DEF 14A of DigitalOcean Holdings, Inc.

Filed Apr 19, 2024 · FY20230001140361-24-020784

Open on EDGAR

PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS
General
General Our Board is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors, and each class has a three-year term. Vacancies on the Board may generally be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified. The Board presently has eight members. There are two directors in the class whose term of office expires in 2024, both of whom have been nominated for re-election to the Board. All of our incumbent directors have previously been elected by our stockholders, other than this year’s two nominees, Pratima Arora and Warren Jenson, each of whom was appointed by our Board prior to our initial public offering to fill then-existing vacancies, and Christopher Merritt, who was appointed by our Board in 2023 to fill a then-existing vacancy and who is expected to be nominated for re-election to the Board at the 2025 Annual Meeting of Stockholders. If elected at the Annual Meeting, each of these nominees would serve until the 2027 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. It is our policy to encourage directors and nominees for director to attend the Annual Meeting. Six out of eight directors attended the 2023 Annual Meeting of Stockholders. Directors are elected by a plurality of the votes of the shares present in person, by remote communication, or represented by proxy at the meeting and entitled to vote generally on the election of directors. Accordingly, the two nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the two nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by the Company, or alternatively, the Board may leave a vacancy on the Board or reduce the size of the Board. Each person nominated for election has agreed to serve if elected. Our management has no reason to believe that any nominee will be unable to serve. The following is a brief biography as of the date of this Proxy Statement of each nominee and each director whose term will continue after the Annual Meeting.
Nominees for Election for a Three-Year Term Expiring at the 2027 Annual Meeting of Stockholders
Nominees for Election for a Three-Year Term Expiring at the 2027 Annual Meeting of Stockholders Pratima Arora, age 44, has served as a member of our Board since February 2021. Ms. Arora has served as Chief Technology Officer at Chainalysis Inc., a blockchain data platform, since June 2021. Prior to joining Chainalysis, Ms. Arora served as General Manager and Vice President of Confluence at Atlassian Corporation Plc, a provider of software development and collaboration tools, from September 2017 to June 2021. From June 2008 to September 2017, Ms. Arora worked at Salesforce.com, Inc., a cloud-based customer relationship management software service, where she most recently served as Vice President of Product Management. Previously, Ms. Arora worked in various roles at SAP SE, an enterprise software management system, and Intuit Inc., a financial services software company. Ms. Arora received a B.S. in Physics from Sri Venkateswara College, Delhi University and an M.B.A. from the Walter A. Haas School of Business at the University of California, Berkeley. We believe Ms. Arora’s extensive experience in product management roles at technology companies qualifies her to serve on our Board. Warren Jenson, age 67, has served as a member of our Board since December 2020. Mr. Jenson currently serves as President and Chief Financial Officer at Nielsen Holdings plc, a firm specializing in audience measurement, data, and analytics, where he has served since April 2023. From February 2012 to April 2023, Mr. Jenson worked at LiveRamp (formerly known as Axiom), a software-as-a-service company that provides identity and data connectivity services, where he most recently served as President, Chief Financial Officer and Executive Managing Director of International. Previously, Mr. Jenson served in C-suite positions with Electronic Arts, Amazon.com, Delta Air Lines and the National Broadcasting Company. Mr. Jenson currently serves on the board of directors of the USC Marshall School of Business, the Marriott School of Business at Brigham Young University, Ripple, a provider of cryptocurrency solutions for businesses, and Jobcase, an online job marketplace and social platform. Mr. Jenson previously served on the board of directors of Cardtronics plc and DigitalGlobe, Inc. Mr. Jenson received a B.S. in Accounting and a Master of Accountancy—Business Taxation from Brigham Young University. We believe that Mr. Jenson’s extensive experience as both a director and an executive officer at several successful public and private companies qualifies him to serve on our Board.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH CLASS III DIRECTOR NOMINEE NAMED ABOVE
EACH CLASS III DIRECTOR NOMINEE NAMED ABOVE
Class I Directors Continuing in Office Until the 2025 Annual Meeting of Stockholders
Class I Directors Continuing in Office Until the 2025 Annual Meeting of Stockholders Padmanabhan Srinivasan, age 49, has served as our Chief Executive Officer and a member of our Board since February 2024. Prior to DigitalOcean, Mr. Srinivasan served as the Chief Executive Officer of GoTo (formerly LogMeIn, Inc.), a provider of software as a service and cloud-based remote work tools for collaboration and IT management, from August 2022 to February 2024 and, prior to serving in such capacity, Mr. Srinivasan served as the Chief Product and Technology Officer at GoTo from June 2020 to August 2022. From June 2019 to June 2020, Mr. Srinivasan served as General Manager, Data, Machine Learning Platform Services, Alexa AI at Amazon. Previously, from June 2013 to June 2019, Mr. Srinivasan held a variety of positions at GoTo, where he most recently served as Senior Vice President, Products, General Manager. Prior to GoTo, Mr. Srinivasan co-founded Opstera, Inc., a cloud monitoring and management startup, which was acquired by a subsidiary of Microsoft Corporation in 2012. Earlier in his career, Mr. Srinivasan held various product and engineering leadership positions at both Oracle Corporation and Microsoft. Mr. Srinivasan received a B.S. in Electrical and Electronic Engineering from the Birla Institute of Technology and Science and an M.B.A. from Southern Methodist University. We believe Mr. Srinivasan’s prior experience as a chief executive officer, extensive product and technical experience, as well as his insight into corporate matters as our Chief Executive Officer, make him a valuable member of the Board. Amy Butte, age 56, has served as a member of our Board since April 2018. Ms. Butte currently serves on the board of directors of Bain Capital Specialty Finance, Inc., a managed specialty finance company; Bain Capital Private Credit, a public non-traded business development company; and Stash Financial, Inc., a financial services technology company, where she serves as audit committee chair. Ms. Butte is an advisor to several private companies, including the Long-Term Stock Exchange, Inc., a startup marketplace for long-term investors. Ms. Butte previously served as the audit committee chair, a member of the risk management committee and as a member of the board of directors of BNP Paribas USA, from 2016 to 2023; as chairperson and a member of the board of directors at Iron Spark I (ISAA), a special purpose acquisition vehicle, from 2021 to 2022; on the board of directors of Tuscan Holdings Corp. from 2019 to 2021; as an independent trustee for the Fidelity Investments Strategic Advisors Funds from 2011 to 2017; as a board member for Accion International from 2008 to 2014; and as the founder of TILE Financial, a fintech startup, from 2008 to 2012. Previously, Ms. Butte served as Chief Financial Officer of Man Financial, Inc., Chief Financial Officer and Executive Vice President of the New York Stock Exchange, and Chief Financial Officer and Strategist for the Financial Services Division of Credit Suisse First Boston, Inc. Ms. Butte received a B.A. from Yale University and an M.B.A. from Harvard Business School. We believe that Ms. Butte’s extensive experience in the financial industry and guiding companies through the complexities of maturing from private to public qualifies her to serve on our Board. Christopher Merritt, age 54, has served as a member of our Board since April 2023. Mr. Merritt currently serves on the board of directors of Sumo Logic, a cloud-based machine data analytics company. From September 2013 to January 2023, Mr. Merritt worked at Cloudflare, Inc., an internet security company, where he most recently served as Chief Revenue Officer and President of Field Operations. Previously, Mr. Merritt served as Chief Marketing and Sales Officer at BranchOut, a professional networking website, as VP of Global Advertiser Partnerships at Yahoo! Inc., a media and technology company, and in various senior roles at Monster Worldwide, Inc., a global employment website. Mr. Merritt received a Bachelor of Industrial Engineering from Auburn University. We believe Mr. Merritt’s extensive experience as a senior sales and/or marketing executive at various technology companies qualifies him to serve on our Board.
Class II Directors Continuing in Office Until the 2026 Annual Meeting of Stockholders
Class II Directors Continuing in Office Until the 2026 Annual Meeting of Stockholders Warren Adelman, age 60, has served as a member of our Board since November 2020 and as our Executive Chairman since August 2023. Mr. Adelman served as our lead independent director from June 2022 to August 2023. Mr. Adelman also serves as the Managing Director of Nativ Group, a personal investment firm, where he has served in such capacity since 2013. Prior to founding Nativ Group, Mr. Adelman held a variety of positions at GoDaddy Inc., a publicly-traded domain name registrar, from 2003 to 2012, most recently serving as Chief Executive Officer. Mr. Adelman also served as a member of GoDaddy’s board of directors from 2006 to 2012. Mr. Adelman currently serves on the board of directors of several technology-related companies. Mr. Adelman also previously served on the board of directors of SendGrid, Inc. from April 2014 until its merger with Twilio Inc. in February 2019. Mr. Adelman holds a B.A. in Political Science and History from the University of Toronto. We believe Mr. Adelman’s extensive experience with technology companies as both a director and an executive officer qualifies him to serve on our Board. Pueo Keffer, age 42, has served as a member of our Board since June 2015. Mr. Keffer currently serves as a Senior Managing Director at Access Technology Ventures, a venture and growth technology firm, where he has served in various capacities since April 2015. Mr. Keffer was a Partner at Redpoint Ventures, a venture capital firm, from January 2009 to April 2015. Previously, Mr. Keffer was an associate at TA Associates, a growth private equity firm, and a financial analyst at Goldman Sachs & Co. Mr. Keffer also currently serves on the board of directors of Opendoor Technologies Inc., an operator of an online real estate marketplace, and Array Corporation, a privately-held software development company. Mr. Keffer received a B.A. in Economics from Stanford University. We believe that Mr. Keffer’s extensive investment experience in the technology industry qualifies him to serve on our Board. Hilary Schneider, age 63, has served as a member of our Board since November 2020. Ms. Schneider served as the Chief Executive Officer of Shutterfly, Inc., a photography and image sharing company, from January 2020 to May 2023. From January 2018 to November 2019, Ms. Schneider served as the Chief Executive Officer of Wag Labs, Inc., an on-demand dog walking company. Ms. Schneider served as President, Chief Executive Officer and a director of LifeLock, Inc., a formerly publicly-traded provider of identity theft protection, identity risk assessment and fraud protection services, from March 2016 to February 2017 and President from 2012 to 2016. Previously, Ms. Schneider held senior leadership roles at Yahoo!, a media and technology company, Knight Ridder, Inc., a media company, and Red Herring Communications, a media company. Ms. Schneider currently serves on the board of directors of Vail Resorts, Inc., a global mountain resort operator, Getty Images, Inc., a global visual content creator and marketplace, Sleep Number Corporation, a manufacturer of beds and bed accessories, and Water.org, a non-profit organization. Ms. Schneider previously served on the board of directors of SendGrid, Inc. from July 2017 until its merger with Twilio Inc. in February 2019. Ms. Schneider holds a B.A. in Economics from Brown University and an M.B.A. from Harvard Business School. We believe Ms. Schneider’s extensive experience with technology companies as both a director and an executive officer qualifies her to serve on our Board.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
NON-EMPLOYEE DIRECTOR COMPENSATION
NON-EMPLOYEE DIRECTOR COMPENSATION The following table sets forth information regarding compensation earned by or paid to our non-employee directors for the year ended December 31, 2023.
NON-EMPLOYEE DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($)(1) | Option Awards ($) | Stock Awards ($)(2)(3) | All Other Compensation ($)(4) | Total ($) | | Warren Adelman | — | 974,985(5) | 285,634 | 691,813 | 1,952,431 | | Pratima Arora | 23,250 | — | 257,599 | — | 280,849 | | Amy Butte | 55,000 | — | 233,230 | — | 288,230 | | Warren Jenson | — | — | 286,911 | — | 286,911 | | Pueo Keffer | — | — | 280,247 | — | 280,247 | | Christopher Merritt | — | — | 638,186 | — | 638,186 | | Hilary Schneider | — | — | 287,907 | — | 287,907 |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (1) The amounts shown for Mses. Arora and Butte reflect the cash fees that such non-employee directors received under our non-employee director compensation policy for the fiscal year ended December 31, 2023. Non-employee director fees are paid quarterly at the end of each fiscal quarter. |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (2) Pursuant to the non-employee director compensation policy, each of our non-employee directors has the option to be paid in the form of cash or fully-vested restricted stock unit (“RSU”) awards. Each of Ms. Schneider and Messrs. Jenson, Keffer and Merritt elected to be paid in RSUs for fees earned with respect to the fiscal year ended December 31, 2023. Ms. Arora elected to be paid in RSUs for fees earned through June 30, 2023 and elected to be paid in cash for the remainder of the year. Mr. Adelman elected to be paid in RSUs for fees earned through August 24, 2023, the date Mr. Adelman became our Executive Chairman and was no longer eligible to receive compensation under our non-employee director compensation policy. Mr. Merritt joined our Board on April 17, 2023 and, upon his appointment, Mr. Merritt received an Initial Grant (as defined below). In addition, pursuant to the non-employee director compensation policy, each of the non-employee directors as of the close of business on the date of our 2023 Annual Meeting of Stockholders automatically received an Annual Grant (as defined below). With respect to RSU grants, the number of shares of common stock granted to a director is based on the average trading price of our common stock on the NYSE for the 10 trading days immediately prior to and ending on the grant date. The grant date fair value was calculated in accordance with Financial Accounting Standard Board Accounting Standards Codification, Topic 718 (“ASC Topic 718”) based on the closing stock price at the grant date. This amount does not reflect the actual economic value that may be realized by the director. The grant date fair value of the RSUs granted in 2023 are as follows: |
NON-EMPLOYEE DIRECTOR COMPENSATION
| Name | Quarter Ended March 31, 2023 ($) | New Board Member Grant April 17, 2023 ($) | Annual Grant June 6, 2023 ($) | Quarter Ended June 30, 2023 ($) | Quarter Ended September 30, 2023 ($) | Quarter Ended December 31, 2023 ($) | Total ($) | | Warren Adelman | 21,426 | — | 233,230 | 19,468 | 11,510 | — | 285,634 | | Pratima Arora | 12,769 | — | 233,230 | 11,600 | — | — | 257,599 | | Amy Butte | — | — | 233,230 | — | — | — | 233,230 | | Warren Jenson | 14,415 | — | 233,230 | 13,086 | 13,192 | 12,988 | 286,911 | | Pueo Keffer | 11,203 | — | 233,230 | 11,600 | 11,703 | 12,511 | 280,247 | | Christopher Merritt | — | 380,317 | 233,230 | 7,185 | 8,795 | 8,659 | 638,186 | | Hilary Schneider | 13,709 | — | 233,230 | 12,484 | 13,625 | 14,859 | 287,907 |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (3) The following table sets forth (a) the aggregate number of outstanding RSUs held by each non-employee director as of December 31, 2023 and (b) the aggregate number of outstanding options held by each non-employee director as of December 31, 2023. |
NON-EMPLOYEE DIRECTOR COMPENSATION
| Name | Total RSUs Held | Total Options Held | | Warren Adelman | 5,220 | 121,799 | | Pratima Arora | 25,352 | — | | Amy Butte(a) | 5,220 | 69,000 | | Warren Jenson | 5,220 | 100,000 | | Pueo Keffer | 5,220 | — | | Christopher Merritt | 16,215 | — | | Hilary Schneider | 5,220 | 100,000 |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (a) Equity is held directly by Plato Partners LLC and Ms. Butte owns substantially all of Plato Partners LLC. |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (4) The amount shown reflects $690,625 in salary and $1,188 in life insurance premiums paid by us in connection with Mr. Adelman’s role as Executive Chairman, which commenced on August 24, 2023. |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (5) In connection with Mr. Adelman's appointment as Executive Chairman, he was granted a stock option award. The amount shown reflects the fair value of the option award computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. This amount does not reflect the actual economic value that may be realized by Mr. Adelman. |
Non-Employee Director Compensation Policy
Non-Employee Director Compensation Policy Under our amended non-employee director compensation policy, each of our non-employee directors is eligible to receive compensation for service on the Board and committees of the Board as set forth below.
Executive Compensation Philosophy and Objectives
| • | attract, motivate, incentivize and retain a highly-skilled team of executive officers who contribute to our long-term success; |
Executive Compensation Philosophy and Objectives
| • | effectively align our executive officers’ interests with the interests of our stockholders by focusing on long-term equity incentives that correlate with the growth of sustainable long-term value for our stockholders. |
Role of the Compensation Consultant
Role of the Compensation Consultant For fiscal year 2023, the scope of Compensia’s engagement for the Compensation Committee included:
Role of the Compensation Consultant
| • | advising the Compensation Committee on executive compensation trends and regulatory developments; |
Role of the Compensation Consultant
| • | researching, developing and reviewing the compensation peer group used for fiscal year 2023 executive compensation benchmarking; |
Role of the Compensation Consultant
| • | presenting market data and analysis to assist the Compensation Committee in developing executive compensation levels, including appropriate salaries and the size and structures of target bonus amounts and equity awards for our executive officers, including our incoming chief executive officer; |
Role of the Compensation Consultant
| • | reviewing market and peer group equity usage metrics with an understanding of our equity budget relative to market; |
Role of the Compensation Consultant
| • | advising on our non-employee director compensation program; |
Role of the Compensation Consultant
| • | reviewing the materials prepared for the Compensation Committee by management relative to fiscal year 2023 compensation for the executive officers; |
Role of the Compensation Consultant
| • | advising on our stock ownership guidelines for non-employee directors and executive officers; and |
Role of the Compensation Consultant
| • | supporting other ad hoc matters throughout the year. |
Role of the Compensation Consultant
The Compensation Committee has analyzed whether the work of Compensia as compensation consultant raises any conflict of interest, taking into account relevant factors in accordance with SEC rules and stock exchange listing standards. Based on its analysis, the Compensation Committee determined that the work of Compensia during 2023 did not create any conflict of interest pursuant to the SEC rules and stock exchange listing standards.
Use of Competitive Market Data
Use of Competitive Market Data For purposes of comparing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a group of peer companies. This compensation peer group consists of publicly-traded technology companies against which we compete for executive talent and that are similar to us in terms of revenue, market capitalization and industry focus. The competitive data drawn from this compensation peer group is only one of several factors that the Compensation Committee considers, however, in formulating its recommendations with respect to the compensation of our executive officers. In October 2022, the Compensation Committee, with the assistance of Compensia, determined the peer group for purposes of fiscal year 2023 compensation decisions was as follows:
Use of Competitive Market Data
| Altair Engineering | Fastly | New Relic | | Appian | Five9 | PagerDuty | | Asana | Freshworks | Ping Identity Holding | | Cloudflare | Hashicorp | Rapid7 | | Confluent | Jamf Holding | Smartsheet | | Datadog | Marqeta | Workiva | | Elastic N.V. | MongoDB | Zuora |
Use of Competitive Market Data
The Compensation Committee reviews our peer group at least annually and makes adjustments to its composition, if warranted, taking into account changes in both our business and the businesses of the companies in the peer group. For 2023 compensation benchmarking, Anaplan, Datto Holding and Domo were removed from the peer group because they ceased to be publicly-traded or no longer met the targeted selection criteria and HashiCorp, Jamf Holding and Marqeta were added to the peer group because they met the targeted selection criteria and because of the comparable nature of their businesses. In addition, Ping Identity Holding was acquired following the Compensation Committee’s approval of our peer group and it was subsequently removed from the peer group when the compensation analysis was performed. Using data compiled from the peer companies, Compensia completed an assessment of our executive compensation to inform the Compensation Committee’s determinations regarding executive compensation for 2023. Compensia prepared, and the Compensation Committee reviewed, a range of market data reference points (generally at the 25th, 50th, 65th and 75th percentiles of the market data) with respect to base salary, performance-based cash bonuses, long-term equity compensation, total target cash compensation (base salary and annual target performance-based cash bonus) and total direct compensation (total target cash compensation and long-term equity compensation) with respect to each of the executive officers. The Compensation Committee targeted total direct compensation to fall between the 50th and 75th percentiles of the market data, but reviewed the market data reference points as only one of the factors in making 2023 compensation decisions. The Compensation Committee considers other factors as described below under “Factors Used in Determining Executive Compensation.”
Factors Used in Determining Executive Compensation
| • | Range of market data reference points, as described above under “Use of Competitive Market Data” |
Factors Used in Determining Executive Compensation
| • | Recommendations from the independent compensation consultant |
Factors Used in Determining Executive Compensation
| • | Value of existing equity holdings, including the potential value of unvested equity awards |
2023 Executive Compensation Program
| Compensation Element | How Payout is Determined | Performance Measures | Purpose | | Base Salary (fixed; paid in cash) | Compensation Committee reviews and determines base salary on an annual basis based on a number of factors, including company and individual performance and market data obtained from our independent compensation consultant | N/A | • Provides stable income for performing job responsibilities • Attracts highly-qualified executives | | Performance-Based Cash Bonus (variable; paid in cash) | Compensation Committee reviews target bonus percentages on an annual basis and determines executive bonus payouts based on predetermined corporate financial objectives | • Revenue • Adjusted free cash flow margin | • Motivates and rewards executives for achievement of company financial goals • Aligns management and stockholder interests by linking pay to financial performance | | Long-Term Equity Incentive - Time-Based RSUs (variable; paid in equity) | Compensation Committee reviews and determines amounts and terms of time-based RSU grants for executive officers annually based on a number of factors, including corporate and individual performance and market data obtained from our independent compensation consultant | Value of an RSU as of the date of vesting is based on stock price on the date of vesting, which links the awards to overall performance and the creation of value for our stockholders | • Represents 35% of the total annual long-term equity incentive award • Serves a retention function • Aligns management and stockholder interests by facilitating management ownership and tying value of award at vesting to stock price at vesting | | Long-Term Equity Incentive - PSUs (variable; paid in equity) | Compensation Committee reviews and determines amounts and terms of performance-based RSU (“PSU”) grants for executive officers annually based on a number of factors, including corporate and individual performance and market data obtained from our independent compensation consultant | • Revenue growth plus adjusted free cash flow margin • Value of a PSU as of the date of vesting is based on stock price on the date of vesting | • Represents 65% of the total annual long-term equity incentive award • PSUs further align interests with our stockholders in driving long-term company performance and growth in value. PSU vesting is contingent upon our achievement of specified corporate performance goals. • Serves a retention function |
Performance-Based Cash Bonus
Performance-Based Cash Bonus Our annual performance-based cash bonus awards provide incentive compensation that is specifically designed to motivate our executive officers to achieve annual financial objectives set by the Compensation Committee and to reward them for results and achievements in a given year. The annual target bonus opportunities for our executive officers are generally determined by the Compensation Committee in the first quarter of each year and expressed as a percentage of each individual’s annual base salary. After a review of the factors described in the section above, in February 2023, the Compensation Committee approved an increase in the target bonus percentage from 65% to 70% for each executive officer (except for Yancey Spruill, our former Chief Executive Officer, and William Sorenson, our former Chief Financial Officer). In September 2023, following the announcement of the chief executive officer succession plan, the Compensation Committee approved an increase to Mr. Steinfort’s annual target bonus percentage from 70% to 80%. Bonuses are payable based on the target bonus percentage and salary in effect as of the end of the applicable year for which the bonus is being paid. The target bonus opportunities approved for and amounts earned by our named executive officers for 2023 were as follows:
Performance-Based Cash Bonus
| Named Executive Officer | Target Bonus Opportunity (% of Base Salary) | Target Bonus Opportunity ($) | Actual Bonus Earned ($) | | Yancey Spruill | 100% | 514,000 | 514,000(1) | | W. Matthew Steinfort | 80% | 432,000 | 241,488 | | William Sorenson | 65% | 186,333(2) | 104,160 | | Muhammad Aaqib Gadit | 70% | 297,470(3) | 166,286(3) | | Gabriel Monroy | 70% | 262,500 | —(4) | | Megan Wood | 70% | 297,500 | 163,625(5) |
Performance-Based Cash Bonus
| (1) Pursuant to the terms of the Spruill Separation Agreement, Mr. Spruill received 100% of his target bonus opportunity, as discussed in further detail below. |
Performance-Based Cash Bonus
| (2) Pursuant to the Sorenson Transition Agreement, Mr. Sorenson was eligible to receive a pro-rated annual bonus equal to two-thirds of the annual target bonus opportunity, as discussed in further detail below. Amount shown reflects Mr. Sorenson’s pro-rated target bonus opportunity. |
Performance-Based Cash Bonus
| (3) Mr. Gadit’s bonus is payable in AED. The amounts shown have been converted from AED to USD using the currency exchange rate as of December 29, 2023, the last business day of the 2023 fiscal year (approximately 0.27223 USD per 1 AED). |
Performance-Based Cash Bonus
| (4) Mr. Monroy resigned from the Company on March 31, 2023 and was not eligible for a 2023 bonus. |
Performance-Based Cash Bonus
| (5) Pursuant to the Wood Separation Agreement, Ms. Wood was entitled to receive the achieved portion of her 2023 annual bonus, as discussed in further detail below. |
Performance-Based Cash Bonus
Executive Bonus Goal Setting The Compensation Committee approved the initial performance metrics and their relative weighting for fiscal year 2023 performance-based cash bonus awards in the first quarter of 2023. The targets against which performance is measured are generated through our annual budget and strategic planning process, which was reviewed with our Board and finalized in the first quarter of 2023. For fiscal year 2023, the Compensation Committee elected to change the relevant weighting for the 2023 bonus payout. In previous years, the total bonus opportunity was based on a mix of predetermined corporate performance objectives and individual performance. For 2023, the Compensation Committee determined that the total annual bonus opportunity for our executive officers would be 100% based on predetermined corporate performance objectives, as discussed in further detail below, to further align the interests of our executive officers with the interests of our stockholders. For 2023, the Compensation Committee determined that one-half of the total annual bonus would be based on revenue and one-half of the total annual bonus would be based on adjusted free cash flow margin (defined as net cash provided by operating activities less purchases of property and equipment, capitalized internal-use software costs, purchase of intangible assets and excluding cash paid for restructuring and other charges, acquisition related compensation, restructuring related charges, and acquisition and integration related costs, as a percentage of revenue). For fiscal year 2023, the Compensation Committee increased the weighting of adjusted free cash flow margin from one-third to one-half of the total annual bonus in an attempt to further prioritize the importance of increasing profitability while also driving revenue growth. The Compensation Committee intended these goals to be challenging to attain based on an analysis of internal forecasts and external market factors. For purposes of calculating the bonus payout amount, when the determined achievement of either of the components exceeds the specified targets, accelerators are applied in order to reward the higher than expected performance, while decelerators are applied if the actual results are lower than the performance target. The potential payout range for each of the revenue and adjusted free cash flow margin components (after applying the decelerator/accelerator factor) was 25-150% and 50-150%, respectively, of the executive’s target bonus opportunity for such component. With respect to the revenue component, the actual payout was set to be 25% for achievement at the threshold amount and up to the intermediate amount and then was determined based on a linear interpolation for achievement between the intermediate and target amounts and the target and maximum amounts. With respect to the adjusted free cash flow margin component, the actual payout was to be determined based on a linear interpolation for achievement between the threshold and target amounts and the target and maximum amounts. The impact of any acquisitions would be determined on a case-by-case basis during the course of the year. The Compensation Committee approved the initial revenue and adjusted free cash flow margin goals during the first quarter of 2023. The initial goals were subsequently adjusted to factor in our revised forecasts for revenue and adjusted free cash flow margin to account for the impact of the Paperspace acquisition. The initial and adjusted revenue and adjusted free cash flow margin goals for the 2023 performance-based cash bonus were as follows:
Performance-Based Cash Bonus
| | 2023 Revenue (Initial) | 2023 Revenue (As Adjusted) | Percentage Payout | | Threshold | $700M | $706.5M | 25% | | Intermediate | $705M | $711.5M | 50% | | Target | $727M | $734M | 100% | | Maximum | $740M | $748M | 150% |
Performance-Based Cash Bonus
| | 2023 Adjusted Free Cash Flow Margin (Initial) | 2023 Adjusted Free Cash Flow Margin (As Adjusted) | Percentage Payout | | Threshold | 21% | 21% | 50% | | Target | 25% | 22% | 100% | | Maximum | 27% | 24% | 150% |
Performance-Based Cash Bonus
Fiscal Year 2023 Bonus Payouts In February 2024, achievement of the corporate performance goals for fiscal year 2023 was determined to be as follows: (i) revenue was $693 million (which included the impact of our acquisition of Paperspace at the direction of the Compensation Committee), resulting in no payout with respect to such component; and (ii) adjusted free cash flow margin was 22.47%, resulting in a payout of 111.8% with respect to such component. Since the total annual bonus opportunity was based entirely on the results of these metrics, each eligible executive officer (except Mr. Spruill) earned 55.9% of such executive’s total annual bonus opportunity. Actual payouts for fiscal year 2023 are included in the table set forth above and the “Summary Compensation Table” below.
Long-Term Equity Incentive Compensation
Long-Term Equity Incentive Compensation We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers to create value for our stockholders. Equity awards also help us retain qualified executive officers in an increasingly competitive market. Long-term incentive compensation opportunities in the form of equity awards are granted to our executive officers by the Compensation Committee, with the exception of our Chief Executive Officer. As with other elements of compensation, the Compensation Committee determines the amount of long-term equity incentive compensation for our executive officers as part of its annual compensation review in the first quarter of the year (absent extenuating circumstances) and after taking into consideration the individual officer’s responsibilities, performance and existing equity retention profiles, and the other factors described in “Factors Used in Determining Executive Compensation” above. For awards to executive officers other than our Chief Executive Officer, the Compensation Committee also takes into account the recommendations of our Chief Executive Officer with respect to appropriate grants and any particular individual circumstances. The amounts of the equity awards are intended to provide competitively-sized awards and resulting target total direct compensation opportunities that the Compensation Committee believes are reasonable and appropriate taking into consideration the factors described herein. In 2023, consistent with the prior year, the Compensation Committee determined to grant our executive officers (with the exception of Yancey Spruill, our former Chief Executive Officer, who did not receive any equity awards in 2023, and W. Matthew Steinfort, our Chief Financial Officer, who received a time-based new hire RSU award in February 2023 and, therefore, only received a PSU award in the March 2023 compensation cycle) long-term equity incentive compensation awards as follows: (i) 35% of the total value of the long-term equity incentive compensation would be in the form of RSU awards, which vest over a four year period and will be settled for shares of our common stock; and (ii) 65% of the total value of the long-term equity incentive compensation would be in the form of PSU awards, which will be earned contingent upon our achievement of corporate financial objectives, as discussed in further detail below, and then, assuming achievement, will vest over a three year period (inclusive of the performance period) and be settled for shares of our common stock. Since the value of RSU and PSU awards increases with any increase in the value of the underlying shares, these equity awards serve as an incentive that aligns the interests of our executive officers with the long-term interests of our stockholders. In addition, because the awards are subject to a multi-year vesting requirement, RSU and PSU awards serve our retention objectives since our executive officers generally must remain continuously employed by us through the applicable vesting dates to fully earn these awards. Despite the fact that granting PSUs is a minority practice within our peer group in general, and particularly the percentage of our total 2023 long-term equity incentive compensation awards that PSUs represent, we believe this plan design further aligns the interests of our executive officers with our stockholders in driving long-term company performance and growth in value. Achievement of the PSU awards granted to our executive officers in 2023 is based on a one-year performance period beginning on January 1, 2023 and ending on December 31, 2023. The actual number of shares earned is determined based upon the aggregate of the following: (i) revenue growth (i.e., the percentage increase in revenue from fiscal year 2022 to fiscal year 2023); and (ii) adjusted free cash flow margin. For purposes of calculating the PSU achievement, when the determined achievement exceeds the specified targets, accelerators are applied in order to reward the higher than expected performance, while decelerators are applied if the actual results are lower than the performance target. The potential achievement for the PSU award was 38.5-200% of the executive’s target PSU award. The actual payout was set to be 38.5% for achievement at the threshold amount and up to the intermediate amount and then was based on a linear interpolation for achievement between the intermediate and target amounts and the target and maximum amounts. The impact of any acquisitions would be determined on a case-by-case basis during the course of the year. The Compensation Committee approved the initial revenue growth plus adjusted free cash flow margin goals during the first quarter of 2023. The initial goals were subsequently adjusted to factor in our revised forecasts for revenue growth and adjusted free cash flow margin to account for the impact of the Paperspace acquisition. The initial and adjusted revenue growth plus adjusted free cash flow margin goals for the 2023 PSU awards were as follows:
Long-Term Equity Incentive Compensation
| | 2023 Revenue Growth Plus Adjusted Free Cash Flow Margin (Initial) | 2023 Revenue Growth Plus Adjusted Free Cash Flow Margin (As Adjusted) | Percentage of PSU Achievement | | Threshold | 42% | 40.4% | 38.5% | | Intermediate | 45% | 43.4% | 50% | | Target | 51% | 49.4% | 100% | | Maximum | 55% | 53.4% | 200% |
Long-Term Equity Incentive Compensation
The equity awards granted to our named executive officers in March 2023 as part of our annual compensation review are set forth in the table below.
Long-Term Equity Incentive Compensation
| Named Executive Officer | RSUs Granted (number of shares)(1)(2) | PSUs Granted (target number of shares)(1)(3) | PSUs Granted (maximum number of shares)(1)(3) | Aggregate Grant Date Fair Value of Equity Awards Granted ($)(4) | | Yancey Spruill(5) | — | — | — | — | | W. Matthew Steinfort(6) | — | 93,359 | 186,718 | 2,964,148 | | William Sorenson(7) | — | — | — | — | | Muhammad Aaqib Gadit | 51,736 | 96,082 | 192,164 | 4,693,222 | | Gabriel Monroy | 62,083 | 115,298 | 230,596 | 5,631,847 | | Megan Wood | 26,608 | 49,416 | 98,833 | 2,413,762 |
Long-Term Equity Incentive Compensation
| (1) The number of shares of our common stock subject to the RSU and PSU awards was determined by dividing the target values approved by the Compensation Committee for each award by the average closing market price of our common stock as reported on the NYSE for the last five trading days of February 2023, the calendar month prior to the month in which the grant date occurred. Therefore, the target value approved by the Compensation Committee differs from the grant date fair value reported in the “Aggregate Grant Date Fair Value of Equity Awards Granted” column and in the “Summary Compensation Table” below. |
Long-Term Equity Incentive Compensation
| (2) The values of the RSU awards approved by the Compensation Committee for Messrs. Gadit and Monroy and Ms. Wood were $1,662,500, $1,995,000 and $855,050, respectively. The shares underlying the RSU awards vest in 16 equal quarterly installments beginning on June 1, 2023, subject to the named executive officer’s continuous service through each such vesting date. |
Long-Term Equity Incentive Compensation
| (3) The target values of the PSU awards approved by the Compensation Committee for Messrs. Steinfort, Gadit and Monroy and Ms. Wood were $3,000,000, $3,087,500, $3,705,000 and $1,587,950, respectively. The maximum number of shares of our common stock that may be earned under the PSU awards is based on 200% of the target value of the approved awards. Subject to achievement of certain 2023 financial performance targets as set forth above and the named executive officer’s continued service with the Company, the PSU awards vest as follows: (a) one-third of the shares underlying the PSU were eligible to vest on the later of (x) March 1, 2024 or (y) two trading days following the public release of our 2023 financial results, and (b) the remaining shares underlying the PSU vest in eight equal quarterly installments thereafter. |
Long-Term Equity Incentive Compensation
| (4) The grant date fair value was calculated in accordance with ASC Topic 718 based on the closing stock price at the grant date using the target value of the PSU awards, which represented the probable outcome of the performance conditions at the grant date. This amount does not reflect the actual economic value that may be realized by the named executive officer. |
Long-Term Equity Incentive Compensation
| (5) In July 2021, Mr. Spruill was awarded a market-based restricted stock unit (“MRSU”) for 3,000,000 shares of our common stock, which was scheduled to vest upon the satisfaction of certain service conditions and the achievement of certain Company stock price goals. Mr. Spruill did not receive an equity award in 2023. |
Long-Term Equity Incentive Compensation
| (6) Mr. Steinfort did not receive a time-based RSU award as part of the March 2023 long-term equity incentive program because he was granted a new hire RSU in February 2023 in connection with the commencement of his employment in January 2023. |
Long-Term Equity Incentive Compensation
| (7) In August 2022, Mr. Sorenson entered into the Sorenson Transition Agreement that provided for his retirement from the Company in 2023. As such, Mr. Sorenson did not receive an equity award in 2023. |
Long-Term Equity Incentive Compensation
In February 2024, the Compensation Committee determined that 2023 revenue growth plus adjusted free cash flow margin was 42.6% (which included the impact of our acquisition of Paperspace at the direction of the Compensation Committee), resulting in the achievement of 38.5% of the target amounts for purposes of the 2023 PSU awards. In addition to the awards granted in March 2023 pursuant to our annual compensation review described above, we also granted certain additional equity awards to our named executive officers as set forth below. The grant date fair value of the awards in the following bullet points was computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures and does not reflect the actual economic value that may be realized by the named executive officers.
Long-Term Equity Incentive Compensation
| • | In February 2023, Mr. Gadit and Ms. Wood were granted RSU awards with grant date fair values of $3,183,235 and $2,193,498, respectively, in connection with each of their promotions to executive officer positions. The shares underlying these RSU awards vest in 16 equal quarterly installments beginning on March 1, 2023, subject to each such named executive officer remaining in continuous service through each such vesting date. |
Long-Term Equity Incentive Compensation
| • | In February 2023, Mr. Steinfort was granted an RSU award with a grant date fair value of $14,979,975 in connection with the commencement of his employment with the Company. 25% of the shares underlying this RSU award vested on December 1, 2023 and the remaining shares vest in 12 equal quarterly installments beginning on March 1, 2024, subject to Mr. Steinfort’s continuous service through each such vesting date. |
Long-Term Equity Incentive Compensation
| • | In September 2023, Mr. Steinfort and Ms. Wood were granted RSU awards with grant date fair values of $2,469,793 and $1,899,830, respectively, following the announcement of the chief executive officer succession plan. These grants are multi-year awards that are intended for retention purposes. 25% of the shares underlying these RSU awards vest on September 1, 2024 and the remaining shares vest in 12 equal quarterly installments beginning on December 1, 2024, subject to each such named executive officer’s continuous service through each such vesting date. |
Long-Term Equity Incentive Compensation
The complete list of equity awards granted to our named executive officers in fiscal year 2023 are reported in the “Summary Compensation” and “Grants of Plan Based Awards” tables below.
Employment Arrangements
Employment Arrangements We have entered into employment arrangements with each of our named executive officers. The arrangements generally provide for at-will employment without any specific term and set forth the named executive officer’s base salary then in effect, bonus potential, eligibility for employee benefits and severance benefits upon a qualifying termination of employment (including in the event of terminations in connection with a change in control of the Company), subject to such executive executing a separation agreement. On August 5, 2022, Mr. Sorenson entered into the Sorenson Transition Agreement that provided for his retirement from the Company. On August 24, 2023, Mr. Spruill entered into the Spruill Separation Agreement that provided for his departure from the Company upon the commencement of a new chief executive officer. On January 15, 2024, Ms. Wood entered into the Wood Separation Agreement, which provided for the termination of her employment on January 16, 2024. The terms of such agreements are described in further detail in the section titled “Executive Compensation—Potential Payments Upon Termination or Change in Control” below. Further information regarding the potential payments and benefits to which our named executive officers would be entitled under the arrangements set forth in their respective employment agreements and other agreements governing payments related to their employment is set forth in the section titled “Executive Compensation—Potential Payments Upon Termination or Change in Control” below. Appointment of New Chief Executive Officer On January 11, 2024, we entered into an employment agreement with Padmanabhan Srinivasan (the “Srinivasan Agreement”) to serve as our Chief Executive Officer, effective as of February 12, 2024. Pursuant to the Srinivasan Agreement, Mr. Srinivasan receives an annual base salary of $600,000 and is eligible for a target annual discretionary performance bonus of up to 100% of his annual base salary, based on the goals determined by the Company. In addition, Mr. Srinivasan received a one-time sign-on bonus in the amount of $600,000, which is subject to repayment on a pro-rata basis in the event Mr. Srinivasan is terminated for “cause” or resigns without “good reason” (each as defined in the Srinivasan Agreement). Under the Srinivasan Agreement, if Mr. Srinivasan is terminated without cause or resigns for good reason, then Mr. Srinivasan will be eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of Mr. Srinivasan’s then-current base salary for a period of 12 months, paid in installments; (2) a bonus calculated at 100% achievement of all company and individual performance objectives; and (3) reimbursement of COBRA premiums for him and his eligible dependents from his last day of employment until the earlier of: (i) 12 months, (ii) the time Mr. Srinivasan accepts employment with another employer that provides comparable benefits, or (iii) the date Mr. Srinivasan ceases to be eligible for COBRA continuation coverage for any reason, including plan termination. In addition, 100% of the shares subject to equity awards granted to Mr. Srinivasan that are subject to time-based vesting that would have been scheduled to vest over the 12 month period following the termination date will accelerate and vest. Alternatively, if Mr. Srinivasan is terminated without cause or resigns for good reason, in either case within three months prior to or within 12 months following a “change in control” (as defined in the Srinivasan Agreement), Mr. Srinivasan will be eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of Mr. Srinivasan’s then-current base salary for a period of 18 months; (2) a bonus calculated at 150% achievement of all company and individual performance objectives; and (3) reimbursement of COBRA premiums for him and his eligible dependents from his last day of employment until the earlier of: (i) 18 months, (ii) the time Mr. Srinivasan accepts employment with another employer that provides comparable benefits, or (iii) the date Mr. Srinivasan ceases to be eligible for COBRA continuation coverage for any reason, including plan termination. In addition, 100% of the shares subject to equity awards granted to Mr. Srinivasan that are subject to time-based vesting will accelerate and vest. Further, if Mr. Srinivasan dies or “disabled” (as defined in the Company’s 2021 Equity Incentive Plan and subject to the criteria set forth in the Srinivasan Agreement), Mr. Srinivasan’s employment will terminate and either Mr. Srinivasan or his estate (as applicable) will be entitled to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of Mr. Srinivasan’s then-current base salary for a period of 12 months, paid in installments; and (2) if eligible based on the terms set forth in the award agreements governing Mr. Srinivasan’s equity pursuant to the 2021 Plan, acceleration of all of Mr. Srinivasan’s outstanding equity awards.
Pension Benefits and Nonqualified Deferred Compensation
Pension Benefits and Nonqualified Deferred Compensation Our executive officers did not participate in, or earn any benefits under, any pension or retirement plan or nonqualified deferred compensation plan sponsored by us during the year ended December 31, 2023, other than such plans made available to all our salaried employees in the same location of residence as the respective executive officer. Our Board may elect to provide our executive officers and other employees with nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.
2023 Summary Compensation Table
2023 Summary Compensation Table The following table shows for the fiscal years indicated, compensation awarded to or paid to, or earned by our named executive officers.
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Option Awards ($) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | | Yancey Spruill Former Chief Executive Officer | 2023 | 514,000 | — | — | — | 514,000 | 16,885 | 1,044,885 | | | 2022 | 514,000 | — | — | — | 257,000 | 26,179 | 797,179 | | | 2021 | 503,333 | — | — | 81,236,800 | 771,000 | 24,929 | 82,536,062 | | W. Matthew Steinfort(6) Chief Financial Officer | 2023 | 470,625 | 252,000 | — | 20,413,917(7) | 241,488 | 10,690 | 21,388,720 | | William Sorenson(6) Former Chief Financial Officer | 2023 | 286,667 | — | — | — | 104,160(8) | 3,016 | 393,843 | | | 2022 | 425,000 | — | 140,701 | 4,385,623 | 139,750 | 4,440 | 5,095,514 | | Muhammad Aaqib Gadit(6) Chief Revenue Officer | 2023 | 351,732(9) | — | — | 7,876,457(7) | 166,286(10) | 16,859,547(11) | 25,254,022 | | Gabriel Monroy Former Chief Product Officer | 2023 | 93,750 | — | — | 5,631,847(7) | — | 8,760 | 5,734,357 | | | 2022 | 375,000 | — | — | 3,009,283 | 121,875 | 17,061 | 3,523,219 | | | 2021 | 78,125 | 100,000 | — | 7,398,031 | 320,000 | 2,677 | 7,898,832 | | Megan Wood(6) Former Chief Strategy and Product Officer | 2023 | 368,333 | — | — | 6,507,090(7) | 163,625 | 14,469 | 7,053,517 |
2023 Summary Compensation Table
| (1) Mr. Steinfort joined the Company in January 2023, Mr. Sorenson departed the Company in August 2023, and Mr. Monroy joined the Company in October 2021 and departed the Company in March 2023. Amounts shown represent the pro rata portion of salary earned by each of Messrs. Steinfort, Sorenson and Monroy during the fiscal year ended December 31, 2023 and the pro rata portion of salary earned by Mr. Monroy during the fiscal year ended December 31, 2021. |
2023 Summary Compensation Table
| (2) Amounts shown represent one-time signing bonuses awarded to the named executive officer in connection with the commencement of such named executive officer’s employment. The one-time signing bonuses were subject to repayment on a pro rata basis to the extent the executive officer’s employment was terminated voluntarily or by the Company for cause within 12 months of the named executive officer’s start date. |
2023 Summary Compensation Table
| (3) Amounts shown represents the aggregate grant date fair value of equity awards granted to our named executive officers under our 2021 Equity Incentive Plan (the “2021 Plan”), computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures and using the assumptions discussed in Note 11. Stock-Based Compensation of the audited consolidated financial statements included in our Annual Report. |
2023 Summary Compensation Table
| (4) Amounts shown represent the named executive officers’ total performance-based cash bonuses earned for each of the years presented, as applicable, based on the achievement of company and individual performance goals as determined by the Board and/or Compensation Committee. |
2023 Summary Compensation Table
| (5) Amounts shown represent 401(k) employer contributions, individual health savings account employer contributions and life insurance premiums paid by us on behalf of each of our named executive officers (except Mr. Gadit) for 2023 in the following amounts: |
2023 Summary Compensation Table
| Name | Company 401(k) Match ($) | Life Insurance Premiums ($) | Company Contributions to HSA ($) | | Yancey Spruill | 14,563 | 2,322 | — | | W. Matthew Steinfort | 8,250 | 1,190 | 1,250 | | William Sorenson | — | 3,016 | — | | Gabriel Monroy | 8,625 | 135 | — | | Megan Wood | 13,929 | 540 | — |
2023 Summary Compensation Table
| (6) Messrs. Steinfort and Gadit and Ms. Wood were not named executive officers for 2021 and 2022 and Mr. Sorenson was not a named executive officer for 2021. As a result, their compensation information for such years has been omitted. |
2023 Summary Compensation Table
| (7) Amounts shown include the grant date fair value of each named executive officer’s PSU award. In valuing the PSU awards, we assumed the probable achievement of the target levels for the performance goals. The grant date fair values of the 2023 PSUs, assuming maximum achievement of all performance conditions, are as follows: Mr. Steinfort: $5,928,297; Mr. Gadit: $6,101,207; Mr. Monroy: $7,321,423; and Ms. Wood: $3,137,948. |
2023 Summary Compensation Table
| (8) Mr. Sorenson was eligible for a prorated portion of his 2023 bonus through the Retirement Date. For more information, see “Compensation Discussion and Analysis-Other Features of Our Executive Compensation Program-Employment Arrangements” above and Exhibit 10.2 to our Current Report on Form 8-K filed on August 8, 2022. |
2023 Summary Compensation Table
| (9) Mr. Gadit was employed in Pakistan through August 16, 2023 and was employed in the United Arab Emirates commencing on August 17, 2023 and as such received payments in PKR and AED, respectively. The amounts shown were converted from PKR and AED to USD based on the currency exchange rates as of December 29, 2023, the last business day of the 2023 fiscal year (approximately 0.00356 USD per 1 PKR and 0.27223 USD per 1 AED). |
2023 Summary Compensation Table
| (10) Amount shown reflects Mr. Gadit’s performance-based cash bonus of AED 610,829, which has been converted from AED to USD using the currency exchange rate as of December 29, 2023, the last business day of the 2023 fiscal year (approximately 0.27223 USD per 1 AED). |
2023 Summary Compensation Table
| (11) Amount shown includes (1) $16,850,762 of contingent compensation earned by Mr. Gadit on September 1, 2023 pursuant to the Share Purchase Agreement, dated as of August 19, 2022, by and among DigitalOcean, LLC, Cloudways Ltd., Mr. Gadit and the other parties thereto (the “Share Purchase Agreement”), which was filed as Exhibit 2.1 to our Current Report on Form 8-K filed on August 23, 2022; and (2) $8,786 representing the employer contributions to the Pakistan Provident Fund and Employees’ Old-Age Benefits Institution while Mr. Gadit was employed in Pakistan, which amounts were contributed by the employer in PKR and converted into USD based on the currency exchange rate as of December 29, 2023, the last business day of the 2023 fiscal year (approximately 0.00356 USD per 1 PKR). |
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023 The following table presents information regarding each plan-based award granted to our named executive officers during the fiscal year ended December 31, 2023.
Grants of Plan-Based Awards in 2023
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($)(3) | | Name | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Yancey Spruill | Annual Cash | — | 64,250 | 514,000 | 771,000 | — | — | — | — | — | | W. Matthew Steinfort | Annual Cash | — | 54,000 | 432,000 | 648,000 | — | — | — | — | — | | | RSU | 2/3/2023 | — | — | — | — | — | — | 483,225(4) | 14,979,975 | | | PSU | 3/1/2023 | — | — | — | 35,943 | 93,359 | 186,718 | — | 2,964,148 | | | RSU | 9/15/2023 | — | — | — | — | — | — | 101,554(5) | 2,469,793 | | William Sorenson | Annual Cash | — | 23,292 | 186,333(6) | 279,500 | — | — | — | — | — | | Muhammad Aaqib Gadit | Annual Cash | — | 37,184 | 297,470 | 446,206 | — | — | — | — | — | | | RSU | 2/3/2023 | — | — | — | — | — | — | 102,685(7) | 3,183,235 | | | RSU | 3/1/2023 | — | — | — | — | — | — | 51,736(8) | 1,642,618 | | | PSU | 3/1/2023 | — | — | — | 36,991 | 96,082 | 192,164 | — | 3,050,604 | | Gabriel Monroy | Annual Cash | — | 32,813 | 262,500 | 393,750 | — | — | — | — | — | | | RSU | 3/1/2023 | — | — | — | — | — | — | 62,083(8) | 1,971,135 | | | PSU | 3/1/2023 | — | — | — | 44,389 | 115,298 | 230,596 | — | 3,660,712 | | Megan Wood | Annual Cash | — | 37,188 | 297,500 | 446,250 | — | — | — | — | — | | | RSU | 2/3/2023 | — | — | — | — | — | — | 70,758(7) | 2,193,498 | | | RSU | 3/1/2023 | — | — | — | — | — | — | 26,608(8) | 844,804 | | | PSU | 3/1/2023 | — | — | — | 19,025 | 49,416 | 98,833 | — | 1,568,958 | | | RSU | 9/15/2023 | — | — | — | — | — | — | 78,118(5) | 1,899,830 |
Grants of Plan-Based Awards in 2023
| (1) The amounts shown in the “Target” column represent target bonus amounts for each named executive officer for 2023 and the amounts in the “Threshold” and “Maximum” columns represent 12.5% and 150% of the target dollar amount, respectively, as described in more detail in the section titled “Executive Compensation—Compensation Discussion and Analysis—Performance-Based Cash Bonus” above. These amounts do not represent the actual bonus payments received by our named executive officers for the year ended December 31, 2023. The dollar value of the actual bonus payments is included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” above. |
Grants of Plan-Based Awards in 2023
| (2) The PSUs were granted pursuant to our 2021 Plan and may be earned based on the achievement of certain financial targets. The number of shares shown in the “Target” column represent the target number of shares for each named executive officer and the number of shares in the “Threshold” and “Maximum” columns represent 38.5% and 200% of the target number of shares, respectively, as described in more detail in the section titled “Executive Compensation—Compensation Discussion and Analysis—Long-Term Equity Incentive Compensation” above. In February 2024, the Compensation Committee determined that the PSUs were achieved at the Threshold amount for the executive officers who remained at the Company on the certification date. All unachieved PSUs were canceled on the certification date. |
Grants of Plan-Based Awards in 2023
| (3) Amounts shown represent the grant date fair value of RSUs and PSUs granted to our named executive officers, computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures and using the assumptions discussed in Note 11. Stock-Based Compensation of the audited consolidated financial statements included in our Annual Report. With respect to the PSU awards, amounts shown include the grant date fair value assuming achievement of the target number of each named executive officer’s PSU award. This amount does not reflect the actual economic value that may be realized by the named executive officer. |
Grants of Plan-Based Awards in 2023
| (4) 25% of the shares underlying this RSU award vested on December 1, 2023 and the remaining shares vest in 12 equal quarterly installments beginning on March 1, 2024, subject to the named executive officer’s continuous service through each such vesting date. |
Grants of Plan-Based Awards in 2023
| (5) 25% of the shares underlying this RSU award vest on September 1, 2024 and the remaining shares vest in 12 equal quarterly installments beginning on December 1, 2024, subject to the named executive officer's continuous service through each such vesting date. |
Grants of Plan-Based Awards in 2023
| (6) Represents the target bonus amount prorated for eight months of 2023. Pursuant to the Sorenson Transition Agreement, Mr. Sorenson was eligible for a prorated portion of his bonus through the Retirement Date. For more information, see “Compensation Discussion and Analysis-Other Features of Our Executive Compensation Program-Employment Arrangements” above and Exhibit 10.2 to our Current Report on Form 8-K filed on August 8, 2022. |
Grants of Plan-Based Awards in 2023
| (7) The shares underlying the RSUs vest in 16 equal quarterly installments beginning on March 1, 2023, subject to the named executive officer's continuous service through each such vesting date. |
Grants of Plan-Based Awards in 2023
| (8) The shares underlying the RSUs vest in 16 equal quarterly installments beginning on June 1, 2023, subject to the named executive officer's continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
Outstanding Equity Awards at 2023 Fiscal Year End The following table sets forth certain information regarding outstanding equity awards granted to our named executive officers that remain outstanding as of December 31, 2023.
Outstanding Equity Awards at 2023 Fiscal Year End
| | | Option Awards(1) | | | | Stock Awards(1) | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options - Exercisable (#) | Number of Securities Underlying Unexercised Options - Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | Yancey Spruill | 2/17/2021 | — | — | — | — | 52,500(3)(16) | 1,926,225 | — | — | | | 7/27/2021 | — | — | — | — | — | — | 3,000,000(4)(16) | 110,069,997 | | W. Matthew Steinfort | 2/3/2023 | — | — | — | — | 362,419(5) | 13,297,153 | — | — | | | 3/1/2023 | — | — | — | — | 35,943(6) | 1,318,749 | — | — | | | 9/15/2023 | — | — | — | — | 101,554(7) | 3,726,016 | — | — | | William Sorenson | 8/13/2019 | 735,612(8) | — | 5.61 | 8/31/2024(9) | — | — | — | — | | Muhammad Aaqib Gadit | 9/6/2022 | — | — | — | — | 36,466(10) | 1,337,938 | — | — | | | 2/3/2023 | — | — | — | — | 77,014(11) | 2,825,644 | — | — | | | 3/1/2023 | — | — | — | — | 42,035(12) | 1,542,264 | — | — | | | 3/1/2023 | — | — | — | — | 36,991(6) | 1,357,200 | — | — | | Gabriel Monroy | — | — | — | — | — | — | — | — | — | | Megan Wood | 4/30/2021 | — | — | — | — | 26,562(13)(17) | 974,560 | — | — | | | 3/8/2022 | — | — | — | — | 6,276(14)(17) | 230,266 | — | — | | | 6/7/2022 | — | — | — | — | 13,336(15)(17) | 489,298 | — | — | | | 2/3/2023 | — | — | — | — | 53,068(11)(17) | 1,947,065 | — | — | | | 3/1/2023 | — | — | — | — | 21,619(12)(17) | 793,201 | — | — | | | 3/1/2023 | — | — | — | — | 19,025(6)(17) | 698,027 | — | — | | | 9/15/2023 | — | — | — | — | 78,118(7)(17) | 2,866,149 | — | — |
Outstanding Equity Awards at 2023 Fiscal Year End
| (1) All awards granted prior to our IPO in March 2021 were granted pursuant to the 2013 Stock Plan and all awards granted after our IPO were granted under the 2021 Plan. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (2) Market value is calculated based on the closing price of our common stock on December 29, 2023, the last trading day of the 2023 fiscal year, which was $36.69, as reported on the NYSE. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (3) 15% of the shares underlying this RSU award vested on March 1, 2022, an additional 25% of the shares vested in four equal quarterly installments beginning on June 1, 2022, and the remaining shares vest in eight equal quarterly installments beginning on June 1, 2023, subject to the named executive officer’s continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (4) Represents the number of shares eligible to vest with respect to the MRSU assuming achievement of all of the Company stock price goals. The actual number of shares eligible to vest is less than the amount reported in this column. The MRSU was scheduled to vest on the first date upon which both the stock price requirement and the time-based service requirement under the terms of the award were satisfied as described in Note 11. Stock-Based Compensation of the audited consolidated financial statements included in our Annual Report. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (5) 25% of the shares underlying this RSU award vested on December 1, 2023 and the remaining shares vest in 12 equal quarterly installments beginning on March 1, 2024, subject to the named executive officer's continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (6) The award was granted as PSUs, to be earned based on the Company’s 2023 financial performance. Amount shown represents the number of shares earned with respect to the PSU based on actual achievement of the financial performance level for 2023. One-third of the shares underlying the PSU award vested on March 1, 2024, and the remaining shares vest in eight equal quarterly installments beginning on June 1, 2024, subject to the named executive officer’s continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (7) 25% of the shares underlying this RSU award vest on September 1, 2024 and the remaining shares vest in 12 equal quarterly installments beginning on December 1, 2024, subject to the named executive officer's continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (8) The shares underlying this option vested in 48 equal monthly installments beginning on September 13, 2019. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (9) Pursuant to the Sorenson Transition Agreement, this option has an extended exercise period of 12 months from the Retirement Date. For more information, see “Compensation Discussion and Analysis—Other Features of Our Executive Compensation Program—Employment Arrangements” above and Exhibit 10.2 to our Current Report on Form 8-K filed on August 8, 2022. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (10) 25% of the shares underlying this RSU award vested on September 1, 2023 and the remaining shares vest in 12 equal quarterly installments beginning on December 1, 2023, subject to the named executive officer's continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (11) The shares underlying this RSU award vest in 16 equal quarterly installments, beginning on March 1, 2023, subject to the named executive officer’s continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (12) The shares underlying this RSU award vest in 16 equal quarterly installments, beginning on June 1, 2023, subject to the named executive officer’s continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (13) 25% of the shares underlying this RSU award vested on March 1, 2022 and the remaining shares vest in 12 equal quarterly installments beginning on June 1, 2022, subject to the named executive officer's continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (14) The shares underlying this RSU award vest in 16 equal quarterly installments, beginning on June 1, 2022, subject to the named executive officer’s continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (15) The shares underlying this RSU award vest in 16 equal quarterly installments, beginning on September 1, 2022, subject to the named executive officer’s continuous service through each such vesting date. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (16) As of February 12, 2024, Mr. Spruill’s last day of employment with the Company, an aggregate of 3,052,500 of the outstanding RSU and MRSU awards held by Mr. Spruill were forfeited. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (17) As of January 16, 2024, Ms. Wood’s last day of employment with the Company, an aggregate of 297,812 of the outstanding RSU and PSU awards held by Ms. Wood were forfeited, calculated based on the maximum number of shares under the PSU award. |
Options Exercised and Stock Vested in 2023
Options Exercised and Stock Vested in 2023 The following table sets forth certain information regarding any option exercises and stock vested during the fiscal year ended December 31, 2023 with respect to our named executive officers.
Options Exercised and Stock Vested in 2023
| Name | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Yancey Spruill | 3,446,525 | 76,815,911 | 40,250 | 1,299,043 | | W. Matthew Steinfort | — | — | 120,806 | 3,726,865 | | William Sorenson | 269,388 | 9,849,729 | 24,254 | 868,040 | | Muhammad Aaqib Gadit | — | — | 51,947 | 1,599,577 | | Gabriel Monroy | — | — | 5,964 | 189,357 | | Megan Wood | — | — | 52,053 | 1,679,679 |
Options Exercised and Stock Vested in 2023
| (1) The aggregate value realized is calculated by multiplying (i) the number of shares of common stock acquired upon exercise by (ii) the difference between the closing price of our common stock on the date of exercise, as reported by the NYSE, and the applicable exercise price of the option. This amount does not represent actual amounts received by our named executive officers as a result of the option exercises. |
Options Exercised and Stock Vested in 2023
| (2) The value realized on vesting is determined by multiplying the number of vested RSUs and PSUs by the closing price of our common stock on the vesting date, as reported by the NYSE. |
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control Severance Benefits--Executive Officers (General Terms) Pursuant to the employment agreements with our named executive officers, if such officer resigns for “good reason” or we terminate his or her employment without “cause” (each as defined in the applicable employment agreement), then the named executive officer will be eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of the named executive officer’s then-current base salary for a period of six months, paid in installments; and (2) reimbursement of health insurance premiums for the named executive officer and his or her eligible dependents from the last day of employment until the earlier of: (i) six months, or (ii) the time the named executive officer accepts employment with another employer that provides comparable benefits. Alternatively, if the named executive officer resigns for good reason or his or her employment is terminated without cause by us or a successor, in either case within three months prior to or within 12 months following a “change in control” (as defined in the applicable employment agreement), the named executive officer will be eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of the named executive officer’s then-current base salary for a period of 12 months, paid in a single lump sum within 60 days following the named executive officer’s last day of employment; (2) a bonus calculated at 100% achievement of all company and individual performance objectives, paid in a single lump sum within 60 days following the named executive officer’s last day of employment; and (3) reimbursement of health insurance premiums for the named executive officer and his or her eligible dependents from the last day of employment until the earlier of: (i) 12 months, or (ii) the time the named executive officer accepts employment with another employer that provides comparable benefits. In addition, 100% of the shares subject to the equity awards granted to the named executive officer that are subject to time-based vesting will vest and become exercisable. Further, if the named executive officer dies or is “disabled” (as defined in the 2021 Plan and subject to the criteria set forth in the applicable employment agreement), the named executive officer’s employment with us will terminate and either the named executive officer or his or her estate will be entitled to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of the named executive officer’s then-current base salary for a period of six months, paid in installments; and (2) if eligible based on the terms set forth in the award agreements governing the named executive officer’s equity pursuant to the 2021 Plan, acceleration of all of the named executive officer’s outstanding equity awards. As a condition to receiving any severance benefits described above or below, the named executive officer (or a representative of his or her estate) must sign and not revoke a general release agreement in a form reasonably acceptable to the Company. Yancey Spruill The foregoing summary applies to Mr. Spruill’s employment agreement with the following enhancements: (1) all references to six months are replaced with 12 months; (2) all references to 12 months are replaced with 18 months; (3) in the event of a resignation for good reason or termination without cause, Mr. Spruill was entitled to a bonus calculated at 100% achievement of all company and individual performance objectives; (4) in the event of a resignation for good reason or termination without cause in either case within three months prior to or within 12 months following a change in control, Mr. Spruill was entitled to a bonus calculated at 150% achievement of all company and individual performance objectives; and (5) Mr. Spruill is entitled to 12 months to exercise the vested shares subject to the options granted to him in the case he resigned for good reason or his employment is terminated without cause by us or a successor, whether or not in connection with a change in control. On August 24, 2023, Mr. Spruill entered into the Spruill Separation Agreement with the Company that provided for his departure from the Company, effective as of the commencement of employment of his successor. Mr. Spruill’s successor, Padmanabhan Srinivasan, commenced employment with the Company on February 12, 2024, at which time Mr. Spruill departed the Company and began to receive the following severance benefits, which were the benefits to which he was entitled under his employment agreement in connection with a termination without cause or resignation for good reason: (1) $514,000, representing 12 months of Mr. Spruill’s base salary, paid in installments; (2) $514,000, representing Mr. Spruill’s 2023 target annual bonus; (3) reimbursement of COBRA premiums for Mr. Spruill and his eligible dependents for up to 12 months; and (4) 12 months to exercise any vested shares subject to options granted to Mr. Spruill. W. Matthew Steinfort The foregoing summary applies to Mr. Steinfort, provided, however, if Mr. Steinfort resigns for good reason or his employment is terminated without cause during the two year period commencing on September 15, 2023, Mr. Steinfort will be eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of Mr. Steinfort’s then-current base salary for a period of 12 months, paid in installments; (2) reimbursement of COBRA premiums for Mr. Steinfort and his eligible dependents from the last day of employment until the earlier of: (i) 12 months, or (ii) the time Mr. Steinfort accepts employment with another employer that provides comparable benefits; (3) 100% of the shares subject to the equity awards granted to Mr. Steinfort that are subject to time-based vesting and that are scheduled to vest over the 12 month period following the termination date will vest on the termination date; and (4) the achievement of any performance-based restricted stock units shall be determined on the termination date based on the Company’s internal forecast for the financial performance measures relevant to such performance-based stock unit award and, assuming such achievement, the shares that are scheduled to vest over the 12 month period following the termination date will vest on the termination date. Following September 15, 2025, the employment terms revert to those described in the general terms summary. William Sorenson The foregoing summary applies to Mr. Sorenson’s employment agreement with the following enhancements: (1) all references to six months are replaced with 12 months; (2) in the event of a resignation for good reason or termination without cause (other than in connection with a change in control), 100% of the shares subject to the equity awards granted to Mr. Sorenson that are subject to time-based vesting that are scheduled to vest over the six month period following the termination date would vest and become exercisable; and (3) Mr. Sorenson was entitled to 12 months to exercise the vested shares subject to the options granted to him if he resigns for good reason or his employment is terminated without cause by us or a successor, whether or not in connection with a change in control.
Potential Payments Upon Termination or Change in Control
On August 5, 2022, Mr. Sorenson entered into the Sorenson Transition Agreement that provided for his retirement from the Company, effective as of the Retirement Date, and set forth the terms of his employment through the Retirement Date. Pursuant to the terms of the Sorenson Transition Agreement, Mr. Sorenson continued to serve as Chief Financial Officer until his successor, W. Matthew Steinfort, commenced employment on January 9, 2023, at which time Mr. Sorenson transitioned to Executive Advisor. From the date of the Sorenson Transition Agreement through the Retirement Date, Mr. Sorenson (1) continued to receive his current annual base salary of $430,000; (2) was entitled to and did receive an annual performance-based cash bonus in the amount of $139,750 with respect to calendar year 2022 based on actual performance; (3) was entitled to and did receive a pro-rated annual bonus with respect to calendar year 2023 of $104,160 based on the achievement of performance goals set forth in the Company’s 2023 bonus plan; (4) continued to vest in any outstanding equity awards through the Retirement Date; (5) remained eligible to receive employee benefits in accordance with the Company’s established policies through the Retirement Date; and (6) is entitled to an extended period of 12 months from the Retirement Date to exercise any outstanding vested nonstatutory stock options. Muhammad Aaqib Gadit The foregoing summary applies to Mr. Gadit, provided, however, if Mr. Gadit resigns for good reason or his employment is terminated without cause during the two year period commencing on September 15, 2023, Mr. Gadit will be eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of Mr. Gadit then-current base salary for a period of 12 months, paid in installments; (2) reimbursement of health insurance premiums for Mr. Gadit and his eligible dependents from the last day of employment until the earlier of: (i) 12 months, or (ii) the time Mr. Gadit accepts employment with another employer that provides comparable benefits; (3) 100% of the shares subject to the equity awards granted to Mr. Gadit that are subject to time-based vesting and that are scheduled to vest over the 12 month period following the termination date will vest on the termination date; and (4) the achievement of any performance-based restricted stock units shall be determined on the termination date based on the Company’s internal forecast for the financial performance measures relevant to such performance-based stock unit award and, assuming such achievement, the shares that are scheduled to vest over the 12 month period following the termination date will vest on the termination date. Following September 15, 2025, the employment terms revert to those described in the general terms summary. Pursuant to the Share Purchase Agreement entered into in connection with the acquisition of Cloudways, if Mr. Gadit’s employment with the Company terminates other than for “cause,” if he resigns for “good reason” (each as defined in the Share Purchase Agreement) or if he dies, Mr. Gadit (or his estate, as applicable) is eligible to receive any unpaid amounts of his deferred payments as of the termination date. As of December 31, 2023, the balance of Mr. Gadit’s deferred payments under the Share Purchase Agreement was approximately $22 million. For more information, see our Current Report on Form 8-K, filed on August 23, 2022. Gabriel Monroy Mr. Monroy resigned from the Company in March 2023. Mr. Monroy was not entitled to and did not receive any severance benefits in connection with his departure. Megan Wood The foregoing summary applies to Ms. Wood, provided, however, if Ms. Wood resigned for good reason or her employment was terminated without cause during the two year period commencing on September 15, 2023, Ms. Wood was eligible to receive the following severance benefits (less applicable withholdings): (1) severance pay equal to 100% of Ms. Wood’s then-current base salary for a period of 12 months, paid in installments; (2) reimbursement of COBRA premiums for Ms. Wood and her eligible dependents from the last day of employment until the earlier of: (i) 12 months, or (ii) the time Ms. Wood accepts employment with another employer that provides comparable benefits; (3) 100% of the shares subject to the equity awards granted to Ms. Wood that were subject to time-based vesting and that were scheduled to vest over the 12 month period following the termination date would vest on the termination date; and (4) the achievement of any performance-based restricted stock units was to be determined on the termination date based on the Company’s internal forecast for the financial performance measures relevant to such performance-based stock unit award and assuming such achievement, the shares scheduled to vest over the 12 month period following the termination date would vest on the termination date. Following September 15, 2025, the employment terms would revert to those described in the general terms summary. On January 15, 2024, Ms. Wood entered into the Wood Separation Agreement, which provided for the termination of her employment on January 16, 2024. In connection with her departure, Ms. Wood received the following severance benefits, which were benefits to which she was entitled under her employment agreement, as amended in connection with a termination without cause or resignation for good reason: (1) $425,000, representing 12 months of Ms. Wood’s base salary, paid in a lump sum, and (2) reimbursement of COBRA premiums for Ms. Wood and her eligible dependents for up to 12 months. Ms. Wood also received (1) $2,448,068 in cash in lieu of accelerated vesting of any equity awards and (2) $163,625 in payment for Ms. Wood’s 2023 bonus. The table below provides information with respect to potential payments and benefits to which our named executive officers would be entitled under the arrangements set forth in their respective employment agreement, as described above, assuming their employment was terminated as of the last business day of fiscal year 2023, including in connection with a change in control.
Potential Payments Upon Termination or Change in Control
| Name | Type of Termination | Base Salary ($) | Bonus ($) | Accelerated Vesting of Equity Awards ($)(1) | Continuation of Insurance Coverage ($) | Other Compensation Arrangements ($) | Total ($) | | Yancey Spruill | Termination without Cause or Good Reason | 514,000 | 514,000 | —(2) | 32,123 | — | 1,060,123 | | | Termination without Cause or with Good Reason in connection with a CIC(3) | 771,000 | 771,000 | 1,926,225(2) | 48,184 | — | 3,516,409 | | | Termination in the case of Death or Disability(4) | 514,000 | — | — | — | — | 514,000 | | W. Matthew Steinfort | Termination without Cause or Good Reason(5) | 540,000 | — | 6,366,118(6) | 25,786 | — | 6,931,904 | | | Termination without Cause or with Good Reason in connection with a CIC(3) | 540,000 | 432,000 | 20,448,511(7) | 25,786 | — | 21,446,296 | | | Termination in the case of Death or Disability(4) | 270,000 | — | — | — | — | 270,000 | | Muhammad Aaqib Gadit | Termination without Cause or Good Reason(5) | 425,000 | — | 2,694,697(6) | 16,750 | 21,979,254(8) | 25,115,701 | | | Termination without Cause or with Good Reason in connection with a CIC(3) | 425,000 | 297,500 | 9,231,094(7) | 16,750 | 21,979,254(8) | 31,949,598 | | | Termination in the case of Death or Disability(4) | 212,500 | — | — | — | 21,979,254(8) | 22,191,754 | | Megan Wood(9) | Termination without Cause or Good Reason(5) | 425,000 | — | 3,273,662(6) | 10,333 | — | 3,708,995 | | | Termination without Cause or with Good Reason in connection with a CIC(3) | 425,000 | 297,500 | 9,113,612(7) | 10,333 | — | 9,846,445 | | | Termination in the case of Death or Disability(4) | 212,500 | — | 7,300,539 | — | — | 7,513,039 |
Potential Payments Upon Termination or Change in Control
| (1) The value of accelerated vesting of unvested RSUs and PSUs is based upon the closing price of our common stock on December 29, 2023, the last trading day of the 2023 fiscal year, as reported on the NYSE, multiplied by the number of units accelerated. |
Potential Payments Upon Termination or Change in Control
| (2) Amount shown does not include the value of any acceleration under the MRSU award. Under the terms of the MRSU award agreement, any MRSUs that did not meet the stock price requirement as of termination of Mr. Spruill’s employment for any reason will be forfeited. The minimum stock price requirement was not met as of December 31, 2023 and as a result we have not considered any part of the MRSU award to be achieved for the purposes of the table. |
Potential Payments Upon Termination or Change in Control
| (3) Represents change in control (as defined in the 2021 Plan) severance benefits based on a double-trigger arrangement, which assumes the named executive officer is terminated without “cause” or resigns for “good reason” (as such terms are defined in the named executive officer’s employment agreement) within three months prior to or 12 months following a change in control of the Company. |
Potential Payments Upon Termination or Change in Control
| (4) Represents benefits based on termination in the case of a named executive officer's death or disability (as defined in the 2021 Plan or any of the agreements governing the named executive officer's employment, as applicable). |
Potential Payments Upon Termination or Change in Control
| (5) Reflects benefits set forth in the amendments to the employment agreements entered into in September 2023. Following September 15, 2025, the benefits revert to the terms of the original employment agreements, as described above. |
Potential Payments Upon Termination or Change in Control
| (6) Amounts shown include 12 months of acceleration of PSUs actually achieved in 2023, as set forth in the amendments to the employment agreements, in connection with a termination without cause or resignation for good reason. |
Potential Payments Upon Termination or Change in Control
| (7) Amounts shown include the acceleration of target PSUs granted in 2023. Pursuant to the terms of the PSU awards, in the event of a termination without cause or resignation for good reason in connection with a change in control during or on the last day of the performance period for the PSUs, the number of achieved PSUs shall be determined as the greater of (i) the target number of PSUs and (ii) the projected number of PSUs that would have been achieved during a performance period ending on the corporate transaction effective date. In the case such achieved PSUs are not assumed or substituted, all such PSUs will accelerate and vest immediately prior to the effective date of the change in control. |
Potential Payments Upon Termination or Change in Control
| (8) Amounts shown represent the remaining portion of the deferred consideration to be paid to Mr. Gadit pursuant to the Share Purchase Agreement. Pursuant to the Share Purchase Agreement, if Mr. Gadit’s employment with the Company terminates other than for “cause,” if he resigns for “good reason” (each as defined in the Share Purchase Agreement) or if he dies, Mr. Gadit (or his estate, as applicable) is eligible to receive any unpaid amounts of his deferred payments as of the termination date. |
Potential Payments Upon Termination or Change in Control
| (9) Ms. Wood departed the Company on January 16, 2024. In connection with her departure, Ms. Wood entered into the Wood Separation Agreement and was entitled to the payments and benefits described above. |
CEO Pay Ratio
CEO Pay Ratio Pursuant to Item 402(u) of Regulation S-K, presented below is the ratio of annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee (except our Chief Executive Officer). The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u). The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. We identified our median compensated employee from all full-time employees globally as of a determination date of December 31, 2023. We did not have any part-time employees as of the determination date. We did not include any contractors or other non-employee workers in our employee population. We used a consistently applied compensation measure consisting of annual base salary, annual bonus target or annual commission target in effect as of the determination date. Non-United States employees’ compensation was converted to U.S. dollar equivalents using applicable exchange rates as of the business day immediately preceding the determination date. The fiscal year 2023 annual total compensation as determined under Item 402 of Regulation S-K for our former Chief Executive Officer was $1,044,885, as reported in the Summary Compensation Table. The annual total compensation as determined under Item 402 of Regulation S-K of our median employee for fiscal year 2023 was $94,344. The ratio of our former Chief Executive Officer’s annual total compensation to the annual total compensation of our median employee for fiscal year 2023 is 11 to 1.
Pay Versus Performance
Pay Versus Performance We are required by SEC rules to disclose the following information regarding compensation paid to our Chief Executive Officer (our “PEO”) and our other named executive officers (collectively, our “non-PEO NEOs”). The amounts set forth below under the headings “Compensation Actually Paid to PEO” and “Average Compensation Actually Paid to non-PEO NEOs” have been calculated in a manner consistent with Item 402(v) of Regulation S-K. The footnotes below set forth the adjustments from the total compensation for each of our NEOs reported in the Summary Compensation Table above. The following table sets forth additional compensation information of our PEO and our non-PEO NEOs, along with total shareholder return (“TSR”), net income and our Company-selected measure (the sum of revenue growth and adjusted free cash flow margin) for fiscal years 2021, 2022 and 2023. Since the Company completed its IPO in 2021, data from fiscal year 2020 is excluded from the table.
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Fiscal Year(1) | Summary Compensation Table Total for PEO(2) ($) | Compensation Actually Paid to PEO ($) | Average Summary Compensation Table Total for non-PEO NEOs(2) ($) | Average Compensation Actually Paid to non-PEO NEOs ($) | Total Shareholder Return(3) ($) | Peer Group Total Shareholder Return(3) ($) | Net Income ($ in thousands) | Revenue Growth Plus Adjusted Free Cash Flow Margin (%)(4) | | 2023 | 1,044,885 | 29,952,755 | 11,964,892 | 12,112,489 | 86.33 | 149.52 | 19,409 | 42 | | 2022 | 797,179 | (200,132,194) | 4,430,909 | (13,942,162) | 59.93 | 94.73 | (27,804)(5) | 47 | | 2021 | 82,536,062 | 293,335,312 | 7,774,582 | 13,883,786 | 189.01 | 131.92 | (19,503) | 41 |
Pay Versus Performance
| (1) The PEO and non-PEO NEOs included in the above compensation table reflect the following: |
Pay Versus Performance
| Year | PEO | Non-PEO NEOs | | 2023 | Yancey Spruill | W. Matthew Steinfort, William Sorenson, Muhammad Aaqib Gadit, Gabriel Monroy, Megan Wood | | 2022 | Yancey Spruill | William Sorenson, Carly Brantz, Jeffrey Guy, Gabriel Monroy | | 2021 | Yancey Spruill | Gabriel Monroy, Alan Shapiro |
Pay Versus Performance
| (2) In determining the compensation actually paid (“CAP”) to our PEO and our non-PEO NEOs, we deducted or added back the following amounts from or to the total amounts of compensation reported in the table above for the 2023 fiscal year. Grant date fair value represents the grant date fair value of equity-based awards granted in each year. Fair value adjustments reflect adjustments to the value of equity awards as calculated in accordance with the rules prescribed under Item 402(v) of Regulation S-K and in accordance with ASC Topic 718, which included the categories of adjustments as set forth below. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. For additional information regarding the determination of fair value, see Note 11. Stock-Based Compensation of the audited consolidated financial statements included in our Annual Report. |
Pay Versus Performance
| PEO | 2023 ($) | | - Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year | — | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | — | | +/- Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years | 23,119,050 | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | — | | +/- Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | 5,788,820 | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | — | | Total Added (or Deducted) | 28,907,870 |
Pay Versus Performance
| Non-PEO NEOs | 2023 ($) | | - Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year | (8,085,862) | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | 7,152,231 | | +/- Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years | 185,444 | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | 1,120,327 | | +/- Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | 451,031 | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | (675,574) | | Total Added (or Deducted) | 147,597 |
Pay Versus Performance
| (3) Peer Group TSR reflects the Company’s peer group (S&P Information Technology Index) used in the stock performance graph contained in our Annual Report. The values assume $100 was invested in each of our common stock and our peer group index at their respective closing prices on March 24, 2021 (the date our common stock commenced trading on the NYSE), including the reinvestment of dividends. |
Pay Versus Performance
| (4) Represents the sum of revenue growth and adjusted free cash flow margin. Revenue growth is defined as the percentage increase in revenue from the prior year. Adjusted free cash flow margin is a non-GAAP financial measure that we define as net cash provided by operating activities less purchases of property and equipment, capitalized internal-use software costs, purchase of intangible assets and excluding cash paid for restructuring and other charges, acquisition related compensation, restructuring related charges, and acquisition and integration related costs, as a percentage of revenue. |
Pay Versus Performance
| (5) Amount shown reflects restated net income as reflected in our restated consolidated financial statements for the fiscal year ended December 31, 2022. |
Pay versus Performance Descriptive Disclosure
Pay versus Performance Descriptive Disclosure The graphs below show the relationships between CAP to our PEO and the average CAP to our non-PEO NEOs to each of (i) the Company’s TSR and the TSR of the S&P Information Technology Index, (ii) our net income and (iii) our Company-Selected Measure, the sum of revenue growth and adjusted free cash flow margin.
Pay versus Performance Tabular List
Pay versus Performance Tabular List The following table provides what we believe are the most important financial performance measures we used to link CAP to our PEO and non-PEO NEOs to Company performance in the most recent fiscal year, each of which is described in more detail in the section titled “Executive Compensation—Compensation Discussion and Analysis”:
Pay versus Performance Tabular List
| Performance Measure | | Revenue growth plus adjusted free cash flow margin | | Revenue growth | | Adjusted free cash flow margin |
Pay versus Performance Tabular List
All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference.

DEF 14A of DigitalOcean Holdings, Inc.

PROPOSAL 1: ELECTION OF DIRECTORS

General

Nominees for Election for a Three-Year Term Expiring at the 2027 Annual Meeting of Stockholders

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR

EACH CLASS III DIRECTOR NOMINEE NAMED ABOVE

Class I Directors Continuing in Office Until the 2025 Annual Meeting of Stockholders

Class II Directors Continuing in Office Until the 2026 Annual Meeting of Stockholders

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

NON-EMPLOYEE DIRECTOR COMPENSATION

Non-Employee Director Compensation Policy

Executive Compensation Philosophy and Objectives

Executive Compensation Philosophy and Objectives

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Role of the Compensation Consultant

Use of Competitive Market Data

Use of Competitive Market Data

Use of Competitive Market Data

Factors Used in Determining Executive Compensation

Factors Used in Determining Executive Compensation

Factors Used in Determining Executive Compensation

2023 Executive Compensation Program

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Performance-Based Cash Bonus

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Long-Term Equity Incentive Compensation

Employment Arrangements

Pension Benefits and Nonqualified Deferred Compensation

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table

2023 Summary Compensation Table