DEF 14A of Elastic N.V.

Filed Aug 28, 2023 · FY20230001707753-23-000038

Open on EDGAR

Board of Directors
Board of Directors The board of directors of the Company is responsible for establishing broad corporate policies and monitoring the overall performance of the Company. The board of directors selects the Company’s senior management, delegates authority for the conduct of the Company’s day-to-day operations to senior management, and monitors their performance. Members of the board of directors are kept informed of the Company’s business by, among other things, participating in meetings of the board of directors and committees and by reviewing analyses and reports provided to them. We have a one-tier board of directors, consisting of executive and non-executive directors. The board of directors determines the number of executive and non-executive directors. The board of directors is currently composed of nine directors. We have two executive directors, our Chief Executive Officer and our Chief Technology Officer, and seven non-executive directors. We have a classified board of directors in which directors serve for staggered terms. Under the Company’s articles of association, each director may be appointed for a maximum term of three years, provided that the director’s term will lapse immediately after the close of the first annual general meeting held after three years (or less if the term is shorter than three years) have lapsed since the director’s appointment, or until the director’s earlier death, resignation or removal. A director may be reappointed, and the three-year maximum term may be deviated from by resolution of the general meeting of shareholders upon a proposal of the board of directors. In the five years since our initial public offering, our Nominating and Corporate Governance Committee and board of directors has focused on developing and maintaining a board composed of directors who possess the qualifications and experience to effectively implement our business strategy and reflect our corporate culture. When we became a public company in 2018, half of our board of directors consisted of members affiliated with the venture capital firms that had financed our growth as a private company, and all of our directors were men. Since that time, two representatives of the venture capital firms have transitioned off our board of directors, which has also become more diverse and has grown from six to nine members, with three women. The evolution of our board of directors has been facilitated by our board structure, which has enabled directors appointed each year to build on their own experience and the experience of our continuing directors for more effective long-term strategic planning and oversight. As discussed under “Board Appointments — Voting Proposal 1,” Mr. Chadwick chose not to stand for re-appointment to the board of directors at the Annual Meeting. Mr. Chadwick has served on our board of directors since August 2018, and we are grateful for his dedication and contributions to our company during this period. The following table sets forth the names, ages as of August 21, 2023, and certain other information for each of the directors who are nominees for appointment as a director at the Annual Meeting and for each of the continuing members of our board of directors:
Board of Directors
| Name | Age | Director Since | Current Term Expires | Expiration of Term For Which Nominated | Independent | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | | Nominees for Director | | | | | | | | | | Paul Auvil(1) | 59 | - | - | 2026 | Yes | ©(1) | ü(1) | | | Alison Gleeson | 58 | 2020 | 2023 | 2026 | Yes | | © | | | Caryn Marooney | 56 | 2019 | 2023 | 2026 | Yes | | | ü | | Continuing Directors | | | | | | | | | | Ashutosh Kulkarni Executive Director Chief Executive Officer (“CEO”) | 48 | 2022 | 2025 | - | No | | | | | Shay Banon Executive Director Chief Technology Officer (“CTO”) | 45 | 2012 | 2024 | - | No | | | | | Chetan Puttagunta Chairperson Lead Independent Director | 37 | 2017 | 2024 | - | Yes | ü | | © | | Sohaib Abbasi Vice-Chairperson | 67 | 2022 | 2025 | - | Yes | | ü | | | Shelley Leibowitz | 62 | 2021 | 2024 | - | Yes | ü | | ü | | Steven Schuurman | 47 | 2012 | 2025 | - | Yes | | | |
Board of Directors
(1) If Mr. Auvil is appointed to our board of directors at the Annual Meeting, he will serve as the Chair of our audit committee and as a member of our compensation committee.
Board Diversity
Board Diversity We believe that our board of directors should reflect a diversity of perspectives and backgrounds. We have had a formal diversity policy since our initial public offering. When assessing the background, qualifications and experience of a candidate for our board of directors, the board of directors takes into account a broad range of factors, including such diversity attributes as the candidate’s gender, race, ethnicity, education, professional background, and international experience among others. The table below presents certain self-identified characteristics of our director nominees and continuing directors.
Board Diversity
| Board Diversity Matrix | | | | | | Total Number of Directors: 9 | | | | | | | Female | Male | Non-Binary | Did Not Disclose Gender | | Directors | 3 | 6 | - | - | | Number of Directors Who Identify as: | | | | | | African American or Black | - | - | - | - | | Alaskan Native or Native American | - | - | - | - | | Asian | - | 3 | - | - | | Hispanic or Latinx | - | - | - | - | | Middle Eastern | - | 1 | - | - | | Native Hawaiian or Pacific Islander | - | - | - | - | | White (not of Hispanic or Latinx origin) | 3 | 2 | - | - | | Two or More Races or Ethnicities | - | - | - | - | | LGBTQ+ | - | | | |
Board Skills and Experience Matrix
Board Skills and Experience Matrix Our board of directors has taken a thoughtful approach to board composition to ensure that our directors have backgrounds that collectively add value to the strategic decisions made by the Company and that enable them to provide oversight of management to ensure accountability to our shareholders. The matrix below summarizes some of the most relevant types of experience, qualifications, attributes and skills, which the board of directors believes should be possessed by our directors.
Board Skills and Experience Matrix
| | | Abbasi | Auvil | Banon | Gleeson | Kulkarni | Leibowitz | Marooney | Puttagunta | Schuurman | | | Industry and IT/Technical Expertise Expertise in the technology industry to oversee our business and address the opportunities and risks we face | ü | ü | ü | ü | ü | ü | ü | ü | ü | | | Scaling a Cloud Business Experience growing a successful Cloud business, reaching multi-billion dollar scale and maturity | ü | ü | ü | ü | ü | ü | | ü | | | | CEO Experience Experience as CEO of a publicly traded company | ü | | ü | | ü | | | | | | | Modern Cloud Technology Expertise Deep knowledge in technology architecture for cloud-based platforms, integrated solutions and customers’ data journey | ü | | ü | | ü | | | ü | | | | Financial Knowledge and Expertise Knowledge of financial markets, financing and accounting and financial reporting processes | ü | ü | | | | ü | | ü | | | | Diverse Backgrounds and Experiences, Including International Experience Diverse backgrounds and experiences that provide unique perspectives and enhance decision-making | ü | ü | ü | ü | ü | ü | ü | ü | ü | | | Cybersecurity / Information Security / Security Expertise to oversee cybersecurity, privacy, and information security management | ü | ü | ü | | ü | ü | | | | | | Sales, Marketing and Brand Management Experience Sales, marketing, and brand management experience to provide expertise and guidance to grow sales and enhance our brand | ü | | ü | ü | ü | | ü | | ü | | | Human Capital Management Experience attracting and retaining diverse top talent to oversee our people and compensation policies in our competitive environment | ü | ü | ü | ü | ü | ü | ü | ü | ü | | | Public Company Board Experience and Corporate Governance Experience to understand the dynamics and operation of a public company, and corporate governance requirements and compliance | ü | ü | ü | ü | ü | ü | ü | ü | |
Board Skills and Experience Matrix
Set forth below is biographical information, as of August 21, 2023, about the persons nominated for appointment at the Annual Meeting and the continuing directors, as well as the qualifications, experience and skills the board of directors considered in determining that each such person should serve as a director.
Nominees for Director
Nominees for Director
Nominees for Director
| | Paul Auvil | | | | Background and Experience | | | | Paul Auvil was nominated for appointment to our board of directors and is standing for appointment at the Annual Meeting. •From March 2007 to February 2023, Mr. Auvil served as the CFO of Proofpoint, Inc., an enterprise security company that provides software as a service and products for email security, data loss prevention, electronic discovery, and email archiving. •From September 2006 to March 2007, Mr. Auvil was an entrepreneur-in-residence with Benchmark Capital, a venture capital firm. Prior to that position, from 2002 to July 2006, he served as the CFO at VMware, Inc., a virtualization company (“VMware”). Previously, he served as the CFO for Vitria Technology, Inc., an eBusiness platform company, and held various executive positions at VLSI Technology, Inc., a semiconductor and circuit manufacturing company, including Vice President of the Internet and Secure Products Division. •Mr. Auvil previously served on the board of directors of 1Life Healthcare, Inc. (doing business as One Medical) from September 2019 to February 2023, when it was acquired by Amazon, Inc. From 2007 to 2017, Mr. Auvil served on the board of directors for Quantum Corporation, a data storage company. From 2009 to 2010, Mr. Auvil served on the board of directors of OpenTV Corp., a provider of interactive television software and services. From 2009 to 2017, Mr. Auvil was a member of the board of directors of Marin Software Incorporated, a cloud-based advertisement management platform company. | | | Age: 59 | | | | IF APPOINTED: Audit Committee (Chair) Compensation Committee | | | | Education | | Qualifications | | Mr. Auvil holds a Bachelor of Engineering degree from Dartmouth College and a Master of Management degree from the J.L. Kellogg Graduate School of Management, Northwestern University. | | The board of directors believes that Mr. Auvil is qualified to serve as a member of our board of directors because of his prior experience as CFO of public technology companies and his current and prior executive and directorship experience for multiple large public and private technology companies. |
Nominees for Director
| | Alison Gleeson | | | | Background and Experience | | | | Alison Gleeson has served as a member of our board of directors since January 2020. She has served as a sales strategic advisor to Verkada Inc., a professional monitoring and video verification threat detection company, since August 2021, and as Special Advisor and Operating Committee Member at Brighton Park Capital, an investment firm, since October 2019. | | | | •From November 2018 to September 2019, Ms. Gleeson was a private investor. •From January 1996 to October 2018, Ms. Gleeson served in various roles with Cisco Systems, Inc., a provider of software-defined networking, cloud and security solutions (“Cisco”), most recently as Senior Vice President, Americas from July 2014 to October 2018. •Ms. Gleeson currently also serves on the boards of directors of 8x8, Inc., a cloud-based provider of voice over IP products, and ZoomInfo Technologies Inc., a comprehensive sales and marketing intelligence SaaS platform. | | | Age: 58 | | | | Compensation Committee (Chair) | | | | Education | | Qualifications | | Ms. Gleeson holds a B.A. in Marketing from Michigan State University. | | The board of directors believes that Ms. Gleeson is qualified to serve as a member of our board of directors because of her prior executive and go-to-market experience for a large public company. |
Nominees for Director
| | Caryn Marooney | | | | Background and Experience | | | | Caryn Marooney has served as a member of our board of directors since April 2019. She has served as a General Partner of Coatue Management, LLC, a technology-focused venture capital firm, since November 2019. | | | | •From May 2011 to May 2019, Ms. Marooney served in various roles at Meta Platforms, Inc. (formerly Facebook, Inc.), a social networking and technology company, most recently serving as Vice President, Global Communications from March 2012 to May 2019. •From June 1997 to March 2011, Ms. Marooney served in various roles, including President and CEO, with The OutCast Agency, a public relations firm. •Ms. Marooney served as a member of the board of directors of Zendesk, Inc., a software development company that provides a software-as-a-service customer service platform, from January 2014 to May 2020. •Ms. Marooney also serves on the boards of various private companies. | | | Age: 56 | | | | Nominating and Corporate Governance Committee | | | | Education | | Qualifications | | Ms. Marooney holds a B.S. in Labor Relations from Cornell University. | | The board of directors believes that Ms. Marooney is qualified to serve as a member of our board of directors because of her prior executive experience and her experience advising technology companies. |
Continuing Directors
Continuing Directors
Continuing Directors
| | Ashutosh Kulkarni (Chief Executive Officer) | | | | Background and Experience | | | | Ashutosh Kulkarni has served as our CEO since January 2022 and was elected to our board of directors in March 2022. Mr. Kulkarni previously served as our Chief Product Officer (“CPO”) from January 2021 to January 2022. | | | | •Prior to joining us, Mr. Kulkarni served as Executive Vice President and Chief Product Officer, Enterprise Business Group, at McAfee Corp., a digital provider of cyber security services, from October 2018 until December 2020. •Prior to joining McAfee Corp., Mr. Kulkarni served as Senior Vice President and General Manager at Akamai Technologies, Inc., a content delivery network, cybersecurity, and cloud service company, in the Web Performance and Web Security division from August 2016 to October 2018 and in the Web Experience division from August 2015 to August 2016. •Prior to that service, Mr. Kulkarni held various senior leadership, product management, product marketing and engineering roles at Akamai Technologies, Informatica and Sun Microsystems. | | | Age: 48 | | | | Education | | Qualifications | | Mr. Kulkarni earned an M.S. in computer engineering from the University of Texas at Austin, an M.B.A. degree from the University of California, Berkeley and a B.E. in engineering from the University of Mumbai. | | The board of directors believes that Mr. Kulkarni is qualified to serve as a member of the Board because of the perspective he brings as our CEO, our former CPO, and his experience as an executive in the technology industry. |
Continuing Directors
| | Shay Banon (Chief Technology Officer) | | | | Background and Experience | | | | Shay Banon co-founded our Company and has served as a member of our board of directors since July 2012 and as our CTO since January 2022. Mr. Banon served as our CEO from May 2017 to January 2022, and as our Chairperson and CEO from June 2018 to January 2022. He previously also served as our CTO from July 2012 to April 2017. Mr. Banon is the creator of our Elasticsearch product. | | | Age: 45 | | | | Education | | Qualifications | | Mr. Banon holds a B.Sc. in Computer Science from Technion, Israel Institute of Technology. | | The board of directors believes that Mr. Banon is qualified to serve as a member of our board of directors because of the perspective and experience he brings as our CTO, our prior CEO and co-founder and his experience as an executive in the technology industry. |
Continuing Directors
| | Sohaib Abbasi (Vice-Chairperson) | | | | Background and Experience | | | | Sohaib Abbasi has served as a member of our board of directors and as our Vice-Chairperson since July 2022. He has also served as a member of the Executive Council of Balderton Capital, a venture capital firm, since January 2018 and as a Senior Advisor of TPG Global LLC, a private equity firm, since July 2017. | | | | •From July 2004 to August 2015, Mr. Abbasi served as the Chief Executive Officer of Informatica Corporation, a data integration company, where he also served as the Chair and a member of the board of directors from March 2004 to December 2015. •Mr. Abbasi previously served in various executive roles at Oracle Corporation, a computer technology corporation, most recently as a member of Oracle's executive committee and as Senior Vice President of the Oracle Tools and Oracle Education divisions. •He currently serves on the board of directors of Udemy, Inc., an online global learning platform company and previously served as a director of McAfee Corp., a computer security software company, from November 2018 to March 2022, New Relic, Inc., an enterprise software company, from May 2016 to September 2019, Nutanix, Inc., a cloud computing company, from March 2020 to December 2020, and Red Hat, Inc., a provider of enterprise open-source software solutions, from March 2011 to July 2019. •He also currently serves on the boards of directors of several private companies | | | Age: 67 | | | | Compensation Committee | | | | Education | | Qualifications | | Mr. Abbasi holds a B.S. and an M.S. in Computer Science from the University of Illinois at Urbana-Champaign. | | The board of directors believes that Mr. Abbasi is qualified to serve as a member of our board of directors because of his prior experience as CEO of a public technology company and his current and prior executive and directorship experience for multiple large public and private technology companies. |
Continuing Directors
| | Shelley Leibowitz | | | | Background and Experience | | | | Shelley Leibowitz has served as a member of our board of directors since October 2021. Ms. Leibowitz has served since January 2016 as President of SL Advisory, which provides advice and insights in innovation and digital transformation, information technology portfolio and risk management, digital trust, performance metrics, and effective governance. | | | | •From 2009 through 2012, Ms. Leibowitz served as Chief Information Officer for the World Bank Group. •Prior to that service, Ms. Leibowitz held Chief Information Officer positions at top-tier financial institutions, including Morgan Stanley, a global financial services firm, and Greenwich Capital Markets, a fixed income financial services firm. •She currently serves as a director of Morgan Stanley. Previously she served as a director of Massachusetts Mutual Life Insurance Company, an insurance and financial services provider, from October 2019 to April 2021, E*Trade Financial Corporation, a financial services company, from December 2014 to October 2020, and AllianceBernstein Holding L.P., a global asset management firm, from November 2017 to June 2019. •Ms. Leibowitz also serves on the boards of directors of private companies in the cybersecurity and risk arenas. | | | Age: 62 | | | | Audit Committee Nominating and Corporate Governance Committee | | | | Education | | Qualifications | | Ms. Leibowitz holds a B.A. in Mathematics from Williams College. | | The board of directors believes that Ms. Leibowitz is qualified to serve as a member of our board of directors because of her current and prior executive and directorship experience and extensive leadership and experience in technology services, digital transformation, and information security. |
Continuing Directors
| | Chetan Puttagunta (Chairperson and Lead Independent Director) | | | | Background and Experience | | | | Chetan Puttagunta has served as a member of our board of directors since January 2017, as our Chairperson since January 2022, and as our Lead Independent Director since June 2018. Mr. Puttagunta has served as General Partner of Benchmark Capital Partners, a venture capital firm, since July 2018. | | | Age: 37 | •From October 2016 until July 2018, Mr. Puttagunta served as a General Partner of New Enterprise Associates, a venture capital firm he joined in April 2011. •Mr. Puttagunta also serves on the boards of directors of various private companies. | | | Nominating and Corporate Governance Committee (Chair) Audit Committee | | | | Education | | Qualifications | | Mr. Puttagunta holds a B.S. in Electrical Engineering from Stanford University. | | The board of directors believes that Mr. Puttagunta is qualified to serve as a member of our board of directors because of his extensive experience in the venture capital industry and his knowledge of the technology industry. |
Continuing Directors
| | Steven Schuurman | | | | Background and Experience | | | | Steven Schuurman co-founded our Company and has served as a member of our board of directors since July 2012 and previously served as our CEO from July 2012 to May 2017. Mr. Schuurman serves on the boards of various private companies. | | | Age: 47 | | | | Education | | Qualifications | | Mr. Schuurman holds a B.Sc. in Electrical Engineering from TH Rijswijk, now known as The Hague University of Applied Sciences. | | The board of directors believes that Mr. Schuurman is qualified to serve as a member of our board of directors because of his deep understanding of our business, operations and strategy due to his role as our co-founder and former CEO. |
Non-Executive Director Compensation
Non-Executive Director Compensation Each non-executive director is eligible to receive compensation for service on the board of directors and its committees consisting of annual cash retainers and equity awards. Our board of directors has the discretion to revise non-executive director compensation as it deems necessary or appropriate, in accordance with our remuneration policy as previously adopted by an annual general meeting of shareholders (the “Remuneration Policy”). Cash Compensation. For fiscal year 2023, all non-executive directors were eligible to receive the following cash compensation for their services: •$35,000 per year for service as a board member; •$20,000 per year additionally for service as Lead Independent Director; •$20,000 per year additionally for service as chairperson of the Audit Committee; •$10,000 per year additionally for service as an Audit Committee member; •$15,000 per year additionally for service as chairperson of the Compensation Committee; •$7,500 per year additionally for service as a Compensation Committee member; •$9,000 per year additionally for service as chairperson of the Nominating and Corporate Governance Committee; and •$4,000 per year additionally for service as a Nominating and Corporate Governance Committee member. All cash payments to non-executive directors, or the retainer cash payments, are paid quarterly in arrears on a prorated basis. Equity Compensation. For fiscal year 2023, our non-executive directors were eligible for nondiscretionary, automatic grants of restricted stock units, except for any non-employee director who either (i) beneficially owns more than 2% of the outstanding and issued share capital of the Company, or (ii) is a partner or a member of any venture capital firm that owns securities of the Company representing more than 2% of the outstanding and issued share capital of the Company. •Initial award. Any person who would have first became an eligible non-executive director would have been granted an award of restricted stock units covering a number of shares having a grant date fair value equal to $200,000 pro-rated for the amount of time that remains in the 12-month period prior to the next scheduled annual general meeting of the Company’s shareholders (and if the date of such annual general meeting of the Company’s shareholders is not known, the one-year anniversary of the most recent Annual Award referred to below granted to non-executive directors), rounded down to the nearest whole share (the “Initial Award”). The shares underlying the Initial Award will settle on the earlier of (i) the one-year anniversary of the date the Initial Award is granted or (ii) the day prior to the date of the annual general meeting of our shareholders next following the date the Initial Award is granted, subject to continued service through the applicable vesting date. •Annual award. For fiscal year 2023, on the date of the general meeting of the Company’s shareholders, each eligible non-executive director was eligible to be granted an award of restricted stock units covering a number of shares having a grant date fair value equal to $200,000 (the “Annual Award”). The shares underlying the Annual Award will settle on the earlier of (i) the one-year anniversary of the date the Annual Award is granted or (ii) the day prior to the date of the annual general meeting of our shareholders next following the date the Annual Award is granted, subject to continued service through the applicable vesting date. The grant date fair value is computed in accordance with GAAP. Any award of restricted stock units granted under our non-executive director compensation policy will fully vest and become exercisable in the event of a change in control, as defined in our amended and restated 2012 Stock Option Plan (the “2012 Plan”) provided that the director remains a director through such change in control. Further, our 2012 Plan provides that in the event of a merger or change in control, as defined in our 2012 Plan, each outstanding equity award granted under our 2012 Plan that is held by a non-executive director will fully vest, all restrictions on the shares subject to such award will lapse, and with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all of the shares subject to such award will become fully exercisable, if applicable, provided such director remains a director through such merger or change in control.
Fiscal 2023 Non-Executive Director Compensation Table
Fiscal 2023 Non-Executive Director Compensation Table The table below shows the total compensation awarded to those serving as non-executive directors for fiscal year 2023:
Fiscal 2023 Non-Executive Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Sohaib Abbasi (2) | 34,046 | 246,480(3) | 280,526 | | Jonathan Chadwick (4) | 62,082 | 199,941(5) | 262,023 | | Alison Gleeson (2) | 49,584 | 199,941(5) | 249,525 | | Shelley Leibowitz (2) | 48,583 | 199,941(5) | 248,524 | | Caryn Marooney (2) | 38,584 | 199,941(5) | 238,525 | | Chetan Puttagunta (2) | 73,459 | 199,941(5) | 273,400 | | Steven Schuurman (6) | 34,584 | — | 34,584 | | Michelangelo Volpi (7) | — | — | — |
Fiscal 2023 Non-Executive Director Compensation Table
(1)The amounts shown represent the grant date fair value of restricted stock unit (“RSU”) awards granted in fiscal year 2023 for financial reporting purposes pursuant to the provisions of Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). Such amounts do not represent amounts paid to or realized by the non-executive director. See Note 11, “Equity Incentive Plans,” of the Notes to our Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal year 2023 regarding assumptions underlying valuation of equity awards. Additional information regarding the RSUs awarded to each non-executive director for fiscal year 2023 is set forth in the footnotes below. (2)As of April 30, 2023, the non-executive director held 2,627 RSUs and no options to purchase ordinary shares. (3)Represents the aggregate grant date fair value of RSUs granted to Mr. Abbasi on July 13, 2022, the effective date of his appointment as a non-executive director, and his annual grants on October 6, 2022, under the terms of our non-executive director compensation policy for fiscal year 2023 and the 2012 Plan, and calculated in accordance with ASC 718 based on the closing market price of our ordinary shares on the grant date as reported on the NYSE. (4)As of April 30, 2023, Mr. Chadwick held 2,627 RSUs and 125,000 options to purchase ordinary shares. (5)Represents the aggregate grant date fair value of RSUs granted to the incumbent non-executive directors on October 6, 2022, under the terms of our non-executive director compensation policy for fiscal year 2023 and the 2012 Plan, and calculated in accordance with ASC 718 based on the closing market price of our ordinary shares on the grant date as reported on the NYSE. (6)Mr. Schuurman did not receive any grants of RSUs or options to purchase ordinary shares for fiscal year 2023 in accordance with our non-executive director compensation policy, which provides that non-employee directors who, at the time of appointment or the date of the annual general meeting, either (i) beneficially owned more than 2% of the outstanding and issued share capital of the Company, or (ii) was a partner or a member of any venture capital firm that owns securities of the Company representing more than 2% of the outstanding and issued share capital of the Company, are not eligible to receive equity awards. As of April 30, 2023, Mr. Schuurman held no RSUs or options to purchase ordinary shares. (7)Mr. Volpi, who resigned from the board of directors effective July 13, 2022, waived his right to receive payments of director fees and the annual equity grant to directors for fiscal year 2023. For the period that Mr. Volpi served as a non-executive director during fiscal year 2023, he would have been eligible to receive $6,667 in fees for his service as a director in fiscal year 2023.
Executive Summary
Executive Summary Elastic is a data analytics company built on the power of search. Our platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows our customers to find insights and drive artificial intelligence and machine learning use cases from large amounts of data. We offer three search-powered solutions – Search, Observability, and Security – that are built into the platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats. Our platform is built on the Elastic Stack, a powerful set of software products that ingest data from any source, in any format, and perform search, analysis, and visualization of that data. At the core of the Elastic Stack is Elasticsearch - a highly scalable document store and search engine, and the unified data store for all of our solutions and use cases. Another component of the Elastic Stack is Kibana, which delivers a common user interface across all of our solutions, with powerful drag-and-drop visual analytics, and centralized management of the platform. Our platform also includes the Elasticsearch Relevance Engine™, which combines advanced artificial intelligence with Elastic’s text search to give developers a full suite of sophisticated retrieval algorithms and the ability to integrate with large language models. Our business model is based primarily on a combination of a paid Elastic-managed hosted service offering and paid and free proprietary self-managed software. Our paid offerings for our platform are sold via subscription through resource-based pricing, and all customers and users have access to all solutions. Fiscal Year 2023 Financial Highlights Fiscal year 2023 was a strong year for us marked by significant growth in our business. Our fiscal year 2023 financial highlights included the following: •Total revenue was $1.069 billion, an increase of 24% year-over-year. •Elastic Cloud revenue was $424 million, an increase of 42% year-over-year. •GAAP operating loss was $219 million, while GAAP operating margin was -21%. •Non-GAAP operating profit was $46 million, while non-GAAP operating margin was 4%. •GAAP net loss per share was $2.47, while non-GAAP net loss per share was $0.25. •Operating cash flow was $36 million with adjusted free cash flow of $57 million. To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP operating loss, free cash flow, and free cash flow margin. For additional information and a full reconciliation for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP, please see Appendix A. Fiscal Year 2023 Executive Compensation Highlights Consistent with our compensation objectives and following a review of data summarizing the competitive market environment and the other factors described below, the Compensation Committee (and, in the case of our CEO and CTO, the board of directors upon the recommendation of the Compensation Committee) took the following key actions with respect to the compensation of our Named Executive Officers during fiscal year 2023: •Base Salaries – No salary increases to continuing executives. As part of the annual review of our executive compensation program, determined that the base salary of each Named Executive Officer that also served in fiscal year 2022 would remain the same for fiscal year 2023. •Annual Cash Incentive (Bonus) Plan – Payouts of 94.3% of target for the first half of fiscal year 2023 and 82.4% of target of the second half of fiscal year 2023. We approved annual cash incentive awards under our Bonus Plan to Messrs. Kulkarni, Moorjani, Banon1 and Exner and Ms. Herzog in the amount of $529,078, $264,539, $226,917, $155,360 and $224,858, respectively. See “Compensation Elements – Annual Cash Incentives” below for a summary of the terms of our Bonus Plan. 1 All cash compensation paid to Mr. Banon was denominated in New Israel Shekels (“ILS”). For purposes of this Compensation Discussion and Analysis, all compensation paid in ILS to Mr. Banon has been converted into USD at an exchange rate of 0.2748 USD for each 1.00 ILS, which was the exchange rate in effect on April 30, 2023 (our fiscal year end).
•2023 Long-Term Incentive Compensation
•2023 Long-Term Incentive Compensation ◦Granted long-term incentive compensation in the form of equity awards to Messrs. Kulkarni, Banon, Moorjani, and Exner and Ms. Herzog with aggregate award values2 of $12.6 million, $3.0 million, $5.5 million, $2.0 million and $1.75 million, respectively. These awards consist of annual awards approved as part of the annual review of our executive compensation program in December 2022.
•Addition of Performance Share Units for Fiscal Year 2024
•Addition of Performance Share Units for Fiscal Year 2024 ◦Determined that we will introduce performance share units (“PSUs”) as part of our fiscal year 2024 equity program. Since this determination, PSUs have been granted and implemented for fiscal year 2024. Further details are discussed below in the section “Compensation Elements—Long-Term Incentive Compensation—Addition of Performance Share Unit Awards for Fiscal Year 2024” •Compensation Arrangements with Ms. Herzog – In connection with her appointment as our CLO, we entered into an employment offer letter dated March 23, 2022 (the “Herzog Employment Letter”) with Ms. Herzog. Pursuant to the Herzog Employment Letter, our initial compensation arrangements with Ms. Herzog were as follows: ◦an initial annual base salary of $425,000; ◦a target annual cash incentive award opportunity equal to 60% of her annual base salary, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan; and ◦new hire equity awards with an aggregate approximate value of $5 million. Seventy-five percent of the value of Ms. Herzog’s new hire equity awards are in the form of an RSU award that may be settled for ordinary shares and 25% of the value of the awards are in the form of an option to purchase ordinary shares. Each of Ms. Herzog’s new hire equity awards vest over a four-year period as described in “Long-Term Incentive Compensation – New Hire Equity Award for Ms. Herzog.” •Compensation Arrangements with Mr. Exner – In connection with his appointment as our CPO, we entered into an employment offer letter dated July 19, 2022 (the “Exner Employment Letter”) with Mr. Exner. Pursuant to the Exner Employment Letter, our initial compensation arrangements with Mr. Exner were as follows: ◦an initial annual base salary of $450,000; ◦a target annual cash incentive award opportunity equal to 60% of his annual base salary, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan; and ◦new hire equity awards with an aggregate approximate value of $10 million. Seventy-five percent of the value of Mr. Exner’s new hire equity awards are in the form of an 2 For purposes of this Compensation Discussion and Analysis, “award value” generally means an economic target value, as distinct from the grant date fair value under Financial Accounting Standard Board’s Accounting Standards Codification Topic 718. The actual number of our ordinary shares subject to an equity award was determined by dividing the applicable award value by one of the following per share values, as applicable: (i) with respect to RSU awards granted to our Named Executive Officers, the value per share was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date, and (ii) with respect to stock options granted to our Named Executive Officers, the value per share was calculated in accordance with the Black-Scholes option valuation methodology, which calculation assumed that the value of one of our ordinary shares was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date. RSU award that may be settled for ordinary shares and 25% of the value of the awards are in the form of an option to purchase ordinary shares. Each of Mr. Exner’s new hire equity awards vest over a four-year period as described in “Long-Term Incentive Compensation – New Hire Equity Award for Mr. Exner.” In addition, each of Ms. Herzog and Mr. Exner entered into our standard form of Change in Control and Severance Agreement. In establishing their initial compensation arrangements, we took into consideration the requisite experience and skills that a qualified candidate would need to manage a growing business in a dynamic and ever-changing environment, the competitive market for similar positions at other comparable companies based on a review of compensation survey data, balancing both competitive and internal equity considerations, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” below. For a summary of the material terms and conditions of each of Ms. Herzog’s and Mr. Exner’s employment offer letters, see “Executive Compensation Tables – Named Executive Officer Employment Letters” below. Relationship Between Pay and Performance We strive to design our executive compensation program to balance the goals of attracting, motivating, rewarding and retaining our Named Executive Officers with the goal of promoting the interests of our stakeholders, such as our users, customers, employees, creditors, shareholders and other stakeholders. To ensure this balance and to motivate and reward individual initiative and effort, we seek to ensure that our program is designed so that a meaningful portion of our Named Executive Officers’ annual target total direct compensation is either “at-risk” or variable in nature. We do not determine either “variable,” “at-risk,” or “fixed” pay for each Named Executive Officer with reference to a specific percentage of target total direct compensation, and we may change the mix from year to year to address the current imperatives. With greater stability in our business and among our executives, for fiscal year 2024, we are increasing the variable portion of our executive compensation by granting PSUs as part of our fiscal year 2024 long term incentives. This philosophy is reflected in the target total direct compensation opportunities of our Named Executive Officers. In fiscal year 2023, the majority of the target total direct compensation granted to our Named Executive Officers consisted of variable pay in the form of a target annual cash incentive award and long-term incentive compensation in the form of RSU awards that may be settled for ordinary shares.. With respect to Mr. Kulkarni, Fixed pay, primarily consisting of base salary, made up only 4.3% of Mr. Kulkarni’s target total direct compensation, while variable pay, consisting of the target annual cash incentive awards and long-term incentive compensation in the form of equity awards, made up 95.7% of his target total direct compensation. In the case of Messrs. Moorjani, Banon and Exner and Ms. Herzog, their target total direct compensation packages were structured similar to that of Mr. Kulkarni, consisting of fixed pay, primarily consisting of base salary, variable pay, consisting of the target annual cash incentive awards, and long-term incentive compensation in the form of RSU awards that may be settled for ordinary shares. Fixed pay made up 7.9%, 13.2%, 16.5%, and 17.5%, of the target total direct compensation of Messrs. Moorjani, Banon and Exner and Ms. Herzog, respectively, on an annualized basis. Variable pay and long term-incentive compensation made up 92.1%, 86.8%, 83.5%, and 82.5%, of the target total direct compensation of Messrs. Moorjani, Banon and Exner and Ms. Herzog, respectively, on an annualized basis. Shareholder Advisory Vote on Named Executive Officer Compensation At the 2022 Annual Meeting, our advisory vote on the compensation of our Named Executive Officers (the “Say-on-Pay” vote) received 83.1% support from our shareholders. The board of directors and the Compensation Committee believe the 2022 Say-on-Pay vote result indicates support for the design of our current compensation program and our overall compensation philosophy and decisions for fiscal year 2023. The Compensation Committee regularly reviews and adjusts our executive compensation program to ensure it remains competitive and aligned with our shareholders’ interests. After taking into account a variety of considerations, including shareholder feedback and the desire to increase the variable or performance-based component of our executive compensation program, the Compensation Committee adopted a PSU program effective for our fiscal year 2024 annual grants. In
•Addition of Performance Share Units for Fiscal Year 2024
fiscal year 2024, we currently anticipate that approximately 25% of our executive officer equity compensation will be in the form of PSU awards, with payout tied to achievement of a total revenue goal, which we believe will further emphasize “at risk” and variable pay to our Named Executive Officers. Full details of these PSU awards will be provided in our 2024 proxy statement. In addition, our goal is to increase the percentage of PSUs until 50% of annual executive officer equity compensation will be in the form of PSU awards. At our 2020 annual general meeting of shareholders, our shareholders indicated their approval of the recommendation that we solicit a Say-on-Pay vote on an annual basis. In accordance with that preference, our board of directors has determined that the Company will conduct a Say-on-Pay vote every year until the next shareholder advisory vote on the frequency of Say-on-Pay votes (the “Say-When-on-Pay” vote). Our board of directors and the Compensation Committee will consider the outcome of the 2023 Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our Named Executive Officers in the future. The next required Say-When-on-Pay vote will take place no later than at the Company’s 2026 annual general meeting of shareholders. Shareholder Engagement in Fiscal Year 2023 We value our shareholders’ opinions and feedback and are committed to maintaining an active dialogue to understand the priorities and concerns of our shareholders. We believe that ongoing engagement builds mutual trust and alignment with our shareholders and is essential to our long-term success. In fiscal year 2023, we undertook engagement efforts to obtain shareholder views on executive compensation, corporate governance and other matters, and to determine how best to respond to that feedback. Our management team regularly updates our board of directors on our engagement efforts. The continuous feedback that we receive from our shareholders has helped to shape the executive compensation program and practices implemented by our Compensation Committee.
Executive Compensation Policies and Practices
Executive Compensation Policies and Practices We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee reviews our executive compensation program on an annual basis to ensure consistency with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation-related policies and practices that were in effect during fiscal year 2023: What We Do: •Maintain Independent Compensation Committee. The Compensation Committee is composed solely of independent directors. The Compensation Committee determines our compensation policies and practices for our executive officers and other senior management team members (or, with regard to our directors, recommends compensation policies and practices to our board of directors, who determine such policies and practices for our directors) and has established effective means for communicating with our shareholders regarding their executive compensation views and concerns, as described in this proxy statement. •Periodic Executive Compensation Review. The Compensation Committee reviews and approves our compensation strategy periodically (or, with regard to the compensation strategy for our CEO and CTO, reviews and recommends to our board of directors to approve such strategy), including a review of our compensation peer group used for comparative purposes. •Maintain Independent Compensation Advisor. The Compensation Committee has engaged its own compensation consultant to assist with the annual executive compensation review. This consultant performed only compensation-related services for us in fiscal year 2023. •Compensation At-Risk. Our executive compensation program is designed such that in setting or recommending our Named Executive Officers’ compensation in a given year, the Compensation Committee considers whether a sufficient portion of their compensation is “at risk” based on corporate performance to align the interests of our Named Executive Officers and shareholders. •Multi-Year Vesting Requirements. The annual equity awards granted to our Named Executive Officers vest over multi-year periods, consistent with current market practice and our retention objectives. •“Double-Trigger” Change-in-Control Arrangements. Under our severance arrangements with our Named Executive Officers, all change-in-control payments and benefits are based on a “double-trigger” arrangement (that is, they require both a change-in-control of the Company plus a qualifying termination of employment before payments and benefits are paid). •Health or Welfare Benefits. Our Named Executive Officers participate in broad-based Company-sponsored health and welfare benefit programs on the same basis as our other employees in the country of their employment. •Succession Planning. Our board of directors and the Nominating and Corporate Governance Committee review the risks associated with our executive officer positions to ensure adequate succession plans are in place. What We Don’t Do: •Limited Perquisites. We provide minimal perquisites and other personal benefits to our Named Executive Officers. •No Tax Payments on Perquisites. We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than on standard relocation benefits. •No “Golden Parachute” Tax Payments on Change-in-Control Arrangements. We do not provide any excise tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company that our Named Executive Officers might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code (the “Code”). •No Hedging or Pledging of our Securities. We prohibit our employees, including our officers, and the members of our board of directors from engaging in hedging transactions or pledging our securities as collateral for a loan or holding our securities in a margin account.
Executive Compensation Philosophy and Objectives
Executive Compensation Philosophy and Objectives Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. We strive to provide an executive compensation program that is competitive, rewards achievement of our business objectives and aligns our Named Executive Officers’ interests with those of our shareholders. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives: •provide market competitive compensation and benefit levels that will attract, motivate, reward and retain a highly talented team of executives within the context of responsible cost management; •establish a direct link between our financial and operational results and strategic objectives and the compensation of our executives; •align the interests and objectives of our executives with those of our shareholders by linking their long-term incentive compensation opportunities to shareholder value creation and their cash incentives to our annual performance; and •offer total compensation opportunities to our executives that, while competitive, are internally consistent and fair. We structure the annual compensation of our Named Executive Officers using base salary, long-term incentive compensation in the form of equity awards, and short-term incentive compensation in the form of annual cash incentive awards. The design of our executive compensation program is influenced by a variety of factors, with the primary goals being to align the interests of our Named Executive Officers and shareholders and to link pay with performance. We have not adopted policies or employed guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. As described below, the Compensation Committee considers a variety of factors in determining the appropriate yearly mix among such compensatory elements, including our compensation philosophy and the value of unvested equity awards granted previously.
Compensation-Setting Process
Compensation-Setting Process Role of the Compensation Committee The Compensation Committee has the overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies and practices applicable to our Named Executive Officers. Our board of directors has delegated express authority to the Compensation Committee to serve as the administrator of the 2012 Plan. The Compensation Committee has authority to make decisions regarding the compensation of our Named Executive Officers, other than our CEO and CTO, for whom it makes recommendations to the board of directors. The board of directors makes all final decisions regarding the compensation of our CEO and CTO with due observance of the Remuneration Policy (as required by Dutch corporate law) adopted by our general meeting of shareholders in 2018. The CEO and the CTO may not take part in the deliberations and decision-making of the board of directors concerning executive director compensation. In carrying out its responsibilities, the Compensation Committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops strategies and makes decisions that it believes further our philosophy or align with developments in best compensation practices, and reviews the performance of our Named Executive Officers when making decisions and recommendations with respect to their compensation. The Compensation Committee’s authority, duties and responsibilities are further described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available in the “Investor Relations” section of our website, which is located at ir.elastic.co, under “Governance—Corporate Governance.” The Compensation Committee retains a compensation consultant to provide support in its review and assessment of our executive compensation program; however, the Compensation Committee exercises its own judgment in making its decisions and recommendations with respect to the compensation of our Named Executive Officers. Role of Management In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance and management’s perspective on compensation matters. Our management also provides certain compensation data about our executive officers to Compensia, the Compensation Committee’s independent compensation consultant, which presents such information to the Compensation Committee as part of its review and analysis of our executive compensation program. The Compensation Committee solicits and reviews our CEO’s proposals with respect to program structures, as well as his recommendations for adjustments to annual cash compensation, long-term incentive compensation and other compensation-related matters for our Named Executive Officers (except with respect to compensation of our CEO and CTO) based on his evaluation of their performance for the prior year. The Compensation Committee reviews and discusses such proposals and recommendations with our CEO and considers them as one factor in determining and approving the compensation of our Named Executive Officers (except with respect to compensation of our CEO and CTO). Our CEO also attends meetings of our board of directors and the Compensation Committee at which executive compensation matters are addressed, except with respect to discussions involving compensation of our CEO and/or CTO. Role of the Compensation Consultant The Compensation Committee has the sole authority to retain an external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review, including the authority to approve the consultant’s reasonable fees and other retention terms. The compensation consultant reports directly to the Compensation Committee and its chair, and serves at the discretion of the Compensation Committee, which reviews the engagement annually. In fiscal year 2023, the Compensation Committee engaged Compensia to serve as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for our Named Executive Officers, and with the data analysis and selection of the compensation peer group. During fiscal year 2023, Compensia attended meetings of the Compensation Committee as requested and provided various services including the following: •the review, analysis and updating of our compensation peer group; •a review and analysis of our non-executive director compensation program and methodology, including an assessment against competitive market data based on the companies in our compensation peer group; •review of compensation related disclosures, including the Compensation Discussion and Analysis for our definitive proxy statement for our 2022 Annual Meeting, and with respect to this proxy statement, reviewing this Compensation Discussion and Analysis and new Pay vs. Performance disclosure; •the review and analysis of the base salary levels, target annual cash incentive awards and long-term incentive compensation of our Named Executive Officers and other senior leadership team members against competitive market data based on the companies in our compensation peer group and/or selected broad-based compensation surveys; •the review and analysis of compensation for Mr. Kulkarni and Mr. Banon, our executive directors; •the review and analysis of our 2022 Say-on-Pay vote results; •review and analysis of executive change in control and severance agreements; •review of and update on compensation trends and rulemaking developments relevant to the Compensation Committee; •review and assessment on market practice for performance-based equity practices; •provide market data on employee stock purchase plan design; and •support on other ad hoc matters throughout the year. Setting Target Total Direct Compensation Each year, the Compensation Committee conducts an annual review of the compensation arrangements of our Named Executive Officers. As part of this review, the Compensation Committee evaluates the base salary levels and long-term incentive compensation of our Named Executive Officers, as well as the annual cash incentive awards for our Named Executive Officers who are eligible to receive such awards, and all related performance criteria. The Compensation Committee does not establish a specific target for formulating the target total direct compensation of our Named Executive Officers. In making decisions and recommendations about the compensation of our Named Executive Officers, the members of the Compensation Committee are initially presented with a competitive market analysis prepared by its compensation consultant based on data gathered from the companies in our compensation peer group and considerations from broader executive compensation trends for its review and consideration. Drawing on this data, the members of the Compensation Committee then apply their professional experience to consider the following factors as applicable: •our executive compensation program objectives; •our performance against the financial, operational and strategic objectives established by the Compensation Committee and our board of directors; •each individual Named Executive Officer’s knowledge, skills, experience, qualifications and tenure relative to other similarly situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys;
Compensation-Setting Process
•the scope of each Named Executive Officer’s role and responsibilities compared to other similarly situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys; •the prior performance of each individual Named Executive Officer, based on a subjective assessment of their contributions to our overall performance, ability to lead their business unit or function and work as part of a team; •the potential of each individual Named Executive Officer to contribute to our long-term financial, operational and strategic objectives; •the compensation of our CEO and CTO relative to that of our other Named Executive Officers, and compensation parity among our Named Executive Officers; •the compensation practices of our compensation peer group and broader executive compensation trends and the positioning of each Named Executive Officer’s compensation in a ranking of executive officer compensation levels based on an analysis of competitive market data; and •the recommendations of our CEO with respect to the compensation of our Named Executive Officers (except with respect to his own and the CTO’s compensation). These factors provide the framework for compensation decision-making regarding the compensation opportunity for each Named Executive Officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable. The Compensation Committee does not weigh these factors in any predetermined manner, nor does it apply any formulas in developing its compensation decisions and recommendations. The members of the Compensation Committee consider this information in view of their individual experience, knowledge of the Company, knowledge of the competitive market, knowledge of each Named Executive Officer and business judgment in making their decisions and recommendations. The Compensation Committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions and recommendations with respect to our Named Executive Officers. Instead, in making its determinations and recommendations, the Compensation Committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment, as well as from more broad-based compensation surveys to gain a general understanding of market compensation levels. Competitive Positioning The Compensation Committee believes that peer group comparisons are useful guides to measure the competitiveness of our executive compensation program and related policies and practices. For purposes of assessing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a select group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization and industry focus. The competitive data drawn from this compensation peer group is one of several factors that the Compensation Committee considers in making its decisions and recommendations with respect to the compensation of our Named Executive Officers. The compensation peer group for fiscal year 2023, which was developed in May 2022 with the assistance of Compensia to analyze the compensation of our Named Executive Officers, was composed of publicly traded technology companies against which we compete for executive talent. In identifying and selecting the companies for the compensation peer group, Compensia considered the following primary criteria: •publicly traded companies in the software and internet services sectors identified on a national basis, with a focus on California-based companies; •similar revenues – within a range of ~0.5x to ~2.0x our trailing four fiscal quarters’ revenue; and •similar market capitalization – within a range of ~0.33x to ~3.0x our then-market capitalization. After consultation with Compensia, the Compensation Committee approved the following compensation peer group for use when making its fiscal year 2023 executive compensation decisions:
Compensation-Setting Process
The Compensation Committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from a custom data cut of the peer companies drawn from the Radford Global Technology Survey database. This data permitted us to evaluate the competitive market when determining the total direct compensation packages for our Named Executive Officers, including base salary, target annual cash incentive awards and long-term incentive compensation. The Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group. The fiscal year 2023 peer group reflects the removal of Anaplan, Cloudera and Sailpoint Technologies due to each being acquired and the addition of Rapid7 and Splunk.
Compensation Elements
Compensation Elements Our executive compensation program consists principally of base salary, annual short-term cash incentive compensation and long-term incentive compensation in the form of equity awards. Base Salary Base salary represents the fixed portion of the compensation of our Named Executive Officers and is an important element of compensation intended to attract and retain highly talented individuals. Generally, we use base salary to provide each Named Executive Officer with a specified level of cash compensation during the year with the expectation that they will perform their responsibilities to the best of their ability and in our best interests. Generally, we establish the initial base salaries of our Named Executive Officers through arm’s-length negotiation at the time we hire the individual, taking into account their position, qualifications, and experience, the market compensation for such role, and the base salaries of our other executive officers. Thereafter, the Compensation Committee reviews the base salaries of our Named Executive Officers each year as part of its annual review of our executive compensation program, with input from our CEO (except with respect to his own and the CTO’s base salary), and makes adjustments (other than with respect to our CEO and CTO) that it determines are reasonable and necessary to reflect the scope of a Named Executive Officer’s performance, individual contributions and responsibilities, position in the case of a promotion and market conditions. With respect to our CEO and CTO, the board of directors determines any base salary adjustments upon the recommendation of the Compensation Committee. In December 2022, the Compensation Committee reviewed the base salaries of our Named Executive Officers employed by the Company at such time. The Compensation Committee (and, with respect to the CEO and CTO, the board of directors) determined not to increase the base salaries of the Named Executive Officers employed by the Company at such time. In making this recommendation, the Compensation Committee took into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own base salary and the base salary of the CTO) and the current business performance, opportunities and challenges facing us, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. The base salaries of our Named Executive Officers as determined in December 2022 for fiscal year 2023 were as follows:
Compensation Elements
The base salaries paid to our Named Executive Officers during fiscal year 2023 are set forth in “Executive Compensation Tables—Fiscal 2023 Summary Compensation Table” below. Annual Cash Incentives Our board of directors has adopted, and our general meeting of shareholders has approved, the Bonus Plan. The Bonus Plan is administered by the Compensation Committee. The Bonus Plan enables the Compensation Committee to provide cash incentive awards to selected employees, including our Named Executive Officers (other than our CEO and CTO), based upon our actual achievement as measured against performance metrics established by the Compensation Committee. In the case of our CEO and CTO, the performance metrics for their cash incentive awards and the actual payment of the awards are established by the board of directors, upon the recommendation from the Compensation Committee. The Compensation Committee believes that the financial performance measures used in the Bonus Plan contribute to driving the creation of long-term stakeholder value, including shareholder value, and play an important role in influencing the performance of our Named Executive Officers who participate in the plan, who are most directly responsible for our overall success. Under the Bonus Plan, each fiscal year (generally during the first fiscal quarter) the Compensation Committee approves the terms and conditions that will serve as the basis for determining the eligibility for, and amount of, cash incentive awards to be paid under the Bonus Plan. Performance under the Bonus Plan is measured semi-annually as of October 31st and April 30th of each fiscal year. After the end of each six-month period, the Compensation Committee reviews our actual achievement against the target levels for the corporate performance measures established for that period and determines the cash incentive awards, if any, to be paid under the plan. Awards are paid out following the approval by the Compensation Committee and, in the case of our CEO and CTO, the approval by the board of directors. The Compensation Committee may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award. In the case of our CEO and CTO, the board of directors determines whether the CEO or CTO’s actual award is increased, reduced or eliminated, taking into consideration the recommendation of the Compensation Committee. The actual award may be below, at or above a participant’s target annual cash incentive award, as determined at the Compensation Committee’s discretion or, in the case of our CEO and CTO, as recommended by the Compensation Committee to our board of directors for their discretionary action. The Compensation Committee may determine the amount of any change (or recommendation for any change in the case of our CEO and CTO) on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers. In fiscal year 2023, neither the Compensation Committee nor, in the case of our CEO and CTO, the board of directors, exercised their discretion with respect to any of the actual cash incentive award payments made under the Bonus Plan. The annual operating plan for fiscal year 2023 was based on demanding but realistically achievable business goals in order to drive strong growth. The Compensation Committee approved corporate financial performance metrics under the Company’s Bonus Plan for fiscal year 2023 (the “Fiscal Year 2023 Bonus Plan”) (or, in the case of Mr. Kulkarni and Mr. Banon, recommended such action to our board of directors), based on our 2023 operating plan because it wanted to incentivize these Named Executive Officers to achieve these performance goals, which were set above prior year actual performance. The Fiscal Year 2023 Bonus Plan was funded based on our actual results for the first and second halves of the fiscal year as evaluated against these performance metrics. In connection with the hiring of Ms. Herzog and Mr. Exner and the Compensation Committee’s desire to incentivize such executive officers, who, as a result of their roles within the Company, are also positioned to drive corporate performance to meet or exceed our principal business objectives as set forth in our fiscal year 2023 annual operating plan, the Compensation Committee approved, in May 2022 with respect to Ms. Herzog and in July 2022 with respect to Mr. Exner, their participation in the Fiscal Year 2023 Bonus Plan using the same performance metrics that had been approved in May 2022 for Mr. Moorjani and in June 2022 for Messrs. Kulkarni and Banon. Target Annual Cash Incentive Award Opportunities For purposes of the Fiscal Year 2023 Bonus Plan, target annual cash incentive awards were to be based upon a specific percentage of each eligible Named Executive Officer’s annual base salary. In May 2022, as part of its annual review of our executive compensation program, the Compensation Committee reviewed the target annual cash incentive award opportunities of Messrs. Kulkarni, Banon, and Moorjani. The Compensation Committee did not make or recommend any changes to such target percentages in fiscal year 2023. In deciding not to make or recommend any changes to the target annual cash incentive award opportunity for our Named Executive Officers from the fiscal year 2022 target annual cash incentive award opportunity percentage, the Compensation Committee took into consideration a competitive market analysis prepared by Compensia, the recommendations of Mr. Kulkarni (except with respect to his own target annual cash incentive opportunity as well as that of the CTO) and the current business performance, opportunities and challenges facing us, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Further, in connection with the hiring of Ms. Herzog and Mr. Exner, the Compensation Committee set the target annual cash incentive award opportunities for each of them at 60% of their annual base salary, as was the case for Messrs. Banon and Moorjani. Corporate Performance Metrics In May 2022, the Compensation Committee approved (or in the case of our CEO and CTO, recommended to the board of directors) the financial performance metrics for fiscal year 2023 in connection with the Fiscal Year 2023 Bonus Plan to provide incentives for Messrs. Kulkarni, Banon, and Moorjani and Ms. Herzog. In June 2022, the board of directors approved the financial performance metrics for our CEO and CTO for fiscal year 2023, upon the recommendation of the Compensation Committee. In July 2022, the Compensation Committee approved the financial performance metrics for fiscal year 2023 in connection with the Fiscal Year 2023 Bonus Plan with respect to Mr. Exner, which were the same financial performance metrics set for the other Named Executive Officers.
Compensation Elements
The Compensation Committee selected the following three performance metrics for the Fiscal Year 2023 Bonus Plan: cloud revenue, total revenue, and non-GAAP operating margin percentage. The Compensation Committee selected total revenue and cloud revenue as new performance metrics to replace the prior year calculated billings performance metric. The Compensation Committee believed these performance metrics were appropriate because, in its view, they represent the best indicators of our successful execution of our annual operating plan. In addition, they provided a strong emphasis on growth and managing profitability, which the Compensation Committee believed would most directly influence the creation of sustainable long-term shareholder value. One-half of the target annual cash incentive award payout under the Fiscal Year 2023 Bonus Plan was based on the attainment of cloud revenue goals, three-tenths was based on the attainment of total revenue goals, and one-fifth was based on the attainment of non-GAAP operating margin percentage goals. For purposes of the Fiscal Year 2023 Bonus Plan: ▪“cloud revenue” meant the portion of total revenue from Elastic Cloud, our family of cloud-based offerings; and ▪“non-GAAP operating margin percentage” meant GAAP operating margin excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses and restructuring and other related charges. In May 2022, the Compensation Committee established threshold, target and maximum achievement levels for each of these performance metrics for the first half of fiscal year 2023 (May 1, 2022 through October 31, 2022). Subsequently, in December 2022, the Compensation Committee established threshold, target and maximum achievement levels for each of these performance metrics for the second half of fiscal year 2023 (November 1, 2022 through April 30, 2023). In establishing these performance levels in May and December, the Compensation Committee set them at an amount that it believed was necessary to motivate the eligible Named Executive Officers to achieve an aggressive level of growth and profitability. In setting the performance levels in December 2022 for the second half of fiscal 2023, the Compensation Committee continued to base the performance levels on the annual operating plan approved in May 2022 for fiscal 2023, and did not lower the performance levels, despite a significantly more challenging macroeconomic and customer spending environment. The Compensation Committee continued to focus on pay-for-performance, rather than lowering the performance levels for the Named Executive Officers based on the external environment. The Compensation Committee also raised the performance level for non-GAAP operating margin percentage, considering the restructuring actions the Company announced in November 2022. Following the Compensation Committee’s decisions in May 2022 and December 2022, the bonus targets and thresholds for our CEO and CTO for the first half of fiscal year 2023 and the bonus targets and thresholds for the second half of fiscal year 2023 were approved by the board of directors in June 2022 and December 2022, respectively (in each case upon the recommendation of the Compensation Committee). To the extent that performance for either metric was below the threshold performance level, there would be no payout with respect to that metric. In addition, the potential payment for any metric was capped at the maximum performance level. Achievement levels and payout percentages for performance between the threshold and maximum performance levels were set forth in tables approved by the Compensation Committee. For all three performance metrics, for achievement between threshold and target, and between target and maximum, the payout was to be determined on a linear interpolation basis. The performance levels for the three performance measures for the first half of fiscal year 2023 were established as follows:
Compensation Elements
| Cloud Revenue | | | | Attainment vs. Plan | Amount | Payout Percentage | | Below Threshold (<80%) | <$168 million | —% | | Threshold (80%) | $168 million | 50% | | Target (100%) | $210 million | 100% | | Maximum (>120%) | >$251 million | 150% |
Compensation Elements
| Total Revenue | | | | Attainment vs. Plan | Amount | Payout Percentage | | Below Threshold (<80%) | <$421 million | —% | | Threshold (80%) | $421 million | 50% | | Target (100%) | $526 million | 100% | | Maximum (>120%) | >$631 million | 150% |
Compensation Elements
| Non-GAAP Operating Margin Percentage | | | Non-GAAP Operating Margin Percentage | Payout Percentage | | Below Threshold (<-5.3%) | —% | | Threshold (-5.3%) | 50% | | Target (-0.3%) | 100% | | Maximum (>4.7%) | 150% |
Compensation Elements
| Cloud Revenue | | | | Attainment vs. Plan | Amount | Payout Percentage | | Below Threshold (<80%) | <$213 million | —% | | Threshold (80%) | $213 million | 50% | | Target (100%) | $267 million | 100% | | Maximum (>120%) | >$320 million | 150% |
Compensation Elements
| Total Revenue | | | | Attainment vs. Plan | Amount | Payout Percentage | | Below Threshold (<80%) | <$490 million | —% | | Threshold (80%) | $490 million | 50% | | Target (100%) | $613 million | 100% | | Maximum (>120%) | >$735 million | 150% |
Compensation Elements
| Non-GAAP Operating Margin Percentage | | | Non-GAAP Operating Margin Percentage | Payout Percentage | | Below Threshold (<-2.1%) | 0% | | Threshold (-2.1%) | 50% | | Target (2.9%) | 100% | | Maximum (>7.9%) | 150% |
Compensation Elements
Annual Cash Incentive Payouts For the six-month period ended October 31, 2022, we achieved cloud revenue of $201 million, which was 96.0% of the cloud revenue target, and total revenue of $514 million, which was 98% of the total revenue target. Our non-GAAP operating margin percentage was 0.1%, which exceeded the target level of -0.3%. Consequently, based on their weighting, the achievement of the performance metrics for the first half of fiscal year 2023 generated a combined payout percentage of 94.3% of the target annual cash incentive award opportunity for that six-month period, determined as follows:
Compensation Elements
| First Half of Fiscal Year 2023 (May 1, 2022 – October 31, 2022) | | | | | | | | Performance Measure | Weighting | Target Performance | Actual Achievement | Achievement Percentage | Payout Percentage | Weighted Payout Percentage | | Cloud Revenue | 50% | $210 million | $201 million | 96% | 89.8% | 44.9% | | Total Revenue | 30% | $526 million | $514 million | 98% | 94.6% | 28.4% | | Non-GAAP Operating Margin Percentage | 20% | -0.3% | 0.1% | N/A | 150.0% | 21.0% | | Total Payout Percentage | | | | | | 94.3% |
Compensation Elements
For the six-month period ended April 30, 2023, the achievement against performance levels was impacted by a significantly more challenging macroeconomic and customer spending environment, which was not considered at the time of setting the performance levels. For this period, we achieved cloud revenue of $223 million, which was 84.0% of the cloud revenue target, and total revenue of $555 million, which was 91.0% of the total revenue target. Our non-GAAP operating margin percentage was 8.3%, which exceeded the maximum level of 7.9%. Consequently, based on their weighting, the achievement of the performance metrics for the second half of fiscal year 2023 generated a combined payout percentage of 82.4% of the target annual cash incentive award opportunity for that six-month period, determined as follows:
Compensation Elements
| Second Half of Fiscal Year 2023 (November 1, 2022 – April 30, 2023) | | | | | | | | Performance Measure | Weighting | Target Performance | Actual Achievement | Achievement Percentage | Payout Percentage | Weighted Payout Percentage | | Cloud Revenue | 50% | $267 million | $223 million | 84% | 59.0% | 29.5% | | Total Revenue | 30% | $613 million | $555 million | 91% | 76.3% | 22.9% | | Non-GAAP Operating Margin Percentage | 20% | 2.9% | 8.3% | >100% | 150.0% | 30.0% | | Total Payout Percentage | | | | | | 82.4% |
Compensation Elements
| Named Executive Officer | Annual Cash Incentive for First Half of Fiscal Year 2023 ($) | Annual Cash Incentive for Second Half of Fiscal Year 2023 ($) | Total Annual Cash Incentive Award for Fiscal Year 2023 ($) | | Ashutosh Kulkarni | 281,878 | 247,200 | 529,078 | | Janesh Moorjani | 140,939 | 123,600 | 264,539 | | Shay Banon | 120,895 | 106,022 | 226,917 | | Ken Exner | 44,120 | 111,240 | 155,360 | | Carolyn Herzog | 119,798 | 105,060 | 224,858 |
Compensation Elements
In the case of our CEO and CTO, the board of directors determined the annual cash incentive award payout for the first half of fiscal year 2023 in December 2022 and determined the annual cash incentive award payout for the second half of fiscal year 2023 in June 2023. The annual cash incentive award payouts for our Named Executive Officers for the first half of the fiscal year were paid in the third fiscal quarter of fiscal year 2023 and the annual cash incentive award payouts for our Named Executive Officers for the second half of the fiscal year were paid in the first fiscal quarter of fiscal year 2024. The annual cash incentive awards paid to our Named Executive Officers for fiscal year 2023 are set forth in “Executive Compensation Tables—Fiscal 2023 Summary Compensation Table” below. Long-Term Incentive Compensation We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use equity awards to incentivize and reward our Named Executive Officers for long-term corporate performance based on the value of our ordinary shares and, thereby, to align their interests with the interests of our stakeholders. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our Named Executive Officers to create value for our shareholders. Equity awards also help us retain our Named Executive Officers in a highly competitive market and as such contribute to the long-term value creation for all our stakeholders. In addition to the initial equity award that each executive officer receives upon being hired, the compensation committee also grants some or all of our executive officers additional equity awards each year as part of our annual review of our executive compensation program. To date, the Compensation Committee has not applied a rigid formula in determining the size or type of the equity awards to be granted to our Named Executive Officers as part of our annual focal review of equity awards. Instead, in making these decisions and, in the case of our CEO and CTO, its recommendation to our board of directors, the Compensation Committee has exercised its judgment as to the amount and type of the awards after considering the performance of each Named Executive Officer, the unvested equity holdings of each Named Executive Officer, the ability of these unvested holdings to satisfy our retention objectives, and Compensia’s recommendations based on a review of compensation practices from our peers. In addition, in granting equity awards to all of our employees, including our Named Executive Officers, the Compensation Committee considers the proportion of our total ordinary shares outstanding used for annual employee long-term incentive compensation awards (our “burn rate”) in relation to the annual burn rate ranges of the companies in our compensation peer group and other recently-public technology companies with which the members of the Compensation Committee are familiar, the potential economic and voting power dilution to our shareholders in relation to the median practice of the companies in our compensation peer group and other recently-public technology companies and the other factors described in “Compensation-Setting Process—Setting Target Total Direct Compensation” above. Addition of Performance Share Unit Awards for Fiscal Year 2024 During the fiscal year 2023 the Compensation Committee determined that for fiscal year 2024 and going forward we would introduce PSUs as part of our long-term incentives based on achievement of performance. Since this determination, PSUs have been granted and implemented for fiscal year 2024. For fiscal year 2024, we currently anticipate that these awards will be approximately 25% of our equity award value, with the goal of increasing them to 50% of the equity award value over the next several years. The payout of these PSUs is tied to achievement of a total revenue goal, which we believe will further emphasize “at risk” and variable pay to our Named Executive Officers. Full details of these PSU awards will be provided in our 2024 proxy statement. Fiscal year 2023 Equity Awards In November 2022, as part of its annual review of our executive compensation program, and after taking into consideration a competitive market analysis prepared by Compensia and the recommendations of Mr. Kulkarni, our CEO (except with respect to his own and the CTO’s equity award), as well as the factors described in the preceding paragraph, the Compensation Committee determined that annual equity awards should be granted to Messrs. Moorjani and Exner and Ms. Herzog in the form of RSU awards with time-based vesting requirements that may be settled for ordinary shares. Accordingly, Messrs. Moorjani and Exner and Ms. Herzog received an annual RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $5.5 million, $2.0 million, and $1.75 million, respectively. In the case of Messrs. Kulkarni and Banon, our executive directors, after taking into consideration a competitive market analysis prepared by Compensia and the factors described above, the Compensation Committee recommended to our board of directors that they be granted an equity award for fiscal year 2023 in the form of an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $12.6 million and $3.0 million, respectively, which the board of directors approved in December 2022. The RSU awards generally vest over four years in equal quarterly installments, subject to continued service to us through the applicable vesting date. For more details regarding our annual equity awards, please see the section below titled “Executive Compensation Tables—Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End.” New Hire Equity Awards for Ms. Herzog In connection with her appointment as our CLO effective May 2, 2022, in June 2022 the Compensation Committee approved an equity award for Ms. Herzog (which was granted on June 8, 2022) in the form of an option to purchase ordinary shares with an award value of $1.25 million and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $3.75 million. The vesting schedule for such equity awards is set forth in the table below. New Hire Equity Awards for Mr. Exner In connection with his appointment as our CPO effective August 29, 2022, in September 2022 the Compensation Committee approved an equity award for Mr. Exner (which was granted on September 8, 2022) in the form of an option to purchase ordinary shares with an award value of $2.5 million and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $7.5 million. The vesting schedule for such equity awards is set forth in the table below. The aggregate equity awards granted to our Named Executive Officers for fiscal year 2023 were as follows:
Compensation Elements
| Named Executive Officer | RSU Awards (aggregate # of shares) | RSU Awards (aggregate award value) | | Ashutosh Kulkarni | 232,644 | $12.6 million | | Janesh Moorjani | 101,550 | $5.5 million | | Shay Banon | 55,391 | $3.0 million | | Carolyn Herzog | 92,794(1) | $5.5 million | | Ken Exner | 126,586(2) | $9.5 million |
Compensation Elements
(1)Consists of (i) a new-hire RSU award covering 60,483 ordinary shares with an award value of $3.75 million and (ii) an annual RSU award covering 32,311 ordinary shares with an award value of $1.75 million. (2)Consists of (i) a new-hire RSU award covering 89,659 ordinary shares with an award value of $7.5 million and (ii) an annual RSU award covering 36,927 ordinary shares with an award value of $2.0 million. Health, Welfare and Retirement Benefits Our Named Executive Officers are eligible to participate in the same employee benefit plans, and on the same terms and conditions, as all other full-time, salaried employees in the jurisdiction where the Named Executive Officer is located. These benefits include medical, dental, and vision insurance, business travel insurance, an employee assistance program, health and dependent care flexible spending accounts, basic life insurance, accidental death and dismemberment insurance, short-term and long-term disability insurance and commuter benefits. We maintain a Section 401(k) plan for our employees, including our Named Executive Officers. The Section 401(k) plan is intended to qualify under Section 401(k) of the Code, so that contributions to the plan by employees or by us, and the investment earnings thereon, are not taxable to the employees until withdrawn, and so that contributions made by us, if any, will be deductible by us when made. Employees may elect to reduce their current compensation by up to the statutorily prescribed annual limits (including “catch-up” contributions for those age 50 and older) and to have the amount of such reduction contributed to their accounts under the Section 401(k) plan. The Section 401(k) plan permits us to make contributions up to the limits allowed by law on behalf of all eligible employees. Typically, we make matching contributions to the plan up to 6% of a participating employee’s eligible compensation, to a maximum match of $19,800 for calendar year 2023, $18,300 for calendar year 2022, and $17,400 for calendar year 2021. All participating employees’ interests in our matching contributions, if any, vest immediately at the time of contribution. The Section 401(k) plan also contains a Roth component. We also maintain defined-contribution plans for employees in certain other countries. In December 2022, we adopted a non-qualified deferred compensation plan that will be effective for fiscal year 2024 that enables select employees, including our executive officers, in the United States who receive compensation in excess of the 401(k) contribution limits imposed under the Internal Revenue Service to defer a portion of their base salary and annual bonus payouts, and associated federal and state income taxes, which provides additional tax and financial planning flexibility and helps us to attract and retain top talent. We do not offer any retirement benefits to our executive officer located in Israel, except to the extent certain social benefits are required pursuant to Israeli labor laws or are common practice in Israel, and such social benefits are applicable to all Israeli employees. Specifically, based on Israeli labor laws, an Israeli employee is entitled to severance pay upon termination of employment for any reason, including retirement, equal to the most recent monthly salary of such employee multiplied by the number of years of employment of such employee. We make a payment of 8.333% of each employee’s monthly base salary to an insurance or pension fund to pay for this future liability payable to our employees upon termination of their employment. In addition, we make a payment of up to 7.5% of each employee’s monthly base salary to another insurance or pension fund, and this accrued amount may be withdrawn by the employee only upon retirement (to the extent either the statutory severance or retirement amounts become payable to Mr. Banon, they will offset amounts otherwise payable to Mr. Banon under his employment agreement, as noted below). We generally provide all of our Israeli employees with a fixed travel allowance for commuting costs, except that we provide Mr. Banon with reimbursements for such costs, up to a maximum amount of ILS 550 per month. Also, as is customary in Israel applicable to all Israeli employees, we provide our Israeli employees with a certain amount of monthly contributions (7.5% of their base salary) to a savings fund designed for employee’s study and training purposes. The amounts of the above referenced benefits contributed by us to Mr. Banon in fiscal year 2023 are specified in the Fiscal 2023 Summary Compensation Table of this proxy statement. We design our employee benefits programs to be affordable and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. Perquisites and Other Personal Benefits Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our Named Executive Officers except as generally made available to our employees or in situations where we believe it is appropriate to assist an individual in the performance of their duties, to make them more efficient and effective, and for recruitment and retention purposes. During fiscal year 2023, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. In the case of our CEO and CTO, the board of directors will approve all perquisites or other personal benefits and subject them to periodic review upon the recommendation of the Compensation Committee.
Employment Arrangements
Employment Arrangements We have entered into a written employment agreement with Mr. Banon (the “Banon Employment Agreement”) and an employment letter with Mr. Kulkarni. We have entered into employment letters with each of Messrs. Moorjani and Exner and Ms. Herzog. The arrangements with Messrs. Banon and Kulkarni, our executive directors, were approved by the board of directors upon recommendation of the Compensation Committee. The arrangements with each of our other Named Executive Officers have been approved by the Compensation Committee. We believe that these arrangements were necessary to secure the service of these individuals in a highly competitive job market. Each of our written employment agreements and employment letters does not have a specific term, provides for “at will” employment (meaning that either we or the Named Executive Officer may terminate the employment relationship at any time without cause) and generally set forth the Named Executive Officer’s initial base salary, target annual cash incentive opportunity, if applicable, and eligibility to participate in our standard employee benefit plans and programs. The Banon Employment Agreement also provides that he may be eligible to receive certain severance payments and benefits in connection with certain terminations of employment with the Company, including a termination of employment in connection with a change in control of the Company, provided that such severance payments and benefits will be reduced by any statutory severance benefits required to be provided to Mr. Banon under applicable law. The amount and type of the severance payments and benefits provided under the Banon Employment Agreement, as well as the terms and conditions under which such severance payments and benefits may be provided, are identical in all material respects to the provisions regarding severance payments and benefits provided for in our change in control and severance agreements, as described under “Post-Employment Compensation” below. For detailed descriptions of the employment arrangements with our Named Executive Officers, see “Executive Compensation Tables—Potential Payments upon Termination or Change in Control” below.
Post-Employment Compensation
Post-Employment Compensation In addition to the severance provisions contained in the Banon Employment Agreement, we have entered into change in control and severance agreements with our other Named Executive Officers (collectively, the severance provisions in the Banon Employment Agreement and the change in control and severance agreements are referred to as the “Severance Arrangements”). The Severance Arrangements provide for certain protections in the event of specified involuntary terminations of employment, including an involuntary termination of employment in connection with a change in control of the Company, in exchange for executing a separation agreement and release of claims in our favor that becomes effective and irrevocable and resigning from all positions the Named Executive Officer may hold as an officer or director. The Severance Arrangements provide reasonable compensation in the form of severance pay and certain limited benefits to a Named Executive Officer if they leave our employ under certain circumstances to facilitate their transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing Named Executive Officer to sign a separation agreement and release of claims in a form and with terms acceptable to us providing for a general release of all claims as a condition to receiving post-employment compensation payments or benefits. We also believe that the Severance Arrangements help maintain our Named Executive Officers’ continued focus and dedication to their assigned duties to maximize stakeholder value if there is a potential transaction that could involve a change in control of the Company. Under the Severance Arrangements, all payments and benefits in the event of a change in control of the Company are payable only if there is a connected involuntary loss of employment by a Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention value following a change in control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction. In the event of a change in control of the Company, to the extent that any of the amounts provided for under the Severance Arrangements would constitute a “parachute payment” within the meaning of Section 280G of the Code and could be subject to the related excise tax under Section 4999 of the Code, a Named Executive Officer will receive such payment as would entitle them to receive the greatest after-tax benefit, even if it means that we pay the Named Executive Officer a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code. We do not provide any tax reimbursement payments (or “gross-ups”) on excise taxes relating to a change in control of the Company and have no such obligations in place with respect to any of our executive officers, including our Named Executive Officers. We believe that having in place reasonable and competitive post-employment compensation arrangements, including in the event of a change in control of the Company, are essential to attracting and retaining highly qualified executive officers. The Compensation Committee does not consider the specific amounts payable under the post-employment compensation arrangements when determining the annual compensation for our Named Executive Officers. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive. For detailed descriptions of the post-employment compensation arrangements with our Named Executive Officers, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Executive Compensation Tables—Potential Payments upon Termination or Change in Control” below.
Other Compensation Policies
Other Compensation Policies Equity Award Grant Policy Our equity award grant policy governs our grant of equity awards under our 2012 Plan and such other equity compensation plans as we may adopt from time to time. Pursuant to our equity award grant policy, duly authorized equity awards are granted to employees on predetermined grant dates in a manner that is consistent with the terms set forth in the policy. Consistent with our policy: •We do not grant long-term incentive awards in anticipation of the release of material non-public information and have never had a practice of doing so. •We have never timed and do not plan to time the release of material non-public information for the purpose of affecting the value of executive compensation. Compensation Recovery (“Clawback”) Policy Pursuant to Dutch corporate law, our Remuneration Policy provides that the short-term and long-term variable remuneration of the executive and non-executive directors of the Company, whether payable in cash or equity, may be adjusted or partly or fully clawed back to the extent it was paid on the basis of incorrect information (i) underlying the targets to be achieved or (ii) regarding the circumstances on which the variable remuneration was made conditional. As a public company listed on the NYSE, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the U.S. federal securities laws as a result of misconduct, the Chief Executive Officer and Chief Financial Officer may be legally required to reimburse Elastic for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002. The SEC has adopted final rules requiring the stock exchanges to adopt listing standards implementing the clawback requirement of Section 954 of the Dodd-Frank Act, which will apply to executive officers, and we intend to adopt a policy before the compliance deadline later in 2023. Prohibition on Hedging and Pledging of Securities Under our Insider Trading Policy, our employees, including officers, and the members of our board of directors are prohibited from engaging in transactions in publicly-traded options, such as puts and calls, other derivative securities with respect to our securities (other than share options, share appreciation rights and other securities issued pursuant to Company benefit plans or other compensatory arrangements with the Company), and debt securities (such as debentures, bonds and notes). This includes any hedging or similar transaction designed to decrease the risks associated with holding our securities. In addition, our employees, including officers, and the members of our board of directors may not engage in short sales (that is, the sale of a security that must be borrowed to make delivery) or “sell short against the box” (that is, a sale with a delayed delivery) involving our securities. Also, under our Insider Trading Policy, our employees, including officers, and the members of our board of directors may not pledge our securities as collateral for a loan or hold our securities in a margin account.
Tax and Accounting Considerations
Tax and Accounting Considerations The Compensation Committee takes the applicable tax and accounting requirements into consideration in designing and overseeing our executive compensation program. Deductibility of Executive Compensation Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our CEO and certain other current and former executive officers that are “covered employees” within the meaning of Section 162(m) to $1 million per individual per year, subject to certain exceptions. The regulations promulgated under Section 162(m) contain a transition rule that applies to companies that become subject to Section 162(m) by reason of becoming publicly held. Pursuant to this rule, certain compensation granted during a transition period (and, with respect to RSU awards, that are paid out before the end of the transition period) currently is not counted toward the deduction limitations of Section 162(m) if the compensation is paid under a compensation arrangement that was in existence before the effective date of the initial public offering and certain other requirements are met. Our transition period ended at our annual general meeting of shareholders held in October 2022. Although the Compensation Committee may consider the tax implications as one factor in making compensation decisions for our covered employees, the Compensation Committee also considers other factors in making such decisions, including ensuring that our executive compensation program supports our business strategy. Consequently, the Compensation Committee retains the discretion and flexibility to compensate our Named Executive Officers in a manner consistent with the objectives of our executive compensation program and the best interests of the Company and our shareholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit of Section 162(m). During fiscal year 2023, our transition relief period ended, and, accordingly, a portion of our Named Executive Officers' compensation was not fully deductible for U.S. federal income tax purposes. However, the amount of compensation paid to covered employees within the meaning of Section 162(m) that we were not able to deduct for U.S. Federal income tax purposes during fiscal year 2023 was not material to our overall business. Accounting for Stock-Based Compensation The Compensation Committee takes accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record a compensation expense in our income statement for all equity awards granted to our executive officers and other employees. This compensation expense is based on the grant date “fair value” of the equity award and, in most cases, will be recognized ratably over the award’s requisite service period (which, generally, will correspond to the award’s vesting schedule). This compensation expense is also reported in the compensation tables below, even though recipients may never realize any value from their equity awards.
Fiscal 2023 Summary Compensation Table
Fiscal 2023 Summary Compensation Table The following table provides information concerning compensation awarded to, earned by or paid to each of our Named Executive Officers for all services rendered in all capacities during the last three fiscal years during which such individuals were Named Executive Officers. The amounts reported reflect rounding, which may result in slight variations between amounts shown in the Total column and the sum of its components as reflected in the table.
Fiscal 2023 Summary Compensation Table
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | | Ashutosh Kulkarni | 2023 | 600,000 | — | 12,599,999 | — | 529,078 | 11,794(3) | 13,740,871 | | Chief Executive Officer | 2022 | 530,834 | — | 7,122,290 | 9,838,736 | 376,635 | 19,575(3) | 17,888,070 | | | 2021 | 164,773 | 200,000 | 6,495,748 | 3,416,442 | 125,191 | 3,750(3) | 10,405,903 | | Janesh Moorjani | 2023 | 500,000 | — | 5,499,948 | — | 264,539 | 15,000(3) | 6,279,487 | | Chief Financial Officer and Chief Operating Officer | 2022 | 432,500 | — | 3,961,090 | 4,359,393 | 251,252 | 20,100(3) | 9,024,335 | | | 2021 | 365,000 | — | 1,837,750 | 2,090,179 | 275,825 | 17,100(3) | 4,585,853 | | Shay Banon | 2023 | 428,891(4) | — | 2,999,977 | — | 226,917(4) | 95,771(4)(5) | 3,751,556 | | Chief Technology Officer | 2022(6) | 426,286(7) | — | 3,406,374 | 3,724,552 | 248,728(7) | 77,971(7)(8) | 7,883,912 | | | 2021(6) | 387,720(9) | — | 4,594,666 | 5,225,530 | 291,827(9) | 65,864(9)(10) | 10,565,607 | | Carolyn Herzog | 2023 | 425,001 | — | 6,485,783 | 1,747,238 | 224,858 | 23,021(3) | 8,905,901 | | Chief Legal Officer | | | | | | | | | | Ken Exner | 2023 | 304,688 | — | 9,609,326 | 2,822,318 | 155,360 | 19,522(3) | 12,911,214 | | Chief Product Officer | | | | | | | | |
Fiscal 2023 Summary Compensation Table
(1)The amounts shown represent the grant date fair value of RSU awards and options, as applicable, to settle or purchase ordinary shares granted to the Named Executive Officers for financial reporting purposes pursuant to ASC Topic 718. Such amounts do not represent the amounts paid to or realized by the Named Executive Officers. See Note 11, “Equity Incentive Plans” of the Notes to our Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal year 2023 regarding assumptions underlying valuation of equity awards. (2)Except as otherwise indicated, the amounts reported represent the amounts earned based upon achievement of certain performance goals under our Bonus Plan. The terms of the Bonus Plan are summarized under “Compensation Discussion and Analysis—Compensation Elements—Annual Cash Incentives.” (3)The amount disclosed represents Elastic’s contributions made under our Section 401(k) plan. (4)Amounts have been reported on an as-converted basis from ILS to U.S. dollars (“USD”) based on a spot currency exchange rate of 1 ILS=USD 0.2748 as of our fiscal year end, April 30, 2023. (5)The listed amount is the sum of the following amounts: (i) contributions by Elastic of $35,727 in ILS to a severance fund under a Section 14 Arrangement pursuant to Israeli Severance Pay Law, (ii) contributions by Elastic of $27,878 in ILS to a pension and manager’s insurance fund pursuant to Israeli labor laws, and (iii) contributions by Elastic of $32,167 in ILS to an education savings fund. (6)Mr. Banon served as our Chief Executive Officer for all of fiscal year 2021 and a portion of fiscal year 2022, and as such, his summary compensation for such years reflect a higher compensation package. (7)Amounts have been reported on an as-converted basis from ILS to U.S. dollars (“USD”) based on a spot currency exchange rate of 1 ILS=USD 0.2991 as of our fiscal year end, April 30, 2022. (8)The listed amount is the sum of the following amounts: (i) contributions by Elastic of $35,510 in ILS to a severance fund under a Section 14 Arrangement pursuant to Israeli Severance Pay Law, (ii) contributions by Elastic of $27,973 in ILS to a pension and manager’s insurance fund pursuant to Israeli labor laws, and (iii) contributions by Elastic of $14,488 in ILS to an education savings fund. (9)A portion of each listed amount was paid in ILS in connection with Mr. Banon’s transfer of employment to Israel in March 2021 and has been reported on an as-converted basis from ILS to USD based on a spot currency exchange rate of 1 ILS=USD 0.3081 as of our fiscal year end, April 30, 2021. With respect to Salary, $50,220 was paid in ILS. With respect to Non-Equity Incentive Plan Compensation, $149,285 was paid in ILS. With respect to All Other Compensation, $8,174 was paid in ILS (see also footnote (10) below). (10)The listed amount is the sum of the following amounts: (i) cash payout of $57,690 in USD to Mr. Banon for earned and unused paid time off in accordance with applicable laws upon his relocation from the United States to Israel, (ii) contributions by Elastic of $4,184 in ILS to a severance fund under a Section 14 Arrangement pursuant to Israeli Severance Pay Law, (iii) contributions by Elastic of $3,264 in ILS to a pension and manager’s insurance fund pursuant to Israeli labor laws, and (iv) contributions by Elastic of $726 in ILS to an education savings fund.
Fiscal 2023 Grants of Plan-Based Awards
Fiscal 2023 Grants of Plan-Based Awards The following table provides information concerning each grant of an award made during fiscal year 2023 for each of our Named Executive Officers under any plan. See “Compensation Discussion and Analysis—Compensation Elements—Long-Term Incentive Compensation.” This information supplements the information about these awards set forth in the Fiscal 2023 Summary Compensation Table above.
Fiscal 2023 Grants of Plan-Based Awards
| | | | | Estimated possible payouts under non-equity incentive plan awards(1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(2) | Exercise or Base Price of Option Awards ($)(3) | Grant Date Fair Value of Stock Awards ($)(4) | | Name | Approval Date | Grant Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | | | | | | Ashutosh Kulkarni | | | Annual Cash | 300,000 | 600,000 | 900,000 | | | | | | | 12/7/2022 | 12/8/2022 | RSUs | | | | 232,644 | | | | | Janesh Moorjani | | | Annual Cash | 150,000 | 300,000 | 450,000 | | | | | | | 12/1/2022 | 12/8/2022 | RSUs | | | | 101,550 | | | | | Shay Banon | | | Annual Cash | 128,667 | 257,335 | 386,002 | | | | | | | 12/7/2022 | 12/8/2022 | RSUs | | | | 55,391 | | | | | Carolyn Herzog | | | Annual Cash | 127,500 | 255,000 | 382,501 | | | | | | | 6/6/2022 | 6/8/2022 | RSUs | | | | 60,483 | | | | | | 12/1/2022 | 12/8/2022 | RSUs | | | | 32,311 | | | | | | 6/6/2022 | 6/8/2022 | Options | | | | | 37,620 | 78.30 | 1,747,238 | | Ken Exner | | | Annual Cash | 91,406 | 182,813 | 274,219 | | | | | | | 9/6/2022 | 9/8/2022 | RSUs | | | | 89,659 | | | | | | 12/1/2022 | 12/8/2022 | RSUs | | | | 36,927 | | | | | | 9/6/2022 | 9/8/2022 | Options | | | | | 56,485 | 84.87 | 2,822,318 |
Fiscal 2023 Grants of Plan-Based Awards
(1)Reflects threshold, target and maximum potential payments for awards under the Fiscal Year 2023 Bonus Plan described in the section above entitled “Compensation Discussion and Analysis—Compensation Elements—Annual Cash Incentives.” Under these awards, the Named Executive Officers were eligible to receive a cash payout subject to the achievement of pre-established corporate performance metrics. (2)All RSU awards and stock options were granted pursuant to the 2012 Plan. (3)The exercise price of the stock options is equal to the closing market price of our ordinary shares on the date of grant. (4)The amounts shown represent the grant date fair value of the RSU awards and options to purchase shares of ordinary shares granted to the Named Executive Officers for financial reporting purposes pursuant to ASC Topic 718. Such amounts do not represent the amounts paid to or realized by the Named Executive Officers. See Note 11, “Equity Incentive Plans” of the Notes to our Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal year 2023 regarding assumptions underlying valuation of equity awards.
Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End
Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End The following table sets forth information regarding outstanding equity awards held by our Named Executive Officers as of April 30, 2023:
Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End
| | | Option Awards | | | | Stock Awards | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | Ashutosh Kulkarni | 3/8/2022(2) | 58,339 | 128,347 | 75.85 | 03/07/2032 | | | | | 12/8/2021(3) | 8,726 | 17,453 | 128.31 | 12/07/2031 | | | | | 3/8/2021(4) | 3,417 | 3,145 | 111.20 | 03/07/2031 | | | | | 2/9/2021(5) | 17,670 | 13,745 | 166.43 | 02/08/2031 | | | | | 12/8/2022(6) | | | | | 218,104 | 12,486,454 | | | 3/8/2022(7) | | | | | 47,631 | 2,726,875 | | | 12/8/2021(8) | | | | | 9,126 | 522,464 | | | 3/8/2021(9) | | | | | 29,209 | 1,672,215 | | Janesh Moorjani | 3/8/2022(10) | 32,756 | 27,718 | 75.85 | 03/07/2032 | | | | | 12/8/2021(3) | 8,726 | 17,453 | 128.31 | 12/07/2031 | | | | | 12/8/2020(11) | 14,564 | 10,404 | 145.83 | 12/07/2030 | | | | | 6/8/2019(12) | 19,094 | 38,191 | 81.39 | 06/07/2029 | | | | | 4/2/2018(13) | 13,865 | 6,250 | 13.07 | 04/01/2028 | | | | | 9/7/2017(14) | 58,931 | — | 10.15 | 09/06/2027 | | | | | 12/8/2022(6) | | | | | 95,204 | 5,450,429 | | | 3/8/2022(15) | | | | | 14,884 | 852,109 | | | 12/8/2021(8) | | | | | 9,126 | 522,464 | | | 12/8/2020(16) | | | | | 6,301 | 360,732 | | | 6/8/2019(17) | | | | | 7,956 | 455,481 | | Shay Banon | 12/8/2021(3) | 17,453 | 34,906 | 128.31 | 12/07/2031 | | | | | 12/8/2020(11) | 36,412 | 26,009 | 145.83 | 12/07/2030 | | | | | 4/2/2018(18) | 108,334 | — | 13.07 | 04/02/2028 | | | | | 9/7/2017(19) | 18,007 | — | 10.15 | 09/06/2027 | | | | | 12/8/2022(6) | | | | | 51,930 | 2,972,993 | | | 12/8/2021(8) | | | | | 18,252 | 1,044,927 | | | 12/8/2020(16) | | | | | 15,754 | 901,917 | | Carolyn Herzog | 6/8/2022(20) | 7,837 | 29,783 | 78.30 | 06/07/2032 | | | | | 12/8/2022(6) | | | | | 30,292 | 1,734,217 | | | 6/8/2022(21) | | | | | 49,143 | 2,813,437 | | Ken Exner | 9/8/2022(22) | 8,237 | 48,248 | 84.87 | 09/07/2032 | | | | | 12/8/2022(6) | | | | | 34,620 | 1,981,995 | | | 9/8/2022(23) | | | | | 78,452 | 4,491,377 |
Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End
(1)The market value of unvested RSUs is calculated by multiplying the number of unvested RSUs held by the applicable named executive officer by the closing market price of our ordinary shares on April 30, 2023, which was $57.25. (2)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on February 11, 2022, subject to continued service to us through the applicable vesting date. (3)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on January 8, 2022, subject to continued service to us through the applicable vesting date. (4)One-fourth of the ordinary shares subject to the option vest on March 8, 2022, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date. (5)One-fourth of the ordinary shares subject to the option vest on January 4, 2022, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date. (6)The ordinary shares subject to the award of RSUs vest in 16 quarterly installments beginning on March 8, 2023, subject to continued service to us through the applicable vesting date. (7)The ordinary shares subject to the award of RSUs vest as follows: (i) two-thirds of the ordinary shares subject to the award of RSUs vest in 16 equal quarterly installments beginning on June 8, 2022 and (ii) one-third of the ordinary shares subject to the award of RSUs vest in eight equal quarterly installments beginning on June 8, 2022, in each case subject to continued service to us through the applicable vesting date. (8)The ordinary shares subject to the award of RSUs vest in 16 quarterly installments beginning on March 8, 2022, subject to continued service to us through the applicable vesting date. (9)One-fourth of the ordinary shares subject to the award of RSUs vest on March 8, 2021, and one-eighth of the ordinary shares subject to the award vest in six equal semiannual installments thereafter, subject to continued service to us through the applicable vesting date. (10)The ordinary shares subject to the option vest in 24 equal monthly installments beginning on April 8, 2022, subject to continued service to us through the applicable vesting date. (11)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on January 8, 2021, subject to continued service to us through the applicable vesting date. (12)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on January 8, 2022, subject to continued service to us through the applicable vesting date. (13)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on November 1, 2019, subject to continued service to us through the applicable vesting date. (14)The option was subject to an early option exercise provision and was immediately exercisable. One-fourth of the ordinary shares subject to the option vested on August 28, 2018, and 1/48th of the ordinary shares subject to the option vested monthly thereafter. The option became fully vested on August 28, 2021. (15)The ordinary shares subject to the award of RSUs vest in eight equal quarterly installments beginning on June 8, 2022, subject to continued service to us through the applicable vesting date. (16)The ordinary shares subject to the award of RSUs vest in eight equal semiannual installments beginning on June 8, 2021, subject to continued service to us through the applicable vesting date. (17)The ordinary shares subject to the award of RSUs vest in eight equal semiannual installments beginning on June 8, 2022, subject to continued service to us through the applicable vesting date. (18)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on May 2, 2018, subject to continued service to us through the applicable vesting date. The option became fully vested on April 2, 2022. (19)The ordinary shares subject to the option vested in 48 equal monthly installments beginning on May 1, 2017, subject to continued service to us through the applicable vesting date. The option became fully vested on April 1, 2021. (20)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on July 8, 2022, subject to continued service to us through the applicable vesting date. (21)The ordinary shares subject to the award of RSUs vest in 16 quarterly installments beginning on September 8, 2022, subject to continued service to us through the applicable vesting date. (22)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on October 8, 2022, subject to continued service to us through the applicable vesting date. (23)The ordinary shares subject to the award of RSUs vest in 16 quarterly installments beginning on December 8, 2022, subject to continued service to us through the applicable vesting date.
Fiscal 2023 Stock Option Exercises and Stock Vested Table
Fiscal 2023 Stock Option Exercises and Stock Vested Table The following table presents, for each of our Named Executive Officers, the number of ordinary shares acquired and the related value realized upon the exercise of stock options and the vesting of RSUs during fiscal year 2023.
Fiscal 2023 Stock Option Exercises and Stock Vested 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 ($)(2) | | Ashutosh Kulkarni | 0 | 0 | 56,276 | 3,811,607 | | Janesh Moorjani | 7,651 | 297,777 | 30,351 | 2,027,155 | | Shay Banon | 0 | 0 | 17,975 | 1,189,562 | | Carolyn Herzog | 0 | 0 | 13,359 | 873,531 | | Ken Exner | 0 | 0 | 13,514 | 778,198 |
Fiscal 2023 Stock Option Exercises and Stock Vested Table
(1)The value realized on exercise is calculated as the difference between the market value of our ordinary shares underlying the options on the date of exercise and the applicable exercise price of those options. (2)The value realized upon vesting is calculated by multiplying the number of ordinary shares released upon vesting of the RSUs by the market value of such ordinary shares on the vesting date.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control The table below provides information with respect to potential payments and benefits to which our Named Executive Officers would be entitled under the arrangements set forth in their change in control and severance agreements or employment agreement, as applicable, assuming their employment was terminated as of April 30, 2023, including in connection with a change in control as of April 30, 2023. The amounts reported reflect rounding, which may result in slight variations between amounts shown in the Total column and the sum of its components as reflected in the table.
Potential Payments Upon Termination or Change in Control
| Name | Termination Reason | Base Salary ($) | Bonus ($) | Accelerated Vesting of Equity Awards ($)(1) | Continuation of Insurance Coverage ($)(2) | Total ($) | | Ashutosh Kulkarni | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 600,000 | 600,000 | 17,408,008 | 21,302 | 18,629,309 | | | Termination Without Cause or Resignation for Good Reason | 300,000 | 300,000 | — | 21,302 | 621,302 | | Janesh Moorjani | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 500,000 | 300,000 | 7,917,340 | 17,333 | 8,734,673 | | | Termination Without Cause or Resignation for Good Reason | 250,000 | 150,000 | — | 17,333 | 417,333 | | Shay Banon | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 428,891 | 257,335 | 4,919,836 | 5,325 | 5,611,387 | | | Termination Without Cause or Resignation for Good Reason | 214,446 | 128,667 | — | 5,325 | 348,438 | | Carolyn Herzog | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 425,000 | 255,000 | 4,547,654 | 21,302 | 5,248,956 | | | Termination Without Cause or Resignation for Good Reason | 212,500 | 127,500 | — | 21,302 | 361,302 | | Ken Exner | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 450,000 | 450,000 | 6,473,372 | — | 7,373,372 | | | Termination Without Cause or Resignation for Good Reason | 225,000 | 225,000 | — | — | 450,000 |
Potential Payments Upon Termination or Change in Control
(1)The value of accelerated vesting of unvested RSUs is based upon the closing market price of our ordinary shares on April 30, 2023 of $57.25, multiplied by the number of unvested RSUs. The value of accelerated vesting of unvested stock options is based on the difference between the closing market price of our ordinary shares on April 30, 2023 of $57.25, and the exercise price per option multiplied by the number of unvested options. (2)This is based on the payment of monthly COBRA premiums as of April 30, 2023 for a 12-month period.
CEO PAY RATIO
CEO PAY RATIO Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of annual total compensation of our median compensated employee to that of Ashutosh Kulkarni, our CEO, in fiscal year 2023. The ratio presented below is a reasonable estimate calculated in a manner consistent with SEC rules and applicable guidelines. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. The pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. As a result, and as explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, shareholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow shareholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures. We identified the median employee using the following methodology: For each member of the applicable employee population, we used the total of their target cash compensation and equity awards received during fiscal year 2023. For employees paid other than in U.S. dollars, we converted their compensation to U.S. dollars using our anticipated exchange rate for fiscal year 2023. With respect to equity awards, we determined the grant date fair value of restricted stock units and options awarded during fiscal year 2023 computed in accordance with FASB ASC Topic 718 using the closing price of our common stock on the date of grant for restricted stock units and the Black-Scholes option-pricing model for stock options. In determining our employee population, we considered the individuals other than our CEO who were employed by us on March 1, 2023, whether employed in a full-time, part-time or temporary capacity. We did not include any contractors, agency workers or other non-employees. After identifying the median employee, we then calculated the total fiscal year 2023 compensation for this individual using the same methodology we use to calculate the fiscal year 2023 amount reported for our CEO in the “Total” column of the Fiscal 2023 Summary Compensation Table as set forth in the “Executive Compensation” section of this proxy statement. For our fiscal year 2023: For fiscal year 2023, the total compensation for our CEO, Mr. Kulkarni, was $13,740,871 as reported in the “Total” column of the Fiscal 2023 Summary Compensation Table as set forth in the “Executive Compensation” section of this proxy statement. The fiscal year 2023 annual total compensation for our median employee was $210,697. Thus, the ratio of our CEO’s total fiscal year 2023 compensation to our median employee’s total fiscal year 2023 compensation was 65:1. Neither the Compensation Committee nor our management used this pay ratio in making compensation decisions. CEO Pay Ratio | Elastic 2023 Proxy Statement 74
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE Pursuant to Section 953(a) of the Dodd-Frank Act, and Item 402(v) of Regulation S-K (the “PvP Rules”), we are providing the following: (1) tabular compensation and performance disclosure for our fiscal years 2021, 2022, and 2023; (2) a list of three performance measures that we consider to be our most important measures used to align compensation actually paid (as calculated per SEC Item 402(v) of Regulation S-K, “compensation actually paid”) in 2023 to the named executive officers (as used in this Pay Versus Performance Section, the “NEOs”) to Company performance; and (3) additional disclosure regarding the relationship between the “compensation actually paid” set forth in the Pay Versus Performance Table and each of the performance metrics set forth in the Pay Versus Performance Table and between the Company’s total shareholder return (“TSR”) and the TSR Peer Group (as set forth in the table below), in each case over fiscal years 2021-2023. For further information concerning our pay-for-performance philosophy and how we align executive compensation with our performance, see “Executive Compensation—Compensation Discussion and Analysis” in this proxy statement and in our proxy statements filed for fiscal years 2021 and 2022. In the below pay versus performance table, we provide information about compensation of our NEOs for each of the last three fiscal years (the “Covered Years”). Additionally, we provide information about the results for certain financial performance measures during the Covered Years. Although the PVP Rules require us to disclose “compensation actually paid,” these amounts do not necessarily reflect compensation that our NEOs actually earned in the Covered Years. Instead, “compensation actually paid” reflects a calculation computed in accordance with the PVP Rules, including adjusted values for unvested and vested equity awards during the Covered Years based on either year-end or vesting date stock prices and various accounting valuation assumptions. “Compensation actually paid” generally fluctuates due to stock price performance.
PAY VERSUS PERFORMANCE
| Pay Versus Performance | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for PEO | Compensation Actually Paid to PEO | Summary Compensation Table Total to Former PEO | Compensation Actually Paid to Former PEO | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid for Non-PEO NEOs | Elastic Total Shareholder Return | Peer Group Total Shareholder Return | Net Income | Total Revenue | | (1) | (2) | (3) | (2) | (3) | (2) | (4) | (5) | (6) | | (7) | | 2023 | $13,740,871 | $9,400,758 | $0 | $0 | $7,962,040 | $5,196,020 | $89 | $170 | ($236,161,000) | $1,068,989,000 | | 2022 | $17,888,070 | $12,888,629 | $7,883,912 | $1,805,028 | $4,869,634 | ($156,939) | $119 | $157 | ($203,848,000) | $862,374,000 | | 2021 | $0 | $0 | $10,565,607 | $14,780,038 | $6,642,551 | $13,659,402 | $188 | $154 | ($129,434,000) | $608,489,000 |
PAY VERSUS PERFORMANCE
(1)Mr. Kulkarni served as our Principal Executive Officer (our “PEO”) for the entirety of fiscal year 2023 and from January 11, 2022 to the end of fiscal year 2022 on April 30, 2022. Mr. Banon (our “Former PEO”) served as the PEO for the entirety of fiscal year 2021 and during fiscal year 2022 from May 1, 2021 to January 11, 2022. Mr. Kulkarni served as a non-PEO NEO (“Reported NEO”) during fiscal year 2021 and during fiscal year 2022 until his appointment to PEO on January 11, 2022. Mr. Banon served as a Reported NEO during fiscal 2022 from January 11, 2022 until the end of fiscal 2022 on April 30, 2022 and during the entirety of fiscal year 2023. For the purposes of this Pay Versus Performance disclosure, both our PEO and Former PEO are included solely as PEOs in fiscal 2022. Our Reported NEOs for the indicated fiscal years were as follows: 2023: Mr. Banon, Mr. Moorjani, Ms. Herzog, and Mr. Exner 2022: Mr. Moorjani, Paul Appleby, and W.H. Baird Garrett 2021: Mr. Kulkarni, Mr. Moorjani, Mr. Appleby, and Mr. Garrett (2)Amounts reported in these columns represent (i) the total compensation reported in the Summary Compensation Table for the indicated fiscal year in the case of our PEO, (ii) the total compensation reported in the Summary Compensation Table for the indicated fiscal year in the case of our Former PEO, and (iii) the average of the total compensation reported in the Summary Compensation Table for the Reported NEOs for the indicated fiscal year. (3)Amounts reported in these columns represent the compensation actually paid to (i) our PEO and (ii) our Former PEO for the indicated fiscal year, as calculated pursuant to PVP Rules based on their total compensation reported in the Summary Compensation Table for the indicated fiscal year and adjusted as shown in the tables below:
PAY VERSUS PERFORMANCE
| PEO A. Kulkarni | | | | | +/- | | 2022 | 2023 | | | Summary Compensation Table - Total Compensation | $17,888,070 | $13,740,871 | | - | Grant Date Fair Value of Stock Awards and Option Awards Granted in Fiscal Year | $(16,961,026) | $(12,599,999) | | + | Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option Awards Granted in Fiscal Year | $14,901,807 | $12,486,454 | | + | Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards Granted in Prior Fiscal Years | $(2,813,346) | $(4,358,806) | | + | Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That Vested During Fiscal Year | $694,968 | $872,545 | | + | Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | $(821,844) | $(740,308) | | - | Fair Value as of Prior Fiscal Year End of Stock Awards and Option Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | $— | $— | | = | Compensation Actually Paid | $12,888,629 | $9,400,758 |
PAY VERSUS PERFORMANCE
| Former PEO S. Banon | | | | | +/- | | 2021 | 2022 | | | Summary Compensation Table - Total Compensation | $10,565,607 | $7,883,912 | | - | Grant Date Fair Value of Stock Awards and Option Awards Granted in Fiscal Year | $(9,820,196) | $(7,130,926) | | + | Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option Awards Granted in Fiscal Year | $3,800,374 | $1,895,048 | | + | Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards Granted in Prior Fiscal Years | $— | $(1,051,107) | | + | Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That Vested During Fiscal Year | $— | $125,835 | | + | Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | $10,234,252 | $82,265 | | - | Fair Value as of Prior Fiscal Year End of Stock Awards and Option Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | $— | $— | | = | Compensation Actually Paid | $14,780,038 | $1,805,028 |
PAY VERSUS PERFORMANCE
Equity Award values are calculated in accordance with FASB ASC Topic 718, and the valuation methodology used to calculate fair values did not materially differ from those disclosed at the time of grant. (4)Amounts reported in this column represent the compensation actually paid to the Reported NEOs in the indicated fiscal year, as calculated pursuant to the PVP Rules based on the average total compensation for such NEOs reported in the Summary Compensation Table for the indicated fiscal year and adjusted as shown in the table below:
PAY VERSUS PERFORMANCE
| Reported NEO Average | | | | | | +/- | | 2021 | 2022 | 2023 | | | Summary Compensation Table - Total Compensation | $6,642,551 | $4,869,634 | $7,962,040 | | - | Grant Date Fair Value of Stock Awards and Option Awards Granted in Fiscal Year | $(6,050,981) | $(4,259,074) | $(7,291,148) | | + | Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option Awards Granted in Fiscal Year | $5,971,413 | $2,950,323 | $5,188,077 | | + | Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards Granted in Prior Fiscal Years | $3,522,030 | $(2,454,512) | $(1,060,359) | | + | Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That Vested During Fiscal Year | $53,999 | $133,070 | $615,935 | | + | Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | $3,520,390 | $944,984 | $(218,524) | | - | Fair Value as of Prior Fiscal Year End of Stock Awards and Option Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | $— | $(2,341,364) | $— | | = | Compensation Actually Paid | $13,659,402 | $(156,939) | $5,196,020 |
PAY VERSUS PERFORMANCE
See footnote (1) for the Reported NEOs included in the average for each indicated fiscal year. For the avoidance of doubt, Mr. Kulkarni is included as a Reported NEO for only fiscal year 2021, while Mr. Banon is included as a Reported NEO for only fiscal year 2023. Equity Award values are calculated in accordance with FASB ASC Topic 718, and the valuation methodology used to calculate fair values did not materially differ from those disclosed at the time of grant. (5)Pursuant to the PVP Rules, the comparison assumes $100 was invested in our common stock on April 30th, 2020, using the closing stock price on that date. Historic stock price performance is not necessarily indicative of future stock price performance. (6)The TSR Peer Group is the S&P 500 Information Technology Index. This calculation assumes that $100 was invested in this index on April 30th, 2020 (aligned with the period used in footnote (5) above). (7)Our total revenue is a key driver of our performance and stockholder value creation. Total revenue will be the sole performance metric used in our inaugural performance share unit awards in fiscal year 2024, and had a 30% weighting among the performance measures used to determine annual bonuses under the Fiscal Year 2023 Bonus Plan.

DEF 14A of Elastic N.V.

Board of Directors

Board of Directors

Board of Directors

Board of Directors

Board Diversity

Board Diversity

Board Skills and Experience Matrix

Board Skills and Experience Matrix

Board Skills and Experience Matrix

Nominees for Director

Nominees for Director

Nominees for Director

Nominees for Director

Continuing Directors

Continuing Directors

Continuing Directors

Continuing Directors

Continuing Directors

Continuing Directors

Continuing Directors

Non-Executive Director Compensation

Fiscal 2023 Non-Executive Director Compensation Table

Fiscal 2023 Non-Executive Director Compensation Table

Fiscal 2023 Non-Executive Director Compensation Table

Executive Summary

•2023 Long-Term Incentive Compensation

•Addition of Performance Share Units for Fiscal Year 2024

•Addition of Performance Share Units for Fiscal Year 2024

Executive Compensation Policies and Practices

Executive Compensation Philosophy and Objectives

Compensation-Setting Process

Compensation-Setting Process

Compensation-Setting Process

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Compensation Elements

Employment Arrangements

Post-Employment Compensation

Other Compensation Policies

Tax and Accounting Considerations

Fiscal 2023 Summary Compensation Table

Fiscal 2023 Summary Compensation Table

Fiscal 2023 Summary Compensation Table

Fiscal 2023 Grants of Plan-Based Awards

Fiscal 2023 Grants of Plan-Based Awards

Fiscal 2023 Grants of Plan-Based Awards

Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End

Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End

Fiscal 2023 Outstanding Equity Awards as of Fiscal Year End

Fiscal 2023 Stock Option Exercises and Stock Vested Table

Fiscal 2023 Stock Option Exercises and Stock Vested Table

Fiscal 2023 Stock Option Exercises and Stock Vested Table

Potential Payments Upon Termination or Change in Control

Potential Payments Upon Termination or Change in Control

Potential Payments Upon Termination or Change in Control

CEO PAY RATIO

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE

PAY VERSUS PERFORMANCE