifying terminations of employment with the Company. Our Compensation Committee believes that these types of arrangements serve to minimize the distraction caused by a potential separation, including in connection with a potential transaction, encourage retention through the conclusion of a transaction, enable our executives to focus on continuing normal business operations and on the success of a potential business combination, and help ensure stability and leadership continuity during a potentially uncertain period. Furthermore, our Compensation Committee believes these arrangements are important for attracting and retaining executive talent, as many of the companies with which we compete for executive talent have similar agreements in place for their senior management. A description of these arrangements, as well as information on the estimated payouts and benefits that our NEOs would have been eligible to receive in connection with a qualifying termination occurring as of December 29, 2023, the last trading day of our fiscal year, are set forth below in the sections entitled “Additional Narrative Disclosure – Change in Control and Severance Arrangements” and “Additional Narrative Disclosure – Potential Payments Upon Termination or Change of Control.”
401(k) Plan
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($)(7) | Total ($) | | Leslie Trigg | 2023 | 723,077 | — | 5,254,876(4) | — | 489,876(6) | 7,117 | 6,474,946 | | President, Chief Executive | 2022 | 661,125 | — | 2,904,800 | — | 555,761 | 6,597 | 4,128,283 | | Officer and Board Chair | 2021 | 560,000 | — | 4,101,079 | 1,499,496 | 977,200 | 506 | 7,138,281 | | Nabeel Ahmed | 2023 | 459,521 | — | 1,715,620(4) | — | 146,873(6) | 6,937 | 2,328,951 | | Chief Financial Officer | 2022 | 457,134 | — | 1,097,530 | — | 191,180 | 6,424 | 1,752,268 | | | 2021 | 323,000 | 75,000(1) | 574,354 | 562,492 | 249,235 | 330 | 1,784,411 | | John Brottem | 2023 | 415,208 | — | 1,197,419(4) | — | 124,770 | 7,117 | 1,744,514 | | General Counsel and | 2022 | 416,512 | — | 940,745 | — | 171,218 | 6,424 | 1,534,899 | | Secretary | 2021 | 349,615 | — | 558,562 | 574,802 | 305,039 | 330 | 1,788,348 | | Jean-Olivier Racine | 2023 | 401,481 | — | 1,188,654(4) | — | 120,645 | 6,825 | 1,717,605 | | Chief Technology Officer | 2022 | 386,246 | — | 862,358 | — | 167,063 | 6,316 | 1,421,983 | | | 2021 | 194,712 | — | 959,431 | 899,883 | 169,886 | 116 | 2,224,028 | | Steve Williamson | 2023 | 529,765 | — | 1,943,180(4) | — | 191,033 | 26,619 | 2,690,597 | | Former Chief | 2022 | 512,144 | — | 1,097,530 | — | 269,767 | 6,597 | 1,886,038 | | Commercial Officer | 2021 | 485,000 | — | — | — | 507,795 | 330 | 993,125 |