SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Securities Exchange Act of 1934
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
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Fee paid previously with preliminary materials. |
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 22, 2023
To the stockholders of NextGen Healthcare, Inc.:
Notice is hereby given that the 2023 Annual Meeting of Stockholders (“Annual Meeting”) of NextGen Healthcare, Inc., a Delaware corporation (the “Company”), will be held at 18101 Von Karman Ave, Suite 200, Irvine, CA 92612 on August 22, 2023, at 10:00 a.m. Pacific Time, for the following purposes:
These items are described more fully in the accompanying proxy statement.
All stockholders are cordially invited to attend the Annual Meeting in person. Only stockholders of record at the close of business on July 13, 2023, are entitled to notice of and to vote at the Annual Meeting and at any adjournments or postponements of the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete and sign the enclosed proxy card and return it in the enclosed addressed envelope. Your promptness in returning the proxy card will assist in the expeditious and orderly processing of the proxy and will assure that you are represented at the Annual Meeting even if you cannot attend the meeting in person. You may also vote by telephone or internet by following the instructions on the proxy card. If you return your proxy card or vote by telephone or internet, you may nevertheless attend the Annual Meeting and vote your shares in person. Stockholders whose shares are held in the name of a broker or other nominee and who desire to vote in person at the meeting should bring with them a legal proxy.
OUR BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL OF OUR DIRECTOR NOMINEES NAMED ON THE ENCLOSED PROXY CARD, AND “FOR” PROPOSALS 2, 3, AND 4.
By Order of the Board of Directors, NEXTGEN HEALTHCARE, INC.
/s/ Jeffrey D. Linton |
Jeffrey D. Linton Executive Vice President, General Counsel and Secretary July 26, 2023 |
TABLE OF CONTENTS
NEXTGEN HEALTHCARE, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 22, 2023
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors (“Board”) of NextGen Healthcare, Inc. (“NextGen Healthcare,” the “Company,” “us,” “we” or “our”) for use at our annual meeting of stockholders to be held at 18101 Von Karman Ave, Suite 200, Irvine, CA 92612 on August 22, 2023, at 10:00 a.m. Pacific Time, and at any and all adjournments and postponements thereof. All shares represented by each properly submitted and unrevoked proxy received in advance of the annual meeting will be voted in the manner specified therein.
Any stockholder has the power to revoke the stockholder’s proxy at any time before it is voted. A proxy may be revoked by a stockholder of record by delivering a written notice of revocation to our Secretary prior to or at the annual meeting, by voting again on the internet or by telephone (only your latest internet or telephone proxy submitted prior to 11:59 P.M. Eastern Time on August 21, 2023 will be counted), by submitting to our Secretary, prior to or at the annual meeting, a later dated proxy card executed by the person executing the prior proxy, or by attendance at the annual meeting and voting in person by the person submitting the prior proxy or voting by ballot at the annual meeting. Stockholders who hold shares in street name through a broker may revoke their proxy and change their vote by following the instructions provided by their broker.
Any stockholder who holds shares in street name and desires to vote in person at the annual meeting should inform the stockholder’s broker of that desire and request a legal proxy from the broker. The stockholder will need to bring the legal proxy to the annual meeting along with valid picture identification such as a driver’s license or passport, in addition to documentation indicating share ownership. If the stockholder does not receive the legal proxy in time, then the stockholder should bring to the annual meeting the stockholder’s most recent brokerage account statement showing that the stockholder owned NextGen Healthcare, Inc. common stock as of the record date. Upon submission of proper identification and ownership documentation, we should be able to verify ownership of common stock and admit the stockholder to the annual meeting; however, the stockholder will not be able to vote at the annual meeting without a legal proxy. Stockholders are advised that if they own shares in street name and request a legal proxy, any previously executed proxy will be revoked, and the stockholder’s vote will not be counted unless the stockholder appears at the annual meeting and votes in person or legally appoints another proxy to vote on its behalf.
We will bear all expenses in connection with the Company’s solicitation of proxies. We will reimburse brokers, fiduciaries, and custodians for their costs in forwarding the Company’s proxy materials to beneficial owners of common stock. Our directors, officers and employees may solicit proxies by mail, telephone and personal contact on behalf of the Company. They will not receive any additional compensation for these activities.
This proxy statement, the accompanying proxy card and our 2023 annual report are being made available to our stockholders on or about July 26, 2023.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on August 22, 2023.
This proxy statement, the notice of our 2023 annual meeting of stockholders and the Company’s 2023 annual report to stockholders are available on our website at https://investor.nextgen.com/.
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Only holders of record of the 67,018,411 shares of our common stock outstanding at the close of business on the record date, July 13, 2023, are entitled to notice of, to attend, and to vote at the annual meeting or any adjournments or postponements thereof. A majority in voting power of the shares of capital stock of the Company issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business. All properly submitted and unrevoked proxies will be counted in determining the presence of a quorum, including those providing for abstention and broker non-votes. Broker non-votes occur when a stockholder who beneficially owns shares that are held in street name, that is through a broker, does not provide the broker with instructions on how to vote those shares on matters that are considered non-routine. Brokers can vote without instruction from the beneficial owners only on routine matters, such as the ratification of the appointment of our independent auditors. The election of directors, the Say-on-Pay and approval of the Amended 2015 Plan are non-routine matters and brokers are not authorized to vote on these matters without instruction. When no instruction is given, it is considered a broker non-vote.
If a quorum is not present or represented at any meeting of the stockholders, the person presiding over the meeting shall have power to recess the meeting or adjourn the meeting from time to time in the manner provided under our Bylaws until a quorum is present or represented. At any recessed or adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
A list of stockholders entitled to vote at the Annual Meeting will be available upon request for examination for ten (10) days prior to the Annual Meeting by contacting us via email to our Secretary, Jeffrey D. Linton, at secretary@nextgen.com. The stockholder list will also be available during the Annual Meeting.
Each stockholder will be entitled to one vote, in person or by proxy, for each share of common stock held on the record date.
Approval of Proposal No. 1, election to the Board of each nominee named in this Proxy Statement requires the affirmative vote of the holders of a majority of the votes cast. Thus, the number of shares voted “FOR” any nominee must exceed the number of shares voted “AGAINST” such nominee for such nominee to be elected to serve until the Company’s 2024 annual meeting and until his or her successor has been duly elected, or until his or her earlier resignation or removal. Abstentions and broker non-votes are not counted as a vote cast and thus will have no effect.
Any incumbent director nominee who fails to receive the requisite majority vote at an annual or special meeting held for the purpose of election of directors, where the election is uncontested, must tender his or her resignation to the Board, which resignation shall be contingent on the acceptance by the Board in accordance with the policies and procedures adopted by the Board for such purpose. The Nominating and Governance Committee shall make a recommendation to the Board as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board will act on the tendered resignation, and publicly disclose its decision and rationale, within ninety (90) days following certification of the stockholder vote. The Nominating and Governance Committee in making its recommendation and the Board in making its decision each may consider any factors and other information that they consider appropriate and relevant. If the Board accepts a director’s resignation, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board may fill the resulting vacancy pursuant to our Charter and Bylaws.
Approval of Proposal No. 2, the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2024 requires the affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes). Thus, the number of votes “FOR” must exceed the number of votes “AGAINST” for this proposal to pass. Brokers are authorized to vote on this proposal without instructions from the beneficial owners and thus broker non-votes are not expected. Abstentions will have no effect on this proposal.
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Approval of Proposal No. 3, the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in this Proxy Statement (i.e., “Say-on-Pay”), requires the affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes). Thus, the number of votes “FOR” must exceed the number of votes “AGAINST” for this proposal to pass. Brokers are not authorized to vote on this proposal without instruction from the beneficial owners. Abstentions and broker non-votes will have no effect on this proposal.
Approval of Proposal No. 4, the approval of the Amended 2015 Plan requires the affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes). Thus, the number of votes “FOR” must exceed the number of votes “AGAINST” for this proposal to pass. Brokers are not authorized to vote on this proposal without instruction from the beneficial owners. Abstentions and broker non-votes will have no effect on this proposal. If this Proposal 4 is approved by our stockholders, the Amended 2015 Plan will become effective as of the date of the annual meeting.
The Board recommends that you vote your shares:
1. “FOR” each of the nine (9) nominees for election to the Board;
2. “FOR” the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2024;
3. “FOR” the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this Proxy Statement; and
4. “FOR” the proposal to approve an amendment of our 2015 Equity Incentive Plan, as amended and restated (the "Amended 2015 Plan").
Unless otherwise instructed, the proxy holders will vote the proxies they receive in accordance with the Board’s recommendations above.
The Board knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the annual meeting, the proxy holders will vote the shares for which you grant your proxy on those matters in accordance with their best judgment.
Your vote is very important. Regardless of whether you plan to attend the annual meeting or not, we recommend that you vote as soon as possible. We encourage you to review this Proxy Statement and your proxy card or voting instructions for your voting options and cast your vote in advance of the annual meeting.
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CAUTIONARY NOTE CONCERNING FORWARD LOOKING STATEMENTS
This proxy statement and accompanying materials contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You can identify forward-looking statements by words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue” or other similar expressions. Actual results may differ from those set forth in the forward-looking statements due to a variety of factors, including those contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023, and the Company’s other filings with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements.
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DIRECTORS
Listed below are the nine nominees for election as director. Each nominee currently serves on the Board. Four of the nine directors elected at the Company’s 2021 Annual Meeting of Stockholders were new to the Board and advanced diversity across race, gender, age, and tenure. The Board comprises a diverse group of leaders with decades of experience across healthcare providers, health insurance, life sciences and enterprise software. In addition, the Board has functional experience in commercialization, corporate strategy and M&A, corporate governance and compensation, finance and accounting, human capital, and public company boards. The Board has an average tenure of 6 years, providing a combination of fresh perspectives and institutional knowledge to inform opportunities that build on the Company’s transformation. The Board believes that the collective experiences, viewpoints, and perspectives of the Company’s nominees for directors result in a Board with the commitment and energy to advance the interests of the Company’s stockholders.
Board Diversity Matrix |
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Board Skills and Qualifications
The Board and the Nominating and Governance Committee believe the skills, qualities, attributes, and experience of the nominees provide the Company with business acumen.
The biographies below describe the skills, qualities, attributes, and experience of the nominees that led the Board and the Nominating and Governance Committee to determine that it is appropriate to nominate these directors.
Director Biographies
Craig A. Barbarosh, age 55, is a director and previously served as our Vice Chair of the Board since November 2015. Currently, he is the Chairman of the Board of Lifecore Biomedical, Inc., where he is a member of the Compensation Committee, a director at Evolent Health, Inc., where he is Chair of the Strategy Committee and a member of the Compensation Committees, and Sabra Health Care REIT, Inc., where he is the Chair of the Audit Committee and a member of the Compensation Committee. Mr. Barbarosh previously served on the boards of Aratana Therapeutics, Inc., where he was the Chair of the Strategy Committee and a member of the Compensation Committee, Bazaarvoice, Inc., where he was a member of the Compensation Committee, and BioPharmX, Inc., where he was the Chair of the Nominating and Governance Committee and a member of the Audit and Compensation Committees. Mr. Barbarosh also previously served as the Independent Board Observer for Payless Holdings, Inc. and as an independent director of Ruby Tuesday, Inc. Mr. Barbarosh is a former practicing attorney and was previously a partner at the international law firm of Katten Muchin Rosenman LLP, a position he held from June 2012 through January 2023. Previously, Mr. Barbarosh was a partner of the international law firm of Pillsbury Winthrop Shaw Pittman LLP. He served in several leadership positions while a partner at Pillsbury including serving on the firm’s Managing Board, as the Chair of the firm’s Board’s Strategy Committee, as a co-leader of the firm’s national Insolvency & Restructuring practice section and as the Managing Partner of the firm’s Orange County office. At Katten, Mr. Barbarosh served as a member of the firm’s Executive and Operating Committee from June 2012 through June 2016 and served on the firm’s Board of Directors for seven years. Mr. Barbarosh received a Juris Doctorate from the University of the Pacific, McGeorge School of Law in 1992, with distinction, and a Bachelor of Arts in Business Economics from the University of California at Santa Barbara in 1989. Mr. Barbarosh received certificates for completing executive education courses from the Wharton School of the University of Pennsylvania in Corporate Valuation (2019) and Harvard Business School in Private Equity and Venture Capital (2007), Financial Analysis for Business Evaluation (2010) and Effective Corporate Boards (2015) and from Carnegie Mellon University in Cybersecurity Oversight (2019). Mr. Barbarosh is also a frequent speaker and author on governance and restructuring topics. Our Board has concluded that Mr. Barbarosh, as an experienced board director and attorney specializing in the area of financial and operational restructuring and related mergers and acquisitions, provides our Board with experienced guidance on governance and transactional matters involving our Company. Mr. Barbarosh has been a director since 2009.
George H. Bristol, age 74, is a director. Mr. Bristol is a Managing Director of Janas Associates, a corporate financial advisor, a position he has held since 2010. From August 2006 until March 2010, Mr. Bristol served as Managing Director-Corporate Finance of Crowell Weedon & Co. From November 2002 until August 2006, Mr.
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Bristol was a member and Chief Financial Officer of Vantis Capital Management, LLC, a registered investment advisor which managed the Vantis hedge funds totaling over $1.4 billion. Prior to Vantis, Mr. Bristol was an investment banker with several firms including Ernst & Young, Paine Webber, Prudential Securities and Dean Witter. Mr. Bristol is a graduate of the University of Michigan and Harvard Business School. Our Board has concluded that Mr. Bristol’s experience analyzing, evaluating and understanding financial statements in his various corporate finance positions provides our Board with insight from someone with direct responsibility for strategic and transactional financial matters. Mr. Bristol has been a director since 2008.
Darnell Dent, age 71, is a director. Mr. Dent is an experienced managed healthcare executive with over nineteen years of board service as a director. Currently, he is the principal of Dent Advisory Services, LLC where he serves as a strategic advisor to Softheon, Inc., a leading provider of cloud-based health insurance exchange (“HIX” or “marketplace”) technology that facilitates private and public marketplace participation and administration since 2019. More recently, he served in a similar capacity for Virgin Pulse, part of Sir Richard Branson’s Virgin Group, a global well-being solution provider providing employees with integrated health, well-being, safety, benefits navigation, and care guidance. Mr. Dent was formerly the CEO of FirstCare Health Plans from 2012 to 2018, and a senior executive at University of Pittsburgh Medical Center Health Plan, Community Health Plan of Washington, Health Net, and Lincoln National Corporation. Mr. Dent is also a board member for several non-profit organizations, including the National Association of Corporate Directors and the Managed Healthcare Executive Editorial Advisory Board. Our Board has concluded that Mr. Dent should serve on our Board because of his executive expertise in the healthcare insurance industry and his experience having served on private company and non-profit organization boards. Mr. Dent earned his bachelor’s degree from Norfolk State University in Psychology and his MA from Pepperdine University in Public Administration. Mr. Dent has been a director since 2021.
Julie D. Klapstein, age 68 is a director. Ms. Klapstein was the founding Chief Executive Officer of Availity, LLC, one of the nation’s largest health information networks optimizing the automated delivery of critical business and clinical information among healthcare stakeholders. Ms. Klapstein served as Availity’s Chief Executive Officer and board member from 2001 to 2011. She was the interim Chief Executive Officer at Medical Reimbursements of America, Inc., a private company, from February 2017 to June 2017. Ms. Klapstein’s more than thirty-five years of experience in the healthcare information technology industry include executive roles at Phycom, Inc. (President and Chief Executive Officer from 1996 to 2001), Sunquest Information Systems (Executive Vice President), Shared Medical Systems’ Turnkey Systems Division (now Siemens Medical Systems), and GTE Health Systems. Ms. Klapstein is a director of Amedisys Inc., where she serves on the Governance, Quality and Compensation committees, and where she serves as Lead Director; Oak Street Health, where she serves on the Compliance committee and as chair of the Compensation committee; and MultiPlan Corporation, where she serves on the Audit and Compensation committees. She also currently serves on the board of directors of a private company, Revecore, which specializes in complex claims solutions and payment integrity for hospitals. Ms. Klapstein previously was a director for two public companies, Annie’s Homegrown/Annies, Inc. from January 2012 to September 2014, where she served on the Governance, Compensation, and Audit committees, and Standard Register Inc. from April 2011 to November 2014, where she served on the Governance, Compensation, and Audit committees. She also has been a director for multiple private companies. Ms. Klapstein earned her bachelor’s degree from Portland State University in Portland, Oregon. Our Board has concluded that Ms. Klapstein should serve on our Board based on her extensive knowledge of the healthcare industry including healthcare information technology, relevant executive and management experience, and public company board experience. Ms. Klapstein has been a director since 2017.
Jeffrey H. Margolis, age 60, is a director and has served as the Chair of our Board since November 2015. Mr. Margolis is the former Chair & CEO of Welltok, Inc., a data-driven, enterprise SaaS company that develops and delivers a consumer activation platform to the healthcare industry, serving in both roles from April 2013 through April 2020 and chair through November 2021. Mr. Margolis is Chair Emeritus of TriZetto Corporation, a recognized leader of in the provision of health information technology for payers and providers and the originator of the industry-vertical SaaS model, where he served as the founding CEO beginning in 1997, served as Chair and CEO until 2010 (publicly traded on NASDAQ from October 1999—August 2008), and continued as Chair until October 2011. Mr. Margolis also served as Senior Executive Advisor to the Oliver Wyman Health Innovation Center, an organization that identifies and disseminates ideas and best practices that aim to transform healthcare, during 2012 and 2013. From 1989 to 1997, Mr. Margolis served as Senior Vice President and Chief Information Officer of FHP International Corp. and its predecessors, a publicly traded company that focused on the delivery of managed group and individual health care insurance and hospital and ambulatory-based clinical services along with a broad array of
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healthcare ancillary services. Earlier in his career, Mr. Margolis served in various positions with Andersen Consulting including his final position as Manager, Healthcare Consulting. Mr. Margolis currently serves on the board of directors of Alignment Healthcare, Inc., a publicly traded population health management company, TriNetX, Inc., a private, for-profit data and software-as-a-service entity that supports clinical trials, Hydrogen Health Management Feeder, LLC, Get-Grin, Inc., a tele-orthodontic IT Platform, and DNAnexus, a multi-omics data management entity and Brightside Healthcare, a telehealth platform delivering mental healthcare to individuals. He has previously served on a variety of other for-profit boards. He also has served on a number of not-for-profit boards of directors. He is a member of the board of governors at Cedars-Sinai in Los Angeles, California and is on the Advisory Boards of the University of California at Irvine’s Center for Healthcare Management & Policy and Center for Digital Transformation. Mr. Margolis also serves as a Senior Advisor to Blackstone (NYSE: BX), one of the world’s largest investment firms. A published author of several books on the topics of healthcare information technology and systems, Mr. Margolis earned a bachelor’s degree in business administration/management information systems with high honors from the University of Illinois in 1984 and holds CPA certificates (currently inactive) in Colorado and Illinois. Our Board has concluded that Mr. Margolis should serve on our Board based on his experience as a chief executive officer in the health care information technology sector and his experience as an executive officer and director of various companies. Mr. Margolis has been a director since 2014.
Geraldine McGinty, MD, MBA, FACR, age 59, is a director. A faculty member at Weill Cornell Medicine in New York City since March 2014, Dr. McGinty serves several roles including Senior Associate Dean of Clinical Affairs and Professor of Clinical Radiology and Population Health Sciences. She formerly served as Chief Strategy Officer and Chief Contracting Officer for the Weill Cornell Medicine Physician Organization, which includes more than 1,600 members. Her role as lead negotiator for managed care contracts at Weill Cornell Medicine incorporated both traditional fee for service agreements as well as value-based payment arrangements. Her broad experience includes: serving as an advisor to the CPT Editorial Panel, the JCAHO and the National Quality Forum, Chair of the American College of Radiology’s Commission on Economics and radiology member of the AMA’s Relative Value Update Committee. She was elected as the Chair of the ACR’s Board of Chancellors from May 2018 to August 2021, the first woman to hold this office. She has also served as Managing Partner of a 70-physician multispecialty medical group on Long Island. She was until September 2021 a Non-Executive Director of IDA Ireland, the national foreign direct investment agency and serves on the Medical Advisory Board of Agamon, a healthcare technology start-up. Dr. McGinty earned her MBA from Columbia University and her MB (MD equivalent) from the National University of Ireland, Galway. Our Board has concluded that Dr. McGinty should serve on our Board as Dr. McGinty is an internationally recognized expert in health care strategy, a practicing Radiologist, and an unwavering advocate for patient-centered care with strong advocacy for the intersection of technology and healthcare and, in 2019, was named as one of the 2019 Most Powerful Women in Health IT by Health Data magazine. Dr. McGinty has been a director since 2021.
Pamela S. Puryear, PhD, MBA, age 59, is a director. Dr. Puryear is a business executive with 35 years of global experience in healthcare, financial services, consulting, and retail. From 2009 to 2021, Dr. Puryear held several executive leadership roles, including Executive Vice President, Global Chief Human Resources Officer at Walgreens Boots Alliance; Senior Vice President, Chief Human Resources Officer at Zimmer Biomet; Senior Vice President, Chief Talent Officer at Pfizer Inc.; and Vice President, Organizational Development and Chief Talent Officer at Hospira Inc. In these global executive team roles, she has driven value creation through her expertise in human capital management, organizational transformation, innovation, and operational excellence. Earlier, Dr. Puryear led an independent organizational development consulting practice for 12 years working globally and across industry sectors, including healthcare, consumer products, financial services, professional services and insurance. Dr. Puryear spent her first 10 years post-MBA in financial services in the real estate investment advisor industry. Dr. Puryear is a recognized business and human capital thought leader who has received numerous honors, most recently, the 2021 “Elite 100”, recognizing black female executives changing the face of corporate America, and she was inducted into the Executive Leadership Council (ELC), the preeminent member organization for Black Executives in 2019. Dr. Puryear is a director at Standard Motor Products, where she serves on all committees, and a director at SpartanNash where she serves on the Compensation and Audit Committees. Dr. Puryear previously served as a director at Rockley Photonics, where she served as the Chair of the Compensation Committee and as a member of the Nominating and Governance Committee. Dr. Puryear holds a PhD degree in organizational psychology; an MBA degree from the Harvard Business School; and a BA degree in psychology with a concentration in organizational behavior from Yale University. Our Board has concluded that Dr. Puryear should serve on our Board as she is a seasoned global business executive with a demonstrated track record of success in
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senior executive positions in the pharmaceutical, medical device and pharmacy sectors of the healthcare industry with deep understanding of human capital issues. Dr. Puryear has been a director since 2021.
Morris Panner, age 60, is a director. Mr. Panner is a long tenured executive with expertise in both healthcare software companies, including SaaS capabilities, and the law. Currently, Mr. Panner is the President of Intelerad Medical Systems, Inc., a medical imaging management solutions company. Prior to his current role, from 2011 until 2021, Mr. Panner was Chief Executive Officer of Ambra Health (formerly DICOM Grid), a cloud-based healthcare software company that manages diagnostic imaging and related healthcare data. Prior to joining Ambra Health as Chief Executive Officer in September 2011, Mr. Panner was the Chief Executive Officer of Townflier, Inc. and related affiliates that provide group communications services, from May 2010 to August 2011. Previously, from April 2000 to May 2010, he was Chief Executive Officer of OpenAir, Inc., a SaaS project management company, which he led from start-up to its successful acquisition by NetSuite Inc., a provider of an integrated web-based business software suite, in 2008. Following the acquisition, Panner led the OpenAir division of NetSuite, during which time he oversaw the acquisition and integration of OpenAir’s nearest competitor, QuickArrow, Inc., as well as the expansion of OpenAir internationally. Mr. Panner served as a board member and as Chair of the Board of the Software Division of the Software and Information Industry Association. Mr. Panner is a lawyer who served as an Assistant United States Attorney, the Resident Legal Advisor in Bogota, Columbia for the U.S. Department of Justice and as the Principal, Deputy Chief of the Narcotics and Dangerous Drug Section of the U.S. Department of Justice. He served on the board of directors of Unanet Technologies, Inc., a software development company specializing in services automation solutions for project-based companies. He currently serves on the External Advisory Board for the Imaging Data Commons of the National Cancer Institute (NCI) at the National Institutes of Health (NIH), and on the board of Drug Strategies, a non-profit research institution on issues of drug addiction and treatment. Mr. Panner was previously a director of the Washington Office on Latin America, a not-for-profit organization, from 2003 to 2009. Mr. Panner graduated from Yale College with a BA in History in 1984 and from the Harvard Law School with a JD in 1988. Our Board has concluded that Mr. Panner’s qualifications as a director include his executive experience at software companies, including at health care software companies, and his legal training. Mr. Panner has been a director since 2013.
David Sides, age 53, was appointed President and Chief Executive Officer in September 2021. Prior to joining the Company, Mr. Sides served as Chief Operating Officer at Teladoc Health, the global leader in virtual care, where he led the company’s worldwide commercial and operations teams. During his tenure at Teladoc, revenues doubled in 2020 and exceeded $2.1 billion in 2021. Previously, Mr. Sides served as CEO of Streamline Health, which offers revenue cycle management solutions for healthcare providers. Mr. Sides led the full-scale turnaround of Streamline Health, growing revenue, EBITDA and cash flow organically. Prior to that, Sides was recruited by TPG to serve as CEO of iMDsoft, an Israeli headquartered provider of clinical information systems and electronic medical records for critical, perioperative and acute care organizations. Under Mr. Sides’ leadership, iMDsoft delivered a more than 30% increase in revenue while investing in new systems and processes. Earlier in his career, Mr. Sides worked for Cerner Corporation, a leading supplier of health information technology services, devices and hardware, from 1995-2012. Among other roles, he served as Senior Vice President, World Wide Consulting, where he led Cerner’s professional services in 24 countries and owned global P&L and functional responsibilities from sales through implementation for the business. At Cerner, he created new methodologies for deployment, new service lines and development plans for 3,500 associates, growing the consulting business from $643 million in 2008 to $1.031 billion in 2012. Mr. Sides is a former director at EMIS Group (EMIS.L), a major provider of healthcare software, information technology and related services in the UK, and at Streamline Health. He is a Fellow in the American College of Healthcare Executives and is NACD Directorship Certified. Mr. Sides holds a B.A. in Biophysics from the University of California, Berkeley, and an MBA and MHA from the University of Missouri, Columbia. Our Board has concluded that Mr. Sides’ position as our President and Chief Executive Officer, as well as his prior executive experience with other companies, provides our Board with the perspective of a person with significant executive management and healthcare information technology industry experience who is involved in the Company’s day to day activities. Mr. Sides has been a director since 2021.
9
NON-DIRECTOR EXECUTIVE OFFICERS
James R. Arnold, Jr., age 67, was appointed our Executive Vice President and Chief Financial Officer in March of 2016, and on July 28, 2021, the Board appointed Mr. Arnold to serve as the interim principal executive officer. Prior to joining the Company, Mr. Arnold served as Chief Financial Officer and Executive Board member of Kofax Ltd., a publicly traded software company, from June 2010 to May 2015, where Mr. Arnold participated in and facilitated the strategic process that resulted in the sale of Kofax Ltd.’s enterprise software division. From 2004 to 2009, Mr. Arnold was Senior Vice President at Nuance Communications, Inc., a publicly traded software company, where he also served as Chief Financial Officer from 2004 to 2008. Previously, Mr. Arnold held numerous other senior-level finance positions at technology companies, to include roles as Vice President Corporate Controller at Cadence Design Systems, Inc., Chief Financial Officer at Informix Software, Inc., and Corporate Controller at Centura Software Corporation. Additionally, from 2003 to 2010 he served as director and chair of the audit committee at Selectica, Inc., where he also was co-chair of the board in 2010. Earlier in his career, Mr. Arnold provided consulting and auditing services to companies in diverse industries while at Price Waterhouse LLP. Mr. Arnold holds a Bachelor of Business Administration degree in Finance from Delta State University in Cleveland, Mississippi, and a Master’s degree in Business Administration from Loyola University in New Orleans, Louisiana.
Jeffrey D. Linton, age 60, became our Executive Vice President, General Counsel and Secretary in December of 2017. Prior to joining the Company, Mr. Linton served as General Counsel and Secretary of Applied Proteomics, Inc. from November 2016 to November 2017. Previously, Mr. Linton was Senior Vice President, General Counsel and Secretary of Sequenom, Inc. from September 2014 to October 2016. Before joining Sequenom, Mr. Linton was Senior Vice President and General Counsel at Beckman Coulter, Inc. from July 2011 to September 2014 and, prior to that, was Vice President, Deputy General Counsel from September 2008 to July 2011. Before joining Beckman Coulter, Mr. Linton was President of the research products and services division of Serologicals Corporation, a company that developed, manufactured and sold life science research products and technologies, diagnostic kits and drug discovery services. Before that role, he served as Vice President, Law, Corporate Business Development and Public Affairs at Serologicals from October 2000 to April 2003. He has held various other positions in law, government and public affairs and human resources. Mr. Linton earned a B.A., magna cum laude, from Butler University and a J.D., cum laude, from the University of Notre Dame Law School. He is a member of the Board of Directors of the Notre Dame Law Association.
Srinivas S. Velamoor, age 48, became our Chief Growth & Strategy Officer and Executive Vice President, in July 2022. Mr. Velamoor brings two decades of experience in driving growth and performance at leading global healthcare, financial services and technology organizations. Prior to joining the Company, Mr. Velamoor served as a partner and the health sector leader of McKinsey & Company’s North America digital analytics and ‘Leap’ business building practices. Over a decade at McKinsey, he orchestrated the growth and scale-up of the firm’s healthcare technology and digital health practices and led the creation, scaling and commercial acceleration of several new digital health businesses. Before joining McKinsey & Company, Velamoor was a principal at both PricewaterhouseCoopers and Diamond Management & Technology Consultants, where he advised industry leading firms in financial services and healthcare. Mr. Velamoor received an MBA in Finance from The Wharton School at The University of Pennsylvania, and a BSE in Biomedical Engineering, Electrical Engineering and Economics from Duke University.
Mitchell L. Waters, age 59, became our Executive Vice President of Commercial Growth in January 2022. Mr. Waters joined the Company in December 2016 as the Senior Vice President, Sales, and served in that role until 2022. Prior to joining the Company, Mr. Waters spent 28 years at McKesson Corporation in leadership roles within the technology, automation and pharmaceutical business units. While employed full-time at McKesson, Mr. Waters earned a Master of Business Administration from Auburn University. Mr. Waters earned his B.S. in Industrial Management from Georgia Institute of Technology, Atlanta, Georgia.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as otherwise indicated in the related footnotes, the following table sets forth information with respect to the beneficial ownership of our common stock as of the record date of July 13, 2023, by:
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. To our knowledge, unless indicated by footnote, and subject to community property laws where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Shares of common stock underlying options, if any, that currently are exercisable or are scheduled to become exercisable for shares of common stock within 60 days after the date of the table are deemed to be outstanding in calculating the percentage ownership of each listed person or group but are not deemed to be outstanding as to any other person or group. Percentage of beneficial ownership is based on 67,018,411 shares of common stock outstanding as of July 13, 2023.
Unless otherwise indicated, the address for each beneficial owner listed in the table below is c/o NextGen Healthcare, Inc., a remote-first company, which accordingly, does not maintain a headquarters. Messrs. Barbarosh, Bristol, Dent, Margolis, Panner, Ms. Klapstein and Drs. McGinty and Puryear are current directors. Our NEOs for our fiscal year 2023 were Messrs. Sides, Arnold, Linton, Velamoor and Waters, as well as Mr. Metcalfe, our former Chief Technology Officer, each of whom is included in the table below.
Name of Beneficial Owner** |
|
Number of Shares of Common Stock Beneficially Owned |
|
|
Percent of Common Stock Beneficially Owned |
|
||
Director and Named Executive Officers |
|
|
|
|
|
|
||
Craig A. Barbarosh |
|
|
57,183 |
|
(1) |
* |
|
|
George H. Bristol |
|
|
72,803 |
|
|
* |
|
|
Darnell Dent |
|
|
20,942 |
|
|
* |
|
|
Julie D. Klapstein |
|
|
60,018 |
|
|
* |
|
|
Jeffrey H. Margolis |
|
|
136,829 |
|
|
* |
|
|
Geraldine McGinty |
|
|
22,791 |
|
|
* |
|
|
Morris Panner |
|
|
89,957 |
|
|
* |
|
|
Pamela Puryear |
|
|
20,942 |
|
|
* |
|
|
David Sides |
|
|
713,877 |
|
|
|
1.1 |
% |
James R. Arnold, Jr. |
|
|
960,829 |
|
(2) |
|
1.4 |
% |
David A. Metcalfe |
|
|
178,207 |
|
(3) |
* |
|
|
Srinivas Velamoor |
|
|
370,998 |
|
|
* |
|
|
Mitchell Waters |
|
|
82,027 |
|
(4) |
* |
|
|
Jeffrey D. Linton |
|
|
239,808 |
|
(5) |
* |
|
|
All directors, director nominees and executive officers as a group |
|
|
3,080,076 |
|
(6) |
|
4.6 |
% |
Stockholders Holding 5% or More |
|
|
|
|
|
|
||
Three Prong Investments, LLC |
|
|
9,889,827 |
|
(7) |
|
14.8 |
% |
Blackrock, Inc. |
|
|
9,663,011 |
|
(8) |
|
14.4 |
% |
The Vanguard Group |
|
|
6,389,869 |
|
(9) |
|
9.5 |
% |
* Represents less than 1.0%
11
12
CORPORATE GOVERNANCE
Corporate Governance Highlights
The following are highlights of our governance practices:
13
INFORMATION ABOUT OUR BOARD OF DIRECTORS, BOARD COMMITTEES AND RELATED MATTERS
Board of Directors
General
Our business, property and affairs are managed under the direction of our Board. Directors are kept informed of our business through discussions with our executive officers, by reviewing materials provided to them and by participating in meetings of our Board and its committees. For the fiscal year ended March 31, 2023, our Board consisted of nine directors who are elected to serve until the election and qualification of their respective successors.
Director Independence
As required under the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed Company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board of Directors. The Board consults with our counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in Nasdaq listing standards, as in effect from time to time. Based on definitions of independence established by Nasdaq, SEC rules and regulations, guidelines established in our Bylaws, and the determinations of our Nominating and Governance Committee and our Board, Messrs. Barbarosh, Bristol, Dent, Margolis and Panner, Ms. Klapstein, and Drs. McGinty and Puryear, are independent. Mr. Sides is not independent because he serves on our management team as President and Chief Executive Officer.
The Nasdaq independence definition includes a series of objective tests, such as that the director or director nominee is not and has not been for the past three years an employee of the Company and has not engaged in various types of business dealings with the Company. In addition, as further required by the Nasdaq rules, our Board has made a subjective determination as to each independent director and director nominee that no relationships exist which, in the opinion of our Board, would interfere with the exercise of independent judgment of such director or director nominee in carrying out his or her responsibilities as a director. In making these determinations, our Board reviewed and discussed information provided by our directors, director nominees and management about each director’s and director nominee’s business and personal activities as they may relate to our management and us. The independent members of our Board meet periodically in executive session without management.
Attendance at Board and Stockholders’ Meetings
During the fiscal year ended March 31, 2023, our Board held ten (10) meetings. No director attended less than 75% of the aggregate of all Board meetings or meetings held by any committee of the Board on which they served during the fiscal year ended March 31, 2023.
Board Leadership Structure
The Board believes that its current leadership structure best serves the objectives of the Board’s oversight of management, the Board’s ability to carry out its roles and responsibilities on behalf of the Company’s stockholders, and the Company’s overall corporate governance. The Board currently believes that the separation of the Chair and the Chief Executive Officer roles allows the Company’s Chief Executive Officer to focus his time and energy on operating and managing the Company. The Board periodically reviews this leadership structure to determine whether it continues to best serve the Company and its stockholders. For the upcoming term, the Board determined that the historical justification for a Vice Chair role is no longer present and therefore intends to eliminate that position at the conclusion of the current term.
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Executive Sessions of Independent Directors
The independent directors of the Company meet regularly in executive session, i.e., with no management directors or management present. These executive sessions may include such topics as the independent directors determine. During these executive sessions, the independent directors have access to members of management and other guests as the independent directors determine.
Annual Board and Committee Evaluations
In accordance with its Charter, the Nominating and Governance Committee is responsible for facilitating an annual evaluation of the Board. The Nominating and Governance Committee also oversees the annual performance evaluation of the committees of the Board.
Board Involvement in Risk Oversight
Our Board is actively engaged, as a whole, and also at the committee level, in overseeing management of our risks. Our Board provides oversight of our annual enterprise risk assessment program as well as regularly reviewing information regarding our personnel, technology, liquidity, and operations, as well as the risks associated with each. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. Our Audit Committee oversees management of financial risks, cybersecurity, and potential conflicts of interest. Our Nominating and Governance committee manages risks associated with the independence and qualifications of our directors. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire Board is regularly informed through committee reports about such risks and matters which may evolve into risks.
Board Committees and Charters
The Board had three standing committees in fiscal year 2023:
The Board has adopted written charters for each of the three standing committees that satisfy the applicable standards of the SEC and the Nasdaq. The Board has determined that the chair and each of the committee and all committee members are independent under applicable Nasdaq and SEC rules for committee memberships.
Audit Committee
Our Board has an Audit Committee, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), that consists of Mr. Bristol (Chair), Ms. Klapstein and Dr. Puryear.
Our Audit Committee is comprised entirely of independent directors under SEC and Nasdaq rules and operates under a written charter adopted by our Board. The duties of our Audit Committee include meeting with our independent public accountants to review the scope of the annual audit and to review our quarterly and annual financial statements before the statements are released to our stockholders. Our Audit Committee also evaluates the independent public accountants’ performance and determines whether the independent registered public accounting firm should be retained by us for the ensuing fiscal year. In addition, our Audit Committee reviews our internal accounting and financial controls and reporting systems practices and is responsible for reviewing, approving and ratifying all related party transactions. Our Audit Committee also exercises primary oversight, on behalf of the Board, over management’s execution of the Company’s cybersecurity and data privacy function.
15
During the fiscal year ended March 31, 2023, our Audit Committee held four (4) meetings. Our Audit Committee’s current charter is posted on our internet website at www.nextgen.com. Our Audit Committee and our Board have confirmed that our Audit Committee does and will continue to include at least three independent members. Our Audit Committee and our Board have confirmed that Mr. Bristol met applicable Nasdaq listing standards for designation as an “Audit Committee Financial Expert.”
Nominating and Governance Committee
Our Board has a Nominating and Governance Committee that consists of Messrs. Panner (Chair), Barbarosh, and Dent. Our Nominating and Governance Committee is responsible for identifying and recommending nominee candidates to our Board, and is required to be composed entirely of independent directors. Our Nominating and Governance Committee may receive suggestions from current Board members, our executive officers or other sources, which may be either unsolicited or in response to requests from our Nominating and Governance Committee for such candidates. Our Nominating and Governance Committee may also, from time to time, engage firms that specialize in identifying director candidates.
Our Nominating and Governance Committee will also consider on the same basis nominees recommended by stockholders for election as a director. Recommendations should be sent to our Secretary and should include the candidate’s name and qualifications and a statement from the candidate that he or she consents to being named in our proxy statement and will serve as a director if elected. In order for any candidate to be considered by our Nominating and Governance Committee and, if nominated, to be included in our proxy statement, such recommendation must be received by the Secretary within the time period set forth under “Proposals of Stockholders,” below.
Our Nominating and Governance Committee works with our Board to determine the appropriate characteristics, skills, and experiences for the Board as a whole and its individual members with the objective of having a Board with diverse backgrounds and experience. Characteristics expected of all directors include independence, integrity, high personal and professional ethics, sound business judgment, and the ability and willingness to commit sufficient time to our Board. In evaluating the suitability of individual candidates, our Nominating and Governance Committee takes into account many factors, including general understanding of marketing, finance, and other disciplines relevant to the success of a large publicly traded company in today’s business environment; understanding of our business; educational and professional background; personal accomplishment; and geographic, gender, age, and ethnic diversity. Our Nominating and Governance Committee evaluates each individual in the context of our Board as a whole, with the objective of recommending a group that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound judgment using its diversity of experience. Our Nominating and Governance Committee evaluates each incumbent director to determine whether he or she should be nominated to stand for re-election, based on the types of criteria outlined above as well as the director’s contributions to our Board during their current term.
Once a person has been identified by our Nominating and Governance Committee as a potential candidate, our Nominating and Governance Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If our Nominating and Governance Committee determines that the candidate warrants further consideration, the Chair of the Committee or another member of our Nominating and Governance Committee may contact the person. Generally, if the person expresses a willingness to be considered and to serve on our Board, our Nominating and Governance Committee may request information from the candidate, review the person’s accomplishments and qualifications and may conduct one or more interviews with the candidate. Our Nominating and Governance Committee may consider all such information in light of information regarding any other candidates that our Nominating and Governance Committee might be evaluating for nomination to our Board. Nominating and Governance Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater firsthand knowledge of the candidate’s accomplishments.
Our Nominating and Governance Committee may also engage an outside firm to conduct background checks on candidates as part of the nominee evaluation process. Our Nominating and Governance Committee’s evaluation process does not vary based on the source of the recommendation, though in the case of a stockholder nominee, our Nominating and Governance Committee and/or our Board may take into consideration the number of shares held by
16
the recommending stockholder and the length of time that such shares have been held. Our Nominating and Governance Committee also has authority to develop and recommend to the Board a set of corporate governance principles, to evaluate the nature, structure and operations of the Board and its committees and to make recommendations to address issues raised by such evaluations. During the fiscal year ended March 31, 2023, our Nominating and Governance Committee held four (4) meetings. Our Nominating and Governance Committee’s current charter is posted on our internet website at www.nextgen.com.
Proxy Access
Our Bylaws provide for “proxy access” by permitting a stockholder or group of no larger than 20 stockholders holding 3% or greater ownership of NextGen Healthcare, Inc.’s common stock for three years the opportunity to include our proxy materials a number of nominees for election as directors up to the greater of 2 and 20% of the Board of Directors.
Majority Voting for Directors with Plurality Carve-out For Contested Elections; Director Resignation Policy
Our Bylaws provide that, in the case of an uncontested director election (i.e., where the number of nominees is the same as the number of directors to be elected), each director shall be elected by the vote of the majority of the votes cast with respect to such director’s election, and in the case of a contested election, directors shall be elected by the vote of a plurality of the votes cast. A majority of the votes cast means that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” such director’s election (with “abstentions” and “broker non-votes” not counted as a vote cast either “for” or “against” such director’s election).
Any incumbent director nominee who fails to receive the requisite majority vote at an annual or special meeting held for the purpose of election directors, where the election is uncontested, must tender his or her resignation to the Board, which resignation shall be contingent on the acceptance by the Board in accordance with the policies and procedures adopted by the Board for such purpose. The Nominating and Governance Committee shall make a recommendation to the Board as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board will act on the tendered resignation, and publicly disclose its decision and rationale, within 90 days following certification of the stockholder vote. The Nominating and Governance Committee in making its recommendation and the Board in making its decision each may consider any factors and other information that they consider appropriate and relevant. If the Board accepts a director’s resignation, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board may fill the resulting vacancy pursuant to our Charter and Bylaws.
Compensation Committee
Our Board has a Compensation Committee that consists of Mr. Barbarosh (Chair), Ms. Klapstein, and Dr. McGinty.
Our Compensation Committee is composed entirely of independent directors under Nasdaq rules, and is responsible for (i) ensuring that senior management will be accountable to our Board through the effective application of compensation policies, (ii) monitoring the effectiveness of our compensation plans applicable to senior management and our Board (including committees thereof) and (iii) approving the compensation plans applicable to senior management. Our Compensation Committee establishes and approves compensation policies applicable to our executive officers. During the fiscal year ended March 31, 2023, our Compensation Committee held four (4) meetings. Our Compensation Committee’s current charter is posted on our internet website at www.nextgen.com.
Our executive officers have played no role in determining the amount or form of director compensation. At the request of the Compensation Committee, our executives provide information from time to time to our Compensation Committee about certain accomplishments, recommendations, qualitative assessments or other metrics regarding the NEOs to assist our Compensation Committee in making compensation decisions for the NEOs. We also have conducted discussions with our NEOs concerning information regarding their performance and prospects.
17
The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of an independent compensation consultant, legal counsel or other advisers to assist in carrying out the Compensation Committee’s duties and responsibilities. Prior to selecting a compensation adviser, the Compensation Committee shall assess whether work performed or advice rendered by such compensation adviser would raise any conflicts of interest. From time to time, the Compensation Committee has engaged independent compensation consultants to advise it on matters of Board and executive compensation. In each case, the Compensation Committee has utilized these compensation consultants to compile and present peer-group compensation data to the Compensation Committee, but did not delegate any authority to the consultants to determine or recommend the amount or form of executive compensation. The Compensation Committee also consults publicly available compensation data from time to time as part of its Board and executive compensation decisions. For fiscal year 2023, there were no conflicts of interest with respect to any compensation advisers.
Audit Committee Report
The following Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulations 14A or 14C of the Exchange Act, or the liabilities of Section 18 of the Exchange Act. The Audit Committee Report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates it by reference.
Our Audit Committee reports to our Board and provides oversight of our financial management, independent registered public accounting firm, and financial reporting system, including accounting policy. Management is responsible for our financial reporting process, including our system of internal control, and for the preparation of our consolidated financial statements. Our independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion on those statements and on management’s assessment of internal control over financial reporting and for reviewing our quarterly financial statements. The Audit Committee has reviewed and discussed our audited consolidated financial statements and the assessments of internal control contained in its annual report on Form 10-K for the fiscal year ended March 31, 2023, with management and our independent registered public accounting firm.
The Audit Committee selects and retains the independent registered public accounting firm, and once retained, the independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee is responsible for approving both audit and non-audit services provided by the independent registered public accounting firm. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the Securities and Exchange Commission. The Audit Committee has received from our independent registered public accounting firm the written disclosures and letter required by the applicable requirements of the PCAOB regarding our independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with our independent registered public accounting firm its independence.
The Audit Committee discussed the overall approach, scope and plans for its audit with our independent registered public accounting firm. At the conclusion of the audit, the Audit Committee met with our independent registered public accounting firm, with and without management present, to discuss the results of its examination, its evaluation of our internal control and the overall quality of our financial reporting.
18
In reliance on the reviews and discussions referred to above, our Audit Committee recommended to our Board (and our Board approved) that the audited financial statements be included in our Annual Report on Form 10-K for the year ended March 31, 2023, and for filing with the SEC.
The Audit Committee has re-appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending March 31, 2024.
AUDIT COMMITTEE
George H. Bristol, Chair
Julie Klapstein Pamela Puryear
Code of Ethics
We have adopted a Code of Business Conduct and Ethics, or code of ethics, that applies to our Chief Executive Officer (principal executive officer), Chief Financial Officer (our principal financial officer), Chief Accounting Officer (principal accounting officer), as well as all directors, officers and employees of the Company. Our code of ethics is posted on our internet website located at www.nextgen.com and may be found as follows: From our main web page, click on “NXGN Investors”, then click on “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code of ethics by posting such information on our website, at the address and location specified above.
Security Holder Communications with our Board
Stockholders and interested parties who wish to communicate with any member (or all members) of our Board, or our independent directors as a group, any Board committee or any Chair of any such committee, may do so by sending written communications electronically. Correspondence should be addressed to the intended recipient in care of our Secretary, Jeffrey D. Linton, at secretary@nextgen.com.
All communications received as set forth in the preceding paragraph will be reviewed by our Secretary for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, patently offensive material or matters deemed inappropriate for our Board will be forwarded promptly to the addressee. In the case of communications to our Board, any group or committee of directors, our Secretary will forwarded to each director who is a member of the group or committee to which the communication is addressed.
19
We strive to create a respectful, diverse, ethical, environmentally sustainable, safe, healthy, and inclusive workplace culture in order to bring out the best in our employees and for our community. We also seek to develop inspiring and caring leaders by supporting community service and volunteer opportunities for our employees. In addition, we are dedicated to providing the best training and professional development opportunities to our employees in order to promote engagement, retention, and performance. We are committed to creating a diverse and inclusive work environment of equal opportunity, where employees feel respected and valued for their contributions. We embrace varied viewpoints, culture, and expertise. We regularly engage with our Board of Directors on strategies, participation, and impact of these initiatives.
TALENT, CULTURE AND ENGAGEMENT
Recruitment, Development and Retention
Engagement
Diversity, Equity, Inclusion and Belonging
20
Health, Safety and Well-Being
Community
ENVIRONMENT AND CORPORATE SUSTAINABILITY
Although as a software and services company our business has low environmental impact by its nature, we embrace sustainable, environmentally friendly practices and assess opportunities to reduce our corporate footprint, promote energy efficiency and reduce waste.
Reducing our Carbon Footprint
21
Facilities; Sustainability
Risk Management
ENABLING ESG PERFORMANCE THROUGH OUR SOLUTIONS AND PARTNERSHIPS
22
Review, Approval or Ratification of Transactions with Related Persons
During fiscal year 2023, our Audit Committee was responsible for reviewing and approving transactions with related persons. Our Board and Audit Committee have adopted written related party transaction policies and procedures relating to approval or ratification of transactions with related persons. Under the policies and procedures, our Audit Committee is to review the material facts of all related party transactions that require our Audit Committee’s approval and either approve or disapprove of our entry into the related party transactions, subject to certain exceptions, by taking into account, among other factors the committee deems appropriate, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director may participate in any discussion or approval of a related party transaction for which he or she is a related party. If an interested transaction will be ongoing, the Committee may establish guidelines for our management to follow in its ongoing dealings with the related party and then at least annually must review and assess ongoing relationships with the related party.
Under the policies and procedures, a “related party transaction” is any transaction, arrangement or relationship or series of similar transactions, arrangements, or relationships (including any indebtedness or guarantee of indebtedness) in which the aggregate amount involved will or may be expected to exceed $30,000 in any calendar year, we are a participant, and any related party has or will have a direct or indirect interest. A “related party” is any person who is or was since the beginning of our last fiscal year an executive officer, director or Board-approved nominee for election as a director and inclusion in our proxy statement at our next annual stockholders’ meeting, any greater than 5% beneficial owner of our common stock known to us through filings with the SEC, any immediate family member of any of the foregoing, or any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or holds a similar position or in which such person has a 5% or greater beneficial ownership interest. “Immediate family member” includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee).
Our Audit Committee has reviewed and pre-approved certain types of related party transactions described below. In addition, our Board has delegated to the Chair of our Audit Committee the authority to pre-approve or ratify (as applicable) any related party transaction in which the aggregate amount involved is expected to be less than $15,000. Pre-approved interested transactions include:
23
Indemnification Agreements
We are party to indemnification agreements with each of our directors and executive officers. The indemnification agreements and our Articles of Incorporation and Bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
24
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about our common stock that may be issued pursuant to awards under all of our equity compensation plans as of March 31, 2023.
Plan Category |
|
Number of Securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
|
Weighted-average exercise price of outstanding options, warrants and rights (b) |
|
|
Number of securities remaining available for future issuance under equity compensation (excluding securities reflected in column (a)) |
|
|
|||
Equity compensation plans approved by security holders |
|
|
2,155,473 |
|
(1) |
$ |
14.75 |
|
(2) |
|
4,760,467 |
|
(3) |
Equity compensation plans not approved by security holders(4) |
|
|
425,666 |
|
(5) |
|
— |
|
|
|
159,384 |
|
(6) |
Total |
|
|
2,581,139 |
|
|
$ |
14.75 |
|
|
|
4,919,851 |
|
|
25
EXECUTIVE AND DIRECTOR COMPENSATION AND RELATED INFORMATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the Company’s executive compensation philosophy and program, the decisions the Compensation Committee made with respect to the Company’s fiscal year 2023 executive compensation program, and the factors that the Compensation Committee considered in making those decisions. The Company’s named executive officers (our “NEOs”) for fiscal year 2023 were:
David Sides – President and Chief Executive Officer
James R. Arnold, Jr. – Executive Vice President and Chief Financial Officer
Jeffrey D. Linton – Executive Vice President, General Counsel and Secretary
Srinivas S. Velamoor – Executive Vice President, Chief Growth Officer
Mitchell L. Waters – Executive Vice President, Commercial Growth
David A. Metcalfe – Former Executive Officer and Chief Technology Officer*
* Effective February 17, 2023, Mr. Metcalfe ceased serving as our Executive Vice President and Chief Technology Officer.
Executive Summary
NextGen Healthcare, Inc. is a leading provider of innovative, cloud-based healthcare technology solutions that empower ambulatory healthcare practices to manage the risk and complexity of delivering care in the rapidly evolving U.S. healthcare system. Our combination of technological breadth, depth and domain expertise makes us a preferred solution provider and trusted advisor for our clients. In addition to highly configurable core clinical, practice management and financial capabilities, our portfolio includes tightly integrated solutions that deliver on ambulatory healthcare imperatives including population health, care management, patient outreach, managed services, telemedicine and nationwide clinical information exchange. We compete for executive talent with a broad range of companies that are leaders in the software and healthcare information technology industries. Our compensation program is intended to:
Accomplishments During Fiscal Year 2023
NextGen Healthcare is committed to creating better healthcare outcomes for all and continues to reinvest in its business to achieve its vision and long-term growth agenda. Achievements in fiscal year 2023 include:
26
These achievements demonstrate how our plan for business success is well underway, even in the midst of a challenging macroeconomic environment.
Overview of Executive Compensation Program
Executive Compensation Program Best Practices
We are committed to maintaining good corporate governance standards with respect to our compensation program, procedures, and practices. As such, our Company’s and Compensation Committee’s practices include the following:
What We Do |
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What We Don’t Do |
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We have a Compensation Committee comprised of entirely independent directors that designs and oversees our executive compensation program |
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We do not pay tax gross-ups on any severance payments |
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We utilize multiple performance metrics in our incentive-based compensation to mitigate risk and create alignment with stockholder long-term interests |
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We do not reprice stock options and our equity plans prohibit repricing stock options without stockholder approval |
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Significant portion of NEO equity awards are performance contingent and tied to the Company’s financial performance and stockholder returns |
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We do not have excessive perquisites; no corporate aircraft |
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We have a robust clawback policy and we intend to adopt a clawback policy that complies with the updated listing standards of the Nasdaq Stock Market prior to the required adoption date |
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We do not have executive supplemental pension benefits |
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We have robust anti-hedging and anti-pledging policies |
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We do not maintain uncapped executive incentive plans; annual and long-term incentives have maximum payouts |
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We have robust stock ownership guidelines for our executive officers and non-employee directors |
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We engage a fully independent compensation consultant who utilizes a peer group, which is approved by our Compensation Committee, for evaluating Company pay practices |
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Annual say-on-pay advisory votes in accordance with good governance practices and to maintain accountability to our stockholders |
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We engage with stockholders as appropriate and consider their input in designing the Company’s executive compensation programs |
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Significant at-risk compensation for NEOs |
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27
Stockholder Feedback on Executive and Director Compensation and Actions in Response
The Compensation Committee considers the outcome of the Company’s annual say-on-pay vote when making decisions regarding the Company’s executive compensation program. At our annual meeting of stockholders in August 2022, approximately 86.3% of the votes cast (excluding abstentions and broker non-votes) were cast in favor of the non-binding advisory vote to approve the compensation of our named executive officers as disclosed in that year’s proxy statement. This was significantly higher than the support of approximately 41.5% of the votes cast in the prior year (which occurred in the context of a proxy contest launched by the Company’s founder and largest stockholder), but lower than the support of approximately 97.5% of the votes cast in the prior three years.
Following last year’s annual meeting of stockholders, the Chair of our Compensation Committee met with the Company’s four largest institutional stockholders to discuss executive compensation matters.
Additionally, commencing in fiscal year 2022 and continuing through fiscal year 2023, we meaningfully enhanced our stockholder engagement program, with focus on both active and passive institutional investors within the top 50 stockholder base.
The feedback gathered during these conversations helped inform the Compensation Committee’s decisions about executive and director compensation. A summary of the specific feedback we received from our stockholders, and the specific actions we took in response to the feedback, is provided below:
We have received support and positive feedback from our stockholders of the Committee’s actions, responsiveness, and intentions. We believe that our robust dialogue on these and other topics demonstrates our commitment to strong corporate governance and market-based compensation structures. We will continue to regularly engage with our stockholders on compensation matters and will continue to address issues and suggestions received through these stockholder efforts. As our stockholders’ views and market practices on executive compensation evolve, the Committee will continue to evaluate and, when appropriate, make changes to our executive compensation program, ensuring that the program continues to reflect our pay-for-performance compensation philosophy and objectives.
28
Overview of Fiscal Year 2023 Executive Compensation Program
Over the past several years, the Compensation Committee revised the design and philosophy of our executive compensation program so that it more closely aligns with the Company’s strategy and market trends. We believe a significant portion of our NEOs’ compensation should be variable, at risk and tied directly to measurable performance. Consistent with these principles, a significant portion of our NEOs’ compensation is in the form of performance-based incentives that are earned upon the attainment of pre-established performance goals. The structure of the fiscal 2023 compensation program remained consistent with recent years, except (i) the performance-based award design was changed to be based on fiscal year 2025 revenue and adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), with a 3-year TSR modifier, so that awards are earned for multi-year operating performance and stock return, and (ii) the cash bonus plan was changed to be based on revenue and adjusted EBITDA (as opposed to revenue and non-GAAP EPS). The Committee selected adjusted EBITDA as it reflects profit from controllable operations better than Non-GAAP EPS. Additionally, stockholder feedback emphasized aligning the plan with our peers and data show that EBITDA is the most common profit measure used by our peers in their bonus plans and only one peer uses EPS.
Set forth below is an overview of the key compensation decisions related to our fiscal year 2023 executive compensation program:
The total compensation to Mr. Sides was set in a median range and was considerably lower in fiscal 2023 than in fiscal 2022 because fiscal 2022 included special one-time new hire and buy-out awards that were not continued in fiscal 2023.
Compensation Philosophy and Objectives
The Compensation Committee regularly assesses the Company’s compensation philosophy as well as target and actual compensation. The Compensation Committee is comprised solely of independent directors and is responsible for overseeing the Company’s overall compensation program, designing, and managing our executive compensation program and making recommendations to the Board concerning compensation matters for our employees and directors. The Compensation Committee works to ensure our executive compensation program is responsible, balanced, performance-based, and competitive. The program is designed to reward achievement of specific performance goals. By rewarding strong management performance, our executive compensation program ensures that management’s interests are aligned with our stockholders’ interests, with the ultimate objective of improving stockholder value.
29
Role of the Compensation Committee
The Compensation Committee designs compensation packages for our executive officers that include equity-based compensation as a key component to further align the interests of our executive officers with those of our stockholders by encouraging long-term performance. The Compensation Committee strives for the program to enable us to recruit, retain and develop effective executive talent by creating compensation opportunities that are fair in light of the Company’s performance and market position.
The Compensation Committee holds meetings following the end of the fiscal year without any members of management present to consider and approve executive officer bonuses earned under the prior fiscal year’s compensation program and approve the salary and cash bonus compensation program for the next fiscal year. The Compensation Committee meets approximately mid-way through each fiscal year to determine executive officer equity awards. During the process, the Compensation Committee discusses the performance of the executive officers as well as market and industry data on compensation metrics and best practices. The Compensation Committee met four (4) times during fiscal year 2023.
The Compensation Committee annually assesses our Company-wide compensation structure, program and practices. Pursuant to this assessment, the Compensation Committee believes that the market level, the balance of cash and equity compensation, and the performance measures used in our compensation program are effective and that our compensation program does not encourage excessive risk taking.
Role of Independent Compensation Consultants
The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of an independent compensation consultant, legal counsel or other advisers to assist in carrying out the Compensation Committee’s duties and responsibilities. Prior to selecting a compensation adviser, the Compensation Committee assesses whether work performed, or advice rendered by such compensation adviser would raise any conflicts of interest. From time to time, the Compensation Committee has engaged independent compensation consultants to advise it on matters of Board and executive compensation. In each case, the Compensation Committee has utilized these compensation consultants to compile and present Peer Group compensation data to the Compensation Committee. For fiscal year 2023, our Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant, and there were no conflicts of interest with respect to this adviser.
Role of the Chief Executive Officer and Executive Management
At the Compensation Committee’s request, the Company’s Chief Executive Officer, Mr. Sides, provides input regarding the performance and appropriate compensation of the Company’s other NEOs. The Compensation Committee considers Mr. Sides’ input because of his direct knowledge of each NEO’s performance and contributions. The Compensation Committee sets the compensation of the Company’s other executive officers after considering Mr. Sides’ input.
Role of Peer Companies and Competitive Market Data
When evaluating the future contribution potential of an executive officer, the Compensation Committee considers both past contribution and anticipated future contributions to our success. To a lesser extent, the Compensation Committee takes note, on an informal basis, of the competitive rates of pay in the corporate community, generally, and the relative standing of our compensation practices to a peer group of similarly sized healthcare information technology/services and business software companies, as well as internal relationships between the officers.
30
Working with FW Cook, the Compensation Committee reviewed the fiscal year 2022 peer group to ensure continued appropriateness and determined to not make any changes for fiscal year 2023 because it was viewed as still relevant in terms of size and industry. Accordingly, the peer group used to evaluate fiscal year 2023 compensation decisions consisted of the 22 U.S.-based publicly traded healthcare IT/services and business software companies listed below (the “2023 Peer Group”):
The composition of the 2023 Peer Group is based on market capitalization, revenue, and other available data. On an overall basis, the Company’s goal is to target total compensation for NEOs at a level that is competitive, but there is no official target percentile and other important considerations include each executive’s particular experience, unique and critical skills, scope of responsibilities, proven performance, succession management and retention considerations, and the need to recruit new executives. The Compensation Committee analyzes base pay, target cash compensation and target total direct compensation within this broader context.
31
Components of the Executive Compensation Program
Our executive compensation program consists of base salary, annual performance-based cash program and long-term incentives in the form of equity awards. A significant portion of our NEOs’ compensation is variable, at risk and tied directly to measurable performance. The structure of our compensation program and the key features of each of these components is summarized in the table below:
Element |
|
Purpose & Characteristics |
|
Features |
Base Salary |
|
• Stable and fixed level of cash compensation to ensure a degree of certainty relative to each NEOs’ variable compensation. • Compensates for day-to-day job responsibilities. • Reviewed annually and adjusted when appropriate based on individual performance, expanded duties and changes in the competitive marketplace. • Competitive base salaries help attract and retain executive talent. |
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• Initial base salaries of our executive officers are established through arm’s length negotiation at the time the individual executive officer is hired, considering his or her qualifications, experience, comparable market data and prior salary level. • Thereafter, the Compensation Committee reviews, and adjusts as necessary, base salaries for each of our executive officers, at a minimum annually as part of our Compensation Committee’s performance review process. • The Compensation Committee also considers how an executive’s base salary compares to the base salaries of the other executives (i.e. internal equity). • Increases are not automatic or guaranteed, to promote a performance culture. |
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Annual Cash Bonus |
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• Target incentive opportunity (set as a percentage of base salary) tied to the achievement of annually established Company financial and operating plan goals. • Payable in cash. |
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• Target award values, metrics, and goals are evaluated and established each year for alignment with business strategy, internal budget, as well as Company and industry dynamics. • Increases to target bonus as a percentage of salary are not automatic or guaranteed. • No uncapped opportunities. |
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|
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Long-Term Incentives |
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• Helps ensure executive compensation is directly linked to the achievement of our long-term objectives. • Creates an ownership culture by aligning the interests of our NEOs with the creation of value for our stockholders. • Restricted stock awards (“RSAs”) are designed to further our goal of executive retention and to motivate an executive to remain with the Company and to align an executive’s interests with stockholders • PSUs reward executives for achieving pre-established financial, operational and market goals and creating long-term stockholder value. |
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• Target award value, metrics, and goals reviewed annually. • Delivered through RSAs and PSUs. • RSAs generally vest ratably over a three-year period • PSUs vest at the end of an applicable multi-year performance period based on the achievement of performance goals and TSR during the period. • Awards are consistent with the Compensation Committee’s guiding principles in that a majority of these long-term incentives are performance-based and all are equity-based. |
32
Base Salary
The Compensation Committee reviews base salaries annually and considers several factors when evaluating potential adjustments including peer group data and individual performance. The Compensation Committee maintained executive base salary increases modest, at an average of 4.3% for fiscal year 2023, in order to remain consistent with increases provided to the rest of the Company and to maintain a focus on long-term incentive compensation. Fiscal year 2023 base salaries were as follows:
Name |
Fiscal 2023 Base Salary ($) |
|
Fiscal 2022 Base Salary ($) |
|
Percentage Increase |
|
|||
David Sides |
|
709,000 |
|
|
675,000 |
|
|
5 |
% |
James R. Arnold, Jr. |
|
541,000 |
|
|
515,000 |
|
|
5 |
% |
Srinivas Velamoor |
|
525,000 |
|
|
500,000 |
|
|
5 |
% |
David A. Metcalfe* |
|
501,000 |
|
|
489,000 |
|
|
2.5 |
% |
Mitchell L. Waters |
|
403,000 |
|
|
380,000 |
|
|
6 |
% |
Jeffrey D. Linton |
|
406,000 |
|
|
397,000 |
|
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2.5 |
% |
* Effective February 17, 2023, Mr. Metcalfe ceased serving as our Executive Vice President and Chief Technology Officer.
Cash Bonuses
For fiscal year 2023, the Compensation Committee did not increase the target cash bonus opportunities for our NEOs, which are expressed as a percentage of base salary. The following table sets forth the potential cash incentive bonuses payable to each of our NEOs under the fiscal year 2023 executive compensation program.
Name |
Target Bonus as a % of Base Salary |
Target Cash Bonus Amount ($) |
|
|
David Sides |
100% |
|
709,000 |
|
James R. Arnold, Jr. |
80% |
|
432,800 |
|
David A. Metcalfe* |
75% |
|
375,750 |
|
Srinivas Velamoor |
75% |
|
393,750 |
|
Mitchell L. Waters |
40% |
|
161,200 |
|
Jeffrey D. Linton |
70% |
|
284,200 |
|
* Effective February 17, 2023, Mr. Metcalfe ceased serving as our Executive Vice President and Chief Technology Officer. Mr. Metcalfe was not eligible to receive a cash bonus for fiscal year 2023.
Bonus Metrics and Goals
Under our fiscal year 2023 executive cash incentive bonus program, each of our NEOs was eligible to earn a cash incentive bonus based on two equally weighted performance measures: (i) revenue for fiscal year 2023 and (ii) adjusted EBITDA for fiscal year 2023. The Committee selected adjusted EBITDA as it is reflects profit from controllable operations better than Non-GAAP EPS. Additionally, stockholder feedback emphasized aligning the plan with our peers and data show that EBITDA is the most common profit measure used by our peers in their bonus plans and only one peer uses EPS. The metrics were selected because the Company believes that it is critical to both increase top-line contribution and that the revenue should be profitable for stockholders. These annual performance metrics are the same measures of financial performance that the Company reports to its stockholders on a quarterly basis. These performance measures recognize success on execution of our business plan, which is focused on increasing long-term revenue growth and operating margin, and which we believe will create long-term value for our stockholders. For fiscal year 2023, the maximum payout opportunity was 150% of the target amount, consistent with the maximum payout opportunity in fiscal 2022. The Compensation Committee determined that achievement of 150% payouts for either revenue or adjusted EBITDA represented significant stretch goals which they determined created the right incentives with opportunities for larger payouts aligned with stretch performance.
33
Revenue
Each executive officer was eligible to earn half of their bonus for revenue, with the goal set at $649.9 million in revenue for fiscal 2023 (a 9% increase over $596.4 million revenue achieved in fiscal year 2022). The threshold revenue to earn any of the revenue portion of the bonus set 5.7% higher than the fiscal 2022 result, and the maximum requiring growth of 10.8% over fiscal year 2022 results.
Adjusted EBITDA
Each executive officer was eligible to earn half of their bonus for achieving adjusted EBITDA of $116.2 million during fiscal year 2023 (a 1.75% increase over $114.2 adjusted EBITDA achieved in fiscal year 2022). The adjusted EBITDA goal was viewed as challenging given customer demand for lower-margin business, accelerated investments in technology along with additional investment in sales, services, and centers of excellence.
The table below depicts the performance schedule and payout range of the revenue and adjusted EBITDA performance measures for the fiscal year 2023 cash incentive bonus program:
|
|
Performance Schedule |
|
|
Corresponding Payout Range (% of Target) |
|
||||||||||||||
|
Weight |
Thresh. |
|
Goal |
|
Max. |
|
|
Thresh. |
|
Goal |
|
Max. |
|
||||||
Revenue ($M) |
50% |
$ |
630.4 |
|
$ |
649.9 |
|
$ |
660.9 |
|
|
|
0 |
% |
|
100 |
% |
|
150 |
% |
Adjusted EBITDA |
50% |
$ |
110.4 |
|
$ |
116.2 |
|
$ |
124.3 |
|
|
|
0 |
% |
|
100 |
% |
|
150 |
% |
Outcomes
Our revenue for fiscal year 2023 was $653.2 million, which was above the goal and our adjusted EBITDA for fiscal year 2023 was $111.7 million, which was below the $116.2 million goal, but above the threshold. Adjusted EBITDA was short of the goal in part, due to customer demand for lower-margin business, accelerated investments in technology along with additional investment in sales, services, and centers of excellence. Accordingly, the bonus payout for revenue performance was 112.4% target and the bonus earnout for adjusted EBITDA was 42.5% target. Based on the combined achievements of the performance measures, the NEOs employed at the end of the fiscal year earned cash incentive bonus payments at 77.4% of their target bonus levels. The cash incentive bonus payment outcomes for our NEOs are set forth in the table below. These reflect the bonus formula without any discretion applied.
Name |
Target Cash Bonus |
|
Cash Bonus Earned |
|
||
David Sides |
|
709,000 |
|
|
548,766 |
|
James R. Arnold, Jr. |
|
432,800 |
|
|
334,987 |
|
David A. Metcalfe* |
|
375,750 |
|
|
— |
|
Srinivas Velamoor |
|
393,750 |
|
|
304,763 |
|
Mitchell L. Waters |
|
161,200 |
|
|
124,769 |
|
Jeffrey D. Linton |
|
284,200 |
|
|
219,971 |
|
* Effective February 17, 2023, Mr. Metcalfe ceased serving as our Executive Vice President and Chief Technology Officer. Mr. Metcalfe was not eligible to receive a cash bonus for fiscal year 2023.
Non-GAAP Financial Measure Reconciliation
Under our fiscal year 2023 executive compensation program, the cash incentive bonus performance measures are revenue and adjusted EBITDA. These performance measures recognize both long-term value creation and short-term success on execution of our business plan. For these reasons, we believe these are appropriate performance measures for our executive cash incentive bonus plan. Adjusted EBITDA is a non-GAAP (Generally Accepted Accounting Principles) performance measure. A reconciliation of this performance measure to its most directly comparable financial measures prepared in accordance with GAAP is provided below. A presentation of our reconciliation of non-GAAP performance measures with their most directly comparable GAAP financial measures is
34
also available in our press release issued on May 16, 2023 and attached as an exhibit to our current report on Form 8-K filed with the SEC on May 16, 2023.
Non-GAAP financial measures are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for United States GAAP. Pursuant to the requirements of Regulation G, we have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying financial tables. Other companies may calculate non-GAAP measures differently than we do, which limits comparability between companies. We believe that our presentation of adjusted EBITDA provides useful supplemental information to investors and management regarding our financial condition and results. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.
We utilize a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each quarter of fiscal year 2023 was 20.0%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.
The Company calculates non-GAAP adjusted EBITDA by excluding net acquisition costs, amortization of acquired intangible assets, impairment of assets, restructuring costs, stockholder disputes and related costs, net of insurance, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, share-based compensation, and other non-run-rate expenses from GAAP income from operations and then adding back amortization of capitalized software costs and depreciation as presented within the condensed consolidated statements of cash flows.
A reconciliation of adjusted EBITDA with GAAP financial measures (in thousands, except per share data) is set forth in the table below:
RECONCILIATION OF ADJUSTED EBITDA |
|
|
|
|
|
||
|
|
|
|
|
|
||
|
Fiscal Year Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Income from operations - GAAP |
$ |
(3,866 |
) |
|
$ |
6,658 |
|
Non-GAAP adjustments: |
|
|
|
|
|
||
Acquisition costs, net |
|
2,345 |
|
|
|
— |
|
Amortization of acquired intangible assets |
|
9,035 |
|
|
|
12,397 |
|
Impairment of assets |
|
3,163 |
|
|
|
3,906 |
|
Restructuring costs |
|
2,473 |
|
|
|
539 |
|
Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance* |
|
36,513 |
|
|
|
29,747 |
|
Share-based compensation |
|
33,458 |
|
|
|
26,552 |
|
Other non-run-rate expenses** |
|
939 |
|
|
|
4,486 |
|
Total adjustments to GAAP income from operations |
|
87,926 |
|
|
|
77,627 |
|
Income from operations - Non-GAAP |
|
84,060 |
|
|
|
84,285 |
|
Amortization of capitalized software costs |
|
22,571 |
|
|
|
23,016 |
|
Depreciation |
|
5,088 |
|
|
|
6,902 |
|
Depreciation and Amortization - Non-GAAP |
|
27,659 |
|
|
|
29,918 |
|
Adjusted EBITDA - Non-GAAP |
$ |
111,719 |
|
|
$ |
114,203 |
|
Total revenues |
$ |
653,172 |
|
|
$ |
596,350 |
|
Adjusted EBITDA margin - Non-GAAP |
|
17.1 |
% |
|
|
19.2 |
% |
* Includes $35,095 of legal settlement and related costs associated with the DOJ investigation regulatory matter.
** Other non-run-rate expenses for the year ended March 31, 2023 consist of $740 excess lease-related expense for vacated facilities and $199 of professional services costs not related to core operations.
35
Other non-run-rate expenses for the year ended March 31, 2022 consist primarily of $1,242 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses, related to the restructuring plan and $2,707 of executive transition costs, including severance and other costs related to the departure of the CEO, $498 of incremental costs and penalties primarily due to the cancellation of certain events directly associated with the COVID-19 pandemic, and $39 of professional services costs not related to core operations.
Sales Compensation Plan (Waters)
As our Executive Vice President, Commercial Growth, Mr. Waters’ responsibilities are focused on commercial operations and his compensation includes participation in an annual sales compensation plan with payout tied to company total bookings. Under the fiscal year 2023 Sales Compensation Plan between Mr. Waters and the Company, Mr. Waters was eligible to earn a target incentive of $200,000 based on the Company’s achievement of a pre-determined target total bookings quota of $162.5 million (“Bookings Quota”) for fiscal year 2023. The Bookings Quota was set at a level that was determined to be rigorous and that would require extraordinary efforts, excellent leadership, effective leveraging of our competencies and focus on driving results. The variable incentive is paid linearly until the “target” Bookings Quota is achieved for the year, at which point various accelerators may be triggered that could result in a multiplier of between 2 times to 2.5 times the target incentive, depending on the percentage by which the Bookings Quota has been exceeded, with a multiplier of 2 times for achievement between 101-110% of target, a multiplier of 2.1 times for achievement between 111-125%, a multiplier of 2.2 times for achievement between 126-175%, and a multiplier of 2.5 times for achievement of 176% or above. For fiscal year 2023, we recorded total bookings, which reflects estimated annual value of our executed contracts of $166.5 million for fiscal year 2023 (9.2% growth over fiscal year 2022). This level of total bookings resulted in a payout of $210,000 under the terms of the fiscal year 2023 Sales Compensation Plan, and after the discretionary inclusion of three transactions for which the sales team had substantially concluded work during fiscal year 2023 but which were not executed until April 2023 and reported as bookings for fiscal year 2024, Mr. Waters received a total payment of $235,640 (118% of the target incentive).
Equity Compensation
Equity-based compensation aligns the interests of our management team with those of our stockholders by incentivizing long-term performance. The Compensation Committee approved the equity component of our fiscal year 2023 executive compensation program following its assessment of our executive compensation program and competitive market practice. The Compensation Committee granted our NEOs equity awards in the form of (i) RSAs, subject to time-based vesting and (ii) PSUs, with three-year cliff vesting dependent on fiscal year 2025 revenue and adjusted EBITDA performance as modified by three-year TSR. The RSAs align our NEOs to our stockholders’ interest and foster our NEOs’ long-term retention. The PSUs require multi-year financial growth for minimum funding and are subject to modification by three-year TSR, provide an incentive to execute on the Company’s long-term strategy in a manner that drives stockholder return. For the fiscal year 2023 executive compensation program, approximately 60% of the total equity granted to Mr. Sides, and roughly 50% of the total equity granted to our other NEOs, was in the form of PSUs—reflecting the Compensation Committee’s emphasis on long-term performance. The three-year vesting schedule creates incentives for our NEOs to sustain performance over the long term and to encourage employment retention as the Company executes its business strategy. We anticipate continuing to grant NEO annual awards during the second half of the fiscal year for our fiscal year 2024 executive equity awards, which we anticipate making in late calendar year 2023.
36
Restricted Stock Awards – Fiscal Year 2023 Annual Awards
Under our fiscal year 2023 executive compensation program, the annual RSAs were granted in October 2022, and vest ratably over three years in annual installments, subject to continued service through each vesting date. The number of RSAs granted to each NEO under the fiscal year 2023 executive compensation program is set forth in the table below:
Named Executive Officer |
RSAs |
|
Grant Date Value |
|
||
David Sides |
|
122,700 |
|
$ |
2,400,012 |
|
James R. Arnold, Jr. |
|
63,906 |
|
|
1,250,001 |
|
Srinivas Velamoor |
|
57,515 |
|
|
1,124,993 |
|
David A. Metcalfe |
|
36,299 |
|
|
710,008 |
|
Mitchell L. Waters |
|
25,562 |
|
|
499,993 |
|
Jeffrey D. Linton |
|
23,006 |
|
|
449,997 |
|
Performance Stock Units – Fiscal Year 2023 Annual Awards
Under our fiscal year 2023 executive compensation program, the PSUs awarded in October 2022 to our NEOs are eligible to vest in the event certain performance goals are achieved (and certified by our Compensation Committee) and the executives remained in continuous service through the date of the achievement. The vesting period requires three years of services and also achievement of equally weighted revenue and adjusted EBITDA goals for fiscal year 2025. The PSUs that become “funded” based on revenue and adjusted EBITDA achieved for fiscal year 2025 are then subject to modification, by up to a 40% increase or a 40% decrease, based on the Company’s cumulative three-year TSR on the three-year anniversary of the grant date, which is also the cliff vest date. The three-year TSR modifier requires 10% growth over three years to avoid a reduction to the amounts earned for fiscal 2025 revenue and adjusted EBITDA. The number of shares to be issued may vary between 31% to 210% of the target number of PSUs depending on performance. The fiscal 2025 revenue and adjusted EBITDA goals require meaningful growth over fiscal year 2022 revenue.
The goals used for the PSUs are different from the goals used for the cash bonus program, because they reflect performance for fiscal year 2025 (rather than fiscal year 2023), emphasizing the long-term strategic plan and requiring robust ongoing growth to be achieved.
Named Executive Officer |
PSUs (target) |
|
Grant Date FV(1) |
|
||
David Sides |
|
184,049 |
|
$ |
4,198,158 |
|
James R. Arnold, Jr. |
|
63,906 |
|
|
1,457,696 |
|
Srinivas Velamoor |
|
57,516 |
|
|
1,311,940 |
|
David A. Metcalfe |
|
36,299 |
|
|
827,980 |
|
Mitchell L. Waters |
|
25,563 |
|
|
583,092 |
|
Jeffrey D. Linton |
|
23,007 |
|
|
524,790 |
|
37
Results of Fiscal Year 2020 PSUs
Under our fiscal year 2020 executive compensation program, the PSUs awarded in December 2019 to Messrs. Arnold, Linton and Metcalfe were eligible to vest in the event certain performance goals were achieved (and certified by our Compensation Committee) and the executives remained in continuous service through the date of the achievement. Approximately 80% of the PSUs were tied to the Company’s fiscal year 2021 revenue and 20% were tied to the Company’s fiscal year 2022 revenue. For each fiscal year, between 0% (for below “threshold” performance) and 150% (for “maximum” performance) of the PSUs eligible to vest based on revenue performance for such fiscal year may be “earned” or “funded” based on actual revenue for such fiscal year. The fiscal year 2021 target revenue goal was $564.7 million. Fiscal 2021 threshold revenue performance was set at $451.8 million and maximum performance was set at $592.9 million. The fiscal year 2022 target revenue goal was $592.9 million. Fiscal year 2022 threshold revenue performance was set at $474.3 million and maximum performance was set at $622.5 million. The PSUs “earned” or “funded” based on fiscal year 2021 and fiscal year 2022 revenue performance were then subject to modification by up to 15% (increase or decrease) based on the Company’s cumulative three-year TSR on the three-year anniversary of the grant date, which was also the cliff vest date. The funded awards under the formula vested on December 27, 2022, as follows:
Named Executive Officer |
Vested/Issued(1) |
|
|
James R. Arnold, Jr. |
|
54,978 |
|
David A. Metcalfe |
|
42,215 |
|
Jeffrey D. Linton |
|
25,525 |
|
Results of Fiscal Year 2021 PSUs
Under our fiscal year 2021 executive compensation program, the PSUs awarded in October 2020 to Messrs. Arnold and Linton were eligible to vest in the event certain performance goals were achieved (and certified by our Compensation Committee) and the executives remained in continuous service through the date of the achievement. The vesting period requires three years of service and also achievement of pre-established goals. Approximately 80% of the PSUs were tied to the Company’s fiscal year 2022 revenue goal and 20% were tied to the Company’s fiscal year 2023 revenue goal. For each fiscal year, between 0% (for below “threshold” performance) and 150% (for “maximum” performance) of the PSUs eligible to vest based on revenue performance for such fiscal year may be “earned” or “funded” based on actual revenue for such fiscal year (they do not vest until three years after grant). The fiscal year 2022 target revenue goal was $565.0 million. Fiscal year 2022 threshold revenue performance was $452.0 million and maximum performance was $593.3 million. The fiscal year 2023 target revenue goal was $600.0 million. Fiscal year 2023 threshold revenue performance was $480.0 million and maximum performance was $630.0 million. The PSUs “earned” or “funded” based on fiscal year 2022 and fiscal year 2023 revenue performance are then subject to modification, by up to 33% increase or 15% decrease, based on the Company’s cumulative TSR on the three-year anniversary of the grant date, which is also the cliff vest date. The funded awards remain subject to vesting until the end of the performance period at the end of October 2023.
Named Executive Officer |
Funded Level of PSUs(1) |
|
|
James R. Arnold, Jr. |
|
135,000 |
|
Jeffrey D. Linton |
|
50,144 |
|
Results of Fiscal Year 2022 PSUs
Under our fiscal year 2022 executive compensation program, the PSUs awarded to our NEOs are based on four (or five, with respect to Mr. Sides) separate stock price goals (with achievement of each goal measured based
38
on the average closing stock price over a 90-day period during the performance period) on or prior to September 22, 2026, with hurdles set at 25% appreciation increments above $15.50 (the “Base Price”). Any earned PSUs are subject to a 33% per year time-based vesting schedule starting from September 22, 2021 (e.g., if a stock price hurdle is achieved within six months following the beginning of the five-year performance period, the PSUs “earned” as a result of achieving such stock price hurdle would continue to be subject to the time-based vesting requirement and would vest 33% per year starting on each anniversary of the grant date). Tranches that are earned in the final two years of the five-year performance period will vest immediately upon achievement of the applicable stock price hurdle because the three-year vesting requirement was already satisfied.
On April 12, 2022, the Board determined that the first stock price hurdle had been achieved due to the Company’s average closing stock price over a 90-day period exceeding $19.38 per share. As a result, such number of PSUs as were eligible to vest based on such stock price hurdle were deemed “earned” in April 2022, subject to service-based vesting requirements in three equal annual installments ending on September 22, 2022, September 22, 2023, and September 22, 2024. Accordingly, one-third of the PSUs associated with the first stock price hurdle fully vested on September 22, 2022, and the remaining two-thirds of such PSUs will vest in equal installments on September 22, 2023, and September 22, 2024.
Named Executive Officer |
|
Performance-Vested PSUs (or “Earned” PSUs) (1) |
|
|
David Sides |
|
|
73,000 |
|
James R. Arnold, Jr. |
|
|
28,200 |
|
Mitchell L. Waters |
|
|
16,356 |
|
Jeffrey D. Linton |
|
|
10,152 |
|
Other Executive Compensation Matters
Separation, Termination, and Change of Control Payments
We provide our NEOs with certain cash severance benefits and equity acceleration in the event of certain qualifying terminations and, in the case of our PSUs, a change in control. For additional details concerning these matters, please see the section captioned “Potential Payments Upon Termination of Employment or Change-in-Control.”
Other Benefits
We have a 401(k) plan available to substantially all of our employees. Participating employees may defer each year up to the limit set in the Internal Revenue Code of 1986, as amended (the “Code”). The annual company contribution is determined by a formula set by our Board and may include matching and/or discretionary contributions. Matching contributions for the NEOs are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year Ended March 31, 2023. We have a deferred compensation plan available for the benefit of officers and employees who qualify for inclusion. The plan is described below in connection with the Nonqualified Deferred Compensation Table for Fiscal Year ended March 31, 2023. These retirement plans may be amended or discontinued at the discretion of our Board.
Perquisites and Other Personal Benefits
We do not provide meaningful perquisites or other personal benefits to our NEOs, other than long-term disability insurance, life insurance and 401(k) and deferred compensation match, as detailed in the Summary Compensation Table for Fiscal Year Ended March 31, 2023. We do not provide tax gross-ups to our NEOs in connection with perquisites or benefits.
39
Executive Stock Ownership Guideline
Our executive stock ownership guideline is for executive officers to acquire within five years, and retain for the full duration of their tenure as executive officers, shares of the Company’s common stock with a value of at least six times annual base salary for our Chief Executive Officer and two times annual base salary for our other executive officers. Executive officers who have not achieved the policy requirements within five years are required to hold all of their after-tax profit shares acquired upon option exercises or the vesting of other equity awards.
Insider Trading Policy
We have an insider trading policy that prohibits Board members, officers and all employees from transacting in our Company’s shares while in the possession of material nonpublic information. Our policy also prohibits these individuals from engaging in short-term or speculative transactions in our Company’s shares, including short sales, publicly traded options, hedging transactions, holding Company shares in a margin account, pledging Company shares as collateral and standing and limit orders.
Clawback Policy for Compensation Recovery
We have an executive compensation recovery policy that claws back cash and equity incentive compensation awarded to an executive officer if the result of a performance measure upon which such award was based is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award. If the result of a performance measure was considered in determining the award, but the award was not made on a formulaic basis, the Compensation Committee will determine the appropriate amount of the recovery. In addition, the Compensation Committee has the authority to recover cash and equity incentive compensation if an executive officer engaged in intentional misconduct that contributed to an award of incentive compensation that was greater than would have been awarded in the absence of such misconduct. The purpose of this policy is to ensure that actual awards earned match actual performance achieved. Pursuant to the Amended 2015 Plan, the Compensation Committee has the discretion to recover time- and performance-based equity and cash incentive compensation paid to our executive officers, if the compensation would not have been earned based on a material restatement of our financial statements within the prior three years.
In addition to continuing to maintain our existing compensation recovery policy as described above, which applies to all equity awards in the event of a covered recovery event, we plan to adopt a clawback policy compliant with the Nasdaq Stock Market listing rules before December 1, 2023, which will require the Company to recover from current and former executive officers “erroneously awarded compensation” (as defined in the Nasdaq listing rules) in the event of a required accounting restatement.
Tax Implications—Deductibility of Executive Compensation
Section 162(m) of the Code disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year to its chief executive officer and to its current and former named executive officers. For tax years prior to 2018 Section 162(m) did not apply to the chief financial officer, former named executive officers or to certain performance-based compensation. Although the Compensation Committee intends to continue emphasizing performance-based compensation as a means of motivating and aligning or executive’s interests with those of our stockholders, it expects in future to approve and pay compensation that is not tax deductible.
Accounting Implications—Accounting for Stock-Based Compensation
We account for stock-based payments in accordance with Accounting Standard Codification Topic 718, Compensation-Stock Compensation. For further information regarding our accounting for stock-based payments,
40
refer to Note 16 to the Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed with the SEC on May 23, 2023.
Summary Compensation Table for Fiscal Year Ended March 31, 2023
The following table provides certain summary information concerning the compensation for our NEOs for fiscal year 2023 (and, to the extent required by applicable SEC disclosure rules, fiscal years 2022 and 2021).
Name and Title |
|
Fiscal Year |
|
Salary |
|
|
Bonus |
|
|
Stock Awards |
|
|
Non-Equity Incentive Plan Compensation |
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings |
|
|
All Other Compensation |
|
|
Total |
|
||||||||
David Sides |
|
2023 |
|
$ |
709,009 |
|
|
$ |
— |
|
|
$ |
6,598,170 |
|
|
$ |
548,766 |
|
|
$ |
— |
|
|
$ |
39,876 |
|
|
$ |
7,895,821 |
|
|
|
President and |
|
2022* |
|
|
355,680 |
|
|
|
100,000 |
|
(5) |
|
14,256,485 |
|
|
|
1,012,500 |
|
|
|
— |
|
|
|
15,470 |
|
|
|
15,740,135 |
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
James R. Arnold, Jr. |
|
2023 |
|
|
541,011 |
|
|
|
— |
|
|
|
2,707,697 |
|
|
|
334,987 |
|
|
|
— |
|
|
|
42,189 |
|
|
|
3,625,884 |
|
|
|
Executive Vice President and |
|
2022 |
|
|
515,010 |
|
|
|
— |
|
|
|
2,874,583 |
|
|
|
618,000 |
|
|
|
— |
|
|
|
33,407 |
|
|
|
4,041,000 |
|
|
Chief Financial Officer |
|
2021 |
|
|
462,506 |
|
|
|
— |
|
|
|
2,310,300 |
|
|
|
480,000 |
|
|
|
— |
|
|
|
50,489 |
|
|
|
3,303,295 |
|
David A. Metcalfe |
|
2023 |
|
|
503,576 |
|
(6) |
|
— |
|
|
|
1,537,989 |
|
|
|
— |
|
|
|
— |
|
|
|
26,328 |
|
|
|
2,067,893 |
|
|
|
Former Executive Vice President and |
|
2022 |
|
|
489,256 |
|
|
|
— |
|
|
|
1,595,035 |
|
|
|
550,406 |
|
|
|
— |
|
|
|
20,953 |
|
|
|
2,655,650 |
|
|
Chief Technology Officer |
|
2021 |
|
|
457,193 |
|
|
|
— |
|
|
|
1,419,217 |
|
|
|
448,875 |
|
|
|
— |
|
|
|
12,984 |
|
|
|
2,338,269 |
|
Srinivas Velamoor |
|
2023 |
|
|
525,007 |
|
|
|
— |
|
|
|
2,436,933 |
|
|
|
304,763 |
|
|
|
— |
|
|
|
20,077 |
|
|
|
3,286,780 |
|
|
|
Executive Vice President and |
|
2022* |
|
|
375,006 |
|
|
|
— |
|
|
|
5,905,085 |
|
|
|
562,500 |
|
|
|
— |
|
|
|
14,583 |
|
|
|
6,857,174 |
|
|
Chief Growth Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Mitchell L. Waters |
|
2023 |
|
|
403,005 |
|
|
|
— |
|
|
|
1,083,085 |
|
|
|
360,409 |
|
|
|
— |
|
|
|
14,583 |
|
|
|
1,861,082 |
|
|
|
Executive Vice President of |
|
2022 |
|
|
376,755 |
|
|
|
— |
|
|
|
1,575,002 |
|
|
|
467,564 |
|
|
|
— |
|
|
|
19,195 |
|
|
|
2,438,516 |
|
|
Commercial Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Jeffrey D. Linton |
|
2023 |
|
|
406,005 |
|
|
|
— |
|
|
|
974,787 |
|
|
|
219,971 |
|
|
|
— |
|
|
|
27,293 |
|
|
|
1,628,056 |
|
|
|
Executive Vice President and |
|
2022 |
|
|
396,555 |
|
|
|
— |
|
|
|
977,598 |
|
|
|
416,378 |
|
|
|
— |
|
|
|
18,913 |
|
|
|
1,809,444 |
|
|
General Counsel and Secretary |
|
2021 |
|
|
370,567 |
|
|
|
— |
|
|
|
858,122 |
|
|
|
316,932 |
|
|
|
— |
|
|
|
14,215 |
|
|
|
1,559,836 |
|
*Salary information for Mr. Sides in fiscal year 2022 reflects amounts paid to him from September 22, 2021 to March 31, 2022, the period of time he served as our President and Chief Executive Officer in fiscal year 2022. Salary information for Mr. Velamoor in fiscal year 2022 reflects amounts paid to him from July 1, 2021 to March 31, 2022, the period of time he served as our Executive Vice President and Chief Growth Officer in fiscal year 2022.
FY23: The grant date fair value of the PSUs granted in fiscal year 2023 was estimated based on a probability-adjusted achievement rate of fiscal year 2025 revenue and adjusted EBITDA combined with a modifier based on cumulative total stockholder return on the three-year grant anniversary, which is also the cliff vest date. The grant date fair value of the PSUs granted in fiscal year 2023 that vest based on the performance goals was determined utilizing a Monte Carlo simulation using the assumptions in the table below:
Grant Date |
10/28/22 |
|
|
Expected term (years) |
3.0 |
|
|
Expected volatility |
|
59.8 |
% |
Expected dividends |
|
0 |
% |
Risk-free rate |
|
4.28 |
% |
41
Amounts shown in the Stock Awards column for fiscal year 2023 include the grant date fair value of the PSUs granted in fiscal year 2023 based on the probable outcome of the applicable performance conditions, assuming a 100% achievement rate, as of the grant date. The value of the PSUs assuming maximum achievement of the performance conditions are set forth in the table below:
Name |
|
Grant Date Fair Value Assuming Maximum Achievement ($) |
|
|
David Sides |
|
|
8,816,131 |
|
James R. Arnold |
|
|
3,061,161 |
|
David A. Metcalfe |
|
|
1,738,758 |
|
Srinivas Velamoor |
|
|
2,755,074 |
|
Mitchell L. Waters |
|
|
1,224,493 |
|
Jeffrey D. Linton |
|
|
1,102,058 |
|
FY22: The grant date fair value for each tranche of the PSUs granted during fiscal year 2022 tied to each stock price hurdle was estimated separately using a Monte-Carlo based valuation model using the assumptions in the table below:
Grant Date |
|
9/22/2021 |
|
|
11/2/2021 |
|
||
Expected term (years) |
|
|
5.0 |
|
|
|
5.0 |
|
Expected volatility |
|
|
52.8 |
% |
|
|
53.1 |
% |
Expected dividends |
|
|
— |
% |
|
|
— |
% |
Risk-free rate |
|
|
0.86 |
% |
|
|
1.13 |
% |
The resulting grant date fair value per share determined using the Monte-Carlo based valuation model for each tranche of the PSUs is set forth below with respect to each stock price hurdle:
|
|
Grant Date Fair Value Per Share for PSUs Tranche Tied to Stock Price Hurdle |
|
|||||
Stock Price Hurdle |
|
PSUs Granted on 9/22/2021 |
|
|
PSUs Granted on 11/2/2021 |
|
||
$19.38 |
|
$ |
12.64 |
|
|
$ |
14.77 |
|
$23.25 |
|
$ |
11.58 |
|
|
$ |
13.62 |
|
$27.13 |
|
$ |
10.58 |
|
|
$ |
12.54 |
|
$31.00 |
|
$ |
9.70 |
|
|
$ |
11.62 |
|
$34.88 |
|
$ |
8.93 |
|
|
N/A |
|
|
The amounts shown in the Stock Awards column for fiscal year 2022 include the aggregate grant date fair value of the PSUs granted in fiscal year 2022 based on the foregoing Monte-Carlo based valuation model are set forth in the table below:
|
|
Grant Date Fair Value of Fiscal 2022 PSUs ($) |
|
|
David Sides |
|
$ |
4,732,250 |
|
James R. Arnold, Jr. |
|
|
1,715,505 |
|
David A. Metcalfe |
|
|
972,348 |
|
Srinivas Velamoor |
|
|
— |
|
Mitchell L. Waters |
|
|
994,994 |
|
Jeffrey D. Linton |
|
|
617,585 |
|
42
FY21: The grant date fair value of the PSUs granted in fiscal year 2021 was estimated based on a probability-adjusted achievement rate of fiscal year 2022 and fiscal year 2023 revenue performance targets combined with a modifier based on cumulative total stockholder return on the three-year grant anniversary, which is also the cliff vest date. The grant date fair value of the PSUs granted in fiscal year 2021 that vest based on the performance goals was determined utilizing a Monte Carlo simulation using the assumptions in the table below:
Grant Date |
|
10/27/2020 |
|
|
Expected term |
|
|
3.0 |
|
Expected volatility |
|
|
62.7 |
% |
Expected dividends |
|
|
— |
|
Risk-free rate |
|
|
0.19 |
% |
The maximum value of the PSUs granted in fiscal year 2021 is $2,193,750 for Mr. Arnold, $1,347,621 for Mr. Metcalfe and $814,832 for Mr. Linton.
43
Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2023
The following table sets forth information regarding plan-based awards granted to our NEOs during the fiscal year ended March 31, 2023.
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) |
|
|
Estimated Possible Payouts Under Equity Incentive Plan Awards (2)(3) |
|
All Other Stock Awards: |
|
|
|
||||||||||||||||
Name |
Grant |
Threshold |
|
Target |
|
Maximum |
|
|
Threshold Performance Shares |
|
Target Performance Shares |
|
Maximum Performance Shares |
|
Number of Shares of Stock |
|
Grant Date Fair Value of Stock and Option Awards ($)(5) |
|
||||||||
David Sides |
|
|
— |
|
|
709,000 |
|
|
1,063,500 |
|
|
|
— |
|
|
— |
|
|
— |
|
$ |
— |
|
$ |
— |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
122,700 |
|
|
2,400,012 |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
57,092 |
|
|
184,049 |
|
|
386,503 |
|
|
— |
|
|
4,198,158 |
|
James R. Arnold, Jr. |
|
|
— |
|
|
432,800 |
|
|
649,200 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
63,906 |
|
|
1,250,001 |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
19,824 |
|
|
63,906 |
|
|
134,203 |
|
|
— |
|
|
1,457,696 |
|
David A. Metcalfe |
|
|
— |
|
|
375,750 |
|
|
563,625 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
36,299 |
|
|
710,008 |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
11,260 |
|
|
36,299 |
|
|
76,228 |
|
|
— |
|
|
827,980 |
|
Srinivas Velamoor |
|
|
— |
|
|
393,750 |
|
|
590,625 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
57,515 |
|
|
1,124,993 |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
17,841 |
|
|
57,516 |
|
|
120,784 |
|
|
— |
|
|
1,311,940 |
|
Mitchell L. Waters |
|
|
— |
|
|
161,200 |
|
|
241,800 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
2,000 |
|
|
200,000 |
|
|
500,000 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
25,562 |
|
|
499,993 |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
7,930 |
|
|
25,563 |
|
|
53,682 |
|
|
— |
|
|
583,092 |
|
Jeffrey D. Linton |
|
|
— |
|
|
284,200 |
|
|
426,300 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
23,006 |
|
|
449,997 |
|
|
10/28/2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
7,137 |
|
|
23,007 |
|
|
48,315 |
|
|
— |
|
|
524,790 |
|
44
Outstanding Equity Awards at Fiscal Year Ended March 31, 2023
The following table provides information concerning unexercised options, stock that has not vested and equity plan awards outstanding as of our fiscal year ended March 31, 2023 for each NEO.
|
|
Option Awards |
|
|
Stock Awards |
|
||||||||||||||||||||||||||
Name |
|
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 |
|
|
Equity Incentive Plan Awards: |
|
|
Equity Incentive Plan Awards: |
|
||||||||
David Sides |
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
113,000 |
|
(2) |
$ |
1,967,330 |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
314,000 |
|
(2) |
|
5,466,740 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
122,700 |
|
(3) |
|
2,136,207 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
48,666 |
|
(4) |
|
847,275 |
|
|
|
83,000 |
|
(4) |
|
1,445,030 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
184,049 |
|
(5) |
|
3,204,293 |
|
James R. Arnold, Jr. |
|
|
250,000 |
|
|
|
— |
|
|
|
15.60 |
|
|
03/01/24 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
175,000 |
|
|
|
— |
|
|
|
14.07 |
|
|
10/31/25 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,000 |
|
(6) |
|
348,200 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,881 |
|
(7) |
|
119,798 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,404 |
|
(8) |
|
703,434 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63,906 |
|
(3) |
|
1,112,603 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
90,000 |
|
(9) |
|
1,566,900 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,800 |
|
(10) |
|
327,308 |
|
|
|
31,830 |
|
(10) |
|
554,160 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
63,906 |
|
(5) |
|
1,112,603 |
|
David A. Metcalfe |
(11) |
|
100,000 |
|
|
|
— |
|
|
|
14.20 |
|
|
06/01/23 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
87,324 |
|
|
|
— |
|
|
|
14.07 |
|
|
06/01/23 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Srinivas Velamoor |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
248,195 |
|
(12) |
|
4,321,075 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
57,515 |
|
(3) |
|
1,001,336 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
57,516 |
|
(5) |
|
1,001,354 |
|
Mitchell L. Waters |
|
|
10,214 |
|
|
|
— |
|
|
|
16.83 |
|
|
06/01/26 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
5,000 |
|
|
|
— |
|
|
|
16.37 |
|
|
06/13/25 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,333 |
|
(13) |
|
58,028 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,100 |
|
(6) |
|
106,201 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,333 |
|
(14) |
|
75,438 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,434 |
|
(8) |
|
407,986 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,562 |
|
(3) |
|
445,034 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,904 |
|
(10) |
|
189,839 |
|
|
|
18,461 |
|
(10) |
|
321,406 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,563 |
|
(5) |
|
445,052 |
|
Jeffrey D. Linton |
|
|
135,000 |
|
|
|
— |
|
|
|
14.38 |
|
|
12/04/25 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,428 |
|
(6) |
|
129,321 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,546 |
|
(8) |
|
253,246 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,006 |
|
(3) |
|
400,534 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,429 |
|
(9) |
|
581,999 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,768 |
|
(10) |
|
117,831 |
|
|
|
11,459 |
|
(10) |
|
199,501 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,007 |
|
(5) |
|
400,552 |
|
45
46
Option Exercises and Stock Vested During Fiscal Year Ended March 31, 2023
The following table sets forth information regarding options exercised and stock awards vested during fiscal year 2023 for our NEOs. Value realized on option exercise is based on the difference between the per share exercise price and the closing sale price of a share of our common stock on the exercise date. The value realized on vesting of stock awards is based on the closing sale price of a share of common stock on the vesting date.
|
|
Option Awards |
|
|
Stock Awards |
|
||||||||||
Name |
|
Number of Shares Acquired on Exercise |
|
|
Value Realized on Exercise |
|
|
Number of Shares Acquired on Vesting |
|
|
Value Realized on Vesting |
|
||||
David Sides |
|
|
— |
|
|
$ |
— |
|
|
|
237,834 |
|
|
$ |
4,047,935 |
|
James R. Arnold, Jr. |
|
|
— |
|
|
|
— |
|
|
|
140,576 |
|
|
|
2,644,147 |
|
David A. Metcalfe |
|
|
— |
|
|
|
— |
|
|
|
97,895 |
|
|
|
1,841,986 |
|
Srinivas Velamoor |
|
|
— |
|
|
|
— |
|
|
|
148,919 |
|
|
|
2,658,701 |
|
Mitchell L. Waters |
|
|
— |
|
|
|
— |
|
|
|
33,886 |
|
|
|
636,522 |
|
Jeffrey D. Linton |
|
|
— |
|
|
|
— |
|
|
|
59,716 |
|
|
|
1,124,489 |
|
Pension Benefits
We do not have any plans that provide for payments or other benefits at, following or in connection with the retirement of any NEO.
Nonqualified Deferred Compensation for Fiscal Year Ended March 31, 2023
The following table sets forth information regarding our defined contribution or other plan that provides for the deferral of compensation for any NEO on a basis that is not tax-qualified. Participating employees may defer between 5% and 50% of their compensation per plan year. In addition, we may, but are not required to, make contributions into the deferral plan on behalf of participating employees. Each employee’s deferrals together with earnings thereon are accrued as part of the long-term liabilities of our company. Investment decisions are made by each participating employee from a family of mutual funds. To offset this liability, we have purchased life insurance policies on some of our participants. We are the owner and beneficiary of the policies, and the cash values are intended to produce cash needed to help make the benefit payments to employees when they retire or otherwise leave our company. Distributions will be paid out to participants either upon retirement, death, termination of employment or upon termination of the nonqualified deferred compensation plan. Distribution will generally equal the deferral amount plus or minus earnings or losses and will be in the form of a lump sum of five annual installments as elected by the participant should the account balance exceed $25,000.
Name |
|
Executive Contributions in Last Fiscal Year |
|
|
Registrant Contributions in Last Fiscal Year |
|
|
Aggregate Earnings in Last Fiscal Year |
|
|
Aggregate Withdrawals/ Distributions |
|
|
Aggregate Balance at Last Fiscal Year |
|
|||||
David Sides |
|
$ |
77,213 |
|
|
$ |
17,130 |
|
|
$ |
1,453 |
|
|
$ |
— |
|
|
$ |
104,249 |
|
James R. Arnold, Jr. |
|
|
208,601 |
|
|
|
11,525 |
|
|
|
(12,180 |
) |
|
|
— |
|
|
|
449,306 |
|
David A. Metcalfe |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Srinivas Velamoor |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mitchell L. Waters |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Jeffrey D. Linton |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
47
Potential Payments Upon Termination of Employment in Change-in-Control
CEO Executive Employment Agreement – David Sides
Effective September 22, 2021, the Company and Mr. Sides entered into an employment agreement. The employment agreement provides Mr. Sides with certain severance benefits, under certain circumstances, if his employment is terminated outside the context of a “Change in Control” of the Company. Under the terms of the employment agreement, if the Company terminates Mr. Sides’ employment without “Cause” or if Mr. Sides resigns from employment for “Good Reason,” and in each case such termination does not occur during the period commencing two months prior to and ending 18 months following a Change in Control (the “Change in Control Period”), then subject to Mr. Sides signing a release and various other customary conditions, Mr. Sides will receive the following:
Qualifying Termination Outside the Change in Control Period
If such termination occurs within the “Change in Control Period,” Mr. Sides would be entitled to the following:
48
Change in Control Severance Agreements – Messrs. Arnold, Linton, Velamoor and Waters
The Company has entered into change in control severance agreements with each of Messrs. Arnold, Linton, Velamoor and Waters. Under the change in control severance agreements, if the NEO is terminated by the Company without “cause,” or terminates his employment for “good reason” within the two-month period before or 18-month period after a “change in control” of the Company, he is entitled to the following benefits: (i) a lump sum severance payment equal to 100% of base salary and target bonus, (ii) 12 months of Company-paid continuation health benefits, (iii) prorated current year cash bonus based on actual performance (or, in the discretion of the Company, prorated target bonus) and (iv) certain other limited benefits, including outplacement services and legal fee reimbursement.
Accelerated Vesting Terms Applicable to Equity Awards
Performance Stock Unit Awards Granted in October 2020
The Company granted PSUs to Messrs. Arnold and Linton effective October 27, 2020. Pursuant to the terms of the PSUs, the PSUs are subject to vesting based on the Company’s achievement of fiscal year 2022 and 2023 revenue goals and modified for 3-year TSR performance during the performance period. In the event of a change in control, such number of PSUs will accelerate as is equal to (1) for any completed performance period, the number of PSUs that would have vested based on revenue performance for such performance period, plus (2) for any incomplete performance period, such number of PSUs determined based on the greater of (i) target or (ii) the Company’s achievement of the applicable revenue goals during the 12 months prior to such change in control, in each case multiplied by the applicable TSR performance modifier based on the Company’s actual TSR performance through the date of the change in control.
Performance Stock Unit Awards Granted in September/November 2021
The Company granted PSUs to Mr. Sides in September 2021, and to Messrs. Arnold, Linton, and Waters in November 2021, that are eligible to vest based on the achievement of pre-determined stock price goals over a five-year period that commenced on September 22, 2021, and that include a three-year service vesting requirement (with a third of the PSUs allocated to each price per share goal vesting each year).
In the event we incur a change in control, any outstanding PSUs that are earned performance-vesting PSUs as of the date of the change in control (including PSUs that have a price per share goal below the acquisition price) but that have not satisfied the service vesting requirement as of such date shall be deemed to have satisfied the applicable service vesting requirement and such PSUs shall become fully-vested PSUs as of the date of the change in control. Any PSUs that have not or do not become earned performance-vesting PSUs upon the date of the change in control shall be immediately forfeited and terminated without consideration. If the acquisition price falls between two price per share goals, the PSUs associated with the greater of the price per share goals shall be deemed partially achieved and vest at closing in a pro rata portion.
The PSUs granted in September 2021 to Mr. Sides also contain accelerated vesting terms in the event of Mr. Sides’ qualifying termination of employment by us without Cause or by Mr. Sides for Good Reason. In the event of Mr. Sides’ qualifying termination of employment by us without Cause or by Mr. Sides for Good Reason, any outstanding PSUs that are earned performance-vesting PSUs as of the date of such qualifying termination but that have not satisfied the service vesting requirement as of such date shall be deemed to have satisfied the applicable service vesting requirement with respect to such portion of the earned performance-vesting PSUs as would have satisfied the service vesting requirement during the 18 months following the date of termination had Mr. Sides remained in continuous service during such period, and such PSUs shall become fully-vested PSUs as of the date of termination.
Any outstanding PSUs that are not earned performance-vesting PSUs as of the date of such qualifying termination shall be deemed to have satisfied the applicable service vesting requirement with respect to such portion of the PSUs as would have satisfied the service vesting requirement during the 18 months following the date of termination if Mr. Sides had remained in continuous service during such period, and such resulting number of deemed service-vested PSUs shall remain outstanding and eligible to become fully-vested PSUs during the 18 month post-termination vesting period upon the achievement of the applicable price per share goals.
49
Restricted Stock Award Granted to Mr. Arnold in August 2021
The Compensation Committee granted a restricted stock award to Mr. Arnold as compensation for his service on an Executive Leadership Committee formed to lead the Company on an interim basis while a CEO search was being conducted (the “ELC RSAs”). The ELC RSAs were intended to provide compensation for services rendered and protection in the event a new CEO desired to make changes to the makeup of the executive team. Mr. Arnold received 10,322 RSAs. The award provides for accelerated vesting in full for involuntary termination without “Cause” or due to a voluntary termination with “Good Reason” as such terms are defined in the Company’s form of restricted stock award agreement.
Performance Stock Unit Awards Granted in October 2022
The Company granted PSUs to our NEOs effective October 28, 2022. Pursuant to the terms of the PSUs, the PSUs are subject to vesting based on the Company’s achievement of fiscal year 2025 revenue and adjusted EBITDA goals and modified for 3-year TSR performance during the performance period. In the event of a change in control, such number of PSUs will accelerate as is equal to the sum of (a) the funded PSUs, as determined based on, with respect to each of the adjusted EBITDA and revenue goals, the greater of (i) target or (ii) the Company’s achievement of the applicable performance goal as measured by treating the trailing 12 months adjusted EBITDA and revenues immediately prior to a change in control as adjusted EBITDA and revenues for fiscal year 2025 (such funded PSUs, the “Change of Control PSUs”) and (b) the product of (x) the Change in Control Funded PSUs and (y) the applicable TSR modifier percentage, determined based on the Company’s annual CAGR TSR performance through the date of the change in control.
Stock Award Exercisability Upon Termination or Change of Control – Amended 2015 Equity Incentive Plan and 2021 Employment Inducement Equity Incentive Plan General Provisions
Types of Awards: Our Amended & Restated 2015 Equity Incentive Plan (our “2015 Plan”) and our 2021 Employment Inducement Equity Incentive Plan (our “2021 Inducement Plan,” and together with our 2015 Plan, the “Equity Plans”) provide for the issuance of numerous types of stock-based awards, including without limitation, stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, other stock awards, and performance awards that may be settled in cash, stock, or other property.
Termination of Employment: Under our Equity Plans, vesting and exercisability of restricted stock awards and restricted stock unit awards generally terminates upon termination of employment, except as may be provided in the applicable award agreements or other agreements between the Company and the participation. Under our 2015 Plan vesting and exercisability of stock options and stock appreciation rights upon termination of employment, outside of a change of control context as discussed under “Termination Following Change of Control” below, generally has the consequences set forth in the table below, except as may be provided in the applicable award agreements or other agreements between the Company and the participant.
Reason for Termination of Employment |
|
Stock Option and Stock Appreciation Right Exercisability Consequences Under the Equity Plans |
Voluntary resignation by employee or termination without cause by us |
|
Unvested options and stock appreciation rights terminate immediately upon termination of employment. Options and stock appreciation rights (to the extent vested prior to termination) remain exercisable until the earlier of the expiration of the award term or three months after termination of employment. |
Termination for cause by us |
|
Unvested and vested options and stock appreciation rights terminate and become unexercisable upon termination of employment. |
Disability |
|
Options and stock appreciation rights (to the extent vested prior to termination) remain exercisable until the earlier of the expiration of the award term or twelve months after termination of employment. |
Death |
|
Options and stock appreciation rights (to the extent vested prior to termination) remain exercisable until the earlier of the expiration of the award term or eighteen months after termination of employment. |
50
Board Powers
Under our Equity Plans, our Board has the power to accelerate, in whole or in part, the time at which an award may be exercised or vest, and to amend the terms of any award in any way that does not impair a participant’s rights under the award.
Change in Control
Under our Equity Plans, in the event of a change of control or corporate transaction as defined in Equity Plans, awards do not automatically vest; however, and unless otherwise provided for in the award agreement or otherwise expressly provided for at the time of grant, the Board in its discretion may take any of the following actions with respect to any award: (i) arrange for the surviving or acquiring corporation to assume or substitute the award; (ii) arrange for the assignment or lapse of any reacquisition or repurchase rights pertaining to the award; (iii) accelerate the award’s vesting in whole or in part; (iv) cancel any unvested or unexercised award in exchange for cash; or (v) pay the award holder the value of the excess of the award’s value in the transaction over the award’s exercise price.
Termination Following Change of Control
Our Equity Plans provides that a stock award may be subject to additional acceleration of vesting and exercisability in the event of a qualifying termination that occurs in connection with a change of control as may be provided in the stock award agreement or other written agreement with the participant, but in the absence of such provision, no such acceleration will occur. However, our form stock option and restricted stock award agreements under our Equity Plans used for all grants to our employees, including our NEOs, state that the vesting and exercisability of awards granted thereunder will be accelerated in full if a grantee experiences a qualifying termination (i.e., an involuntary termination without cause or a voluntary termination with good reason) within twelve months of a change in control, as such terms are defined in the award agreements.
Quantification of Payments Upon Termination of Employment or Change-in-Control
The following table describes and illustrates potential payments to our NEOs other than Mr. Metcalfe under existing contracts, agreements, plans or arrangements, whether written or unwritten, for various scenarios involving a change-in-control or termination of employment, including a summary of payments that would have been required had a termination or change-in-control taken place on March 31, 2023, based upon the per share closing price of the Company’s common stock ($17.41) on the last trading day of the fiscal year. The table does not include the value of any benefits to the extent they do not discriminate in scope, terms or operation, in favor of the NEOs and that are available generally to all salaried employees, nor does it reflect payments under our non-qualified deferred compensation plan, which are described above under the “Non-Qualified Deferred Compensation for Fiscal Year Ended March 31, 2023.” Mr. Metcalfe is not included in the table below given his employment terminated prior to the end of fiscal year 2023.
51
Potential Payments Upon Termination of Employment in Change-in-Control
|
Termination by the Company without cause or termination by employee for good reason other than in connection with a change in control ($) |
|
|
Termination by the Company without cause or termination by employee for good reason during the change in control period ($) |
|
|
Change in Control (no termination of employment) ($) |
|
|||
David Sides |
|
|
|
|
|
|
|
|
|||
Cash Severance(1) |
|
2,127,000 |
|
|
|
2,127,000 |
|
|
— |
|
|
Cash Bonus(2) |
|
548,766 |
|
|
|
548,766 |
|
|
— |
|
|
RSA Acceleration(3) |
|
8,146,139 |
|
(6) |
|
9,570,277 |
|
(7) |
— |
|
|
PSU Acceleration(4) |
|
847,275 |
|
(8) |
|
847,275 |
|
(9) |
|
4,051,568 |
|
Continued Benefits(5) |
|
39,343 |
|
|
|
39,343 |
|
|
— |
|
|
Outplacement |
— |
|
|
|
42,000 |
|
|
— |
|
||
Legal Fee Reimbursement |
— |
|
|
|
5,000 |
|
|
— |
|
||
Total |
|
11,708,523 |
|
|
|
13,179,661 |
|
|
|
4,051,568 |
|
James R. Arnold, Jr. |
|
|
|
|
|
|
|
|
|||
Cash Severance(1) |
— |
|
|
|
973,800 |
|
|
— |
|
||
Cash Bonus(2) |
— |
|
|
|
334,987 |
|
|
— |
|
||
RSA Acceleration(3) |
|
119,798 |
|
(10) |
|
2,284,035 |
|
|
— |
|
|
PSU Acceleration(4) |
|
— |
|
|
|
— |
|
|
|
3,006,811 |
|
Continued Benefits(5) |
— |
|
|
|
26,621 |
|
|
— |
|
||
Outplacement |
— |
|
|
|
42,000 |
|
|
— |
|
||
Legal Fee Reimbursement |
— |
|
|
|
5,000 |
|
|
— |
|
||
Total |
|
119,798 |
|
|
|
3,666,443 |
|
|
|
3,006,811 |
|
Srinivas Velamoor |
|
|
|
|
|
|
|
|
|||
Cash Severance(1) |
— |
|
|
|
918,750 |
|
|
— |
|
||
Cash Bonus(2) |
— |
|
|
|
304,763 |
|
|
— |
|
||
RSA Acceleration(3) |
|
— |
|
|
|
5,322,411 |
|
|
|
— |
|
PSU Acceleration(4) |
|
— |
|
|
|
— |
|
|
|
1,001,354 |
|
Continued Benefits(5) |
— |
|
|
|
26,621 |
|
|
— |
|
||
Outplacement |
— |
|
|
|
42,000 |
|
|
— |
|
||
Legal Fee Reimbursement |
— |
|
|
|
5,000 |
|
|
— |
|
||
Total |
|
— |
|
|
|
6,619,545 |
|
|
|
1,001,354 |
|
Mitchell L. Waters |
|
|
|
|
|
|
|
|
|||
Cash Severance(1) |
— |
|
|
|
564,200 |
|
|
— |
|
||
Cash Bonus(2) |
— |
|
|
|
124,769 |
|
|
— |
|
||
RSA Acceleration(3) |
|
— |
|
|
|
1,092,686 |
|
|
|
— |
|
PSU Acceleration(4) |
|
— |
|
|
|
— |
|
|
|
634,890 |
|
Continued Benefits(5) |
— |
|
|
|
29,238 |
|
|
— |
|
||
Outplacement |
— |
|
|
|
42,000 |
|
|
— |
|
||
Legal Fee Reimbursement |
— |
|
|
|
5,000 |
|
|
— |
|
||
Total |
|
— |
|
|
|
1,857,893 |
|
|
|
634,890 |
|
Jeffrey D. Linton |
|
|
|
|
|
|
|
|
|||
Cash Severance(1) |
— |
|
|
|
690,200 |
|
|
— |
|
||
Cash Bonus(2) |
— |
|
|
|
219,971 |
|
|
— |
|
||
RSA Acceleration(3) |
|
— |
|
|
|
783,102 |
|
|
|
— |
|
PSU Acceleration(4) |
|
— |
|
|
|
— |
|
|
|
1,100,382 |
|
Continued Benefits(5) |
— |
|
|
|
26,055 |
|
|
— |
|
||
Outplacement |
— |
|
|
|
42,000 |
|
|
— |
|
||
Legal Fee Reimbursement |
— |
|
|
|
5,000 |
|
|
— |
|
||
Total |
|
— |
|
|
|
1,766,327 |
|
|
|
1,100,382 |
|
52
Director Compensation
We believe that a combination of cash and equity compensation is appropriate to attract and retain the individuals we desire to serve on our board of directors and that this approach is comparable to the policies of our peers. The cash component of our program is designed to encourage frequent and active interaction between our directors and our executives, both during and between formal meetings, as well as to compensate our directors for their time and effort. Further, we believe that it is important to align the long-term interests of our non-employee directors with those of the Company and its stockholders and that awarding equity compensation to, and thereby increasing ownership of our common stock by, our non-employee directors is an appropriate means to achieve this alignment.
In determining the reasonableness of the Company’s director compensation, the Compensation Committee periodically consults with, and reviews market data provided by, its independent compensation consultant, FW Cook. The primary source of the market data is the same group of companies that are used for executive compensation determination purposes. We do not target a specific level of director compensation relative to the market reference information, but rather use such information, along with information on broader trends and practices, to help guide our decisions related to our director compensation program.
Fiscal Year 2023 Director Compensation Program
The Compensation Committee continued the director compensation program for fiscal year 2023, with no changes from the program approved in fiscal year 2022 (which took effect in January 2022), except that, under the fiscal year 2023 program, non-employee directors could elect to receive all or a portion of any cash compensation payable to such director in the form of restricted stock. In addition, directors could elect to defer payment of all or a portion of the awards of restricted stock granted for their service as a director (including any restricted stock awards issued in lieu of cash compensation), as discussed below.
53
The elements of the 2023 Director Compensation Program are set forth in the table below.
Director Compensation Program |
|
Employee Director |
|
|
Non-Employee Director Base Compensation |
|
|
Nominating & Governance Committee Chairperson/Member Additional Compensation |
|
|
Compensation Committee Chairperson/Member Additional Compensation |
|
|
Audit Committee Chairperson/Member Additional Compensation |
|
|
Board Chairperson Additional Compensation |
|
||||||
Annual Base Compensation |
|
$ |
— |
|
|
$ |
90,000 |
|
|
$12,000/ |
|
|
$15,000/ |
|
|
$20,000/ |
|
|
$ |
40,000 |
|
|||
Value of Restricted Shares |
|
$ |
— |
|
|
$ |
165,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
40,000 |
|
Deferred Compensation Plan for Non-Employee Directors
Under the Deferred Compensation Plan for Non-Employee Directors (the “Director Deferred Stock Plan”), non-employee directors may elect to defer payment of all or a portion of the awards of restricted stock granted for their service as a director. An election to defer payment of these awards must generally be made prior to the year to which the stock award relates (or, for a newly nominated director, within 30 days following the date of the commencement of the director’s service as a director). Deferred awards are credited to an account in an equal amount of deferred stock units (“DSUs”). The DSUs are subject to the same vesting or other forfeiture restrictions that would have otherwise applied to such restricted stock. The DSUs shall be settled in the form of shares of common stock in a lump sum on the earliest to occur of:
Director Compensation
The following table provides information concerning compensation for our non-employee directors for the fiscal year ended March 31, 2023. Mr. Sides was an employee during his service as directors during the fiscal year ended March 31, 2023 and thus were not provided additional compensation for such service. The compensation received by Mr. Sides as an employee is described elsewhere in this filing.
Director Name |
|
Fees Earned or Paid in Cash |
|
|
Stock Awards |
|
|
Option Awards |
|
|
Non-Equity Incentive Plan Compensation |
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings |
|
|
All Other Compensation |
|
|
Total |
|
|||||||
Craig Barbarosh |
|
$ |
130,769 |
|
|
$ |
165,004 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
295,773 |
|
George Bristol |
|
|
120,000 |
|
|
|
165,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
285,004 |
|
Darnell Dent |
|
|
95,000 |
|
|
|
165,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
260,004 |
|
Julie D. Klapstein |
|
|
107,500 |
|
|
|
165,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
272,504 |
|
Jeffrey H. Margolis |
|
|
130,000 |
|
|
|
205,007 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
335,007 |
|
Geraldine McGinty |
|
|
97,500 |
|
|
|
165,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
262,504 |
|
Morris Panner |
|
|
107,000 |
|
|
|
165,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
272,004 |
|
Pamela Puryear |
|
|
100,000 |
|
|
|
165,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
265,004 |
|
54
At March 31, 2023, the aggregate number of option awards, shares of restricted stock awards and/or DSUs outstanding for each of the directors named in the table was as follows:
Director Name |
|
Total |
|
|
Total Unvested |
|
||
Craig A. Barbarosh |
|
|
— |
|
|
|
9,483 |
|
George H. Bristol |
|
|
— |
|
|
|
9,483 |
|
Darnell Dent |
|
|
— |
|
|
|
9,483 |
|
Julie D. Klapstein |
|
|
— |
|
|
|
9,483 |
|
Jeffrey H. Margolis |
|
|
— |
|
|
|
11,782 |
|
Geraldine McGinty |
|
|
— |
|
|
|
9,483 |
|
Morris Panner |
|
|
— |
|
|
|
9,483 |
|
Pamela Puryear |
|
|
— |
|
|
|
9,483 |
|
Director Stock Ownership Guideline
Directors are subject to a stock ownership guideline to hold shares of the Company’s common stock (to include common stock purchased on the open market, unvested Restricted Stock, vested or unvested deferred shares, and shares owned by immediate family members or trusts) valued in an amount equal to at least four times the value of the director’s annual cash retainer compensation. Current directors are expected to satisfy this ownership guideline within five years of adoption of the Company’s fiscal year 2017 Director Compensation Plan or within five years of any increase to the annual director cash retainer amount. New directors are expected to satisfy this ownership guideline by the fifth annual stockholder meeting after they join the Board. Compliance with the stock ownership guideline shall be measured annually on a date determined in the Board’s discretion. Noncompliance with the guideline within a specified period will not result in sanctions; however, in such cases, a director is expected to hold all after-tax profit shares after the vesting of equity awards until the director has achieved compliance (i.e., share sales by a director who is not in compliance with the guidelines at the end of a compliance period shall be limited to sales necessary for tax purposes).
Compensation Committee Interlocks and Insider Participation
Our Compensation Committee consists of Mr. Barbarosh (Chair), Ms. Klapstein and Dr. McGinty. None of these individuals was, during the fiscal year ended March 31, 2023, an officer or employee of the Company, and none of these individuals ever formerly served as an officer of the Company. No member of our Board has a relationship that would constitute an interlocking relationship with executive officers and directors of another entity.
Compensation Committee Report
The following Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulations 14A or 14C of the Exchange Act, or the liabilities of Section 18 of the Exchange Act. The Compensation Committee Report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates it by reference.
Our Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis. Based on such review and discussion, our Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in our Proxy Statement for the fiscal year ended March 31, 2023.
COMPENSATION COMMITTEE
Craig A. Barbarosh, Chairman
Julie D. Klapstein |
|
Dr. Geraldine McGinty |
55
CEO Pay Ratio
Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and applicable SEC rules, we have prepared the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other employees. We chose March 31, 2023, as the date for establishing the employee population used in identifying the median employee and determined our median employee based on our employees’ actual base salaries for fiscal year 2023, provided that regularly scheduled, permanent employees who were newly hired during fiscal year 2023 or on leave for a portion of the fiscal year were assumed to have worked for the entire fiscal year 2023 measurement period. We included all employees as of March 31, 2023, consisting of approximately 2,059 individuals located in the U.S. and 721 individuals located in India. We then determined the annual total compensation of our median employee, which includes base salary for fiscal year 2023, annual cash bonus for fiscal year 2023, the grant date fair value of equity awards granted during the fiscal year 2023 measurement period, 401(k) matching contributions, and the cost of long-term disability insurance paid by the company. The annual total compensation for our median employee for fiscal year 2023 was $71,174. Our Chief Executive Officer’s annual total compensation for fiscal year 2023 was $7,895,821, which includes compensation as disclosed in the Summary Compensation Table in this proxy statement. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was 111 to 1.
Pay Versus Performance Table
The following table sets forth information concerning: (1) the compensation of the Company’s current principal executive officer (“PEO”) and Chief Executive Officer (Mr. Sides), former PEO and Chief Executive Officer (Mr. Frantz) and the average compensation for the Company’s other NEOs, each as reported in the Summary Compensation Table and with certain adjustments to reflect the “compensation actually paid” to such individuals, as defined under SEC rules, for each of the fiscal years ended March 31, 2021, 2022 and 2023 and (2) the Company’s cumulative total stockholder return (“TSR”), the cumulative TSR of the Company’s comparator peer group (“Comparator Group TSR”), net income and revenue for each such fiscal year in accordance with SEC rules:
|
|
|
|
|
|
|
Value of Initial Fixed $100 Investment Based on: |
|
|
|
Year |
Summary Compensation Table Total for PEO (Frantz) |
Compensation Actually Paid for PEO (Frantz) |
Summary Compensation Table Total for PEO (Sides) |
Compensation Actually Paid to PEO (Sides) |
Average Summary Compensation Table Total for Non-CEO NEOs ($) |
Average Compensation Actually Paid to Non-CEO NEOs ($) |
Total Stockholder Return ($)(3) |
Peer Group Total Stockholder Return ($)(4) |
Net Income/(Loss) (thousands) ($) |
Revenue |
2023 |
$— |
$— |
$ |
$ |
$ |
$ |
$ |
$ |
$( |
$ |
2022 |
( |
|||||||||
2021 |
— |
— |
||||||||
Year |
PEO(s) |
Non-CEO NEOs |
2023 |
|
James R. Arnold, Jr., Jeffrey D. Linton, David A. Metcalfe, Mitchell L. Waters, Srinivas S. Velamoor |
2022 |
Rusty Frantz |
James R. Arnold, Jr., David A. Metcalfe, Mitchell L. Waters, Srinivas S. Velamoor |
2021 |
James R. Arnold, Jr., Jeffrey D. Linton, David A. Metcalfe |
56
|
2021 |
|
|
2022 |
|
|
2023 |
|
|||||||||||||||
Adjustments |
Mr. Frantz |
|
Average non-CEO NEOs |
|
|
Mr. Frantz |
|
Mr. Sides |
|
Average non-CEO NEOs |
|
|
Mr. Sides |
|
Average non-CEO NEOs |
|
|||||||
Summary Compensation Table Total |
$ |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
|||||||
Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY |
|
( |
) |
|
( |
) |
|
|
— |
|
|
( |
) |
|
( |
) |
|
|
( |
) |
|
( |
) |
Increase/deduction based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
Increase/deduction for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
( |
) |
|
( |
) |
|||
Increase/deduction for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date |
|
|
|
|
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
( |
) |
|
( |
) |
||
Deduction of ASC 718 Fair Value of Awards Granted during Prior FY that were Forfeited during Applicable FY, determined as of Prior FY End |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
— |
|
|
( |
) |
Increase based on Dividends or Other Earnings Paid during Applicable FY prior to Vesting Date |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
= Compensation Actually Paid |
$ |
|
$ |
|
|
$ |
( |
) |
$ |
|
$ |
|
|
$ |
|
$ |
|
||||||
The Company does not have a pension plan, therefore, there is no pension specific impact included in the compensation actually paid adjustments.
Compensation actually paid does not reflect the actual amount of compensation earned by or paid to the CEO and the other NEOs during the applicable year. For information regarding the decisions made by the Compensation Committee for fiscal year 2023, see “Compensation Discussion & Analysis.”
57
Narrative Disclosure to Pay Versus Performance Table
Relationship between Financial Performance Measures
The line graphs below compares (i) the compensation actually paid to our PEOs and the average of the compensation actually paid to our remaining NEOs, with (ii) our cumulative TSR, (iii) peer group TSR, (iv) our net income (loss), and (v) our revenue, in each case, for the fiscal years ended March 31, 2021, 2022 and 2023.
TSR and peer group TSR amounts reported in the graph assume an initial fixed investment of $100, and that all dividends, if any, were reinvested.
Relationship Between Compensation Actually Paid and Cumulative Company and Peer Group TSR
The following graph describes the relationship between compensation actually paid versus cumulative total shareholder return (“TSR”):
58
Relationship Between Compensation Actually Paid and Net Income
The following graph describes the relationship between compensation actually paid versus net income:
Relationship Between Compensation Actually Paid and Revenue
The following graph describes the relationship between compensation actually paid versus revenue.
59
Pay Versus Performance Tabular List
The following performance measures represent the most important financial performance measures used by the Company to link compensation actually paid to NEOs to performance for the fiscal year ended March 31, 2023:
60
ELECTION OF DIRECTORS
(Proposal No. 1)
Proposal No. 1 concerns the election of the following director nominees: Craig A. Barbarosh, George H. Bristol, Darnell Dent, Julie D. Klapstein, Jeffrey H. Margolis, Dr. Geraldine McGinty, Morris Panner, Dr. Pamela Puryear, and David Sides. Based on definitions of independence established by Nasdaq, SEC rules and regulations, guidelines established in our Bylaws, and the determinations of our Nominating and Governance Committee and our Board, Messrs. Barbarosh, Bristol, Dent, Margolis, Panner, Ms. Klapstein, and Drs. McGinty and Puryear are independent.
Based on the recommendation of our Nominating and Governance Committee, the Board has nominated each of these individuals for election as a director. Each of our director nominees has consented to being named in this proxy statement and has agreed to serve as a director if elected. Directors are elected at each annual meeting of stockholders and hold office until the next annual meeting or until their respective successors are duly elected and qualified. All nine director nominees currently serve on the Board.
If elected, each of the nominees will hold office until the next annual meeting or until their respective successors are duly elected and qualified. Information concerning each Director nominee is set forth above under “Information Concerning Directors and Nominees,” along with information about other members of our Board.
Board Recommendation
OUR BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES
61
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 2)
Our stockholders are being asked to ratify the appointment of PricewaterhouseCoopers LLP to serve as our independent registered public accountants to audit our financial statements for the fiscal year ending March 31, 2023. Stockholder ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm is not required by our Bylaws or other applicable legal requirements. However, our Board is submitting our Audit Committee’s appointment of PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the appointment by an affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes), our Audit Committee may reconsider whether to retain PricewaterhouseCoopers LLP as our independent registered public accounting firm. Even if the appointment is ratified, our Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
We expect that representatives of PricewaterhouseCoopers LLP will attend the annual meeting, will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions posed by our stockholders.
Board Recommendation
OUR BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
62
AUDIT MATTERS
Audit and Non-Audit Fees
The following table sets forth the aggregate fees billed to us by PricewaterhouseCoopers LLP, our principal accountant for professional services rendered in the audit of our consolidated financial statements for the years ended March 31, 2023 and 2022.
|
2023 |
|
|
2022 |
|
||
Audit fees |
$ |
2,448,169 |
|
|
$ |
1,743,109 |
|
Audit-related fees |
|
— |
|
|
|
— |
|
Tax fees |
|
103,509 |
|
|
|
124,268 |
|
All other fees |
|
5,400 |
|
|
|
5,400 |
|
Audit Fees. Audit fees consist of fees billed for professional services for audit of our consolidated financial statements and review of the interim consolidated financial statements included in our quarterly reports and services that are normally provided by an independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. No audit-related fees were incurred for fiscal years 2023 and 2022.
Tax Fees. Tax fees for fiscal years 2023 and 2022 consist of fees billed for tax planning and advice services.
All Other Fees. All other fees for fiscal years 2023 and 2022 incurred is due to the use of subscription-based accounting research and disclosure checklist tools.
Auditor Independence
Pursuant to its charter and the policy described further below, our Audit Committee pre-approves audit and non-audit services rendered by our independent public accounting firm, PricewaterhouseCoopers LLP. Our Audit Committee has determined that the rendering of non-audit services for tax compliance, tax planning and tax consulting advice by PricewaterhouseCoopers LLP is compatible with maintaining the independence of PricewaterhouseCoopers LLP.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services
Our Audit Committee’s policy is to pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by our Audit Committee prior to the completion of the audit.
63
ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY”)
(Proposal No. 3)
We are asking our stockholders to provide advisory approval of the compensation of our named executive officers, or NEOs, as we have described it in the “Executive and Director Compensation and Related Information-Compensation Discussion and Analysis” section of this proxy statement and the related executive compensation tables. Our executive compensation programs are designed to enable us to recruit, retain and develop effective management talent, who are critical to our success.
The Compensation Committee believes that our executive compensation programs are designed appropriately to reward performance with responsible and balanced incentives and to align management’s interests with our stockholders’ interests to support long-term value creation. Such programs reward our NEOs for the achievement of specific annual and long-term goals, including overall Company and performance goals and the realization of increased stockholder value. Consistent with these principles, a significant portion of our NEOs’ compensation is in the form of performance-based annual cash and equity incentives that are variable, at risk and tied directly to the Company’s measurable performance. We are also committed to maintaining good corporate governance standards with respect to our compensation program, procedures and practices. We urge our stockholders to review the “Executive and Director Compensation and Related Information—Compensation Discussion and Analysis” section of this proxy statement and the related executive compensation tables for more information.
The Board has determined to hold a “say-on-pay” advisory vote every year. In accordance with this determination and Section 14A of the Securities Exchange Act of 1934, as amended, and as a matter of good corporate governance, we are asking our stockholders to approve, on an advisory, non-binding basis, the following resolution at the 2023 annual meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of its NEOs, as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion of this Proxy Statement”
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. Although non-binding, the Compensation Committee and the Board will review and consider the voting results when making future decisions regarding our executive compensation programs. The next say-on-pay advisory vote will be held at the 2024 annual meeting.
OUR BOARD RECOMMENDS THAT STOCKHOLDERS “FOR” THE ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
64
AMENDMENT AND RESTATEMENT OF
2015 AMENDED EQUITY INCENTIVE PLAN
(Proposal No. 4)
On July 24, 2023, our Board of Directors amended the NextGen Healthcare, Inc. 2015 Equity Incentive Plan (the “2015 Plan”), subject to stockholder approval, to, among other things, increase the number of shares of common stock of the Company (the “Shares”) authorized for issuance under the 2015 Plan by an additional 2,150,000 Shares. We refer to the 2015 Plan, as amended on July 24, 2023, as the “Amended 2015 Plan” throughout this proxy statement. References in this proposal to our Board of Directors include the Compensation Committee of the Board, where applicable.
A description of the material terms of the Amended 2015 Plan are summarized below. The key differences between the terms of the 2015 Plan and the Amended 2015 Plan are as follows:
Why We Are Asking our Stockholders to Approve the Amended 2015 Plan
The Board has determined that it is in the best interests of the Company and its stockholders to approve this proposal. Currently, we maintain the 2015 Plan to grant restricted stock units and other stock awards in order to provide long-term incentives to our employees, consultants and directors. Approval of the Amended 2015 Plan by our stockholders will allow us to continue to grant restricted stock unit awards and other awards at levels determined appropriate by our Board or Compensation Committee. The Amended 2015 Plan will also allow us to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of our employees, directors and consultants, and to provide long-term incentives that align the interests of our employees, directors and consultants with the interests of our stockholders. The Board of Directors believes that the Amended 2015 Plan is an integral part of our long-term compensation philosophy and the Amended 2015 Plan is necessary to continue providing the appropriate levels and types of equity compensation for our employees. Since the time the 2015 Plan was initially approved by our stockholders, no grants may be made under the Company’s Amended and Restated 2005 Stock Option and Incentive Plan (the “Prior Plan”).
65
Requested Shares
Subject to adjustment for certain changes in our capitalization, if this Proposal 4 is approved by our stockholders, the aggregate number of shares of our common stock that may be issued under the Amended 2015 Plan since the 2015 Plan’s original effective date will not exceed (A) 25,075,000 shares (which number is the sum of (i) 11,500,000 shares initially reserved under the 2015 Plan, (ii) 6,000,000 shares approved by our stockholders in August 2017, (iii) 3,575,000 shares approved by our stockholders in August 2019, (iv) 1,850,000 shares approved by our stockholders in October 2021, (v) 2,150,000 newly requested shares, and (B) certain shares subject to outstanding awards granted under the Prior Plan that may become available for grant under the Amended 2015 Plan as such shares become available from time to time (as further described below in “Description of the Amended 2015 Plan—Shares Available for Awards”).
Why You Should Vote to Approve the Amended 2015 Plan
Equity Awards Are an Important Part of Our Compensation Philosophy
Our Board believes that our future success depends, in large part, on our ability to maintain a competitive position in attracting, retaining and motivating key personnel, consultants and advisors. The Board believes that the issuance of equity awards is a key element underlying our ability to attract, retain and motivate key personnel, consultants and advisors, and better aligns the interests of our personnel, consultants and advisors with those of our stockholders. The Amended 2015 Plan will allow us to continue to provide performance-based incentives to our eligible employees, consultants and advisors. Therefore, the Board believes that the Amended 2015 Plan is in the best interests of the Company and its stockholders and recommends a vote in favor of this Proposal 4.
The Size of Our Share Reserve Request Is Reasonable
As of June 30, 2023, we had 876,740 shares available for grant under the 2015 Plan. If the Amended 2015 Plan is approved by our stockholders, we will have an additional 2,150,000 shares available for grant after our annual meeting. Thus, subject to adjustment for certain changes in our capitalization and the Amended 2015 Plan’s share counting provisions, as of the date of the Company’s Annual Stockholder Meeting in 2023 (August 22, 2023), and subject to stockholder approval, there will be 3,026,740 shares available for the grant of new awards, less grants made after June 30, 2023 and counted on a one-for-one basis. We anticipate this to be a pool of shares necessary to provide a predictable amount of equity for attracting, retaining, and motivating employees. The size of our request is also reasonable in light of the equity granted to our employees and directors over the past year, which is comparatively lower than the majority of our peer companies
Prior to June 30, 2023, we also maintained the 2021 Employment Inducement Equity Incentive Plan (the “Inducement Plan”). Effective as of June 30, 2023, the Inducement Plan was terminated and any shares remaining available for future issuance under the Inducement Plan were canceled; however, the terms and conditions of the Inducement Plan will continue to govern any outstanding awards thereunder granted prior to June 30, 2023.
Although prior to June 30, 2023, we had 159,384 shares available for issuance under the Inducement Plan, pursuant to the listing rules of the Nasdaq Stock Market, awards under the Inducement Plan were only able to be granted to an individual who was commencing employment with the Company or who was being rehired following a bona fide interruption of employment with the Company, and such awards were required to be granted in connection with such individual’s commencement of employment with our Company and as an inducement material to his or her entering into employment with our Company. Combining the outstanding share reserve under the Inducement Plan (and discontinuing the use of the Inducement Plan) with the reservation of additional shares under the Amended 2015 Plan will allow us more flexibility in our equity grant practices and ensure that we retain an important compensation tool for all employees, not just new employees.
We Manage Our Equity Incentive Award Use Carefully, and Dilution Is Reasonable
We continue to believe that equity awards such as restricted stock awards are a vital part of our overall compensation program. Our compensation philosophy reflects broad-based eligibility for equity incentive awards. However, we recognize that equity awards dilute existing stockholders, and, therefore, we must responsibly manage
66
the growth of our equity compensation program. We are committed to effectively monitoring our equity compensation share reserve, including our “burn rate,” to ensure that we maximize stockholders’ value by granting the appropriate number of equity incentive awards necessary to attract, reward, and retain employees. The tables below show our responsible overhang and burn rate percentages.
67
Overhang
The following table provides certain additional information regarding our equity incentive program and reflects all outstanding awards. Following the termination of the Inducement Plan for purposes of granting additional awards on June 30, 2023, the 2015 Plan is our only active equity incentive plan for purposes of granting new equity-based awards. No additional awards have been or will be granted under the Inducement Plan following June 30, 2023; provided, that the terms and conditions of the Inducement Plan will continue to govern any outstanding awards thereunder granted prior to June 30, 2023.
|
|
As of June 30, 2023 |
|
|
Total number of shares of common stock subject to outstanding stock options |
|
|
937,289 |
|
Weighted-average exercise price of outstanding stock options |
|
$ |
14.86 |
|
Weighted-average remaining term of outstanding stock options |
|
|
1.77 |
|
Total number of shares of common stock subject to outstanding Full Value Awards (1) |
|
|
4,682,037 |
|
Total number of shares of common stock available for grant under the 2015 Equity Incentive Plan |
|
|
876,740 |
|
Total number of shares of common stock available for grant under the Inducement Plan (2) |
|
|
— |
|
Total number of shares of common stock available for grant under other equity incentive plans |
|
|
— |
|
|
|
As of Record Date |
|
|
Total number of shares of common stock outstanding |
|
|
67,043,022 |
|
Per-share closing price of common stock as reported on NASDAQ Global Select Market |
|
$ |
16.22 |
|
Burn Rate
The following table provides detailed information regarding the activity related to our equity incentive plans for fiscal years 2021-2023.
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
3-Year |
|
||||
Time-Vested Full Value Awards granted |
|
|
1,222,863 |
|
|
|
2,391,578 |
|
|
|
1,840,211 |
|
|
|
|
|
Performance-based Awards granted (at Target) |
|
|
408,861 |
|
|
|
926,713 |
|
|
|
475,337 |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding |
|
|
66,739,000 |
|
|
|
67,370,000 |
|
|
|
67,005,000 |
|
|
|
|
|
Gross burn rate |
|
|
2.44 |
% |
|
|
4.93 |
% |
|
|
3.46 |
% |
|
|
3.61 |
% |
68
Key Plan Features
The Amended 2015 Plan includes provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices including:
69
In this Proposal 4, stockholders are requested to approve the Amended 2015 Plan. Proposal 4 will be considered approved if the vote constitutes the affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes). If this Proposal 4 is approved by our stockholders, the Amended 2015 Plan will become effective as of the date of the Annual Meeting.
If the Amended 2015 Plan is not approved by our stockholders, the 2015 Plan will continue in full force and effect, and we may continue to grant awards under the 2015 Plan, subject to its terms, conditions and limitations, using the shares available for issuance thereunder.
Plan Benefits
The material features of the Amended 2015 Plan are described below. The following description of the Amended 2015 Plan is a summary only and is qualified in its entirety by reference to the complete text of the Amended 2015 Plan. Stockholders are urged to read the actual text of the Amended 2015 Plan in its entirety, which is appended as Annex A to the copy of this Proxy Statement filed with the SEC, which may be accessed from the SEC’s website at www.sec.gov.
Purpose
The Amended 2015 Plan is designed to secure and retain the services of our employees, directors and consultants, provide incentives for our employees, directors and consultants to exert maximum efforts for the success of our Company and our affiliates, and provide a means by which our employees, directors and consultants may be given an opportunity to benefit from increases in the value of our common stock.
Types of Awards
The terms of the Amended 2015 Plan provide for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, other stock awards, and performance awards that may be settled in cash, stock, or other property.
Shares Available for Awards
Subject to adjustment for certain changes in our capitalization, if this Proposal 4 is approved, the aggregate number of shares of our common stock that may be issued pursuant to stock awards granted under the Amended 2015 Plan since the Amended 2015 Plan’s original effective date, or the Share Reserve, will not exceed the sum of
70
(i) 11,500,000 shares initially reserved under the 2015 Plan, (ii) 6,000,000 shares approved by our stockholders in August 2017, (iii) 3,575,000 shares approved by our stockholders in August 2019, (iv) 1,850,000 shares approved by our stockholders in October 2021, (v) 2,150,000 newly requested shares, and (vi) any Prior Plan’s Returning Shares (as defined below), as such shares become available from time to time.
The term “Prior Plan’s Returning Shares” refer to any shares subject to outstanding stock awards granted under the Prior Plan that from and after 12:01 a.m. Pacific time on May 26, 2015 (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or repurchased at the original issuance price; or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award other than a stock option or stock appreciation right.
No additional awards have been or will be granted under the Inducement Plan following June 30, 2023; provided, that the terms and conditions of the Inducement Plan will continue to govern any outstanding awards thereunder granted prior to June 30, 2023.
The number of shares available for issuance under the Amended 2015 Plan will be reduced by (1) one share for each share of common stock issued pursuant to an Appreciation Award option grant or stock appreciation right with a strike price of at least 100% of the fair market value of the underlying common stock on the date of grant, and (2) 2.77 shares for each share of common stock issued pursuant to a Full Value Award granted under the Amended 2015 Plan after May 22, 2019 and before September 30, 2021, and by one share for each share of common stock issued pursuant to a Full Value Award granted under the Amended 2015 Plan on or after September 30, 2021.
To the extent there is a share of common stock issued pursuant to a Full Value Award (whether granted under the 2015 Plan, the 2005 Plan or the Amended 2015 Plan), and such share of common stock again becomes available for issuance under the Amended 2015 Plan, then the number of shares of common stock available for issuance under the Amended 2015 Plan will increase by the applicable number (that is 2.5, 3.27, 2.77, or 1.0) of shares for each such forfeited or otherwise returned share of Common Stock, based on the number that by which the share reserve was reduced at the time the award was granted. For clarity, if at the time of grant the Share Reserve was originally reduced by 3.27 shares for each share underlying a Stock Award that is later forfeited, for example, on or after October 13, 2021, then the share reserve will correspondingly be increased by 3.27 shares for each such forfeited share underlying such Stock Award.
Any shares reacquired or withheld by us pursuant to our tax withholding obligations in connection with a stock option or stock appreciation right or as consideration for the exercise of a stock option or stock appreciation right will not again become available for issuance under the Amended 2015 Plan. In addition, the gross number of shares subject to a stock appreciation right shall count against the Share Reserve if such stock appreciation right is settled in shares, and shares that are reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options will not be added to the Share Reserve. However, any shares reacquired or withheld by us pursuant to our tax withholding obligations in connection with a restricted stock award, restricted stock unit award, performance stock award or other stock award will become available for issuance under the Amended 2015 Plan, but any such withheld shares that have a value in excess of the minimum amount of tax required to be withheld by law shall not become available for issuance under the Amended 2015 Plan.
In addition, if a stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued in full or is settled in cash, such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that may be available for issuance under the Amended 2015 Plan. If any shares of common stock issued pursuant to a stock award are forfeited back to, or repurchased by us because of the failure to meet a contingency or condition required to vest such shares, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Amended 2015 Plan.
Eligibility
All of our (including our affiliates’) employees, non-employee directors and consultants are eligible to participate in the Amended 2015 Plan and may receive all types of awards other than incentive stock options. Incentive stock options may be granted under the Amended 2015 Plan only to our employees (including officers) and employees of our affiliates. As of March 31, 2023, we have 2,780 employees and eight non-employee directors. We have not granted, and do not anticipate granting, stock awards to our consultants.
71
Non-Employee Director Compensation Limit
Under the Amended 2015 Plan, the maximum number of shares subject to awards granted during a single fiscal year to any non-employee director under this plan and under any other equity plan maintained by us, taken together with any cash fees paid to such non-employee director during the fiscal year for services as a non-employee director rendered for such year, shall not exceed $600,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes and excluding, for this purpose, the value of any dividend equivalent payments paid pursuant to any award granted in a previous fiscal year).
Individual Annual Limitations
Subject to certain capitalization adjustments, the following limitations apply to annual employee grants:
Administration
The Amended 2015 Plan is administered by our Board of Directors, which may in turn delegate authority to administer the Amended 2015 Plan to a committee. Our Board of Directors has delegated concurrent authority to administer the Amended 2015 Plan to its Compensation Committee, but may, at any time, revert in itself some or all of the power previously delegated to the Compensation Committee. Our Board of Directors and our Compensation Committee are considered to be the “Plan Administrator” for purposes of this Proposal 4. Subject to the terms of the Amended 2015 Plan (including certain minimum vesting requirements (see “Minimum Vesting Requirements” below)), the Plan Administrator may determine the recipients, numbers and types of awards to be granted, and terms and conditions of the awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the Plan Administrator also determines the fair market value applicable to a stock award and the exercise price of stock options and stock appreciation rights granted under the Amended 2015 Plan. Subject to applicable law, our Board of Directors or Compensation Committee may further delegate the authority to administer the Amended 2015 Plan to one or more officers, provided that such officers may not be delegated the authority to administer the Amended 2015 Plan with respect to non-employee directors or officers subject to Section 16 of the Exchange Act.
No Repricing; No Cancellation and Re-Grant of Stock Awards
Under the Amended 2015 Plan, subject to adjustment for changes in capitalization, the Plan Administrator does not have the authority to reprice any outstanding stock option or stock appreciation right by reducing the exercise, purchase or strike price of such stock award or to cancel any outstanding stock option or stock appreciation right that has an exercise price greater than the current fair market value of our common stock in exchange for cash or other stock awards (except in the event of a change in control) without obtaining the approval of our stockholders within 12 months prior to the repricing or cancellation and re-grant event.
Minimum Vesting Requirements
The Amended 2015 Plan provides that, except as may be provided in connection with any (i) substitute awards, (ii) shares delivered in lieu of fully vested cash awards, and (iii) awards to non-employee directors that vest on the earlier of the one-year anniversary of the date of grant or the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, no stock award granted on or after August 22, 2023 may vest until at least 12 months following the date of grant of such award, except that up to 5% of the share
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reserve of the Amended 2015 Plan (subject to certain equitable adjustments as provided in the plan) may be subject to awards granted on or after August 22, 2023 that do not meet such vesting requirements. The foregoing restriction does not apply to the Board’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, disability or a change in control, in the terms of the Award or otherwise.
Dividends and Dividend Equivalents
The Amended 2015 Plan provides that dividends or dividend equivalents may be paid or credited with respect to any shares of our common stock subject to an award (other than a stock option or stock appreciation right), as determined by the Board and contained in the applicable award agreement; provided, however, that (i) no dividends or dividend equivalents may be paid with respect to any such shares before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable award agreement (including any vesting conditions), and (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest.
Stock Options
Stock options may be granted under the Amended 2015 Plan pursuant to stock option agreements. The Amended 2015 Plan permits the grant of stock options that are intended to qualify as incentive stock options, or ISOs, and nonstatutory stock options, or NSOs. Individual stock option agreements may be more restrictive as to any or all of the permissible terms described in this section.
The exercise price of NSOs may not be less than 100% of the fair market value of the common stock subject to the stock option on the date of grant. The exercise price of ISOs may not be less than 100% of the fair market value of the common stock subject to the stock option on the date of grant and, in some cases (see “Limitations on Incentive Stock Options” below), may not be less than 110% of such fair market value.
The term of stock options granted under the Amended 2015 Plan may not exceed ten years and, in some cases (see “Limitations on Incentive Stock Options” below), may not exceed five years. Except as explicitly provided otherwise in an optionholder’s stock option agreement or other agreement between the participant and the Company, stock options granted under the Amended 2015 Plan generally terminate three months after termination of the optionholder’s service unless (i) termination is due to the optionholder’s disability, in which case the stock option may be exercised (to the extent the stock option was exercisable at the time of the termination of service) at any time within 12 months following termination; (ii) the optionholder dies before the optionholder’s service has terminated, or within the period (if any) specified in the stock option agreement after termination of service for a reason other than death, in which case the stock option may be exercised (to the extent the stock option was exercisable at the time of the optionholder’s death) within 18 months following the optionholder’s death by the person or persons to whom the rights to such stock option have passed; (iii) the optionholder is terminated for cause in which case the stock option will cease to be exercisable immediately upon the optionholder’s termination, or (iv) the stock option by its terms specifically provides otherwise. In addition, the Plan Administrator may grant options with different terms. A stock option term may be extended in the event that exercise of the stock option following termination of service is prohibited by applicable securities laws or if the sale of stock received upon exercise of a stock option would violate our insider trading policy. In no event may a stock option be exercised after its original expiration date.
Acceptable forms of consideration for the purchase of our common stock pursuant to the exercise of a stock option under the Amended 2015 Plan will be determined by the Plan Administrator and may include (i) cash, check, bank draft or money order made payable to us, (ii) payment pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board, (iii) common stock previously owned by the optionholder, (iv) a net exercise feature (for NSOs only), or (v) other legal consideration approved by the Plan Administrator.
Stock options granted under the Amended 2015 Plan may become exercisable in cumulative increments, or “vest,” as determined by the Plan Administrator at the rate specified in the stock option agreement (subject to the limitations described in “Minimum Vesting Requirements” above). Shares covered by different stock options granted under the Amended 2015 Plan may be subject to different vesting schedules as the Plan Administrator may determine. The Plan Administrator also has flexibility to provide for accelerated vesting of stock options in certain events.
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Generally, an optionholder may not transfer a stock option other than by will or the laws of descent and distribution or a domestic relations order with the approval of the Plan Administrator or a duly authorized officer. Additionally, an optionholder may, with the approval of the Plan Administrator or a duly authorized officer, designate a beneficiary who may exercise the stock option following the optionholder’s death.
Limitations on Incentive Stock Options
The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. The stock options or portions of stock options that exceed this limit or otherwise fail to qualify as ISOs are treated as NSOs. No ISO may be granted to any person who, at the time of grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any affiliate unless the following conditions are satisfied:
Subject to adjustment for certain changes in our capitalization, the aggregate maximum number of shares of our common stock that may be issued pursuant to the exercise of ISOs granted under the Amended 2015 Plan is 25,075,000 shares.
Restricted Stock Awards
Restricted stock awards may be granted under the Amended 2015 Plan pursuant to restricted stock award agreements. A restricted stock award may be granted in consideration for cash, check, bank draft or money order payable to us, the participant’s services performed for us or any of our affiliates, or any other form of legal consideration acceptable to the Plan Administrator. Shares of our common stock acquired under a restricted stock award may be subject to forfeiture to or repurchase by us in accordance with a vesting schedule to be determined by the Plan Administrator (subject to the limitations described in “Minimum Vesting Requirements” above). Rights to acquire shares of our common stock under a restricted stock award may be transferred only upon such terms and conditions as are set forth in the restricted stock award agreement. Any dividends paid on restricted stock will be subject to the same vesting conditions as apply to the shares subject to the restricted stock award. Upon a participant’s termination of continuous service for any reason, any shares subject to restricted stock awards held by the participant that have not vested as of such termination date may be forfeited to or repurchased by us.
Restricted Stock Unit Awards
Restricted stock unit awards may be granted under the Amended 2015 Plan pursuant to restricted stock unit award agreements. Payment of any purchase price may be made in any form of legal consideration acceptable to the Plan Administrator. A restricted stock unit award may be settled by the delivery of shares of our common stock, in cash, in a combination of cash and stock, or in any other form of consideration determined by the Plan Administrator and set forth in the restricted stock unit award agreement. Restricted stock unit awards may be subject to vesting in accordance with a vesting schedule to be determined by the Plan Administrator (subject to the limitations described in “Minimum Vesting Requirements” above). Dividend equivalents may be credited in respect of shares of our common stock covered by a restricted stock unit award, provided that any additional shares credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying restricted stock unit award. Except as otherwise provided in a participant’s restricted stock unit award agreement or other written agreement with us or one of our affiliates, restricted stock units that have not vested will be forfeited upon the participant’s termination of continuous service for any reason.
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Stock Appreciation Rights
Stock appreciation rights may be granted under the Amended 2015 Plan pursuant to stock appreciation right agreements. Each stock appreciation right is denominated in common stock share equivalents. The strike price of each stock appreciation right will be determined by the Plan Administrator, but will in no event be less than 100% of the fair market value of the common stock subject to the stock appreciation right on the date of grant. The Plan Administrator may also impose restrictions or conditions upon the vesting of stock appreciation rights that it deems appropriate (subject to the limitations described in “Minimum Vesting Requirements” above). The appreciation distribution payable upon exercise of a stock appreciation right may be paid in shares of our common stock, in cash, in a combination of cash and stock, or in any other form of consideration determined by the Plan Administrator and set forth in the stock appreciation right agreement. Stock appreciation rights will be subject to the same conditions upon termination of continuous service and restrictions on transfer as stock options under the Amended 2015 Plan.
Performance Awards
The Amended 2015 Plan allows us to grant performance stock and cash awards. Performance awards may be granted, vest or be exercised based upon the attainment during a specified period of time of specified performance goals (subject to the limitations described in “Minimum Vesting Requirements” above). The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be determined by our Compensation Committee.
In granting a performance award, our Compensation Committee will set a period of time, or a performance period, over which the attainment of one or more goals, or performance goals, will be measured. Our Compensation Committee will establish the performance goals, based upon one or more criteria, or performance criteria, enumerated in the Amended 2015 Plan and described below. As soon as administratively practicable following the end of the performance period, our Compensation Committee will generally certify (in writing) whether the performance goals have been satisfied.
Performance goals under the Amended 2015 Plan may be based on any one or more of the following performance criteria: (1) earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings before interest, taxes, depreciation and amortization; (4) total stockholder return; (5) return on equity or average stockholder’s equity; (6) return on assets, investment, or capital employed; (7) stock price; (8) margin (including gross margin); (9) income (before or after taxes); (10) operating income; (11) operating income after taxes; (12) pre-tax profit; (13) operating cash flow; (14) sales or revenue targets; (15) increases in revenue or product revenue; (16) expenses and cost reduction goals; (17) improvement in or attainment of working capital levels; (18) economic value added (or an equivalent metric); (19) market share; (20) cash flow; (21) cash flow per share; (22) share price performance; (23) debt reduction; (24) implementation or completion of projects or processes; (25) customer satisfaction; (26) stockholders’ equity; (27) capital expenditures; (28) debt levels; (29) operating profit or net operating profit; (30) workforce diversity; (31) growth of net income or operating income; (32) billings; and (33) other measures of performance selected by the Board.
Performance goals may be based on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. In establishing a performance goal, our Board of Directors may provide that performance will be appropriately adjusted as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to
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exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles. In addition, our Board of Directors retains the discretion to increase, reduce or eliminate the compensation or economic benefit due upon attainment of performance goals and to define the manner of calculating the performance criteria it selects to use for a performance period.
Other Stock Awards
Other forms of stock awards valued in whole or in part with reference to our common stock may be granted either alone or in addition to other stock awards under the Amended 2015 Plan. The Plan Administrator will have sole and complete authority to determine the persons to whom and the time or times at which such other stock awards will be granted, the number of shares of our common stock to be granted and all other conditions of such other stock awards. Other forms of stock awards may be subject to vesting in accordance with a vesting schedule to be determined by the Plan Administrator (subject to the limitations described in “Minimum Vesting Requirements” above).
Clawback/Recovery
Pursuant to the Amended 2015 Plan, the Compensation Committee has the discretion to recover time- and performance-based equity and cash incentive compensation paid to a participant, if the compensation would not have been earned based on a material restatement of our financial statements within the prior three years. Further, stock awards granted under the Amended 2015 Plan will be subject to recoupment in accordance with the Company’s current clawback policy as well as any clawback policy we adopt pursuant to applicable law and listing requirements. In addition, our Board of Directors may impose such other clawback, recovery or recoupment provisions in any stock award agreement as it determines necessary or appropriate.
Changes to Capital Structure
In the event of certain capitalization adjustments, the Plan Administrator will appropriately adjust: (i) the class(es) and maximum number of securities subject to the Amended 2015 Plan; (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of ISOs; and (iii) the class(es) and number of securities and price per share of stock subject to outstanding stock awards.
Transactions
In the event of a transaction (as defined in the Amended 2015 Plan and described below), our Board of Directors will have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent upon the closing or completion of such transaction), unless otherwise provided in the stock award agreement or other written agreement with the participant or unless otherwise provided by our Board of Directors at the time of grant:
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The Board of Directors is not obligated to treat all stock awards or portions of stock awards in the same manner. The Board of Directors may take different actions with respect to the vested and unvested portions of a stock award.
For purposes of the Amended 2015 Plan, a transaction will be deemed to occur in the event of a corporate transaction or a change in control. A corporate transaction generally means the consummation of (i) a sale or other disposition of all or substantially all of our consolidated assets, (ii) a sale or other disposition of more than 50% of our outstanding securities, (iii) a merger, consolidation or similar transaction following which we are not the surviving corporation, or (iv) a merger, consolidation or similar transaction following which we are the surviving corporation but the shares of our common stock outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction.
A change of control generally means (i) the acquisition by a person or entity of more than 50% of our combined voting power other than by merger, consolidation or similar transaction; (ii) a consummated merger, consolidation or similar transaction immediately after which our stockholders cease to own more than 50% of the combined voting power of the surviving entity; (iii) a consummated sale, lease or exclusive license or other disposition of all or substantially of our consolidated assets; or (iv) when a majority of our Board of Directors becomes comprised of individuals whose nomination, appointment, or election was not approved by a majority of our Board members or their approved successors.
Change in Control
Under the Amended 2015 Plan, a stock award may be subject to additional acceleration of vesting and exercisability in the event of a qualifying termination that occurs in connection with a change in control (as defined in the Amended 2015 Plan) as may be provided in the stock award agreement or other written agreement with the participant, but in the absence of such provision, no such acceleration will occur.
Plan Amendments and Termination
Our Board of Directors will have the authority to amend or terminate the Amended 2015 Plan at any time. However, except as otherwise provided in the Amended 2015 Plan, no amendment or termination of the Amended 2015 Plan may materially impair any rights under awards already granted to a participant unless agreed to by the affected participant. We will obtain stockholder approval of any amendment to the Amended 2015 Plan as required by applicable law and listing requirements. No ISOs may be granted under the Amended 2015 Plan after the tenth anniversary of the earlier of the date the Amended 2015 Plan was adopted by our Board of Directors or approved by our stockholders.
U.S. Federal Income Tax Consequences
The information set forth below is a summary only and does not purport to be complete. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award. The Amended 2015 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of our tax reporting obligations.
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Nonstatutory Stock Options
Generally, there is no taxation upon the grant of an NSO if the stock option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, an optionholder will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over the exercise price. If the optionholder is employed by us or one of our affiliates, that income will be subject to withholding taxes. The optionholder’s tax basis in those shares will be equal to their fair market value on the date of exercise of the stock option, and the optionholder’s capital gain holding period for those shares will begin on that date.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the optionholder.
Incentive Stock Options
The Amended 2015 Plan provides for the grant of stock options that qualify as “incentive stock options,” as defined in Section 422 of the Code. Under the Code, an optionholder generally is not subject to ordinary income tax upon the grant or exercise of an ISO. If the optionholder holds a share received on exercise of an ISO for more than two years from the date the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss.
If, however, an optionholder disposes of a share acquired on exercise of an ISO before the end of the required holding period, which is referred to as a disqualifying disposition, the optionholder generally will recognize ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the stock option, the amount of ordinary income recognized by the optionholder will not exceed the gain, if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on exercise of an ISO exceeds the exercise price of that stock option generally will be an adjustment included in the optionholder’s alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum tax purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the stock option is exercised.
We are not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a share acquired on exercise of an ISO after the required holding period. If there is a disqualifying disposition of a share, however, we are allowed a deduction in an amount equal to the ordinary income includible in income by the optionholder, subject to Section 162(m) of the Code and provided that amount constitutes an ordinary and necessary business expense for us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
Restricted Stock Awards
Generally, the recipient of a restricted stock award will recognize ordinary income at the time the stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a period of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the recipient will recognize ordinary
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income equal to the excess, if any, of the fair market value of the stock on the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service, within 30 days following his or her receipt of the stock award, to recognize ordinary income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient for the stock.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the stock becomes vested.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award.
Restricted Stock Unit Awards
Generally, the recipient of a stock unit structured to conform to the requirements of Section 409A of the Code or an exception to Section 409A of the Code will recognize ordinary income at the time the stock is delivered equal to the excess, if any, of the fair market value of the shares of our common stock received over any amount paid by the recipient in exchange for the shares of our common stock. To conform to the requirements of Section 409A of the Code, the shares of our common stock subject to a stock unit award may generally only be delivered upon one of the following events: a fixed calendar date (or dates), separation from service, death, disability or a change in control. If delivery occurs on another date, unless the stock units otherwise comply with or qualify for an exception to the requirements of Section 409A of the Code, in addition to the tax treatment described above, the recipient will owe an additional 20% federal tax and interest on any taxes owed.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock units will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award.
Stock Appreciation Rights
We may grant under the Amended 2015 Plan stock appreciation rights separate from any other award or in tandem with other awards under the Amended 2015 Plan.
Where the stock appreciation rights are granted with a strike price equal to the fair market value of the underlying stock on the grant date, the recipient will recognize ordinary income equal to the fair market value of the stock or cash received upon such exercise. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock appreciation right.
Section 162(m) Limitations
Compensation of persons who are “covered employees” of the Company is subject to the tax deduction limits of Section 162(m) of the Code. The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered employees in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017 and which is not modified in any material respect on or after such date.
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New Plan Benefits
Except as described in this paragraph with respect to our non-employee directors, the Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to executive officers, directors, and employees under the Amended 2015 Plan. We do not presently have any current plans, proposals or arrangements, written or otherwise, to issue any of the newly available authorized shares under the Amended 2015 Plan. Our non-employee directors are, however, entitled to receive automatic annual awards of restricted stock (or DSUs) under our director compensation program, as described above under “Director Compensation.” As a result, the awards to be granted on the date of the Annual Meeting to our non-employee directors pursuant to the fiscal year 2023 Director Compensation Program will be granted under the Amended 2015 Plan, assuming approval of this Proposal 4.
Option Awards Granted Under the 2015 Plan
The following table sets forth, for each of the individuals and various groups indicated, the total number of shares of our common stock subject to equity awards that have been granted under the 2015 Plan as of June 30, 2023.
Name and Position |
|
Number of Shares underlying Option Awards |
|
|
Number of Shares underlying Restricted Stock Awards |
|
|
Number of Shares underlying Performance Awards (1) |
|
|||
David Sides, President and Chief Executive Officer |
|
|
— |
|
|
|
122,700 |
|
|
|
184,049 |
|
James R. Arnold, Jr. Executive Vice President and Chief Financial Officer |
|
|
425,000 |
|
|
|
427,895 |
|
|
|
337,139 |
|
Jeffrey D. Linton, Executive Vice President, General Counsel and Secretary |
|
|
135,000 |
|
|
|
120,404 |
|
|
|
122,359 |
|
Srinivas S. Velamoor, Executive Vice President and Chief Growth Officer |
|
|
— |
|
|
|
57,515 |
|
|
|
57,516 |
|
Mitchell L. Waters, Executive Vice President, Commercial Operations |
|
|
65,430 |
|
|
|
128,114 |
|
|
|
60,380 |
|
David A. Metcalfe, Former Executive Vice President and Chief Technology Officer |
|
|
340,000 |
|
|
|
229,155 |
|
|
|
216,841 |
|
All current executive officers as a group |
|
|
990,430 |
|
|
|
1,154,037 |
|
|
|
988,509 |
|
All current directors who are not executive officers as a group(2) |
|
|
— |
|
|
|
488,677 |
|
|
|
— |
|
Each nominee for election as a director(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Each associate of any executive officers, current directors or director nominees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Each other person who received or is to receive 5% of awards |
|
|
1,630,000 |
|
|
|
627,659 |
|
|
|
536,105 |
|
All employees, including all current officers who are not executive officers, as a group |
|
|
2,961,200 |
|
|
|
8,786,079 |
|
|
|
815,615 |
|
Required Vote and Board of Directors Recommendation
Approval of Proposal No. 4, the approval of the Amended 2015 Plan, requires the affirmative vote of the holders of a majority of the votes cast (excluding abstentions and broker non-votes). Thus, the number of votes “FOR” must exceed the number of votes “AGAINST” for this proposal to pass. Brokers are not authorized to vote on this proposal without instruction from the beneficial owners. Abstentions and broker non-votes will have no effect on this proposal. If this Proposal 4 is approved by our stockholders, the Amended 2015 Plan will become effective as of the date of the annual meeting.
OUR BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE THE AMENDED 2015 PLAN.
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ANNUAL REPORT AND AVAILABLE INFORMATION
Our annual report containing audited financial statements for our fiscal years ended March 31, 2023 and 2022 accompanies this proxy statement. Such report is not incorporated herein and is not deemed to be a part of this proxy solicitation material. Our internet website address is www.nextgen.com. We make our periodic and current reports, together with amendments to these reports, available on our internet website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. You may access such filings in the “Investor Relations” section of our website. Members of the public may also read and copy any materials we file with, or furnish to, the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC 20549. To obtain information on the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330. The SEC maintains an internet site at www.sec.gov that contains the reports, proxy statements and other information that we file electronically with the SEC. The information on our internet website is not incorporated by reference into this Proxy Statement. Our common stock trades on the Nasdaq Global Select Market under the symbol “NXGN.”
Stockholders may obtain free of charge a copy of our latest annual report (without exhibits) as filed with the SEC by contacting our Secretary, Jeffrey D. Linton, at secretary@nextgen.com. In addition, all of our public filings, including our annual report, can be found free of charge on the SEC’s website at www.sec.gov.
Submitting a Stockholder Proposal for the 2024 Annual Meeting
SEC Regulation
Pursuant to Rule 14a-8 promulgated under the Exchange Act, proposals by stockholders that are intended for inclusion in our proxy statement and proxy and to be presented at our next year’s (i.e. 2024) annual meeting must be received by us by March 28, 2024, and must otherwise comply with Rule 14a-8. Such proposals should be addressed to our Corporate Secretary and, while our Board will consider stockholder proposals, we reserve the right to omit from the proxy statement stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
Company Bylaws
Our Bylaws provide that for nominations or other business to be properly brought before meeting of stockholders by a stockholder, any such proposed business must constitute a proper matter for stockholder action and the stockholder must have given timely notice thereof, including providing certain information regarding the stockholder making such proposal and regarding the nominee or business proposed by the stockholder, in writing to our Corporate Secretary via email to secretary@nextgen.com. If a stockholder intends to present a proposal for consideration at the 2024 annual meeting that will not be included in our proxy statement pursuant to the procedures contemplated in our Bylaws, outside the processes of Rule 14a-8, the stockholder must provide timely notice to our Corporate Secretary at the principal executive office of the Company not less than ninety (90) days nor more than one hundred and twenty (120) days prior to August 22, 2024, provided that if the date of the 2024 annual meeting is more than thirty (30) days before or more than sixty (60) days after August 22, 2024, notice by a stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to August 22, 2024 or, if later, the tenth (10th) day following the day on which public disclosure of the date of the 2024 annual meeting is first made by the Company. Notice received outside of these dates is considered untimely. For proposals not made in accordance with Rule 14a-8, you must comply with specific procedures set forth in our Bylaws and the proposal must contain the specific information required by our Bylaws.
Proxy Access Nominees
Our Bylaws allow a single stockholder or group of no more than twenty (20) stockholders who have held at least three percent (3%) of our common stock for at least three (3) years to submit director nominees (not to exceed the greater of two (2) or 20% of the Board) for inclusion in our Proxy Statement if the stockholder(s) and nominee(s) satisfy the requirements specified in our Bylaws. To be timely, a stockholder’s nomination notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Company not less than one hundred and twenty (120) days nor more than one hundred and fifty days (150) days prior to August 22, 2024; provided, however, that in the event that the annual meeting is called for a date that is more than thirty (30)
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days before or sixty (60) days after the anniversary of the preceding year’s annual meeting, in order to be timely the nomination notice must be so received not later than the close of business on the later of one hundred and twenty (120) days in advance of such annual meeting or ten (10) days following the day on which public disclosure of the date of the annual meeting was made. Any stockholder’s nomination notice must comply with the specific procedures set forth in our Bylaws and the nomination must contain the specific information required by our Bylaws.
Proposals Pursuant to Rule 14a-9
In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules (once they become effective), stockholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule 14a-9 under the Exchange Act no later than June 23, 2024.
We intend to file a Proxy Statement and WHITE proxy card with the SEC in connection with our solicitation of proxies for our 2023 Annual Meeting. Stockholders may obtain our Proxy Statement (and any amendments and supplements thereto) and other documents as and when filed by us with the SEC without charge from the SEC’s website at: www.sec.gov.
General Information Relating to Stockholder Proposals and Nominations
Any stockholder who wishes to submit a stockholder proposal or to nominate a director nominee should send such proposal or nomination to our Secretary, Jeffrey D. Linton, at secretary@nextgen.com. You may contact the Secretary for a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. The Company’s Bylaws also are available on our website at www.nextgen.com under “Corporate Governance”
The chair of the annual meeting has the sole authority to determine whether any nomination or other proposal has been properly brought before the meeting in accordance with our Bylaws. If we receive a proposal other than pursuant to Rule 14a-8 or a nomination for the 2024 annual meeting of stockholders, and such nomination or other proposal is not delivered within the time frame specified in our Bylaws, then the person(s) appointed by the Board and named in the proxies for the 2024 annual meeting of stockholders may exercise discretionary voting power if a vote is taken with respect to that nomination or other proposal.
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HOUSEHOLDING OF ANNUAL MEETING MATERIALS
The SEC has implemented rules regarding the delivery of proxy materials (that is, annual reports, proxy statements, proxy statements combined with a prospectus or any information statements provided to stockholders) to households. This method of delivery, often referred to as “householding,” would permit us to send a single annual report and/or a single proxy statement to any household in which two or more stockholders reside if we believe those stockholders are members of the same family or otherwise share the same address or that one stockholder has multiple accounts. In each case, the stockholder(s) must consent to the householding process. Each stockholder would continue to receive a separate notice of any meeting of stockholders and proxy card. The householding procedure reduces the volume of duplicate information you receive and reduces our expenses. We may institute householding in the future and will notify registered stockholders who would be affected by householding at that time.
Many brokerage firms and other holders of record have instituted householding. If your family has one or more “street name” accounts under which you beneficially own common shares of NextGen Healthcare, Inc., you may have received householding information from your broker, financial institution or other nominee in the past. Please contact the holder of record directly if you have questions, require additional copies of this proxy statement or our latest annual report or wish to revoke your decision to household and thereby receive multiple copies. You should also contact the holder of record if you wish to institute householding. These options are available to you at any time.
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OTHER MATTERS
Our Board does not intend to present any business at the annual meeting other than the matters described in this proxy statement. If any other matters are presented properly for action at the annual meeting or at any adjournments or postponements thereof, it is intended that the proxy will be voted with respect thereto by the proxy holders in accordance with the instructions and at the discretion of our Board or a properly authorized committee thereof.
By Order of the Board of Directors,
NEXTGEN HEALTHCARE, INC.
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Annex A
NextGen Healthcare, Inc.
2015 Equity Incentive Plan
Adopted by the Board of Directors: May 20, 2015
Approved by the Shareholders: August 11, 2015
Amended by the Board of Directors: June 13, 2017
Approved by the Shareholders: August 22, 2017
Amended by the Board of Directors: May 22, 2019
Approved by the Shareholders: August 15, 2019
Amended by the Board of Directors: May 25, 2021
Approved by the Shareholders: October 13, 2021
Amended by the Board of Directors: July 24, 2023
Approved by the Shareholders: [_]
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Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however, that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:
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This amended and restated Plan will become effective on the Restatement Effective Date.
The laws of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.
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Notwithstanding the foregoing definition or any other provision of this Plan, the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.
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[1]As of the Restatement Effective Date (i.e., the date of the Company’s Annual Stockholder Meeting in 2023 (August 22, 2023)), and subject to stockholder approval, there will be 3,026,740 shares available for the grant of new awards (consisting of 876,740 shares that were available for the grant of new awards under the Plan as of June 30, 2023, plus 2,150,000 newly requested shares), less grants made after June 30, 2023 and counted on a one-for-one basis, subject to adjustment pursuant to Section 9(a) and Section 3(b)(i).
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HEALTHCARE, INC. ATTN: JEFFREY D. LINTON GENERAL COUNSEL AND SECRETARY 3525 PIEDMONT RD., NE BUILDING 6 SUITE 700, ATLANTA, GEORGIA SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 08/16/2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 08/16/2022. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees For Against Abstain 1a. Craig A. Barbarosh 1b. George H. Bristol 1c. Darnell Dent 1d. Julie D. Klapstein 1e. Jeffrey H. Margolis 1f. Geraldine McGinty 1g. Morris Panner 1h. Pamela Puryear 1i. David Sides The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023 3. Advisory vote to approve the compensation for our named executive officers. The Board of Directors recommends you vote 1 YEAR on the following proposal: 4. Advisory vote to approve the frequency of the advisory vote on executive compensation. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000575499_1 R1.0.0.24
1 1 12345678 12345678 12345678 12345678 12345678 12345678 12345678 12345678 NAME THE COMPANY NAME INC. - COMMON 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS A 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS B 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS D 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS E 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS F 123,456,789,012.12345 THE COMPANY NAME INC. - 401 K 123,456,789,012.12345 → x 02 0000000000 JOB # 1 OF 2 1 OF 2 PAGE SHARES CUSIP # SEQUENCE # THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date CONTROL # SHARES SCAN TO VIEW MATERIALS & VOTE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0000617719_1 R1.0.0.6 NEXTGEN HEALTHCARE, INC. ATTN: JEFFREY D. LINTON EVP, GENERAL COUNSEL AND SECRETARY 18111 VON KARMAN AVENUE, SUITE 600 IRVINE, CA 92657 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 08/21/2023. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 08/21/2023. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees For Against Abstain 1a. Craig A. Barbarosh 1b. George H. Bristol 1c. Darnell Dent 1d. Julie D. Klapstein 1e. Jeffrey H. Margolis 1f. Geraldine McGinty 1g. Morris Panner 1h. Pamela Puryear 1i. David Sides The Board of Directors recommends you vote FOR proposals 2, 3 and 4. For Against Abstain 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2024. 3. Advisory vote to approve the compensation for our named executive officers. 4. Amendment and Restatement of NextGen Healthcare, Inc. 2015 Equity Incentive Plan. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
0000617719_2 R1.0.0.6 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com NEXTGEN HEALTHCARE, INC. PROXY FOR 2023 ANNUAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned appoints Jeffrey D. Linton and James R. Arnold, Jr., and each of them, individually, as attorneys and proxies, with full power of substitution, to vote all shares of Common Stock of NextGen Healthcare, Inc. (“NextGen Healthcare”) held of record by the undersigned as of July 13, 2023 at the Annual Meeting of Shareholders of NextGen Healthcare to be held at 18101 Von Karman Ave, Suite 200, Irvine, CA 92612 on August 22, 2023, at 10:00 a.m. Pacific time and at all adjournments and postponements thereof (the “Annual Meeting”), upon the following matters, which are described in NextGen Healthcare’s Proxy Statement for the Annual Meeting. NextGen Healthcare's Board of Directors recommends shareholders vote "FOR" all of the directors in Proposal 1 and "FOR" Proposals 2, 3 and 4. In accordance with the discretion and at the instruction of the Board of Directors or an authorized committee thereof, the proxy holder is authorized to act upon all matters incident to the conduct of the meeting and upon other matters that properly come before the meeting subject to the conditions described in NextGen Healthcare’s Proxy Statement concerning the Annual Meeting. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. If any nominee named on the reverse side declines or is unable to serve as a director, the persons named as proxies shall have the authority to vote for any other person who may be nominated at the instruction and discretion of the Board of Directors or an authorized committee thereof. Continued and to be signed on reverse side
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com NEXTGEN HEALTHCARE, INC. PROXY FOR 2022 ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned appoints Jeffrey D. Linton and James R. Arnold, Jr., and each of them, individually, as attorneys and proxies, with full power of substitution, to vote all shares of Common Stock of NextGen Healthcare, Inc. (“NextGen Healthcare”) held of record by the undersigned as of July 6, 2022 at the Annual Meeting of Stockholders of NextGen Healthcare to be held at 18101 Von Karman Ave, Suite 200, Irvine, CA 92612 on August 17, 2022, at 9:00 a.m. Pacific time and at all adjournments and postponements thereof (the “Annual Meeting”), upon the following matters, which are described in NextGen Healthcare’s Proxy Statement for the Annual Meeting. NextGen Healthcare’s Board of Directors recommends stockholders vote “FOR” all of the directors in Proposal 1, “FOR” Proposals 2 and 3, and “ONE YEAR” for Proposal 4. In accordance with the discretion and at the instruction of the Board of Directors or an authorized committee thereof, the proxy holder is authorized to act upon all matters incident to the conduct of the meeting and upon other matters that properly come before the meeting subject to the conditions described in NextGen Healthcare’s Proxy Statement concerning the Annual Meeting. This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. If any nominee named on the reverse side declines or is unable to serve as a director, the persons named as proxies shall have the authority to vote for any other person who may be nominated at the instruction and discretion of the Board of Directors or an authorized committee thereof. Continued and to be signed on reverse side 0000575499_2 R1.0.0.24
