DEF 14A of Lovesac Co
Filed Apr 17, 2023 · FY20230001213900-23-030220
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS Lovesac’s business and affairs are managed under the direction of our Board of Directors. The number of Directors is determined by our Board of Directors, subject to the terms of our Amended Certificate and Amended and Restated By-Laws (the “By-Laws”). Our Board of Directors currently consists of eight members and is authorized to have no less than five members nor more than nine members. Each of our Directors serves until the next annual meeting of stockholders and until his or her successor is elected and duly qualified, or until his or her earlier death, resignation or removal. On March 23, 2023, our Board of Directors fixed the number of Directors constituting the full Board at eight members.
Board Composition
Board Composition The Nominating and Governance Committee (the “Nominating Committee”) works with the Board of Directors to determine the appropriate skills and qualifications necessary for Board membership, taking into consideration the Board’s needs at the time. In seeking qualified candidates for Board membership, the Board will consider a variety of factors including professional experience and other individual qualities and characteristics that contribute to a diverse mix of viewpoints and experience represented on the Board.
Required Qualifications for Board Membership
Required Qualifications for Board Membership The Board of Directors and Nominating Committee require all Directors and Director candidates to be of high character and integrity and have the ability to guide our Company based on experience gained in positions as leaders with a high degree of responsibility in the companies with which they are or were affiliated. Each Director and Director candidate must also ensure that other existing and anticipated future commitments do not interfere with his or her service as a Director. In determining whether to recommend a Director for re-election, the Nominating Committee also considers the Director’s past attendance at meetings, participation in and contributions to the activities of the Board and the Company, tenure and other qualifications set forth in the Nominating Committee’s charter or developed and approved by the Nominating Committee.
Key Qualifications and Experience for Board Membership
Key Qualifications and Experience for Board Membership The Board has identified key qualifications and experience that are important to be represented on the Board based on the Company’s current business strategy and future business goals. These qualifications are evaluated regularly and updated to adapt to the evolving needs of the Board and the Company. This list is not exhaustive, but rather represents a summary of the key criteria considered by the Board during the nomination and appointment process.
Key Qualifications and Experience for Board Membership
| | Executive Leadership | Experience leading and building high functioning teams, developing interdisciplinary long-range strategic plans, policy development and people management. | | | Business Operations | Experience with day-to-day operational execution of long-range plans and targets, leading sourcing, distribution and transportation strategy, and developing real estate strategy and assessing and negotiating real estate leases. | | | Marketing and Sales | Experience developing and executing digital marketing strategies, managing the customer experience, brand management, developing sales plans and promotions to meet financial targets, and ecommerce. |
Key Qualifications and Experience for Board Membership
| | Environmental, Social and Governance | Experience in environmental and sustainability practices, fostering diversity and inclusion culture and programs, and providing accountability and transparency and protecting shareholder interests. | | | Technology and Security | Experience in safeguarding the generation, transmission and distribution of digital assets, knowledge and experience in the strategic use and governance of information management and information technology | | | Accounting, Finance and Internal Controls | Experience evaluating financial statements and capital structure, overseeing financial reporting, fundraising across debt/equity markets, investor relations, assessing internal controls and regulatory compliance, and risk valuation and risk management oversight. |
Director Nominees
Director Nominees Shawn Nelson, Andrew R. Heyer, John Grafer, Jack A. Krause, Sharon M. Leite, Walter F. McLallen, Vineet Mehra and Shirley Romig have been nominated for election as Directors to serve until the 2024 Annual Meeting of Stockholders and until their successors are elected and have qualified. All our nominees are current Directors. Each nominee has consented to being named in the Proxy Statement and has agreed to serve as a member of the Board of Directors, if elected. If any of the nominees is unable to serve as a Director, it is intended that the proxy will be voted for the election of such substitute nominee, if any, as shall be designated by the Board of Directors. The Board of Directors has no reason to believe that any of the nominees named below will be unable to serve if elected. The Board of Directors believes that each nominee has valuable skills and experiences that provide us with the knowledge, judgment and strategic vision necessary to provide effective oversight. The biographies below reflect the particular experience, qualifications and skills that led the Board of Directors to conclude that each Director nominee should serve on the Board. There are no family relationships between and among any of our executive officers or Directors. There are no arrangements or understandings between any of our executive officers or Directors and any other person pursuant to which any of them are elected as an officer or Director.
Director Nominees
| | Shawn Nelson | | | | Age: 46 Director since: 2017 Independent: No Committees: None | Skills and Qualifications: We believe Mr. Nelson is qualified to serve on our board because of his leadership experience as our founder, his extensive knowledge of the Company and his service as our Chief Executive Officer. |
Director Nominees
Shawn Nelson founded Lovesac in 1998 and is currently serving as our Chief Executive Officer and as a member of the Board of Directors. Mr. Nelson is the lead designer of the Company’s patented products and directly oversees design, product development, public relations, and investor relations. In 2005, Mr. Nelson won Richard Branson’s “The Rebel Billionaire” on Fox and continues to participate in ongoing TV appearances. Mr. Nelson has a master’s degree in Strategic Design and Management and is a former graduate-level instructor at Parsons, The New School for Design in New York City. Mr. Nelson is also fluent in Chinese with a B.A. in Mandarin from the University of Utah.
Director Nominees
| | Andrew R. Heyer | | | | Age: 65 Director since: 2017 Independent: No Committees: None Designation: Chair of the Board | Skills and Qualifications: We believe Mr. Heyer is qualified to serve on our board because of his extensive experience in private equity investing in the consumer goods industry and his experience on other private and public company boards. |
Director Nominees
Andrew R. Heyer is the Chair of our Board of Directors. Mr. Heyer is a finance professional with over 35 years of experience investing in the consumer and consumer-related products and services industries. He has deployed in excess of $1 billion of capital over that time frame and has guided several public and private companies as a member of their boards of directors. Mr. Heyer is the Chief Executive Officer and Founder of Mistral Equity Partners, a private equity fund manager founded in 2007 that invests in the consumer industry. Prior to founding Mistral, Mr. Heyer served as a Founding Managing Partner of Trimaran Capital Partners. Until 1995, Mr. Heyer was a vice chairman of CIBC World Markets Corp. and a co-head of the CIBC Argosy Merchant Banking Funds. Prior to joining CIBC World Markets Corp., Mr. Heyer was a Founder and Managing Director of The Argosy Group L.P. Prior to joining Argosy, Mr. Heyer was a Managing Director at Drexel Burnham Lambert Incorporated and, prior to that, he worked at Shearson/American Express. Mr. Heyer serves on the boards of directors of several private companies, including Worldwise, a pet accessories business. Other Public Company Directorships: ■ Current: OneSpaWorld Holdings Limited (since 2019); Arko Corp. (since 2020); Tastemaker Acquisition Corp. (since 2021); AF Acquisition Corp. (since 2021); Haymaker Acquisition Corp. III (since 2019); and Biote Inc. (since 2022). ■ Previous (During Past 5 Years): The Hain Celestial Group (2012 – 2019); XpresSpa Group, Inc. (2016 – 2020); and Haymaker Acquisition Corp. (2017 – 2019).
Director Nominees
| | John Grafer | | | | Age: 53 Director since: 2017 Independent: Yes Committees: • Compensation Committee | Skills and Qualifications: We believe Mr. Grafer is qualified to serve on our board because of his substantial experience in private equity investing and investment banking, his accounting expertise and his experience on other company boards. |
Director Nominees
John Grafer is a member of our Board of Directors. Mr. Grafer is a partner at Satori Capital, a multi-strategy alternative investment firm founded on the principles of conscious capitalism. Mr. Grafer is a member of Satori’s investment committee, a board member of Accelerated Learning Solutions, Hobo, SunTree Snack Foods, Formulife, and Zorch International, a former board observer for Aspen Heights, and a former board member of California Products Corporation, Longhorn Health Solutions, and FWT. Prior to joining Satori in 2009, Mr. Grafer was Senior Vice President at Giuliani Partners, a principal investment and consulting firm founded by former New York City Mayor Rudolph W. Giuliani. Prior to joining Giuliani Partners in 2003, Mr. Grafer was a member of the mergers and acquisitions group at Credit Suisse First Boston, a member of the proprietary trading group at J.P. Morgan Chase, and a team member at Ernst & Young, where he earned his C.P.A. Mr. Grafer has also assisted a family office with early-stage investments in sustainably managed companies, including Honest Tea. Mr. Grafer is an elected member of the board of directors and executive committee of Americans For Fair Taxation® (FairTax®) and was formerly a first-round judge for the McCloskey Business Plan competition at the University of Notre Dame. Mr. Grafer received a B.B.A. from the University of Notre Dame and an M.B.A. in Finance from the University of Chicago Booth School of Business.
Director Nominees
| | Jack A. Krause | | | | Age: 60 Director since: 2021 Independent: No Committees: None | Skills and Qualifications: We believe Mr. Krause is qualified to serve on our board because of his extensive brand management and marketing experience, and his deep knowledge of the Company having served as President and Chief Operating Officer from 2015 to 2021. |
Director Nominees
Jack A. Krause is the Chief Strategy Officer of The Lovesac Company and a member of the Board of Directors. Previously, he served as President and Chief Operating Officer of Lovesac from 2015 until November 2021. Prior to Lovesac, Mr. Krause served as President of Vitamin World, a division of NBTY. He also served as Senior Vice-President of Watch Station Global Retail and Skagen from 2011 to 2013. Mr. Krause also held the position of General Manager of Sunglass Hut North America from 2008 to 2010 along with other executive positions at Luxottica. Mr. Krause worked for 11 years at Bath and Body Works in roles of increasing responsibility leading to Senior Vice-President of Brand Development from 2004 to 2006. Prior to that he spent 10 years in brand management at Jergens and Marion Consumer Products. Mr. Krause has a Bachelor of Science in Business Administration from Miami University. Other Public Company Directorships: ■ Current: None. ■ Previous (During Past 5 Years): None.
Director Nominees
| | Sharon M. Leite | | | | Age: 60 Director since: 2021 Independent: Yes Committees: • Audit Committee • Nominating and Governance Committee | Skills and Qualifications: We believe Ms. Leite is qualified to serve on our board because she brings significant general management experience, as well as retail sales, operations, digital, ecommerce, real estate, merchandising and marketing experience. |
Director Nominees
Sharon M. Leite is a member of our Board of Directors. Since January 2023, Ms. Leite has been the Chief Executive Officer and a member of the Board of Directors of Ideal Image. Previously, she was the Chief Executive Officer of The Vitamin Shoppe, Inc., from 2018 to 2023. She also served as President, North America, for Godiva Chocolatier from October 2017 until August 2018. Prior to joining Godiva, from February 2016 until May 2017, Ms. Leite was the President of Sally Beauty — North America (NYSE: SBH), an international specialty retailer and distributor of professional beauty products, with over 3,000 stores. Prior to joining Sally Beauty, from August 2007 until January 2016, Ms. Leite was the Executive Vice President of Sales, Customer Experience and Real Estate at Pier 1 Imports (NYSE: PIR). In addition, Ms. Leite has held various executive leadership roles at Bath and Body Works (L Brands) as well as various sales and operations positions with other prominent retailers including Gap Inc. and The Walt Disney Company. She serves on the boards of the National Retail Federation, Performing Arts Forth Worth and the Neeley School of Business at Texas Christian University. Ms. Leite attended Loyola University, Kent State University and Delgado College and is completing an M.B.A. at The Jack Welch Management Institute. ■ Previous (During Past 5 Years): Tandy Leather Factory, Inc. (2017 – 2022).
Director Nominees
| | Walter F. McLallen | | | | Age: 57 Director since: 2019 Independent: Yes Committees: • Audit Committee, Chair • Compensation Committee, Chair • Nominating and Governance Committee | Skills and Qualifications: We believe Mr. McLallen is qualified to serve on our board due to his extensive consumer products, operational and board experience, as well as his background in finance. |
Director Nominees
Walter F. McLallen is a member of our Board of Directors. Mr. McLallen is a finance professional with over 30 years of leveraged finance, private equity and operations experience. Mr. McLallen has been the Managing Member of Meritage Capital Advisors, an advisory boutique firm focused on debt and private equity transaction origination, structuring and consulting, since 2004. Mr. McLallen has extensive board and organizational experience and has served on numerous corporate and non-profit boards and committees, with a significant historical focus on consumer products-related companies. He also served on the boards of several consumer-focused private companies, including Timeless Wine Company, the producer of consumer luxury wine brands; Worldwise, Inc., a consumer branded pet products company; adMarketplace, a search engine advertiser; and Frontier Dermatology Partners, a dermatology practice management company. Mr. McLallen is the Founder and Co-Chairman of Tomahawk Strategic Solutions, a law enforcement and corporate training and risk management company. From 2006 to 2015, he was Vice Chairman of Remington Outdoor Company, an outdoor consumer platform he co-founded with a major investment firm. Mr. McLallen was formerly with CIBC World Markets from 1995 to 2004, during which time he was a Managing Director, head of Debt Capital Markets and head of High Yield Distribution. Mr. McLallen started his career in the Mergers & Acquisitions Department of Drexel Burnham Lambert and was a founding member of The Argosy Group L.P. Mr. McLallen received a B.A. with a double major in Economics and Finance from the University of Illinois at Urbana-Champaign. Other Public Company Directorships: ■ Current: OneSpaWorld Holdings Limited (since 2017). ■ Previous (During Past 5 Years): Centric Brands Inc. (2016 – 2020); AerCap Holdings N.V. (2015 – 2017); and Haymaker Acquisition Corp. II (2019 – 2020).
Director Nominees
| | Vineet Mehra | | | | Age: 44 Director since: 2022 Independent: Yes Committees: • Audit Committee | Skills and Qualifications: We believe Mr. Mehra is qualified to serve on our board based on his expertise in global marketing strategy, brand development, and deep knowledge of the omni-channel retail and consumer products industries. |
Director Nominees
Vineet Mehra is a member of our Board of Directors. Since June 2022, he has served as the Chief Marketing Officer for Chime, where he oversees all marketing initiatives across the company. Prior to Chime, Vineet was the Chief Growth and Customer Experience Officer of Good Eggs, from 2021 to 2022. From 2019 to 2021, Vineet was the Global Chief Customer and Marketing Officer for Walgreens Boots Alliance (WBA) where he was responsible for laying out the vision and strategic direction for all of WBA’s marketing activities across their full portfolio of Retail and Consumer Brands. From 2017 to 2019, Vineet was the Global Chief Marketing and Revenue Officer for Ancestry.com, the world’s leading Consumer Genomics company, where he was tasked with modernizing the marketing organization, and bringing consumer genomics into the cultural mainstream while owning Ancestry’s worldwide revenue target. Prior to Ancestry, Vineet held key leadership positions at Johnson & Johnson from 2013 to 2017 including Global President - Baby Care where he led their flagship portfolio of brands, and Global President - Marketing Services, where he held responsibility for their Global Media budget and Global Consumer Insights & Analytics. Vineet has received numerous accolades and awards throughout his career. He was named by Forbes as one of the world’s Top 50 CMOs, recognized by AdWeek as one of the Top 20 Tech-Driven CMOs, honored with the Top 40 under 40 award by both Ad Age and P&G’s Alumni Association, Chair of the Jury for the Global Media Awards, and an Invited Speaker at the prestigious Cannes Lions Festival of Creativity. His views and opinions have been quoted in major publications such as the Harvard Business Review, Forbes and Ad Age. ■ Current: AdTheorent (since 2021). ■ Previous (During Past 5 Years): None.
Director Nominees
| | Shirley Romig | | | | Age: 45 Director since: 2019 Independent: Yes Committees: • Nominating and Governance Committee, Chair • Compensation Committee | Skills and Qualifications: We believe Ms. Romig is qualified to serve on our board based on her expertise in ecommerce, digital innovation, corporate strategy and scaling complex retail operations. |
Director Nominees
Shirley Romig is a member of our Board of Directors. Ms. Romig has two decades of experience in operationalizing growth strategies and leading transformational initiatives in complex consumer-oriented and technology organizations. Most recently, Ms. Romig was the Co-Founder and CEO of Mixo Group, a digital creator platform for the $1.7 trillion food market, through December 2022. Prior to that, Ms. Romig was a Vice President with Lyft, leading Global Operations, East and Canada from 2019 to 2022. From 2017 to 2019, Ms. Romig led six lines of businesses at Equinox Fitness Clubs as Group Vice President. From 2016 to 2017, Ms. Romig was the Head of Retail Strategy for SapientRazorfish, a global digital agency. From 2013 to 2015, Ms. Romig was the Senior Vice President of Corporate Strategy with HBC responsible for implementation of growth initiatives across Saks Fifth Avenue, Saks OFF 5th, Lord & Taylor and Hudson’s Bay in Canada. Ms. Romig also served as a Vice President for Saks Incorporated where she led the company’s omnichannel transformation work and launched Saksoff5th.com as well as numerous growth initiatives for Saks.com from 2009 to 2013. Earlier in her career, Ms. Romig worked in equity research and digital and strategy consulting. Ms. Romig holds an M.B.A. from the Darden School of Business and a Bachelor of Science from the McIntire School of Commerce, both at the University of Virginia. Other Public Company Directorships: ■ Current: MamaMancini’s Holdings, Inc. (since 2023). ■ Previous (During Past 5 Years): None. The affirmative vote of a plurality of the votes of the shares present in person, by remote communication or represented by proxy at the Annual Meeting and entitled to vote is required for the election of directors.
Director Nominees
| | THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” ALL EIGHT NOMINEES. |
Considerations in Evaluating Director Nominees
Considerations in Evaluating Director Nominees
Identifying Director Nominees
Identifying Director Nominees The Nominating Committee identifies qualified candidates through a variety of means, including recommendations from members of the Board, suggestions from our management or third-party search firms. Mr. Mehra was recommended to the Nominating Committee as a board candidate by a third-party search firm and appointed to the Board in July 2022. Our Nominating Committee will evaluate candidates that have been duly recommended or nominated by stockholders in accordance with our Amended By-Laws. The criteria the Nominating Committee uses for evaluating a candidate duly recommended or nominated by a stockholder are the same criteria used for evaluating candidates recommended by management or members of our Board of Directors. For more information on the procedures to be followed by stockholders who wish to recommend or nominate individuals to serve on our Board of Directors, see “Other Matters — Stockholder Proposals for Fiscal 2024 Annual Meeting of Stockholders” on page 61.
Director Nominee Qualifications
Director Nominee Qualifications In evaluating director candidates, including the members of the Board eligible for re-election, our Nominating Committee will consider the current size and composition of our Board of Directors, the needs of our Board of Directors and its respective committees, and other factors that the Nominating Committee deems appropriate and in our stockholders’ best interests. The Nominating Committee requires each nominee to satisfy the following minimum qualifications for a position on the Board: ■ The highest level of personal and professional ethics and integrity; ■ Proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment; ■ Skills that are complementary to those of the existing Board; ■ The ability to assist and support management and make significant contributions to the Company’s success; and ■ An understanding of the fiduciary responsibilities that are required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities. Director candidates must have sufficient time available in the judgment of our Nominating Committee to perform all Board of Directors and applicable committee responsibilities. Members of our Board of Directors are expected to prepare for, attend, and participate in all Board of Directors and applicable committee meetings. Our Nominating Committee also considers these and other factors as it oversees the annual Board of Directors evaluations. After completing its review and evaluation of director candidates, our Nominating Committee recommends to our full Board of Directors the director nominees for selection.
Director Compensation
Director Compensation Our non-employee Directors are compensated pursuant to the Company’s Director Compensation Policy which supports the objective of assembling a high-performing Board that can best guide the Company in achieving its strategic and operational goals and promoting long-term stockholder value. Board compensation is reviewed annually by the Compensation Committee to ensure that it continues to satisfy the Board’s overall compensation objectives and philosophy. The Compensation Committee and Nominating Committee are guided in their review by an independent compensation consultant, FW Cook, which provides compensation benchmarking and consultation services using the same peer group that is used for purposes of benchmarking executive compensation. In fiscal 2023, the Board of Directors, upon the recommendation of the Compensation Committee, adjusted the compensation payable to outside Directors following a review of FW Cook’s director compensation benchmarking study. Below is a description of compensation approved by our Directors under the amended Director Compensation Policy effective January 27, 2023 (“Amended DCP”).
Director Compensation Table for Fiscal 2023
Director Compensation Table for Fiscal 2023 The following table provides information on the compensation paid to persons serving as non-employee Directors of our Company for the fiscal year ended January 29, 2023. Mr. Nelson, our CEO, and Mr. Krause, our Chief Strategy Officer, receive no additional compensation for their service as Directors. Mr. Nelson’s and Mr. Krause’s compensation is discussed in the “Compensation Discussion and Analysis” section beginning on page 24.
Director Compensation Table for Fiscal 2023
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | All Other Compensation ($) | Total ($) | | John Grafer | 25,000 | 88,229 | — | 113,229 | | Andrew R. Heyer | 50,000 | 88,229 | — | 138,229 | | Sharon M. Leite | 50,000 | 88,229 | — | 138,229 | | Walter F. McLallen | 43,333 | 88,229 | — | 131,562 | | Vineet Mehra | 50,000 | 138,182 | — | 188,182 | | Shirley Romig | 30,000 | 88,229 | — | 118,229 |
Director Compensation Table for Fiscal 2023
(1) The Fees Earned or Paid in Cash column reflects the fees paid to our Directors for their service for the fiscal year ended January 29, 2023. In June 2022, the Board transitioned from single lump sum to quarterly retainer payments. Amounts shown reflect two quarterly payments made in the second half of fiscal 2023, and no payments in the first half of fiscal 2023. Mr. Heyer, Ms. Leite and Mr. Mehra elected to receive the full value of their cash retainers in the form of a single RSU grant (“RSU Retainer Grant”) in the amounts of 2,028, 1,267 and 1,567 shares, respectively. These RSUs vest in full on the anniversary of the grant date. Mr. Heyer and Ms. Leite elected to defer receipt of their RSU Retainer Grant. (2) The amounts reported represent the aggregate grant date fair value of RSUs awarded to the director calculated in accordance with FASB ASC Topic 718. The methods and assumptions used in calculating the grant date fair value of RSUs reported in this column are set forth in Note 7 of our audited financial statements included in our 2023 Annual Report. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. (3) Reflects the fair value of (a) each Director’s Annual Grant awarded on June 2, 2022 (and July 1, 2022 for Mr. Mehra) which vests in full on the one year anniversary of the grant date; (b) for Mr. Mehra, his Appointment Grant awarded on June 1, 2022, which vests in two equal installments on June 1, 2023 and June 1, 2024. Mr. Heyer and Ms. Leite elected to defer receipt of their Annual Grant. The following table lists all outstanding RSUs (including RSUs for which the payout of shares has been deferred by such Director) held by our non-employee Directors as of January 29, 2023.
Director Compensation Table for Fiscal 2023
| Name | Aggregate Number of Unvested Stock Awards | | John Grafer | 2,408 | | Andrew R. Heyer | 4,435 | | Sharon M. Leite | 4,068 | | Walter F. McLallen | 2,408 | | Vineet Mehra | 6,424 | | Shirley Romig | 2,408 |
Executive Compensation Policies and Practices
| WHAT WE DO | | WHAT WE DON’T DO | | | | Place a significant emphasis on performance-based at-risk long-term incentive compensation | | No repricing of stock option awards without stockholder approval | | | Have 100% independent Directors on our Compensation Committee | | No tax gross-ups at all. | | | Engage an independent compensation consultant that reports to our Compensation Committee | | No post-employment retirement benefits for our NEOs that are not available to all associates | | | Maintain a clawback policy covering incentive compensation | | No executive perquisites offered to our NEOs | | | Maintain robust stock ownership guidelines for executives to ensure alignment with stockholder interests | | Our NEOs are employed “at-will” under their Employment Agreements |
Elements of Compensation
| Component | CEO / COO / CSO(1) | CFO(1) | Description | | Base Salary | | | Fixed compensation for performing day-to-day job responsibilities. Reviewed annually for potential adjustment based on market competitiveness, change in responsibilities and other factors. | | Annual Incentive | | | Annual performance-based award opportunity based on achievements related to Company performance metrics and targets established by the Compensation Committee. | | Long-Term Incentives | | | Equity awards designed to reward executives for strong long-term performance, serve as a retention tool and to align the interests of executives and stockholders. |
Executive Compensation Program Snapshot
| Component | Type | Terms | | Salary | Cash | Fixed amount of compensation, reviewed annually for potential adjustment based on market competitiveness, changes in responsibilities and other factors. | | Annual Incentive | Cash | Annual performance-based award opportunity based on achievements with respect to the Company’s net sales, adjusted EBITDA and customer satisfaction performance. | | Long-Term Incentives | Time-based RSUs | Time-based RSUs vest in three equal installments over three years subject to continued employment through each vesting date. RSUs are payable in shares of Company stock upon vesting. Unvested RSUs are forfeited upon termination from the Company. | | | Performance-based RSUs (PSUs) | Eligible to vest based on the Company’s achievements with respect to net sales and adjusted EBITDA targets pre-established by the Compensation Committee for the applicable performance period, subject to completed employment on the vesting date. Once vested, PSUs are payable in shares of Company stock. Unearned PSUs are forfeited. | | | Long-Term Performance Awards (LTPAs) | Eligible to vest based on the Company’s achievements with respect to stretch net sales and adjusted EBITDA targets pre-established by the Compensation Committee for the applicable performance period, subject to continued employment on the vesting date. Once vested, LTPAs are payable in shares of Company stock. Unearned LTPAs are forfeited. | | Retirement | 401(k) | A qualified safe harbor 401(k) plan that provides participants with the opportunity to defer a portion of their compensation and receive a Company matching contribution equal to 100% of deferrals up to 4% of gross pay. |
Role of the Compensation Committee
Role of the Compensation Committee The Compensation Committee is responsible for establishing, approving and adjusting compensation arrangements for our NEOs, and for reviewing and approving corporate goals and objectives relevant to these compensation arrangements. The Compensation Committee also evaluates the performance of our NEOs taking into consideration achievements relative to the Company’s long-term business and financial goals. The Compensation Committee is comprised of independent Directors and works closely with its independent consultant, FW Cook, and senior executives to assess the effectiveness of the Company’s executive compensation program throughout the year. Compensation decisions for our NEOs were made by the Compensation Committee with input from FW Cook for fiscal 2023. The Compensation Committee reviewed the cash and equity compensation of our NEOs with the goal of ensuring that our executive officers are properly incentivized and made adjustments it determined to be appropriate. The Compensation Committee considers compensation data from our peer group as one of several factors that inform its judgment of appropriate compensation levels. The Compensation Committee also considers other factors in determining compensation including those set forth below, and may pay up to the 75th percentile of our peer group in target total direct compensation: ▪ The performance and experience of each NEO; ▪ The scope and strategic impact of the NEO’s responsibilities; ▪ Our past business performance and future expectations; ▪ Our long-term goals and strategies; ▪ The difficulty and cost of replacing high-performing leaders with in-demand skills; and ▪ The relative compensation among our NEOs.
Role of the Compensation Consultant
Role of the Compensation Consultant The Compensation Committee has the authority to retain the services of external advisors, including compensation consultants, legal counsel and other advisors, as needed to carry out its duties. The Compensation Committee engaged FW Cook to assist in guiding and executing our executive and director compensation strategy, assessing the target total direct compensation opportunities of our executive officers relative to market practices, developing a compensation peer group and advising on executive compensation decisions for fiscal 2023. FW Cook does not provide any services to us other than the services provided to the Compensation Committee. Our Compensation Committee has assessed the independence of FW Cook and has concluded that no conflict of interest exists with respect to the work that FW Cook performs for the Compensation Committee.
Compensation Peer Group
Compensation Peer Group The Compensation Committee reviews market data of companies that we believe are comparable to us. The Compensation Committee, with assistance from FW Cook, determined our peer group for fiscal 2023 based on several factors, including industry classification, company size, and other qualitative and business-related factors. Each year, the Compensation Committee examines our compensation peer group to ensure that it continues to reflect these factors and will make adjustments as needed. Our peer group for fiscal 2023 compensation decisions consisted of 17 companies the majority of which are consumer goods companies. The Compensation Committee referred to compensation data from this peer group when making base salary, annual incentive award and long-term incentive award decisions for our NEOs. The following is a list of the companies that comprised our fiscal 2023 peer group.
Compensation Peer Group
| ▪ | Boot Barn Holdings, Inc. | ▪ | GrowGeneration Corp. | ▪ | Oxford Industries, Inc. | | ▪ | CarParts.com, Inc. | ▪ | Inter Parfums, Inc. | ▪ | Purple Innovation, Inc. | | ▪ | Casper Sleep Inc. | ▪ | Johnson Outdoors, Inc. | ▪ | Rocky Brands, Inc. | | ▪ | Clarus Corporation | ▪ | Liquidity Services, Inc. | ▪ | The RealReal, Inc. | | ▪ | e.l.f. Beauty, Inc. | ▪ | Mohawk Group Holdings, Inc. | ▪ | XPEL, Inc. | | ▪ | GoPro, Inc. | ▪ | Nautilus, Inc. | | |
Annual Incentive Plan (AIP) Compensation
Annual Incentive Plan (AIP) Compensation A significant portion of each NEO’s compensation is tied to Company performance. We provide for annual performance-based cash incentive opportunities for our NEOs (“AIP Award”) based on achievements relative to Company financial and strategic objectives. Target AIP Award levels are based on a percentage of our NEOs’ base salaries at the conclusion of the applicable performance year and are informed by market data and Compensation Committee judgment. Actual award amounts are based on achievement relative to threshold, target, stretch and maximum performance goals established by the Compensation Committee. Performance is measured at the end of the fiscal year and actual payouts made relative to each NEO’s target AIP Award opportunity as shown in the following table:
Annual Incentive Plan (AIP) Compensation
| | AIP Payout Levels based on Performance Levels(1)(2) | | | | | | | | | | Threshold | | Target | | Stretch | | Maximum | | | Name | Performance | Payout | Performance | Payout | Performance | Payout | Performance | Payout | | Shawn Nelson | | $133,530 | | $267,060 | | $400,590 | | $534,120 | | Mary Fox | 50% of target | $133,530 | 100% of target | $267,060 | 150% of target | $400,590 | 200% of target | $534,120 | | Jack Krause | | $133,530 | | $267,060 | | $400,590 | | $534,120 | | Donna Dellomo | | $104,175 | | $208,350 | | $312,525 | | $416,700 |
Annual Incentive Plan (AIP) Compensation
(1) Threshold performance results in a payout of 30% of base salary for Mr. Nelson, Ms. Fox and Mr. Krause, and a payout of 25% of base salary for Ms. Dellomo. Target performance results in a payout of 60% of base salary for Mr. Nelson, Mr. Fox and Mr. Krause, and 50% of base salary for Ms. Dellomo. Stretch performance results in payout of 90% of base salary for Mr. Nelson, Ms. Fox and Mr. Krause, and 75% of base salary for Ms. Dellomo. Maximum performance results in payout capped at 120% of base salary for Mr. Nelson, Ms. Fox and Mr. Krause, and 100% of base salary for Ms. Dellomo. Target levels as a percentage of base salary remain unchanged from the prior fiscal year.
Fiscal 2023 AIP Awards
Fiscal 2023 AIP Awards
Company Performance Metrics
Company Performance Metrics For fiscal 2023 AIP Awards, the Compensation Committee selected metrics and weightings that balance a growth measure (net sales) and a profitability-related measure (adjusted EBITDA). In addition, to drive strong customer service the Company established targets for post-purchase customer satisfaction (“CSAT”) survey results as a condition to maximum payout eligibility under the 2023 AIP. If CSAT is not attained, the maximum payout is 180% of target. The performance targets for each metric are based on Company operating and financial plans and other factors. During fiscal 2023, the Company exceeded net sales performance targets and achieved a 112% payout on the net sales metric. Adjusted EBITDA performance, however, was negatively impacted by unplanned and extraordinary freight costs which resulted in a 790 basis point increase on cost of sales. There was also a substantial decline in the home furnishing category due to inflation and other external factors that led to a decrease in discretionary consumer spending and overall demand. These factors, all of which were generally outside the control of the Company, adversely impacted the adjusted EBITDA AIP performance results. The Compensation Committee carefully considered these factors, the impact the AIP payouts might have on the Company’s ability to retain and reward employees necessary to achieve the Company’s financial and strategic goals, and the Company’s record net sales and outperformance relative to industry peers despite significant market headwinds. Accordingly, the Compensation Committee, as permitted under the provisions of the 2023 AIP, determined that it was appropriate to exclude the impact of unplanned and extraordinary freight costs of at least $11 million from adjusted EBITDA resulting in performance of $71.3 million and achievement of a 106% payout on the adjusted EBITDA metric. The Committee then applied negative discretion to decrease the weighted net sales and adjusted EBITDA payout percentage to target level (100%), which is the overall payout level it felt was appropriate for performance in 2023. The amounts shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 37 reflect this level of performance.
Company Performance Metrics
| Metrics | Weight | Performance Levels (rounded) | | | Results | Weighted Payout Percent | | Net Sales | 40% | Threshold: | $630M = | 50% | $651.5M | 112% | | (Growth measure) | | Target: | $642M = | 100% | | | | | | Stretch: | $682M = | 150% | | | | | | Maximum: | $721M = | 200% | | | | Adjusted EBITDA(1) | 40% | Threshold: | $68M = | 50% | $71.3M | 106% | | (Profitability-related measure) | | Target: | $70M = | 100% | | | | | | Stretch: | $76M = | 150% | | | | | | Maximum: | $83M = | 200% | | | | CSAT(2) | 20% | Target: | 83.5% | | 84.2% | Not applicable | | (Customer satisfaction measure) | | | | | | | | Total Payout Percent | | | | | | 109% | | Adjusted Payout Percent | | | | | | 100% |
Company Performance Metrics
(1) Adjusted EBITDA is a non-GAAP measure. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement. As discussed above and permitted under the 2017 Equity Plan, the adjusted EBITDA results shown in this table reflect an adjustment from actual adjusted EBITDA results reported in the Company’s Form 10-K for the fiscal year ended January 29, 2023. (2) Achievement of CSAT targets is a condition to maximum payout. Committee discretion applied.
Mary Fox Fiscal 2023 Performance Bonus
Mary Fox Fiscal 2023 Performance Bonus In connection with her appointment to the role of President and Chief Operating Officer in November 2021, in addition to her AIP Award discussed below, Ms. Fox was eligible to receive an additional performance bonus of up to $400,000 (“Additional Bonus”) for fiscal 2023 payable under the AIP. The Additional Bonus was payable in two installments, with 60% of the Additional Bonus payable upon certification of the performance results following the conclusion of the third quarter of fiscal 2023 based on annual operating plan targets for fiscal 2023, and the remaining 40% payable upon certification of performance results following the conclusion of the fourth quarter of fiscal 2023 based on the annual operating plan targets for net sales and adjusted EBITDA, and with the ability to true-up the payment of the third quarter installment based on performance for the fourth quarter of fiscal 2023 to the extent that the third quarter targets were not then met. The Company achieved its net sales and adjusted EBITDA operating plan targets for the third quarter of fiscal 2023 earning Ms. Fox 60%, or $240,000, of her Additional Bonus. As discussed in the Fiscal 2023 AIP Awards section above, for the fourth quarter and fiscal year ended January 29, 2023, the Company exceeded net sales performance targets, but was negatively impacted by unplanned and extraordinary freight costs which resulted in performance below adjusted EBITDA targets. Consistent with its analysis and considerations made with respect to fiscal 2023 AIP Awards, the Compensation Committee, as permitted under the provisions of the 2023 AIP, determined it was appropriate to exclude the impact of unplanned and extraordinary freight costs from adjusted EBITDA which resulted in Ms. Fox earning 40%, or $160,000, of her Additional Bonus. The full value of 100% of Ms. Fox’s Additional Bonus is included in the Summary Compensation Table on page 37.
Long-Term Incentive Compensation
Long-Term Incentive Compensation To encourage a strong focus on long-term performance, our Compensation Committee grants our NEOs stock-based awards, the value of which depends on our stock performance and other performance measures. The Compensation Committee generally awards long-term incentive compensation in the form of time-based RSUs, and performance-based PSUs and LTPAs. Long-term incentive awards are generally granted to our NEOs annually and grant amounts are determined based on various factors including Company performance and market practices. In fiscal 2023, the Compensation Committee awarded long-term incentives to the NEOs under our 2017 Equity Plan in the form of RSUs, PSUs, and LTPAs weighted approximately 15%, 15% and 70%, respectively, of each NEO’s total long-term incentive target award value. The Compensation Committee selected this award mix to emphasize incentive award opportunities that are contingent upon both strong performance and retention. Target award values for RSUs, PSUs and LTPAs were determined based on peer group data provided by FW Cook. The following table shows the long-term incentive target award values for fiscal 2023 for each of the NEOs:
Long-Term Incentive Compensation
| FISCAL 2023 LONG-TERM INCENTIVE TARGET VALUES | RSU ($) | PSU ($) | LTPA ($) | Total Value ($) | | Shawn Nelson | 382,500 | 382,500 | 1,649,000 | 2,414,000 | | Mary Fox | 382,500 | 382,500 | 1,649,000 | 2,414,000 | | Jack Krause | 382,500 | 382,500 | 735,000 | 1,500,000 | | Donna Dellomo | 145,500 | 145,500 | 420,000 | 711,000 |
Long-Term Incentive Compensation
Actual RSU and PSU share amounts are determined by dividing the target award values by the average closing price of a share of the Company’s common stock for the 30-day trading period prior to the date of grant.
Fiscal 2023 PSU and RSU Awards
Fiscal 2023 PSU and RSU Awards PSUs. The Compensation Committee grants performance-based awards to align executive compensation with stockholder interests. PSU awards are granted to our NEOs and can be earned based on achievement of predefined Company performance metrics and targets measured and certified by the Compensation Committee at the end of three consecutive 12-month performance periods. The Compensation Committee sets performance targets at the beginning of each 12-month performance period and the performance targets may change from year to year. NEOs can earn 50% of their target award for achieving 90% of the performance targets, and up to 100% of their target award for performance above 90% of such targets. There is no payout for performance below 90% of the performance targets. Once earned, PSUs are paid in shares of Company stock. If the PSU performance targets are met for a given 12-month performance period, one-third of the target PSU award will be paid out to the NEO on the applicable anniversary of the grant date provided that the NEO is employed by the Company on the payout date. If the PSU performance targets are not met for the first or second 12-month performance period, then such unearned PSUs (representing one-third of the target award) will be eligible to vest if the Company’s performance at the end of the next fiscal year exceeds the aggregate of the performance targets for the current fiscal year plus the prior fiscal year. Unearned PSUs may be carried forward only one year in this manner and may only be carried forward twice during the three-year term of the PSU award. ▪ Fiscal 2023 PSUs. In fiscal 2023, one-third of target PSUs could be earned by our NEOs based on Company performance relative to the same net sales and adjusted EBITDA performance targets established for the fiscal 2023 AIP Awards for the 12-month performance period ending January 29, 2023 (“Fiscal 2023 PSUs”). During fiscal 2023, the Company exceeded net sales performance targets and achieved a 100% payout on the net sales metric. Adjusted EBITDA performance, however, was negatively impacted by unplanned and extraordinary freight costs as discussed in the AIP Award section on page 30. There was also a substantial decline in the home furnishing category due to inflation and other external factors that led to a decrease in discretionary consumer spending and overall demand. These factors, all of which were generally outside the control of the Company, adversely impacted the adjusted EBITDA PSU performance results. The Compensation Committee carefully considered these factors, the impact the PSU payouts might have on the Company’s ability to retain and reward employees necessary to achieve the Company’s financial and strategic goals, and the Company’s record net sales and outperformance relative to industry peers despite significant market headwinds. Accordingly, the Compensation Committee, as permitted under the provisions of the 2017 Equity Plan, determined that it was appropriate to exclude the impact of unplanned and extraordinary freight costs of at least $11 million from adjusted EBITDA resulting in performance of $71.3 million and achievement of a 100% payout on the adjusted EBITDA metric. Based on the performance ranges and results shown in the table below, the Company exceeded both the net sales and adjusted EBITDA performance targets earning the NEOs one-third of their target Fiscal 2023 PSUs as follows: Mr. Nelson — 2,772 shares, Ms. Fox — 2,772 shares, Mr. Krause — 2,772 shares, and Ms. Dellomo — 1,054 shares.
Fiscal 2023 PSU and RSU Awards
| Metrics | Weight | Performance Ranges | | | Results | Payout Percent | | Net Sales | 50% | Threshold: | $630M = | 50% | $651.5M | 50% | | (Growth measure) | | Target: | $642M = | 100% | | | | Adjusted EBITDA(1) | 50% | Threshold: | $68M = | 50% | $71.3M | 50% | | (Profitability measure) | | Target: | $70M = | 100% | | | | Total Payout Percent | | | | | | 100% |
Fiscal 2023 PSU and RSU Awards
(1) Adjusted EBITDA is a non-GAAP measure. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement. As discussed above and permitted under the 2017 Equity Plan, the adjusted EBITDA results shown in this table reflect an adjustment from actual adjusted EBITDA results reported in the Company’s Form 10-K for the fiscal year ended January 29, 2023. ▪ Fiscal 2022 PSUs. On June 7, 2021, Mr. Nelson, Mr. Krause and Ms. Dellomo were granted PSUs and on November 18, 2021, Ms. Fox was granted PSUs (the “Fiscal 2022 PSUs”). The Compensation Committee applied the same metrics and targets used for the Fiscal 2023 PSUs (see table above) to the second performance period of the Fiscal 2022 PSU grant earning the NEOs one-third of their target Fiscal 2022 PSUs as follows: Mr. Nelson — 1,457 shares, Ms. Fox — 2,416 shares, Mr. Krause — 1,457 shares and Ms. Dellomo — 555 shares. ▪ Fiscal 2021 PSUs. On June 5, 2020, Mr. Nelson, Mr. Krause and Ms. Dellomo were granted PSUs (the “Fiscal 2021 PSUs”). The Compensation Committee applied the same metrics and targets used for the Fiscal 2023 PSUs (see table above) to the third performance period of the Fiscal 2021 PSU grant earning the NEOs one third of their target Fiscal 2021 PSUs as follows: Mr. Nelson — 7,145 shares, Mr. Krause — 7,145 shares, and Ms. Dellomo — 2,723 shares. ▪ Fiscal 2021 PSU2s. The Compensation Committee granted PSUs to Mr. Nelson, Mr. Krause and Ms. Dellomo that vest, if the Company achieves $550 million in net sales and $50 million in adjusted EBITDA over a four-year performance period ending in fiscal 2024 (“Fiscal 2021 PSU2s”). Fiscal 2021 PSU2s vest in the fiscal year in which the Company achieves both the net sales and adjusted EBITDA targets but no later than June 5, 2024. Once earned, Fiscal 2021 PSU2s are payable in the year earned. If both targets are not achieved Fiscal 2021 PSU2s are forfeited. Based on Company net sales performance of $651.5 million and adjusted EBITDA performance of $60.3 million, Mr. Nelson, Mr. Krause and Ms. Dellomo earned their target Fiscal 2021 PSU2s as follows: Mr. Nelson — 24,759 shares, Mr. Krause — 24,759 shares, and Ms. Dellomo 23,212 shares. Long-Term Performance Awards. In fiscal 2023, the Compensation Committee introduced long-term performance awards (“LTPAs”) to reward strong Company and individual performance and to serve as a retention tool. LTPAs are denominated in performance-based restricted stock units of which 100% may be earned by the NEOs based on performance relative to stretch targets established by the Committee for a designated performance period. Once earned, LTPA’s are payable in a single tranche following the fiscal year in which the performance levels were achieved. If the performance targets are not achieved, no LTPAs will be paid. Since they are earned for stretch performance, the LTPA grants may be granted up to an amount that would bring the executive’s target total direct compensation opportunity to the 75th percentile of the Company’s peer group. On April 15, 2022, the Compensation Committee granted LTPAs (“Fiscal 2023 LTPAs”) to the NEOs that vest upon achievement of stretch net sales and adjusted EBITDA targets designed to award accelerated performance over a three-year performance period ending in fiscal 2025. Fiscal 2023 LTPAs vest in the fiscal year in which the Company achieves both the net sales and adjusted EBITDA targets but no later than April 25, 2025. RSUs. RSUs provide incentives for executives to remain employed by the Company to execute the Company’s long-term strategic goals. The Compensation Committee believes that RSUs tie compensation to Company performance, given that the value of an RSU can increase or decrease with our stock price. Generally, RSUs vest in three equal annual installments on each of the first three anniversaries of the grant date. Vested shares are settled in common stock on each vest date provided that the executive remains employed by the Company on such date.
Fiscal 2020 Performance Stock Options
Fiscal 2020 Performance Stock Options On June 5, 2019, Mr. Nelson, Mr. Krause and Ms. Dellomo were awarded performance stock options that were eligible to vest on the third anniversary of the grant date if the average closing price of Company stock was at least $75 for 40 consecutive trading days (“Market Condition”) during the period beginning on the date of grant and ending on June 5, 2022, subject to continued service with the Company (“Employment Condition”). On June 5, 2021, the Market Condition was satisfied. On June 5, 2022, the Employment Conditions were satisfied, and the options became fully vested and exercisable. Stock options provide the opportunity to receive any appreciation in value between the stock price on the date of grant and the date the option is exercised.
Post-Employment Agreements
Post-Employment Agreements For a description of the material terms of each contract, agreement, plan or arrangement that provides for payment(s) to a named executive officer at, following, or in connection with the resignation or other termination of a named executive officer, or a change in control, see the section entitled “Executive Employment Arrangements” beginning on page 41.
Summary Compensation Table
Summary Compensation Table The following Summary Compensation Table summarizes the total compensation paid to or earned by each of our named executive officers for services provided to the Company for fiscal 2023.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | | Shawn Nelson | 2023 | 440,229 | — | 2,472,858 | — | 267,060 | 24,536 | 3,204,682 | | Chief Executive | 2022 | 405,450 | — | 732,744 | — | 489,060 | 12,842 | 1,640,096 | | Officer | 2021 | 341,847 | — | 1,266,865 | 582,677 | 408,000 | 10,914 | 2,610,303 | | Mary Fox | 2023 | 440,404 | — | 2,472,858 | — | 667,060 | 12,227 | 3,592,548 | | President and Chief | 2022 | 72,692 | 500,000 | 1,640,839 | — | 489,060 | 768 | 2,703,359 | | Operating Officer | | — | — | — | — | — | — | — | | Jack Krause | 2023 | 440,229 | — | 1,537,620 | — | 267,060 | 24,536 | 2,269,444 | | Chief Strategy | 2022 | 405,450 | — | 732,744 | — | 489,060 | 12,462 | 1,639,716 | | Officer | 2021 | 341,847 | — | 1,266,865 | 194,222 | 408,000 | 10,914 | 2,221,848 | | Donna Dellomo | 2023 | 412,304 | — | 727,391 | — | 208,350 | 23,891 | 1,371,936 | | EVP and Chief | 2022 | 380,109 | — | 279,188 | — | 381,544 | 10,735 | 1,051,576 | | Financial Officer | 2021 | 320,478 | — | 762,092 | 97,112 | 382,500 | 11,444 | 1,573,626 |
Summary Compensation Table
(1) The Salary column reflects base salaries paid during the years shown. (2) The Stock Awards column reflects the grant date fair value of RSUs, PSUs and LTPAs as computed in accordance with FASB ASC Topic 718. The methods and assumptions used to calculate these amounts are discussed in Note 7 to our financial statements included in our 2023 Annual Report for the fiscal year ended January 29, 2023. The aggregate grant date fair value for each type of award assumes the satisfaction of all relevant conditions. If the Company were to meet its performance targets the maximum payout for PSUs and LTPAs is 100% of target. (3) The Non-Equity Incentive Plan Compensation column reflects payments earned under the Company’s AIP based on performance relative to net sales, adjusted EBITDA and CSAT targets established by the Compensation Committee for the 12- month performance period ended January 29, 2023. For Ms. Fox, also includes the payment of a $400,000 Additional Bonus, as further described on page 31 for achievement of 100% of the net sales and adjusted EBITDA performance targets established for the third and fourth quarters of fiscal 2023. (4) Amounts shown include 401(k) matching contributions and for Mr. Nelson, Mr. Krause and Ms. Dellomo, a payment of $12,308, $12,308 and $11,538, respectively, to adjust for base salary underpayments in fiscal 2021 that were paid in fiscal 2023.
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(6) | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Shawn Nelson | | | | | | | | | | | AIP | | 133,530 | 267,060 | 534,120 | — | — | — | — | — | | RSU(2) | 04/15/2022 | — | — | — | — | — | — | 8,316 | 391,850 | | PSU(3) | 04/15/2022 | — | — | — | 4,158 | 8,316 | — | — | 391,850 | | LTPA(4) | 04/15/2022 | — | — | — | — | 35,848 | — | — | 1,689,158 | | Mary Fox | | | | | | | | | | | AIP | | 133,530 | 267,060 | 534,120 | — | — | — | — | — | | AIP2(5) | | — | 400,000 | — | — | — | — | — | — | | RSU(2) | 04/15/2022 | — | — | — | — | — | — | 8,316 | 391,850 | | PSU(3) | 04/15/2022 | — | — | — | 4,158 | 8,316 | — | — | 391,850 | | LTPA(4) | 04/15/2022 | — | — | — | — | 35,848 | — | — | 1,689,158 | | Jack Krause | | | | | | | | | | | AIP | | 133,530 | 267,060 | 534,120 | — | — | — | — | — | | RSU(2) | 04/15/2022 | — | — | — | — | — | — | 8,316 | 391,850 | | PSU(3) | 04/15/2022 | — | — | — | 4,158 | 8,316 | — | — | 391,850 | | LTPA(4) | 04/15/2022 | — | — | — | — | 16,000 | — | — | 753,920 | | Donna Dellomo | | | | | | | | | | | AIP | | 104,030 | 208,350 | 416,700 | — | — | — | — | — | | RSU(2) | 04/15/2022 | — | — | — | — | — | — | 3,164 | 149,088 | | PSU(3) | 04/15/2022 | — | — | — | 1,582 | 3,164 | — | — | 149,088 | | LTPA(4) | 04/15/2022 | — | — | — | — | 9,109 | — | — | 429,216 |
Grants of Plan-Based Awards
(1) NEOs can earn AIP Awards between 0% and 200% of target based on net sales, adjusted EBITDA and CSAT performance relative to targets pre-established by the Compensation Committee. Performance is measured at the end of a 12-month performance period ending January 29, 2023. (2) Reflects RSUs that vest in three equal annual installments on each of the first, second, and third anniversaries of the grant date, subject to continued service with the Company through the vesting date. (3) Reflects PSUs that may be earned based on achievements relative to net sales and adjusted EBITDA performance targets pre-established by the Compensation Committee. NEOs are eligible to earn between 50% and 100% of their target award. PSUs are payable in shares of the Company’s common stock, subject to continued service with the Company through the vesting date. See the section “Fiscal 2023 PSU and RSU Awards” on page 32 for additional information. (4) Reflects LTPAs that may be earned based on achievements relative to stretch net sales and adjusted EBITDA performance targets pre-established by the Compensation Committee. NEOs are eligible to earn 100% of their target award. LTPAs are payable in shares of the Company’s common stock, subject to continued service with the Company through the vesting date. See the section “Long-Term Performance Awards” on page 33 for additional information. (5) In connection with her appointment as President and Chief Operating Officer of the Company in November 2021, Ms. Fox was eligible to earn a $400,000 Additional Bonus, as further described on page 31 for achievement of 100% of the net sales and adjusted EBITDA performance targets established for the third and fourth quarters of fiscal 2023. (6) Reflects the grant date fair value of awards computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the awards reported, see Note 7 to the Company’s financial statements in the Company’s 2023 Annual Report for the fiscal year ended January 29, 2023.
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth for each Named Executive Officer certain information concerning their outstanding equity awards as of the fiscal year ended January 29, 2023.
Outstanding Equity Awards at Fiscal Year-End
| | | Option Awards | | | | | Stock Awards | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested(2) (#) | Market Value of Shares of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(7) | | Shawn Nelson | 06/05/2019 | 330,244 | — | 38.10 | 06/05/2029 | — | — | — | — | | | 06/05/2020 | — | — | — | — | 7,146 | 185,582 | 7,145(4) | 185,556 | | | 06/05/2020 | — | — | — | — | — | — | 24,759(5) | 642,991 | | | 06/07/2021 | — | — | — | — | 2,916 | 75,729 | 2,915(4) | 75,703 | | | 04/15/2022 | — | — | — | — | 8,316 | 215,967 | 8,316(4) | 215,967 | | | 04/15/2022 | — | — | — | — | — | — | 35,848(6) | 930,973 | | Mary Fox | 11/18/2021 | — | — | — | — | 7,249 | 188,257 | 7,248(4) | 188,231 | | | 04/15/2022 | — | — | — | — | 8,316 | 215,967 | 8,316(4) | 215,967 | | | 04/15/2022 | — | — | — | — | — | — | 35,848(6) | 930,973 | | Jack Krause | 06/05/2019 | 110,081 | — | 38.10 | 06/05/2029 | — | — | — | — | | | 06/05/2020 | — | — | — | — | 7,146 | 185,582 | 7,145(4) | 185,556 | | | 06/05/2020 | — | — | — | — | — | — | 24,759(5) | 642,991 | | | 06/07/2021 | — | — | — | — | 2,916 | 75,729 | 2,915(4) | 75,703 | | | 04/15/2022 | — | — | — | — | 8,316 | 215,967 | 8,316(4) | 215,967 | | | 04/15/2022 | — | — | — | — | — | — | 16,000(6) | 415,520 | | Donna Dellomo | 06/05/2019 | 55,041 | — | 38.10 | 06/05/2029 | — | — | — | — | | | 06/05/2020 | — | — | — | — | 2,722 | 70,690 | 2,723(4) | 70,716 | | | 06/05/2020 | — | — | — | — | — | — | 23,212(5) | 602,816 | | | 06/07/2021 | — | — | — | — | 1,111 | 28,853 | 1,111(4) | 28,853 | | | 04/15/2022 | — | — | — | — | 3,164 | 82,169 | 3,164(4) | 82,169 | | | 04/15/2022 | — | — | — | — | — | — | 9,109(6) | 236,561 |
Outstanding Equity Awards at Fiscal Year-End
(1) Reflects performance stock options granted on the date shown which vest on the third anniversary of the grant date if the average closing price of the Company’s common stock has been at least $75 for 40 consecutive trading days during the period beginning on the date of grant and ending on the third anniversary of the grant date, subject to continued service with the Company. On June 5, 2021, the Market Condition was satisfied. On June 5, 2022, the Employment Condition was satisfied and the options fully vested and became exercisable. See the discussion on page 34 for more information on performance stock options. (2) Reflects RSUs which vest in three equal annual installments (and four annual installments for Ms. Fox’s November 18, 2021 Appointment Grant only) on the anniversary of the grant date subject to continued service with the Company through the vesting dates. (3) Reflects the market value of the shares underlying RSUs that have not vested as of the fiscal year ended January 29, 2023, based on the closing price of our common stock of $25.97 per share on January 27, 2023, the last trading day of fiscal 2023. (4) Reflects Fiscal 2021 PSUs (third tranche), Fiscal 2022 PSUs (second and third tranches) and Fiscal 2023 PSUs (first, second and third tranches) which may be earned based on the Company’s performance relative to pre-established metrics and targets set by the Compensation Committee for three consecutive 12-month performance periods. See the discussion on page 32 for more information on PSU awards. (5) Reflects Fiscal 2021 PSU2s which may be earned based on the Company’s performance relative to stretch net sales and adjusted EBITDA targets over a four-year performance period ending in fiscal 2024. See the discussion on page 32 for more information on PSU awards. (6) Reflects Fiscal 2023 LTPAs which may be earned based on the Company’s performance relative to stretch net sales and adjusted EBITDA targets over a three-year performance period ending in fiscal 2025. See the discussion on page 33 for more information on LTPA awards. (7) Reflects the market value of the shares underlying Fiscal 2021 PSUs, Fiscal 2021 PSU2s, Fiscal 2022 PSUs, Fiscal 2023 PSUs, and LTPAs, as applicable, as of the fiscal year ended January 29, 2023, assuming performance at target, and based on the closing price of our common stock of $25.97 per share on January 27, 2023, the last trading day of fiscal 2023.
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table provides information on stock options exercised and stock awards that vested for the NEOs in fiscal 2023.
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards(1) | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Shawn Nelson | — | — | 22,540 | 824,134 | | Mary Fox | — | — | 7,245 | 217,161 | | Jack Krause | — | — | 22,540 | 824,134 | | Donna Dellomo | — | — | 8,655 | 316,441 |
Option Exercises and Stock Vested
(1) The following table provides details of the stock awards that vested during fiscal 2023:
Option Exercises and Stock Vested
| Name | Vesting Date | Number of Shares Acquired (#) | Value Realized on Vesting ($) | Stock Price on Vesting Date ($) | Award Description | | Shawn Nelson | 06/05/2022 | 9,813 | 356,703 | 36.35 | PSU | | | 06/05/2022 | 9,813 | 356,703 | 36.35 | RSU | | | 06/07/2022 | 1,457 | 55,366 | 38.00 | PSU | | | 06/07/2022 | 1,457 | 55,366 | 38.00 | RSU | | Mary Fox | 02/25/2022 | 1,168 | 48,857 | 41.83 | RSU | | | 06/07/2022 | 1,245 | 47,310 | 38.00 | RSU | | | 11/18/2022 | 2,416 | 60,497 | 25.04 | PSU | | | 11/18/2022 | 2,416 | 60,497 | 25.04 | RSU | | Jack Krause | 06/05/2022 | 9,813 | 356,703 | 36.35 | PSU | | | 06/05/2022 | 9,813 | 356,703 | 36.35 | RSU | | | 06/07/2022 | 1,457 | 55,366 | 38.00 | PSU | | | 06/07/2022 | 1,457 | 55,366 | 38.00 | RSU | | Donna Dellomo | 06/05/2022 | 3,772 | 137,112 | 36.35 | PSU | | | 06/05/2022 | 3,773 | 137,149 | 36.35 | RSU | | | 06/07/2022 | 555 | 21,090 | 38.00 | PSU | | | 06/07/2022 | 555 | 21,090 | 38.00 | RSU |
Potential Payments Upon Termination of Employment or Change in Control
Potential Payments Upon Termination of Employment or Change in Control The table below shows potential payments to our NEOs in the event of their termination of employment by the Company without cause, termination by the executive for good reason, and termination due to disability or in connection with a change in control. The payments and benefits extended to the NEOs upon each of these termination scenarios are payable pursuant to the terms of each of their Employment Agreements, the 2017 Equity Plan and related award agreements. The table below assumes the following: ▪ Termination of employment, change of control or Existing Investor Asset Disposal, as applicable, occurred on January 29, 2023, the last day of fiscal 2023; ▪ The Company performed at target levels for purposes of calculating the AIP Award and equity awards; and ▪ The NEOs elected COBRA benefits for the maximum time period allowed under their Employment Agreements.
Potential Payments Upon Termination of Employment or Change in Control
| Name | Disability ($) | Termination of NEO Without Cause or by Executive for Good Reason ($) | Termination of NEO Without Cause or by NEO for Good Reason following Change in Control or Existing Investor Asset Disposal(1) | | Shawn Nelson | | | | | Cash Severance | 148,367 | 890,200 | 890,200 | | AIP Award | — | 267,060 | 267,060 | | Health and Life Benefits | — | 60,241 | 60,241 | | Equity | — | 1,597,493 | 2,528,465 | | TOTAL | 148,367 | 2,814,994 | 3,745,966 | | Mary Fox | | | | | Cash Severance | 148,367 | 445,100 | 445,100 | | AIP Award | — | 267,060 | 267,060 | | Health and Life Benefits | — | 24,435 | 24,435 | | Equity | — | 808,420 | 1,739,393 | | TOTAL | 148,367 | 1,545,015 | 2,475,988 | | Jack Krause | | | | | Cash Severance | 148,367 | 445,100 | 445,100 | | AIP Award | — | 267,060 | 267,060 | | Health and Life Benefits | — | 26,561 | 26,561 | | Equity | — | 1,597,493 | 2,013,013 | | TOTAL | 148,367 | 2,336,214 | 2,751,734 | | Donna Dellomo | | | | | Cash Severance | 138,900 | 416,700 | 416,700 | | AIP Award | — | 208,350 | 208,350 | | Health and Life Benefits | — | 20,523 | 20,523 | | Equity | — | 966,266 | 1,202,827 | | TOTAL | 138,900 | 1,611,839 | 1,848,400 |
Pay Versus Performance
Pay Versus Performance This disclosure has been prepared in accordance with the SEC’s pay versus performance rules in Item 402(v) of Regulation S-K under the 1934 Act (“Item 402(v)”) and does not necessarily reflect value actually realized by the NEOs. The following tables and related disclosures provide information about (i) the total compensation (“SCT Total”) of our principal executive officer (“PEO”) and our non-PEO NEOs (collectively, the “Other NEOs”) as presented in the Summary Compensation Table on page 37, (ii) the “compensation actually paid” (“CAP”) to our PEO and our Other NEOs, as calculated pursuant to Item 402(v), (iii) certain financial performance measures used by the Company when making compensation decisions, and (iv) the relationship of the CAP to those financial performance measures.
Pay Versus Performance
| Year(1) | Summary Compensation Total for PEO ($) | Compensation Actually Paid to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) | Average Compensation Actually Paid to Non-PEO Named Executive Officers ($)(2) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($M) | Company Selected Measure: Adjusted EBITDA ($M)(4) | | | | | | | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($)(3) | | | | 2023 | 3,204,682 | (2,926,332) | 2,411,309 | 182,775 | 229 | 118 | 28.2 | 60.4 | | 2022 | 1,640,096 | (961,134) | 1,798,217 | 1,123,546 | 445 | 122 | 45.9 | 55.5 | | 2021 | 2,610,303 | 13,954,746 | 1,897,737 | 6,720,312 | 498 | 139 | 14.7 | 28.3 |
Pay Versus Performance
(1) The Principal Executive Officer (“PEO”) in all three reporting years is our CEO, Shawn Nelson. The Non-PEO NEOs for fiscal years 2023 and 2022 are Jack Krause, Mary Fox, and Donna Dellomo. The Non-PEO NEOs for fiscal year 2021 are Jack Krause and Donna Dellomo. (2) “Compensation actually paid” amounts to our CEO and NEOs in each of 2023, 2022, and 2021, reflect the respective Summary Compensation Total with adjustments shown below as determined pursuant to SEC rules.
Pay Versus Performance
| Year | SCT Total ($) | Minus SCT Change in Pension Value ($) | Plus Pension Value Service Cost ($) | Minus SCT Equity ($) | Plus (Minus) EOY Fair Value of Equity Awards Granted During Fiscal Year that are Outstanding and Unvested at EOY ($) | Plus (Minus) Change from BOY to EOY in Fair Value of Awards Granted in Any Prior Fiscal Year that are Outstanding and Unvested at EOY ($) | Plus Fair Value at Vesting Date of Awards Granted and Vested During the Fiscal Year ($) | Plus (Minus) Change in Fair Value from BOY to Vesting Date of Awards Granted in Any Prior Fiscal Year that Vested During the Fiscal Year ($) | Minus Fair Value at BOY of Awards Granted in Prior Year that were Forfeited During the Fiscal Year ($) | Plus Value of Dividends or Other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Calculated CAP ($) | | PEO | | | | | | | | | | | | | 2023 | 3,204,682 | 0 | 0 | 2,472,858 | 1,362,906 | (494,398) | 0 | (4,526,664) | 0 | 0 | (2,926,332) | | 2022 | 1,640,096 | 0 | 0 | 732,744 | 441,972 | (2,832,849) | 0 | 522,391 | 0 | 0 | (961,134) | | 2021 | 2,610,303 | 0 | 0 | 1,849,542 | 3,823,574 | 8,807,809 | 527,971 | 34,631 | 0 | 0 | 13,954,746 | | Average Non-PEO NEOs | | | | | | | | | | | | | 2023 | 2,411,938 | 0 | 0 | 1,579,290 | 870,419 | (346,322) | 0 | (1,173,341) | 0 | 0 | 183,404 | | 2022 | 1,798,217 | 0 | 0 | 884,257 | 538,217 | (606,465) | 0 | 277,834 | 0 | 0 | 1,123,546 | | 2021 | 1,897,737 | 0 | 0 | 1,160,146 | 3,029,668 | 2,417,441 | 511,489 | 24,123 | 0 | 0 | 6,720,312 |
Pay Versus Performance
”SCT” — Summary Compensation Table; “CAP”— Compensation Actually Paid; “EOY” — End of Year; “BOY” — Beginning of Year Equity valuations above are as follows: Stock option fair values are calculated based on a Monte Carlo simulation as of each measurement date. Performance-based restricted stock fair values are calculated assuming target performance on the grant date. Subsequent valuations reflected probable outcomes at each measurement date and the actual outcome when vested. All time-vested restricted stock fair values are determined based on the valuation assumptions at the time of the grant. (3) Reflects the total shareholder return indexed to $100 per share for the Russell 2000 Index. (4) Adjusted EBITDA is a non-GAAP measure. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement.
Relationship Between Compensation Actually Paid and Company Performance
Relationship Between Compensation Actually Paid and Company Performance The graphs below show the relationship between “compensation actually paid” to our PEO and Other NEOs and (i) the Company’s adjusted EBITDA performance (non-GAAP), (ii) the Company’s net income performance, and (iii) the Total Shareholder Return (“TSR”) of both the Company and the Russell 2000 Index, in each case for the fiscal years ended 2021, 2022 and 2023. In accordance with Item 402(v), the CAP calculation reflects, among others, adjustments to the fair value of equity awards during the years presented. Factors impacting the fair value of equity awards include the price of our common stock at year end, as well as the projected and actual achievement of performance goals.
CEO Pay Ratio
CEO Pay Ratio Under SEC rules, the Company is providing the following information for fiscal year 2023: ▪ The total compensation of the median employee, excluding the CEO, was $26,767 ▪ The annual total compensation of the CEO was $3,205,306 ▪ The ratio of CEO total compensation to median employee total compensation: 120 to 1 Our CEO pay ratio information is a reasonable good faith estimate calculated in a manner consistent with the SEC pay ratio rules and methods for disclosure. In order to determine the median employee, the Company examined W2 wages for the 2022 calendar year for all employees, excluding our CEO, employed as of December 31, 2022. On the determination date, our employee population consisted of 1,415 individuals, all located in the United States. This population consisted of our full-time, part-time, seasonal and temporary employees. There are no employee exclusions considered for median employee determination. Our median employee is an hourly associate, employed part-time at an hourly rate of $15, working approximately 24 hours per week. Our part-time employees are also eligible to participate in a field incentive program. Actual earnings were taken into consideration per SEC rules to identify the median employee. Once we identified our median employee, we combined all the elements of the median employee’s compensation for fiscal year 2023 to determine the median employee total compensation in accordance with the requirements of item 402(c)(2)(x) of Regulation S-K and compared such total compensation to the total compensation of our CEO, as reported in the Summary Compensation Table.