DEF 14A of Qualys, Inc.
Filed Apr 24, 2024 · FY20230001193125-24-110066
Information Concerning Director Nominees
Information Concerning Director Nominees Jeffrey P. Hank has served as a director of Qualys since January 2010, including as Chair of the Board since January 2023. Mr. Hank currently serves as the chairman of the board of directors for First Tech Federal Credit Union since April 2022. From June 2005 to July 2012, Mr. Hank was the Vice President, Chief Accounting Officer and Corporate Controller of Intuit, Inc., and Mr. Hank served as the Vice President of Finance and Chief Accounting Officer of Intuit from July 2012 until September 2013. From June 2002 until September 2003, Mr. Hank was an audit partner at KPMG LLP. From September 1994 until June 2002, Mr. Hank was an audit partner at Arthur Andersen LLP. Mr. Hank holds a Bachelor of Science degree in Business Administration from the University of California at Berkeley. We believe that Mr. Hank possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as an executive at a technology company and his background in the accounting industry. Sumedh S. Thakar has served as a director of Qualys since February 2021, as our Chief Executive Officer since April 2021 and as our President since October 2019. Mr. Thakar previously served as our interim Chief Executive Officer from February 2021 to April 2021, and as our Chief Product Officer from June 2014 to April 2021. Mr. Thakar joined us in February 2003 and has held various positions with us since that time, including Principal Engineer, Engineering Manager, Director of Engineering, and Vice President, Engineering. Mr. Thakar holds a Bachelor of Computer Science degree from the University of Pune, India. We believe that Mr. Thakar possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as our President and Chief Product Officer and his knowledge of our company.
Information Concerning Continuing Directors
Information Concerning Continuing Directors Kristi M. Rogers has served as a director of Qualys since August 2013. Ms. Rogers is currently co-founder and Managing Partner for Principal to Principal. From March 2014 to December 2016, Ms. Rogers served as Managing Director, Chief Executive Officer and member of the board of directors of Aspen Healthcare Services, LLC. From 2012 to 2014, Ms. Rogers also served on the board of directors of Aspen Medical USA. From August 2006 to January 2013, Ms. Rogers served in various positions, including Executive Vice President, President, Chief Executive Officer and Vice Chairman of the Board, at Aegis Defense Services LLC, a provider of security and support services to the U.S. government. Ms. Rogers also currently serves on the board of directors of Business Executives for National Security and is co-chair of the board of directors of Women’s Foreign Policy Group, both non-profit organizations. She serves on the board of directors of NowSecure, a private company providing mobile app security. Ms. Rogers holds a Bachelor of Science degree in Political Science from Michigan State University and a Certificate for Cyber Security Risk Oversight from Carnegie Mellon University, and she graduated from Stanford’s Graduate School of Business Executive Education & Corporate Governance Program. We believe that Ms. Rogers possesses specific attributes that qualify her to serve as a member of our board of directors, including her executive experience and her expertise in the public service sector. Thomas P. Berquist has served as a director of Qualys since August 2023. He has been Executive Vice President and Chief Financial Officer at Cloud Software Group since September 2022. From October 2015 to September 2022, Mr. Berquist served as Executive Vice President and Chief Financial Officer of TIBCO Software. Mr. Berquist has previously served as an executive officer at multiple software companies including Corel Software and Ingres Corporation, was a Managing Director of Software Equity Research at Salomon Smith Barney, Goldman Sachs and Piper Jaffray, and worked at Deloitte Consulting and Wells Fargo. Mr. Berquist holds a B.A. degree in Accounting with an Application Area in Computer Science from the University of Saint Thomas as well as an M.B.A. with an emphasis in Marketing from the University of Saint Thomas. We believe that Mr. Berquist possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as an executive at multiple technology companies and investment banks and his background in finance and accounting. Wendy M. Pfeiffer has served as a director of Qualys since August 2019. Ms. Pfeiffer served as a director of SADA Systems, a Google reseller and professional services company, from January 2020 until December 2023. Ms. Pfeiffer served as senior vice president and chief information officer of Nutanix, Inc., an enterprise cloud computing company, from January 17, 2017 until March 17, 2023. Previously, Ms. Pfeiffer served as chief information officer and vice president IT of GoPro, Inc., a maker of video and photo capture devices, from July 2015 to January 2017. Ms. Pfeiffer also served as senior director, IT shared services, of Robert Half International, a staffing and recruiting company, from February 2009 to June 2015. Ms. Pfeiffer holds a Bachelor of Science degree in Business Administration, Financial Accounting and Technology, from the University of Phoenix. We believe that Ms. Pfeiffer possesses specific attributes that qualify her to serve as a member of our board of directors, including her experience serving as chief information officer at technology companies. John A. Zangardi has served as a director of Qualys since June 2020. Dr. Zangardi has served as Chief Executive Officer of Redhorse Corporation, a technology services company delivering decision quality data to federal government customers, since December 2021, and as President of Redhorse Corporation since June 2020. From November 2019 to May 2020, Dr. Zangardi served as Senior Vice President of Business Initiatives and Strategic Partnerships for the Civil Group at Leidos, Inc., a science, engineering and information technology company. From November 2017 to November 2019, Dr. Zangardi served as Chief Information Officer of the Department of Homeland Security, a presidentially appointed position, where he was responsible for overseeing IT and its related security and management for the Department. Prior to that, Dr. Zangardi first served as the Principal Deputy Chief Information Officer and later as the Acting Chief Information Officer of the Department of Defense, between October 2016 to November 2017. Dr. Zangardi also served as the Deputy Assistant Secretary of the Navy for Command, Control, Communications, Computers, Intelligence, Information Operations & Space from March 2011 to September 2016. Dr. Zangardi also served additionally as the Department of Navy CIO from 2014 to 2015. A retired Naval Flight Officer, Dr. Zangardi served in a variety of command and staff assignments during his military career. Dr. Zangardi also currently serves on the board of directors of Symetrica, a privately held radiation detection company, and previously served on the board of directors for Forcepoint, a privately held software company, from April 2021 to January 2024. Dr. Zangardi holds a Bachelor of Science degree in Business Administration from the University of Scranton, a Master of Science degree in Finance from the Naval Postgraduate School, and a Doctor of Philosophy degree in Public Policy from George Mason University. We believe that Dr. Zangardi possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as chief information officer for departments of the federal government and Dr. Zangardi’s background in the U.S. military and executive experience at technology companies.
Considerations in Evaluating Director Nominees
Considerations in Evaluating Director Nominees Our Nominating and ESG Committee uses a variety of methods for identifying and evaluating director nominees. In its evaluation of director candidates, our Nominating and ESG Committee will consider the current size and composition of our board of directors and the needs of our board and its committees. Some of the qualifications that the committee considers include, without limitation, issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and other commitments. Nominees must also have the ability to offer advice and guidance to our Chief Executive Officer based on past experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Director candidates must have sufficient time available in the judgment of our Nominating and ESG Committee to perform all board of director and committee responsibilities. Members of our board of directors are expected to prepare for, attend, and participate in all board and applicable committee meetings. Other than the foregoing, there are no stated minimum criteria for director nominees, although our Nominating and ESG Committee may also consider such other factors as it may deem, from time to time, are in our and our stockholders’ best interests. Our Nominating and ESG Committee will also seek appropriate input from our Chief Executive Officer from time to time in assessing the needs of our board of directors for relevant background, experience, diversity and skills of its members. Although our board of directors does not maintain a specific policy with respect to board diversity, our board of directors recognizes the benefits of having a diverse board. To that end, our Nominating and ESG Committee considers a broad range of backgrounds, viewpoints, and experiences in making determinations regarding nominations of directors. Our Nominating and ESG Committee also considers these and other factors as it oversees the annual board of director and committee evaluations.
Non-Employee Director Compensation
Non-Employee Director Compensation
2023 Director Compensation Table
2023 Director Compensation Table The following table provides information regarding compensation of our non-employee directors during our fiscal year ended December 31, 2023. Directors who are also our employees receive no additional compensation for their service as a director. During 2023, our CEO, Sumedh S. Thakar was an employee. Mr. Thakar’s compensation is discussed in the “Executive Compensation” section of this proxy statement. We reimburse our non-employee directors for expenses associated with attending meetings of our board of directors and meetings of committees of our board of directors.
2023 Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | | Sandra E. Bergeron(3) | 21,250 | 177,633(3) | 198,883 | | Thomas P. Berquist | 16,019(5) | 453,788(6) | 469,807 | | William S. Berutti | 43,410 | 215,254(7) | 258,664 | | Jeffrey P. Hank | 100,972 | 215,254(7) | 316,226 | | General Peter Pace(4) | 23,750 | —(7) | 23,750 | | Wendy M. Pfeiffer | 50,000 | 215,254(7) | 265,254 | | Kristi M. Rogers | 52,500 | 215,254(7) | 267,754 | | John A. Zangardi | 60,000 | 215,254(7) | 275,254 |
2023 Director Compensation Table
| (1) The dollar amounts reported in this column represent the grant date fair value of restricted stock unit awards granted in 2023. These amounts have been calculated in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718. The fair value of each restricted stock unit award is measured based on the closing market price of our common stock on the date of grant. Pursuant to SEC rules, the amounts reported exclude the impact of estimated forfeitures related to service-based vesting conditions. For a discussion of valuation assumptions, see the stock-based compensation note to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024. |
2023 Director Compensation Table
| (2) As of December 31, 2023, the aggregate number of shares of our common stock underlying unvested stock awards and outstanding option awards held by each of our non-employee directors was: |
2023 Director Compensation Table
| Name | Aggregate Number of Shares Underlying Unvested Stock Awards | Aggregate Number of Shares Underlying Outstanding Option Awards | | Sandra E. Bergeron | — | — | | Thomas P. Berquist | 3,068 | — | | William S. Berutti | 2,801 | — | | Jeffrey P. Hank | 1,700 | 8,000 | | General Peter Pace | — | — | | Wendy M. Pfeiffer | 1,700 | — | | Kristi M. Rogers | 1,700 | — | | John A. Zangardi | 1,700 | — |
2023 Director Compensation Table
| (3) Ms. Bergeron retired from our board of directors on January 28, 2023. The outstanding and unvested awards granted to Ms. Bergeron on June 8, 2022 of 1,556 unvested RSUs (valued at $177,633, based on $114.16 per share, which was the closing price per share on the Nasdaq Stock Market of our common stock on January 27, 2023) were accelerated and fully vested. |
2023 Director Compensation Table
| (4) Gen. Pace retired from our board of directors on June 7, 2023. |
2023 Director Compensation Table
| (5) Mr. Berquist joined our board of directors on August 23, 2023. Accordingly, this reflects a pro-rata amount for his service on our board of directors during 2023. |
2023 Director Compensation Table
| (6) On August 23, 2023, Mr. Berquist was granted an award of 3,068 restricted stock units, which vest in three equal annual installments on each of the first three anniversaries of September 1, 2023, subject to Mr. Berquist’s continued service to us through each vesting date. |
2023 Director Compensation Table
| (7) On June 7, 2023, each of Mr. Berutti, Mr. Hank, Ms. Pfeiffer, Ms. Rogers and Dr. Zangardi was granted an award of 1,700 restricted stock units, which vest on the earlier of (i) June 7, 2024 or (ii) the day before our 2024 annual meeting of stockholders, subject to the applicable director’s continued service to us through each vesting date. |
Non-Employee Director Compensation Program
Non-Employee Director Compensation Program Our Compensation and Talent Committee is responsible for reviewing and making recommendations with respect to the compensation of our non-employee directors. The committee’s practice is to engage a compensation consultant every year to conduct a full review and competitive analysis (using the same peer group used to analyze executive compensation) of our non-employee directors’ compensation in order to ensure that our directors’ compensation is in line with peer companies competing for director talent. Our current non-employee director compensation program was reviewed and approved in 2022 in connection with input from Compensia, Inc. (“Compensia”), an independent compensation consultant. Equity Compensation Upon joining our board of directors, each newly elected non-employee director will be granted an award of restricted stock units with an intended “value” (based on the average of the closing prices of our common stock for the 30 trading days ending one week before the applicable grant date) of $420,000 (the “Initial Award”), which may be different from the award’s actual grant date fair value. An Initial Award will vest in three equal annual installments on each of the first three anniversaries of the first day of the month following the month that the director joins our board of directors, subject to continued service to us through each vesting date. On the date of each annual meeting of stockholders, each non-employee director who has served on our board of directors for at least six months prior to such date will be granted an award of restricted stock units with an intended “value” (based on the average of the closing prices of our common stock for the 30 trading days ending one week before the applicable grant date) of $200,000 (the “Annual Award”), which may be different from the award’s actual grant date fair value. Annual Awards will vest on the earlier of the first anniversary of its grant date or the day before the next annual meeting of stockholders, subject to continued service to us through the applicable vesting date. Notwithstanding the vesting schedules described above, the vesting of each Initial Award and each Annual Award will accelerate in full upon a “change in control” (as defined in our 2012 Equity Incentive Plan) of Qualys. Cash Compensation Our non-employee director compensation program provides that each year, each non-employee director will receive a cash retainer of $35,000 for serving on our board of directors (the “Annual Retainer”). In addition to the Annual Retainer, the non-employee Chair of the Board is entitled to an additional cash retainer of $50,000. The chairpersons and members of our board’s three standing committees are entitled to the following cash retainers each year:
Non-Employee Director Compensation Program
| Board Committee | Chairperson Retainer | Member Retainer | | Audit and Risk Committee | $20,000 | $10,000 | | Compensation and Talent Committee | 15,000 | 7,500 | | Nominating and ESG Committee | 10,000 | 5,000 |
Non-Employee Director Compensation Program
Each non-employee director who serves as a committee chair will receive only the additional annual cash fee as the chair of the committee, and not the additional annual fee as a member of the committee. All retainers in cash are paid in four equal installments on a quarterly basis at the end of the applicable quarter, provided that the individual served as a non-employee director in the applicable capacity during the full quarter. If a director did not serve in the applicable capacity for the full quarter, retainers are pro-rated, unless otherwise approved by the board of directors, which occurred in the first quarter of 2023 with respect to Ms. Bergeron’s retainer and in the second quarter of 2023 with respect to Gen. Pace’s retainer.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
REPORT OF THE AUDIT AND RISK COMMITTEE
| * Mr. Hank was Chair at the time the Committee made the above recommendation to the board of directors. Mr. Berquist was appointed Chair effective April 1, 2024 |
Executive Compensation Highlights
Executive Compensation Highlights Historically, our board of directors or the Compensation and Talent Committee approved our annual performance goals that would be used for the PRSU component of the equity award for the next year, in the fourth quarter of the preceding year. During 2023, our board of directors continued this practice of approving the target value of PRSUs for 2024 in October 2023, but decided to move the approval of the performance goals to be used for the PRSU component to February 2024. Our board of directors and the Compensation and Talent Committee intends to maintain this structure (approving target value in October and approving performance goals in February of the following year). This change was made so that our board of directors and the Compensation and Talent Committee has the benefit of a complete view of year end results and a more refined forecast when approving our performance goals, which improves their ability to set appropriately calibrated goals. The result of this change in 2023 is that there were no PRSUs considered granted to NEOs in 2023 for purposes of ASC Topic 718. The PRSUs that would have been historically granted in October of 2023 were instead considered granted in February of 2024. Years two and three of our 2022 and 2021 PRSUs, respectively, would have historically been considered granted in October of 2023 but instead were considered granted in February of 2024. Beginning in 2024, resulting from this change in structure, three tranches of PRSUs will be considered granted in February of each year and our annual RSU award will be considered granted in October of each year. This is illustrated in the chart below, where each row represents the annual grant approved by our Compensation and Talent Committee, and each column represents the year the grant is reported in the Summary Compensation Table. To ensure transparency and clarity to our shareholders, we are providing a supplemental Compensation Table in the CD&A (see page 59), as well as providing the detail in the footnotes of the Summary Compensation Table (see the footnotes of page 64). This change is discussed in more detail in the section entitled “Equity Compensation” of the Executive Compensation Program Components, and in the section entitled “2023 Summary Compensation Table”.
Philosophy and Objectives
| Element of Compensation | Basis for Providing Element | | Base Salary | To provide compensation to our named executive officers for services based on their experience and past performance | | Non-Equity Incentive Plan Compensation | To motivate and reward our named executive officers for focusing on our company objectives that drive increased stockholder value | | Equity Compensation | To align our named executive officers’ interests with the long-term interests of our stockholders and to promote the retention of our named executive officers | | Non-Cash and Non-Equity Benefits | To provide for the safety and wellness of our named executive officers | | Change in Control and Severance Payments and Benefits | To promote the retention of our named executive officers and, in the case of change in control payments and benefits, incentivize them to identify and execute economic transactions for the benefit of our stockholders |
Good Pay and Governance Practices
| What we do | | ✓ We balance near- and long-term strategic objectives by providing a mix of cash and equity incentives | | ✓ We cap non-equity incentive awards at 100% of target for all of our named executive officers, except our former CRO whose commissions were capped at 200% of target | | ✓ A substantial portion of our named executive officers’ equity awards is performance-based equity with vesting and release of the PRSU awards capped at 100% of target performance in each of the first two years of the performance period. Cumulative achievement over 100% is vested and released at the end of the third year of the performance period, subject to the continued service by the named executive officer through the date that performance is certified | | ✓ We audit our incentive plan processes, results, and payments on a regular basis | | ✓ We hold an annual stockholder advisory vote to approve our named executive officers’ compensation and we engage with stockholders and respond to their feedback on our executive compensation program | | ✓ We adopted stock ownership guidelines for our non-employee directors and executive officers | | ✓ We adopted clawback and compensation recovery policies for our former and current executive officers that comply with Exchange Act Rule 10D-1 and the applicable Nasdaq Listing Rules |
Role of the Compensation and Talent Committee
Role of the Compensation and Talent Committee Our Compensation and Talent Committee operates under a written charter adopted by the committee and approved by our board of directors. The charter is available on our website. Each member of our Compensation and Talent Committee qualifies as (i) an “independent director” under the Nasdaq Stock Market requirements, and (ii) a “non-employee director” under Exchange Act Rule 16b-3. Our Compensation and Talent Committee oversees our overall compensation philosophy, compensation plans, and benefits programs. Our Compensation and Talent Committee is responsible for reviewing, approving, and administering our annual and long-term incentive compensation plans and our employee benefit plans and for administering our equity incentive plans. To this end, our Compensation and Talent Committee establishes the performance objectives and certifies the performance achievement under our annual and long-term incentive compensation plans and approves the grant of equity awards under our equity incentive plans. Our Compensation and Talent Committee also reviews on a periodic basis the operations of our executive compensation program to determine whether they are properly coordinated and achieving their intended purposes. If our Compensation and Talent Committee determines that any aspect of our executive compensation program yields payments and benefits that are not reasonably related to executive and corporate performance, the committee may take steps to modify the program. Our Compensation and Talent Committee has authority to engage independent outside consultants and obtain input from our management team, other employees, and external advisers. In 2023, our Compensation and Talent Committee engaged Compensia, Inc., a national compensation consulting firm to assist us with respect to the compensation of our executive team, including our named executive officers.
Role of Compensation Consultants
Role of Compensation Consultants In 2023, Compensia provided a report on regulatory developments, proxy advisory policy changes, and trends in short-term and long-term incentive compensation program design. In 2023, Compensia further provided data on the compensation provided to executives in our compensation peer group and the competitive market in general. The compensation peer group was selected on the basis of relevant industry, size, location and comparability of the business. This data was considered by our Compensation and Talent Committee in setting executive compensation in 2023. This process involved Compensia analyzing, reviewing and making recommendations to our Compensation and Talent Committee regarding (i) the compensation peer group and (ii) various elements of our executive compensation program based on a comparison of the base salary, target total cash compensation (i.e., base salary plus target non-equity incentive plan compensation), annual long-term incentive values, and target total direct compensation (i.e., target total cash compensation plus equity awards) we provide to our named executive officers against that provided by our compensation peer group to similarly situated executives. Compensia also provided data on market practices relating to stock ownership guidelines for executives and non-employee directors and data on our compensation peer group’s non-employee director compensation, short-term and long-term incentive compensation program design, and equity utilization, as well as reports on executive compensation trends and regulatory developments. In 2023, Compensia did not provide any services to us or receive any payments from us, except in its capacity as a consultant to our Compensation and Talent Committee. Based on the consideration of the various factors as set forth in the rules of the SEC and the Nasdaq Stock Market, our Compensation and Talent Committee believes that its relationship with Compensia and its work on behalf of the committee has not raised any conflicts of interest.
Peer Companies
Peer Companies On an annual basis, our Compensation and Talent Committee approves a list of peer companies for the committee to use in conducting a competitive market analysis of executive officer compensation. To represent the market in which we compete for talent, we consider four primary company selection characteristics in determining the peer group each year:
Peer Companies
| 1. | Size: Similarly-sized publicly-traded companies in terms of annual revenues and market capitalization. |
Peer Companies
| 2. | Industry: Application Software or Systems Software GICS sub-industry. |
Peer Companies
| 3. | Growth: Companies with strong revenue growth and high market capitalization to revenue ratios. |
Peer Companies
| 4. | Location: Primarily companies in Northern California. |
Peer Companies
In April 2023, with the assistance of Compensia, our Compensation and Talent Committee reviewed our compensation peer group based on our peer group selection criteria. This resulted in adding four new companies to the peer group and removing four companies from the peer group (each of which are no longer publicly-traded). The following is a list of the public companies that our Compensation and Talent Committee used to set cash and equity compensation beginning in 2023:
Peer Companies
| Compensation Peer Group | | | | Altair Engineering Inc. | Guidewire Software, Inc. | Rapid7, Inc. | | AppFolio, Inc. | HashiCorp, Inc. | SecureWorks Corp. | | BlackLine, Inc. | HubSpot, Inc. | SentinelOne, Inc. | | Confluent, Inc. | New Relic | Splunk Inc. | | CrowdStrike Holdings, Inc. | PagerDuty, Inc. | Tenable Holdings, Inc. | | Elastic N.V. | Palo Alto Networks, Inc. | Varonis Systems, Inc. | | Five9, Inc. | Paycor HCM, Inc. | |
Non-Equity Incentive Plan Compensation
Non-Equity Incentive Plan Compensation 2023 Corporate Bonus Plan To motivate and reward our named executive officers to achieve our annual financial and operational objectives and our long-term strategic and growth goals, we provide cash incentive compensation to them based on meeting one or more corporate performance objectives. The objectives change from year to year as we grow and market conditions evolve and different priorities are established, but our Compensation and Talent Committee selects challenging objectives that are achievable only by strong performance. Except for Mr. Peters (who, prior to the termination of his employment, participated in our Sales Incentive Compensation Plan described below, in light of his position as our Chief Revenue Officer through February 7, 2023 with transition services provided through March 31, 2023), our named executive officers participated in our 2023 Corporate Bonus Plan, which provided them with an opportunity to receive formula-based incentive amounts on a quarterly basis. Our Compensation and Talent Committee decided this was the most appropriate measure of time to determine achievement of our short-term objectives because it aligns with the time periods for which we give external guidance. These named executive officers’ target bonus opportunities under the 2023 Corporate Bonus Plan are expressed as a percentage of each named executive officer’s base salary as of the last day of the applicable quarter. For 2023, each named executive officer’s percentage remained unchanged from 2022. The target bonus opportunity of each named executive officer that participated in the 2023 Corporate Bonus Plan is listed in the table below and represents the maximum amount that the named executive officer could receive under the 2023 Corporate Bonus Plan.
Non-Equity Incentive Plan Compensation
| Named Executive Officer | Target (and Maximum) Bonus for 2023 | | Sumedh S. Thakar | 100% | | Joo Mi Kim | 50% | | Bruce K. Posey | 50% |
Non-Equity Incentive Plan Compensation
For 2023, the performance metrics used to determine bonuses continued to be (i) growth in our bookings for the applicable quarter over the same quarter of the prior year, (ii) growth in revenues from the same quarter in 2022 and (iii) non-GAAP earnings per diluted share, with all three metrics weighted equally. Our Compensation and Talent Committee selected these three metrics, which measure sales growth and profitability, as the corporate performance metrics that best supported our annual operating plan and enhance long-term value creation. These three metrics were calculated as follows:
Non-Equity Incentive Plan Compensation
| • | Bookings was calculated as the sum of subscribed revenues for all new, renewal and upsell subscriptions contracted by customers and channel partners in each quarter. The subscribed revenues were based on the amount of subscription contracted if the term is one year or less and were capped at one year’s worth of subscribed revenues if the subscription term exceeds one year. The bookings growth measure is an internal measure and is a non-GAAP financial measure. |
Non-Equity Incentive Plan Compensation
| • | Revenues was determined in accordance with GAAP and set forth in our quarterly and annual financial statements. |
Non-Equity Incentive Plan Compensation
| • | Non-GAAP earnings per diluted share measure was calculated as GAAP net income adjusted for (i) stock-based compensation expense, (ii) amortization of acquired |
Non-Equity Incentive Plan Compensation
| technology, (iii) non-recurring charges such as acquisition related expenses and (iv) the related income tax effects of these adjustments, divided by weighted average shares (diluted) for the applicable quarter. The repurchase of shares under our share repurchase program was considered when calculating non-GAAP earnings per diluted share to avoid any unintended increase in the amount of actual awards under our 2023 Corporate Bonus Plan. Appendix B contains a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure. |
Non-Equity Incentive Plan Compensation
For each of the three metrics, performance may be adjusted to remove the effects of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the disposal of a segment of a business or related to a change in accounting principle, asset write-downs, litigation, claims, judgments or settlements, the effect of changes in tax law or other such laws or provisions affecting reported results, accruals for reorganization and restructuring programs. These exclusions are intended so that performance can be evaluated on organic foreseeable results rather than extraordinary transactions outside the scope of the Compensation and Talent Committee’s forecasts. The Compensation and Talent Committee made no adjustments to any of these metrics in 2023. The target award amounts for our named executive officers (other than Mr. Peters) in each quarter of 2023 were as follows:
2023 Corporate Bonus Plan Target Awards
2023 Corporate Bonus Plan Target Awards
2023 Corporate Bonus Plan Target Awards
| Named Executive Officer | Q1 Target | Q2 Target | Q3 Target | Q4 Target | Total Target | | Sumedh S. Thakar | $137,500 | $137,500 | $137,500 | $150,000 | $562,500 | | Joo Mi Kim | 51,250 | 51,250 | 51,250 | 56,250 | 210,000 | | Bruce K. Posey | 45,000 | 45,000 | 45,000 | 47,500 | 182,500 |
2023 Corporate Bonus Plan Target Awards
Each named executive officer’s bonus is paid as a percentage of his or her target bonus opportunity amount based on the weighted average of the payout percentages for each applicable measure. To be eligible for a quarterly bonus payment under our 2023 Corporate Bonus Plan, an individual must be employed as of the last working day of the quarter. For each of the three equally-weighted metrics, the payout percentage was capped at target (100%). Our Compensation and Talent Committee believed that achieving the top end of the targets would be sufficiently challenging and incentivize top-end performance. Payout could be zero if performance is below minimum levels for all three measures. The following table shows the level of achievement of each quarterly performance target under our 2023 Corporate Bonus Plan and the corresponding payout for each of these quarterly performance targets:
2023 Corporate Bonus Plan Target Awards
| | Q1 | | | Q2 | | | Q3 | | | Q4 | | | | | Target | Actual | Payout | Target | Actual | Payout | Target | Actual | Payout | Target | Actual | Payout | | Bookings Growth | 15.6% | * | —% | 15.6% | * | 57% | 17.8% | * | —% | 17.8% | * | 100% | | Revenue Growth | 17.8% | 15.2% | —% | 16.8% | 14.4% | —% | 16.2% | 13.1% | 44% | 16.3% | 10.5% | —% | | Non-GAAP EPS | $0.94 | $1.09 | 100% | $0.98 | $1.27 | 100% | $1.03 | $1.51 | 100% | $1.12 | $1.40 | 100% | | Weighted Payout | | | 33% | | | 52% | | | 48% | | | 67% |
2023 Corporate Bonus Plan Target Awards
| * With respect to actual bookings growth rate, as noted above, this is an internal measure that we do not disclose for several reasons, including our belief that disclosure would result in competitive |
2023 Corporate Bonus Plan Target Awards
| harm to the Company. If the results were disclosed, we believe the information would provide competitors with insights into our operations and sales compensation programs that would be harmful to us. |
2023 Corporate Bonus Plan Target Awards
Based on the achievement against the applicable performance metrics discussed above, the quarterly and aggregate actual amounts awarded to our named executive officers (other than Mr. Peters) for 2023 were as follows:
2023 Corporate Bonus Plan—Actual Award Amount
2023 Corporate Bonus Plan—Actual Award Amount
2023 Corporate Bonus Plan—Actual Award Amount
| Named Executive Officer | Q1 Award Amount | Q2 Award Amount | Q3 Award Amount | Q4 Award Amount | Total Amount | | Sumedh S. Thakar | $45,833 | $71,775 | $66,138 | $100,050 | $283,796 | | Joo Mi Kim | 17,083 | 26,753 | 24,651 | 37,519 | 106,006 | | Bruce K. Posey | 15,000 | 23,490 | 21,645 | 31,683 | 91,818 |
2023 Corporate Bonus Plan—Actual Award Amount
Sales Incentive Compensation Plan Since Mr. Peters’ responsibilities were based primarily on his ability to drive sales, his non-equity incentive plan compensation opportunity was provided under our Sales Incentive Compensation Plan instead of our 2023 Corporate Bonus Plan. Mr. Peters had a target sales incentive compensation opportunity under our Sales Incentive Compensation Plan equal to 100% of his base salary. As a participant in our Sales Incentive Compensation Plan, Mr. Peters had the opportunity to receive quarterly payments based on the year-over-year growth in our year-to-date new bookings (which was weighted 60%) and upsell bookings (which was weighted 40%). Our Compensation and Talent Committee decided that these two metrics and this weighting best supported our short-term sales goals given our focus on new customer acquisition. The two bookings metrics under our Sales Incentive Compensation Plan were calculated as follows:
2023 Corporate Bonus Plan—Actual Award Amount
| • | New bookings was calculated as the sum of subscribed revenues for all subscriptions contracted (in the quarter) by customers that either had never previously purchased a Qualys product, license, or service or had neither been under contract nor purchased or received any Qualys product, license, or service for 12 months. |
2023 Corporate Bonus Plan—Actual Award Amount
| • | Upsell bookings was calculated as the sum of (i) the subscribed revenues added (in the quarter) before the term of existing contracts and (ii) the incremental subscribed revenues exceeding the subscribed revenues of the original contracts that were being renewed in the quarter (i.e., the total subscribed revenues minus the subscribed revenues that result from the customers’ renewed or extended commitments to pay subscription fees for Qualys’ services that were provided to the customers under their prior or existing contracts). |
2023 Corporate Bonus Plan—Actual Award Amount
For each metric, the subscribed revenues were based on the amount of subscription contracted if the term was one year or less and were capped at one year’s worth of subscribed revenues if the subscription term exceeded one year. The measures were internal measures and are non-GAAP financial measures. Mr. Peters’ sales incentive compensation as of the end of each quarter of 2023 was to be calculated as a percentage of his target sales incentive compensation opportunity based on the weighted average of the payout percentages for each applicable metric. For each of the two metrics, the payout percentage was to be capped at 200% of target. Our Compensation and Talent Committee believed that achieving the top end of the targets would be sufficiently challenging and incentivize top-end performance. The amount of sales incentive compensation could be zero if performance was below minimum levels for both measures. Mr. Peters’ employment with us was terminated on February 7, 2023, before the end of the first quarter of 2023. Accordingly, Mr. Peters did not receive any payments under our Sales Incentive Compensation Plan in 2023.
Equity Compensation
Equity Compensation We use equity awards to incentivize and reward strong long-term corporate performance and to align the interests of our named executive officers with those of our stockholders. Continuing the practice we introduced in 2021 based on feedback from our stockholders, the equity award grants for our named executive officers that were approved in 2023 were a mix of time-based RSU and PRSUs. RSUs serve to retain our named executive officers over the long-term and align with our objective of long-term stockholder value creation. PRSUs drive long-term stockholder value creation and more strongly align our named executive officers’ interests with the interests of the Company and its stockholders. The PRSUs will provide significant value to our named executive officers only if the Company achieves specific operational goals since the PRSUs will vest only if these goals are achieved. During 2023, the board of directors and the Compensation and Talent Committee decided to change the timing of setting the performance goals for the PRSUs, which resulted in a change in the date the PRSUs are considered granted under FASB ASC Topic 718 (and therefore a change in the amount to be included in the Summary Compensation Table for each named executive officer’s 2023 compensation). For more information about the timing of PRSUs approved to our named executive officers, please see “Executive Compensation Highlights” above. Each year, we evaluate granting equity awards to our named executive officers to provide additional incentive to continue providing services to us. When determining the size of these equity awards, we generally do not apply a fixed formula. Instead, we aim to maximize long-term stockholder value by granting an amount of equity that properly rewards the named executive officer for his or her contribution to the growth in such value. We consider factors such as:
Equity Compensation
| • | the named executive officer’s performance, contributions, responsibilities, and experience; |
Equity Compensation
| • | the equity held by the named executive officer (including the economic value of his or her unvested equity awards and the ability of this equity to satisfy our retention objectives); |
Equity Compensation
| • | a compensation analysis performed by our human resources department and/or our independent compensation consultant; |
Equity Compensation
| • | market data researched from our compensation peer group (as well as custom cuts of survey data from Radford) and a competitive market analysis provided by our independent compensation consultant; |
Equity Compensation
| • | the equity award recommendations of management (except with respect to their own equity awards); and |
Equity Compensation
| • | internal equity considerations. |
Equity Compensation
We also periodically grant equity awards to new executive hires or in connection with a promotion and to recognize corporate and individual performance. The size of equity awards granted to our named executive officers in connection with their hire is determined through arm’s-length negotiation. We consider factors such as the named executive officer’s prospective role and responsibilities, the cash compensation the named executive officer is expected to receive, the potential incentive and retention value of the award, and the prevailing competitive market conditions. The equity awards granted to our named executive officers in 2023 are set forth in the sections entitled “2023 Summary Compensation Table” and “Grants of Plan-Based Awards in 2023 Table” below. Annual Equity Grants The annual equity grants for our named executive officers that were approved in 2023 consisted of a mix of RSUs and PRSUs. In the case of the PRSUs, our board of directors approved the target number of PRSUs in 2023, but our board of directors did not approve the performance goals for the performance period covering the 2024 fiscal year until February 2024. The RSUs granted to our named executive officers vest over four years and serve to retain our named executive officers over a long-term period and align with our objective of long-term stockholder value creation. The vesting of the RSUs is subject to the applicable named executive officer’s continued service with us as of each vesting date. Each named executive officer’s PRSUs are divided into three tranches with one-year performance periods covering the calendar years 2024, 2025, and 2026, respectively. One-third of the target number of PRSUs is allocated to each tranche. Up to 200% of the target number of PRSUs allocated to each tranche will become eligible to vest based on the annual growth rate of the Company’s revenues and the Company’s adjusted EBITDA margin for the applicable performance period. These two metrics are to be calculated as follows:
Equity Compensation
| • | Revenues are determined in accordance with GAAP in effect on the date of grant, subject to adjustments to exclude the effects of acquisitions and/or dispositions during the performance period. |
Equity Compensation
| • | Adjusted EBITDA margin is calculated as (i) net income (loss) for the performance period before (A) other (income) expense, net, which includes interest income, interest expense and other income and expense, (B) provision for (benefit from) income taxes, (C) depreciation and amortization of property and equipment, (D) amortization of intangible assets, and (E) stock-based compensation, divided by (ii) revenues for the performance period, subject to adjustments to exclude the effects of acquisitions and/or dispositions during the performance period. |
Equity Compensation
The revenue growth and adjusted EBITDA margin targets for the first tranche are based on the Company’s annual operating plan for 2024. In order to enable more calibrated goal setting, our board of directors did not set the performance goals for this tranche when target number of PRSUs was approved and instead waited to set the goals until February 2024 (after 2023 fiscal year had been completed, which provided the benefit of having a complete view of year end results). The revenue growth and adjusted EBITDA margin targets for the second and third tranches will be based on the Company’s annual operating plan for the applicable year, which is expected to be determined by our board of directors shortly after the beginning of the applicable year. Any PRSUs that become eligible to be earned and vest will be scheduled to vest according to the following schedule, subject to the applicable named executive officer’s continued service through the applicable vesting date:
Equity Compensation
| • | For the first and second tranches, up to 100% of the target number of PRSUs allocated to the tranche will vest on the date that performance is certified for that tranche, and any remaining PRSUs that became eligible to vest (“Overperformance Amount”) will vest on the date that performance is certified for the third tranche. |
Equity Compensation
| • | For the third tranche, all of the PRSUs that became eligible to vest will vest on the date that performance is certified for that tranche. |
Equity Compensation
In designing the performance and vesting structure of these PRSUs, our Compensation and Talent Committee sought to balance the short-term and long-term incentive and retention aspects of the PRSUs, by allowing the named executive officers to earn and vest in up to the target number of PRSUs each year but requiring continued service for approximately three years in order to vest in any excess number of PRSUs that are earned based on over-achievement of the performance goals. In addition, the vesting of these RSUs and PRSUs would accelerate upon the occurrence of certain specified events, as described in the section entitled “Potential Payments Upon Termination or Change in Control” below. The number of shares of our common stock covered by the RSUs and PRSUs and their intended value at the time of grant are listed in the table below.
Equity Compensation
| Named Executive Officer | Number of Time-Based RSUs(1) | Intended Value of Time-Based RSUs | Number of PRSUs at Target Level of Performance(1)(2) | Intended Value of PRSUs at Target Level of Performance | Number of PRSUs at Maximum Level of Performance(1) | Intended Value of PRSUs at Maximum Level of Performance | | Sumedh S. Thakar | 45,551 | $7,100,000 | 45,551 | $7,100,000 | 91,102 | $14,200,000 | | Joo Mi Kim | 25,599 | $3,990,000 | 10,971 | $1,710,000 | 21,942 | $3,420,000 | | Bruce K. Posey | 15,270 | $2,380,000 | 6,544 | $1,020,000 | 13,088 | $2,040,000 |
Equity Compensation
| (1) For each of these equity awards, the intended value of each equity award was converted into a number of RSUs or PRSUs, as applicable, by dividing the intended value by $155.87 per share, which was the average closing price of our common stock for the 30-trading-day-period ending seven days before the grant date. |
Equity Compensation
| (2) These PRSU awards are divided into three tranches with one-year performance periods covering the calendar years 2024, 2025, and 2026, respectively. One-third of the target number of PRSUs is allocated to each tranche. Each tranche will be subject to performance goals to be set shortly after the beginning of applicable performance year. |
Equity Compensation
| Understanding the Differences: Reported PRSU Values in the 2023 Summary Compensation Table vs. Target PRSU Values Approved by the Compensation and Talent Committee As discussed above, the PRSUs awarded to our named executive officers in October 2021, 2022 and 2023 vest annually over a three-year period based on the attainment of performance goals that are set and measured in each year of the three-year period. This results in differences between the reported PRSU award grant date fair value (“GDFV”) in the Summary Compensation Table and the target values of the PRSUs approved by the Compensation and Talent Committee. The differences between the GDFVs and the target values are due to the SEC requirement that PRSU award values disclosed in the Summary Compensation Table reflect the GDFV of the PRSU as determined under FASB ASC Topic 718, which stipulates that grant date is established when the underlying terms of the award are fixed. Because the performance goals for each tranche of the PRSU awards are set in different fiscal years, the tranches are reported separately in the proxy statements discussing those fiscal years. In addition, the total GDFV of the three tranches for FASB ASC Topic 718 purposes (as reported in the Summary Compensation Table in those proxy statements) may differ from the target value that the Compensation and Talent Committee originally approved. In years when the stock price has declined, the GDFV reported for that tranche in the Summary Compensation Table will be lower than the tranche’s target value. In years when the stock price has increased, the GDFV reported for that tranche in the Summary Compensation Table will exceed the tranche’s target value. |
Equity Compensation
| To assist investors in understanding the differences between the GDFV of equity awards in the Summary Compensation Table and the annual target equity award values (inclusive of both RSUs and PRSUs) approved by the Compensation and Talent Committee, the below table shows the current compensation for 2023 (actual base salary + actual short-term incentive + GDFV of equity awards granted during 2023), as disclosed in the Summary Compensation Table, as well as a pro-forma of “intended” compensation for 2023 (actual base salary + actual short-term incentive + the annual intended target equity award values for 2023 and resulting total compensation for 2023). For simplicity, we have omitted “Other Compensation” from the table. |
Equity Compensation
| 2023 Summary Compensation Table Values | | | | | 2023 “Intended” Compensation | | | Named Executive Officer | Salary ($) [A] | Actual Short- Term Incentive ($) [B] | Long-Term Incentive GDFV ($) [C] | Total Comp. ($) [D = A+B+C] | Target Long- Term Incentive Value ($) [E] | Total Comp. ($) [F = A+B+E] | | Sumedh S. Thakar | 558,333 | 283,796 | 6,931,496 | 7,773,625 | 14,200,000 | 15,042,129 | | Joo Mi Kim | 416,667 | 106,006 | 3,895,400 | 4,418,073 | 5,700,000 | 6,222,673 | | Bruce K. Posey | 363,333 | 91,818 | 2,323,636 | 2,778,787 | 3,400,000 | 3,855,151 |
Equity Compensation
CEO Appointment PRSUs In April 2021, in connection with Mr. Thakar’s appointment as our CEO, our board of directors approved the grant of an award of 9,671 PRSUs at the target level of performance (or 19,342 PRSUs at the maximum level of performance). The PRSU award was eligible to be earned and vest based on the compound annual growth rate of the Company’s revenues for a three-year performance period from January 2021 through December 2023 and the compound annual growth rate of the Company’s free cash flow per share for the same three-year performance period. The two metrics were calculated as follows:
Equity Compensation
| • | Revenue was determined in accordance with GAAP in effect on the date of grant, subject to adjustments to exclude the effects of acquisitions and/or dispositions during the performance period. |
Equity Compensation
| • | Free cash flow per share was calculated as (i) calendar year cash flows provided by operating activities, determined according to GAAP in effect on the date of grant, less (A) purchases of property and equipment, less (B) principal payments under capital lease obligations, divided by (ii) weighted average dilutive shares outstanding for such calendar year. |
Equity Compensation
As a result of the Company achieving compound annual growth in revenue of 15% and compound annual growth in free cash flow per share of 19% from January 2021 through December 2023, 14,005 of the PRSUs (which represents 145% of the target number of PRSUs) were earned and vested. PRSU Awards Granted in October 2021 In October 2021, our board of directors approved the grant of PRSU awards to our named executive officers. Each named executive officer’s PRSU award was divided into three tranches with one-year performance periods covering the calendar years 2022, 2023, and 2024, respectively. One-third of the target number of PRSUs was allocated to each tranche. Each tranche was and is to become eligible to vest based on the annual growth rate of the Company’s revenues and the Company’s adjusted EBITDA margin for the applicable performance period. As a result of the Company achieving revenue growth of 13% and adjusted EBITDA margin of 47% in 2023, the following number of PRSUs were earned and vested for the second tranche of each named executive officer’s PRSUs (which represents 98% of each named executive officer’s target number of PRSUs for that tranche): (i) 12,797 for Mr. Thakar, (ii) 4,620 for Ms. Kim, and (iii) 2,901 for Mr. Posey. Mr. Peters’ then-unvested PRSUs were forfeited when his transition services ended on March 31, 2023. PRSU Awards Granted in October 2022 In October 2022, our board of directors approved the grant of PRSU awards to our named executive officers. Each named executive officer’s PRSU award was divided into three tranches with one-year performance periods covering the calendar years 2023, 2024, and 2025, respectively. One-third of the target number of PRSUs was allocated to each tranche. Each tranche was and is to become eligible to vest based on the annual growth rate of the Company’s revenues and the Company’s adjusted EBITDA margin for the applicable performance period. As a result of the Company achieving revenue growth of 13% and adjusted EBITDA margin of 47% in 2023, the following number of PRSUs earned and vested for the first tranche of each named executive officer’s PRSUs (which represents 98% of each named executive officer’s target number of PRSUs for that tranche): (i) 14,831 for Mr. Thakar, (ii) 3,834 for Ms. Kim, and (iii) 2,191 for Mr. Posey. Mr. Peters’ then-unvested PRSUs were forfeited when his transition services ended on March 31, 2023. Retirement and Other Benefits Our named executive officers participate in the same retirement plan as other U.S.-based full-time employees. We maintain a tax-qualified 401(k) plan that provides eligible employees with an opportunity to save for retirement on a tax advantaged basis. All participants’ interests in their deferrals are 100% vested when contributed. We match 100% on the dollar up to the first 6% contributed with no vesting period, for our employees, including our named executive officers. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) plan is intended to qualify under Section 401(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all contributions are deductible by us when made. In addition, our named executive officers are entitled to participate in the same employee benefit plans, and on the same terms and conditions, as our other U.S.-based, full-time employees. These benefits include health, dental and vision insurance; medical and dependent care flexible spending accounts; short- and long-term disability insurance; life insurance; and accidental death and dismemberment insurance. We believe these benefits are generally consistent with those offered by companies with which we compete for employees.
Change in Control and Severance Payments and Benefits
Change in Control and Severance Payments and Benefits Ms. Kim’s employment offer letter and, prior to the end of his employment with us, Mr. Peters’ employment offer letter provided for certain protections in the event of termination of their employment under specified circumstances. In addition, certain equity awards granted to our named executive officers provided for acceleration of vesting upon termination of their employment under specified circumstances. Our board of directors previously approved (i) a severance and change of control policy for our CEO in April 2021, in connection with Mr. Thakar’s appointment as CEO, and (ii) for our other named executive officers in October 2021. The severance and change of control payments and benefits under these policies supersede any prior agreement or arrangement the named executive officers may have had with us that provided for severance and/or change in control payments or benefits (other than any existing vesting acceleration benefits upon a termination of employment due to death or disability). We believe that these arrangements maximize stockholder value by minimizing any potential distractions caused by the possibility of an involuntary termination or a potential change in control, which allows our named executive officers to maintain their focus and dedication to their responsibilities. We believe that these arrangements also provide further retention value by encouraging our named executive officers to continue providing services to us. For a summary of the material terms and conditions of these severance and change in control arrangements, as well as an estimate of the potential payments and benefits payable thereunder, see the section entitled “Potential Payments Upon Termination or Change in Control” below.
Transition Agreement with Mr. Peters
Transition Agreement with Mr. Peters In connection with the termination of Mr. Peters’ employment with us, we entered into a Transition Agreement and Release with Mr. Peters, in connection with which, and pursuant to the terms of the severance policy described below in the section entitled “Potential Payments Upon Termination or Change in Control—Severance and Change in Control Policies,” Mr. Peters provided transition services to us until March 31, 2023, and we paid Mr. Peters $162,500 in addition to the wages earned through March 31, 2023. Mr. Peters did not receive any acceleration of his equity awards in connection with the termination of his employment with us.
Deductibility of Executive Compensation
Deductibility of Executive Compensation Section 162(m) of the Code generally limits the amount we may deduct for federal income tax purposes for compensation paid to our Chief Executive Officer, our Chief Financial Officer, and certain of our other executive officers in any taxable year to $1 million per person. An exception to the $1 million limitation for performance-based compensation meeting certain requirements was repealed beginning in 2018 (other than with respect to certain grandfathered arrangements) under the Tax Cuts and Jobs Act (the “Act”). Under the transition relief provisions of the Act, it is possible that certain of the equity awards we granted prior to 2018 may be grandfathered and eligible to be excluded from the Section 162(m) deduction limits. Except for any equity awards that qualify for such transition relief provisions, compensation paid to any of our covered executive officers generally will not be deductible in 2023 or future years, to the extent that it exceeds $1 million. While our Compensation and Talent Committee is mindful of the benefit of being able to fully deduct the compensation paid to our executive officers, the committee believes that we should retain the flexibility to compensate our executive officers in a manner that can best promote our business objectives. Therefore, our Compensation and Talent Committee intends to continue to compensate our executive officers in a manner consistent with the best interests of our company and our stockholders, even if such compensation is not fully deductible.
“Parachute Payments” and Deferred Compensation
“Parachute Payments” and Deferred Compensation Under Sections 280G and 4999 of the Code, certain service providers, which may include our named executive officers, may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the Company that exceeds certain prescribed limits, and the Company may forfeit a deduction on the amounts subject to this excise tax. Also, Section 409A of the Code imposes significant additional taxes on a service provider in the event the service provider receives “deferred compensation” that does not meet the requirements of Section 409A of the Code. In 2023, we did not provide any of our named executive officers with a “gross-up” or other reimbursement payment for any excise tax liability that he or she might owe as a result of the application of Sections 280G or 4999 or for any additional tax that he or she might owe as a result of the application of Section 409A. We have not agreed and are not otherwise obligated to provide any named executive officer with such a “gross-up” or other reimbursement.
Accounting Considerations
Accounting Considerations Accounting standards on stock compensation requires us to measure the compensation expense for all share-based payment awards made to employees (including our named executive officers) and directors based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the tables below, even though our named executive officers and directors may never realize any value from their equity awards. The accounting standards also require us to recognize the compensation cost of share-based payment awards in our income statements over the period that the named executive officer or director is required to provide services to us in exchange for the vesting of the equity award.
Risk Considerations
| • | Balance among short- and long-term incentives, cash and equity, fixed and variable pay |
Risk Considerations
| • | Multiple performance metrics as targets |
Risk Considerations
| • | Holding period requirement for performance-based equity awards |
Risk Considerations
| • | Double-trigger change in control arrangements |
2023 Summary Compensation Table
2023 Summary Compensation Table The following table provides information regarding the compensation of our named executive officers for years 2023, 2022 and 2021.
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | | Sumedh S. Thakar | 2023 | 558,333 | 6,931,496(3)(4) | 283,796 | 9,607(5) | 7,783,232 | | Director, President and | 2022 | 550,000 | 10,361,307(3)(6) | 467,570 | 13,676(7) | 11,392,553 | | Chief Executive Officer | 2021 | 502,308 | 8,364,620(8) | 512,500 | 17,237(9) | 9,396,664 | | Joo Mi Kim | 2023 | 416,667 | 3,895,400(3)(10) | 106,006 | 18,752(11) | 4,436,825 | | Chief Financial Officer | 2022 | 410,000 | 5,069,403(3)(12) | 174,276 | 19,306(13) | 5,672,984 | | | 2021 | 351,667 | 4,541,750(14) | 178,750 | 16,282(15) | 5,088,449 | | Allan Peters(16) | 2023 | 81,250 | —(3)(17) | — | 190,672(18) | 271,922 | | Former Chief Revenue Officer | 2022 | 323,769 | 3,854,273(3)(19) | — | 14,616(20) | 4,192,658 | | | 2021 | 209,375 | 3,483,318(21) | 258,276 | 9,793(22) | 3,960,762 | | Bruce K. Posey | 2023 | 363,333 | 2,323,636(3)(23) | 91,818 | 23,182(24) | 2,801,969 | | Chief Legal Officer and | 2022 | 360,000 | 2,934,223(3)(25) | 153,023 | 20,798(26) | 3,468,044 | | Corporate Secretary | 2021 | 335,000 | 2,851,185(27) | 168,750 | 15,856(28) | 3,370,791 |
2023 Summary Compensation Table
| (1) RSU awards and PRSU awards are shown at their aggregate grant date fair value as determined in accordance with FASB ASC Topic 718. The fair value of each RSU award and PRSU award is measured based on the closing price of our common stock on the date of grant. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For a discussion of valuation assumptions, see the stock-based compensation note to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024. |
2023 Summary Compensation Table
| (2) For Mr. Thakar, Ms. Kim and Mr. Posey, the amounts in this column reflect cash incentives earned under our Corporate Bonus Plan for the applicable year. For Mr. Peters, the amounts in this column reflect sales commissions earned under his individualized sales incentive plan for the applicable year. |
2023 Summary Compensation Table
| (3) As discussed above in the “Compensation Discussion and Analysis” section, the PRSU awards granted to the named executive officers in October 2023, 2022, and 2021 are divided into three tranches with one-year performance periods. One-third of the target number of PRSUs is allocated to each tranche. Each tranche will become eligible to be earned and vest based on the annual performance goals approved by our board of directors for the applicable performance period before or shortly after the start of the performance year. Pursuant to FASB ASC Topic 718, the accounting grant date for each PRSU tranche is the date the performance goals are approved by the Compensation and Talent Committee and communicated to the employee. |
2023 Summary Compensation Table
| (4) Due to the change in the timing of approval of the performance goals for the 2024 performance period discussed above in the “Compensation Discussion and Analysis” section, the performance metrics for the third tranche of the PRSU award granted to Mr. Thakar in October 2021, the second tranche of the PRSU award granted to Mr. Thakar in October 2022, and the first tranche of the PRSU award granted to Mr. Thakar in October 2023 had not been established in 2023. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2023 compensation that is presented in this table. The performance metrics for these tranches were established in February 2024, and the total grant date fair value for these tranches was $7,311,206, which will be reported for 2024 in next year’s proxy statement. |
2023 Summary Compensation Table
| (5) Reflects (a) 401(k) matching contributions by Qualys ($8,257) and (b) a premium paid by Qualys for life insurance ($1,350). |
2023 Summary Compensation Table
| (6) This amount includes the grant date fair value of the first tranche (representing 15,178 PRSUs) and second tranche (representing 13,096 PRSUs) of the PRSU awards granted in October 2022 and 2021 totaling $3,969,104 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $7,938,208). |
2023 Summary Compensation Table
| (7) Reflects (a) 401(k) matching contributions by Qualys ($12,214) and (b) a premium paid by Qualys for life insurance ($1,462). |
2023 Summary Compensation Table
| (8) This amount includes (a) the grant date fair value of a PRSU award granted in April 2021 in connection with Mr. Thakar’s appointment as Chief Executive Officer totaling $1,037,698 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $2,075,397), and (b) the grant date fair value of the first tranche (representing 13,096 PRSUs) of a PRSU award granted in October 2021 totaling $1,572,306 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $3,144,612). |
2023 Summary Compensation Table
The performance metrics for the second and third tranches (representing an aggregate of 26,192 PRSUs) of the PRSU award granted to Mr. Thakar in October 2021 had not been established in 2021. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2021 compensation that is presented in this table.
2023 Summary Compensation Table
| (9) Reflects (a) 401(k) matching contributions by Qualys ($13,050), (b) a premium paid by Qualys for life insurance ($1,350), and (c) a premium paid by Qualys for supplemental disability insurance ($2,837). |
2023 Summary Compensation Table
| (10) Due to the change in the timing of approval of the performance goals for the 2024 performance period discussed above in the “Compensation Discussion and Analysis” section, the performance metrics for the third tranche of the PRSU award granted to Ms. Kim in October 2021, the second |
2023 Summary Compensation Table
| tranche of the PRSU award granted to Ms. Kim in October 2022, and the first tranche of the PRSU award granted to Ms. Kim in October 2023 had not been established in 2023. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2023 compensation that is presented in this table. The performance metrics for these tranches were established in February 2024, and the total grant date fair value for these tranches was $2,070,866, which will be reported for 2024 in next year’s proxy statement. |
2023 Summary Compensation Table
| (11) Reflects (a) 401(k) matching contributions by Qualys ($17,852) and (b) a premium paid by Qualys for life insurance ($900). |
2023 Summary Compensation Table
| (12) This amount includes the grant date fair value of the first tranche (representing 3,923 PRSUs) and second tranche (representing 4,728 PRSUs) of the PRSU awards granted in October 2022 and 2021 totaling $1,214,427 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $2,428,855). |
2023 Summary Compensation Table
| (13) Reflects (a) 401(k) matching contributions by Qualys ($18,331) and (b) a premium paid by Qualys for life insurance ($975). |
2023 Summary Compensation Table
| (14) This amount includes the grant date fair value of the first tranche (representing 4,729 PRSUs) of a PRSU award granted in October 2021 totaling $567,764 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $1,135,527). |
2023 Summary Compensation Table
The performance metrics for the second and third tranches (representing an aggregate of 9,457 PRSUs) of the PRSU award granted to Ms. Kim in October 2021 had not been established in 2021. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2021 compensation that is presented in this table.
2023 Summary Compensation Table
| (15) Reflects (a) 401(k) matching contributions by Qualys ($13,050), (b) a premium paid by Qualys for life insurance ($900), and (c) a premium paid by Qualys for supplemental disability insurance ($2,332). |
2023 Summary Compensation Table
| (16) Mr. Peters’ employment with the Company was terminated on February 7, 2023 with transition services provided through March 31, 2023. |
2023 Summary Compensation Table
| (17) Mr. Peters’ then-unvested PRSUs were forfeited when his transition services ended on March 31, 2023. |
2023 Summary Compensation Table
| (18) Reflects (a) 401(k) matching contributions by Qualys ($6,139) and (b) a premium paid by Qualys for life insurance ($968). (c) vacation payout ($21,066) and termination payment ($162,500). |
2023 Summary Compensation Table
| (19) This amount includes the grant date fair value of the first tranche (representing 2,977 PRSUs) and second tranche (representing 3,638 PRSUs) of the PRSU awards granted in October 2022 and 2021 totaling $928,614 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $1,857,227). |
2023 Summary Compensation Table
| (20) Reflects (a) 401(k) matching contributions by Qualys ($10,076) and (b) a premium paid by Qualys for life insurance ($4,540). |
2023 Summary Compensation Table
| (21) This amount includes the grant date fair value of the first tranche (representing 3,638 PRSUs) of a PRSU award granted in October 2021 totaling $436,778 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $873,557). |
2023 Summary Compensation Table
The performance metrics for the second and third tranches (representing an aggregate of 7,276 PRSUs) of the PRSU award granted to Mr. Peters in October 2021 had not been established in 2021. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2021 compensation that is presented in this table.
2023 Summary Compensation Table
| (22) Reflects (a) 401(k) matching contributions by Qualys ($6,797), (b) a premium paid by Qualys for life insurance ($2,258), and (c) a premium paid by Qualys for supplemental disability insurance ($738). |
2023 Summary Compensation Table
| (23) Due to the change in the timing of approval of the performance goals for the 2024 performance period discussed above in the “Compensation Discussion and Analysis” section, the performance metrics for the third tranche of the PRSU award granted to Mr. Posey in October 2021, the second tranche of the PRSU award granted to Mr. Posey in October 2022, and the first tranche of the PRSU award granted to Mr. Posey in October 2023 had not been established in 2023. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2023 compensation that is presented in this table. The performance metrics for these tranches were established in February 2024, and the total grant date fair value for these tranches was $1,243,630, which will be reported in 2024 in next year’s proxy statement. |
2023 Summary Compensation Table
| (24) Reflects (a) 401(k) matching contributions by Qualys ($15,781) and (b) a premium paid by Qualys for life insurance ($7,401). |
2023 Summary Compensation Table
| (25) This amount includes the grant date fair value of the first tranche (representing 2,242 PRSUs) and second tranche (representing 2,968 PRSUs) of the PRSU awards granted in October 2022 and 2021 totaling $731,380 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $1,462,760). |
2023 Summary Compensation Table
| (26) Reflects (a) 401(k) matching contributions by Qualys ($10,822) and (b) a premium paid by Qualys for life insurance ($9,976). |
2023 Summary Compensation Table
| (27) This amount includes the grant date fair value of the first tranche (representing 2,969 PRSUs) of a PRSU award granted in October 2021 totaling $356,458 based upon the probable outcome of performance conditions (if maximum performance is achieved, the aggregate grant date fair value of such award is $712,916). |
2023 Summary Compensation Table
The performance metrics for the second and third tranches (representing an aggregate of 5,937 PRSUs) of the PRSU award granted to Mr. Posey in October 2021 had not been established in 2021. As a result, there was no reportable grant date fair value under FASB ASC Topic 718 for such tranches to be included in the 2021 compensation that is presented in this table.
2023 Summary Compensation Table
| (28) Reflects (a) 401(k) matching contributions by Qualys ($5,575), (b) a premium paid by Qualys for life insurance ($5,677), and (c) a premium paid by Qualys for supplemental disability insurance ($4,604). |
Grants of Plan-Based Awards in 2023 Table
Grants of Plan-Based Awards in 2023 Table The following table shows information regarding cash incentive and equity awards granted to our named executive officers during 2023.
Grants of Plan-Based Awards in 2023 Table
| Name | Grant Date | Approval Date | Type of Award(1) | Estimated Future Payouts Under Non- Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards ($)(3)(4) | | | | | | Threshold ($)(5) | Target ($) | Maximum ($) | | | | Sumedh S. Thakar | | | | | | | | | | | — | — | Cash Incentive | 225,000 | 562,500 | 562,500 | | | | | 10/26/2023 | 10/26/2023 | Time-based RSUs | | | | 45,551 | 6,931,496 | | Joo Mi Kim | | | | | | | | | | | — | — | Cash Incentive | 84,000 | 210,000 | 210,000 | | | | | 10/26/2023 | 10/26/2023 | Time-based RSUs | | | | 25,599 | 3,895,400 | | Allan Peters | | | | | | | | | | | — | — | Cash Incentive | 45,500 | 325,000 | 650,000 | | | | Bruce K. Posey | | | | | | | | | | | — | — | Cash Incentive | 73,000 | 182,500 | 182,500 | | | | | 10/26/2023 | 10/26/2023 | Time-based RSUs | | | | 15,270 | 2,323,636 |
Grants of Plan-Based Awards in 2023 Table
| (1) Time-based RSUs were granted under our 2012 Equity Incentive Plan. |
Grants of Plan-Based Awards in 2023 Table
| (2) For our named executive officers other than Mr. Peters, the amounts reported represent cash incentive compensation opportunities under our 2023 Corporate Bonus Plan. For Mr. Peters, the amount reported represents the cash incentive compensation opportunity under his individualized 2023 sales incentive compensation plan. |
Grants of Plan-Based Awards in 2023 Table
| (3) Because the performance metrics for the third tranche of the PRSU awards granted to our named executive officers in October 2021, the second and third tranches of the PRSU awards granted to our named executive officers in October 2022, and all three tranches of the PRSU awards granted to our named executive officers in October 2023 had not been established as of the end of fiscal 2023, such tranches were not yet considered granted under FASB ASC Topic 718. As a result, there is no reportable grant date fair value under FASB ASC Topic 718 for such tranches, and they are not included in this table. |
Grants of Plan-Based Awards in 2023 Table
| (4) Amounts reported in this column represent the grant date fair value of stock awards, calculated in accordance with FASB ASC Topic 718. The fair value of each RSU award is measured based on the closing price of our common stock on the date of grant, excluding the impact of estimated forfeitures related to service-based vesting conditions. |
Grants of Plan-Based Awards in 2023 Table
| (5) The amounts reported in this column represent (a) in the case of Mr. Thakar, Ms. Kim, and Mr. Posey, the payout under our 2023 Corporate Bonus Plan based on the minimum amounts payable for certain levels of performance for all three performance metrics, or (b) in Mr. Peters’ case, the payout under his individualized 2023 sales incentive compensation plan based on the minimum amounts payable for certain levels of performance for both performance metrics. Payout could be zero if performance is below minimum levels for all of the applicable performance metrics. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
Outstanding Equity Awards at 2023 Fiscal Year-End Table The following table presents information regarding stock options held by our named executive officers as of December 31, 2023.
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| | Option Awards(1) | | | | | | | Name | Grant Date | Vesting Commencement Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | | Sumedh S. Thakar | 4/28/2016 | 4/28/2016 | 136,000(2) | — | 25.56 | 4/27/2026 | | | 10/30/2014 | 10/30/2014 | 12,911(2) | — | 30.58 | 10/29/2024 | | Bruce K. Posey | 4/28/2016 | 4/28/2016 | 10,000(2) | — | 25.56 | 4/27/2026 |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (1) All stock options referenced in this table were granted under our 2012 Equity Incentive Plan. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (2) Each of these options was fully vested as of December 31, 2023. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
The following table presents information regarding stock awards held by our named executive officers as of December 31, 2023.
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| | Stock Awards(1) | | | | | | Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares or Units of Stock That Have Not Vested ($)(3) | | Sumedh S. Thakar | 10/26/2023 | 45,551(4) | 8,940,750 | —(5) | — | | | 10/27/2022 | 14,831(6) | 2,911,029 | —(7) | — | | | 10/27/2022 | 34,152(8) | 6,703,355 | — | — | | | 10/28/2021 | 23,418(9) | 4,596,485 | —(10) | — | | | 10/28/2021 | 19,644(11) | 3,855,724 | — | — | | | 4/27/2021 | 14,005(12) | 2,748,901 | — | — | | | 4/27/2021 | 3,627(13) | 711,908 | — | — | | | 10/27/2020 | 20,270(14) | 3,978,596 | — | — | | Joo Mi Kim | 10/26/2023 | 25,599(4) | 5,024,572 | —(5) | — | | | 10/27/2022 | 3,834(6) | 752,538 | —(7) | — | | | 10/27/2022 | 20,596(8) | 4,042,583 | — | — | | | 10/28/2021 | 8,456(9) | 1,659,744 | —(10) | — | | | 10/28/2021 | 16,550(11) | 3,248,434 | — | — | | | 10/27/2020 | 2,534(14) | 497,374 | — | — | | | 7/29/2020 | 7,106(15) | 1,394,766 | — | — | | Bruce K. Posey | 10/26/2023 | 15,270(4) | 2,997,196 | —(5) | — | | | 10/27/2022 | 2,191(6) | 430,049 | —(7) | — | | | 10/27/2022 | 11,769(8) | 2,310,019 | — | — | | | 10/28/2021 | 5,309(9) | 1,042,051 | —(10) | — | | | 10/28/2021 | 10,390(11) | 2,039,349 | — | — | | | 10/27/2020 | 8,108(14) | 1,591,438 | — | — |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (1) All stock awards referenced in this table were granted under our 2012 Equity Incentive Plan. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (2) Stock awards in this column consist of unvested time-based RSUs. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (3) Values reported were computed by multiplying (i) $196.28, the closing price per share on the Nasdaq Stock Market of our common stock on December 29, 2023, the last business day of fiscal 2023, by (ii) the number of shares or units of stock. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (4) The RSUs vest quarterly in equal installments over four years, with the first vesting date on February 1, 2024. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (5) As discussed above in the “Compensation Discussion and Analysis” section, the Company approved a PRSU award in October 2023, which is a multi-year PRSU award with one-year performance periods covering the calendar years 2024, 2025, and 2026, respectively. Because the performance metrics for all three tranches of this PRSU award had not been established in 2023, no portion of this PRSU award had been considered granted or outstanding under FASB ASC Topic 718 in 2023, and no portion of this PRSU award is included in this table. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (6) As discussed above in the “Compensation Discussion and Analysis” section, this PRSU award is a multi-year PRSU award with one-year performance periods covering the calendar years 2023, 2024, and 2025, respectively. Subject to continued service, each tranche will become eligible to vest based on the annual growth rate of the Company’s revenues and the Company’s adjusted EBITDA margin for the applicable performance period, except that vesting and release of the PRSUs is capped at 100% of target performance for each of the first two tranches, with cumulative achievement over 100% to be vested and released at the end of the performance period for the third tranche. For the first tranche, 97.7% of the target number of PRSUs allocated to the tranche became eligible to vest based on the actual annual revenue growth rate and the adjusted EBITDA margin result for calendar year 2023, all of which vested when the performance was certified in February 2024. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (7) Because the performance metrics for the second and third tranches of this PRSU award had not been established in 2023, each of these tranches was not considered granted or outstanding under FASB ASC Topic 718 in 2023 and is not included in this table. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (8) The RSUs vest quarterly in equal installments over four years, with the first vesting date on February 1, 2023. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (9) As discussed above in the “Compensation Discussion and Analysis” section, this PRSU award is a multi-year PRSU award with one-year performance periods covering the calendar years 2022, 2023, and 2024, respectively. Subject to continued service, each tranche will become eligible to vest based on the annual growth rate of the Company’s revenues and the Company’s adjusted EBITDA margin for the applicable performance period, except that vesting and release of the PRSUs is capped at 100% of target performance for each of the first two tranches, with cumulative achievement over 100% to be vested and released at the end of the performance period for the third tranche. For the first tranche, 181.1% of the target number of PRSUs allocated to the tranche became eligible to vest based on the actual annual revenue growth rate and the adjusted EBITDA margin results for calendar year 2022. Among these eligible PRSUs, 100% (out of the 181.1%) of the target number of PRSUs allocated to the tranche vested when the performance was certified in February 2023 and 81.1% of the target number of PRSUs (i.e., the eligible PRSUs exceeding 100% of the target number of PRSUs) will vest and be released when the performance for the third tranche is certified, subject to the applicable named executive officer’s continuous service with the Company. For the second tranche, 97.7% of the target number of PRSUs allocated to the tranche became eligible to vest based on the actual annual revenue growth rate and the adjusted EBITDA margin result for calendar year 2023, all of which vested when the performance was certified in February 2024. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (10) Because the performance metrics for the third tranche of this PRSU award had not been established in 2023, such tranche was not considered granted or outstanding under FASB ASC Topic 718 in 2023 and is not included in this table. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (11) The RSUs vest quarterly in equal installments over four years, with the first vesting date on February 1, 2022. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (12) Subject to continued service through the date that performance is certified, the number of shares that will vest under this PRSU award will vary from 0% to 200% of target based on the compound annual growth rate of the Company’s revenues for a three-year period from January 2021 through December 2023 and the compound annual growth rate of free cash flow per share for the same three-year period. As a result of the Company achieving compound annual growth in revenue of 15% and compound annual growth in free cash flow per share of 19% from January 2021 through December 2023, 144.8% of the target number of PRSUs were vested when the performance was certified in February 2024. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (13) The RSUs vest quarterly in equal installments over four years, with the first vesting date on August 1, 2021. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (14) The RSUs vest quarterly in equal installments over four years, with the first vesting date on February 1, 2021. |
Outstanding Equity Awards at 2023 Fiscal Year-End Table
| (15) The RSUs vest quarterly in equal installments over four years, with the first vesting date on October 1, 2020. |
Option Exercises and Stock Vested in 2023 Table
Option Exercises and Stock Vested in 2023 Table The following table sets forth the number of shares of common stock acquired during 2023 by our named executive officers upon the exercise of stock options and the vesting of restricted stock unit awards and the value realized upon such exercise or vesting.
Option Exercises and Stock Vested in 2023 Table
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Sumedh S. Thakar | 93,200 | 9,362,240 | 77,543 | 9,991,534 | | Joo Mi Kim | — | — | 31,876 | 4,118,671 | | Allan Peters | — | — | 6,766 | 813,598 | | Bruce K. Posey | 20,300 | 2,602,206 | 28,911 | 3,743,250 |
Option Exercises and Stock Vested in 2023 Table
| (1) The value realized upon exercise was determined by multiplying (i) the number of shares of our common stock acquired on exercise by (ii) the difference between the closing price per share on the Nasdaq Stock Market of our common stock on the day of exercise and the exercise price per share. |
Option Exercises and Stock Vested in 2023 Table
| (2) The value realized upon vesting was determined by multiplying (i) the number of shares of our common stock acquired on vesting by (ii) the closing price per share on the Nasdaq Stock Market of our common stock on the day of vesting. |
Pension Benefits & Nonqualified Deferred Compensation
Pension Benefits & Nonqualified Deferred Compensation We do not provide a pension plan for our employees, and no named executive officers participated in a nonqualified deferred compensation plan during 2023.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
Estimated Payments Upon Termination or Change in Control
Estimated Payments Upon Termination or Change in Control The following table provides an estimate of the payments and benefits that would be provided in the circumstances described above for each of the named executive officers except Mr. Peters, assuming the triggering event took place on December 29, 2023 (the last business day of 2023) and based on the $196.28 closing price per share of our common stock on the Nasdaq Stock Market on that date. A number of factors may affect the nature and amount of any potential payments or benefits, and as a result, the payments and benefits actually paid (if any) may be different. For example, a triggering event may occur on a date other than December 29, 2023, the price per share of our common stock on the date of the triggering event may be higher or lower than $196.28 or the assumptions relied upon in the estimate of potential payments and benefits below may not reflect the actual circumstances of the triggering event. Accordingly, there is no guarantee that a triggering event would produce the same or similar results as those estimated below. The benefits to which Mr. Peters was eligible upon the end of his employment are explained above in “Potential Payments Upon Termination or Change in Control”.
Estimated Payments Upon Termination or Change in Control
| | | Upon a Qualifying Termination of Employment(1) | | | | Name | Type of Benefit | Not in Connection With a Change of Control ($) | In Connection With a Change of Control ($) | Upon Disability or Death ($) | | Sumedh S. Thakar | Vesting Acceleration | — | 33,722,904 | 33,722,904 | | | Cash Severance | 633,078 | 1,849,616 | — | | | COBRA Payments | 33,078 | 49,616 | — | | | Total Termination Benefits | 666,156 | 35,622,136 | 33,722,904 | | Joo Mi Kim | Vesting Acceleration | — | 16,658,797 | 16,658,797 | | | Cash Severance | 230,305 | 685,609 | — | | | COBRA Payments | 5,305 | 10,609 | — | | | Total Termination Benefits | 235,610 | 17,355,015 | 16,658,797 | | Bruce K. Posey | Vesting Acceleration | — | 10,433,314 | 10,433,314 | | | Cash Severance | 309,808 | 603,078 | — | | | COBRA Payments | 24,808 | 33,078 | — | | | Total Termination Benefits | 334,616 | 11,069,470 | 10,433,314 |
Estimated Payments Upon Termination or Change in Control
| (1) The amounts reported represent the severance and vesting acceleration payments and benefits described above in the section entitled “Potential Payments Upon Termination or Change in Control” as of December 29, 2023 (the last business day of 2023). For RSUs and PRSUs, the value of such vesting acceleration is computed by multiplying (i) the number of shares of our common stock subject to the RSUs or PRSUs that are being accelerated (at target for PRSUs for which a performance period has not been completed) by (ii) the closing sales price per share of our common stock on December 29, 2023 of $196.28. |
CEO Pay Ratio
CEO Pay Ratio Under Item 402(u) of Regulation S-K, we are required to provide the following information regarding the relationship between the annual total compensation of Mr. Thakar, our Chief Executive Officer as of the date we selected to identify the median employee, and the median of the annual total compensation of all our employees (other than Mr. Thakar) for 2023:
CEO Pay Ratio
| 1. | The median of the annual total compensation of our all employees (other than Mr. Thakar) (including our consolidated subsidiaries) was $43,552. |
CEO Pay Ratio
| 2. | Mr. Thakar’s annual total compensation, as reported in the 2023 Summary Compensation Table included in this proxy statement, was $7,783,232. |
CEO Pay Ratio
| 3. | Based on the above, for 2023, the ratio of Mr. Thakar’s annual total compensation to the median of the annual total compensation of all our employees other than Mr. Thakar was approximately 179 to 1. |
CEO Pay Ratio
This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. We determined the median of the annual total compensation of our employees (other than Mr. Thakar) as of December 31, 2023, at which time we (including our consolidated subsidiaries) had 2,188 full-time, part-time, seasonal and temporary employees, 556 of whom are U.S. employees, and 1,632 (or approximately 75% of our total employee population) of whom are located outside of the United States (11 in Australia, 4 in Brazil, 13 in Canada, 1 in Colombia, 1 in the Czech Republic, 31 in France, 20 in Germany, 4 in Hong Kong, 1,440 in India, 10 in Italy, 3 in Japan, 5 in Mexico, 10 in the Netherlands, 2 in the Philippines, 5 in Poland, 6 in Singapore, 1 in South Africa, 8 in Spain, 2 in Saudi Arabia, 9 in the United Arab Emirates, and 46 in the United Kingdom). In accordance with the permitted methodology for determining the “median employee”, we re-identified the “median employee” for 2023 due to a change in our employee population. We excluded all non-U.S. employees (other than those located in France, Germany, India, and the United Kingdom) from our calculations under the de minimis exclusion to the extent the aggregate did not exceed 5% of our total employee population. We did not annualize the compensation of all permanent employees who were new-hires in 2023. We then compared the base salaries paid, bonuses earned, and equity awards granted to our 2,093 employees in the U.S., France, Germany, India, and the United Kingdom (which consisted of 556 U.S. employees and 1,537 non-U.S. employees) in 2023 to determine the median employee. Once we identified our median employee, we calculated the employee’s annual total compensation as though the median employee was reported in the 2023 Summary Compensation Table in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, yielding the median annual total compensation disclosed above. With respect to the annual total compensation of Mr. Thakar, we used the amount reported in the “Total” column in the 2023 Summary Compensation Table included in this proxy statement.
Pay Versus Performance
Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance measures of the Company. For further information concerning the Company’s pay-for-performance philosophy and how executive compensation aligns with the Company’s performance, please see the “ Executive Compensation — Compensation Discussion and Analysis ” section of this proxy statement.
Pay Versus Performance Table
Pay Versus Performance Table
Pay Versus Performance Table
| | | | | | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (4) | Average | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for First PEO (1),(2) | Compensation Actually Paid to First PEO (1),(3) | Summary Compensation Table Total for Second PEO (1),(2) | Compensation Actually Paid to Second PEO (1),(3) | | Compensation Actually Paid to Non-PEO Named Executive Officers (5) | Total Shareholder Return (6) | Peer Group Total Shareholder Return (7) | Net Income (8) (in millions) | Revenues (9) (in millions) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | | 2023 | $— | $— | $7,783,232 | $23,974,241 | $2,503,572 | $4,719,665 | $235.43 | $221.06 | $151.6 | $554.5 | | 2022 | — | — | $11,392,553 | $5,138,863 | $4,444,562 | $2,529,882 | $134.62 | $132.79 | $108.0 | $489.7 | | 2021 | $20,875,111 | $16,450,909 | $9,396,664 | $12,827,121 | $4,140,001 | $5,326,529 | $164.59 | $206.76 | $71.0 | $411.2 | | 2020 | $22,398,351 | $30,358,397 | — | — | $4,516,347 | $5,326,614 | $146.18 | $149.98 | $91.6 | $363.0 |
Pay Versus Performance Table
| (1) The first PEO is Philippe F. Courtot, who served as PEO in 2020 and in 2021 through March 19, 2021. The second PEO is Sumedh S. Thakar, who served as PEO beginning on April 27, 2021 and in 2022 and 2023. |
Pay Versus Performance Table
| (2) Represents the total compensation paid to each of our PEO in each listed year, as shown in our Summary Compensation Table for such listed year. |
Pay Versus Performance Table
| (3) Compensation actually paid does not mean that our PEOs were actually paid those amounts in the listed year, but this is a dollar amount derived by adjusting the Summary Compensation Table total compensation under the methodology prescribed in the relevant rules under Item 402(v) of Regulation S-K, as shown in the following tables: |
Second PEO
| (5) This figure is the average of the “compensation actually paid” for our NEOs other than our PEO in each listed year. “Compensation actually paid” does not mean that these NEOs were actually paid those amounts in the listed year, but this is a dollar amount derived by adjusting the average of the Summary Compensation Table total compensation figure for all NEOs other than our PEO for the listed year under the methodology prescribed under Item 402(v) of Regulation S-K, as shown in the following table: |