United States
Securities and Exchange Commission
Washington, D.C. 20549
Schedule 14 A
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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| Filed by the Registrant |
| Filed by a Party other than the Registrant |
Check the appropriate box: |
| Preliminary Proxy Statement |
| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material under Rule 14a-12 |
United States
Securities and Exchange Commission
Washington, D.C. 20549
Schedule 14 A
Proxy Statement Pursuant To Section 14(a)
of the Securities Exchange Act of 1934
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check all boxes that apply):
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| No fee required |
| Fee paid previously with preliminary materials. |
| Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
MessagefromtheChiefExecutiveOfficer
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| In March 2021,OUTLOOK: SHORT-TERM HEADWINDS
& LONG-TERM TAILWINDS
At-home fitness, like many other consumer-focused industries, is undergoing short-term macro-economic challenges. On top of this, our industry and Nautilus experienced hyper-growth during the pandemic, resulting in some pull-forward of demand and the industry is now looking to find its post-pandemic footing. To weather the macro and sector challenges, we are staying grounded in our Investor Day,noble mission and unwavering dedication to build a healthier world, one person at a time. On a brighter note, during and after the pandemic, there appears to have been a profound and enduring shift in consumer fitness habits that favor at-home workouts, which we unveiled “North Star” -believe will enhance the long-term opportunity for our new, long-term, strategic plan. This strategy is built on our key strengths, which differentiate usCompany. The hybrid work model, where many work from our competitors: well-respected brands,home a portfolioportion of productseach week, has more consumers exercising at home than pre-pandemic. Pre-pandemic, 43% of U.S. adults surveyed by YouGov said they consistently worked out at home. Today, that includes multiple modalities and price points, and broad, multichannel distribution. Our consumer is at the heart of everything we donumber has grown to 64% and has fueled the modernization ofheld steady for more than two years. In our Bowflex® brand. This renewed focus, powered by an enhanced teamcore target segment, this trend is even more pronounced, with expanded long-term capabilities, sets us on a path to scale with our differentiated JRNY® platform offering. At the center of North Star is connected fitness and our transformation from a product-led to a consumer-led company. An important catalyst for this change is the digital transformation that has been occurring over the last few years in home fitness and was accelerated to elevated levels of opportunity by the COVID-19 pandemic. People discovered that connected fitness brought home many of the benefits of the gym, along with a variety of programming as available in JRNY®, to provide encouragement to stick to their fitness routines longer.nearly 90% working out at home.
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AsIn addition, connected fitness has enhanced consumers’ workouts, coupling equipment with content and innovative software to deliver superior fitness experiences. Instead of getting bored with a resultfew “canned” workouts that traditionally came installed on equipment, connected fitness brings variety, freshness, progress tracking, coaching, and community that make their workouts more engaging and less routine. Nautilus is well-positioned to leverage both the long-term trend toward at-home workouts and connected fitness experiences.
We provide consumers a broad variety of these long-term changessuperior products at a range of price points via our omnichannel distribution model. And we continue to enhance the portfolio with our differentiated JRNY® connected fitness offering.
With the ups and downs in habits, we believe the industry growth opportunity will remain elevated relative to pre-pandemic levels. This results in greater opportunities for our industry and for Nautilus.
We are focusedin recent years, it is easy to forget that we have been driving an ambitious transformation of our Company. We’ve made strong progress on investing in our company and have continued to concentrate investments on JRNY®, our brands, and our digital transformation. Our Board and Management Team are committed to our strategy and will continue to invest prudently while balancing the long and short-term challenges and opportunities.
Through disciplined execution and staying true toall of our North Star initiative,pillars over the past two years, and I am confidentfirmly believe that we are emerging fromhave set the pandemicfoundation for our path to become a leader in connected fitness by leveraging our equipment business and scaling a differentiated offering. All of this affirms our conviction in our North Star strategy, which is already paying off and will result in an even stronger Company as macro and industry conditions normalize.
Nautilus’ operating model is a much stronger company.
FY 2022 Highlights
• Revenuestrategic advantage to weather short-term, top-line challenges. Our asset-light manufacturing, diversified product portfolio, omni-channel distribution and semi-variable cost structure that enables tight management of $590M, 112% increase versus pre-pandemic FY 2020
• Over 325,000 JRNY® members (exceeding by 30%margin, operating expenses and inventory level is a model built to flex with the goalvariation of 250,000 thatmarket conditions. In anticipation of a challenging outlook for the coming quarters, in February 2023, we settook difficult actions as responsible operators to re-set our operating model, eliminating approximately $30M in March 2021)
• Added nearly 600,000 new customers incosts. These reductions provide us additional agility to help us navigate the last two years
• Increasedshort-term to capture the installed base from 140k in FY 2020 to over 2.7 million at the end of FY 2022
• Approximately 80% of total units sold connectable-to-JRNY® versus only 22% in FY 2020long-term opportunity.
FY 2022 FINANCIAL2023 HIGHLIGHTS
FY 2022 demonstrated strong demand for our products, resulting in another historic sales year. For FY 2022, net sales were $590 million, a 112% increase compared to the same period two years ago, excluding Octane. FY 2022 had the second highest annual revenue in the last 15 years, with FY 2021 being the highest. Our omnichannel approach and assortment of strength and cardio products has enabled us to strongly compete in the market. Offering a diverse portfolio of modalities and price points provided us with the foundation to meet our target consumer's need for variety. As we enter year two of our North Star strategy, we are proud of the tremendous progress.
Strategic North Star Pillar Progress
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| ADOPT A CONSUMER-FIRST MINDEST |
The enhanced level of researchOur consumer-first positioning has transformed how we have conducted about consumers led ustarget our consumer segments and how we develop our products to identifymeet their expectations. In addition to better meeting our customers’ needs in the development cycle, we are making great progress in our operations with a new targetfocus on better customer service and delivery. Our investments here are paying off with increased ROI on advertising and significant market segment we call enthusiastic cross-trainers and now drivesshare gains in our product and go-to-market decisions. Our commitment to a Consumer-First Mindset guided our transition to a consumer-led digital company, as the preferred home workout habits established during the pandemic helped us acquire nearly 600,000 new customers in two years, compared to a pre-pandemic average of 100,000 per year.Direct business. We have also increased by almost three times the numberremedied past delivery challenges and have driven improvements resulting in 99% on-time delivery to our direct customers during fiscal year 2023. We are looking forward to launching a suite of Retail doors where ournew products are sold, providing numerous choices for consumers.carrying a refreshed Bowflex® brand identity later this year.
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| Scale a Differentiated Digital Offering |
The successful launchWe continue to enhance and scale our differentiated digital offering, JRNY®, to better serve our customers and capture long-term revenue and profit. 80% of our products are JRNY®-enabled and JRNY® is now offered across the cardio portfolio including treadmills, bikes, and our proprietary Max Trainers, as well as available with bring your own device for our #1 selling SelectTech® dumbbells.
We have also made tremendous progress in bringing hyper-personalized experiences to JRNY® members. In FY 2023, we debuted JRNY® with Motion Tracking, which offers personalized form-coaching and feedback, rep counting, and individualized workout recommendations. This enhances our strength offerings with workouts that are designed for use with Bowflex® SelectTech® 552 and Bowflex® SelectTech® 1090 Dumbbells, and with Android or iOS tablets and mobile devices.
By transitioning our cardio portfolio to connected fitness as an installed base for JRNY®, introducing vision and motion-tracking technologies to our strength portfolio and enabling members to receive personalized real-time form-coaching and rep-counting using their mobile devices, we have laid a full linestrong foundation for JRNY®. Additionally, we have been able to reduce near-term spend on JRNY® and keep connected fitness experiences much more affordable than our key competitors so that anyone can experience the benefits of connected cardio machines, treads, bikes, and Max Trainers all with the JRNY® differentiated digital platform allowed usfitness. As a result, we have continued to expand our JRNY® reach to more than 325,000 members. We expanded the capabilitydeliver total member growth. This has resulted in achievement of our JRNY® digital platform to include usage to those who do not own a connected fitness product. Adaptive, personalized training was made available, along with a substantial increase in content available to our subscribers. We acquired Vay, a market leader in vision systems, and have focused on integrating its motion tracking capabilities into the JRNY® platform. Expansion500,000 member goal, including 156,000 subscribers, each as of our SelectTech® JRNY® experience will offer rep-counting and individualized form strength coaching. This will advance and accelerate our personalized strength workouts, enhancing the JRNY® experience.March 31, 2023.
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| Focus Investments on Core Businesses |
One step in returningTo further enhance our ability to navigate near-term industry challenges, last month we announced several actions to enhance our Core Business includedbalance sheet. This consisted of the sellingsale of our Commercial Business (Octane). We also reduced our SKU count by more than 25%, allowingnon-core assets, including the Nautilus® brand trademark assets and related licenses, for approximately $13 million. This enables us to continue to streamline our focus on our exceptionaltop brands and improve our debt position as we leveraged the net proceeds to pay down part of our term loan. The sale of the Nautilus® brand choices. Our revenue more than doubled at its peak, but through efficienciesreflects a deliberate strategic branding approach we announced two years ago and streamlined processes, we managed to keepwill have minimal ongoing impact as our increase in headcount to less than 20%. A variable cost structure has allowed us to maintain agility during volatile times,Bowflex®, Schwinn®, and to navigate the company through extraordinary challenges with disciplined execution.JRNY® brands generate over 95% of our revenue.
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| Evolve Supply Chain to be a Strategic Advantage |
As the world grappled with unprecedented supply chain challenges this past year,We are achieving our improvements in planning and execution acrosstransformative goal to turn our supply chain allowed usinto a competitive advantage. This can be seen in tangible gross margin improvements driven by actions such as renegotiated inbound freight rates, as well as contract manufacturing costs for our top products. We have also significantly enhanced our delivery times to shipretailers, permitting them to order closer in time to when they need product, and we are rolling out a record numberbetter last-mile delivery process for our Direct consumers. We closed our Portland, Oregon distribution center at the end of units in FY 2022. A new Distribution Center wasOctober 2022 and have successfully opened intransferred inventory to our Columbus, Ohio and Southern California putting us closerdistribution centers - both strategically placed to larger ports and expediting our supply chain timing. Additionally, we continue to look for opportunities to diversify our supply chain both through supplier selection and geographical footprint. In FY 2023, we will continue to actively manage the supply chain situation, keeping line of site on inbound freight and third-party storage costs. We are also expecting to capture cost savings through consolidation of our Distribution Centers by exiting our Portland DC location.optimize expedited deliveries.
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| Build Organizational Capabilities to Win |
Immense progress has been made in buildingWe continued to advance our organizational capabilities thisin FY 2023, with particular focus on learning and development opportunities for our employees. We launched “Nautilus University”, our internal L&D platform which is driving strong learning engagement and growth throughout the Company. With more than 400 courses offered across various technical and leadership disciplines, we are delighted with its adoption as more than 3,000 voluntary courses were completed during its first year. We enhancedalso continue to prioritize our talentdiversity, equity and inclusion (DEI) efforts. We facilitated a company-wide implicit bias workshop as we continue to drivefocus on diversity and inclusion awareness. Additionally, we completed a new manager training program and completed organizational design and structure changes for better efficiencies with our Centers of Excellence.
At our core, we excel at equipment. We continue to see demand for our fast-moving top sellers and traction in our Direct channel. Our focus remains on providing consumers with a broad variety of superior products at a range of price points. We have an exciting pipeline of new products planned for fiscal year 2024 with a strong lineup of updated connected fitness equipment carrying our innovative new Bowflex® visual branding.
While the North Star transformation, adding seasoned leadersentire home fitness industry struggles to find its post-pandemic footing and refreshingwe are navigating an uncertain macro environment, we believe these challenges are short-term. We remain confident in the long-term industry opportunity and our Board of Directors. Basedown position due to our leading brands, comprehensive equipment portfolio, and omnichannel approach as we continue on our new hybrid work model, we were able to bring in a variety of new talent allowing for a greater diversity of thought, experience, and backgrounds to drive our transformation.
We have positioned Nautilus well to capture the numerous opportunities available in the home fitness market. As we enter the second year of our North Star Strategy, our people continue to deliver incredible and tangible results. I am proud of our ability to move the company to the next level, while remaining nimble and agile. We have achieved strong operating results in the face of incredible and dynamic challenges. We will draw on our talent and experience to keep the focus on our long-term success, continuing the North Star momentum, while navigating through the micro and macroeconomic conditions. This approach puts us on a path to success, buildingbecoming a healthier world, one person at a time.leader in connected fitness.
On behalf of all of us at Nautilus, I thank you for your continued support as we embark on this exciting JRNY®.
support.
Onwards and upwards,
Jim Barr
Chief Executive Officer
Notice of Annual Meeting of Shareholders to
be held on August 2, 20222023 as a Virtual Meeting
To the Shareholders of Nautilus, Inc.:
The annual meeting of shareholders of Nautilus, Inc. (the “Company”) will be held on Tuesday,Wednesday, August 2, 2022,2023, at 8:00 a.m. Pacific Daylight Time. With the health and well-being of our shareholders, employees, directors, auditors, and those corporate partners who normally attend the annual meeting in mind, toTo expand shareholder access to attend the meeting, and to reduce our costs and environmental impact, this year’s annual meeting will be held virtually and will be conducted via our live webcast. Our embrace of the latest technology provides expanded access, improved communication and cost savings for our shareholders and the Company. We believe that hosting a virtual meeting will enable greater shareholders attendance and participation from any location around the world. You will not be able to attend the annual meeting in person. You will be able to participate in the annual meeting of shareholders online, vote and submit your questions during the meeting by visiting https://meetnow.global/M4JQLZS,MZTV62J, for the following purposes:
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| To elect a Board of Directors, consisting of six (6) members, to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified; |
| To approve the compensation of the named executive officers in a non-binding, advisory vote, as reported in this Proxy Statement; |
| To approve an amendment to& restatement of the Nautilus, Inc. Amended and Restated 2015 Long-Term IncentiveEmployee Stock Purchase Plan; |
| To ratify the Audit Committee’s appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023;2024; and |
| To consider and act upon any other matter which may properly come before the annual meeting or any adjournment thereof. |
Only shareholders who held their shares at the close of business on June 3, 2022,5, 2023, the record date, are entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof.
All shareholders are cordially invited to participate in the annual meeting. Whether or not you plan to participate in the annual meeting, please sign and promptly return the enclosed proxy card, which you may revoke at any time prior to its use. A prepaid, self-addressed envelope is enclosed for your convenience. Your shares will be voted at the annual meeting in accordance with your proxy.
By Order of the Board of Directors,
Alan L. Chan
Secretary
Vancouver, Washington
June 17, 202216, 2023
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting of
Shareholders to Be Held On August 2, 2022:2023:
Pursuant to rules promulgated by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials by sending you a Notice of Annual Meeting, and by notifying you of the availability of our proxy materials on the Internet. The Notice of Annual Meeting, Proxy Statement and FY 20222023 Annual Report on Form 10-K are available at no cost at www.nautilusinc.com. In accordance with the SEC rules, the materials on the website are searchable, readable and printable, and the website does not have “cookies” or other tracking devices which identify visitors.
Notice of Annual Meeting of ShareholdersProxy Statement Summary
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when August 2, 20222023
8:00am PT | where Virtual Meeting
https://meetnow.global/M4JQLZSMZTV62J | record date June 3, 20225, 2023 |
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Items of Business | Voting recommendation |
1 | To elect a Board of Directors, consisting of six (6) members, to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified; | “FOR” all of the nominees |
2 | To approve the compensation of the named executive officers in a non-binding, advisory vote, as reported in this Proxy Statement; | “FOR” |
3 | To approve an amendment to& restatement of the Nautilus, Inc. Amended and Restated 2015 Long-Term IncentiveEmployee Stock Purchase Plan; | “FOR” |
4 | To ratify the Audit Committee’s appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023;2024; and | “FOR” |
5 | Transact other business that may properly come before the annual meeting. | |
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Your vote is very important Make your vote count. Please cast your vote as soon as possible, even if you plan to attend the 20222023 annual meeting. For information about registering, attending, and voting at the 20222023 annual meeting, please see “Participating in the Annual Meeting” on page 8 of the proxy statement | | Important Notice Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on August 2, 2022.2023. The Notice of Annual Meeting of Shareholders, Proxy Statement, and FY 20222023 Annual Report on Form 10-K are available at www.nautilusinc.com/investors. |
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Vote by Internet Access the website indicated on the Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form. | Vote by Phone Call the number on the Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form. | Vote by Mail* Sign, date, and return the proxy card or voting instruction form in the postage-paid envelope. *if you requested paper material |
By Order of the Board of Directors,
Alan L. Chan
Chief Legal Officer and Corporate Secretary
Vancouver, Washington
June 17, 2022
Proxy Statement
General Information
Our Board of Directors (the “Board”) is furnishing this Proxy Statement and the accompanying Annual Report to Shareholders, Notice of Annual Meeting and proxy card in connection with its solicitation of proxies for use at our 20222023 annual meeting of shareholders (the “Annual Meeting”) or any adjournment thereof. The Annual Meeting will be held on Tuesday,Wednesday, August 2, 2022,2023, beginning at 8:00 a.m., Pacific Daylight Time, online via live webcast at https://meetnow.global/M4JQLZS.MZTV62J.
Our Board has designated the person named on the enclosed proxy card, Aina E. Konold, to serve as proxy in connection with the Annual Meeting. These proxy materials and the accompanying Annual Report to Shareholders are being mailed on or about June 17, 202216, 2023 to our shareholders of record as of June 3, 2022.5, 2023.
Participating in the Annual Meeting
We will be hosting the Annual Meeting live via Internet webcast. You will not be able to attend the meeting in person. A summary of the information you need to participate in the Annual Meeting online is provided below:
•Any shareholder may listen to the Annual Meeting and participate live via webcast at https://meetnow.global/ M4JQLZS.MZTV62J. The webcast will begin at 8:00 a.m. Pacific Daylight Time on Tuesday,Wednesday, August 2, 20222023
•Shareholders may vote and submit questions during the Annual Meeting via live webcast.
•To enter the meeting, please have your 15-digit control number which is available on your proxy card. If you do not have your 15-digit control number, you will be able to listen to the meeting only, you will not be able to vote or submit questions during the meeting.
•Instructions on how to connect to and participate in the Annual Meeting via the Internet, including how to demonstrate proof of stock ownership, are posted at https://meetnow.global/M4JQLZS.MZTV62J.
How Do I Vote?
If you are a shareholder of record, there are several ways to vote:
•by participating in the Annual Meeting and voting according to the instructions posted at https://meetnow.global/ M4JQLZS;MZTV62J;
•by completing and mailing your proxy card (if you requested printed proxy materials); or
•by following the instructions on your proxy card for voting either online or by phone.
Even if you plan to participate in the Annual Meeting, we recommend that you also vote by proxy so that your vote will be counted if you later decide not to participate in the Annual Meeting.
If you are a street name shareholder, you will receive voting instructions from your broker, bank or other nominee. You must follow the voting instructions provided by your broker, bank or other nominee in order to instruct your broker, bank or other nominee on how to vote your shares. Street name shareholders should generally be able to vote by returning an instruction card, or by telephone or on the Internet. However, the availability of telephone and Internet
voting will depend on the voting process of your broker, bank or other nominee. As discussed below, if you are a street name shareholder, you may not vote your shares live during the Annual Meeting unless you obtain a legal proxy from your broker, bank or other nominee
Can I attend the Annual Meeting in person?
With the health and well-being of our shareholders, employees, directors, auditors and those corporate partners who normally attend the annual meeting in mind, weWe will be hosting the Annual Meeting via live webcast on the Internet. You will not be able to attend the Annual Meeting in person. The webcast will start at 8:00 a.m. Pacific Daylight Time, on August 2, 2022.2023. Shareholders may vote and submit questions while connected to the Annual Meeting on the Internet. Any shareholder can listen to and participate in the Annual Meeting live via the Internet at https://meetnow.global/ M4JQLZS.MZTV62J.
What do I need in order to be able to participate in the Annual Meeting online?
You will need the 15-digit control number included on your proxy card in order to be able to vote your shares or submit questions during the meeting. Instructions on how to connect and participate in the Annual Meeting via the Internet, including how to demonstrate proof of stock ownership, are posted at https://meetnow.global/M4JQLZS.MZTV62J. If you do not have your 15-digit control number, you will be able to listen to the meeting only, you will not be able to vote or submit questions during the meeting.
Revocability of Proxies
If you are a shareholder of record, you may change your vote or revoke any proxy you execute at any time prior to its use at the Annual Meeting by:
•delivering written notice of revocation to our Secretary at the address provided on the first page of this proxy statement; or
•delivering an executed proxy bearing a later date to our Secretary at the address provided on the first page of this proxy statement.
To revoke your proxy and vote during the Annual Meeting, follow the instructions posted at https://meetnow.global/ M4JQLZS.MZTV62J.
If you are a street name shareholder, your broker, bank or other nominee can provide you with instructions on how to change your vote.
Record Date
Our Board has fixed the close of business on June 3, 20225, 2023 as the record date for determining which of our shareholders are entitled to notice of and to vote at the Annual Meeting. At the close of business on the record date, 31,467,68831,986,018 shares of our common stock were outstanding.
Voting; Quorum
Each share of common stock outstanding on the record date is entitled to one vote per share at the Annual Meeting. Shareholders are not entitled to cumulate their votes. The presence, online at the virtual meeting or by proxy, of the holders of a majority of our outstanding shares of common stock is necessary to constitute a quorum at the Annual Meeting.
Votes Required to ApproveApprove Each Proposal
If a quorum is present at the Annual Meeting:
(i)the six (6) nominees for the election of directors who receive the greatest number of votes cast by the shares present and voting online at the virtual meeting or by proxy will be elected as directors;
(ii)the proposal regarding the advisory vote on named executive officer compensation will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against it;
(iii)the amendment to& restatement of the Nautilus, Inc. Amended and Restated 2015 Long-Term IncentiveEmployee Stock Purchase Plan will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against it; and
(iv)the ratification of the selectionappointment of the independent registered public accounting firm will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against it.
Counting of Votes; Abstentions
You may vote “FOR” or “WITHHOLD” authority to vote for the nominees for election as directors. If you vote your shares without providing specific instructions, your shares will be voted FOR the nominees for election to the Board of Directors. If you vote to “WITHHOLD” authority to vote for the nominees for election as directors, the shares represented will be counted as present for the purpose of determining a quorum, but they will not be counted as a vote cast on the proposal and will have no effect in determining whether a nominee is elected.
You may vote “FOR” or “AGAINST” or “ABSTAIN” from voting when voting on the proposals regarding the advisory vote on named executive officer compensation, the amendment to& restatement of the Nautilus, Inc. Amended and Restated 2015 Long-Term IncentiveEmployee Stock Purchase Plan, and the ratification of the selectionappointment of the independent registered public accounting firm. If you choose “ABSTAIN” from voting on a proposal, your shares represented will be counted as present for the purpose of determining a quorum but will not be counted as votes cast on the proposal and will have no effect in determining whether the proposal is approved.
Broker non-votes, as explained below, will not be counted as votes cast on any proposal and will have no effect in determining whether any proposal at the Annual Meeting is approved.
Broker Discretionary Voting
If your shares are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” and the Notice of Annual Meeting was forwarded to you by your broker or nominee, who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your shares. Beneficial owners are also invited to participate in the Annual Meeting. However, since a beneficial owner is not the shareholder
of record, you may not vote your shares of our common stock at the Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy. If you request a printed copy of our proxy materials by mail, your broker, bank or other nominee will provide a voting instruction form for you to use. Throughout this proxy statement, we refer to shareholders who hold their shares through a broker, bank or other nominee as “street name shareholders.”
If you hold your shares in street name, your broker, bank or other similar institution may be able to vote your shares without your instructions depending on whether the matter being voted on is “discretionary” or “non-discretionary.” In the case of a discretionary matter (for example, the ratification of the independent registered public accounting firm), your broker is permitted to vote your shares of common stock if you have not given voting instructions. In the case of a non-discretionary matter (for example, the election of directors, the amendment toand restatement of the Long-Term IncentiveEmployee Stock Purchase Plan and the advisory vote to approve named executive officer compensation), your broker cannot vote your shares if you have not given voting instructions.
A “broker non-vote” occurs when your broker submits a proxy for the Annual Meeting with respect to discretionary matters, but does not vote on non-discretionary matters because you did not provide voting instructions on these matters. Broker non-votes are counted for the purpose of determining the presence or absence of a quorum, but are not counted as votes cast for a proposal and will have no effect on the outcome of any proposals at the Annual Meeting. Therefore, it is important that you provide specific voting instructions to your broker, bank or similar institution.
Proxy Procedure
When a proxy card is properly dated, executed and returned, the shares it represents will be voted at the Annual Meeting in accordance with the instructions specified in the proxy. If no specific instructions are given, the shares will be voted FOR the election of the director nominees described below, FOR the proposal to approve, on a non-binding, advisory basis, the compensation of our named executive officers as set forth in the proxy statement, FOR the amendment to& restatement of the Nautilus, Inc. Amended and Restated 2015 Long-Term IncentiveEmployee Stock Purchase Plan, and FOR the ratification, on a non-binding, advisory basis, of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2022.2024. If other matters come before the Annual Meeting, the persons named in the accompanying proxy will vote in accordance with their best judgment with respect to such matters. If the Annual Meeting is adjourned, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have properly revoked your proxy instructions, as described above.
Cost of Proxy Solicitation
We will bear all costs associated with the solicitation of proxies in connection with the Annual Meeting. We do not plan to hire a proxy solicitor, but to the extent we choose to use proxy solicitor services, we will pay the related fees and expenses.
Procedures for Shareholder Proposals and Nominations
Shareholders interested in submitting a proposal for inclusion in our proxy materials and for presentation at the FY 20232024 annual meeting of shareholders may do so by following the procedures set forth in Rule 14a-8 under the Exchange Act. Rule 14a-8 addresses when we must include a shareholder proposal in our proxy materials, including eligibility and procedural requirements that apply to the proponent. In general, to be eligible for inclusion in our proxy materials, shareholder proposals must be received by our Secretary no later than February 17, 2023.2024.
In addition to the requirements of Rule 14a-8, all shareholders proposals, including any director nomination, must comply with the notice requirements contained in our Amended and Restated Bylaws (“Bylaws”), which requires, among other things, detailed information concerning the shareholder making the proposal (and the beneficial owner on whose behalf the proposal is made, if any), the name and address of the shareholder, specific information concerning such shareholder’s interests in our securities and a commitment by any proposed director nominee to serve the full term if nominated and elected. In addition, the notice must include the recommended director nominee’s name, biographical data, qualifications, and details regarding any material monetary agreements between the shareholder and the proposed nominee. In order for a nomination of persons for election to our Board or a proposal of business to be properly brought before the FY 20232024 annual meeting of shareholders, it must be either specified in the notice of the meeting given by our Secretary or otherwise brought before the meeting by or at the direction of our Board or by a shareholder entitled to vote and who complies with the notice procedures set forth in our Bylaws. A shareholder making a nomination for election to our Board or a proposal of business for the FY 20232024 annual meeting of shareholders must deliver proper notice to our Secretary not less than 120 days nor more than 180 days before the first anniversary of the date of the mailing of the notice for the preceding year’s annual meeting. In other words, for a shareholder nomination for election to our Board or a proposal of business to be considered at the FY 20232024 annual meeting of shareholders, it should be properly submitted to our Secretary no earlier than December 19, 2022,2023, and no later than February 17, 2023.2024. If the date of our 2022 Annual MeetingFY 2024 annual meeting of Shareholdersshareholders changes by more than 30 days before or after August 2, 2022,2024, then shareholder nominations and proposals must be received not later than the close of business on the later of (a) the 90th day prior to such annual meeting or (b) the 15th day following the day on which public announcement of the date of such meeting is first made.
In addition to satisfying the requirements under our Bylaws with respect to advance notice of any director nomination, any shareholder who intends to solicit proxies in support of director nominees other than the Company’s nominees in accordance with Rule 14a-19 must provide the required notice of intent to solicit proxies to the Corporate Secretary no later than 60 calendar days prior to the first anniversary of the date of the 20222023 Annual Meeting (no later than June 3, 20232024 for the FY 20232024 annual meeting of shareholders).
Under Rule 14a-4(c) of the Exchange Act, our Board may exercise discretionary voting authority under proxies solicited by it with respect to any matter properly presented by a shareholder at the FY 20232024 annual meeting of shareholders that the shareholder does not seek to have included in our proxy statement if (except as described in the following sentence) the proxy statement discloses the nature of the matter and how our Board intends to exercise its discretion to vote on the matter, unless we are notified of the proposal on or before May 3, 2023,2, 2024, and the shareholder satisfies the other requirements of Rule 14a-4(c)(2). If we first receive notice of the matter after May 3, 2023,2, 2024, and the matter nonetheless is permitted to be presented at the FY 20232024 annual meeting of shareholders, our Board may exercise discretionary voting authority with respect to the matter without including any discussion of the matter in the proxy statement for the meeting. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with the requirements described above and other applicable requirements.
Where can I find the results of the Annual Meeting?
We willplan to announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the Annual Meeting, we will file a Current Report on Form 8-K to publish preliminary results and will provide the final results in an amendment to the Current Report on Form 8-K after they become available.
Where You Can Find More Information
We file our annual reports, quarterly reports, current reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). The SEC maintains a website at www.sec.gov where you can obtain copies of most of our SEC filings. We also make available, free of charge, on our website at www.nautilusinc.com/investors, our proxy statements filed with the SEC as soon as reasonably practicable after they are filed electronically with the SEC.
We filed our Annual Report on Form 10-K for FY 20222023 (“FY 20222023 Annual Report”) with the SEC on June 3, 2022.1, 2023. Our FY 20222023 Annual Report is being made available to our shareholders concurrently with this Proxy Statement and does not form part of the proxy solicitation material. It is also available free of charge at the SEC’s web site at www.sec.gov. Upon written request by a shareholder, we will mail, without charge, a copy of the FY 20222023 Annual Report, including the financial statements and financial statement schedules, but excluding exhibits to the FY 20222023 Annual Report. Exhibits to the FY 20222023 Annual Report are available upon payment of a reasonable fee, which is limited to our expenses in furnishing the requested exhibit. Such requests may be made by writing to our Secretary at the address included on the first page of this proxy statement.
Our Vision
To build a healthier world, one
person at a time.
Our Mission
We empower healthier
living through individualized
connected fitness experiences.
Environmental, Social, and Governance (ESG)
In our effortseffort to build a healthier world, one person at a time, we strive to make a positive impact on the global fitness industry, our community, and our planet with a commitment to provideembody transparent, socially conscious, and sustainable business practices. The importance of ESG is reflected throughout our organization – from formally delegating oversight and accountability for ESG matters to the Nomination andCorporate Governance Committee of our Board of Directors to the creation of employeethe ESG working groups.Employee Committee. The ESG Employee Committee was started in 2022 and includes a core group of Nautilus employees with oversight from members of our executive leadership team and the Board of Directors. The initial focus of the ESG Employee Committee is to assess our current activities and impact and then evaluate potential goals and action to further the ESG priorities that are being established by our Board of Directors. The following sections highlight recentsome of our achievements, practices and developing plans.goals related to ESG matters.
ENVIRONMENT
At Nautilus, we understand that environmental sustainability is a critical component of our business strategy. WhileBy implementing sustainability initiatives throughout our operations, supply chain and product lifecycle, we intend to improve the resource efficiency of our business, decrease our environmental-related risks, and reduce our environmental impact. We also strive to comply inwith all material respects with applicable federal, state, and local environmental regulations and laws at our U.S. locations, and we havework closely with our overseas partners to comply with local environmental requirements. In FY 2023, we continued assessing our risks, identifying areas of focus, and will continueevaluating appropriate and achievable solutions related to evaluateimproving our resource efficiency, decreasing environmental risk, and reducing our environmental impact and initiate improvements internally and with our third-party partners. By aligning sustainability initiatives throughout our operations, supply chain, and product lifecycle, we continue to develop ourselves and our programs to improve resource efficiency and reduce waste.
We will continue to build our environmental initiatives, ensuring that we have the information, systems, people, and processes in place to execute on our aspirations and engage with key functions across the organization to develop targets and roadmaps for priority focus areas. We will accelerate tangible progress and further embed sustainability across our full value chain.impact. Some of the actionsmeasures we have taken to datealready include:
LoweringReducing our carbon footprint
•We addeduse controlled and LED lighting toin our headquarters and distribution centers
•We provide electric car charging stations for employee use at 75% of our domestic facilities
•Additionally, weWe transitioned industrial equipment in our distribution centers from propane to electric power
•We have begun initiatives to introduce the use of solar power and transition to electric powered industrial equipment in some of our distribution centers
Reducing landfill waste
•We introduced processes to maximize recycling potential, including separating out metals during obsolete material scrapping, recycling all cardboard/paper/fill, and salvaging damaged pallets
•We recycled over 20,000 lbs. of metal during FY 2023
•We introduced green packaging initiatives including the elimination of the use ofand our Quality & Engineering Teams are continually working with our suppliers to identify environmentally conscious packaging alternatives to expanded polystyrene foam (EPS) and piloting the use of biodegradable materialsproducts
Safety and compliance with chemical
regulations
•Rigorous testing and compliance with regulations including RoHS, Prop65, Toxics in Packaging Clearinghouse (TPCH), product lead paint testing
•Associated recordkeeping including Material Safety Data Sheets (MSDS)(SDS)
ESG Standards & Audits
•A major supplier constituting 42% of our total production achieved ISO 9001:2015 and ISO 14001:2015 certification contributing to the United Nation’s Sustainability goals (UN SDGs)
•Conducted internal ESG training, created audit procedures, and conducted ESGESG-related audits for all95% of our suppliers
•Ensured supplier compliance with RoHS for all products
•Ensured supplier compliance with California Air Resources Board (CARB) & Toxic Substances Control Act (TSCA)
SOCIAL
At Nautilus, we are committed to a positive company culture that attracts and retains talent, engages with employees, and promotes wellness, while ensuring diversity, equity, and inclusion for all employees. Every member of Team Nautilus brings a unique background and skills to our company. We celebrate our differences but are united by our mission. We are a dynamic team driving the future of consumer fitness experiences through our well-known brands and a passionate company culture. Our culture is shaped by our Values and our Integrity:
Values
Consumer-obsessed
We exist to serve the consumer’s needs and wants, using data and our deep consumer knowledge to drive our decision making
Focused
We are committed to focus on fewer, bigger, bolder bets and seek simplicity in all we do
Ambitious Innovators:
We think big, seek to be the disruptors, and innovate on differentiating experiences that make an important difference in our consumers’ lives
Problem Solvers
We are diligent and accountable to ourselves and our teams by taking responsibility, providing transparency, and adhering to the highest ethical standards
Care Deeply
We care deeply about our employees, partners, shareholders, and communities where we do business and go above and beyond to be inclusive and create a positive environment where everyone’s contributions are valued
Win Together
We put our teams above ourselves, pushing and supporting each other, and having fun as we work together as a team to accomplish our goals
Integrity
Our employees demonstrate integrity every day in their display of strong ethical and moral principles. These principles are also codified and guided by our compliance practices such as:
Code of Business Conduct
& Ethics
Our Code of Conduct that articulates our:
•Anti-discrimination policy
•Anti-bribery policy
•Conflict of interest policy
Ethics Hotline
•All complaints investigated. No complaints reported in FY 2022violations of the Code of Conduct found.
Insider Trading Policy
•Restricted Persons policy including Blackout Period and Pre-Clearance procedure
•No short term or speculative trading permitted including hedging
Human Rights
•Our Suppliers are audited againstNo forced andor compulsory labor at the Company or our Suppliers
•No child labor at the Company or our Suppliers
SOCIAL
At Nautilus, we are committed to creating and supporting a positive company culture that attracts and retains talent, engages with employees, and promotes wellness, while ensuring diversity, equity, and inclusion for all employees. Every member of Team Nautilus brings a unique background and skills to our company. We celebrate our differences but are united by our mission. We are a dynamic team driving the future of consumer fitness experiences through our well-known brands and a passionate company culture. Our culture is shaped by our Values and our Integrity:
Our People
Our People are the foundation of Nautilus, each representing our Values wherever we work. We foster an environment where we value diversity and unique contributions from each of our team members. We create a trusting, open, and inclusive environment by treating each person in a manner that reflects our core values. We are committed to creating an inclusive environment for our employees, customers, partners, and the communities in which we live, work, and play. Our goal is to positively impact our employees and our communities.
We believe in and invest in the well-being of our employees through a total rewards strategy that includes a competitive salary, incentives, health, welfare, and retirement benefits designed to encourage physical, financial, and emotional/social well-being.
We have been recognized as one of The Oregonian/OregonLive’s’ TOP WORKPLACES since 2013. Through employee nominations and surveys, the Top Workplaces competition identifies those workplaces in Oregon and Southwest Washington that are happy, stimulating, nurturing, and productive.
Domestically and internationally, our employees, suppliers and partners are expected to act in a manner consistent with our Values, our Code of Business Conduct & Ethics, and U.S. and international law.
Awards:
•Recognized as one of The Oregonian/OregonLive’s’ TOP WORK PLACES since 2013
•Oregon/SW Washington’s Healthiest Employer since 2010
•CES Innovation Award 2021 Honoree
Talent
As one pillar of our North Star strategy is to Build Organizational Capabilities, we have a comprehensive and holistic approach to ensuring that we have the best people with exceptional and diverse skills and perspectives who are engaged and can grow to execute our strategy in a continuously changing environment.
Hire, Develop, Engage, Retain
Our talent philosophy includes hiring from a diverse pool of candidates, developing our internal talent with formal and informal training opportunities, engaging our people with our company culture, and retaining our talent with competitive rewards and promoting our well-qualified and diverse pipeline of leaders.
Hire
We have expanded our candidate pool and instituted processes to combat unconscious bias:
•Outreach to diverse candidate populations
•Training interviewers on unbiased interviewing
•Standardized scorecards for all candidates
Develop
We design programs that provide career and leadership development opportunities for employees at all levels. Talent development is key to leadership readiness, employee engagement and retention.
•Skills development workshops in monthly manager meetings
•Nautilus Beginnings – new, immersive full day onboarding experience
•Nautilus University – includes live professional development workshops, online self-paced learning library, and the creation of individual learning plans
Engage
Our inclusive environment engages our employees and our community through opportunities from our employee-led Culture Club. This includes participation in and extending support for organizations like:
•Toys for Tots
•Clark County Food Drive
•American Lung Association Reach the Beach Biking Fundraiser
•Providence Cancer Institute Portland to Coast Walking Fundraiser
Retain
In addition to our competitive rewards program, we have instituted several initiatives for open communication between leaders and employees to ensure that management is able to respond continuously and strategically to employee needs and concerns. We believe that open and continuous dialogue fosters a dynamic culture of ownership and accountability at all levels.
Diversity, Equity, and Inclusion:
We are committed to a diverse, equitable and inclusive workplace to better serve our customers and communities. This includes increased and improved outreach, recruitment, hiring and retention of diverse groups at all levels of the workforce. We strive to ensure employees are included and fairly treated within all levels of the organization and that all feel welcomed, valued, and respected. We also are continuous learners, constantly seeking growth and development through Nautilus University including understanding DEI issues and initiatives. This diversity of perspectives, experiences and backgrounds makes us stronger and provides a competitive advantage.
Executive Management team
Employee Resource Groups
The Women in Leadership and Allies (WILA) group is a collaborative group of women leaders and allies at all levels of the Company who have come together to inspire, empower, educate, and encourage each other, while elevating the power of women’s voices in the Company and their communities.
The Veterans Group is a group of employee veterans and allies focused on increasing awareness, supporting veterans, and improving understanding of veterans in the workplace and community.
EMPLOYEE ORGANIZATIONS
The IDEA Committee (Inclusion, Diversity, Equity & Accessibility)
The IDEA committee is an employee committee sponsored by several members of our Executive Management Team. Itthat helps guide the Company in building and implementing plans that further our efforts to grow a diverse, equitable, and inclusive workforce and offers employees opportunities to connect and dialogue with colleagues on important topics.
Employee Resource Groups
The During FY 2023, the IDEA Committee currently sponsors the Women in Leadershipcommittee helped design and Allies (WILA) group.roll-out a company-wide implicit bias workshop. They also hosted a number of outside presenters/speakers that led discussions with employees on topics ranging from ethnic diversity to neurodiversity.
Executive Management team
The Wellness Committee is an employee committee with a mission of empowering healthier living to build a better world, one employee at a time.
The Culture Club is a group of employees whose mission is to facilitate employees getting to know each other through organizing and hosting events for employees and their families.
Wellness & Safety
AsNautilus pledges to maintain a safe work environment across its locations, including its headquarters, distribution centers and first tier supplier base. FY 2023 was the first year we included all Company locations and 95% of our first tier supplier base in our audits, ensuring a designated person to manage health and wellness company, we recognize the key rolesafety policies and procedures as well as implementation. Our suppliers undergo yearly internal audits and third-party audits managed by our retail customers. We are committed to immediately addressing any issues that physical and mental wellness play in our employees, our customers, and our world. We provide meaningful benefits that support all employees so that we can support our communities.
Wellness Committee
Holistic well-being programs and activities:may arise whether found internally or externally.
•Lunch & Learns/Activities focused on healthWe achieved a 66.67% reduction in recordable incidents in our network year-over-year1, resulting in an overall Total Recordable Incident Rate (TRIR) of 0.26. This is best in class performance as compared to similar industry averages of 4.8 in Warehousing and wellness1.9 in Administrative and Support Services2.
•Stress relief trainingOn average, our safety record saved the Company approximately $130K in calendar year 2022 compared to comparable companies3.
1TRIR is measured on a calendar year basis. Nautilus had 3 recordable incidents in 2021 and 1 recordable incident in 2022.
2Bureau of Labor Statistics (https://www.bls.gov/web/osh/summ1_00.htm)
3Based on the National Safety Council average of $42,000 per medically consulted injury (https://injuryfacts.nsc.org/work/costs/work-injury-costs/) multiplied by the average Warehousing and Administrative and Support Services TRIR of 3.35.
Nautilus University:
Nautilus University is our learning and development platform that was launched on May 18, 2022 that provides courses to improve the personal and professional development of our employees.
•Over 3,000 classes ranging from professional competencies, leadership, mental health and DEI completed since launch.
•Financial wellness training
COVID-19 Response
At the onset of the COVID-19 pandemic, Nautilus pivoted into a fully remote work force and environment. As the pandemic continued, numerous efforts and careful decisions were made by the Executive Management Team, considering employee input, to maintain the highest level of health and safety of employees and their families. Remote work continued until safety precautions were lifted, and employees could safely return to an office environment. The flexibility and ability to adjust to change continues as we settle into a hybrid schedule, allowing collaboration and interaction while showing continued commitment and flexibility. Managers are provided training to develop skills for success in this hybrid transition.
Safety
We have a ‘safety first’ mindset and believe the safety of our employees and customers is paramount.
•Our three Distribution Centers logged 4,001 days (over 10 years) without incident through the end of FY 2022.Hosted 94 live, instructor-led professional development workshops
•Nautilus conducts product safety testing to meet and in many cases exceed industry standards for indoor fitness equipment.
Rewards
In addition to competitive compensation and benefits packages, we offer additional employee benefits to promote health & wellness as well as contributions to our community.
•State-of-the-art fitness center for employees, spouses, and partners as well as discount programs on fitness equipment.Over 100 individual development plans completed.
•Volunteer Time Off: 8 paid hours per year to volunteer with an organization or cause.Over 200 employees completed implicit bias training.
•To promote mental wellness, the Executive Management Team recognized the many contributions of employees this yearPhilanthropy and closed offices for a week during the holidays.
Community:
At Nautilus, we are committed to supporting the communities in which we work, play, and live. We value our philanthropic partnerships with businesses, academic institutions, and non-profit organizations to serveserving our community. Ourcommunities, and our charitable contributions focus on supporting these partnerships and serving the communities in which we live and work. We are engaged citizens in the local community and our commitment to diversity, equity and inclusion extends to the way we support these communities.
Donations:partnerships.
•InWe donated home fitness equipment valued at over $41,000 to non-profit organizations across the last three years, we have given over $100K,U.S., including exercise equipment, to community organizations that promote youth activityMedical Teams International, Bike Clark County, Boys & Girls Clubs – Central Ohio, Cleveland National Forest – Trabuco Ranger District, Heron Creek Therapeutic Program, and education, advance health, and fitness research, and address key social determinants of health, like food insecurity.RAPID.
•In partnershipNautilus provides 8 hours of Paid Volunteer Time per year to all employees to positively impact their communities. During FY 2023, 124 employees volunteered 932 hours of their time with Medical Team Internationalorganizations including Chapple Hill Cat Sanctuary, Clark County Food Bank, Bay Area Crisis Nursery, Watershed Alliance, and the Ukrainian American Cultural Association (UACA), we supported the shipment of over 23 tons of medical supplies to meet critical needs of Ukranian refugees.Shop with a Cop.
Human Rights
We prohibit forced, compulsory or child labor and believe in the potential and dignity of every individual who is a member of Team Nautilus whether directly employed or indirectly employed with our suppliers. We validate compliance with our human rights policies through internal and third-party audits. In FY 2023, we broadened the criteria used in our social audits by using a combination of retail customer requirements and Sedex audit criteria to cover 95% of our supplier base. Third-party audits were also conducted by the Business Social Compliance Initiative and Sedex which provided validation of our internal audit results. Our internal and third party audits, did not identify any forced, compulsory or child labor at the Company or at any of our suppliers in FY 2023.
GOVERNANCE
Our Board is responsible for providing oversight of the Company’s business and affairs, including the Company’s strategic direction and the management of the financial and operational execution that will best facilitate the success of the business and support the long-term interests of our shareholders. To effectively support its responsibilities, the Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each of these Board committees is currently comprised solely of independent directors. These Board committees carry out the responsibilities set out in the specific committee charters approved by the Board that are consistent with applicable requirements of the New York Stock Exchange (“NYSE”) and the Securities and Exchange Commission (“SEC”). The Board and each committee may from time-to-time form other committees or sub-committees for specified purposes. The Board and each committee may also, at its discretion, retain outside advisors at the Company’s expense in carrying out its responsibilities.
Our Board is committed to good corporate governance practices and seeks to represent shareholder interests through the exercise of sound judgment. To this end, the Board has adopted Corporate Governance Policies (“Governance Policies”) that provide the framework for the governance of the Board and Company and a Code of Business Conduct and Ethics (“Code of Conduct”) that represents our commitment to the highest standards of ethics and integrity in the conduct of our business. The Board committee charters, the Governance Policies and the Code of Conduct, as well as any amendments we may make to these documents from time to time, may be found on the Investor Relations section of our website under “Corporate Governance” at https://www.nautilusinc.com/investors/corporate-governance/, and together with our charter and bylaws, serve as our governance and compliance framework. Please note that information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this document.
Commitment to Board Diversity
As reflected in our Governance Policies, we are committed to building a Board that consists of the optimal mix of members that represent a diversity of skills, experiences, expertise, and backgrounds capable of effectively overseeing the Company’s business strategy and risk management. Our Board consists of highly engaged, independent, and diverse directors who are actively involved in strategic, risk, and management oversight. Consistent with that effort, in 2021, we welcomed Shailesh Prakash, who brings ethnic diversity to the Board, and Kelley Hall, who enhances the Board’s gender diversity. In addition, in 2022, we welcomed Ruby Sharma who brings ethnic and gender diversity to the Board.
Board Refreshment
The Board believes the fresh perspectives brought by newer directors are critical to a forward-looking and strategic Board when appropriately balanced with the deep understanding of our business provided by longer-serving directors. Accordingly, we have maintained a deliberate mix of new and tenured directors on the Board and the Nominating and Corporate Governance Committee is focused on ensuring the optimal mix of tenures, backgrounds, skills, and perspectives. Since 2020, Nautilus has added four new directors with diverse backgrounds and experiences to enhance the oversight of our strategic goals and initiatives and contribute to the development and expansion of the Board’s knowledge and capabilities.
General/Executive Management: Experience planning, leading and managing a business.
Consumer Marketing: Experience with consumer product and services marketing across all mediums.
Strategy: Experience formulating and facilitating strategic initiatives including business partnerships and M&A.
Innovation/Product Development: Experience bringing consumer products and services from concept to market.
Finance & Accounting: NYSE Section 303.07 financially literate or SEC Reg S-K Item 407 financial expert.
Digital/Subscriptions: Experience with a software subscription business.
ESG: Experience with Sustainability,
DEI
and Governance.
Supply Chain/Logistics: Experience with Demand Planning, Procurement, Supply Chain Operations, Manufacturing, and Logistics.
OmniChannel: Experience with selling consumer products in a variety of distribution channels including e-Commerce, Direct and Retail channels.
Talent Management: Experience with attracting, developing, and retaining talent.
Proposed Board of Directors
Diversity
Proposal No. 1: Election Of Directors
According to our Bylaws, our Board shall be comprised of not less than five (5) nor more than fifteen (15) directors, provided, however that the number may be otherwise set by resolution of our Board. The Board has fixed the authorized number of our directors at six (6).
At this Annual Meeting, our shareholders will elect a board consisting of six (6) directors to serve until our FY 20232024 annual meeting of shareholders or until their respective successors are elected and qualified. Our Board has nominated the individuals listed below to serve on our Board. All of the nominees are currently members of our Board. If any nominee is unable or unwilling to serve as a director at the time of the Annual Meeting, our Board may provide for a lesser number of directors or designate a substitute. If our Board designates a substitute, the proxy holders will have the discretionary authority to vote for the substitute. Proxies may not be voted for more than six (6) nominees.
OUR BOARD UNANIMOUSLY RECOMMENDS YOU VOTE “FOR” EACH OF THE FOLLOWING NOMINEES FOR ELECTION AS DIRECTOR:
| Name | Age | Director Since | Independent | Other Public Boards | Age | Director Since | Independent | Other Public Boards |
James “Jim” Barr, IV | 59 | 2019 | No | - | 60 | 2019 | No | - |
Anne G. Saunders | 60 | 2012 | Yes | 2 | 61 | 2012 | Yes | 2 |
Patricia “Patty” M. Ross | 57 | 2020 | Yes | - | 58 | 2020 | Yes | 1 |
Kelley Hall | 50 | 2021 | Yes | - | 51 | 2021 | Yes | - |
Shailesh Prakash | 53 | 2021 | Yes | - | 54 | 2021 | Yes | - |
Ruby Sharma | 55 | 2022 | Yes | 1 | 56 | 2022 | Yes | 3 |
| | |
| | James “Jim” Barr, IV Jim joined Nautilus, Inc. as Chief Executive Officer and Board Member in July 2019. He brings with him key capabilities of driving growth through people leadership, consumer-driven marketing, innovation and technology, as well as multiple successes transforming and growing large scale digital and multichannel businesses in diverse industries. Before joining Nautilus, Inc., from 2014 to 2018, Mr. Barr was Group President of Ritchie Bros., a global leader in the sales of used industrial equipment. Prior to that Mr. Barr held the position of EVP and Chief Digital Officer of OfficeMax where he led the transformation of its online and omnichannel experiences. In 2008, Mr. Barr was named the first President of Sears Holdings’ newly-formed Online Business Unit, where he developed and drove an omnichannel and online strategy that rapidly expanded the product assortment and growth. Mr. Barr’s foundational digital experiences came as an executive for 12 years in Microsoft’s online businesses as GM, Commerce Services, where he led Microsoft’s B2C ecommerce businesses, such as online shopping, shopping search, classified advertising and auctions, as well as underlying technology platforms, and, before that was GM, MSN Business Development. Mr. Barr holds a B.S. from Miami University, and an M.B.A. in Finance from the University of Chicago Booth School of Business. Our Board has determined that Mr. Barr’s experience as an executive across a diverse array of industries and his experience with e-commerce and subscription businesses, among other things, makes him highly qualified to serve on the Board. |
|
James “Jim” Barr, IV, 59
Jim joined Nautilus, Inc. as Chief Executive Officer and Board Member in July 2019. He brings with him key capabilities of driving growth through people leadership, consumer-driven marketing, innovation and technology, as well as multiple successes transforming and growing large scale digital and multichannel businesses in diverse industries. Before joining Nautilus, Inc., from 2014 to 2018, Mr. Barr was Group President of Ritchie Bros., a global leader in the sales of used industrial equipment. Prior to that Mr. Barr held the position of EVP and Chief Digital Officer of OfficeMax where he led the transformation of its online and omnichannel experiences. In 2008, Mr. Barr was named the first President of Sears Holdings’ newly-formed Online Business Unit, where he developed and drove an omnichannel and online strategy that rapidly expanded the product assortment and growth. Mr. Barr’s foundational digital experiences came as an executive for 12 years in Microsoft’s online businesses as GM, Commerce Services, where he led Microsoft’s B2C ecommerce businesses, such as online shopping, classified advertising and auctions, as well as underlying technology platforms, and, before that was GM, MSN Business Development. Mr. Barr holds a B.S. from Miami University, and an M.B.A. in Finance from the University of Chicago Booth School of Business.
Our Board has determined that Mr. Barr’s experience as an executive across a diverse array of industries and his experience with e-commerce and subscription businesses, among other things, makes him highly qualified to serve on the Board.
Anne G. Saunders 60
Anne joined our Board in April 2012. Ms. Saunders is2012 and currently serves as the ChairmanChair of the Nominating and Corporate Governance CommitteeBoard and a member of the Audit Committee and the Compensation Committee. Since November 2017, Ms. Saunders has been a non-executive director of the Swiss Water Process Decaffeinated Coffee Company (TSX: SWP), a global leader in natural process green coffee decaffeination, where she chairs the Corporate Governance and Compensation Committee. Since March 2019, Ms. Saunders has also served as a non-executive director for Thethe WD-40 Company (NASDAQ: WDFC) a global consumer products company with an iconiconic brand. She chairs the Compensation Committee, and also serves on the Nominating/Governance Committee. From April 2016 to January 2017, Ms. Saunders was U.S. President of NakedWines.com, where she delivered record growth for a disruptive e-commerce business selling boutique wines directly to consumers. From September 2014 to April 2016, Ms. Saunders was U.S. President of FTD, Inc. (NYSE: FTD), where she ran the P&L for the $1B US e-commerce floral and gifting businesses. From August 2012 to January 2014, Ms. Saunders was President of Redbox, a $2B company that revolutionized home entertainment. From March 2009 until January 2012, Ms. Saunders was Executive Vice President and Chief Marketing Officer for Knowledge Universe, a privately-held, multi-brand, for-profit education company with 1,800 schools globally. From February 2008 until March 2009, Ms. Saunders was Senior Vice President, Consumer Bank Executive and, from May 2007 until February 2008, she was Senior Vice President, Brand Executive, for Bank of America Corporation (NYSE: BAC). Between 2001 and 2007, Ms. Saunders held a variety of positions with Starbucks Coffee Co. (NASDAQ: SBUX), including Senior Vice President, Global Brand, during that company’s period of
most rapid domestic and international growth. Ms. Saunders has also held executive and senior management positions with eSociety, a Saas e-commerce platform, AT&T Wireless and Young & Rubicam. Additionally, Ms. Saunders served, from 2006 until 2007, as a director for Blue Nile, Inc. (NASDAQ: NILE). She received a B.A. from Northwestern University and an M.B.A. from Fordham University.
Our Board has determined that Ms. Saunders’s more than a decade of public board experience and success as a CEO and President of e-commerce and subscription businesses, across an array of diverse industries: retail, manufacturing, telecom, fintech, software development, entertainment/content, among other things, makes her highly qualified to serve on the Board.
Patricia “Patty” M. Ross 57
Patty joined the Board in March 2020 and currently serves as the Chair of the Corporate Governance Committee and Chair of the Compensation Committee. Ms. Ross has served as Founder and Principal of PMR Consulting, LLC, a management consulting company. Ms. Ross joined our Board incompany since March 2020 and currently serves as a member of the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee.2017. She is an accomplished Senior Executive who leverages her experience, leadership acuity, and definitive record, positioning her as a go-to global strategist in the consumer product industry. Ms. Ross most recently served Apple (NASDAQ: AAPL) as an Executive Advisor for the People organization, where she delivered talent management, retention, inclusion, and diversity strategies across all US and global divisions from November 2019 to February 2020. From 1992 to March 2017, Ms. Ross spent her career with Nike (NYSE: NKE), where she dedicated over 34 years in strategy, process re-engineering, operations, and general management roles. Including GM, Asia Pacific Equipment; Senior Director, Global Footwear; VP, Global Product Process Innovation, and finally a VP in Global Operations, Innovation & Technology. She wasis routinely trusted and relied upon to start up new
divisions, functional units, and incubators, charged with implementing change, innovation, and growth. Her direct efforts led to millions of revenue dollars for Nike annually. In addition to her professional contributions at Nike, Ms. Ross gained a reputation for both innovative excellence and reliable execution by spearheading value initiatives such as the first e-commerce B2B website for retailers, Nike’s Product Creation Center of Excellence, Nike’s Workplace of the Future, and the Women of Nike Diversity Network.
Ms. Ross holds a Bachelor of Applied Science degree in Marketing and Finance from Portland State University, a coaching certification in Executive Leadership Development from The Hudson Institute of Coaching, and an Advanced Management certificate in Business Administration and General Management from Harvard Business School. As a global executive, Ms. Ross brings knowledge of public board governance through current board experience, prior interactions with boards and committees as an executive, and the formal training and graduate of the Executive Board Education Certification from Harvard Business School and NACD Directorship Certified™ from the National Association of Corporate Directors. In addition to growing and reshaping organizations as a strategic advisor and operations leader, Ms. Ross is active in various professional boards and speaking engagements. As a current board member, Patty serves on the Compensation and Chair of the ESOP Committee of MMC Corp, and Chair of the Nominating and Governance Committee and member of the Audit and Compensation Committees of Movella.Movella (NASDAQ: MVLA). She is also an active member of the National
Association of Corporate Boards (NACD), Athena Alliance, WomenExecs on Boards, and Women Corporate Directors (WCD), and the International Coaching Federation (ICD), where she is committed to the professional development of executives of all ages.
Our Board has determined that Ms. Ross’s considerableRoss has the requisite experience to be a director of Nautilus. Ms. Ross brings to our Board a strong background in consumer products, corporate governance, talent development, and operations expertise among other things, makes her highly qualified to serve on the Board.Nautilus.
Kelley Hall 50
Kelley joined our Board in October 2021 and currently serves as a member of the Audit Committee and Compensation Committee. She is the Executive Vice President and Chief Financial Officer at Recreational Equipment, Inc. (REI), the nation’s largest consumer co-operative bringing top-quality outdoor gear, apparel, expert advice and experiences to its members and customers. Kelley leads all aspects of REI’s finance,strategy, sustainability, financial planning and analysis, accounting, and strategy; as well as sustainability, supply chain, merchandise planning,treasury, internal audit, tax, strategic sourcing and asset protection.protection teams. Kelley also leads REI’s integrated value chain team, including global supply chain operations and merchandise/demand planning. Prior to REI, she served as Senior Vice President, Chief Accounting Officer, and Treasurer for Nordstrom, Inc., where she supported strategic efforts to evolve Nordstrom’s accounting, indirect procurement, tax, and treasury work across the organization. Kelley also spent nine years at NIKE, Inc. and held various senior finance leadership positions, including Vice President and Chief Financial Officer for NIKE, Inc.’s Enterprise Operations. Prior to NIKE, Kelley spent 14 years with Starbucks Corporation in a variety of finance leadership roles, including several roles as Vice President supporting U.S. retail and corporate finance. Since 2018, Kelley has also served on the Board of Trustees for the Seattle Foundation, a community foundation focused on strengthening the health and vitality of the greater Seattle community by connecting generous people with well-informed philanthropic strategies. She received a Bachelor of Arts and a Master of Business Administration from the University of Washington.
Our Board has determined that Ms. Hall’s extensive experience as a strategic advisor to consumer and retail businesses as well as her finance and accounting expertise, among other things, makes her highly qualified to serve on the Board.
Shailesh Prakash 53
Shailesh joined our Board in October 2021 and currently serves as a member of the Compensation Committee and Corporate Governance Committee. He is the Chief Information OfficerGeneral Manager and Vice President of DigitalGoogle News, where he leads product and engineering teams building the future of News for publishers and consumers. Shailesh joined Google in 2022 from the Washington Post where he was the Chief Product Development at The Washington Post. He is responsibleand Technology Officer, with responsibility for all aspects of product, developmentdesign, engineering and technology, including web, mobile, video, print and advertising. Under his leadership, and in close partnership withdata analytics. At the newsroom, The Post has seen tremendous digital growth. Prakash hashe also spearheadedheaded the development of Arc XP, The Post’sthe fast-growing global software-as-a-service business. This state-of-the-art digital platform and suite of tools is engineered to meet the needs of publishers, broadcasters and brands and currently powers more than 1500 sites in the U.S. and around the world. In 2018, Prakash was named to AdWeek 50, an annual list that highlights the most indispensable executives in the media and advertising industries. Fast Company named The Washington Post one of the “10 Most Innovative Companies in Media of 2017.” AdWeek named The Post the “Hottest Digital Publication” of 2016. In 2015, The Post topped Fast Company’s annual list as “The World’s Most Innovative
Media Company” and Digiday recognized The Post as “Most Innovative Publisher.” Prakash has an extensive track record in senior positions spanning multiple industries. Hecontent platform. Shailesh began his career as a software engineer, in Silicon Valley moving to positions of increasing responsibilitywith roles at Motorola, Sun Microsystems, and Netscape and Microsoft where he was a key member of the Bing search engine. An engineer at heart and by training, ShaileshMicrosoft. He holds a Bachelor of ScienceBS in Computer Science from IIT, Mumbai,Bombay, a Master of ScienceMS in Computer Science from Clemson University, and a Master of Business Administrationan MBA from Georgia State University.
Our Board has determined that Mr. Prakash’s extensive experience with technology development, digital platforms, software-as-a-service and subscription businesses, among other things, makes him highly qualified to serve on the Board.
Ruby Sharma 55
Ruby joined our Board in May 2022 and currently serves as athe Chair of the Audit Committee and member of the AuditCorporate Governance Committee. She has served since September 2018 as Managing Partner of RNB Strategic Advisors,is a strategic advisory firm,multi-cultural, global business advisor with comprehensive expertise in strategy, operational risk transformation, M&A, governance, audit, and hasaccounting. Ruby is also served since December 2021 as a member of the board of directors ofat Southwest Gas Holdings, Inc. (NYSE: SWX); S&C Electric Company (private); ShotSpotter, Inc. (NASDAQ: SSTI), a leader in precision policing technology solutions that enable law enforcement to more effectively respond to, investigate,; and deter crime. Since October 2021, Ms. SharmaATI Inc. (NYSE: ATI). Previously she has served as an advisory council member for reacHIRE, a technology company helping women successfully re-enter the workforce after a career break. She previously served as the Chair of the Audit Committee at Penn Medicine Princeton Health; on the Board of Trustees for Aspira Women’s Health a leading provider of healthcare services, from 2010 to October 2020. Ms. Sharma served(NASDAQ: AWH), with the National Ascend Organization; and as a PartnerMember of the Asia Society Business Council.
Ruby retired as a senior partner at Ernst & Young LLP (“EY”) with a multinational professional services network, from 2002proven capacity to 2017, where she leddevelop and manage new business ventures, and generate sustained revenue growth. A frequent keynote speaker and panelist on corporate governance topics, Ruby has authored several audit committee handbooks and guides, as well as white papers on governance, value protection, and diversity and inclusion topics.
Ruby was honored as an Outstanding 50 Asian Americans in Business in the Center for Board Matters, Risk Advisory from 2010 to December 2017 and servedAmericas in Fraud Investigations and Dispute Services from 2002 to 2010. Ms. Sharma served as Senior Manager of Forensic and Litigation Services at Arthur Andersen LLP, a holding company that provided auditing, tax and consulting services to large corporations, from 1999 to 2002. Prior to that, Ms. Sharma served as Senior Manager and Assistant to2011 by the Managing Partner at Grant Thornton GMBH, a professional services network of independent accounting and consulting member firms, from 1996 to 1998. Ms. Sharma served as Manager at Haines Watts, a UK firm of chartered accountants and business advisors, from 1989 to 1996. Ms. SharmaAsian American Business Development Center. She is a Fellow Chartered Accountant of the Institute(Institute of Chartered Accountants in England and Wales& Wales) and holds a B. A. in Economics from Delhi University, India. Ms. Sharma also attended the Executive Education program for EY Partners at Northwestern University, Kellogg School of Management.
Our Board has determined that Ms. Sharma’s considerable experience as a strategic advisor to public company boards and management teams and comprehensive background in M&A, Governance, Audit & Accounting, among other things, makes her highly qualified to serve on the Board.
No family relationship exists among any of the directors or executive officers. No arrangement or understanding exists between any director or executive officer and any other person pursuant to which any director was selected as a director or executive officer of Nautilus.
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NAUTILUS’ BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE ABOVE-LISTED NOMINEES TO THE BOARD OF DIRECTORS. |
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Our Board oversees our overall performance on behalf of our shareholders. Members of our Board stay informed of our business through discussions with our Chief Executive Officer (“CEO”) and other members of our executive team, by reviewing materials provided to them, and by participating in regularly scheduled Board and committee meetings.
Our Board met tenfourteen times in FY 2022. Except for Kelley Hall, all of our2023. All directors attended at least 75% of the meetings of our Board. Due to the fact that Ms. Hall joined the Board for only partand of the year and three special meetings were called in November and December, two of which Ms. Hall was not able to attend, Ms. Hall attended 60% of the Board meetings she was eligible to attend. Allcommittees of our directors attended at least 75% of the meetings held by the committee(s)Board on which theysuch member served that were held during the period in which such director served. Currently, we do not have a policy requiring our Board members’ attendance at the annual shareholders meeting. AllExcept for Richard A. Horn, Kelley Hall and Shailesh Prakash, all of our directors attended our 20212022 annual shareholders meeting.
In order to promote open discussion among independent directors, our Board has a policy of conducting executive sessions of independent directors during each regularly scheduled board meeting and at such other times if requested by an independent director. These executive sessions are generally led by our Chair.
Transactions with Related Persons
Our Board recognizes that “transactions” with a “related person” (as such terms are defined in Item 404 of Regulation S-K) present a heightened risk of conflict of interest and/or improper valuation (or the perception thereof) and, therefore, has adopted a policy which shall be followed in connection with all related person transactions. Specifically, this policy addresses our procedures for the review, approval, and ratification of all related person transactions.
Our Board has determined that the Audit Committee is best suited to review and approve related person transactions. Accordingly, any related person transactions recommended by management shall be presented to the Audit Committee for approval at a regularly scheduled meeting of the Audit Committee. Any related person transaction shall be consummated or shall continue only if the Audit Committee approves the transaction, the disinterested members of our Board approve the transaction, or the transaction involves compensation approved by the Compensation Committee.
Committees of the Board
Our Board currently has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each committee is governed by a written charter that may be amended by our Board at any time. The full text of each committee charter, our Code of Business Conduct and Ethics, and our Corporate Governance Policies are available in the Investor section of our website at www.nautilusinc.com. In addition, we will promptly deliver free of charge, upon request, a copy of the committee charters, Code of Business Conduct and Ethics and our Corporate Governance Policies to any shareholder requesting a copy. Requests should be sent to the Nautilus, Inc. Secretary at the address provided on the first page of this Proxy Statement.
The current composition of our three standing committees is as follows:
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Name1 | Audit Committee2 | Compensation Committee2 | Nominating & Corporate Governance Committee2
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M. Carl Johnson, III
|
|
| | |
Anne G. Saunders | | | | |
Patty Ross
| | | | |
Patricia “Patty” M. RossRuby Sharma
| |
| | |
Richard A. Horn
| | 3 | | |
Marvin G. Siegert
| | 3
| | |
Kelley Hall | | 3 |
|
|
Shailesh Prakash |
|
| |
|
1All Committee members qualify as an “independent director” under our Corporate Governance Policies, Section 303A.02 of the Listed Company Manual of the New York Stock Exchange (“NYSE”), and applicable rules of the SEC, and each such person is free of any relationship that would interfere with the individual exercise of independent judgment.
2Our Board has further determined that each member of the Board’s three committeesAudit Committee and Compensation Committee meets the independence requirements applicable to those committees prescribed by the Listed Company Manual and the SEC, including Rules 10A-3(b)(1) and 10C-1 under the Exchange Act related to independence of audit committee and compensation committee members, respectively.
3Qualifies as a “financialan “audit committee financial expert”.
| |
| Indicates Committee Chair |
Audit committee
| |
Membership1 | Key Committee Responsibilities |
Marvin G. Siegert,Ruby Sharma, Chair*
Anne G. Saunders Patricia “Patty” M. Ross
Richard A. Horn*
Kelley Hall* *Qualifies as an audit committee financial expert Meetings in FY 2022:2023: 4 | Select, and evaluate the performance of, the Company’s independent registered public accounting firm (including its qualifications, performance and independence); |
Review and discuss with management and our independent registered public accounting firm the content of our financial statements prior to filing our quarterly reports on Form 10-Q, and the annual audited financial statements prior to the filing of our annual report on Form 10-K, including disclosures made in management’s discussion and analysis of financial condition and results of operations, and recommend to our Board whether the audited financial statements should be included in our annual report on Form 10-K; |
Oversee the Company’s systems of internal accounting and financial controls and review the activities and qualifications of the Company’s internal audit function; |
Review and discuss risk management and controls, including policies and guidelines with respect to risk assessment and risk management; |
Review and approve related party transactions for potential conflicts of interest; and |
Oversee the processes for handling complaints relating to accounting, internal accounting controls and auditing matters. |
1During FY 2023, Mr. Marvin G. Siegert, Mr. Richard A. Horn, and Ms. Ross served on the Audit Committee until the August 2022 annual meeting.
Compensation committee
| |
Membership1 | Key Committee Responsibilities |
Richard A. Horn,Patty Ross, Chair
M. Carl Johnson III
Anne G. Saunders
Patricia “Patty” M. Ross
Marvin G. Siegert2
Shailesh Prakash Kelley Hall Meetings in FY 2022: 82023: 7 | Approve the compensation of each of the Company’s executive officers who are, as determined from time to time by our Board, subject to the provisions of Section 16 of the Exchange Act (the “Senior Executives” or “Section 16 Officers”), and approve (as appropriate) employment agreements and severance plans; |
Review the CEO’s individual goals and objectives and set the CEO’s compensation after evaluating his performance; |
Review, approve and make recommendations to the Board regarding equity-based plans and incentive compensation plans in which the CEO and the other Senior Executives may participate; |
Approve grants of stock options, restricted stock awards and/or other awards under our Amended and Restated 2015 Long-Term Incentive Plan (the “2015 LTIP”); |
Recommend to the Board compensation of the non-employee Board members; |
Develop and periodically review with the Board succession plans with respect to the CEO and other senior executives; and |
Administer the Company’s clawback policy. |
1During FY 2023, Mr. M. Carl Johnson, III, Mr. Seigert, Mr. Horn, and Ms. Saunders served on the Compensation Committee until the August 2022 annual meeting.
2Mr. Prakash served as Chair of the Compensation Committee from August 2022 until May 2023 when Ms. Ross was elected Chair of the Committee.
Nominating & Corporate Governance COMMITTEE
| |
Membership1 | Key Committee Responsibilities |
Anne G. Saunders,Patty Ross, Chair
M. Carl Johnson IIIShailesh Prakash
Patricia “Patty” M. RossRuby Sharma
Richard A. Horn
Marvin G. Siegert
Meetings in FY 2022:2023: 4 | Evaluate the performance, size and composition of the Board to determine the qualifications and areas of expertise, including a diversity of experience and backgrounds, needed to further enhance the composition of the Board and working with management in attracting candidates with those qualifications; |
Identify individuals qualified to become directors and review the qualifications of prospective nominees, including nominees recommended by shareholders, and recommend to the Board candidates for election at the Company’s Annual Meeting of Shareholders and to fill Board vacancies; |
Recommend to the Board committee chairs and members, as well as changes in number or function of committees; |
Establish procedures, subject to the Board’s approval, for the annual performance self-evaluation of the Board and its committees; |
Periodically review the Company’s corporate governance practices and leadership structure; |
Develop and oversee the Company’s orientation program for new directors and an education program for all directors; and |
Monitor progress of the Company’s ESG initiatives and performance. |
1During FY 2023, Mr. Johnson, Mr. Seigert, Mr. Horn, and Ms. Saunders served on the Corporate Governance Committee until the August 2022 annual meeting.
The Audit Committee
During FY 2022,2023, the Audit Committee consisted of fivethree independent directors: Marvin G. SiegertRuby Sharma (Chair), Richard A. Horn, Patricia M. Ross, Anne G. Saunders, and Kelley Hall. Mr. Marvin G. Siegert, Mr. Richard A. Horn, and Ms. Hall was appointed toPatty Ross served on the Audit Committee in October 2021.from the prior fiscal year end until August 2022. Each member of the Audit Committee meets the independence, financial literacy and experience requirements contained in the corporate governance listing standards of the NYSE relating to audit committees. In addition, our Board has determined that Mr. Horn, Mr. Siegert,Ms. Sharma and Ms. Hall each qualify as an “audit committee financial expert” under the regulations of the SEC. Although all members of the Audit Committee meet the current NYSE regulatory requirements for accounting or related financial management expertise, and our Board has determined that Mr. Horn, Mr. Siegert,Ms. Sharma and Ms. Hall each qualify as an “audit committee financial expert,” members of the Audit Committee are not professionally engaged in the practice of auditing or accounting. The Audit Committee met four times during FY 2022.2023.
A copy of the full text of the Audit Committee Charter can be found on our website at www.nautilusinc.com.
The Compensation Committee
The Compensation Committee met eightseven times during FY 2022.2023. Pursuant to its charter, the Compensation Committee has the authority, to the extent it deems necessary or appropriate, to retain compensation consultants, independent legal counsel or other advisors and has the sole authority to approve the fees and other retention terms with respect to such advisors. From time to time the Compensation Committee has engaged compensation consultants to advise it on certain matters. See “Compensation Discussion and Analysis.”
A copy of the full text of the Compensation Committee Charter can be found on our website at www.nautilusinc.com.
Compensation Committee Interlocks & Insider Participation
During FY 2022,2023, the Compensation Committee was comprised of sixthree independent directors: Richard A. Horn (Chair)Shailesh Prakash (Chair, August 2022 – May 2023), Patty Ross (Chair, May 2023 – Present), and Kelley Hall. Mr. M. Carl Johnson, III, Patricia M. Ross,Mr. Marvin Seigert, Mr. Richard Horn, and Ms. Anne G. Saunders Marvin G. Siegert, and Shailesh Prakash. Mr. Prakash was appointed toserved on the Compensation Committee in October 2021.from the prior fiscal year end until August 2022. None of the members of the Compensation Committee have a relationship with Nautilus, other than as directors and shareholders. With the exception of Mr. Johnson’s interim service from March 2019 to July 2019, noNo member of the Compensation Committee is, or was formerly, an officer or an employee of Nautilus. None of our executive officers served, during the fiscal year ended March 31, 2022,2023, as a member of the compensation committeeCompensation Committee or on the board of directors of any entity that has an executive officer serving as a member of our Compensation Committee or Board.
The Nominating & Corporate Governance Committee
The Nominating and Corporate Governance Committee will consider recommendations for directorships submitted by shareholders. Shareholders who wish the Nominating and Corporate Governance Committee to consider their directorship recommendations should submit their recommendations in writing to Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, Attn: ChairwomanChair of Nominating and Corporate Governance Committee pursuant to the procedures set forth in the section titled “Procedures for Shareholder Proposals and Nominations”. Recommendations by shareholders that are made in accordance with these procedures will receive the same consideration given to nominations made by the Nominating and Corporate Governance Committee.
Nominees may be suggested by directors, members of management, shareholders or, in some cases, by a third-party firm. In identifying and considering candidates for nomination to the Board, the Nominating and Corporate Governance Committee considers a candidate’s quality of experience, our needs and the range of talent and experience represented on our Board. In evaluating particular candidates, the Nominating and Corporate Governance Committee will review the nominee’s personal and professional integrity, judgment, experience, and ability to serve the long-term interest of the shareholders. The Nominating and Corporate Governance Committee will also take into account the ability of a director to devote the time and effort necessary to fulfill his or her responsibilities, as well as matters of diversity, including gender, race and national origin, education, professional experience and differences in viewpoints and skills. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, both the Board and the Nominating and Corporate Governance Committee believe that it is essential that Board members represent a diverse range of experience, expertise, and viewpoints.
During FY 2022,2023, the Nominating and Corporate Governance Committee was comprised of fivethree independent directors: Anne G.Patty Ross (Chair), Shailesh Prakash and Ruby Sharma. Mr. Johnson, Mr. Seigert, Mr. Horn, and Ms. Saunders (Chair), M. Carl Johnson III, Marvin G. Siegert, Patricia M. Ross, and Richard A. Horn.served on the Corporate Governance Committee from the prior fiscal year end until August 2022. The Nominating and Corporate Governance Committee met four times during FY 2022.2023.
A full copy of the Nominating and Corporate Governance Committee Charter can be found on our website at www.nautilusinc.com.
Communications with Directors
All interested parties may send correspondence to our Board or to any individual director at the following address: Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683.
Your communications should indicate that you are a shareholder of Nautilus. Depending on the subject matter, we will either forward the communication to the director or directors to whom it is addressed (or, if no director is specified, to the Chairman)Chair), attempt to handle the inquiry directly, or not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. Correspondence marked confidential will not be opened prior to forwarding to the Board or any individual director.
Board Leadership Structure
Our Board has a majority of independent directors; five out of our six director nominees are independent. The Audit, Compensation, and Nominating and Corporate Governance committees are each composed solely of independent directors.
We separate the roles of Chair of the Board and CEO in recognition of the differences between the two positions. Mr. Johnson,Ms. Saunders, who acts as the Chair, oversees our business broadly, leads the meetings of our Board, and provides guidance to our management team. Our CEO is generally charged with oversight of the day-to-day operations of the business. We believe that consistency between day-to-day operations and the overall management is reached through the service of our CEO as a director, but the separation of the Chair and CEO roles is important to achieve a balance of oversight that is favorable to us and our shareholders.
Board Role in Risk Oversight
While risk management is primarily the responsibility of our management team, our Board is responsible for overall supervision of risk management efforts as they relate to the key business risks that we face. Management identifies, assesses, and manages the risks most critical to our operations and routinely advises our Board regarding those matters. Areas of material risk may include operational, financial, legal and regulatory, human capital, information technology and cyber-security, and strategic and reputational risks. Our Board’s role in risk oversight is consistent with our leadership structure, with senior management having responsibility for assessing and managing risk exposure, and our Board and its committees providing oversight in connection with those efforts.
DIRECTOR COMPENSATION
Nautilus has a Director Compensation Program that provides for compensation of the non-employee members of our Board. Director compensation consists of annual retainers, fees for service as a committee chair, and awards of equity compensation. Directors who are employees receive no additional or special remuneration for serving as directors.
Annual Retainer, Committee Chair & Member Fees
Under the Director Compensation Program, each non-employee director receives an annual retainer of $57,500. Our Board’s Chair receives an additional annual fee of $35,000. Each director serving on a committee of our Board receives an additional fee of $6,000. The Chair of the Audit Committee receives an additional annual retainer of $17,500, while the Chairs of the Compensation Committee and the Nominating and Corporate Governance Committee each receive an additional annual retainer of $8,750. We also reimburse non-employee director expenses for attending meetings of the boardBoard of directors.Directors.
Initial Equity Grant
Our Director Compensation Program provides that, upon initial election to our Board, each non-employee director will be granted 10,000 restricted stock units with one-third vesting each year over three years. Such grant is reflected in the ‘Stock awards’ column of the Equity Award Outstanding at March 31, 2022 table below.
Annual Equity Grant
Upon each non-employee director’s re-election to the Board in June 2021,August 2022, they each received a grant of 5,14719,553 shares of Nautilus restricted stock. Due to volatility in the price of Nautilus common stock, the number of shares of restricted stock granted to non-employee directors was determined by using a forty-five day moving average of the price of Nautilus common stock. The shares subject to the restricted stock awards are subject to forfeiture until vesting on the first anniversary of the grant date, subject to continued service of the director through such date.
FY 20222023 Director Compensation
| Name | Fees Earned or Paid in Cash | Stock Awards1 | Total | Fees Earned or Paid in Cash | Stock Awards1 | Total |
Kelley Hall | $28,507 | $65,400 | $93,907 | $67,500 | $41,061 | $108,561 |
Richard A. Horn | $106,502 | $83,742 | $190,243 | |
M. Carl Johnson, III | $129,343 | $83,742 | $213,085 | |
Shailesh Prakash | $28,507 | $65,400 | $93,907 | $73,333 | $41,061 | $114,394 |
Patricia M. Ross | $97,127 | $83,742 | $180,868 | |
Patty Ross | | $77,333 | $41,061 | $118,394 |
Anne G. Saunders | $106,502 | $83,742 | $190,243 | $93,750 | $41,061 | $134,811 |
Marvin G. Siegert | $115,877 | $83,742 | $199,618 | |
Ruby Sharma | | $70,793 | $68,561 | $139,534 |
Richard A. Horn2 | | $28,551 | $0 | $28,551 |
M. Carl Johnson, III2 | | $35,353 | $0 | $35,353 |
Marvin G. Siegert2 | | $41,516 | $0 | $41,516 |
1Stock award amounts reflect the aggregate grant date fair value of awards granted during FY 2022,2023, based on a grant of 5,14719,553 restricted shares for all directors except Mr. Prakash andthat Ms. Hall whoSharma also received an additional 10,000 RSU’s.RSU’s upon her initial election to the Board in FY 2023. See Notes 1 and 920 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 20222023 for information on determining the fair value of stock awards and other related information.
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2Mr. Horn, Mr. Johnson, and Mr. Siegert no longer serve on the Board. | | 35
|
Equity Awards Outstanding at March 31, 20222023
| | |
Name | Unvested Stock Awards (# of Shares)1 | Option Awards (# of Shares)2 |
Kelley Hall | 10,0003
|
|
Richard A. Horn4
| 5,1471
| -
|
M. Carl Johnson, III4
| 5,14726,2191
| - |
Shailesh Prakash | 10,00026,21931
| -
|
Patricia M.Patty Ross
| 5,14719,55312
| 15,00024 |
Anne G. Saunders | 5,14719,55312
| - |
Ruby Sharma | 26,2193 | - |
Richard A. Horn5 | 0 | - |
M. Carl Johnson, III5 | 0 | - |
Marvin G. Siegert45 | 5,14710
| - |
1StockConsists of (a) 6,666 remaining RSU awards vest on June 16, 2022.
2Stock options vested on March 9, 2021.
3The initial equity grant RSU award vestsvesting in threetwo more equal annual installments on the anniversary of the grant date beginningof October 21, 2021, and (b) 19,553 restricted stock awards vesting on August 22, 2023.
2Consists of 19,553 restricted stock awards vesting on August 22, 2023
3Consists of (a) 6,666 remaining RSU awards vesting in two more equal installments on the anniversary of the grant date of May 18, 2022, and (b) 19,553 restricted stock awards vesting on August 22, 2023.
4Consists of 15,000 stock options that vested and became exercisable on March 9, 2021.
45M. CarlMr. Horn, Mr. Johnson, III, Richard A. Horn and Marvin Siegert’s terms as directors will endMr. Siegert no longer serve on their retirement currently scheduled for August 2, 2022.the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The following table summarizes certain information regarding the beneficial ownership of our outstanding common stock, as of the most recent practicable date,May 31, 2023, by: 1) each director; 2) each of the named executive officers included in the Summary Compensation Table; 3) all persons that we know are beneficial owners of 5% or more of our common stock as of the record date; and 4) all directors and executive officers as a group. Except as otherwise indicated, and subject to applicable community property laws, each owner has sole voting and sole investment powers with respect to all shares beneficially owned.
| | |
Name of Beneficial Owner | Total Shares
Beneficially Owned2 | Percentage
Beneficially Owned2 |
Blackrock, Inc.3 | 2,028,202 | 6.4% |
The Vanguard Group4 | 1,614,983 | 5.1% |
Quinn Opportunity Partners LLC5 | 1,575,731 | 5% |
Non-Employee Directors1 | | |
M. Carl Johnson, III6 | 143,409 | Less than 1% |
Richard A. Horn7 | 74,224 | Less than 1% |
Marvin G. Siegert8 | 62,224 | Less than 1% |
Anne G. Saunders9 | 43,224 | Less than 1% |
Patricia M. Ross10 | 37,067 | Less than 1% |
Named Executive Officers1 | | |
James Barr, IV11 | 879,479 | 2.7% |
Aina E. Konold12 | 135,805 | Less than 1% |
Christopher K. Quatrochi13 | 52,603 | Less than 1% |
Garry R. Wiseman14 | 12,161 | Less than 1% |
John R. Goelz15 | 3,930 | Less than 1% |
All Directors & Executive Officers as a Group (19 persons)16 | 1,488,624 | 4.6% |
| | |
Name of Beneficial Owner | Total Shares
Beneficially Owned2 | Percentage
Beneficially Owned2 |
Namdar Family Holding LLC3 | 3,178,769 | 9.9% |
Non-Employee Directors1 | | |
Anne G. Saunders | 43,224 | * |
Patty Ross4 | 37,607 | * |
Shailesh Prakash | 3,334 | * |
Kelley Hall | 3,334 | * |
Ruby Sharma | 3,334 | * |
Named Executive Officers1 | | |
James Barr, IV5 | 828,578 | 2.6% |
Aina E. Konold | 211,291 | * |
Alan L. Chan | 3,224 | * |
All Directors & Executive Officers as a Group (11 persons)6 | 1,240,308 | 3.9% |
*Less than 1%
1The address for each director and executive officer is c/o Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683.
2This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G, if any, filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company
believes that each of the shareholders named in this table has sole voting and investment power with respect the shares indicated as beneficially owned. Applicable percentages are based on 31,467,68831,986,018 shares outstanding on May 31, 2022,2023, adjusted as required by rules promulgated by the SEC.
3Information is based on the Schedule 13G/A filed on February 3, 2022April 24, 2023 by BlackRock, Inc., a parent holding company. BlackRock, Inc.Namdar Family Holding LLC, Igal Namdar, and Namdar Realty LLC (collectively, “Namdar”). Namdar has sole voting power with respect to 1,999,6533,178,769 shares, shared voting power with respect to 0 shares, sole dispositive power with respect to 2,028,2033,178,769 shares, and shared dispositive power with respect to 0 shares. The address of the foregoing entityNamdar is 55 East 52nd St.,150 Great Neck Road, Suite 304, Great Neck, New York NY 10055.11021.
4Information is based on the Schedule 13G/A filed on February 10, 2022 by The Vanguard Group (“Vanguard”), an investment adviser. Vanguard has sole voting power with respect to 0 shares, shared voting power with respect to 37,889 shares, sole dispositive power with respect to 1,565,025 shares, and shared dispositive power with respect to 49,958 shares. The address of the foregoing entity is 100 Vanguard Blvd., Malvern, PA 19355.
5Information is based on Schedule 13G filed on November 18, 2022 by Quinn Opportunity Partners LLC (“Quinn”), an investment management firm. Quinn has sole voting power with respect to 0 shares, shared voting power with respect to 1,575,731 shares, sole dispositive power with respect to 0 shares, and shared dispositive power with respect to 1,575,731 shares. The address of the foregoing entity is 2 Boars Head Place, Suite 250, Charlottesville, VA 22903.
6Consists of (a) 133,262 shares of common stock held by Mr. Johnson and (b) 5,147 shares issuable upon settlement of restricted stock awards held by Mr. Johnson that vest within 60 days of May 31, 2022 and (c) 5,000 shares held by the M. Carl Johnson III Trust, of which Mr. Johnson is a trustee.
7Consists of (a) 69,077 shares of common stock held by Mr. Horn and (b) 5,147 shares issuable upon settlement of restricted stock awards held by Mr. Horn that vest within 60 days of May 31, 2022.
8Consists of (a) 49,077 shares of common stock held by Mr. Siegert and (b) 5,147 shares issuable upon settlement of restricted stock awards held by Mr. Siegert that vest within 60 days of May 31, 2022 and (c) 8,000 shares held by The Marvin G. Siegert Living Trust, of which Mr. Siegert is a trustee.
9Consists of (a) 38,077 shares of common stock held by Ms. Saunders and (b) 5,147 shares issuable upon settlement of restricted stock awards held by Ms. Saunders that vest within 60 days of May 31, 2022.
10Consists of (a) 16,92022,607 shares of common stock held by Ms. Ross and (b) 15,000 shares issuable upon exercise of stock options that are currentcurrently exercisable or exercisable within 60 days of May 31, 2022 and (c) 5,147 of shares issuable upon the settlement of restricted stock awards held by Ms. Ross that vest within 60 days of May 31, 2022.2023.
115Consists of (a) 201,206373,803 shares of common stock held by Mr. Barr and (b) 454,775 shares issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of May 31, 2022 and (c) 223,489 of shares issuable upon the settlement of restricted stock units held by Mr. Barr that vest within 60 days of May 31, 2022.2023.
12Consists of 135,805 shares of common stock held by Ms. Konold.6
13Consists of 52,603 shares of common stock held by Mr. Quatrochi.
14Consists of 12,161 shares of common stock held by Mr. Wiseman.
15Consists of 3,930 shares of common stock held by Mr. Goelz.
16Consists of (a) 761,125770,533 shares of common stock held by our directors and officers, and (b) 469,775 shares issuable upon exercise of stock options held by our directors and officers that are currently exercisable or exercisable within 60 days of May 31, 2022 and (c) 257,724 shares issuable upon the settlement of RSU awards held by our directors and officers that vest within 60 days of May 31, 2022.2023.
EXECUTIVE OFFICERS
The following table identifies our executive officers as of the date of this Proxy Statement, the positions they hold and the year in which they began serving as officers of Nautilus. Our Board appoints all our executive officers, who hold office until their respective successors are elected and qualified.
| Name | Age | Current Position(s) with Nautilus | Officer Since | Age | Current Position(s) with Nautilus | Officer Since |
James Barr, IV | 59 | Chief Executive Officer | 2019 | 60 | Chief Executive Officer | 2019 |
Aina E. Konold | 53 | Chief Financial Officer | 2019 | 54 | Chief Financial Officer | 2019 |
Garry R. Wiseman | 46 | Senior Vice President and Chief Digital Officer | 2020 | |
Christopher K. Quatrochi | | 54 | Chief Product Officer | 2018 |
Becky L. Alseth | 60 | Chief Marketing Officer | 2020 | 61 | Chief Marketing Officer | 2020 |
Ellen Raim | 64 | Chief People Officer | 2021 | |
John R. Goelz | 51 | Chief Supply Chain Officer | 2021 | 52 | Chief Operating Officer | 2021 |
Christopher K. Quatrochi | 53 | Senior Vice President, Innovation | 2018 | |
Alan L. Chan | 46 | Chief Legal Officer | 2021 | 47 | Chief Legal & People Officer, Secretary | 2021 |
Jay E. McGregor | 66 | Senior Vice President, General Manager, North America Sales | 2018 | |
Jeffery L. Collins | 55 | Vice President, General Manager, International | 2014 | |
Following are the biographies of the foregoing persons, except the biography of Mr. Barr, which is located above under the heading “Proposal No. 1: Election of Directors.”
Aina E. Konold
was namedjoined Nautilus, Inc. as Chief Financial Officer in December 2019 and leads the Finance, Strategy, Business Development, and IT Functions at Nautilus Inc.Functions. Ms. Konold has over 25 years of global retail, strategy, financial management, and operational experience, with a strong track record of driving growth and optimizing and scaling operating models. Prior to joining Nautilus, Inc., Ms. Konold held several executive level positions during her 20-year career with Gap, Inc., across financial planning and analysis, controllership, shared services, real estate strategy, and investor relations. Most recently, she was the founding CFO for Gap Inc. in China, where she led the business through its hyper growth phase and established a scalable business model in a constantly evolving marketplace, particularly in the areas of digital and e-commence. Ms. Konold holds a B.A. from Stanford University and began her career at PricewaterhouseCoopers.
Garry R. Wiseman
was named Senior Vice President and Chief Digital Officer in October 2020. In his role at Nautilus, Inc., Mr. Wiseman oversees general management of the JRNY® subscription business and also coordinates software and digital initiatives to accelerate the Company’s ongoing digital transformation. Mr. Wiseman brings more 25 years of product and e-commerce capabilities, as well as expertise in designing and implementing high scale digital experiences at some of the world’s largest technology companies, including Microsoft, eBay, Salesforce and Dell. Prior to joining Nautilus, Inc., from 2017 to 2020, Mr. Wiseman served as Senior Vice President of Digital Customer Experience for Dell Technologies where he steered the company through a rapid digital transformation that led to significant year-over-year revenue increases and enhanced performance. Wiseman was responsible for Dell.com, the Dell Premier B2B marketplace, all offline sales systems and in-house commerce platforms, as well as leading product management, design, engineering, and content teams. Mr. Wiseman attended Wolverhampton University and has authored eight U.S. patents.
Becky L. Alseth
joined Nautilus, Inc. as GM Direct to Consumer and Vice President of Marketing and Direct in March 2020 and, in February 2021, was promoted to Chief Marketing Officer and transitioned her role of VP, Direct to Mr. Wiseman.Officer. In her role, Ms. Alseth leads global marketing for the Company. Prior to joining Nautilus, Ms. Alseth held senior marketing and branding positions at Fortune 500 companies, including Avis Budget Group and The Clorox Company, as well as global giants Diageo and Nestle, with repeat successes of growing market share, customer loyalty, and brand equity. Most recently, from 2016 to 2019, she oversawled marketing at Ritchie Bros. Auctioneers where she led efforts to position the company as, a multi-channel innovatorworld leader in asset management and disposition. A native of Montana, Becky holds a B.S.Bachelor of Science in Society & Technology from Montana Tech and her an M.B.A. from the University of Washington Foster School of Business in Seattle.
Ellen Raim
was named Chief People Officer in March 2021. She oversees HR strategy and leads Nautilus, Inc.’s business growth through the lens of people. Her areas of focus are organizational design, change management, recruiting, succession planning, learning and development, diversity, equity and inclusion, organizational effectiveness, employee engagement, compensation and benefits, and employee relations. Prior to joining Nautilus, Inc., from 2019 to 2021, Ms. Raim was Senior Vice President, People and Culture, at Invoca, a software start-up, where she built the “people systems” to enhance and protect the culture as the company scaled. She began her career as a labor and employment attorney for a large multinational law firm, moved into Human Resources at Intel Corp. and held many positions there with worldwide scope. After Intel, she held roles as Vice President of Human Resources at several high-tech hardware companies. Ms. Raim holds a B.A. in Economics from Brown University, an M.A. in Organizational Design from Seattle University, a Masters in Behavioral Science from London School of Economics, and a J.D. from the University of Miami School of Law.
John R. Goelz
was namedjoined Nautilus, Inc. as Chief Supply Chain Officer in March 2021. With2021 and assumed the role of Chief Operating Officer in February 2023 to oversee the company’s Customer Care, sales, supply chain, and analytics channels. Mr. Goelz brings more than 20 years of global supply chain experience Mr. Goelz oversees the global supply chain strategy by leading all management and operation aspects, including planning, sourcing, quality, distribution and logistics.to Nautilus. Prior to joining Nautilus, Inc., from 2015 to 2021,the Company, Mr. Goelz was Vice President of Global Supply Chain, Operations and Quality at The Master Lock Company. There, and at Rockwell Automation, a manufacturer of integrated technologies, he held progressive levels of supply chain oversight, including all facets of manufacturing, procurement, logistics, and planning. John is an Army veteran and holds a B.A.bachelor’s degree in Business and Human Resource Management from Upper Iowa University, as well as an M.B.A. from Marquette University in Milwaukee, Wisconsin.
Christopher K. Quatrochi
was namedjoined Nautilus, Inc. as Senior Vice President of Innovation in January 2018 and assumed the role of Chief Product Officer in February 2023. In his role, Chris oversees all product development efforts across the Nautilus, Inc. family of brands in the Nautilus Innovation Center. Prior to joining Nautilus, Inc., Mr. Quatrochi was Group Vice President for Product Operations at Broan-Nutone a(a manufacturer of residential use products,products) from 2015 to 2017, where2017. While at Broan-Nutone, he managed product development and marketing. Mr. Quatrochi has also held multiple positions with Whirlpool Corporation a(a multinational manufacturer and marketer of home appliances,appliances) from 2007 to 2015, including roles as head of global product experience design and connectivity, global strategy and planning for refrigeration, global director for the kitchen category, and leadership over cost and quality management. Prior to Whirlpool, Mr. Quatrochi held the role of Chief Operating Officer for Access Communications in Chicago from 2002 to 2007 and Engagement Manager focusing on operational effectiveness at McKinsey and Company from 2000 to 2002. Mr. Quatrochi holds a B.A. in Electrical Engineering from Bradley University and an M.B.A. from Northwestern’s Kellogg School of Management.
Alan L. Chan
was namedjoined Nautilus as Chief Legal Officer and Secretary in August 2021.2021 and was named Chief Legal & People Officer and Secretary in April 2023. With more than 20 years of experience, including deep legal knowledge in the areas of the supply chain, intellectual property, and technology solutions and services, Mr. Chan leads all aspects of Nautilus, Inc.’s global legal strategy, including corporate governance and compliance, mergers and acquisitions, and intellectual property. He also oversees the Company’s human resources department. Mr. Chan began his career as a commercial and patent litigation lawyer in New York City. Prior to joining Nautilus, Inc., heHe spent the next 16 years with Fortune 110 company Arrow Electronics in New York and Denver, culminating as the Vice President of Legal Affairs and Assistant Corporate Secretary. He led global teams with diverse responsibilities, including M&A, commercial agreements, immigration, intellectual property, and corporate governance. Mr. Chan holds a B.S.bachelor’s degree in Biologybiology from Binghamton University and a J.D.law degree from Emory University School of Law.
Jay E. McGregor
originally joined Nautilus in May 2018 Vice President, General Manager, Retail North America in May 2018. In April 2022, Mr. McGregor was named Senior Vice President, General Manager, North America Sales. In his current role, Mr. McGregor is responsible for the management and development of Direct & Retail North America Channel strategies and direction, along with management of the sales and marketing teams. Before joining Nautilus, Inc., Mr. McGregor was the Senior Vice President, Global Sales from 2017 to 2018 for Ergobaby Inc., the global market leader in the baby carrier category. Prior to Ergobaby, Mr. McGregor was the Vice President of Sales - Americas for Reef Sandals from 2014 to 2016. Mr. McGregor held various senior level sales and marketing positions in leading footwear and outdoor companies, including Adidas, Birkenstock USA, the Coleman Co., Gerber Legendary Blades, and Teva. Mr. McGregor holds a B.S. from Cal State University – Long Beach, as well as a Ryan Lifetime Teaching Credential (K-12) in Physical Education, Mathematics & Science, and attended the INSEAD Excellence in Leadership program in Fountainebleau, France.
Jeffery L. Collins
originally joined Nautilus in August 2013 as Vice President, Retail Sales, and was named an officer in February 2014. In December 2017, Mr. Collins was named Vice President, General Manager of the International Channel. From November 2015 until December 2017, Mr. Collins was Vice President, General Manager, Retail, where he was responsible for the Channel’s strategy and direction, along with managing both the domestic and international Retail sales teams. Prior to joining Nautilus, Mr. Collins was the Senior Vice President, Large Retail Sales, for Oreck Corporation, a manufacturer of vacuum cleaners and air purifiers, from 2009 to 2013. Prior to Oreck, Mr. Collins held various senior sales and marketing positions in leading consumer goods companies, including Pepsico, Pepsi Bottling Group, Handleman Co., Dyson Ltd., and Techtronic Industries. Mr. Collins attended both Grand Valley State University and Western Michigan University.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board oversees Nautilus’ compensation programs on the Board’s behalf.
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement to be filed with the SEC in connection with our 2022 Annual Meeting of Shareholders and incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, which was filed with the SEC on June 3, 2022.
Respectfully submitted,
Richard A. Horn, Chairman
Anne G. Saunders
Marvin G. Siegert
M. Carl Johnson III
Patricia M. Ross
Shailesh Prakash
COMPENSATION DISCUSSION & ANALYSIS
In this section of the proxy statement, we identify the material elements of our compensation programs for our executive officers, including an overview of our executive compensation philosophy and the processes and methodology we use in making executive pay decisions. We also provide detailed information regarding compensation paid to each Named Executive Officer (“NEO”) during the three month periodfiscal year ending March 31, 2021 (the “Transition Period”2023 (“FY 2023”) and the fiscal year endedending March 31, 2022 (“FY 2022”). Our NEOs for FY 20222023 are our Chief Executive Officer Chief Financial Officer and our threetwo most highly compensated executive officersofficer other than the Chief Executive Officer and Chief Financial Officer, who were serving as executive officers as of March 31, 2022,2023, as follows:
| |
Name | Position |
James Barr, IV | Chief Executive Officer |
Aina E. Konold | Chief Financial Officer |
John R. Goelz1Alan L. Chan
| Chief Supply ChainLegal & People Officer, |
Christopher K. Quatrochi
| Senior Vice President, Innovation
|
Garry R. Wiseman
| Senior Vice President and Chief Digital Officer Secretary
|
1Mr. Goelz joined Nautilus on April 5, 2021.
Executive Summary
Our company is historically known for being a leader in strong durable consumer fitness equipment. Recognizing the trends in fitness were changing, we have expanded our focus on connected fitness that combines high quality equipment with digital solutions. In late 2020, we launched our new strategy, North Star, and started to shift our business mix from product revenue to a balance of product and subscription-based revenue. As a result, the Compensation Committee continues to assess the incentive plan metrics and expects that to be a continuing evolutioncontinue to assess and evolve our compensation program in the coming years to ensure alignment of the compensation program with our strategy. The pandemic, supply chain challengespost-pandemic recalibration, uncertain macro-economic conditions, inflation, and other factors are key considerations as the Compensation Committee balances management retention and increasing shareholder valuevalue.
We have three primary elements of compensation: base salary, annual short-term incentives, and long-term incentives.
| | | | |
Base Salary Provides a competitive level of fixed compensation, which is based upon individual factors such as scope of responsibility, experience, and strategic impact. | | Short-Term
Incentive (STI) Cash Award
Variable cash compensation component aligned with near-term objectives, while also supporting our long-term strategic plan. | | Long-Term
Incentive (LTI) Performance-based
Stock Units
Variable equity-based compensation component emphasizing long-term Company performance. Aligns executive officer interests with those of our shareholders. |
Benefits & Perquisites
NEOs are generally not eligible for any additional benefits or perquisites beyond what is provided to the general employee populationpopulation.
Governance of Our Executive Compensation Program
The Compensation Committee (herein referred to as the “Committee”) has overall responsibility for the evaluation, approval and oversight of our compensation plans, policies and programs and the total direct compensation of our executive officers. The Committee has sole responsibility for determining our CEO’s compensation and reviewing it with our Board. Our CEO provides recommendations to the Committee on compensation matters for our other executive officers. From time to time, the Committee seeks input from an independent compensation consultant who advises the Committee regarding executive compensation matters.
During FY 2021, the Transition Period and FY 2022,2023, the Committee retained Semler Brossy, LLCClearBridge Compensation Group (“Semler Brossy”ClearBridge”) to serve as its executive compensation consultant. All of the services that Semler BrossyClearBridge performs for Nautilusthe Company are performed at the request of the Committee, are related to executive and/or director compensation, and are in support of decision making by the Committee.
The Committee considered Semler Brossy’sClearBridge’s independence in light of SEC rules and New York Stock Exchange listing standards. The Committee reviewed a questionnaire completed by Semler BrossyClearBridge addressing factors pertaining to the independence of Semler BrossyClearBridge and the senior advisor involved in the engagement, including the following factors: (1) other services provided to us by Semler Brossy;ClearBridge; (2) fees paid by us as a percentage of Semler Brossy’sClearBridge’s total revenue; (3) policies and procedures maintained by Semler BrossyClearBridge that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisor and a member of the Committee; (5) any company stock owned by Semler BrossyClearBridge or the senior advisor; and (6) any business or personal relationships between our executive officers and Semler BrossyClearBridge or the senior advisor. The Committee discussed these considerations and concluded that the work performed by Semler BrossyClearBridge and Semler Brossy’sClearBridge’s senior advisor involved in the engagement did not raise any conflict of interest. Semler BrossyClearBridge reports directly to the Committee and supports the Committee by:
•providing information on executive compensation best practices and current trends;
•reviewing compensation-guiding principles and recommending assessment methodologies;
•conducting detailed executive compensation assessments, including development of appropriate peer group, and providing preliminary recommendations for executive compensation adjustments; and
•providing conceptual guidance and design advice on short-term and long-term incentive programs.
Compensation Philosophy
Our executive compensation program is designed with two primary objectives in mind:
•attracting, retaining and motivating executives critical to our financial stability and future success; and
•rewarding executives for meeting ambitious financial, operational and individual performance goals and taking effective actions which are expected to increase shareholder value over time.
Consistent with these objectives, we offer our executive officers a mix of base salary, short-term incentive cash compensation, long-term cash and equity-based incentives, health and welfare benefits and employment contracts. While we do not target a specific percentage allocation for base salary, short-term incentive compensation or long-term incentives (as a percent of total compensation), we operate under the general philosophy of targeting a total compensation opportunity that is competitive within our market for executive talent. Individual levels of compensation are affected by the executive’s experience, performance and potential, as assessed by the Committee with input from the CEO. The Committee has considered the results of the advisory vote on executive compensation conducted during the 2021FY 2022 annual meeting of shareholders, which resulted in a majority vote percentage (84%) in support for the Committee’s current executive compensation policies.
Executive Compensation Practices
What We Do
We Do have a pay-for-performance compensation program, which ties compensation to rigorous pre-established performance goals
We Do use more than one performance metric for our annual incentive program which is linked to our financial and strategic objectives
The Compensation Committee Does use an independent compensation consultant
We Do have reasonable severance and change in control (“CIC”) protections that require involuntary termination (i.e., are “double trigger” protections)
We Do have a clawback policy
We Do have policies prohibiting hedging/pledging of the Company’s stock
We Do conduct a say-on-pay shareholder vote on an annual basis
What We Don’t Do
We Don’t have “single trigger” vesting of outstanding equity-based awards based solely on a CIC
We Don’t maintain compensation policies or practices that encourage unreasonable risk taking
We Don’t allow for uncapped incentive compensation payouts
We Don’t offer excessive perquisites
We Don’t provide tax gross-ups for any excise taxes triggered in connection with a CIC
We Don’t offer supplemental executive pension benefits
| | |
What We Do We Do have a pay-for-performance compensation program, which ties compensation to rigorous pre-established performance goals | | 46We Do link our financial and strategic objectives to our annual incentive program
|
Relative to our peer group, variable compensation currently comprises a greater percentage of our executives’ total compensation opportunity. In light of recent volatility in the current fitness environment we believe that a larger percentage weighting towards long-term incentives better aligns our executive compensation with shareholder interests. Therefore, we have and will continue to increase our usage of equity-based incentives to attract, retain and motivate our executives. We do not believe the elements of our compensation program are structured so as to encourage excessive risk taking by any of our executives, but are part of an overall compensation and management philosophy designed to increase shareholder value over time.
| |
CEOThe Compensation Committee Does use an independent compensation consultant
| OTHER NEOsWe Do have double-trigger change in control (“CIC”) severance protections that require involuntary termination
|
We Do have a clawback policy We Do have policies prohibiting hedging/pledging of the Company’s stock We Do conduct a say-on-pay shareholder vote on an annual basis | |
What We Don’t Do We Do Not have “single trigger” vesting of outstanding equity-based awards based solely on a CIC We Do Not maintain compensation policies or practices that encourage unreasonable risk taking We Do Not allow for uncapped incentive compensation payouts We Do Not offer excessive perquisites We Do Not provide tax gross-ups for any excise taxes triggered in connection with a CIC We Do Not offer supplemental executive pension benefit |
• Acushnet Holdings Corp. (GOLF)
• Lifetime Brands, Inc. (LCUT)
• Bassett Furniture Industries, Inc. (BSET)
• Malibu Boats, Inc. (MBUU)
• Callaway Golf Co. (ELY)
• Marine Products Corporation (MPX)
• Ethan Allen Interiors Inc. (ETH)
• MasterCraft (MCFT)
• Flexsteel Industries, Inc. (FLXS)
• Movado Group, Inc. (MOV)
• Hooker Furniture Corporation (HOFT)
• Vera Bradley, Inc. (VRA)
• iRobot Corporation (IRBT)
• ZAGG Inc. (ZAGG)
• Johnson Outdoors Inc. (JOUT)
Peer group data is used to compare our compensation program for executive officers with that of executives in comparable roles at peer group companies. This data is supplemented by data from published relevant compensation surveys, providing additional market-based analytical data for corporate executive pay at companies similar in industry, annual revenues or other relevant metrics.
Based upon the selection criteria, which targeted high-end consumer products companies with annual revenues similar to Nautilus, the following companies were used for our peer group for FY 2022:2023:
| | |
• Bassett Furniture Industries, Inc. (BSET) • Clarus Corporation (CLAR) • Escalade, Incorporated (ESCA) • Flexsteel Industries, Inc. (FLXS) • fuboTV Inc. (FUBO) • GoPro, Inc. (GPRO) • iRobot Corporation (IRBT) • Johnson Outdoors Inc. (JOUT) • Lifetime Brands, Inc. (LCUT) • Marine Products Corporation (MPX) | | • MasterCraft Boat Holdings, Inc. (MCFT) • Movado Group, Inc. (MOV) • Purple Innovation, Inc. (PRPL) • The Beachbody Company, Inc. (BODY) • Vera Bradley, Inc. (VRA) • Vivint Smart Home, Inc.1 • WW International, Inc. (WW) • Zuora, Inc. (ZUO) 1Vivint Smart Home was purchased by NRG Energy, Inc. on March 10, 2023 and is no longer publicly traded. |
Transition Period Compensation
The Committee metIn light of volatility in early 2021the current fitness environment we believe that a greater percentage weighting towards long-term incentives better aligns our executive compensation with shareholder interests. We do not believe the elements of our compensation program are structured to approve a one-time revisionencourage excessive risk taking by any of our executives but are part of an overall compensation and management philosophy designed to the short-term incentive plan and long-term incentive plan due to our change in fiscal year-end. This one-time revision covered performance during the period from January 1 through March 31, 2021.
The Company experienced very strong performance during the Transition Period, including record high net revenue and the third highest quarter of Operating Income.
Transition Period Short-Term Incentive Program
For the Transition Period, the short-term incentive plan focused on achievement of two corporate financial goals, Net Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). Individual bonus targets for the Transition Period were unchanged from the 2020 targets.increase shareholder value over time.
| |
Name
| Individual Bonus Target (% of eligible wages)
|
James Barr, IV
| 100%
|
Aina E. Konold
| 60%
|
John R. Goelz
| 50%
|
Christopher K. Quatrochi
| 50%
|
Garry R. Wiseman
| 50%
|
In May 2021, the Committee certified the Company’s performance with respect to Net Revenue and EBITDA metrics. The table below outlines the financial criteria weighting, achievement, and payout.
| | | | | |
Performance
Metric | Threshold
(30% payout) | Target (100%) | Stretch (200%) | Actual Result
for Performance
Period | Weighted Payout
(as a % of Target) |
Net Revenue (40%) | $144.7 | $160.8 | $184.9 | $206.1 | 80% |
EBITDA (60%) | $18.4 | $23.6 | $31.3 | $40.4 | 120% |
Total | | | | | 200% |
Dollars in Millions
Based on the achievement of the Net Revenue and EBITDA targets, our NEOs earned the maximum payout allowed under the plan, 200% of target. The NEOs earned the following short-term incentive compensation related to the Transition Period:
| |
Name
| Incentive Amounts EarnedCEO
| OTHER NEOs | |
James Barr, IV
| 275,000
| | |
Aina E. Konold
| 115,500
|
John R. Goelz
| -
|
Christopher K. Quatrochi
| 81,250
|
Garry R. Wiseman
| 87,500
|
1Mr. Goelz joined Nautilus on April 5, 2021 and therefore not eligible for an incentive payout for the Transition Period.
Transition Period Long-Term Incentive Plan
In early 2021, the Committee approved RSU grants under our long-term incentive plan. In light of the nature of the Transition Period, the Committee determined to deliver the awards for this period solely in a time-vested vehicle. These grants were a proration of typical annual grants, focused on the time period between our prior fiscal year-end and current fiscal year-end. These grants vest in three equal annual installments on the anniversary of the grant date, subject to the grantee’s continuous employment through such date.
Equity awards granted to our NEOs in February 2021 for their performance during the Transition Period were as follows:
| |
Name
| Restricted Stock Units1
|
James Barr, IV
| 10,195
|
Aina E. Konold
| 3,568
|
John R. Goelz2
| -
|
Christopher K. Quatrochi
| 2,636
|
Garry R. Wiseman
| 2,838
|
1RSUs vest in three equal annual installments on the anniversary of the grants.
2Mr. Goelz joined Nautilus on April 5, 2021 and therefore was not eligible for an equity award grant for the Transition Period.
Fiscal Year 20222023 Compensation
Base Salaries
Base salaries of our executive officers are intended to attract and retain executives, as part of the total compensation package, by providing a competitive base level of compensation. Base salaries are typically considered by the Committee on an annual basis, as well as in connection with the hiring of a new executive, a promotion or other changes in an incumbent executive’s job responsibilities. Base salaries of executive officers are determined by evaluating the responsibilities of the position, the experience and performance of the individual, and by reference to the competitive marketplace median for corporate executive positions of comparable scope, duties and responsibilities.
In early 2021, Semler Brossy2022, ClearBridge conducted a competitive assessment of target total direct compensation for all executives (including the CEO). Based on showing below market compensation for all of the findings, the Committee reviewed and approved the proposedCompany’s executive officers. However, no base compensation increase outlined below, which was effective April 1, 2021 for the CEO. Salary adjustmentsincreases occurred in late 2020 for the other NEOs active at that time.
| | | | | |
Name | 2019
Base Salary | Percent
Increase | 2020 Base Salary | Percent
Increase | FY2022
Base Salary |
James Barr, IV | $550,000 | 0.00% | $550,000 | 13.6% | $625,000 |
FY 2023.
Short-Term Incentive Program
Our short-term incentive program for FY 20222023 was designed to compensate eligible employees based on the accomplishment of both financial and non-financial factors. Under the short-term incentive program, individual plan participants are eligible to receive incentive compensation in the form of cash bonuses based on a target percentage of their annual base salary. Individual bonus targets under the short-term incentive program remained unchanged in FY 2022.2023.
The calculation for determining an individual executive’s incentive amount earned under the short-term incentive program is a product of: 1) the executive’s base salary; 2) the executive’s target bonus percentage; and 3) combined achievement against the financial and non-financial factors. For FY 2022,2023, the combined maximum payout allowed under the plan was 200%150% of target.
Individual Bonus Targets
Individual bonus targets established under our short-term incentive program for 2022FY 2023 for our NEOs ranged from 50% to 100% of annual eligible wages, consisting of base salaries and payable up to a maximum of 200%150% of target, as follows:
| |
Name | Individual Bonus Target (% of eligible wages) |
James Barr, IV | 100% |
Aina E. Konold | 60% |
John R. Goelz
| 50%
|
Christopher K. Quatrochi
| 50%
|
Garry R. WisemanAlan L. Chan
| 50% |
Corporate Financial Factor
The corporate financial factors were comprised of Net Revenue and Operating Income. In addition to the Corporate financial factors, an individual responsible for a Channel may have had Channel financial factors comprised of Channel Revenue and/or Channel Contribution.Adjusted EBITDA1. The achievement against the financial factors could range from 30% to 200%150%, assuming established threshold levels were met. If the threshold was not met for a specific factor, achievement would be 0% for that factor. The Corporate financial factors were calculated on a bi-annual fiscal year basis for FY 2022. The first period being April 1, 2021 through September 30, 2021 and the second period was October 1, 2021 through March 31, 2022.
Corporate Non-Financial Factor
In addition to the corporate financial factors, onetwo non-financial factorfactors supporting the Company’s North Star initiative waswere established. For FY 2022,2023, the goal was 250,000 JRNY® subscribers.goals were JRNY® Subscribers and Bowflex® Net Promote Score. Achievement against the non-financial factor could range from 30% to 200%150%, assuming the established threshold level waslevels were met. If the threshold wasthresholds were not met, achievement would be 0% for that factor. The non-financial factor wasfactors were calculated on the full fiscal year basis.
The FY 20222023 specific weightings for the financial and non-financial factors were:
| | | |
| Net Revenue | Operating Income | JRNY® |
First Half | 24% | 16% | |
Second Half | 24% | 16% | |
Full Year | | | 20% |
| | | | |
| Net Revenue | Adjusted EBITDA1 | JRNY® Subscribers | Bowflex® Net Promoter Score |
FY 2023 | 30% | 30% | 25% | 15% |
The company experienced multiple highlights in FY 2022 including:
| | |
1Adjusted EBITDA excludes the non-cash charge related to goodwill and intangible asset impairments, legal settlements, acquisitions and other related costs, restructuring and exit charges, depreciation and amortization, stock-based compensation and certain other net expenses. | | 51
|
FY 2022 Short-Term Incentive Program Payments2023 SHORT-TERM INCENTIVE PROGRAM PAYMENTS
For FY 20222023, the Company achieved 100% for the Bowflex® Net Promoter Score factor but did not meet thresholds for any other factor. Due to the failure to achieve threshold performance ourfor the most heavily weighted factors, management recommended to the Compensation Committee that awards not be awarded and paid pursuant to the short-term incentive program. The Compensation Committee agreed with management’s recommendation that the partial achievement of the short-term incentive program factors did not overcome the Company’s overall performance and that it was in the shareholder’s best interests to not award and pay the awards. As a result, the NEOs earneddid not earn awards pursuant to the short-term incentive program based on the following achievements:
| | | |
| Net Revenue | Operating Income | JRNY® |
First Half | 66% | 139% | |
Second Half | 38% | 45% | |
Full Year | | | 56% |
Based on the level of goals achieved, the NEOs earned the following short-term incentive compensation related toin FY 2022:
| |
Name
| Incentive Amounts Earned
|
James Barr, IV
| $411,175
|
Aina E. Konold
| $151,970
|
John R. Goelz
| $100,327
|
Christopher K. Quatrochi
| $106,906
|
Garry R. Wiseman1
| $102,787
|
1Mr. Wiseman’s earned incentive includes achievements related to his Channel financial factors. Mr. Wiseman’s Channel financial factors included Direct Net Revenue, Direct Operating Income and JRNY® Net Revenue.2023.
Long-Term Incentive Program
Long-term incentives are intended to focus executive behavior on making decisions that meaningfully contribute to our long-term success as reflected in our stock price. Under our long-term incentive plan, the Committee may grant equity awards in the form of stock options, stock appreciation rights, restricted stock, performance stock units (“PSUs”) or time-vested restricted stock units (“RSUs”) to executive officers and other employees. Stock options have exercise prices equal to the fair market value of our common stock on the date of grant as defined by the plan. In granting these awards, the Committee may establish vesting conditions or other restrictions it deems appropriate. In order to better align our executive compensation with long-term shareholder value, the Committee has increased the use of equity-based long-term incentives to maintain appropriate levels of incentives to retain the Company’s executives.
New Hire Equity Grants
Our executive officers generally are provided an equity grant upon commencement of their employment. The Committee reviews the equity position of executive officers on a periodic basis. Additionally, an executive officer’s overall equity position is reviewed at the time of promotion and an additional grant may be considered at that time. An equity award was granted to Mr. Goelz in 2021 upon his being hired as Chief Supply Chain Officer.
| |
Name
| Restricted Stock Units
|
John R. Goelz 1
| 12,270
|
1RSUs vest in three equal annual installments on the anniversary of the grant date.
Equity IncentivesEQUITY INCENTIVES
In early FY 2022, Semler Brossy2023, ClearBridge conducted a benchmark equity compensation analysis to assist the Committee in determining equity grants. The Committee approved a grant of equity compensation, which included a mix of RSUs, PSUs, cash-settled PSUs and PSUs, bothstock options, all issued under our long-term incentive plan. Cash-settled PSUs were added to the long-term incentive mix in FY 2023 in order to manage dilution to shareholders while continuing to align the financial incentives of executives with long-term company performance and shareholder value creation. The RSUs and stock options vest in three equal annual installments with the initial vesting occurring on the anniversary of the grant date, which was August 22, 2022. The second and third vesting dates occur on the anniversary of the May 17, 2022 Board meeting, which aligns with the typical timing of our annual grants. All awards are subject to the grantee’s continuous employment through sucheach applicable vesting date. The equity and cash-settled PSUs vest based on achievement of goals established for paid JRNY®JRNY® subscribers and Bowflex® Net Promoter Score over a three-year performance period. The actual number of shares or amount of cash issued under a PSU award is based on the level at which the goal is achieved and can range from a 30% minimum threshold to a maximum of 200%. If the threshold is not met, no shares or cash will vest.
Below is a breakdown of the mix of vehicles used to deliver the LTI Targets:
| | | | |
Name | Stock Options | Restricted Stock Units | Performance Stock Units | Cash-settled
Performance Units |
CEO | 40% | 0% | 30% | 30% |
Other NEOs | 25% | 25% | 25% | 25% |
In addition, the Committee approved a one-time PSU retentionlong-term incentive grant of 600,000 stock options for James Barr, IV and 400,000 stock options for Aina Konold in late FY 2022 withNovember 2022. In light of the focus of aligning executive long term retention incentives with increasingbusiness’ ongoing transformation, it became critical to retain our CEO and CFO in order to preserve and create long-term shareholder value. The PSUs vest in two installments upon Nautilus, Inc.’s common stock achievingAs a $10.00 price per share over a defined period (the “Performance Goal” and the “Performance Period”). If the Performance Goal is met prior to February 23, 2024, one-halfresult of the Units will vest on February 23, 2024,business challenges the Company has faced, many awards were underwater or were not projected to pay out, and one-half ofit was crucial to ensure the Units will vest on February 23, 2025; if the Performance Goal is met after February 23, 2024, one-half of the Units will vest on the date the Performance Goal is achievedCEO and one-half of the Units will vest on February 23, 2025 (which is the last day of the Performance Period). The number of shares reported represents the maximum that may be earned, which is 100% of the number of Units awarded. No number of Units are guaranteed to vest and the actual number of Units that will vest during the Performance Period is contingent on achieving the Performance Goal during the Performance Period and contingent on the reporting person’s continued service through the vesting datesCFO had appropriate alignment with shareholders going forward.
Equity awards granted to our NEOs in FY 20222023 were as follows:
| Name | Restricted Stock Units1 | Performance Stock Units2 | Performance Stock Units3 | Stock Options1 | Restricted Stock Units2 | Performance Stock Units3 | Cash-settled
Performance Units4 |
James Barr, IV | 29,364 | 53,615 | 809,497 | - | 104,749 |
Aina E. Konold | 9,044 | 33,027 | 432,263 | 21,508 |
John R. Goelz | 18,539 | 6,269 | 26,164 | |
Christopher K. Quatrochi | 6,680 | 27,880 | |
Garry R. Wiseman | 7,194 | 30,025 | |
Alan L. Chan | | 23,830 | 15,887 |
1RSUs vestIncludes the 600,000 options granted to Mr. Barr and 400,000 options granted to Ms. Konold on November 28, 2022. This grant vests in three equal annual installments on the anniversary of the grant date. SharesThe stock options granted to Mr. Goelz include his award upon hire as describedon August 22, 2022 vest in three equal installments. The first occurs on the “New Hire Equity Grants.”anniversary of the grant date. The second and third vests occur on the anniversary of the May 17, 2022 board meeting.
2RSUs vest in three equal annual installments. The first occurs on the anniversary of the grant date of August 22, 2022. The second and third vests occur on the anniversary of the May 17, 2022 board meeting.
3PSUs are subject to vesting based on achievement of specific financial targetpaid JRNY® subscribers and Bowflex® Net Promoter Score targets for the three-year vesting term of the award. The actual number of PSUs to vest can range from 0% to 200%, depending on the attainment of the specific Company performance goal.goals.
34Cash-settledPSUs are subject to vesting based on achievement of a specific financial targetpaid JRNY® subscribers and Bowflex® Net Promoter Score targets for the two-yearthree-year vesting term of the award. The actual numberamount of cash-settled PSUs to vest is eitherpayout can range from 0% or 100%to 200%, depending on the attainment of the specific Company performance goal.goals. The price of the cash-settled unit is equivalent to the stock price at time of vesting, with a $10 maximum.
Early Fiscal Year 2023 Compensation DecisionsEARLY FISCAL YEAR 2024 COMPENSATION DECISIONS
In preparation for FY 2023,2024, the Committee retained ClearBridge Compensation Group (“ClearBridge”) to advise the Committee regarding the amount and types of compensation that we provide to our executive officers and how our compensation practices compared to the compensation practices of peer companies.
The Committee met in early FY 20232024 to approve revisions to the short-term incentive plan. The short-term incentive plan in place for FY 20232024 focuses on achievement of certainan annual Company financial goals, including Net Revenue andgoal – adjusted EBITDA. The short-term incentive plan will start to fund once a positive adjusted EBITDA (Corporate financial factors), as well as non-financial goals, including Bowflex® Net Promoter Scoregoal is met and JRNY® Subscribers (Corporate non-financial factors). The achievement against the factors can range from 30%continue to 150%, assuming established threshold levels are met.fund until a maximum payout of 200%
The Committee confirmedapproved the following individual bonus targets for FY 2023,2024, which are unchanged from the FY 20222023 targets:
| |
Name | Individual Bonus Target (% of eligible wages) |
James Barr, IV | 100% |
Aina E. Konold | 60% |
John R. Goelz
| 50%
|
Christopher K. Quatrochi
| 50%
|
Garry R. WisemanAlan L. Chan
| 50% |
PerquisitesExecutive Compensation
Summary Compensation Table
The following table provides information about the compensation of each of our NEO’s for the fiscal year ended March 31, 2023 and March 31, 2022:
| | | | | | |
Fiscal
Year | Salary | Bonus1 | Stock
Awards2 | Option
Awards3 | All Other
Compensation4 | Total |
James Barr, IV | Chief Executive Officer |
2023 | $625,000 | $0 | $439,946 | $912,471 | $10,675 | $1,988,092 |
2022 | $622,693 | $411,175 | $1,267,526 | - | $5,048 | $2,306,442 |
Aina E. Konold | Chief Financial Officer |
2023 | $385,000 | $0 | $135,300 | $379,675 | $4,912 | $905,087 |
2022 | $385,000 | $151,970 | $465,696 | - | $3,110 | $1,005,776 |
Alan L. Chan | Chief Legal and People Officer5 |
2023 | $325,000 | $0 | $100,088 | $35,509 | $11,050 | $471,647 |
2022 | - | - | - | - | - | - |
1The amounts reported reflect cash bonus payments earned pursuant to the short-term incentive plan.
2The amounts reported reflect the aggregate grant date fair value of equity awards granted under our 2015 LTIP. For further information regarding our stock-based compensation, see Notes 1 and 20 of Notes to Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. Additionally, FY 2023 amounts include the cash-settled PSUs at the aggregate grant date fair value of the PSU equity award grant. The cash-settled PSUs totaled $219,723 for Mr. Barr, $45,167 for Ms. Konold and $33,363 for Mr. Chan.
3The amount reflects the aggregate grant date fair value of a stock option awarded to the NEOs.
4The amounts reported in this column reflect employer paid 401(k) match and/or taxable fringe benefits.
5Mr. Chan was not a NEO prior to FY 2023, therefore compensation information is not provided for FY 2022.
PERQUISITES & Other Benefits OTHER BENEFITS
Our executive officers are eligible to participate in our medical, dental, vision, flexible spending, health savings account, 401(k), life, disability, Employee Stock Purchase Plan, and wellness programs on substantially the same terms as eligible non-executive employees, subject to legal limits on the amounts that may be contributed or paid to executive officers under these plans. No significant perquisites are provided to our executive officers.
TaxTAX & Accounting ConsiderationsACCOUNTING CONSIDERATIONS
Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for certain executive officers. The Committee previously considered the deductibility of awards as one factor in determining executive compensation and certain awards were intended to be fully deductible under the “performance-based” compensation exception previously provided by Section 162(m) of the Code. However, as a result of the Tax Cuts and Jobs Act of 2017, the exception to Section 162(m) for performance-based compensation was eliminated for tax years beginning after December 31, 2017, subject to certain transition and grandfathering rules.
For fiscal year ended March 31, 2022,2023, a portion of the compensation paid to James Barr, IV and Aina E. Konold was not deductible.
Clawback PolicyCLAWBACK POLICY
Our Board of Directors has adopted an executive compensation clawback (“recoupment”) policy. Under our recoupment policy, the Board must, in all appropriate circumstances, require an executive officer to reimburse the Company for any annual incentive payment or long-term incentive payment to the executive officer where: (i) the
payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of our financial statements filed with the SEC; (ii) the Board determines the executive engaged in intentional misconduct that caused or substantially caused the need for the substantial restatement; and (iii) a lower payment would have been made to the executive based on the restated financial results. In each such instance, we will, to the extent practicable, seek to recover from the individual executive the amount by which the individual executive’s incentive payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results.
Hedging PolicyOn October 26, 2022, the SEC adopted final rules that direct the NYSE to establish listing standards that require listed issuers to adopt and comply with written clawback policies meeting certain conditions. On February 22, 2023, the NYSE released its proposed listing standards, and on June 9, 2023, the SEC approved the clawback-related listing standards proposed by the NYSE. The NYSE clawback rule provides for an effective date of October 2, 2023 and listed issuers will be required to adopt a compliant policy no later than December 1, 2023. We are reviewing, and expect to revise, our clawback policy to ensure compliance with the SEC final rules and the NYSE listing standards, and we will adopt a compliant policy prior to December 1, 2023.
HEDGING POLICY
The Company has adopted a policy prohibiting our executive officers and non-executive employees from engaging in short sales and transactions involving publicly-traded options. In addition, with limited exceptions, our executive officers are prohibited from holding Nautilus securities in margin accounts and from pledging Nautilus securities as collateral for loans. We believe that these policies further align our executives’ interests with those of our shareholders.
Executive Compensation
Summary Compensation Table
The following table provides information about the compensation of each of our NEO’s for the fiscal year ended March 31, 2022, the transition period for the three months ended March 31, 2021 (indicated as “TP”), and the calendar years ended December 31, 2020 and 2019:
| | | | | | |
Fiscal
Year | Salary | Bonus1 | Stock
Awards2 | Option Awards3 | All Other Compensation4 | Total |
James Barr, IV | Chief Executive Officer5 |
2022 | $622,693 | $411,175 | $1,267,526 | - | $5,048 | $2,306,442 |
TP | $126,923 | $275,000 | $309,124 | - | $9,625 | $720,672 |
2020 | $571,154 | $825,000 | $1,712,097 | - | $9,625 | $3,117,876 |
2019 | $211,539 | - | $1,173,321 | $531,405 | $455,419 | $2,371,684 |
Aina E. Konold | Chief Financial Officer6 |
2022 | $385,000 | $151,970 | $465,696 | - | $3,110 | $1,005,776 |
TP | $88,846 | $115,500 | $108,217 | - | $9,625 | $322,188 |
2020 | $370,192 | $321,058 | - | - | $109,810 | $801,060 |
2019 | $5,385 | - | $694,800 | - | $100,000 | $800,185 |
John R. Goelz | Chief Supply Chain Officer7 |
2022 | $293,269 | $100,327 | $537,721 | - | $35,251 | $966,568 |
TP | - | - | - | - | - | - |
2020 | - | - | - | - | - | - |
2019 | - | - | - | - | - | - |
Christopher K. Quatrochi | Senior Vice President, Innovation |
2022 | $325,000 | $106,906 | $359,864 | - | $2,625 | $794,395 |
TP | $75,000 | $81,250 | $79,950 | - | $9,036 | $245,236 |
2020 | $286,731 | $233,904 | $360,904 | - | $4,703 | $886,242 |
2019 | $265,000 | $26,500 | $22,200 | - | $4,601 | $318,301 |
Garry R. Wiseman | Senior Vice President and Chief Digital Officer8 |
2022 | $350,000 | $102,787 | $387,553 | - | $10,130 | $850,470 |
TP | $80,769 | $87,500 | $86,077 | - | - | $254,346 |
2020 | $60,577 | $45,433 | $770,829 | - | $7,455 | $884,294 |
2019 | - | - | - | - | - | - |
1The amounts reported reflect cash bonus payments earned pursuant to the short-term incentive plan.
2The amounts reported reflect the aggregate grant date fair value of equity awards granted under our 2015 LTIP. For further information regarding our stock-based compensation, see Notes 1 and 18 of Notes to Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
3The amount reflects the aggregate grant date fair value of a stock option awarded to Mr. Barr upon his employment as Chief Executive Officer.
4The amounts reported in this column reflect employer paid 401(k) match and/or taxable fringe benefits. Additionally, Mr. Barr’s 2019 amount includes a discretionary bonus of $275,000 as a sign-on bonus and $174,496 in relocation payments; Ms. Konold’s 2020 and 2019 amounts each include a $100,000 installment of her sign-on bonus, which totaled $200,000; Mr. Wiseman’s 2020 amount includes $7,455 in relocation payments; Mr. Goelz’s FY 2022 amount includes a sign-on bonus of $25,000
5Mr. Barr joined Nautilus on July 29, 2019.
6Ms. Konold joined Nautilus on December 10, 2019.
7Mr. Goelz joined Nautilus on April 5, 2021.
8Mr. Wiseman joined Nautilus on October 26, 2020.
Grants of Plan-Based Awards
The following table sets forth certain information regarding grants of plan-based awards to our NEOs from January 1, 2021 through March 31, 2022.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards1
| | | |
Name | Threshold ($) | Target ($) | Maximum ($) |
James Barr, IV | $187,500 | $625,000 | $1,250,000 |
Aina E. Konold | $69,300 | $231,000 | $462,000 |
John R. Goelz | $45,750 | $152,500 | $305,000 |
Christopher K. Quatrochi | $48,750 | $162,500 | $325,000 |
Garry R. Wiseman | $52,500 | $175,000 | $350,000 |
1Amounts reflect potential payments to our NEOs under our short-term incentive program for the fiscal year ended March 31, 2022. For amounts actually earned by our NEOs in FY 2022, see “Summary Compensation Table” located herein. Participation in the program is limited to those executives who are employed by us at the time the incentive payments are made. The threshold is calculated assuming the Company financial factors are achieved at the minimum threshold. The target payout is calculated assuming the Company financial factors are achieved at 100%. The maximum payout is calculated assuming the Company financial factors are achieved at the maximum level. For further information regarding our short-term incentive program, see “Short-Term Incentive Program” located herein.
Estimated Future Payouts Under Equity Incentive Plan Awards1
| | | | | |
Name | Grant
Date | Threshold
(# Shares) | Target
(# Shares) | Maximum
(# Shares) | Grant Date Fair Value of Stock & Option Awards ($)2 |
James Barr, IV | 2/16/2021 | 10,195 | 10,195 | 10,195 | $309,214 |
| 5/14/2021 | 38,173 | 58,728 | 88,092 | $1,023,042 |
| 2/23/2022 | 26,808 | 53,615 | 53,615 | $244,484 |
Aina E. Konold | 2/16/2021 | 3,568 | 3,568 | 3,568 | $108,217 |
| 5/14/2021 | 11,757 | 18,088 | 27,132 | $315,093 |
| 2/23/2022 | 16,514 | 33,027 | 33,027 | $150,603 |
John R. Goelz | 4/5/2021 | 12,270 | 12,270 | 12,270 | $200,001 |
| 5/14/2021 | 8,150 | 12,538 | 18,807 | $218,412 |
| 2/23/2022 | 13,082 | 26,164 | 26,164 | $119,308 |
Christopher K. Quatrochi | 2/16/2021 | 2,636 | 2,636 | 2,636 | $79,950 |
| 5/14/2021 | 8,684 | 13,360 | 20,040 | $232,731 |
| 2/23/2022 | 13,940 | 27,880 | 27,880 | $127,133 |
Garry R. Wiseman | 2/16/2021 | 2,838 | 2,838 | 2,838 | $86,077 |
| 5/14/2021 | 9,352 | 14,388 | 21,582 | $250,639 |
| 2/23/2022 | 15,013 | 30,025 | 30,025 | $136,914 |
1Amounts reflect potential stock to be earned pursuant to RSU and PSU awards. The RSUs vest in three equal annual installments on the anniversary of the grant date, subject to grantee’s continuous employment through such date. The PSUs vest based on achievement of goals over a three-year performance period. The actual number of shares issued under the 5/14/2021 PSU award is based on the level at which the goals are achieved and can range from a 30% minimum threshold to a maximum of 200%. The actual number of shares issued under the 2/23/2022 grant is either 0% or 100% based on achievement of the goal.
2See Notes 1 and 19 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended March 31, 2022 for detailed information regarding determining the fair value of stock-based awards and other relevant information.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding stock-based awards held by our NEOs as of March 31, 2022.2023.
Option AwardsOPTION AWARDS
| Name | Grant
Date | Number of Securities
Underlying Unexercised
Options -
Exercisable (#) | Number of Securities
Underlying Unearned
Unexercised Options -
Unexercisable (#) | Option
Exercise
Price | Option
Expiration
Date1 | Grant
Date | Number of Securities
Underlying Unexercised
Options -
Exercisable (#) | Number of Securities
Underlying Unearned
Unexercised Options -
Unexercisable (#) | Option
Exercise
Price | Option
Expiration
Date1 |
James Barr, IV | 7/29/20192 | 227,388 | 227,387 | $1.79 | 7/29/2027 | 7/29/20192 | 454,775 | - | $1.79 | 7/29/2027 |
| | 8/22/20223 | - | 209,497 | $2.10 | 8/22/2032 |
| | 11/28/20222 | - | 600,000 | $1.41 | 11/28/2032 |
Aina E. Konold | | 8/22/20223 | - | 32,263 | $2.10 | 8/22/2032 |
| | 11/28/20222 | - | 400,000 | $1.41 | 11/28/2032 |
Alan L. Chan | | 8/22/20223 | - | 23,830 | $2.10 | 8/22/2032 |
Stock Awards
| | | | | |
Name | Grant
Date | Number of
Shares or
Units of Stock
That Have Not
Vested (#)3 | Market Value
of Shares or
Units of Stock
That Have Not
Vested ($) | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or Other
Rights That Have Not
Vested (#)4 | Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares, Units
or Other Rights That Have
Not Vested ($) |
James Barr, IV | 7/29/2019 | 223,489 | $920,775 | - | - |
| 5/5/2020 | 85,089 | $350,567 | 128,923 | $531,163 |
| 2/16/2021 | 6,728 | $27,719 | - | - |
| 5/14/2021 | 29,364 | $120,980 | 29,364 | $120,980 |
| 2/23/2022 | - | - | 53,615 | $220,894 |
Aina E. Konold | 12/10/20195 | 173,332 | $714,128 | - | - |
| 2/16/2021 | 2,354 | $9,698 | - | - |
| 5/14/2021 | 9,044 | $37,261 | 9,044 | $37,261 |
| 2/23/2022 | - | - | 33,027 | $136,071 |
John R. Goelz | 4/5/2021 | 12,270 | $50,552 | - | - |
| 5/14/2021 | 6,269 | $25,828 | 6,269 | $25,828 |
| 2/23/2022 | - | - | 26,164 | $107,796 |
Christopher K.
Quatrochi | 5/5/2020 | 23,915 | $98,530 | 18,118 | $74,646 |
2/16/2021 | 1,739 | $7,165 | - | - |
5/14/2021 | 6,680 | $27,522 | 6,680 | $27,522 |
2/23/2022 | - | - | 27,880 | $114,866 |
Garry R. Wiseman | 10/26/2020 | 18,764 | $77,308 | - | - |
| 2/16/2021 | 1,873 | $7,717 | - | - |
| 5/14/2021 | 7,194 | $29,639 | 7,194 | $29,639 |
| 2/23/2022 | - | - | 30,025 | $123,703 |
| | | | | |
Name | Grant
Date | Number of
Shares or
Units of Stock
That Have Not
Vested (#)3 | Market Value of
Shares or Units
of Stock That
Have Not Vested
($) | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or Other
Rights That Have Not
Vested (#)6 | Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares, Units
or Other Rights That Have
Not Vested ($) |
James Barr, IV | 5/5/20204 | 42,544 | $57,009 | 128,923 | $172,757 |
| 2/16/20214 | 3,364 | $4,508 | - | - |
| 5/14/20214 | 19,576 | $26,232 | 29,364 | $39,348 |
| 2/23/2022 | - | - | 53,615 | $71,844 |
| 8/22/20228 | - | - | 209,498 | $280,727 |
Aina E. Konold | 12/11/20197 | 53,333 | $71,466 | - | - |
| 2/16/20214 | 1,177 | $1,577 | - | - |
| 5/14/20214 | 6,029 | $8,079 | 9,044 | $12,119 |
| 2/23/2022 | - | - | 33,027 | $44,256 |
| 8/22/20225,8 | 21,508 | $28,821 | 43,016 | $57,641 |
Alan L. Chan | 8/3/20214 | 10,634 | $14,250 | - | - |
| 2/23/2022 | - | - | 27,880 | $37,359 |
| 8/22/20225,8 | 15,887 | $21,289 | 31,774 | $42,577 |
1Options granted under our 2015 LTIP and prior plans generally expire seventen years from the date of grant. All options described in the table were granted under our 2015 LTIP.
2Option awards vest in three equal annual installments, beginning on the first anniversary of the grant date.
3Option awards vest in three equal annual installments. The first occurs on the anniversary of the grant date. The second and third vests occur on the anniversary of the May 17, 2022 board meeting.
4RSUs vest in three equal annual installments, beginning on the first anniversary of the grant date.
45RSUs vest in three equal annual installments. The first occurs on the anniversary of the grant date. The second and third vests occur on the anniversary of the May 17, 2022 board meeting.
6PSU awards will be earned and vest if the applicable performance goal(s) have been achieved at the end of the three-year performance period.
57RSU inducement grants awarded on December 11, 2019 outside of our 2015 LTIP. Ms. Konold received an initial inducement grant of 200,000 RSUs of which 66,667 vested December 2020 and 2021, and received a second inducement grant of 160,000 RSUs of which 53,334 vested May 2021 and 2022.
Options Exercised & Stock Vested8
The following table provides information about options exercised and stock awards vested forThis grant includes the NEOs from January 1, 2021 to March 31, 2022.
Option Awards
| | |
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise1 |
James Barr, IV | 227,388 | $2,610,742 |
Aina E. Konold | - | - |
John R. Goelz | - | - |
Christopher K. Quatrochi | - | - |
Garry R. Wiseman | - | - |
Stock Awards
| | |
Name | Number of Shares Acquired on Vesting | Value Realized on Vesting1 |
James Barr, IV | 270,791 | $4,046,964 |
Aina E. Konold | 121,215 | $1,305,998 |
John R. Goelz | - | - |
Christopher K. Quatrochi | 42,929 | $914,299 |
Garry R. Wiseman | 12,444 | $124,093 |
1cash-The market value realized was determined basedsettled PSUs granted on the NYSE closing price of our common stock on the date of exercise or the vesting date, as applicable.August 22, 2022.
CEO Pay Ratio
As mandated by the Dodd-Frank Act, Item 402(u) of Regulation S-K requires us to disclose the ratio of the compensation of our Chief Executive Officer to the total compensation of our median employee. Mr. Barr, our Chief Executive Officer, had FY 2022 annual total compensation of $2,306,442. Our median employee had FY 2022 annual total compensation of $66,896. As a result, the ratio of Mr. Barr’s FY22 annual total compensation to our median employee’s FY 2022 annual total compensation was approximately 34.5 to 1.
Mr. Barr’s FY 2022 annual total compensation is reported in the Summary Compensation Table provided in this Proxy Statement and includes the dollar value of Mr. Barr’s base salary and bonus awards (cash and non-cash) under our short-term and long-term incentive plans. Consistent with the calculation of Mr. Barr’s FY 2022 annual total compensation, our median employee’s FY 2022 annual total compensation includes the dollar value of her or his wages plus overtime and bonus earned for the performance year FY 2022.
We chose March 31, 2022 as the date to identify our median employee. We identified our median employee using a cash compensation measure, consistently applied to all employees, that included each employee’s cash base salary or wages plus overtime and cash bonus paid under our short-term incentive plan(s). This measure consistently excluded non-cash compensation, such as equity awards, and also consistently excluded certain cash compensation, such as 401(k) matching contributions. In addition, wages and salaries were annualized for those employees that were not employed for the full FY 2022. In identifying our median employee, we included all employees worldwide.
Potential Payments Upon Termination Or Change-In-Control
Severance TermsSEVERANCE TERMS
Each of our NEOs is employed “at-will,” meaning employment may be terminated by either party with or without cause. However, we believe that modest post-employment benefits are an important factor in maintaining the stability of our executive management team. We have separate severance arrangements with each of our currently-employed NEOs under their respective employment agreements. These documents outline the terms and conditions of the post-employment benefits.
The agreements provide that, in the event of an involuntary termination of employment for reasons other than cause, the Company will pay severance of twelve months for Mr. Barr, nine months for Ms. Konold, and six months for Mr. Goelz and Mr. Wiseman and four months for Mr. QuatrochiChan. of the employee’s base salary. In general, the definition of “cause” includes: indictment or conviction of the employee for a crime that, in our judgment, makes the employee unfit or unable to perform his or her duties, or adversely affects our reputation; employee dishonesty related to his or her employment; violation of key Company policies; insubordination; serious conflicts of interest or self-dealing; intentional or grossly negligent conduct by the employee that is significantly injurious to us; certain serious performance failures by the employee; and, death or disability of the employee. In addition, if the employee leaves for “good reason” (as such terms are defined in the applicable employment agreement), we may be obligated to pay separation benefits to the employee.
The agreements with our executives also provide for continuation, during the severance period, of health benefits under COBRA for the employee and covered dependents, at active employee premium rates. Refer to the table entitled “Post-employment ”Benefits and Payments” and related notes for information regarding severance and post-employment benefits that may be payable to our NEOs upon their termination.
Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A.
Change in Control TermsCHANGE IN CONTROL TERMS
Except for Mr. Barr, Ourour NEO’s entered into new Change in Control Agreements (the ‘CIC Agreement’“CIC Agreement”) in 2022. Under the terms of the CIC Agreement, if the employment of the NEO is terminated either involuntarily without Cause or voluntarily for Good Reason within 12 months after a Change in Control, the NEO will be eligible for the payments and benefits described below subject to the NEO’s timely execution, delivery and non-revocation of a Separation and Release Agreement:
•Severance pay equal to twelve (12) months of the NEO’s then current salary (or if greater, NEO’s salary immediately prior to the Change in Control).
•Continued payment, at the Company’s cost, current medical and dental coverage elected by the NEO as of the date of termination, up to twelve (12) months.
As defined in the CIC Agreements:
•“Change in Control” means either: (a) the sale, transfer or other disposition of all or substantially all of the Company’s assets; (b) a merger, consolidation, share exchange or reorganization of the Company with one or more entities, as a result of which, immediately following such merger, consolidation, share exchange or reorganization, the shareholders of the Company as a group hold less than a majority of the ownership interests in or voting power of the surviving entity; (c) any person, entity or group, including any “person” as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, directly or indirectly becomes the “beneficial owner” as defined in such Act, of fifty percent (50%) or more of ownership interests in or voting power of the Company; (d) the election of a majority of Directors to the Board of Directors who are nominated by any person or entity other than the members of the Board of Directors in existence as of the date of this Agreement or successors of such members nominated by such members; or (e) the dissolution or liquidation of the Company.
•“Cause” means (i) Executive’s indictment or conviction in a court of law for any felony that in the Company’s reasonable judgment makes Executive unfit for continued employment, prevents Executive from performing Executive’s duties or other obligations or adversely affects the reputation of Employer if Executive remained in Executive’s position; (ii) dishonesty by Executive related to employment with the Company that has a material adverse effect on the Company; (iii) violation of a key Company policy, this Agreement or the Business Protection Agreement (if any) by Executive Post (including, but not limited to, acts of harassment or discrimination, use of or being under the influence of unlawful drugs on the Company’s premises or while performing duties on behalf of the Company) that has a material adverse effect on the Company; (iv) insubordination (i.e. conduct such as refusal to follow direct orders of the Company’s Chief Executive Officer), provided, however, conduct based on adherence to legal requirements (i.e. tax and securities laws) shall not constitute insubordination; (v) Executive’s failure to perform minimum duties after warning and failure to correct to the Chief Executive Officer’s reasonable satisfaction within thirty (30) days after written notice to Executive; (vi) Executive’s competition with the Company, diversion of any corporate opportunity or other similarly serious conflict of interest or self-dealing incurring to Executive’s direct or indirect benefit and the Company’s detriment; or (vii) intentional or grossly negligent conduct by Executive that is significantly injurious to the Company or its affiliates after warning and failure to correct to the Chief Executive Officer’s reasonable satisfaction within thirty (30) days after written notice to Executive.
•“Good Reason” means the occurrence, without the consent of Executive, of any one or more of the following: (i) demotion to a position other than the position held as of the date of the Change in Control, provided that any such demotion (x) shall only constitute Good Reason during the ninety (90) day period following the date of such demotion (after which it shall be deemed waived by Executive if prior thereto Executive has not exercised the right to resign for Good Reason) and (y) shall only constitute Good Reason if Executive gives written notice to the Company of her intent
to terminate this Agreement and the Company fails to remedy the same within thirty (30) days of after such notice; (ii) reduction of Executive’s base salary or target bonus, except to the extent ratably consistent with reductions applied to the base salaries and/or target bonuses of all of the members of the Company’s Executive Team; (iii) a material breach of this Agreement by Company; or (iv) a relocation of the Company’s headquarters by more than 25 miles.
Prior to Executive’s right to terminate employment for Good Reason, Executive shall give written notice to the Company of Executive’s intention to terminate employment due to Good Reason. Such notice shall state the act or acts or the failure or failures to act that constitute the grounds on which Executive’s Good Reason termination is based (the “Grounds”) and such notice shall be given within ninety (90) days of the occurrence of the Grounds. The Company shall have thirty (30) days upon receipt of the notice in which to cure such conduct, to the extent such cure is possible, and upon such cure, Executive shall no longer be able to terminate employment for Good Reason based on such Grounds.
To address the arrangement with Mr. Barr
Under his employment agreement dated July 29, 2019, Mr. Barr is eligible to receive severance payments and benefits upon a qualifying termination and in the event a change in control of our Company.
If Mr. Barr’s employment is terminated without cause or he leaves for good reason or remains an employee of the Company at the time the change in control is consummated, he will be eligible to receive:
•Severance pay equal to twelve (12) months of his base salary in effect at the date of termination.
•Continued payment, at the Company’s cost, of the Company portion of the current medical and dental coverage elected by Mr. Barr as of the date of termination for the duration of the severance period.
•Payment of the portion of his annual bonus prorated through the end of the month in which his employment ends to the extent of achievement of Company results and individual performance goals though that month.
•As a precondition to receipt of the severance benefits Mr. Barr acknowledges and understands that he must sign a separation and release agreement and he will not be entitled to receive any severance benefits until he executes and delivers the separation and release agreement, and the revocation period set forth in the separation and release agreement has expired.
•Accelerated vesting such that one hundred percent (100%) of his outstanding equity awards as of the date of termination shall immediately vest and stock options shall become exercisable for the duration of the option term without regard to any contingent vesting provisions set forth therein but otherwise in accordance with the plan and applicable stock units and option agreements.
•In the event a change in control of the Company occurs during his employment, if he remains an employee of the Company at the time the change in control is consummated, the Company shall accelerate vesting of his outstanding equity awards such that one hundred percent (100%) of his outstanding equity awards as of the date the change of control is consummated shall immediately vest and stock options shall become exercisable for the full option term without regard to any contingent vesting provisions set forth therein but otherwise in accordance with the plan and the applicable stock units and option agreements.
Post Employment Benefits and Payments
The following table summarizes the potential payments to each of our NEOs under the Severance and Change in Control terms, in each case assuming such termination or separation occurred as of March 31, 2022.2023.
| | | |
Name | Executive Benefits and
Payments Upon Termination | Change in Control and
Involuntary Termination
Without Cause or for
Good Reason | Involuntary Termination
Without Cause or for
Good Reason |
James Barr, IV | Salary Continuation or Severance2 | $1,250,000 | $1,250,000 |
| Accelerated Vesting of Stock Awards1 | $2,822,888 | $2,822,888 |
| Cobra benefits | $14,527 | $14,527 |
| Total | $4,087,415 | $4,087,415 |
Aina E. Konold | Salary Continuation or Severance | $385,000 | $288,750 |
| Accelerated Vesting of Stock Awards1 | $934,420 | |
| Cobra benefits | $29,635 | $15,265 |
| Total | $1,1349,055 | $304,015 |
John R. Goelz | Salary Continuation or Severance | $305,000 | $152,500 |
| Accelerated Vesting of Stock Awards1 | $210,005 | |
| Cobra benefits | $23,637 | $9,400 |
| Total | $538,642 | $161,900 |
Christopher K.
Quatrochi | Salary Continuation or Severance | $325,000 | $108,333 |
Accelerated Vesting of Stock Awards1 | $350,249 | |
Cobra benefits | $23,637 | $6,267 |
Total | $698,886 | $114,600 |
Garry R. Wiseman | Salary Continuation or Severance | $350,000 | $175,000 |
| Accelerated Vesting of Stock Awards1 | $268,006 | |
| Cobra benefits | $29,635 | $10,177 |
| Total | $647,641 | $185,177 |
| | | |
Name | Executive Benefits and
Payments Upon Termination | Change in Control and
Involuntary Termination
Without Cause or for
Good Reason | Involuntary Termination
Without Cause or for
Good Reason |
James Barr, IV | Salary Continuation or Severance1 | $1,250,000 | $1,250,000 |
| Accelerated Vesting of Stock Awards2 | $652,425 | $652,425 |
| Cobra benefits | $15,900 | $15,900 |
| Total | $1,918,325 | $1,918,325 |
Aina E. Konold | Salary Continuation or Severance | $385,000 | $288,750 |
| Accelerated Vesting of Stock Awards2 | $223,960 | - |
| Cobra benefits | $32,692 | $16,699 |
| Total | $641,652 | $305,449 |
Alan L. Chan | Salary Continuation or Severance | $325,000 | $162,500 |
| Accelerated Vesting of Stock Awards2 | $115,475 | - |
| Cobra benefits | $26,139 | $10,287 |
| Total | $466,614 | $172,787 |
1In accordance with the Amended and Restated 2015 Long-Term Incentive Plan and the underlying Grant Agreements, Stock Unit Awards granted to Grantees shall immediately vest if the Grantee is terminated by the Company for a reason other than Cause upon or within twelve (12) months following a Change in Control. Mr. Barr’s “Accelerated Vesting of Stock Awards” includes the value of his stock options if they were exercised at the closing price of $4.12 on March 31, 2022.
2Mr. Barr’s “Salary Continuation of Service” includes payment of the portion of his annual bonus prorated through the end of the month in which his employment ends to the extent of achievement of Company results and individual performance goals through that month, assuming target performance. This table reflects a full annual bonus without proration.proration
2In accordance with the Amended and Restated 2015 Long-Term Incentive Plan and the underlying Grant Agreements, Stock Unit Awards granted to Grantees shall immediately vest if the Grantee is terminated by the Company for a reason other than Cause upon or within twelve (12) months following a Change in Control. The row “Accelerated Vesting of Stock Awards” includes the value of stock options if they were exercised at the closing price of $1.34 on March 31, 2023.
Pay Versus Performance
In accordance with rules adopted by the Securities and Exchange Commission (“SEC”) pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive “compensation actually paid” (“CAP”, as calculated in accordance with the SEC rules) and certain Company performance measures for the fiscal years listed below. For information regarding the Company’s pay-for-performance philosophy and how the Company aligns executive pay with performance, refer to our Compensation Discussion & Analysis (“CD&A”).
| | | | | | | |
Fiscal
Year | Summary
Compensation
Table Total
$ | Compensation
Actually Paid
$ | | Average
Summary
Compensation
Table Total
$ | Average
Compensation
Actually Paid
$ | Value of Initial Fixed $100
investment on March
31, 2021 based on Total
Shareholder Return
$ | Net
Income
($K) |
2023 | $1,988,092 | ($222,970) | | $688,367 | $291,284 | $8.57 | ($105,399) |
2022 | $2,306,442 | ($7,603,160) | | $904,302 | ($267,899) | $26.34 | ($22,431) |
1Amounts reported in these columns reflect (i) the total compensation reported in the Summary Compensation Table for James Barr, IV for each of FY 2022 and FY 2023 and (ii) the CAP for James Barr IV for each of FY 2022 and FY 2023.
2Amounts reported in the Non-CEO NEOs columns reflect (i) the average of the total compensation reported in the Summary Compensation Table for Aina Konold and Alan Chan for FY2023 and for Aina Konold, Chris Quatrochi, Garry Wiseman and John Goelz for FY 2022 and (ii) the average CAP for Aina Konold and Alan Chan for FY 2023 and for Aina Konold, Chris Quatrochi, Garry Wiseman and John Goelz for FY 2022.
3To calculate the CAP, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable year. The deductions from, and additions to, total compensation in the Summary Compensation Table by year that were used to calculate CAP include:
| | | | | | | | | |
Fiscal
Year | | Summary
Compensation
Table Total
(1) | Grant
Date
Value
of New
Awards
(2) | Year End
Value
of New
Awards
(3) | Change in
Value of
Unvested
Awards
(4) | Change
in Value
of Vested
Awards
(5) | Values of
Awards
Canceled
as of
Prior FYE
(6) | Total
Equity CAP
(7)=(3)+(4)+(5)+(6) | Total
CAP*
(8)=(1)-(2)+(7) |
2023 | PEO | $1,988,092 | $1,352,417 | $886,906 | ($654,484) | ($1,091,067) | $0 | ($858,645) | ($222,970) |
Average
Non-PEO NEOs | $688,367 | $325,386 | $263,356 | ($202,222) | ($132,831) | $0 | ($71,697) | $291,284 |
2022 | PEO | $2,306,442 | $1,267,526 | $392,618 | ($8,635,735) | ($398,958) | $0 | ($8,642,075) | ($7,603,160) |
Average
Non-PEO NEOs | $904,302 | $437,709 | $155,023 | ($726,170) | ($163,346) | $0 | ($734,493) | ($267,899) |
Pay Versus Performance: Graphical Description
The illustrations below provide graphical descriptions of the relationships between the following:
•The PEO’s CAP and non-PEO NEO’s CAP and the Company’s cumulative total shareholder return (“TSR”); and
•The PEO’s CAP and non-PEO NEO’s CAP and the Company’s net income.
Compensation Actually Paid vs TSR
Compensation Actually Paid vs Net Income
Proposal No. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking shareholders to approve, on a non-binding, advisory basis, a resolution approving our executive compensation as reported in this Proxy Statement. We currently conduct this non-binding vote to approve executive compensation annually, and the next non-binding vote to approve executive compensation will take place at the FY 20232024 annual meeting of shareholders.
We urge shareholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which describes how our executive compensation program is designed and operates, as well as the Summary Compensation Table and other related compensation tables, which provide additional information on the compensation of our named executive officers. The Board and the Committee believe that our executive compensation program has supported and contributed to our recent and long-term success and the creation of long-term shareholder value;value, and that these programs are effective in helping us attract and retain the high caliber of executive talent necessary to drive our business forward and build sustainable value for our shareholders.
In accordance with regulations issued under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking shareholders to approve the following non-binding, advisory resolution at the Annual Meeting:
RESOLVED, that the compensation paid to Nautilus’ Named Executive Officers, as disclosed in the compensation tables and narrative discussion of the Proxy Statement for the 20222023 Annual Meeting of Shareholders, is hereby APPROVED.
While this advisory resolution, commonly referred to as a “say on pay” resolution, is non-binding, the Committee will carefully review and consider the voting results when making future decisions regarding our executive compensation program.
|
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RESOLUTION APPROVING NAUTILUS’ NAMED EXECUTIVE OFFICERS’ COMPENSATION. |
Proposal No. 3
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE NAUTILUS, INC. AMENDED 2015 LONG-TERM INCENTIVE PLANApproval of the Amendment & Restatement of the Nautilus, Inc. Employee Stock Purchase Plan
We are seeking shareholder approval to amendThe purpose of our Amended 2015 Long-Term Incentiveexisting Nautilus, Inc. Employee Stock Purchase Plan (the “Amended“Plan”) is to encourage employee stock ownership, thus aligning employee interests with those of our shareholders, and to enhance the ability of the Company to attract, retain and motivate qualified employees. We believe that the Plan offers a convenient means for our employees who might not otherwise own our common stock to purchase shares. The Plan, which is qualified as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”) and the related regulations, was originally approved by the shareholders of the Company on April 28, 2015 Plan”)and covered an aggregate of 500,000 shares of our common stock. As of June 5, 2023, 40 shares of our common stock remained available for issuance under the Plan. As a result, the Compensation Committee recommended, and the Board approved, on May 17, 2023, subject to approval by our shareholders at the annual shareholder meeting, that the Plan be amended and restated to increase the number of shares reservedthat may be issued under the Plan by 750,000 shares (to a total of 750,000 shares available for issuanceissuance). The request of 750,000 shares reflects 2.3% of our total outstanding shares as of May 31, 2023. Further, in an effort to allow more employees to be able to participate in the Plan and further employee stock ownership, the Board also approved changing the definition of “Eligible Employee” to refer to all employees of the Company and its participating subsidiaries who have been employed by 4,000,000 shares1. Our continuing abilitythe Company or a participating subsidiary for at least 3 months prior to offer incentive awards underthe applicable offering date to be are eligible to participate in the Plan. Previously Eligible Employees were required to have been employed for 12 months before they were eligible to participate in the Plan.
Other key elements of the Plan, as currently in effect and as proposed to be amended and restated, include the following:
•The purchase price per share is equal to the lesser of (i) ninety percent (90%) of the fair market value of a long-term incentive planshare of our common stock on the Offering Date or (ii) ninety percent (90%) of the fair market value of a share our common stock on the Purchase Date;
•The Plan will be carried out in a series of six-month offerings (each an “Offering”) with a new Offering commencing on May 15 and November 15 of each year; and
•The Plan has an annual purchase limit per employee of $25,000.
SUMMARY OF THE NAUTILUS, INC. EMPLOYEE STOCK PURCHASE PLAN
The summary below of the material terms of the Plan is criticalqualified in its entirety by reference to the text of the Plan, as proposed to be amended and restated, which is attached as Appendix A to this Proxy Statement.
Purpose
The purpose of the Plan is to enhance our ability to attract motivate and retain highly qualified personnel.
12,666,667 shares would be available to grant as full value awards after adjustment by reducing each share by one and a half (1.5) shares as per the Amended 2015 Plan.
Why We Believe You Should Vote for this Item
We believe our future success depends on our ability to attract, motivate, and retain high quality employees, directors and consultants. As highlighted in the fifth pillar of our North Star strategy, building organizational capabilities is an important piece to the Company’s digital transformation. The ability to provide stock-based awards has been critical to the immense progress we have made in attracting seasoned talent and leaders. And our ability to continue to recruit personnel will be critical to achieving our long term strategy as we compete for talent in an industry in which equity compensation is market practice and is expected by both existing personnel and prospective candidates.
The Board believes that equity-based compensation plans such as the Amended 2015 Plan serve many important purposes such as (i) allowing the Company to use a vehicle other than cash to compensate its employees and other key personnel and (ii) benefittingalign the long-term interests of eligible employees with those of our shareholders by effectively linking employee compensation to the performanceproviding a convenient means by which our employees may purchase shares of our Common Stock. By maintaining a long-term incentive plan such as the Amended 2015 Plan, the Committee is able to design and implement executive compensation programs to recruit and retain our key employees, compensate those employees based on the performance of the Company and other individual performance factors, align the goals and objectives of our employees with the interests of our shareholders and promote a focus on long-term value creation.
The Company has made significant strides to attract highly talented personnel for its digital transformation and long term growth strategy and would be at a severe competitive disadvantage if we could not use stock-based awards to continue to recruit and compensate our talent to continue our journey. If the amendment is not approved, we would not be able to make customary long term incentive equity grants under the Amended 2015 Plan this year and we would be required to rely more heavily on long term incentives using cash. This would increase our cash compensation expense, utilize cash that could otherwise be used to grow our business, make acquisitions, repay debt or for other corporate purposes, and reduce the alignment between our employees and our shareholders.
Equity Plan Overview
Our Board of Directors adopted our 2015 Long-Term Incentive Plan (the “2015 Plan”) on February 11, 2015, subject to shareholder approval. Nautilus shareholders approved the 2015 Plan at the Nautilus 2015 annual meeting of shareholders on April 28, 2015. The 2015 Plan provides for the grant of awards to eligible employees, directors, and consultants in the form ofcommon stock options, stock appreciation rights, restricted stock awards, restricted stock units, and performance units.through payroll deductions.
In April 2020, ourAdministration
The Plan will be administered by the Compensation Committee recommended and our(the “Committee”) of the Board of Directors approved an amendment toDirectors. The Committee may promulgate rules and regulations for the 2015operation of the Plan, whichadopt forms for use in connection with the Nautilus shareholders approved atPlan, and decide any question of interpretation of the 2020 annual meeting. This Amended 2015 Plan increasedor rights arising thereunder. All determinations and decisions of the numberCommittee shall be final.
Shares Available for Issuance
As of June 5, 2023, 40 shares of our common stock remained available for issuance under the Amended 2015Plan. If the amendment and restatement of the Plan is approved, a total of 750,000 shares will be available for issuance in the future under the Plan. If any purchase right under the Plan terminates, is cancelled or expires without having been exercised in full, the underlying shares that were not purchased will again be available under the Plan. To prevent dilution or enlargement of the rights of participants under the Plan, appropriate adjustments will be made if any change is made to our outstanding common stock by 2,000,000reason of stock dividends, stock splits, combinations of shares, from 4,769,292 shares to 6,769,292 shares. recapitalizations or other change in corporate structure affecting our common stock or its value.
Eligibility
In addition, it added multiple shareholder friendly elementsgeneral, all employees of the Company and its participating subsidiaries (as determined by the Committee) who have been employed by the Company or a participating subsidiary for at least 3 months prior to the Amended 2015applicable offering date (described below) are eligible to participate in the Plan. However, an individual who would, after a purchase of shares under the Plan, including:be deemed under Section 424(d) of the Code to own stock (including stock subject to any outstanding options held by the employee) equal to or exceeding 5% or more of the total combined voting power or value of all classes of stock of the Company or any parent or subsidiary of the Company is not eligible to participate. Non-employee directors are not eligible to participate in the Plan. Participation in the Plan is voluntary.
•Offering Periodsrequires
The Plan shall be carried out in a series of six-month offerings (each an “Offering”) with a new Offering commencing on May 15 and November 15 of each year. Each Offering commencing on May 15 of any year shall end on November 14 of that ninety-fiveyear, and each Offering commencing on November 15 of any year shall end on May 14 of the following year. The first day of each Offering is the “Offering Date” for that Offering and the last day of each Offering is the “Purchase Date” for that Offering.
On each Offering Date, each eligible employee shall be granted the option under the Plan to purchase, on the Purchase Date for the Offering, exclusively through payroll deductions in the manner specified in the Plan, shares of our common stock; provided, however, that (i) no option shall permit the purchase of more than 1,000 shares on any Purchase Date, and (ii) no option may be granted pursuant to the Plan that would allow an employee’s right to purchase shares under all stock purchase plans of the Company and its parents and subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds
$25,000 of fair market value of shares (determined at the date of grant) for each calendar year in which such option is outstanding.
Purchase Price
The purchase price per share shall be equal to the lesser of (i) ninety percent (95%(90%) of the awards cannot become vested prior to the first anniversary of the date of grant of each such award
•prohibits any vesting acceleration solely upon our change in control
•permits 100% vesting acceleration of an award, if the award holder is terminated by us for a reason other than cause upon or within twelve (12) months following our change in control
•prohibits the issuance of dividends or dividend equivalents with respect to unissued or unvested shares under any award
•requires that all awards be subject to clawback or recoupment pursuant to our compensation clawback or recoupment policy
•reduces the aggregate number of shares available for issuance under the 2015 Plan by one and a half (1.5) shares for each share delivered in settlement of any stock appreciation rights, restricted stock, restricted stock unit or performance unit award, and one (1) share for each share delivered in settlementfair market value of a stock option award.
Shares Available for Future Awards
As of March 31, 2022, we had 31,467,688 shares of common stock outstanding and 1,152,428 unadjusted shares remained available for grant under the Amended 2015 Plan. On that date, the closing priceshare of our common stock as reported on the NYSE was $4.12 per share. In determiningOffering Date or (ii) ninety percent (90%) of the numberfair market value of additional shares requested for authorization, the Board of Directors and the Committee carefully considereda share our anticipated future equity needs and our historical equity compensation practices (including our historical “burn rate,” as discussed below). The number of additional shares being requested for authorization under the amendment to the Amended 2015 Plan is 4,000,000 shares.common
While adding 4,000,000 shares to the Amended 2015 Plan will increase the potential dilution to our current shareholders, our Board believes that our equity compensation programs are appropriately managed. As shown in the table below, the potential dilution with the potential share request would be 16.32%
| | | | |
| Shares | Adjusted Shares | Common Shares Outstanding (CSO) Fully-Diluted Total3 | Dilution6 |
Available Shares | 1,152,428 | 768,2851 | 34,938,1564 | 2.20% |
Outstanding Shares3 | 2,859,275 | 2,702,1832 | 34,938,1564 | 7.73% |
Current Total
(Available + Outstanding) | 4,011,703 | 3,470,468 | 34,938,1564 | 9.93% |
Potential Share Request | 4,000,000 | 2,666,6671 | 37,604,8235 | 7.09% |
Total | 8,011,703 | 6,137,135 | 37,604,8235 | 16.32% |
stock on the Purchase Date. The fair market value of a share of our common stock on any date is equal to the closing price of the common stock on the immediately preceding trading day on the New York Stock Exchange, or if the common stock is not traded on the New York Stock Exchange, to such other reported value of the common stock as the Committee shall specify pursuant to the Plan.
Payroll Deductions
An eligible employee may elect to participate in the Plan for any Offering by completing and submitting the requisite subscription and payroll deduction form no later than the subscription deadline established for the Offering, which shall be approximately three weeks prior to the Offering Date. The payroll deduction authorization will authorize the employing entity to deduct an amount designated by the participant from each of the participant’s paychecks during the Offering. The designated amount to be deducted from each paycheck must be a whole percentage of not less than one percent (1%) or more than ten percent (10%) of the gross amount of the participant’s regular, overtime, differential and commission earnings, including paid time off, for the payroll period. Once submitted, a subscription and payroll deduction authorization shall remain in effect unless amended or terminated, and upon the expiration of an Offering the participants in that Offering will be automatically enrolled in the new Offering starting the following day.
Purchase and Custody of Shares
All amounts withheld from a participant’s compensation shall be credited to the participant’s account under the Plan. No interest will be paid on the amounts in such accounts. On each Purchase Date, the amount of the account of each participant will be applied to the purchase of Common Stock by that participant from the Company at the applicable purchase price for the Offering. No fractional shares will be purchased under the Plan. Any cash balance remaining in a participant’s account after a Purchase Date because it was less than the amount required to purchase a full share shall be retained in the participant’s account for the next Offering. Any other amounts in a participant’s account after a Purchase Date shall be refunded to the participant.
Shares purchased by participants pursuant to the Plan shall be delivered to and held by a custodian appointed by the Committee. A participant may from time to time sell all or part of the shares held by the custodian for the participant’s account at the market price at the time the order is executed. By appropriate instructions to the custodian, a participant may obtain (a) transfer into the participant’s own name of all or part of the shares held by the custodian for the participant’s account and delivery of such shares to the participant, or (b) transfer of all or part of the shares held for the participant’s account by the custodian to a regular individual brokerage account in the participant’s own name, either with the firm then acting as custodian or with another firm; provided, however, that no shares may be transferred under (a) or (b) until two (2) years after the Offering Date of the Offering in which the shares were purchased.
Amendment and Termination of Participation
After a participant has begun participating in the Plan by initiating payroll deductions, the participant may amend the payroll deduction authorization (i) once during any Offering period to decrease the amount of payroll deductions, and (ii) effective for the first paycheck of a new Offering to either increase or decrease the amount of payroll deductions.
By notice to the Company in the form specified by the Company, a participant may terminate participation in the current Offering and the Plan any time prior to the subscription deadline established for the next Offering. Participation in the Plan shall also terminate when a participant ceases to be an eligible employee for any reason, including termination of employment or death. A participant may not reinstate participation in the Plan with respect to a particular Offering after terminating participation in the Plan with respect to that Offering. Upon termination of participation in the Plan, all amounts deducted from the participant’s compensation and not previously used to purchase shares under the Plan shall be returned to the participant.
Amendment and Termination of the Plan1Divided by 1.5 fungible ratio (to reflect
The Board of Directors may, from time to time, amend the Plan in any and all respects, except that, without approval of the shareholders of the Company, the Board of Directors may not increase the number of shares reserved for the Plan or decrease the purchase price of shares offered pursuant to the Plan.
In the case of certain corporate transactions (including, without limitation, stock dividends, stock splits, combinations of shares, recapitalizations or other changes in the outstanding common stock), the Committee may adjust the number of shares reserved for the purposes of the Plan. The Board may amend the Plan as it may deem proper and in the best interests of the Company, provided that can be grantedno such amendment will, without prior approval of the Company shareholders: (i) increase the total number of shares reserved under the Plan (except as full value awards)set forth above in the event of certain corporate transactions); or (ii) decrease the purchase price of shares offered pursuant to the Plan.
2Reflects 2,388,000 full valueThe Plan shall terminate when all of the shares + (471,278 options divided by 1.5,reserved for purposes of the Plan have been purchased, provided that (a) the Committee, in its sole discretion, may, at any time, terminate the Plan with respect to reflect differenceany participating subsidiary and (b) the Board, in dilutive effectits sole discretion, may, at any time, terminate the Plan completely. Other than distribution of stock optionscash and full value share)
3Basic CSO = 31,467,688 shares, outstandingif any, held in the accounts of participants to whom the termination applies, the Company shall have no obligation on May 31, 2022.account of any such termination.
4Fully-Diluted Total CSO = Basic CSO + Adjusted Shares Available + Adjusted Outstanding Shares
5Fully-Diluted Total CSO = Basic CSO + Adjusted Shares Available + Adjusted Outstanding Shares + Adjusted Share Request
6Dilution = Adjusted Shares divided by Fully-Diluted Total CSO.
New Plan Benefits
WeParticipation in the Plan is voluntary and is dependent on each eligible employee’s election to participate and his or her determination as to the level of payroll deductions. Accordingly, the Company cannot currently determineforecast the extent of future participation and future purchases under the Plan are not determinable. Therefore, the Company has omitted the tabular disclosure of the benefits or number of shares subject to awards that may be granted to our executive officers, employees, or directors under our Equity Plan. Following the 2022 Annual Meeting, we intend to make annual equity grants generally consistent with our historic practice and subject to limits as set forth in Section 6(b) of our Amended 2015 Plan, attached to this proxy statement as Appendix A.
Disclosure with Respect to Equity Compensation Plan
For a table providing information as of March 31, 2022, concerning equity awards granted under our Amended 2015 Plan, please see the Director and Executive Compensation sections of this Proxy statement.
Burn Rate
The Company’s three-year unadjusted average annual burn rate as of March 31, 2022 is 5.17%. The higher burn rate in FY 2020 was primarily due to a very low stock price and new grants given to Jim Barr as part of his recruitment package. Additionally, the FY 2021 period includes equity grants given during the Transition Period.
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| FY 2020 | FY 2021 +
Transition Period | FY 2022 |
Options Granted | 682,000 | 15,000 | 0 |
Full-Value Shares Granted | 1,168,000 | 1,407,000 | 1,410,000 |
Total Granted | 1,850,000 | 1,422,000 | 1,410,000 |
Weighted Average # of Common Shares Outstanding | 29,684,000 | 30,007,000 | 31,029,000 |
Burn Rate | 6.23% | 4.74% | 4.54% |
3-year average (unadjusted) burn rate of 5.17% | | | |
Summary of the Amended 2015 Plan
Types of Awards
The Amended 2015 Plan permits the grant of awards to certain of our employees, directors and consultants. Types of awards include:
• stock options;• stock appreciation rights or SARs;
• restricted stock; and • restricted stock units and performance units.
Eligibility
Awards may be grantedamounts allocated under the Amended 2015 Plan to any person who is (i) our employee, (ii) a non-employee member of our Board of Directors or the board of directors of our subsidiary or (iii) a consultant who provides services to us.
Administration
The Committee will generally administer the Amended 2015 Plan, except that our Board administers the Amended 2015 Plan with respect to awards made to its non-employee directors. The Committee is wholly comprised of directors who are deemed “independent” under applicable rules of the New York Stock Exchange and the SEC.
The Committee has full power and authority to determine when and to whom awards will be granted, including the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the Amended 2015 Plan. In addition, the Committee has the authority to interpret the Amended 2015 Plan and the awards granted under the plan, and establish rules and regulations for the administration of the Amended 2015 Plan.
The Committee may delegate certain ministerial duties associated with the Amended 2015 Plan to our officers, including, for example, the maintenance of records of the awards. The Committee may also delegate the authority to grant awards to a subcommittee comprised of one or more Board members, or to executive officers of the Company, provided that such subcommittee or executive officers cannot be authorized to grant awards to executive officers.
Types of Awards
Under the Amended 2015 Plan, the Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance units. Awards may be granted alone, in addition to, or in combination with any other award granted under the Amended 2015 Plan. Subject to the limitations set forth in the Amended 2015 Plan, the terms and conditions of each award will generally be governed by the particular document or agreement granting the award.
Stock Options.
Stock options may either be incentive stock options, which must comply with Section 422 of the Internal Revenue Code, or non-qualified stock options. The Committee sets option exercise prices and other terms of stock options, except that the exercise price of stock options granted under the Amended 2015 Plan must be at least 100% of the fair market value of the Company’s common stock on the date of grant. Unless the Committee otherwise determines, fair market value means, as of a given date, the closing price of our common stock on that date. At the time of grant, the Committee determines when stock options are exercisable and when they expire, except that the term of a stock option cannot exceed ten (10) years. The option exercise price will be paid in cash or in such other form permitted by the Committee, including without limitation by delivery of already owned shares with a value equal to the exercise price, withholding of shares otherwise issuable under the stock option, and/or by payment under a broker-assisted sale and remittance program acceptable to the Committee.
Stock Appreciation Rights.
Stock appreciation rights (“SARs”) may be granted independently or in combination with an award of stock options. SARs typically will provide for payments to the recipient based upon increases in the price of our common stock over the exercise price of the award. The exercise price of a SAR will be determined by the Committee, which will not be less than the fair market value of our common stock over the exercise price of the award. The Committee may elect to pay SARs in cash or in common stock or in a combination of cash and common stock. The term for a SAR may be set by the Committee but in no event will the term exceed ten (10) years from the date of grant.
Restricted Stock Awards.
Restricted stock awards consist of shares granted to a participant that are subject to one or more risks of forfeiture. Restricted stock awards may be subject to risk of forfeiture based on the passage of time and/or the satisfaction of other criteria, such as continued employment, or achievement, as determined by the Committee, of individual or Company performance criteria. Recipients of restricted stock awards are entitled to vote and receive dividends attributable to the vested shares underlying the award beginning on the grant date.
Restricted Stock Units.
Stock units consist of a right to receive shares in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the performance period as the Committee may specify, including, for example, continued employment with us and/or achievement, as determined by the Committee, of individual or Company performance criteria. Settlement of stock units will be made in shares, cash or a combination thereof, as determined by the Committee, at the times(s) and in the manner set forth in the applicable restricted stock unit agreement. Recipients of restricted stock units have no rights as a shareholder with respect to any shares covered by the award until the date a stock certificate or book entry evidencing such shares is issued or made, respectively.
Performance Units.
Performance units consist of the right, upon achievement of goals established for the performance period, to receive shares, cash or a combination thereof, as determined by the Committee, at the time(s) and in the manner set forth in the applicable performance unit agreement. The Committee establishes the performance goals and, after the performance period has ended, the extent to which the established performance goals have been achieved. Recipients of performance awards have no rights as a shareholder with respect to any shares covered by the award until the date a stock certificate or book entry evidencing such shares is issued or made, respectively.
Minimum Award Price
The exercise price per share under a stock option or stock appreciation right must not be less than 100% of the fair market value of a share of our common stock on the date of grant. “Fair market value” is defined in the Amended 2015 Plan, and generally refers to the closing price per share of our common stock on the New York Stock Exchange on the date of grant.
The Committee determines the price at which restricted stock or restricted stock units can be sold or awarded to a participant, and such prices vary from time to time and among participants. With respect to performance units, the Committee has the authority to grant performance units at any time or from time to time based on achievement of certain goals relating to performance, and such units may be awarded either alone or in addition to other awards granted under the Amended 2015 Plan.
Duration of Awards
Each stock option or stock appreciation right under the Amended 2015 Plan will be exercisable during the period prior to the expiration of the stock option or stock appreciation right as determined by the Committee. The Committee will have the right to make the timing of the ability to exercise any stock option or stock appreciation right subject to continued employment, the passage of time and/or such performance requirements as deemed appropriate by the Committee. The restricted stock or restricted stock unit or performance unit agreement may provide for the forfeiture or cancellation of the restricted stock or restricted stock unit award, in whole or in part, in the event of the termination of employment or service of the participant to whom it was granted.
Ninety-five percent (95%) of the awards cannot become vested prior to the first anniversary of the date of grant of each such award; there will be no vesting acceleration upon our change in control; and the vesting of one hundred percent (100%) of an award will become fully accelerated if the award holder is terminated by us for a reason other than cause upon or within twelve (12) months following our change in control.
Means of Purchasing Stock Option Awards
The exercise price of a stock option may be paid in cash or any other means of payment as may be permitted by the Committee, including:
•delivery of shares already owned;
•withholding (either actually or by attestation) of shares otherwise issuable under the stock option; and/or
•payment under a broker-assisted sale and remittance program acceptable to the Committee.
Required Award Elements
Each restricted stock agreement and each restricted stock unit agreement will contain provisions regarding: the number of shares subject to the award or a formula for determining such; the purchase price of the shares, if any, and the means of payment for the shares; the performance criteria and level of achievement, if any, that will determine the number of shares granted, issued, retainable and/or vested; such terms and conditions on the grant, issuance, vesting and/or forfeiture of the shares as may be determined from time to time by the Committee; restrictions on the transferability of the shares; and such further terms and conditions as may be determined from time to time by the Committee.
With respect to performance units, the Committee will determine the extent to which the established performance goals (to be established by the Committee) have been achieved, after the applicable performance period (as defined in the Amended 2015 Plan) will have ended.
Term and Amendment of the Amended 2015 Plan
Our Board may amend, alter or discontinue the Amended 2015 Plan at any time. However, no amendment or alteration may be made which would impair the rights of any participant under any award without such participant’s consent; provided that no such consent will be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either:
•is required or advisable in order for the Company, the Amended 2015 Plan or the award to satisfy any law or regulation or to meet the requirements of any accounting standard; or
•is not reasonably likely to significantly diminish the benefits provided under such award, or that any such diminishment has been adequately compensated.
Subject to earlier termination by our Board of Directors, the Amended 2015 Plan will remain available for the grant of awards until the earliest of (i) April 28, 2025, or (ii) the date on which all shares available for issuance under the Amended 2015 Plan have been issued as fully-vested Shares. The expiration of the Committee’s authority to grant awards under the Amended 2015 Plan will not affect the operation of the terms of the Amended 2015 Plan or the Company’s and participants’ rights and obligations with respect to awards granted on or prior to the expiration date of the Amended 2015 Plan.
Transferability
Unless otherwise provided by the Committee, awards under the Amended 2015 Plan may only be transferred by will or the laws of descent and distribution. The Committee may permit further transferability pursuant to conditions and limitations that it may impose, except that no transfers for consideration will be permitted.
Dividends
Under Proposal No. 3, no adjustment will be made in shares issuable under an award on account of cash dividends that may be paid or other rights that may be issued to the holders of our common stock before the issuance or vesting of shares under an award, and in no event will unissued or unvested shares under any award receive dividends or dividend equivalent amounts.
Recoupment Policy
Under Proposal No. 3, subject to applicable law, all awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by us or required by law during the term of an award recipient’s service with us. This clawback or recoupment policy may require the cancellation of outstanding awards and the clawback or recoupment of any gains realized under awards.
Resale Restrictions
Employees and consultants who are not “affiliates” of the Company may resell without restriction any shares acquired under the Amended 2015 Plan. Affiliates may resell shares pursuant to a separate registration statement or the provisions of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without regard to the one-year holding period thereunder. An “affiliate” is defined under the Securities Act as a person who directly or indirectly controls the Company’s activities and, ordinarily, includes directors and officers.
U.S. Federal Income Tax MattersConsequences
The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the Amended 2015 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.
Award recipients should seek,The amounts deducted from an employee’s pay pursuant to the Plan will be included in the employee’s compensation and must depend upon,be subject to federal income and employment tax. Generally, no additional income will be recognized by the adviceemployee either at the beginning of their own tax advisors regarding the specific tax consequences of a grant or exercise of an award and the sale of shares covered by awards.
Options.
Under present law, an optionee will not recognize any taxable income on the date a non-qualified option (“NSO”) isOffering period when purchase rights are granted pursuant to the Amended 2015Plan or at the time the employee purchases shares of common stock pursuant to Plan. Upon exercise
If the shares of common stock are disposed of at least two years after the first day of the option, however,Offering to which the optionee mustshares of common stock relate and at least one year after the shares of common stock were acquired under the Plan (the “holding period”), the employee will recognize ordinary income in the year of disposition in an amount equal to the lesser of (a) the excess of the fair market value of the shares of common stock on the first day of the Offering period over the purchase price of the share of common stock, or (b) the excess of fair market value of the shares of common stock at the time of such disposition over the purchase price of the shares of common stock.
If the shares of common stock are sold or disposed of before the expiration of the holding period, the employee will recognize ordinary income in the year of sale or disposition in an amount equal to the excess of the sales price over the purchase price.
If the employee disposes of shares of common stock purchased pursuant to the Plan after the holding period, we will not be entitled to any federal income tax deduction with respect to the shares of common stock issued under the Plan. If the employee disposes of such shares of common stock prior to the expiration of the holding period, we generally will be entitled to a federal income tax deduction in an amount equal to the yearamount of exercise, compensation taxable as ordinary income recognized by the employee as a result of such disposition.
In addition, the employee generally will recognize capital gain or loss in an amount equal to the difference between the option price and the fair market value of our common stock on the date of exercise. Uponamount realized upon the sale of the shares, any resulting gain or loss will be treated as capital gain or loss. The Company will receive an income tax deduction in its fiscal year in which NSOs are exercised equal to the amount of ordinary income recognized by those optionees exercising options, and must comply with applicable tax withholding requirements.
Incentive stock options (“ISOs”) granted under the Amended 2015 Plan are intended to qualify for favorable tax treatment under Section 422 of the Internal Revenue Code. Under Section 422, an optionee recognizes no taxable income when the option is granted. Further, the optionee generally will not recognize any taxable income when the option is exercised if he or she has at all times from the date of the option’s grant until three months before the date of exercise been an employee of ours. The Company ordinarily is not entitled to any income tax deduction upon the grant or exercise of an ISO. This favorable tax treatment for the optionee, and the denial of a deduction for the Company, will not, however, apply if the optionee disposes of the shares acquired upon the exercise of an incentive stock option within two (2) years from the granting of the option or one (1) year from the receipt of the shares.
Stock Appreciation Rights.
Generally, a recipient of a SAR will recognize compensation taxable as ordinary income equal to the value of the shares of Company common stock or the cash received in the year that the stock appreciation right is exercised. The Company normally will receive a corresponding deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Restricted Stock Awards.
Generally, no income is taxable to the recipient of a restricted stock award in the year that the award is granted. Instead, the recipient will recognize compensation taxable as ordinary income equal to the fair market value of the shares in the year in which the risks of forfeiture restrictions lapse. Alternatively, if a recipient makes an election under Section 83(b) of the Internal Revenue Code, the recipient will, in the year that the restricted stock award is granted, recognize compensation taxable as ordinary income equal to the fair market value of the shares on the date of the award. The Company normally will receive a corresponding deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Restricted Stock Units.
A recipient of restricted stock units will generally recognize compensation taxable as ordinary income in an amount equal to the fair market value of the shares (or the amount of cash) distributed to settle the stock units on the vesting date(s). The Company normally will receive a corresponding deduction at the time of vesting, equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Performance Awards.
A recipient of performance awards will recognize compensation taxable as ordinary income equal to the value of the shares of Company common stock or the cash received, as the case may be, in the year that the recipient receives payment. The Company normally will receive a deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Code Section 409A.
The Company intends that awards granted under the Amended 2015 Plan comply with, or otherwise be exempt from, Code Section 409A, but make no representation or warranty to that effect.
Tax Withholding.
We are authorized to deduct or withhold from any award granted or payment due under the Amended 2015 Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of common stock and the employee’s tax basis in the shares of common stock (generally, the amount the employee paid for the shares of common stock plus the amount, if any, taxed as ordinary income). Capital gain or otherwise settle an award underloss recognized on a disposition of shares of common stock will be long-term capital gain or loss if the Amended 2015 Plan until all tax withholding obligations are satisfied.
employee’s holding period for the shares of common stock exceeds one year. The purchase date begins the holding period for determining whether the gain or loss realized is short or long term.
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OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT AND& RESTATEMENT OF THE NAUTILUS, INC. AMENDED 2015 LONG-TERM INCENTIVEEMPLOYEE STOCK PURCHASE PLAN |
AUDIT COMMITTEE REPORT TO SHAREHOLDERS *SHAREHOLDERS*
Our Audit Committee has reviewed and discussed with our management and Grant Thornton LLP (“Grant Thornton”) our audited consolidated financial statements and managements report on internal control over financial reporting for the year ended March 31, 2022.2023. Our Audit Committee has also discussed with Grant Thornton the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our Audit Committee has received and reviewed the written disclosures and the letter from Grant Thornton required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our Audit Committee concerning independence and has discussed with Grant Thornton its independence from us.
Based on the review and discussions referred to above, our Audit Committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the fiscal year ended March 31, 20222023 for filing with the U.S. SEC.
Respectfully Submitted,
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Ruby Sharma, Chair
Anne G. Saunders
Kelley Hall Marvin G. Siegert, Chairman
| Anne G. Saunders
| Kelley Hall
|
Patricia M. Ross
| Richard A. Horn
| Ruby Sharma
|
*The information contained in the Report of the Audit Committee shall not be deemed “soliciting material” or be incorporated by reference by any general statement incorporating this proxy statement into any filings under either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (together, the “Acts”), except to the extent Nautilus specifically incorporates such report by reference, and further, such Report shall not otherwise be deemed filed under the Acts.
Proposal No. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDENDING MARCH 31, 20232024
The Audit Committee approved the decision to change accountants and appointedappoint Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm to audit our consolidated financial statements and internal controls over financial reporting for the fiscal year ending March 31, 2023.2024. Although we are not required to seek shareholder approval of this appointment, the Board has determined it to be sound corporate governance to do so. If the appointment is not ratified by our shareholders, the Audit Committee will investigate the possible basis for the negative vote and will reconsider the appointment in light of the results of its investigation.
Grant Thornton has served as our independent registered public accounting firm since March 1, 2021. A representative of Grant Thornton is expected to be present at the Annual Meeting. The representative will be given the opportunity to make a statement on behalf of Grant Thornton if the representative so desires, and the representative will be available to respond to appropriate shareholder questions.
We understand the need for Grant Thornton to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity of Grant Thornton, our Audit Committee has restricted the non-audit services that Grant Thornton may provide. These determinations are among the key practices adopted by the Audit Committee in its Policies and Procedures for the Approval of Audit and Non-auditNon-Audit Services Provided by the Independent Auditor (the “Independent Auditor Pre-Approval Policy”). Under the Independent Auditor Pre-Approval Policy, we may use Grant Thornton for the following categories of non-audit services only with the pre-approval of the Audit Committee: merger and acquisition due diligence and audit services; tax services; employee benefit plan audits; and reviews and procedures that we engage Grant Thornton to undertake to provide assurances on matters not required by laws or regulations. All of the services performed by Grant Thornton in 2021FY 2022 and KPMG in 2020FY 2023 were pre-approved in accordance with the Independent Auditor Pre-Approval Policy.
We employed KPMG as our independent registered public accounting firm until we dismissed KPMG on March 1, 2021. KPMG’s report on the financial statements for the past two years were unqualified opinions and there were no disagreements between the Company and KPMG.
The following table presents fees for professional audit services rendered by Grant Thornton and KPMG for the audits of our annual financial statements for the fiscal years ended March 31, 2022, the Transition Period2023 and DecemberMarch 31, 2020,2022, respectively, and fees billed for other services rendered by such firmsGrant Thornton during those periods.
| Types of Fees | FY 2022 + Transition Period | FY 2020 | FY 2023 | FY 2022 |
Audit Fees1 | $595,010 | $830,640 | $668,071 | $595,010 |
Audit-Related Fees2 | - | $26,500 | - |
Tax Fees3 | $138,409 | $111,505 | $64,811 | $121,745 |
All Other Fees4 | - | |
Total | $733,419 | $942,145 | $759,382 | $716,755 |
1Fees for the audit of our consolidated financial statements included in our Annual Reports on Form 10-K, review of our condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with our statutory and regulatory filings or engagements, including the audit of internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. The FY 2022 + Transition Period fees were rendered by Grant Thornton and the FY 2020 fees were rendered by KPMG.
2Audit-related fees includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.
3Fees billed for tax compliance, tax advice and tax planning services rendered during the respective periods. Tax advice fees encompass a variety of permissible tax services, including technical tax advice related to federal and state and international income tax matters, assistance with sales tax and assistance with tax audits.
4All other fees includes fees for services other than the services reported in audit fees, audit-related fees and tax fees.
The Audit Committee believes that the foregoing expenditures are compatible with maintaining the independence of our independent registered public accounting firm.
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OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE AUDIT COMMITTEE’S APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR ENDENDing MARCH 31, 2023.2024. |
DELINQUENT SECTION 16(a)16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, as well as persons who own more than 10% of our outstanding common stock, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of shares of our common stock. Based solely on a review of copies of such forms filed with the SEC and written representations from our executive officers, directors and 10% shareholders that no other reports were required to be filed during the fiscal year ended March 31, 2022,2023, we believe that all Section 16(a) filing requirements attributable to Nautilus were timely made with respect to the fiscal year ended March 31, 2022;2023; except that: due to administrative errors, Ms. Raim,Alseth, Mr. Barr, Mr. Chan, Mr. Goelz, Ms. Hall, Ms. Jones, Ms. Konold, Mr. Prakash and Mr. Ross each filed one Form 4 late relatingrelated to the vesting of her RSUsRSU and restricted stock awards granted in August following the withholding of shares by the Company for taxes due upon vesting of her RSUs; Mr. Siegert filed one Form 4 late relating to an administrative error calculating the date of acquisition of Company stock in March 2022; Mr. Collins filed one Form 4 late relating to his sale of Company stock in March 2021; and Mr. Chan and Ms. Hall each filed their respective Form 3 late due to administrative challenges related to getting EDGAR codes in a timely manner2022 annual shareholder meeting.
CODE OF ETHICS
We have adopted the Nautilus, Inc. Code of Business Conduct and Ethics (the “Code of Ethics”), which applies to all of our directors, officers and employees. You can view the Code of Ethics on our website at www.nautilusinc.com. A copy of the Code of Ethics will be provided in print without charge to all interested parties who submit a request in writing to Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, Attn: Corporate Communications.
HOUSEHOLDING
In accordance with applicable regulations, we deliver a single Annual Report and Proxy Statement to certain persons who share an address, unless we have been notified that such persons prefer to receive individual copies of those documents. This practice is referred to as “householding.” If you reside at an address that received only one copy of proxy materials as a result of householding, we will deliver additional copies at no cost to you promptly upon oral or written request. If you wish to receive separate copies in the future, please contact us at Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, or by phone at (360) 859-2900. If you and others living at your address received multiple copies of proxy materials and prefer to receive a single copy, you may request that a single copy be sent in the future by contacting us as described above.
OTHER MATTERS
As of the date of this Proxy Statement, the Board is not aware of any other matters that may come before the Annual Meeting. The persons named in the enclosed proxy card intend to vote the proxy in accordance with their best judgment if any other matters properly come before the Annual Meeting.
We will provide, without charge, on the written request of any beneficial owner of shares of our common stock entitled to vote at the Annual Meeting, a copy of our Annual Report on Form 10-K as filed with the SEC for our fiscal year ended March 31, 2022.2023. Written requests should be mailed to Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, Attn: Company Secretary.
Please return the enclosed proxy card as soon as possible. Unless a quorum consisting of a majority of the outstanding shares entitled to vote is represented at the Annual Meeting, no business can be transacted. Therefore, please be sure to date and sign your proxy card exactly as your name appears on your stock certificate and return it in the enclosed postage prepaid return envelope. Please act promptly to ensure that you will be represented at this important meeting.
By Order of the Board of Directors
ALAN L. CHAN
Secretary
Vancouver, Washington
June 17, 202216, 2023
Appendix A
AMENDED & RESTATED
NAUTILUS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. Nautilus, Inc. (the “Company”) believes that ownership of shares of its common stock by employees of the Company and its Participating Subsidiaries (as defined below) is desirable as an incentive to better performance and improvement of profits, and as a means by which employees may share in the Company’s growth and success. The purpose of the Company’s Employee Stock Purchase Plan (as amended, restated or supplemented, the “Plan”) is to provide a convenient means by which employees of the Company and Participating Subsidiaries may purchase the Company’s shares through payroll deductions and a method by which the Company may assist and encourage employees to become shareholders.
2. Shares Reserved for the Plan. There are 750,000 shares of the Company’s authorized but unissued or reacquired Common Stock, no par value (“Common Stock”), reserved for purposes of the Plan. The number of shares reserved is subject to adjustment in the event of stock dividends, stock splits, combinations of shares, recapitalizations or other changes in the outstanding Common Stock. The determination of whether an adjustment shall be made and the manner of any adjustment shall be made by a compensation committee (the “Committee”) appointed by the Board of Directors of the Company, whose determination shall be conclusive.
3. Administration of the Plan. The Plan shall be administered by the Committee. The Committee may promulgate rules and regulations for the operation of the Plan, adopt forms for use in connection with the Plan, and decide any question of interpretation of the Plan or rights arising thereunder. All determinations and decisions of the Committee shall be conclusive.
4. Eligible Employees. The Board hereby authorizes the purchase of shares of Common Stock pursuant to the Plan by employees of the Company and of each of the Company’s subsidiary corporations that is designated by the Committee as a participant in the Plan (each, a “Participating Subsidiary”). All Eligible Employees (as defined below) of the Company and all Eligible Employees of each Participating Subsidiary are eligible to participate in the Plan. An “Eligible Employee” is an employee of the Company or a Participating Subsidiary who has been continuously employed by the Company or a Participating Subsidiary for at least three months prior to the Offering Date (as defined below) excluding, however, any employee who would, after a purchase of shares under the Plan, own or be deemed (under Section 424(d) of the Internal Revenue Code of 1986, as amended (the “Code”)) to own stock (including stock subject to any outstanding options held by the employee) possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any parent or subsidiary of the Company.
5. Offerings.
(a) Offering and Purchase Dates. The Plan shall be implemented by a series of six-month offerings (the “Offerings”) with a new Offering commencing on May 15 and November 15 of each year; provided, however, that the first Offering shall be a four-month offering commencing on July 15, 2015. Each Offering commencing on May 15 or July 15 of any year shall end on November 14 of that year, and each Offering commencing on November 15 of any year shall end on May 14 of the following year. The first day of each Offering is the “Offering Date” for that Offering and the last day of each Offering is the “Purchase Date” for that Offering.
(b) Grants; Limitations. On each Offering Date, each Eligible Employee shall be granted an option under the Plan to purchase shares of Common Stock on the Purchase Date for the Offering for the price determined under paragraph 7 of the Plan exclusively through payroll deductions authorized under paragraph 6 of the Plan; provided, however, that (i) no option shall permit the purchase of more than 1,000 shares on any Purchase Date, and (ii) no option may be granted pursuant to the Plan that would allow an employee’s right to purchase shares under all stock purchase plans of the Company and its parents and subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market value of shares (determined at the date of grant) for each calendar year in which such option is outstanding.
6. Participation in the Plan.
(a) Initiating Participation. An Eligible Employee may participate in an Offering under the Plan by submitting to the Company or its agent a subscription and payroll deduction authorization in the form specified by the Company. The subscription and payroll deduction authorization must be submitted no later than the “Subscription Deadline” for the Offering, which shall be a date approximately three weeks prior to the Offering Date as determined for each Offering by the Company’s senior human resources executive and communicated to Eligible Employees. Once submitted, a subscription and payroll deduction authorization shall remain in effect unless amended or terminated, and upon the expiration of an Offering the participants in that Offering will be automatically enrolled in the new Offering starting the following day. The payroll deduction authorization will authorize the employing corporation to deduct an amount designated by the participant from each of the participant’s paychecks during the Offering. The designated amount to be deducted from each paycheck must be a whole percentage of not less than 1 percent or more than 10 percent of the gross amount of the participant’s base salary, hourly compensation, overtime, differential and commission earnings, including paid time off, for the payroll period. If payroll deductions are made by a Participating Subsidiary, that corporation will promptly remit the amount of the deductions to the Company.
(b) Amending Participation. After a participant has begun participating in the Plan by initiating payroll deductions, the participant may amend the payroll deduction authorization (i) once during any Offering to decrease the amount of payroll deductions, and (ii) effective for the first paycheck of a new Offering to either increase or decrease the amount of payroll deductions. A request for a decrease in payroll deductions during an Offering must be submitted to the Company in the form specified by the Company and shall be effective for any paycheck only if the request is received by the Company at least 10 business days prior to the payday for that paycheck. A request for an increase or decrease in payroll deductions effective for the first paycheck of a new Offering must be submitted to the Company in the form specified by the Company no later than the Subscription Deadline for the new Offering. In addition, if the amount of payroll deductions from any participant during an Offering exceeds the maximum amount that can be applied to purchase shares in that Offering under the limitations set forth in paragraph 5(b) above, then (x) as soon as practicable following a written request from the participant, payroll deductions from the participant shall cease and all such excess amounts shall be refunded to the participant, and (y) payroll deductions from the participant shall restart as of the commencement of the next Offering at the rate set forth in the participant’s then effective payroll deduction authorization.
(c) Terminating Participation. After a participant has begun participating in the Plan by initiating payroll deductions, the participant may terminate participation in the current Offering and the Plan any time prior to the Subscription Deadline for the next Offering by notice to the Company in the form specified by the Company. Participation in the Plan shall also terminate when a participant ceases to be an Eligible Employee for any reason, including death, retirement or the participant’s employing corporation ceasing to be a Participating Subsidiary. A participant may not reinstate participation in the Plan with respect to a particular Offering after once terminating participation in the Plan with respect to that Offering. Upon termination of a participant’s participation in the Plan, all amounts deducted from the participant’s compensation and not previously used to purchase shares under the Plan shall be returned to the participant.
7. Option Price. The price at which Common Stock shall be purchased in an Offering shall be the lesser of (i) 90 percent of the fair market value of a share of Common Stock on the Offering Date of the Offering, or (ii) 90 percent of the fair market value of a share of Common Stock on the Purchase Date of the Offering. The fair market value of a share of Common Stock on any date shall be the closing price on the immediately preceding trading day of the Common Stock on the New York Stock Exchange or, if the Common Stock is not traded on the New York Stock Exchange, such other reported value of the Common Stock as shall be specified by the Committee.
8. Purchase of Shares. All amounts withheld from the compensation of a participant shall be credited to the participant’s account under the Plan. No interest will be paid on the amounts in such accounts. On each Purchase Date, the amount of the account of each participant will be applied to the purchase of Common Stock by that participant from the Company at the price determined under paragraph 7. No fractional shares will be purchased under the Plan. Any cash balance remaining in a participant’s account after a Purchase Date because it was less than the amount required to purchase a full share shall be retained in the participant’s account for the next Offering. Any other amounts in a participant’s account after a Purchase Date shall be refunded to the participant.
9. Delivery and Custody of Shares. Shares purchased by participants pursuant to the Plan shall be delivered to and held in the custody of such investment or financial firm (the “Custodian”) as shall be appointed by the Committee. By appropriate instructions to the Custodian, a participant may from time to time sell all or part of the shares held by the Custodian for the participant’s account at the market price at the time the order is executed. By appropriate instructions to the Custodian, a participant may obtain (a) transfer into the participant’s own name of all or part of the shares held by the Custodian for the participant’s account and delivery of such shares to the participant, or (b) transfer of all or part of the shares held for the participant’s account by the Custodian to a regular individual brokerage account in the participant’s own name, either with the firm then acting as Custodian or with another firm; provided, however, that no shares may be transferred under (a) or (b) until two years after the Offering Date of the Offering in which the shares were purchased.
10. Records and Statements. The Custodian will maintain the records of the Plan. As soon as practicable after each Purchase Date each participant shall receive a statement showing the activity of the participant’s account since the preceding Purchase Date and the balance on the Purchase Date as to both cash and shares. Participants will be furnished such other reports and statements, and at such intervals, as the Committee shall determine from time to time.
11. Expenses of the Plan. The Company will pay all expenses incident to operation of the Plan, including costs of recordkeeping, accounting fees, legal fees and issue or transfer taxes on purchases pursuant to the Plan. The Company will not pay expenses, commissions or taxes incurred in connection with sales of shares by the Custodian at the request of a participant.
12. Rights Not Transferable. The right to purchase shares under this Plan is not transferable by a participant and is exercisable during the participant’s lifetime only by the participant. Upon the death of a participant, any cash withheld and not previously applied to purchase shares, together with any shares held by the Custodian for the participant’s account shall be transferred to the persons entitled thereto under the laws of the state of domicile of the participant upon a proper showing of authority.
13. Dividends and Other Distributions. Cash dividends and other cash distributions, if any, on shares held by the Custodian will be paid currently to the participants entitled thereto unless the Company subsequently adopts a dividend reinvestment plan and the participant directs that cash dividends be invested in accordance with such plan. Stock dividends and other distributions in shares of the Company on shares held by the Custodian shall be issued to the Custodian and held by it for the account of the respective participants entitled thereto.
14. Voting and Shareholder Communications. In connection with voting on any matter submitted to the shareholders of the Company, the Custodian will cause the shares held by the Custodian for each participant’s account to be voted in accordance with instructions from the participant or, if requested by a participant, will furnish to the participant a proxy authorizing the participant to vote the shares held by the Custodian for the participant’s account. Copies of all general communications to shareholders of the Company will be sent to participants in the Plan.
15. Responsibility. Neither the Company, its Board of Directors, the Committee, any Participating Subsidiary, nor any officer or employee of any of them shall be liable to any participant under the Plan for any mistake of judgment or for any omission or wrongful act unless resulting from willful misconduct or intentional misfeasance.
16. Conditions and Approvals. The obligations of the Company under the Plan shall be subject to compliance with all applicable state and federal laws and regulations, compliance with the rules of any stock exchange on which the Company’s securities may be listed, and the approval of federal and state authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to comply with such laws, regulations and rules to obtain required approvals.
17. Amendment of the Plan. The Board of Directors may from time to time amend the Plan in any and all respects, except that without approval of the shareholders of the Company, the Board of Directors may not increase the number of shares reserved for the Plan or decrease the purchase price of shares offered pursuant to the Plan.
18. Termination of the Plan. The Plan shall terminate when all of the shares reserved for purposes of the Plan have been purchased, provided that (a) the Committee in its sole discretion may at any time terminate the Plan with respect to any Participating Subsidiary, without any obligation on account of such termination, except as set forth in the following sentence, and (b) the Board in its sole discretion may at any time terminate the Plan completely, without any obligation on account of such termination, except as set forth in the following sentence. Upon any such termination, the cash and shares, if any, held in the accounts of each participant to whom the termination applies shall forthwith be distributed to the participant or to the participant’s order.
Appendix B
